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Caveat: Hennepin County Taxpayers Will Pay More to Fund Met Council Vision for Trains

Hennepin County is poised to raise the sales tax next week to fund not just Southwest LRT (SWLRT) but a far-flung transit plan that includes the Bottineau LRT, Orange Line BRT along 35-W and more. Commissioner Peter McLaughlin (Mr. LRT) has been single-minded for more than a decade to fulfill his vision of a transit focused metro area.

The 2017 Legislature gave metro counties the power to fund that vision at the local level; the Transportation bill signed by Governor Dayton gave the metro counties the green light to raise the Transportation Improvement Tax from 0.25% to 0.50%–all without a referendum. That’s the bad news. The good news is that the Legislature also removed the state from paying for any of the operating costs of these new or expanded LRT lines. Currently, state taxpayers fund both a portion of the capital costs and half the costs of operating LRT (and BRT).

The tax is estimated to raise about $125 million a year. It also puts Hennepin County in a better position to take on debt/bonding for capital costs instead of the Met Council.

Just a quick reminder on where final funding decision are made: this does not mean that any of these projects have secured federal matching funds. In fact, the Trump administration has made it clear that it does not intend to support local transit projects in its budget. The very real danger is that the Met Council, Hennepin County and all the construction and real estate companies that expected to make money off SWLRT and other transit projects will win the day, lobbying Congress and cutting a deal that funds at least SWLRT.

But that does not mean that the Met Council, et. al., are not spending as if this is a done deal, or that the tax will not be collected.

Other than the Center, no one is fighting this in Congress so please drop a note to your Congressman today, with a copy to the chair of the transportation appropriations committee, Congressman Mario Diaz Balart of Florida. Here is a link to the sub-committee. Otherwise they only hear from lobbyists.

One can make a cogent argument that shifting transit costs to the local level makes sense, as long as the operating and future capital replacement costs are handled at the local level, too. (Not shifted back to state taxpayers, which is always a danger with future administration and legislatures.)

The problem for Hennepin County and the cities in the county, is that the sales and other taxes are already quite high. Minneapolis is also promising to raise the minimum wage to $15 an hour, thus making the city an outlier and pariah for small and medium companies. Well, it will sort things out but not in favor of Minneapolis and Hennepin County.

According to MPR News:

Several residents spoke out against the proposal at Tuesday’s committee meeting. John Webster of Minneapolis said a tax hike will drive businesses and shoppers out of the county.

“If you’re out buying building materials for a home, or if you’re out making other big-ticket purchases, you’ve got a real incentive to shop somewhere else,” he said.

I, for one. will do more of my shopping outside of Hennepin County, especially for big-ticket items. Hello Carver County! (There’s a great brewery in Waconia by the way.)

Factoids:  Current Tax Rates for Hennepin Count and Minneapolis

In addition to the 6.875% Minnesota sales and use tax, retail sales and taxable services in Hennepin County may be subject to local sales and use taxes such as:0.15% Hennepin County tax (ballpark) 0.25% Transit Improvement tax (Anoka, Dakota, Hennepin, Ramsey and Washington counties). This Transit Improvement tax would go to 0.50% in Hennepin. Ramsey is expected to follow suit; the other metro counties are not. The combined sales tax rate for Minneapolis, MN is 7.775%. This is the total of state, county and city sales tax rates. Again, it would go up 0.25% to 8.025.

Update: Ramsey County is making the same move:

Ramsey County likely to increase sales tax for public transportation From the ST. PAUL PIONEER PRESS: The Ramsey County Board of Commissioners held a public hearing Tuesday on a likely increase to its sales tax to fund transportation needs. The county plans to increase its one-quarter percent sales tax to one-half percent. The tax money, which has funded transit projects backed by the regional Counties Transit Improvement Board, will instead fund projects specific to Ramsey County once CTIB disbands.

 

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