New sales tax this month seen as game-changer for transit service in Twin Cities

Many metro-area residents likely have no idea the extra sales tax they began paying Oct. 1 will shore up the Twin Cities' public transportation system for generations to come.

Or that it's seen as a game-changing model to fund transit service — and the envy of many cities nationwide. But that's how it worked out.

An obscure but critical provision in a voluminous transportation bill passed by the Legislature and signed by Gov. Tim Walz earlier this year called for a ¾-cent regional sales tax that will help build and maintain the metro's transit system.

"This is a once-in-a-generation opportunity to start planning and taking care of a system we're building that's going to be there 20, 30, even 50 years," said Charlie Zelle, chair of the Metropolitan Council, which operates Metro Transit.

The new tax is expected to raise $433 million in 2024 and a total of $21 billion over the next three decades.

And not a moment too soon. Metro Transit had been facing a $150 million budget shortfall in fiscal 2026. Bridging that yawning gap without a dependable, recurring cash infusion would have likely led to reduced train and bus service — on top of cuts already made during the COVID-19 pandemic — and a curtailed vision for public transportation in the future.

"The entire local bus system would have been a shell of its former self," said Rep. Frank Hornstein, DFL-Minneapolis, and chair of the House Transportation Finance and Policy Committee. "We needed to do something to save the system."

Not everyone's a fan of the new tax. Rep. John Petersburg, R-Waseca, said it's regressive and that it most affects "those who can't afford it the most, like the people using transit."

Petersburg, the GOP lead on the House transportation committee, also questions funding a transit system in flux, given uncertain ridership trends following the pandemic and issues with crime aboard light-rail trains. The tax, he said, "seems premature."

Met Council officials argue that the tax has been a long time coming. Zelle recalls advocating for dedicated transit funding two decades ago while working with the Itasca Project, a civic organization. Every two years, like clockwork, council officials would approach lawmakers with dire predictions of a "fiscal cliff" and a "structural deficit."

The DFL trifecta at the State Capitol this year — the party's control of the administration and both legislative chambers — seemingly clinched the tax. Zelle said the council's outreach, as well as the support of transit advocates "who cared about the economic development of the region and state," helped seal the deal as well.

"This is about having a region and a state where people don't have to shoulder the financial and climate burden of owning a car to see friends or go to the store," said Sam Rockwell, executive director of Move Minnesota, a St. Paul advocacy group that released a report on the tax last week.

"It's about giving folks a faster trip home so that they can spend time with their kids — and it's about delivering a more stable climate for those kids," Rockwell said. "Plus, it elevates Minnesota as a national leader on sustainable and equitable transportation."

Timing was critical for the new tax. Public transit ridership nationwide plummeted during the pandemic, which caused lockdowns across the country and resulted in remote work, so fare revenue just about dried up, according to a report by TransitCenter, a New York-based research organization.

The federal government helped transit agencies cover costs. The Met Council received $726 million in relief funds, $100 million of which was used to shore up the financially troubled $2.7 billion Southwest light-rail line. (The new sales tax, by the way, can't be used for Southwest until a state task force studying the Met Council's structure wraps up by Feb. 1.)

But with federal COVID funding drying up, job shortages and ridership so far failing to return to pre-pandemic levels, most transit agencies nationwide "are anticipating a steep, sudden operating budget deficit that will deepen annually, absent other forms of funding," according to the TransitCenter report.

Metro Transit is one of the few agencies securing a solution, Zelle said.

"If you look at other systems around the country that haven't made these plans, they'll never catch up. We're in an enviable position," he said.

The Met Council will dig deeper in coming months to map out exactly how the money will be spent. For now, officials say, the tax will fund and expand the current transit system, add personnel to bolster safety, and replace an aging fleet and facilities. A small portion will support active transportation, including walking and biking.

The law stipulates that the Met Council will receive 83% of the largesse, with the metro's seven counties getting 17%. Part of the deal calls for the council to fully assume transit operating costs, which until now has been shared with counties. The move will save Hennepin County $25 million a year, and Ramsey County about $6 million annually.

Lawmakers also want the tax revenues to be used to improve maintenance at transit stops and centers, replace bus shelters, expand the popular arterial bus rapid transit system, invest in zero-emission buses, boost wages for Metro Transit employees, and explore micro-transit options including on-demand, shared-ride and smaller scale service.

For transit advocates like Rockwell, the tax means that more people will be able to shed the yoke of car ownership — and the state can make real strides toward combatting climate change, given transportation is the top contributor to greenhouse gases.

Minnesota, he said, "is rewriting the playbook."