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Breaking-up bad: Plan to dissolve key Twin Cities transit funding board is now, officially, dead

The Counties Transit Improvement Board — which collects sales tax in five metro counties to help fund transit projects — isn’t going anywhere. 

The funding mechanism has contributed around 30 percent of the construction costs of projects such as the Green Line between downtown St. Paul and downtown Minneapolis.
MinnPost photo by Corey Anderson

The death of the Counties Transit Improvement Board appears to be dead.

While the deadline to dissolve the regional transit funding body, known as CTIB, doesn’t technically come until the end of the day Friday, both Hennepin County and Dakota County have failed to take actions that would have completed a proposal to break up the board once and for all. 

Dakota County voted against the dissolution earlier in the month. Its seven commissioners don’t think the county and its taxpayers are getting a good enough deal, and their unanimous vote blocked the move: CTIB bylaws require all five counties who are members — Anoka, Dakota, Hennepin, Ramsey and Washington — to agree on a break-up plan. 

Earlier this week, Hennepin County tabled its own resolution that would have agreed to the divorce. While Hennepin supported the dissolution plan, it decided not to go through the motions given that the deal was already dead. “Unfortunately, Dakota County has decided to thwart the efforts of the other four counties,” said Hennepin County Commission and CTIB Chair Peter McLaughlin. “Dakota County has been unwilling to do so on anything resembling reasonable terms.”

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Hennepin County Board Chair Jan Callison said the terms outline by Dakota County were not in the best interest of her county’s taxpayers. “The jury’s out on CTIB long term, but it’s not appropriate for it to go away on Dakota County’s terms,” she said.

It’s about the money

It seemed like a good idea when the dissolution maneuver was unveiled earlier this year. The five counties who are members of CTIB are authorized to impose a quarter cent sales tax and use the proceeds to increase transit in the region.

The funding mechanism has contributed around 30 percent of the construction costs of projects such as the Green Line between downtown St. Paul and downtown Minneapolis. CTIB was committed to cover a similar share of future LRT expansions. And it shares equally with the state of Minnesota the operating subsidy of the region’s light rail lines.

But the state and regional partnership over transit has been fraying. Not only have Republicans in the Legislature balked at continuing to contribute a 10 percent share of the cost of new lines, but some of the counties have changed their attitudes toward the way the sales taxes captured under CTIB are collected and spent. Dakota County legally triggered its own exit from CTIB earlier this year, after concluding that it gave more in tax revenue than it received in projects over the nine-year existence of the board. But that departure won’t happen until the end of 2018. 

Hennepin County Commissioner Mike Opat
County Commissioner Mike Opat

Before voting to table the matter Tuesday, Hennepin County Commissioner Mike Opat said CTIB itself faces additional political challenges from within. “There has clearly been over the last few years a profound change in the support for the Counties Transit Improvement Board and its agenda by both Dakota and Anoka counties,” he said, citing elections that “have changed the philosophies of both boards. The future is certainly going to be different than the past.” 

Had CTIB been dissolved, each of the member counties would have been allowed to collect a sales tax of up to half a cent on the dollar — double the amount CTIB counties can now collect — and use it not just for transit but for roads and bridges as well. 

Hennepin and Ramsey had planned to impose the half-cent sales tax and use the money to further several major transit projects. Those plans included covering the state’s and CTIB’s shares of construction costs for Southwest LRT and the Bottineau line. In Ramsey County, it included plans to pay the non-federal share of the as-yet-undetermined transit improvement for the Riverview Corridor and bus rapid transit for the Rush Line.

The smaller CTIB counties — Anoka, Dakota and Washington — were expected to keep their sales tax at the same level as the current CTIB tax, but would keep all proceeds and use it as their elected officials chose. Dakota County’s priorities include enhancing the Red Line bus rapid transit line and building its share of the Orange Line to downtown Minneapolis. Anoka would use its funds to pick up the operating costs of the North Star commuter rail (now covered by CTIB), while Washington County would further work on the Gold Line bus rapid transit.

