Local in Ann Arbor

Is the countywide transit plan fair? (The sequel)

In our previous post, we introduced the idea that a major underlying factor in discussion of the countywide plan (an umbrella term that includes the TMP and the proposal to incorporate a new transit authority: see this post for a discussion of the differences) is the concept of fairness.  So much of the back-and-forth has been about the question of who will pay vs. who benefits, and how fair that is.

Let’s review the proposition briefly.

• The idea is that the current Act 55 Ann Arbor city transit authority (AATA) will eventually be disbanded and its assets (both hard capital assets like buses and shelters, and financial reserves) will be turned over to a new Act 196 authority (currently being called the New Transit Authority) that has a broader potential geographic reach.  See our post, AATA: Moving Us Along for some description of the process.
•  But to give the new authority a solid revenue base, Ann Arbor’s perpetual millage (voted into the city charter by the citizens and thus sometimes called the “charter millage”) is proposed to be transferred to the new entity.
• The City of Ypsilanti, which also has a charter millage, would do the same.
• This transfer of charter millages to the NTA is the only purpose of the 4-party agreement, approved as amended (pdf of draft, as amended, that was approved) by the Ann Arbor City Council, March 5, 2012.  (See brief report from the Ann Arbor Chronicle here.)
•  The NTA would also levy a millage across the entire county (or the parts that didn’t opt out of it) to support additional services.
• Depending on the level of that millage (both 1 mill and 1/2 mill have been discussed), it has been acknowledged that taxpayers of Ann Arbor will pay the greatest share, perhaps about 2/3, of the entire local tax collected to support the Transit Master Plan, which is also referred to as the “county-wide plan”.

Some basic questions

1. Is it fair if taxpayers in rural communities (the “countywide” in the table below) who will receive some, but not much, increased service, pay for an enhanced system with some strong urban biases?
2. Is the proposed arrangement fair for the communities other than Ann Arbor who are part of the urban network?
3. Is it fair if Ann Arbor taxpayers pay most of the cost of a county-wide system?

 The “countywide” rural communities

As we discussed in a couple of former posts about politics of a millage vote and the likelihood that various local units might drop out of a “countywide” organization (5 townships out of 20 have already declined to participate), the history and politics of the other communities in Washtenaw County is that they are very resistant to voting for increased taxation, since even half a mill is a substantial fraction of their current taxes.

• The actual service improvements being offered to many of the more rural townships are minimal. In most cases, only a commuter express bus is being proposed for the outlying areas. Express buses do not serve the needs of individuals who are not mostly commuting to a job in Ann Arbor. Hours are restricted and “demand” service (for the disabled and elderly) does not automatically go along with express bus service. (With a fixed bus route, Federal rules require demand service at no more than twice the fare for a fixed route, but that requirement can be evaded with express buses.)

The Transit Master Plan overview, as prepared by consultants Steer Davies Gleave. Click for larger view.

• Note in the table below that only about 10% of operating costs are proposed for bus service and demand service outside the urban area. (The “urban network” is roughly described by the green blob with yellow lines in it above.)

• Also, a significant percentage of the long-term expense is for high-capital projects like commuter rail, which doesn’t directly benefit those more distant communities.  (Note that commuter rail, the airport service, and the long-distance express bus services could be said to enhance the economics of the entire area, so might be argued to have a diffuse but real benefit to rural communities.)

Summary of combined operating costs for different types of service, from Financial Task Force November 2011 distributions

The non-Ann Arbor communities that are part of the urban network

Some communities are currently paying for AATA (fixed route bus) services, under what is called POSA (Purchase of Service Agreement).  Those POSA would be revoked under the Act 196 NTA, since those communities would be part of the new transit regional authority.

The City of Ypsilanti has a dedicated millage for transit of approximately 1 mill.  Actually, that millage does not go directly to AATA as tax receipts.  Instead, it is used to pay the POSA for the service that Ypsilanti has had in the past. (See the route map.) Originally, there was no money to pay for this service in Ypsilanti’s increasingly stressed city budget.  For a while the cost was borne by Federal stimulus funds.  Then, the citizens of Ypsilanti voted in the charter millage (a really brave and forward-looking act on their parts).  Recently, because of changes in the AATA chargeback schedule, the millage amount fell short of the required amount to pay the POSA, causing consternation in Ypsilanti’s City Council.  But the service has not been curtailed, and even better, recently service on Route 4 has been increased at no additional cost to Ypsilanti (the amount not covered by Federal formula funds is paid by Ann Arbor taxpayers).  Still, the on-and-off-again bus funding has led Ypsilanti’s mayor Paul Schreiber to support the 4-party plan at a public hearing in Ann Arbor “to stabilize Ypsilanti’s bus service”.

Now that the City of Ann Arbor has (provisionally) approved the 4-party agreement, the baton passes to the City of Ypsilanti.  My information is that it (the agreement) is on the March 20 council agenda.

