Municipal League Foundation Ballot Issues Committee: Recommendation on Prop. 1

16
Mar
2014

Proposition 1: King County Transportation Funding

 April 22, 2014 Special Election Ballot Measure

 Summary of Measure

 

The King County Council, sitting as the Transportation Benefit District that it created, is proposing to voters a measure to fund, within the new countywide district, additional resources for Metro Transit, city streets, and roads in unincorporated areas of the county. The proposal would increase the sales tax by 0.1% and establish a $60 vehicle license fee for 10 years, generating an estimated $130 million per year in new revenues for transportation. Of the amount raised each year, 60%, or $80 M, would go to fund Metro service hours at current levels, and 40%, or $50 M, would go to maintain city streets and unincorporated area roads, allocated based on population. The household impact from the two sources is estimated at approximately $11 per month. The measure would also provide for a $20 rebate of the vehicle fee to individuals whose income is less than 45% of the county’s median household income. The County is also proposing, separately, to raise Metro bus fares again in 2015. In response to concerns about the increasing impact on low income individuals, it is proposing to introduce a new low income fare of $1.25.

 

Metro service is primarily funded by sales tax revenue which declined severely during the great recession. To make up for lost revenue without making major reductions in bus service, Metro over the last five years cut costs, increased operational efficiencies, and raised fares four times. The County also imposed a temporary $20 congestion reduction charge (CRC) to raise some $50 M over two years, but the CRC is due to expire this year. In all, Metro states it has cut $800 M out of its budget through 2013, with $148 M in savings each year that will continue into the future.

 

While sales tax revenues have recovered to pre-recession levels, they have not recovered enough to support current expenses. The level of bus service has grown with the introduction of new RapidRide routes and inflation has continued to increase the cost of operating at current service levels. Metro estimates that it faces an ongoing budget gap of up to $75 M a year and that if new funding is not made available, it will need to cut as much as 17% or 600,000 hours of service annually.

 

King County has repeatedly sought authority from the State Legislature for new revenues to support Metro services from sources other than the sales tax. The Legislature has failed to develop the comprehensive statewide transportation revenue package authorizing such new sources, so the County is proceeding with Proposition 1, based on previously granted authority to create the Transportation Benefit District.

 

Additional Note: The Municipal League has been actively monitoring Metro since 2008 when we published our Review of Metro Transit. In 2013, we issued a follow-on report in which we found that much progress had been made on issues of service allocation, performance measurement and transparency. However, in both reports we expressed concerns about a continuing problem with Metro’s cost structure. Metro has a relatively high cost structure and it also has a long-time problem generating adequate operating revenue. During the period 2001 to 2011 annual operating revenues consistently failed to cover operating expenses, and the deficit was covered through transfers from the agency’s capital fund. In 2011 the capital fund transfer to operations was a net $60 million. The Municipal League’s review of Proposition 1 should be understood in the context of this historical concern.

 

 

Arguments FOR the Measure

 

The following arguments are put forth by proponents of the measure:

 

  • Metro Transit is part of the county’s vital transportation and economic infrastructure, carrying 400,000 riders per day and providing service in support of the region’s growth management goals and environmental response to climate change.
  • Well beyond just moving riders, maintaining service and providing resources to continue to meet future demand are critical to the region.
  • Metro has made significant efforts in response to earlier criticism that it was operating inefficiently and its costs were too high. It has restructured service to improve productivity; improved scheduling practices; and reduced staff positions.
  • To meet operating expenses during the period of reduced revenues, Metro took one-time transfers from reserves and the reserves must now be replenished.
  • Failure to pass Proposition 1 would result in 600,000 hours of cuts to service that people rely on every day. Neighborhoods and communities throughout the county value their Metro service and are anxious about the magnitude of potential service cuts.
  • The 40% of new funds that would go to city streets and county roads are also vitally needed, as funds for maintenance and preservation of roads have also declined significantly with the recession and the related decline of property tax revenues.
  • In response to criticism that Metro’s operating cost per hour is much higher than other transit agencies in the region, Metro states that it is the ninth largest transit system in the country and thus it is appropriate to compare itself not to much smaller agencies here, but to other large systems with whose costs it is comparable.
  • Proposition 1 is a balanced proposal that meets vital infrastructure needs and is supported by riders, communities all over King County, business, environmentalists, and advocates for low income people. The King County Council passed it unanimously.

 

 

Arguments AGAINST the Measure

 

The following arguments are put forth by opponents of the measure:

 

  • The creation of another special taxing district continues the bad policy of starving the general fund, and putting government funds into dedicated silos that require voter approval.
  • Proposition 1 does not address the fundamental problem of an unsustainable cost structure. The long term trajectory of operating costs growing faster than revenues is not addressed. The County will be back again in a few years with claims that new revenues are needed.
  • Metro must first adjust its expenses to operate within available revenues. This proposal is a Band-Aid, not the systemic financial fix the agency needs.
  • The low income fare proposal and the $20 low income fee rebate are not well-thought out and, as brand new policies, have been developed on the fly to appease the concerns of one constituency. The low income rebate is an idea that does not exist anywhere else in the country and Metro is proposing an untested program.
  • The sales tax and the license fee are regressive taxes. The sales tax is also highly cyclical and unstable as a source for ongoing operations. Metro should seek other sources of revenue.
  • Metro policy sets a goal of keeping expense growth to the rate of inflation, but agency expenses have consistently grown twice as fast as inflation.
  • Metro claims that massive service cuts will be necessary are exaggerated. Cuts would be phased in over time and new efficiencies could be found to meet available revenues as sales tax revenue recovers. An infusion of new funds will discourage pursuing the additional efficiencies the agency needs to make.

 

 

Recommendation and Rationale

 

The Municipal League reluctantly recommends a Yes vote on Proposition 1. We believe that our growing region needs to make investments in its transportation infrastructure, both transit and roads. We must ensure that the economy can thrive, people can move about, our urban areas can support the density that our comprehensive plans envision, and our environment can be protected. For these reasons, we have repeatedly urged Metro to do more to control its operating costs and to address its long term structural issues of unsustainable cost growth and inadequate revenues to meet expenses. However, we acknowledge that the agency has taken many actions to meet the challenges of the great recession and a volatile funding source. We encourage Metro to continue to work on issues of efficiency and cost control and to use peer benchmarking to do so. The Municipal League intends to continue to monitor Metro’s progress on these issues.

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