Image from Publicola
Image from Publicola

For an agency like Metro that has been forced to largely fund itself by sales tax the recent State revenue forecast revision could have significant ramifications.  About half of the State’s revenue comes from sales tax so an increase in state revenue generally means an increase in sales tax revenue.  With that in mind I contacted the County inquiring about their projections and Metro’s shortfall.  Here’s David Reich, King County’s chief economist:

The county has its own models for forecasting revenues. Transit gets revenue from various sources including bus fares, sales tax receipts, property taxes, the congestion relief charge, intergovernmental transfers and others. Any impacts to metro’s financial situation would depend on the sum of all these factors (along with updated expenditures). We do forecast metro sales and property taxes in March, July and August.

It is too soon to know if these values will be revised up for the July forecast. Generally speaking, economic conditions are not worse than when the March forecast was done. The July forecast should be available July 24.

STB will check back at the end of July but in the mean time I have done some VERY ROUGH back of the envelope number crunching.  Digging into the State’s numbers (pages 27 and 28), the Economic and Revenue Forecast Council projects the Department of Revenue will collect an additional $112.8 million this biennium.  For the 2013-2015 biennium the State projection increased $101.2 million.  Since sales tax is half of state revenue I cut those numbers in half.  Using Martin’s estimate that Metro’s sales tax revenue is about 5.6%* of the state total, that would amount to $3.2m extra this biennium and $2.8m** extra for the 2013-2015 one, so $6m total additional sales tax revenue for Metro.

With Metro’s total 2015 budget gap at $60m that would come out to about 10% of the shortfall.  So a little less bone and muscle cutting and if a tax package does pass it’d be a little more new service and less back-filling old service.

Now, it could be that the factors that caused the State to revise their forecast upwards were already incorporated into the County’s March estimate, so there will be no change.  On the other hand it could be that since Seattle and King County are leading the economic recovery our tax receipts will grow faster than the State’s.  There are really too many factors involved for anything but the clumsiest of estimates.  I look forward to seeing the real numbers next month.

* His 5.6% number is based on the 2012 State sales tax estimate of $7.241 billion and 2013-14 Metro budget’s 2012 sales tax estimate of $402.9m.

** The State projections show a ‘non economic changes’ debit of $55 in the 2013-2015 biennium.  If this debit doesn’t effect Metro’s revenue then that comes out to an additional $1.5m for that period, for a total of $7.5m.  Or about 12.5% of the $60m shortfall.

18 Replies to “State Revenue Forecast Increase and Metro’s Shortfall”

  1. TL;DR
    We’re still screwed if the Legislature doesn’t pass a funding package, but possibly a tiny bit less screwed than before. Maybe.

    1. Agreed. Any increase in Sales Tax revenue due to improving economic conditions should be used to rebuild Metro’s reserves. At least some of the looming cuts should have been made long ago (I’d put the tail of the 249 that I ride at the top of that list, BTW. Love it, use it, but if we don’t have the money, kill it) once Metro started dipping into their reserves. Sadly, political realities have prevented that and likely have made potential future cuts more drastic.

  2. What this says to me is that there is no way in hell any transit supporter should get behind the poison pill the Leg is considering. Between new money (don’t forget the internet sales bill that’s moved to the House that would cover an additional 10% of the shortfall), routes that need to be cut anyway, and effeciencies that can can be derived from reorganizations*, it is not worth mortgaging our future for only a two year reprive from little to no real pain.

    *which we know Metro staff has the ability to come up with. The agency/County Council so far has just lacked the backbone to impliment them.

    1. Right, because a 17% cut is “real pain” but a 15,3% cut (extrapolating from Matt’s VERY ROUGH calculations) is a bed of roses.

      1. David, first off, half the cuts would go to poor performing routes that should have been cut already. So there is 50% right there. Throw in 10% from increased revenue from this, and another possible 10% from the internet sales tax bill and we’re up to 70% of the cuts being covered. And that is without any reorganization. Combine the above with a reorg and those scary ’17% cuts’ look like they might not be that bad after all. Definitely not something to mortgage our future by acquiescing to a massive freeway expansion package just to get a measly (possible mind, still have to have a vote) two years of extra revenue in return.

        Just Say No.

      2. David, first off, half the cuts would go to poor performing routes that should have been cut already. So there is 50% right there.

        A. I am skeptical of your claim that 8.5% of all service hours can be cut without any real harm.

        B. As you surely know, cuts are political. Poor performing routes are not all equally cutable, even if they should be.

        I don’t know if the poison pill is a price worth paying or not, but let’s think about this with a clear, honest sense of the actual costs of each choice. Pretending your preferred trade-off is cost free is not an honest way of approaching this difficult choice.

