Local in Ann Arbor

Is the proposed “countywide” transit funding scheme fair to Ann Arbor?

First, let’s review what the new plan will cost Ann Arbor taxpayers. The Financial Task Force appointed by the AATA to come up with a funding plan were able to reduce the likely millage needed to 0.5 mills (based on full countywide participation). Here are their budget spreadsheets for the first 5 years of the plan: the operating budget, the capital budget,and the summary.  (Their full report and service review subgroup report have some explanations of changes and assumptions.)  After excluding some capital-intensive projects and making some other adjustments, they were able to project that the plan could be done with a 5-year budget gap of $32,877,825; that is, nearly $33 million in new funding must be found to pay for the reduced plan.

An important assumption in the FTF’s budget is that the Transit Master Plan’s services will be extended to the entire county, and the new funding (we still assume that this is a property tax millage, though they took care to deny that this is their recommendation) could be paid by a 0.5 mill tax on the entire county tax base. This appears to be substantially correct. Using their assumptions (no change from 2011, no subtractions for DDAs and other TIF, no change in law to exclude personal property), the 5-year yield from a whole-county 0.5 mill tax would be $32,788,601.  (Here is a spreadsheet summarizing all the TV and millage yields.) (Note: the FTF calculations and all those here are based on the Washtenaw County taxable values table for 2011.  The taxable values for 2012 will not be available until assessments are fully reviewed and apportioned.  This should be any day now.  See our post on city income tax for a discussion of the assessment and tax schedule.)

Washtenaw County participating municipalities shown in green; five townships have declined. Click for larger image.

But as we already know, the full county will not be participating.  According to the response I obtained through a FOIA, 5 of 20 townships have already declined to participate.  If these low-population rural townships’ taxable value is subtracted, there is still a calculated 5-year tax yield of $30,968,566.

Terri Blackmore, the executive director of Washtenaw Area Transportation Study (WATS) has been somewhat the godmother of the countywide transit plan, including its governance structure.  At the FTF meeting, she rose to point out that as municipalities drop out, so will the service to those areas, reducing expenses.  However, on examination, it is clear that these townships would not receive much additional service in any event.  They may have been able to expect more demand services, and to make use of express services by traveling to a city or township nearby.  Eliminating those services to these few residents will not be likely to bring about $2 million in savings.

The “optimistic” scenario (click for larger)

In our earlier post, How Much “County” in Washtenaw County-wide Transit?, we presented a number of different scenarios for participation across the county, each with justification.  Let’s assume for the moment that the “optimistic” scenario is the correct one.  Note that this scenario retains all the cities (except Milan), the more urbanized townships, and several more distant townships that have reason to be more amenable to a regional plan.  They represent the greatest fraction (with the city of Ann Arbor) of the taxable value of the county.  Still, the 5-year total is still only $26,912,443 – a $5-6 million shortfall of the amount needed.  The townships who have dropped out are still not heavily served by the TMP, so again the savings are not likely to be high.

But Ann Arbor (and the city of Ypsilanti) are still contributing the full amount of their charter millages, so as other communities in the county drop out, the total tax contribution of those two cities rises in proportion to the rest of the county.  This effect is exacerbated by the drop in the new millage from 1 mill to 0.5 mills.  And since (under what is actually a set of very generous assumptions) there is already a “budget gap” again, the burden is likely to fall on the remaining communities disproportionately, since they will have to carry the truly regional aspects of the TMP with less support.  This will inevitably lead to more fare increases, loss of service, or perhaps additional tax demands.

Percent tax paid in a single year by Washtenaw County communities (the “optimistic” scenario), based on 2011 TV and 0.5 mill new millage. Ann Arbor and Ypsilanti millage rates based on FTF assumptions.

So taxpayers of the city of Ann Arbor (who make up almost exactly 1/3 of the population of the county: 113,934 vs 334,791; thanks to Steve Bean for challenging me to make this comparison) are expected to pay more than twice that relative percentage in property taxes in order to support a “county-wide” transit system.  If you own a house that has a TV of $100,000 (which means that it has a supposed market value of $200,000, depending on what year you bought it), you will be paying $250 each year to support the new transit system.

Is that fair?

In the next post we’ll explore what fairness, and its cousin, equity, mean in this context.

UPDATE:  For a full apples-to-apples comparison, here are the amounts and percentages of tax paid in one year by all currently participating communities.

Tax paid by all participating communities (including 15 townships and all cities and villages), assuming a 0.5 mill tax plus existing charter millages. (2011 valuations)

Assuming that all communities currently participating in the u196 process also remain in a new authority,  94.5% of the taxable value of the county will be included in the new tax.  However,  the City of Ann Arbor represents 35.7% of that TV, and because Ann Arbor will be paying tax at a rate Five Times that of all communities other than the City of Ypsilanti, its tax contribution to the new transit authority is still nearly three-quarters of the total.

UPDATE: Northfield Township has now withdrawn from the Act 7/u196 organization. This means that the “optimistic scenario” above was in indeed optimistic.  Six of the twenty townships in the county are now out of the picture – and the formal decision hasn’t even come to them yet.

This entry was posted on March 13, 2012 at 9:22 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.