Local in Ann Arbor

Funding Transit

The Comprehensive Transportation Fund is critical to any discussion of transit in Michigan. It is the major, if not the only, source for transit funding in the state.  As explained in this guide to Act 51, transit funding is constitutionally limited to 10% of transportation tax revenue.  This memo summarizes the features of the fund.  In addition to the MTF allocation (explained in our previous post), the CTF also receives money from auto-related sales tax.  For FY 2012-2013, estimated revenue from the MTF was $158.155 M and $88 M from the auto-related sales tax.  As the memo (from the excellent House Fiscal Agency) notes, this fund is the source of local bus operating assistance and the total allocated to that purpose has not been increased since FY 2006-2007.  This has created a “zero sum game” for local transit agencies, since they must compete for a limited pot of money.  A complicated funding formula distributes funds in part based on the total operating expenditure for each agency, but there is also a floor created by a 1997 bill.

…the state operating assistance formula rewards local cost participation.  Agencies that pass local transit millages can expand service and effectively use local funding to leverage additional state funding.  Since state funding is capped at the appropriated amount, every additional dollar of state assistance a transit agency can capture comes at the expense of other transit agencies.  Under this formula, agencies in relatively affluent areas…have tended to capture and increasing share of state assistance.

AATA has benefited from this, since our local millage has allowed an expansion of service.   However, DDOT (supported by the Detroit city general fund) received a disproportionate amount of the funding this year (although less in previous years) because of the floor.  (See the report by the Ann Arbor Chronicle and the truly head-spinning explanation of how the formula worked.)  AATA fell short of their expected state assistance by about $800,000; they are hoping that the legislature will make them whole in a placeholder bill that currently contains no provisions but is evidently intended to fill in various budgetary holes around the state.

For the FY2013 budget year (through September), AATA expects to receive $8,301,880 in state assistance out of a total of $32,403,360 in revenue, or about 25.6% of its revenue.

A critical point for the future is that the SE Michigan Regional Transit Authority will now receive the entire CTF allocation for the region, and will distribute that to the different public transit providers under its authority.  This begins on October 1, 2013.  Public transit providers are required to submit applications to the RTA for their allocations.  The RTA will also receive all Federal operating assistance under MAP-21 and distribute that.

In FY2013, AATA expects to receive $5,795,268 from Federal formula funds, about 17.9% of operating revenue.

The Regional Transit Authority

As we just indicated, the emergence of the Regional Transit Authority has brought about a profound alteration in the way AATA will receive operating funds from state and Federal sources.

Here is a guide to the package of bills passed in the last days of the December House session that established the RTA. They have now been assigned Public Act numbers.  (All are “Public Act…of 2012.)  The most authoritative overview of the effect of this package of bills is from the House Fiscal Agency.  Click on the links to individual bills to read their text.

Despite the passage of a resolution by the Ann Arbor City Council on December 10, 2012 and what has reportedly been some vigorous lobbying in Lansing by our Mayor, it appears that Washtenaw County is firmly included in the RTA.  (The urgency shown by the Mayor is presumably related to this item in the RTA act):

Section 6 (3) (b) A board shall provide in its bylaws that the following actions require the unanimous approval of all voting members of the board: (i) A determination to acquire, construct, operate or maintain any form of rail passenger service within a public transit region.

The new board (see the temporary SEMCOG site for pictures) had its first meeting on April 10.  Local (Detroit area) transit advocates were wildly ecstatic.  Here is a live blog account. There is money. The RTA bill appropriated $250,000 which does not expire with the end of the fiscal year but can be carried over.

This may have a number of effects that we can only guess at for the moment. In addition to the routing of state and Federal operating funds through the RTA,  all grant requests for capital projects must also go through the RTA.  AATA has been particularly effective at obtaining Federal grants for capital purchases and special programs.

Among the many questions which we might ask: how does Detroit’s desperate situation play into this?  It is now under an emergency manager and its bus system is supported by general funds.  Will the rest of the region be, in essence, taxed to make DDOT a viable system?  Will the RTA board try to rearrange Washtenaw’s transit plan?  Will it continue to allow UM’s ridership to count toward the state formula requirements for AATA?  But above all, what will be the new funds source for this new layer of transit administration?  Much depends on how much more of Governor Snyder’s transportation proposals are accepted by the state Legislature.  And that is not going too well.

UPDATE: The House Fiscal Agency has issued updated discussions of the CTF and the overall transportation funding structure.

SECOND UPDATE: A discussion at the recent AAATA board meeting (July 23, 2013) of the RTA’s funding problems also reviewed its possible effect on funding of local transit agencies.  The Ann Arbor Chronicle’s account has the details.

An overview of state funding for transportation.

The poor condition of Michigan’s roads and bridges is almost legendary.  I remember my puzzlement on arriving here in 1986 and wondering if I had landed in a third-world country.  This Pure Michigan parody on potholes expresses what many of us have felt at one time.  Legislators have raised alarms.  As a result of P.A. 221 of 2007, a Transportation Funding Task Force (nicknamed “TF2”) was formed and issued a report in late 2008  detailing the many problems.  The task force declared, “Michigan is moving from underinvesting in transportation, to disinvesting in transportation.”  It stated that Michigan was falling short even of enough revenue to provide matching funds to obtain available Federal funds.  (We have not attempted to discover whether this happened.)  UPDATE: There is indeed a shortfall, which was made up by a general fund appropriation in the current budget. However, despite the report’s call for more revenue to be raised via several possibilities including vehicle registration fee increases, no new initiatives were taken.

