Shannon Fiecke of the Shakopee Valley News reports:

Shakopee’s direct bus service to downtown Minneapolis could get financially dinged by the Metropolitan Council for planning — and saving — too much.

The council has reduced funding for the BlueXpress and other suburban bus providers with “excess reserves” in order to help cover a $62 million regional shortfall for mass transit.

The Metropolitan Council, which doles out transit dollars across the metro area, is trying to plug a two-year funding deficit without slashing routes or hiking fares. Suburban providers are being asked to take money they’ve saved to add routes or expand stations and instead spend it on operations.

All suburban providers have carried budget reserves healthier than the 25 percent ratio now preferred by Met Council managers — with savings ranging from 40 percent to more than 200 percent.

While council officials say they are trying to avoid service reductions across the entire region, some suburban providers allege the council is plugging holes in its own transit operations on the backs of suburbs, which have been making smart financial decisions.

“In a sense, the Met Council is penalizing those of us who did the right thing, so they can limit the funding and shift it to other places,” said Len Simich, director of SouthWest Transit, which serves the cities of Chanhassen, Chaska and Eden Prairie.

Council spokeswoman Bonnie Kollodge, however, said the council was providing discretionary allocations to suburban providers based on how much they said they needed to maintain existing services. These amounts proved more than necessary, as evidenced by the $4.2 million a number of them added to their savings in 2008, she said.

While funding for suburban buses flows through the Metropolitan Council, local governments run their services independently — albeit with increasing dictates from the Met Council.

In addition to its regional planning obligations, the Met Council operates Metro Transit, the massive urban bus system, and Metro Mobility, a door-to-door service for the disabled.

Given the economy and impending shortfall in transit dollars, the council feels it is reasonable and equitable for suburban providers to spend down their reserves to a level closer to 25 percent of their operating budgets, Kollodge said in an e-mail.

“This shouldn’t adversely impact service,” Kollodge said. “In fact, it will help to maintain service levels.”

PRUDENT PLANNING

Money for buses and light-rail transit come from a variety of sources, including the motor vehicle sales tax, fares, and state and federal funds distributed by the Met Council.

Declining auto sales are expected to leave metro-area transit funds 8 percent short over the next couple of years.

SouthWest Transit says it prepared for such a moment in advance, trimming services and leaving vacant positions unfilled.

“Bigger systems may not have taken such a proactive position prior to now,” Simich said.

While suburban systems aren’t being asked to keep reserves as low as Metro Transit’s 8 percent target, they still feel the 25 percent level is unreasonable.

“For a smaller system like ours, a $250,000 reserve isn’t going to deal with much,” said Michael Leek, community development director in Shakopee, which operates a circulator service and also runs the BlueXpress to Minneapolis with neighboring Prior Lake.

“Say you have a catastrophic failure of a bus, or some other event — it would wipe out our reserve pretty quickly,” Leek said. “A new bus is around $500,000.”

Transit providers that don’t reduce reserves are told they will not receive any dollars beyond the base amount they are obligated to get by statute.

Shakopee city Councilor Matt Lehman pointed out last month that the state recommends cities maintain 40 to 45 percent savings.
Shakopee has accumulated much more than this — about $1.7 million right now, which it planned to use to operate additional buses in the future, as well as to maintain existing services with a loss of $200,000 in revenue next year. Its annual expenses are currently around $1 million.

The BlueXpress was awarded federal funding in December 2008 for another bus to offer reverse commutes from Minneapolis. However, buses can only be acquired through the Met Council — and Shakopee is told the bus won’t arrive until October 2010, although it has the money to operate it.

BlueXpress has also had preliminary discussions about linking to stops in Eden Prairie’s Anderson Lakes area, which SouthWest Transit isn’t able to serve well. In exchange, SouthWest Transit may add service to the older part of Shakopee. More buses could be required for such a venture, however.

