Should Transit Funding Sources be Diversified?
This is a guest post, originally posted by Josh at the Course Weblog of PA5113:
It seems that during these harsh economic times most transit agencies are running a deficit. Major cities like St. Louis and Seattle are facing heavy choices ahead. Transit Agencies Facing Huge Deficits. Many services are considering cutting service or substantially raising fares. Metro Transit has not been spared. Initially, the expected deficit would be around $45 million which by latest estimates will be more towards the total of $62 million. Metro Transit Predicts More Red Ink. Metro Transit like many different transit agencies will have to reevaluate funding.
However, Metro Transit should consider itself lucky to not be in a larger as other agencies are in. Metro Transit relies on several different funding sources for bus and light rail operational funding. The largest source of revenue comes from the Motor Vehicle Sales Tax. Because of a constitutional amendment, MVST has been dedicated for transportation funding with 40% dedicated to transit. Relying on this tax appears counter to the goals of transit. If transit ridership increases through new routes and transit corridors, people will place as many miles on their vehicles. Vehicles will last longer and new and used vehicle sales will decrease, decreasing the revenue for the MVST. However, this source only accounts for 38% of total funding sources. Minnesota Transit Spending. Some have called for a shift to a sales tax to stabilize funding and spending. However, transit systems relying heavily on a sales tax have also not remained stable.
Seattle and S. Louis both rely heavily on a regional sales tax and fares. St. Louis Metro Funding. Seattle Transit Funding. Both of these systems are in serious deficit. Seattle is currently running a $100 million deficit and St. Louis is running a deficit 21% of its operating budget. Reliance on a sales tax and fares may not be the answer for a stable revenue flow. Transit may want to take the advice of a stock broker and diversify.
Metro Transit is only running a deficit equal to 6% of its operating budget. This can be attributed to several different sources making up funding for the transit. Like with sales tax, diversifying the sources of revenue will allow for the system to become more stable. The formula of funding sources should not rely so heavily on an elastic vehicle sales tax. Consideration should be given for a regional transit sales tax as another funding source for transit. The most recent transportation bill included provisions for a county option sales tax for capital transitway and park and ride projects. Local Option Sales Tax. Consideration should be given for the addition of a sales tax to the formula of sources for operational funding. A county sales tax for operation will allow the reduction in the reliance on the motor vehicle sales tax and increase the diversity of funding sources creating a better formula for transit funding and stabilize the revenue flow.