The City of Ypsilanti’s budget problems are simply staggering.  For an overview, see Mark Maynard’s discussion of the consequences of the nonapproval of a city income tax.  On May 8, Ypsilanti’s beleaguered taxpayers will be asked to approve both a 1% income tax (0.5% for workers in Ypsilanti who live elsewhere) and an additional millage to pay off debts.  Ypsilanti’s property tax millage is already the highest in the county (for 2011, it was 33.6731, over twice the City of Ann Arbor’s at 16.4660 and miles above any township).  In spite of this, the city has gone through round after round of service cuts.  One problem was an ill-advised attempt by the city to dabble in development.  The Water Street Development, a failed exercise in urban redevelopment, left the city with bond debt and unaffordable payments.  So on May 8, in addition to the income tax vote, residents are being asked to vote themselves an additional 4.7085 mills merely to retire these bonds.  (The Ypsilanti City Council is now expecting that they will not need to levy the full amount.)

To POSA or not to POSA?

Ypsilanti City and three other Washtenaw County municipalities currently pay POSA (purchase of service agreement) contractual amounts to AATA for specified services.  They are all within that urban network seen in the map above.  POSA charges are calculated yearly using a formula to pay actual “loaded” costs of the specified services.  In general, POSA amounts are part of a municipality’s general fund budget and are paid right off the top of their discretionary revenue.

Here are the amounts these communities currently pay in POSA charges, and the total tax that would be raised if the countywide millage were applied instead.  Note that the POSA charges would disappear.

*Amounts for Ypsilanti City are calculated differently. Its tax rate would include the current 1 mill plus the additional countywide millage.

As is quickly evident, the total tax dollars paid by each municipality would be considerably higher with the new transit plan.  The difference for all but Ypsilanti City is that the municipal budgets would save money and the costs would be transferred to their taxpayers.  Because Ypsilanti City would be a signatory to the 4-party plan, while the accounting method would change (a direct transfer of their millage to the NTA rather than a check), their taxpayers would continue to pay the current millage amount plus the additional millage.

This might not seem too bad a deal for Ypsilanti City, considering that they are already receiving enhanced service without paying for it and there are many of the other enhancements to the urban network will serve them directly.  But whether their anguished taxpayers will agree with this as they face two more impending tax measures is a different question.

For the other municipalities, it does not appear that they will immediately see markedly different service levels.  The current routes that are being supplied with fixed-route buses may see some hour and frequency enhancements, and more Park and Ride lots and transit hubs might be built.  But new fixed route lines look to be unlikely in the near future, based on the maps that have been provided.  Thus, whether taxpayers from Superior, Ypsilanti and Pittsfield townships view the change as “fair” probably depends in part on whether they view the general increase in connectivity over the county to be beneficial to the overall economic climate and thus to themselves.

Complications to the who pays, who benefits question

All the discussion so far as been based on the assumption that the voters of the county will vote in a new millage to support a new transit authority.  The talk for the last several years was that it would be 1 mill.  However, this has now been scaled back to 0.5 mill.The recommendations of the Financial Task Force, issued on February 29, are just that, recommendations.  The FTF has no actual authority and is not the final planning body for the new authority, which does not yet exist.  Thus, its projections are merely hypothetical.  Nevertheless, they were able to arrive at the 0.5 mill amount (which they style as a mere placeholder, not an actual recommendation for a millage) by stating that the capital-intensive commuter rail and connector programs should not be folded in to the 5-year plan (thus allowing a smaller budget gap to be addressed by a millage).

This recommendation is apparently being sidestepped by AATA.  As its CEO Michael Ford says in his executive summary for March 15,

Capital intensive portions of the original program were removed with the caveat that alternate sources of funding should be secured to support the service.However, the planning and development of the capital projects will continue, but will not be slated to utilize the new local funding source.

Now this is a puzzling statement.  Money is fungible and if an activity costs something, it comes out of the total budget.  So if the FTF considered the total budget and recommended the exclusion of activities that are being carried out anyway, the money has to come from somewhere.  AATA has, of course, had budgets for many years in which certain funds (like Federal formula funds) had to be allocated to specific services.  But it is dizzying to consider an accounting system that somehow segregates general tax funds in such a ways that one dollar goes to allowable uses and another is held back.  The sleight of hand is less impressive when the quarter falls out of the cuff.

The inescapable conclusion is that the additional millage paid by former POSA communities will, in part, be used for commuter rail and connector projects.  (Though these might depend heavily on Federal and private funding, they will require some local funds.)

Another factor in the calculation of benefit vs. additional payment is that the FTF also recommended (in order to make this package fit into its tighter garment) that fares be raised an average 50 cents.  So while the former POSA communities are paying more in property taxes, their transit riders will also be paying more to ride.

Is that fair?

Next: the conclusion.  Is this plan fair to Ann Arbor?

UPDATE:  The final version of the 4-party agreement as passed by Council on March 5 is here.

SECOND UPDATE: Note the comment regarding the meaning of the 4-party agreement below.  There is additional justification for my statement that the 4-party agreement is necessary only because of the transfer of the two city millages.

THIRD UPDATE: A commenter also raised the issue of availability of demand (“paratransit”) services. Though the Financial Task Force recommendations themselves make no reference to lowered expectations for these services (apart from a fare increase), the report from the subcommittee signaled that they may be regarded as optional, depending on funding.  The quote is from their presentation on February 29, 2012.

“Adjustments to estimated Countywide Door-to-Door service costs – reduced estimated usage volume based on A-Ride’s experience with the proportion of eligible population that are active users.”

This entry was posted on March 10, 2012 at 9:35 pm and is filed under civic finance, politics, Transportation. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site.