Governor Rick Snyder, who was elected in 2010, has made transportation one of his key issues.  He issued a special message on transportation in October 2011.  He then followed up with his budget message for FY 2014 and FY 2015, which states:

The plan addresses the lack of appropriate road funding by creating a new funding model based on a gasoline and diesel tax of 33 cents a gallon; and increasing registration taxes for vehicles and heavy trucks. This will cost a typical Michigan family an estimated $120 per vehicle each year.

The Governor’s budget (which is his proposal to the Michigan Legislature) thus proposes new revenue. In addition, it proposes a redirection of priorities in transportation.  Here is an excellent summary of the transportation budget recommendations and the changes from prior years.   As it states:

A Long Tradition of Dividing Between Constituencies

Transportation funding is mostly directed by Public Act 51 of 1951, , which dictates how revenue collected from transportation users (including gasoline taxes and vehicle registration fees) are allocated. These are gathered into the Michigan Transportation Fund and then reallocated according to formula.  The MTF is a “restricted” fund that is limited to the uses dictated by P.A. 51.

After several transfers to some specific programs and departments, the balance of the MTF is divided up.  First,  10%  of the balance (approximately 8.5% of the MTF) is transferred to the Comprehensive Transportation Fund (CTF).  (The CTF funds public transit and other non-auto transportation.) Article IX, Section 9 of the Michigan Constitution specifies that  “Not less than 90 per cent. . . . shall be used exclusively for . . . roads, streets, and bridges . . .”  The remainder is divided up as follows:

State Trunkline Fund (STF):     39.1%

County Road Commissions:     39.1%

Cities and Villages:                       21.8%

The portion going to county road commissions is used for county roads and roads in rural and urbanized townships.   It is generally agreed that there is never enough money to do the job.  The Washtenaw County Road Commission  (WCRC) has been the subject of constant complaint ever since I became acquainted with the County.  It has a separate board of three commissioners, who serve for 6-year terms.  The road commissioners are appointed by the county Board of Commissioners, and that is the sole influence the BOC has over them.  (Another constant has been the complaints about Road Commissioner Fred Veigel, who has been reappointed constantly for nearly two decades. He is powerful politically because of his position as the Huron Valley Labor Council head.) Generally, every locality considers that it is being treated unfairly on attention to its roads.  County commissioners are powerless to address the complaints of their constituents.

Thus, Governor Snyder got their attention last year when he signed a pair of bills that empower county boards of commissioners to absorb the road commission within their own shop. The bills, now P.A. 14 and P.A. 15,  set a deadline of January 1, 2015 for this action to take place within a county.  The Washtenaw County BOC has been having a conversation about absorbing the WCRC, according to this report from AnnArbor.com.  Conan Smith, who has expressed interest in doing away with the road commission in the past, is encouraging discussion of a county transportation reorganization.  Some of the themes mentioned, such as a conflation of roads with other means of transportation and a new local tax, are likely to raise hackles, especially in the townships.  From the AnnArbor.com story:

Yousef Rabhi:  “The funding aspect should take a holistic view to transportation”,  mentioning bike lanes, pedestrian access and alternative modes of transportation.

Conan Smith:  “Our transportation system needs to change to meet the needs of a different kind of user.  We’ve focused on transportation too long as roads as primary and public transit as secondary.”

Smith and Rabhi have both been big supporters of the Southeast Michigan Regional Transit Authority, which is meeting for the first time on April 10.   Smith has really pushed the envelope with his maneuvers on the RTA, including using his position as the Executive Director of the Michigan Suburbs Alliance and his marriage to Senator Rebekah Warren to shepherd it through the Legislature with Washtenaw County appended to this metropolitan Detroit transit authority.  He also managed to appoint the two RTA board members from Washtenaw just before ending his term as Chair of the BOC.  It is not clear how his notion of having the BOC take on more authority over transportation in the county would integrate with that thrust.

Meanwhile, the talk of more state revenue has caused some excitement at the WCRC itself.  Its managing director, Roy Townsend, is quoted in another AnnArbor.com report as having plenty of ideas on how to spend additional road funds raised by the Governor.  A quick look at the map included in the article seems to indicate that most of the projects are on rural roads.

Clearly, there are very different visions of how additional transportation funds should be spent  – fixing roads? Or more transit?  One complication not always mentioned is that the 10% constitutional limit for transit applies across the board for governmental expenditures on transportation, not just to the MTF.

Next: special aspects of funding for transit.

UPDATE: The House Fiscal Agency has just released an excellent overview of transportation funding, which includes a discussion of  many of the concerns and issues with the gap between funding and needs.

SECOND UPDATE:   As of May 29, 2013, the transportation budget has not been finalized, in that the Legislature has not adopted it.  However, a conference committee has resolved differences between the House and Senate transportation budgets.  Here is a summary.

THIRD UPDATE:   This commentary in Bridge Magazine points out that the Legislature missed a deadline (June 1) to put new funding measures on “an upcoming” statewide ballot.  Instead, the budget contains short-term fixes.

FOURTH UPDATE: Here is a recent (June 10, 2013)  update from Transportation for Michigan on Michigan legislative action regarding transportation funding.

FIFTH UPDATE:  Another update (February 10, 2014) from Transportation for Michigan on the Governor’s budget for state transportation funding.  Not much good news.