RESERVES

If suburbs don’t keep savings at 25 percent, they will lose out on any additional funds from the Minnesota Vehicle Sales Tax, under a new policy that requires approval from the Met Council board.
Suburban transit would still receive “base” funding, but not any extra dollars generated because of a 2006 ballot measure that restricts all auto sale tax proceeds to roads and transit. (Legislators used to siphon part of the tax off for other purposes.)

Slumping auto sales have drastically reduced how much transit gets from MNVST, however.

Part of the reason suburban providers say they’ve built up such high reserves is because of the unreliability of the tax.
Maple Grove has the greatest amount stashed away among the six suburban transit providers: $8.4 million at the end of last year, with $3.5 million in expenses.

Maple Grove has about $5.8 million earmarked for the second phase of its Parkway Transit Station, which will include a parking ramp, Transit Administrator Mike Opatz said. It has also earmarked savings for future repairs and replacement of the existing Maple Grove Transit Station and parking ramp. The rest is operating reserve.

Minnesota Valley Transit Authority in Burnsville, which is operated by Savage and four neighboring suburbs, stands to lose an annual $1.9 million if it doesn’t lower its reserves by 10 percent.
Minnesota Valley follows state auditor guidelines in keeping at least a four-month operating reserve, director Beverley Miller said. It saves for emergency purchases and park-and-ride facility improvements, as well as to cover operations in light of declining auto sales.

“We feel we have been managing our resources. I have a very conservative board. Because we’ve been conservative, that plays to your detriment,” Miller said. “It’s kind of a true statement — because we didn’t spend it, now we’re going to lose it.”

SouthWest Transit derives the bulk of its savings from real estate development.

Minnesota Valley earns dollars similarly. It leases space at its transit sites and puts the revenue back into improving or running those sites, with a goal of making each more self-sufficient.
SouthWest Transit, which is tapping $3.5 million in savings for a new bus garage, should be able to meet the one-fourth reserve requirement and continue receiving its annual $1 million payment from the special MNVEST pool. Others, like the city of Plymouth, could be locked out.

Plymouth plans to pull a million dollars out of savings next year for operations, and after that should be able to qualify for the additional dollars, Simich said, but likely with stipulations. The city, according to Met Council projections, has savings close to its annual budget of around $4 million.

“We haven’t seen their contract, yet, but I’m sure it’s going to be with strings,” Simich said.

While the Met Council is cutting off discretionary funding for smaller providers like Shakopee that have deeper reserves, Miller said the council has agreed to still give $1.9 million next year to Minnesota Valley, which it needs just to keep its existing service going.

Even with the additional $1.9 million, by the end of 2010, Miller estimates Minnesota Valley will have less than two months of reserve funds.

“We’ve already been using our reserves. [The Met Council policy] is going to force others to be in the same position as all of us are in,” she said.

LESS MONEY

Suburban transit operators have followed state auditor guidelines in establishing their reserves, Simich said, which is important because they rely on a shaky source of revenue.

It’s difficult to predict how many dollars will come from MNVEST each year, he said, noting there was a period of time when the Met Council even held onto these dollars.

Suburban transit providers say the council wants them to compete on a regional basis for additional funding for future route expansion or purchases instead of putting money away.

However, most of the regional funds for operations come from MNVEST, which now is “a smaller pie split up for more services — it is also used for Hiawatha and the central corridor (light-rail projects) and those didn’t exist a couple years ago,” Leek said.

And “on the capital side, there really hasn’t been enough capital bonding to fund all the capital projects in the [regional] capital improvement program,” Leek said.

WHAT WILL HAPPEN?

Kollodge said the council has taken a number of other steps to also shore up mass transit.

It is slashing overhead at the council and Metro Transit, tapping regional general-purpose and land-development funds and using $25 million in federal stimulus dollars.

