Does Light Rail Need Its Own Tax?
Whether an increased sales tax or a new taxing jurisdiction, advocates say a reliable funding stream could insulate transit from political winds.
The Southwest Light Rail Transit project hasn’t had an easy time securing state funding over the past couple years. It faced stiff opposition from Republicans, with the former transportation committee head promising to stop the Southwest LRT "in its tracks."
DFL wins in the 2012 Election bode well for the project, but there’s no way of knowing how long that will last. With the line years away from operation, and the Bottineau Transitway moving forward, some light rail advocates are questioning whether transit should rely so much on state funding.
That was the question brought up multiple times Tuesday during a meeting with national and local development experts about making the most of Southwest LRT. Instituting a reliable revenue stream, such as a sales tax, could insulate transit from political swings and allow the region to develop its transit system step by deliberate step, they argued.
“Most of our peer cities have decided to get out of the mess that is state politics,” said Will Schroeer, the infrastructure for economic development director at the Minneapolis Regional Chamber of Commerce.
All of those peer cities—Dallas, Denver, Houston, Los Angeles, Phoenix, Salt Lake and Seattle—used a sales tax as the primary local funding source, according to a Metropolitan Council report. All use sales taxes for capital and operations. And five of the seven cities increased their sales taxes to fund their light rail projects.
Meanwhile, just two of the cities—Denver and Los Angeles—receive state funding.
Additional taxes for transportation aren’t a new idea in Minnesota. In November, a transportation advisory panel recommended increasing gas taxes, fees and a transit-dedicated sales tax to build an “economically competitive/world class” transportation network, which would require an additional $4.2 billion over the next 20 years in the metro region alone.
Planning doesn’t stop with construction of the line itself, though. The areas surrounding the stations need to be part of a clear, corridor-wide vision to get the most from the project, developers emphasized.
The corridor could benefit from an infrastructure district that would coordinate planning across the system, said Will Fleissig—the president and managing director of TransAct, a San Francisco-based urban development firm.
“It’s not about getting from A to B,” Fleissig said. “It’s about what happens at A and what happens at B and how do you transform the area.”
Met Council Member Jim Brimeyer added that something akin to a regional economic development authority could guide development in a more direct fashion.
Many cities have economic development authorities and can levy property taxes on the EDA’s behalf. Brimeyer said an EDA-like arrangement for the corridor would allow planners to makes loans to development projects, lock up parcels until the right development opportunity comes along and use incentives like tax increment financing to bring in development.
“The way we do it now, it’s scary at best,” said Brimeyer, whose district includes St. Louis Park, Golden Valley and part of Minneapolis.
Both an infrastructure district and a regional EDA would require the Legislature to allow them under state statute.
Meanwhile, others argued that finding new funding streams is a priority that goes beyond purely local reasons. The percentage that the federal government contributes to transit projects is likely to decrease, while the competition for funds is likely to increase. Putting up a larger local share can make a project more attractive and bump it ahead of competing projects.
“In all cases and in all regions, going to Washington with more local funding puts you in a better position,” said Jay Corbalis—a Smart Growth America associate for Locus, which is a national coalition of developers an investors advocating for sustainable urban development.
New taxes are never an easy sale, though, and light rail opponents remain no less skeptical of rail projects than they were before the Legislature changed hands. Expect a hearty debate when lawmakers reconvene in January.