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 Response Page - Matt Kane Interview - Transportation Issues    

These comments are responses to the questions listed below,
which were generated in regard to the
Matt Kane Interview of 06/20/08.

The Questions:

_7.9 average___ On a scale of (0) strong disagreement, to (5) neutral, to (10) strong
agreement, what is your view on whether metro area transportation officials are
more likely to pay attention to the importance of transit than are state
transportation officials?

_5.2 average___ On a scale of (0) strong disagreement, to (5) neutral, to (10) strong
agreement, what is your view on whether the income tax should be used as a
revenue source for transportation?

Gordon Jacobson (7) (2)

David Broden (7) (3)
Income tax should not be a element of the transportation system unless a very broad overall state policy is established and then only if some very controlled conditions applied.

Mark Ritchie
Very interesting fellow - thanks.

Tim McDonald (8) (1)
8 -- I would say they are better suited; how to allocate power is a relevant question.
1 -- Sales tax, if there is to be a tax, is more fair by my definition of the term
Thanks for the great work on this.

Bright Dornblaser (10) (8)
(Income tax) should for equity, but non-stable resource and politically a non-starter. Other ideas suggested are preferable.

Bob White (7) (8)
Emphasis on a revenue source; i.e., income tax as one among several sources.

Robert A. Freeman (7) (4)
Generally agree metro officials pay more attention to constituents
than state officials, but I think this is just a function of having less constituents.

Think tax revenues for transportation should come from a broader spectrum of sources, not just "taxing the rich". Mileage tax is a good idea but would be hard to enforce.

Generally thought there were some good ideas in the discussion and especially like his point about congestion being a sign of prosperity -also thought he made important points about the way funding is distributed arbitrarily to different levels of government as an entitlement.

Ray Schmitz (5) (10)
1. 5 neutral - seems that the issue really is what part of the picture one is discussing, the state may make better decisions on overall transit, but cities/counties have more contact with local and feeder routes. Additionally the state is less likely to support roads to encourage sprawl, while cities/counties may very well fall into that trap.

2. 10 strongly agree. The idea that revenue directly related to transportation in some way is the only method of funding it seems obsolete. Gas taxes are politically difficult and not necessarily related to increasing costs and demand. Excise taxes on purchases and titling/licenses really have no relationship to use. The governor's Porsche was no more likely to use the road than a 15 years old clunker but it again costs more. Also increased efficiency drives down the gas tax. His discussion of the balance between efficient travel and sprawl is important. If we minimize the pain, do we just encourage moving further out with the then increasing demand? Vicious cycle.

Richard McGuire (5) (10)
His comments are thoughtful and more "out of the box" than most elected officials statements and views. One of the huge controlling underlying issues with any transportation question is land use. Kane alludes to it but it really is a driving force in the needs of your transportation system and how the system develops. As Kane points out you need density of origins and/or destinations to make most transit systems work....preferably some density at both ends.

Charles Lutz (6) (10)

Margaret Donahue (10) (9)
It (income tax) already contributes to transit through the general fund appropriations made for transit systems.

Wayne Jennings (6) (8)
It's such a pleasure to drive on well-maintained and well-designed roads with smooth flowing traffic that the current gridlock on revenues needs to be broken to reduce pain and frustration with driving. So, I favor more gas taxes and income taxes filling in the gap. And of course, use of rail where ridership warrants. We shouldn't continue the half way road operation we now have! How come we can't do things right and do them well? It would not take that much more to put us over the top including catching up with deferred maintenance. I know it's billions but let's get on with it and then keep it up to high standards.

Lyall Schwarzkopf (8) (2)
Users should pay for their transportation.

Al Quie (10) (0)
Wait till we adequately fund Preschool, K-12, Higher Education and research before you even consider using the income tax.

Malcolm McLean (8) (3)
It does seem that transit touches the metro area much more than the rest of MN and hence metro area officials are likely to pay keener attention to it. On the income tax suggestion, I have no detailed information on this but can easily imagine the fights about invading that source of revenue when transportation has its own variety of other sources. That doesn't make it bad but it makes it more politically difficult.

Jim Olson (9) (3)

Larry and Ann Schluter (7) (0)

Bill Frenzel (7) (0)
Question #1 - Metro officials may pay attention, but often for the wrong reason (economic development of particular areas). Transportation is bigger than transit (if I understand the terms correctly).

John Rollwagen (10) (0)
I see the graduated income tax as essentially an income redistribution system in support of a fair and balanced society. Transportation services, on the other hand, while certainly providing a public benefit, have an even larger economic impact on both enterprises and individuals. As a result, those services are best financed, in my opinion, by user fees paid by those that benefit most. The gas tax should be doubled or quadrupled. Tolls should be considered, as well as congestion pricing.

As for public transit, fare box charges will inevitably have to increase as operating costs go up; although the transit system itself should still be subsidized from the gas tax, etc. as a general benefit for all transportation users, including automobile drivers.

