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.

This entry was posted on April 12, 2013 at 7:36 pm and is filed under civic finance, 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.