Commissioner Peter McLaughlin
MinnPost photo by Peter Callaghan
Commissioner Peter McLaughlin

The breakup would have required a new set of agreements between each county and the Met Council, the regional planning body that builds and manages transit in the Twin Cities. That was laid out in a resolution that was passed earlier this month by the CTIB board.

But when the dissolution came to a vote, Dakota’s representatives voted no. Their reason: the county wanted a larger payout than it was going to get under the dissolution plan — $29 million more, in fact. CTIB Chair McLaughlin offered the county around $13 million more, mostly from funds already directed toward projects in Hennepin County.

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It was not enough. In a letter to McLaughlin, Dakota County Commission Chair Mike Slavik wrote that the dissolution details “were neither acceptable nor equitable” to the county. “The Dakota County Commissioners recognize the benefits associated with an earlier exit from CTIB,” Slavik wrote. But the county calculated that it would still be receiving less in projects and distributions from CTIB than the other four counties under the divorce. 

“Our Board concluded that the proposed terms for dissolution were not satisfactory and were a continuation of an inequitable and unfair return on investment in comparison to the other members of CTIB,” Slavik wrote.

There will be costs to Dakota County for not dissolving now, however. It will continue to contribute proceeds from its transit sales tax to CTIB until the end of 2018 rather than halting contributions this summer. It will also have to make a payment at the end of 2018 to cover its share of debt service for borrowing done by CTIB while the county was a part of the organization. And it will forego the distribution of left-over revenue that would have come with dissolution.

McLaughlin estimates that scuttling the dissolution will cost Dakota County about $52 million.

Dakota County Commission Chair Mike Slavik
Dakota County Commission Chair
Mike Slavik

On Wednesday, Dakota County Commission Chair Mike Slavik said he thought the counties came close to a deal that worked for all but ran out of time. “All five counties would love to see some sort of resolution,” Slavik said. “The art of compromise is both sides have to come to an agreement that doesn’t make both sides entirely happy. But the job of public policy is we also have to look out for our constituents.”

Slavik took issue with suggestions made by officials from the other CTIB counties that Dakota County is anti-transit. “A lot of our residents work outside the county,” he said. “We ask, how can we have good and efficient transit to get them to and from work. … Dakota County is still very committed to transit.”

Slavik noted that there could be an effort at the statehouse to do what the commissioners couldn’t: dissolve the regional organization and distribute the assets. “They were waiting for CTIB to figure it out themselves,” Slavik said. “With that not being done by this deadline, there is a chance they will intervene. From what I understand, some of that is already happening.”

But the issue is complicated by the fact that it doesn’t break cleanly along partisan lines. Should any measure tend to lean in favor of Dakota County’s position, there are Republicans as well as Democrats from the four other counties in CTIB who might oppose it.

Referendum on Southwest LRT?

During a public hearing Tuesday, many residents opposed to the Green Line extension to Eden Prairie, also known as Southwest LRT, also opposed the CTIB dissolution.

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Hennepin County Board Chair Jan Callison
Hennepin County Board Chair
Jan Callison

“Everyone in this room knows that the issue that brings us here today is Southwest LRT,” said Mary Pattock of the Lakes and Parks Alliance. “The mismanagement of that project and the recklessness and arrogance of its leaders has exacerbated both partisan and urban-rural tensions to the point at which all Metro area transit is jeopardized.”

Hennepin County Commissioner Callison said that the actions this week were not a referendum on Southwest LRT, “no matter how much people want it to be.”

And McLaughlin said the funding package for Southwest is still in place via a summertime sale of “certificates of participation” — a borrowing mechanism backed by the Met Council and CTIB — replacing the still-missing state share of construction costs. The rest of the local money would come from CTIB and the Hennepin County Regional Rail Authority.

All of it, however, depends on Congress allotting funds to the Federal Transit Administration for 50 percent — more than $900 million — of the costs of Southwest LRT, and the FTA’s signing of a full-funding grant agreement by late summer. Some legislative Republicans have asked the federal government to refuse to share in the construction costs of the $1.858 billion project.