“We are looking at how to best distribute regional and capital and operating funds in order to maintain the existing system,” Kollodge said. “Given today’s economic conditions, the top priority when allocating scarce resources is maintaining and preserving existing services, and the essential capital investments [fleet and facilities] that support the service. The circumstances require a fresh look at how funds are equitably distributed to meet regionwide needs and priorities.”

The Met Council is set to vote on its 2010 budget on Dec. 9 and soon will address the 25 percent saving policy for suburban transit.

Shakopee and Prior Lake are considering spending down their reserves by buying or leasing a bus to offer a better reverse-commute service.

“We haven’t gotten to the next phase of ‘what-if,’ ” said Miller at Minnesota Valley. “It doesn’t look good. We have so many needs. We’ve come to rely on those funds for the shortfalls in capital.”

FEDERAL FUNDS

The Met Council is also considering requiring suburban providers to contribute a portion of their federal dollars to a regional pool for bus and facility improvements, although it isn’t asking its own providers to do so.

Shakopee only receives about $20,000 annually from the federal National Transit Database (NTD) fund, dollars it earns based on the service it provides. The much larger Minnesota Valley Transit Authority receives roughly $1 million — money it planned to use toward expanding the Eagan bus garage.

Shakopee and Minnesota Valley have chosen to use these federal dollars to supplement what they receive through the Met Council for capital expenses.

“The Met Council has come to the conclusion that they’ve been paying for regional buses, which include buses we use. Their transit operators put their NTD into operations and, my goodness, we should be putting ours into regional capital,” Leek told the Shakopee City Council sarcastically.

“Someone at the meeting asked what does that mean. My quip was, it’s fiscal disparity for NTD funds,” he said, referring to a state mandate that requires Shakopee to share its business property tax revenue with other cities.

Metro Mobility and Metro Transit, which get about $15 million in NTD funds, can continue spending all of theirs on their own operations.

“If they didn’t, regional transit would have faced an even higher projected shortfall, and that likely would have resulted in services reductions or fare increases across the system,” said Kollodge, noting that Metro Transit provided 80 million rides last year. “Applying those NTD funds to operations benefits the entire regional system.”

Miller said Minnesota Valley has only spent its NTD on capital, but the Met Council now wants it to also use a portion for operations.

FRUSTRATION

The proposed changes are among others transit providers have been talking to the Met Council staff about.

Leek said most of those who represent transit organizations outside Metro Transit “tend to walk away from those meetings thinking that our input really isn’t beneficial when the end of the day comes.”
Suburban providers claim the council is becoming overly bureaucratic, insulting and wasting the time of successful suburban transit operations.

“We have countless meetings, a lot of forms,” Miller said. “It has been very, very stressful and very difficult to have a plan moving forward when things seem to be changing all the time. It is becoming harder and harder to maintain your autonomy.”

Local officials are pushing back against attempts by the Met Council and others to standardize transit services across the region, including the appearance of buses.

Legislation proposed by DFL Rep. Alice Hausman of St. Paul — who doesn’t think it’s fair the suburbs have nicer buses and facilities — would eliminate suburban control of bus services (as well as Metro Transit’s), folding all transit providers into one statewide entity.

Transit providers say they’ve been able to build nice facilities because of prudent decision-making and their real estate investments.

“I’ll defend to the nines these opt-outs and what they’re able to do with flexibility and treating customers as customers,” Carver County Commissioner Tom Workman has said.

Miller said she understands the Met Council’s need for accountability, but it could be accomplished more simply with random audits or site visits.

Minnesota Valley has never been cited, Miller said, and has its own review system of incentives and penalties for the bus companies it works with.

“I’d stand our performance up to anyone, anywhere in our region,” she said.

Shakopee Mayor John Schmitt told his council the latest Met Council directive just adds to local frustrations with the regional body.

“We’re going to have to do more things out here in order to stand up and speak for ourselves and carry some weight,” Schmitt said.

Shannon Fiecke is a staff writer for the Shakopee Valley News. She
can be reached at sfiecke@swpub.com.