Finally, it is certainly appropriate to provide transportation assistance to low income users. Some of that should come from employers and the rest from the general fund — which is where the income tax comes in, as well as property and sales taxes,

Scott Halstead (10) (10)
The legislature has acted in response to an ineffective and non-responsive Met. Council. Unfortunately, we are likely to get in-cohesive transportation/transit with 3 part-time players. Two counties opted out from the tax which will increase transit problems in the future. Transit needs to be planned prior to development so that development occurs in response and at lower cost.

The planned Central Corridor LRT is going to be a big waste transit wise. A well designed route in the same general area could have provided the majority of local residents with faster and better service and been a building block for the future. The operating costs of the Central Corridor LRT are going to be very high because it will be very slow.

I would agree that a dedicated income tax for transportation/transit tiered will be a good source of funds for the future. The metro area and non-metro residents employed in the metro area should pay higher rates. A parking tax will also encourage HOV's and use of transit.

A well conceived 494/694 bus system could increase transit use by 25% or more at much lower total cost.

John Adams (8) (9)
As a general rule, I believe that much of the government spending in the state should come form general revenues that are collected at the state level--namely general sales tax and income tax. Pushing too much to the local is making matters worse, both politically and economically.

I disagree with Matt about the sales tax. His view is a legacy of 1930s Depression-era thinking that sales taxes are unfair to lower-income households. We should not be doing social policy through tax policy. We live in a consumer-oriented society and I believe that consumption should be more heavily taxed and that the sales tax should be broadened cover most goods and services. We should not be using the sales tax to address income and wealth disparities in society. For example, the recent federal government mailing of "economic stimulus payments" to all households was a misguided (politically pandering) effort to promote "economic growth.

What it did instead was send money directly to China whereas the same amount of federal deficit spending could have been used to invest in a variety of infrastructure needs in the US, with the added bonus of keeping the money re-circulating within the US, creating assets, rather than building up even more dollars outside the country--and dropping further the international value of the dollar with its impact on oil prices and domestic inflation.

I agree with Matt's political analysis regarding the division of responsibility between the state and the metro council and the counties.

County and local governments should finance things that are truly local (e.g, neighborhood parks, fire protection), and the state and feds should absorb the cost and operation of public goods and services that are not bounded spatially within local jurisdictions (e.g., transportation, welfare, most education).

Craig Westover (10) (10)
_10___ On a scale of (0) strong disagreement, to (5) neutral, to (10) strong agreement, what is your view on whether metro area transportation officials are more likely to pay attention to the importance of transit than are state transportation officials? (But that's not necessarily a good thing; state resources shouldn’t be used for local projects with limited statewide benefit.)

