March 14, 2007
RALEIGH – Charlotte could focus on real transportation problems and improve its bus system’s efficiency by scrapping a special half-cent sales tax. That’s a key finding in a new John Locke Foundation Spotlight report.
Click here to view and here to listen to Dr. Michael Sanera discussing this Spotlight report.
“The half-cent sales tax money has been an unfortunate diversion,” said Dr. Michael Sanera, JLF Research Director and local government analyst. “It has diverted the attention of Charlotte’s citizens to a light rail system that has expended vast amounts of money with little promise of reducing traffic congestion.
“It has also diverted Charlotte’s bus system onto a path of inefficient operations,” Sanera added. “It is time for Charlotte to rethink its total transportation needs without the half-cent sales tax.”
Sanera and co-author Joseph Coletti, JLF fiscal policy analyst, are unveiling their report as light rail critics work to repeal the half-cent sales tax. If those critics gather enough signatures, Charlotte voters will decide in November whether to repeal the tax.
Charlotte adopted the special sales tax in 1998. Supporters said the tax would generate funds to help expand an existing city bus system and to match federal funds for the city’s light rail system.
Sanera and Coletti found that the tax has had harmful unintended consequences. Cost estimates for the entire transit system – light rail and buses – increased from $2 billion to $9 billion. Bus ridership increased by 52 percent from 1997 to 2005, but operating costs more than doubled during the same period, Sanera said.
“The ridership increase would be a success story if the system had controlled its costs, but the infusion of guaranteed sales tax funds caused costs to spiral out of control,” Sanera said. “For example, operating costs per trip grew 118 percent from 1997 to 2005. If Charlotte cut its costs from $4.29 per trip to $3.20 per trip – the average cost for seven other North Carolina bus systems – the city could slice 25 percent off its operating expenses.”
Revenue from the special sales tax has allowed the Charlotte Area Transit System to become one of the least efficient bus systems in North Carolina, Sanera said. “Transit bureaucrats, like most bureaucrats, will always find ways to spend most, if not all, of the money available, even if they spend it inefficiently. Flush with cash, CATS went on a spending binge that resulted in an inefficient system and some of the highest costs in the state.”
Repealing the sales tax would force Charlotte’s bus system to return to more efficient pre-1998 operating practices, Sanera said. “Ending the half-cent sales tax would force transit bureaucrats to control costs and reverse spending trends,” he said. “Cutting per-trip costs would lower expenses. Then CATS could fund its less expensive bus system by taking too simple steps.
“First, ask riders to pay more,” Sanera explained. “Before the tax, riders paid 26 percent of total costs. Now they pay 14 percent of total costs. Charlotte should increase that percentage to 25 percent to bring in another $14.3 million.”
Second, Charlotte should give CATS $21.9 million, about 2.5 percent of the city’s operating budget, Sanera said. “Most cities fund bus systems without designated tax revenue,” he said. “Bus systems justify their worth in the normal city budget process. This keeps the pressure on bus administrators and helps systems operate more efficiently.”
Joseph Coletti and Dr. Michael Sanera’s Spotlight report, “Charlotte’s Transit Tax: A costly distraction from the city’s true transit needs,” is available at the JLF web site. For more information, please contact Sanera at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].