Obscure Transit Agency Lays Groundwork for Massive Sales Tax Increase

Higher sales taxes could be coming down the tracks in five metro counties with several proposed new rail lines already under consideration expected to deplete existing taxpayer subsidies by the time they get up and running.

In short, Twin Cities transit officials appear to be getting out ahead of themselves and taxpayers, planning to build more rail lines than can likely be sustained with the amount of tax revenue generated from existing transit sales and motor vehicle excise taxes.

It all comes down to a little known transit agency formed under a 2008 agreement between Anoka, Dakota, Hennepin, Ramsey and Washington counties for the purpose of funding major transit improvements such as passenger and light rail lines and rapid bus transitways. Known as the County Transit Improvement Board (CTIB), the agency receives about $97 million yearly from a quarter-cent sales tax and $20 motor vehicle excise tax imposed on residents and consumers in the five metro counties.

Some board officials, however, reportedly believe the Twin Cities transit sales tax should be more in line with other metropolitan areas with higher rates. So CTIB has begun quietly laying the groundwork for a sales tax hike, starting with the group’s 2012 financial annual review.

“Within the decade, and if projects develop as indicated, the Board’s Sales Tax will largely be consumed by debt service and its 50% share of net operating subsidy...each year that passes bring (sic) the Board closer to having to seek to increase its revenue base or choose which projects to fund in the future,” according to the Annual Financial Review and Capacity Estimate report from June 2012.

Talk of a tax increase caught some officials off guard at a June 20 CTIB workshop, during which Anoka County Commissioner Matt Look posted a comment on his Facebook page, referencing talk of jacking up the current one-quarter cent transit sales tax to a full cent.

“There are those that are advocating for a 1 cent sales tax (currently .25 cent sales),” Look wrote. “Someone help me.... Is that a 300 or 400% increase?”

The minutes of an official CTIB meeting several days later, at which the annual financial review was unanimously approved, include no mention of a tax hike or increasing revenues. No audio or video recordings are made of CTIB meetings, according to staff.

The transit board is already on the hook to fund 50 percent of the annual operating subsidies for five transitways: Hiawatha Light Rail, Northstar Commuter Rail, Cedar Avenue Bus Rapid Transit, I-35W South Bus Rapid Transit and Central Corridor Light Rail. Currently CTIB spends about $22.6 million on operating costs. By 2021, however, that figure is expected to quadruple to $89 million, depleting nearly all of the board’s sales tax revenues when combined with debt service payments.

CTIB and the Metropolitan Council have commissioned a study that will describe “the funding constraints of the Board and its funding partners and options available to address them.” The first phase of this study is expected to be completed later this summer.

The bottom line: While the Dayton administration and rail advocates plan a huge expansion of our rail system, it’s increasingly clear that massive tax hikes will be part and parcel of their plan.

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