_10___ On a scale of (0) strong disagreement, to (5) neutral, to (10) strong agreement, what is your view on whether the income tax should be used as a revenue source for transportation? (But that does not necessarily mean raising income taxes. Transportation funding should come out of general funds and compete for state resources with other priorities.)
Good interview. I found it interesting that Kane and I are not far apart on issues like congestion, the structure of transportation funding, and dislike of the transit sales tax. A few specific responses to some of Kane’s comments:
In discussing the Central Corridor, Kane noted that it is not intended to ease congestion but to accommodate anticipated demand, which buses can’t accommodate, and thus provide access to destinations for people. Regarding the relationship between buses and LRT he says, “We need to keep in mind both costs and who is served when exploring transit modes.”
I think Kane’s analysis is of the Venus De Milo kind -- what there is of it is magnificent, but missing are important elements. The first is, transportation is about more than getting from point A to point B. All trips are taken with a purpose. Mobility is getting people from where they are to where they want to go, to do what they want to do when they want to do it. While transit can enhance the ability to get from where you are to where you want to go, it doesn’t necessarily enhance your ability to do what you want to do (grocery shop for a family) or when your want to do it (grocery shop on a Vikings Sunday). To the extent that transit costs detract from other transportation options, it is a limiting factor on mobility.
Second, demand is never independent of price. The demand for transit is based on the assumption that non-transit riders will subsidize not only transit construction but also ongoing transit operations. This greatly distorts the market. On the one hand, there are lamentations that the wealthy don’t pay their fair share of taxes; on the other the state subsidizes suburbanites who work downtown and people who can afford to drop a couple hundred dollars at a Viking’s game. For transit “demand” to have a viable economic meaning (let own a multiple-line viability), we need to move away from subsidizing the system to a model where most people pay a full fare market rate and the state, as necessary, subsidizes low-income riders allowing them to make independent transportation decisions.
Third, Kane’s statement vis-à-vis keeping costs and who is served in mind is what in the business world we referred to as “skilled incompetence.” It is circularly true, but ignores that hard reality that there is a trade-off involved and that someone is going to come out holding the smelly end of the stick. It avoids conflict during decision-making, but never removes it because it is never brought up. The Central Corridor project was premised on LRT from the get go. Just look at all the route controversies and manipulation of the bus routes taking place to make the project viable – all taking place well after the fact that LRT was decided on as the way to go. And why did the U finally compromise? Because it didn’t want to be the one that kept LRT, the agreed upon good, from becoming a reality.
Regarding suburban transit systems, Kane noted that that it is difficult to design a system to well serve potential transit users in locations with low densities for housing and low concentrations of jobs, but innovative approaches would be welcome. The lack of innovative approaches is an opportunity cost of heavily subsidized transit systems. Because public models are so large in scale, they set pricing parameters – think Medicare setting the bar for medical prices in private practice. Segmenting the transit system into a public sector that picks the low hanging fruit and a private sector that must compete with subsidized pricing in suboptimal sectors does not encourage risky innovation.
Kane said that the metro area needs a wider range of options for getting to where they need to go and that land use matters, too, in terms of where people live vis-à-vis where they work. He said that the use of pricing mechanisms to encourage drivers to seek lower cost alternatives has appeal. One approach he noted would be to charge motorists based on vehicles miles traveled, perhaps varying the rate based on when, where, and how far a trip occurs. Kane also said he is not opposed to considering a parking tax, too.
Treating roads as a commodity, it is reasonable that during high demand times, individuals should pay more for the limited supply of road than during times when the supply of road is greater than the demand. In the interview Kane noted that reducing congestion shouldn’t discourage economic activity, yet he seems divorced from that concept with these recommendations. New pricing mechanisms should NOT be implemented to ENCOURAGE alternatives; they should be implemented to provide additional value (generally time-saving) for additional cost. Thus, charging congestion pricing is not a good policy (and a parking tax is an absolute disaster) – building an alternative route or designating high speed lanes at a cost is. LRT like the Central Corridor, subsidized transit that only replaces existing capability, is not cost effective; a high-speed light rail charging what the market will bear. Higher cost should be based on increased value.
Kane also said that the metro area needs a wider range of options for getting to where they need to go and that land use matters, too, in terms of where people live vis-à-vis where they work. This is the dangerous notion of new urbanists – the idea that we must accept decreased mobility as if that had no consequences. The Department of Labor tells us that the average person will change jobs four to seven times in a career. If a person is limited to making career choices based on proximity to his or her home, that severely limits opportunity. The slippery slope is transportation can’t work without land use policy; land use policy can’t work without reengineering individual behavior.
Kane said Growth & Justice favors tapping into income tax revenues. The Minnesota Free Market Institute doesn’t favor an increase in income taxes but we do believe that state resources are state resources and roads, bridges, and transit should be paid for out of general fund dollars and compete with hockey arenas, zoo exhibits and sheet music museums for bonding authority. The bucket approach to transportation funding and the process that places a priority on geographic equity over statewide necessity ought to be done away with.
To support transportation funding, Kane says Growth & Justice believes Minnesota should look to income tax increases targeted toward higher income earners. A discussion of this notion can be summed up in two words: “Carlos Delgado.” Delgado is a professional baseball player traded from the Florida Marlins to the New York Mets. His contract contains a clause that if he moves from a low income tax state (or no income tax like Florida) to a high tax state, his new team must increase his salary so he nets the same salary. The Mets had to pay Delgado an estimated $350 to $400K a year because of the New York tax system. The point is, in the modern world a single state cannot control the flow of capital. If Minnesota has a higher marginal tax rate at upper incomes, it will have to pay higher salaries to lure people to come to Minnesota. Higher salaries, in turn, create a higher cost of doing business, which creates higher prices for products and services. It also creates a larger pre-tax gap in wages between wealthy and non-wealthy. A progressive tax system is an effective tax system when low income people pay a very low tax rate, but the marginal rate jumps quickly between low and average earners and then increases in very small increments at the margins. Economic activity is determined at the margins. Top-loading the system decreases productivity and, contrary to the objective of Growth & Justice, creates a greater (and more visible) income gap between wealthy and non-wealthy.
A final note on the Growth & Justice model: While G&J is going through the multiple steps of their process of collecting and analyzing data to come up with economic policies, millions of individuals are making billions of decisions, each in its small way contributing to a changing economic environment. It is a “fatal conceit” to think that any group of experts can shape the market more effectively than individuals pursuing their own interests – that a better society is produced by experts integrating transportation, land use and behavioral engineering using a multi-step planning model than is the society created in response to millions of individuals making billions of transactions.



The Civic Caucus   is a non-partisan, tax-exempt educational organization.   The Core participants include persons of varying political persuasions, reflecting years of leadership in politics and business. Click here  to see a short personal background of each.

   Verne C. Johnson, chair;  Lee Canning,  Charles Clay, Bill Frenzel, 
Paul Gilje,  Jim Hetland,  John Mooty,  Jim Olson,  Wayne Popham  and  John Rollwagen.  

The Civic Caucus, 01-01-2008
8301 Creekside Circle #920,   Bloomington, MN 55437.
Verne C. Johnson, chair, 952-835-4549,       Paul A. Gilje, coordinator, 952-890-5220.

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