Existing sales tax revenue sufficient for Metro bus service

bus stop
If Seattle voters want to preserve bus service and believe a sales tax hike is needed, they should review Metro Transit’s financial forecasts. Photo: Freepik.com

If Seattle voters want to preserve bus service and believe a sales tax hike is needed to do that, they should take a moment to review King County Metro Transit’s financial forecasts and spending plans for the coming years. Metro’s projections show agency officials can provide service with their existing revenue, without imposing a sales tax increase.

The Seattle sales tax hike is on the ballot as Proposition 1. It would re-impose a 2014 sales tax increase passed in the Seattle Transportation Benefit District that is due to expire, while increasing the rate by 50%.  Prop. 1 would boost the regressive tax rate from 0.1% to 0.15%.

This tax increase would generate about $39 million annually over its six-year life, with about half going to actual bus service and the rest going to other Seattle transportation programs. That’s about $234 million between 2021 and 2027. For comparison, that is less than what Metro plans to spend over roughly the same period on bus electrification alone. Those purchases can and should wait, or at least take lower priority than providing the bus service officials and advocates say is essential to the city’s post-COVID recovery.

Metro’s countywide sales tax of 0.9 percent is a viable option to pay for these programs if they are needed. Washington Policy Center analyzed the county sales tax since the justification for the Seattle Transportation Benefit District taxes passed in 2014 was largely that county sales tax revenue was insufficient to maintain service at current levels.

We compared the projections officials made in 2015 for the decade (2015 to 2024), to actual revenue and new, post-COVID projections for the same decade.

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As shown in the bar graph above, new projections show that over the next four years, Metro’s sales tax revenue collections will be roughly where the agency anticipated they would be in 2015, despite the pandemic.

Just looking at 2020, Metro officials expect to receive about $36 million less in sales tax revenue than what was anticipated in the 2015 forecast. However, Metro will also receive about $244 million in federal CARES Act money this year – a cash infusion that puts the agency $208 million above where officials thought they would be this year.

This is not to say that the fiscal impact of the pandemic does not present problems for the transit agency—it does. Metro’s farebox recovery rate is normally 25 percent of operating costs, but the agency suspended fares from March through September of this year, adding to the agency’s revenue loss. The budget for 2021-22 is based on previous years’ actuals, and there is a real reduction in sales tax revenue for those two years as well. However, Metro projects sales tax revenue collections will be back at 2019 levels by 2023.

One option for the agency is to tighten its budget – including postponing or scaling back its $270 million electrification program and using those funds to pay for service.

Additionally, Metro plans to “bring service back, with the potential to restore nearly all the currently suspended service hours” in 2021 – which would place an unnecessary strain on the agency’s budget, especially as severely reduced ridership is not expected to recover quickly.

Metro could also partner with the private sector to provide mobility to those who need it throughout the city and county, without wasting time and money running empty buses on unproductive routes. This could include a partnership like the one some transit agencies are exploring with Canadian company Pantonium – which uses technology to help transit agencies increase ridership while reducing costs. Metro could continue running buses on popular fixed routes, while converting other routes to flexible, on-demand service using its existing bus fleet. Benefits would include bypassing empty stops, reducing the number of buses on the road, and increasing speed and reliability of trips by minimizing stops and transfers for riders.

These efficiencies are achievable and necessary, whether there is a recession or not. Agencies are often incentivized to pursue efficiencies when placed under greater fiscal constraint.

Seattle residents who support Metro’s proposed uses for the increased sales tax revenue can certainly support Proposition 1 – local sales taxes are a broad and fair way to pay for local transit. Residents who want to see agency officials operate more efficiently and be more accountable to the public should carefully consider Metro’s financial outlook and whether the tax increase is necessary for Metro to deliver service.

Mariya Frost is the Transportation Director at the Coles Center for Transportation at Washington Policy Center, an independent research organization with offices in Seattle, Olympia, Tri-Cities and Spokane.

 

 

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