      3. David, first off, half the cuts would go to poor performing routes that should have been cut already. So there is 50% right there.

        Most of the routes on Metro’s “delete” list are not poorly performing. Metro has already cut almost all of its poorly performing service. Of the 17% to be cut under the worst-case scenario, perhaps 2%-3% is truly poorly performing service. The rest is service that performs decently but not as well as the rest of the network. Cutting it will cause a lot of people pain.

        djw says it the right way: we need to be aware of the costs of Just Saying No. I don’t think the costs are worth it, especially because there are only a couple of things in the highway part of the package that I even object to.

      4. Also, I don’t understand where you’re getting your “two years” from. The local MVET to be voted on would be permanent. The sales tax in Curtis King’s package would be for just three years, but no one is taking his package seriously.

  3. Why is the legislature trying to give us this temporary crap? Is it really that big of a deal to just give us our MVET that we lost in ’99? They don’t want to solve the problem, they want to shut us up so they can focus on BIG highway projects.

    1. They don’t want to be seen raising taxes, especially on MVET which comes as one annual bill and causes sticker shock and outrage and looks like a war on cars. Voters don’t understand the difference between allowing King County to tax themselves with a vote, and just imposing the tax, and they’re afraid if you do it in King County now, you’ll do it in my county later. A temporary authorization is more palatable because they can argue it’s just a temporary compromise and will go away in a few years. Maybe by then King County will have lost interest in transit, or their voters will be more tax-hostile, or a sea change will have happened making it less politically risky to raise taxes. In any case, it’s a future legislature’s problem, not mine.

      1. “…especially on MVET which comes as one annual bill and causes sticker shock and outrage and looks like a war on cars. Voters don’t understand the difference between allowing King County to tax themselves with a vote, and just imposing the tax, and they’re afraid if you do it in King County now, you’ll do it in my county later.”

        These two sentences are what drive me the most nuts. First is that we have to govern to the lowest possible voting outcome because simple people with simple ideas always seem to have the most impact. (Person: “Taxes are always bad!” Crowd: “Yeah!”) Second is that voters don’t seem to understand the concept of one area having different taxes than another outside of property tax. Third, and the most annoying, is that lots of people yell for “transparency in taxation,” yet the only possible taxes which can get passed these days are “small bite at a time” taxes that are easy to hide. The only “nibble” taxes we have right now are property, which most people pay monthly through an escrow account, and sales, which is atrociously regressive and easy to work around if you’re near a county or city boundary. Besides, none of the foregoing actually discusses whether or not Metro, Pierce, and Community Transit actually need the additional revenue. (I happen to think they do, but I don’t want to get too off-topic.) We can’t even have that discussion because one of the options–raising taxes to get more revenue–is automatically off the table except for “temporary” fixes.

      2. Yes – and in the era of campaign soundbites, when opponent says “xxx voted to raise taxes 50 times”, you had better believe it that a vote for a local option for metro would count as one of the 50 – even if the district is far, far away from King County.

      3. While I think that all of this is true, but that there is a further, more cynical motive. King County is a cash cow for the state. If the State ever allowed King County to tax itself for its own needs, it would lose a great deal of the leverage it has when it wants King County legislators to vote for statewide taxes that benefit the rest of the state.

    2. The only fair way to fund this is through increased property taxes.

      If transit truly is an improvement, then property owners benefit directly.

      So they should pay for it…and that includes all the property owners.

      First order of business is removing all the limits on increases so they can rise to a level needed for a state that wants and needs premium service.

      Second thing that needs to happen is reassessment of land for best use. No more grandfathering or hiding asset value. Best use means that if it is worth more with a commercial office then that’s what it’s worth, nothing less.

      1. Not to sound too cynical, though here I go: If that happened, an overreacting initiative similar to California’s disastrous Prop. 13 would be on the ballot in record-setting time. And it would pass by an overwhelming majority. And then that would be the end of anything beyond state police and highway construction.

        (As above, my prediction is not predicated on whether yours is a good idea. I just think that the reaction to it being implemented would be overwhelmingly bad.)

  4. Our legislature is going to screw transit riders and Metro over and not give us the ability to vote ourselves a tax increase to fund transit or to not vote for that. They cannot even pass a budget and as a state employee I got my layoff notice. The legislature must be considered essential so they are not worried about paying the bills, rent and eating if the state shuts down,. If they were in that situation I doubt they would have taken it down to the wire like this. There needs to be some legislators voted out come November, and two traitors have a bulls eye on their back!

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