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Five Steps to Fair Funding

How to bulk up Michigan’s starving public transit

January 27, 2006 | By Andy Guy
Great Lakes Bulletin News Service

MLUI/Pat Owen

Grand Valley residents want a more successful transit system. But state planning and investment is weighted heavily towards roadbuilding projects such as the South Beltline.

Despite the growing public demand for more transportation choices, raising the dollars to fund mass transit systems remains a significant challenge. The Grand Valley metropolitan area should embrace two broad strategies to secure crucial funding. First, civic leaders must ensure that money intended for transit projects is actually spent on transit projects. Second, citizens and public officials must boldly advance innovative ways to finance expanded transit investments, including new tax proposals.

Residents across the metro area strongly support greater public transit investment. In April 2000, for instance, 65 percent of voters in the six-city urban area serviced by The Rapid said “yes” to a tax increase to enhance transit service. Then, in November 2003, 66 percent of voters approved an additional tax hike for transit; support for the transit millage actually grew in suburban areas.

Meanwhile, federal financial support for capital projects is also rising.

Graphs: MLUI/Jane Kowieski. Reference: The Rapid.

Soaring ridership, combined with rising fuel, personnel, and equipment costs push The Rapid's expenses sharply upward.
Click here to enlarge map

But state funding is essential to capturing those crucial federal funds, and that is where the big problem is. Lansing continues to reduce state investments in transit, even as ridership and expenses climb—not just in our region, but across Michigan. So state funding remains well below Michigan’s constitutional limit for transit. Worse, our elected state officials have for several years now diverted dollars earmarked for transit to other priorities, even as tax revenues increase. This hurts The Rapid’s ability to buy and run buses, upgrade technology, and maintain basic things like bus shelters. It also could forfeit significant federal money. 

“In Congress, we’ve increased funding for transit, particularly for the Grand Rapids area,” said Congressman Vern Ehlers of Grand Rapids. “It is a great disappointment that the state has not come up with the matching funds that are necessary. That to me is not very bright, simply because for every dollar the state puts up they are going to get four dollars back from the federal government. That is a pretty good deal.”

And that is just the beginning of what Michigan could gain for its transit investment. A 1999 study by the Massachusetts consulting firm Cambridge Systematics Inc. estimated that every $10 million investment in public transit generates 300 jobs and a $30 million boost in local sales, because new and improved bus or rail corridors attract significant private investment capital.

Graphs: MLUI/Jane Kowieski. Reference: The Rapid.

…while support from the State of Michigan continues to fall, squeezing the system.
Click here to enlarge map

But, despite the tremendous financial leverage that increased spending on transit provides, Michigan’s economic development strategy remains in the clutches of road and highway spending. “According to the state Constitution, 90 percent of the Michigan Transportation Fund is supposed to be spent on roads,” said Jennifer Kalczuk, spokeswoman for The Rapid. “That is not a balanced funding strategy if the goal is to promote a comprehensive transportation system that provides a range of mobility choices beyond the car.”

Such a narrow strategy is increasingly out of touch with the needs and goals of cities like Grand Rapids, Kentwood, Wyoming, and other communities in the metro area. Here are five ways to reverse the trend and ramp up transit investment:

Get Michigan’s Fair Share
Michigan’s lackluster commitment to public transit risks sacrificing $100 million a year in federal funds earmarked to maintain and grow public transit. It costs the Grand Valley metro area dearly for two reasons. First, service providers must cover Lansing’s cuts by shifting scarce dollars away from bus and technology upgrades, service enhancements, and other line items that improve the system.

Second, for every dollar Michigan does not spend on local transit, it loses four additional federal dollars that could be used to maintain and improve those services. Leaving these critical federal dollars on the table, especially in such uncertain financial times, is bad business and irresponsible governance. Securing those funds must be a top priority for state legislators and the governor.

Stop Stealing from Transit Fund
Another reason why Michigan fails to leverage its fair share of federal transit funding is that state lawmakers now habitually spend money originally collected for transit on other priorities. Since fiscal year 2000-2001, lawmakers have taken more than $65 million from the Comprehensive Transpor-tation Fund to cover general fund deficits. The largest allocation of CTF revenues traditionally provides operating assistance to local transit agencies. Transfers from the fund must cease, and all transit dollars must be spent on transit.    

Fully Fund Transit
The Michigan Constitution allows using “up to 10 percent” of gas and diesel tax
revenues to replenish the Comprehensive Transpor-tation Fund. The state, however, fails to contribute the full 10 percent. In fact, when then-Governor John Engler raised the state gas tax in 1997, the most recent hike, the full four-cent increase went to maintaining, expanding, and building roads; none went to the CTF. State leaders must support the transportation fund at the state’s constitutional maximum. That will elevate and stabilize currently unpredictable transit funding, leverage more federal dollars, and maintain and expand local transit services.

Boost Local Investment
The people of the Grand Valley region are clearly willing to pay for carefully thought-out transit improvements. In 2000, the six cities that comprise The Rapid’s service area—Grand Rapids, East Grand Rapids, Kentwood, Wyoming, Walker, and Grandville—passed a 0.75 mill levy for transit. In 2003, voters renewed that millage and raised it to 0.95 mills. After both millage elections, The Rapid invested the new money to expand service and provide more rides. Both times, the system saw significant ridership increases.

So, in addition to securing additional state and federal support, local leaders must consider further increasing the local millage to support more service enhancements. Regional leaders must also think beyond the current six-city service area and consider a regional taxation strategy—particularly in Kent County and eastern Ottawa County—to expand and pay for improving service throughout the greater metropolitan area.

Think Outside the Box
Political leaders must also think creatively about new funding streams that go well beyond the old ones, which are most often property tax millages. Summit participants identified two reasonable and promising ideas that merit immediate action.

First, more of the taxes collected on auto-lease agreements must go to transit. Currently, a percentage of the tax generated from auto sales goes directly to the CTF to support transit programs. But similar revenues generated from leasing agreements, an increasingly popular arrangement, go to the general fund, not transportation. State leaders should close this anti-transit loophole by transferring the special, statewide tax on auto-leasing agreements to the CTF. 

Second, increase the state gas and/or diesel tax to generate new funding. The Legislature could boost annual transportation funding—across the board—by $50 million for every cent it raises the diesel tax. That would mean an additional $5 million increase in transit-related funding.

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