City of
Public Transit
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RE: |
Proposed Transit
Sales Tax Rate Analysis |
Attached
for your review is a spreadsheet analysis recently prepared by staff regarding
proposed sales tax rates to support public transportation service in
The analysis factors
projected revenues received from the four primary sources of funding for the
next 10 years that includes: Federal
Transit Administration, Kansas Department of Transportation, fares and bus
passes collected from transit patrons, and proposed local sales tax. In addition, the analysis evaluates projected
expenditures needed to support transit system operating and capital needs based
upon historical costs and current pricing.
Many assumptions are made regarding projected revenue and expenditures
over the next ten years that have been clearly outlined.
Staff believes that rising
fuel costs will be the most difficult expenditure to project in the
long-term. Since this time a year ago,
the price of diesel fuel per gallon has increased by an astonishing 79%. The pace at which the price of fuel is
increasing is unprecedented and making it very difficult to predict what the
cost of fuel will be in the future.
Another challenge to be
addressed is how to budget accordingly for transit system capital and
infrastructure needs. As with any
service, there are both operating and capital needs. To ensure that the service is well positioned
for success in the short and long-term will require funding that adequately
addresses both these needs.
In summary, in order for the
transit system to maintain status quo service operating 67,018 revenue hours of
service annually based on existing demand for service and to adequately address
its capital needs will require a .25% sales tax rate assuming projected
revenues from other sources and expenditures are accurate. At this rate, the transit system is well
positioned for success for the next 10-years and will operate in the black for
9 out of 10 years. The reason why it does not operate in the black in the first
year is that the City will not collect a full year of sales tax in FY09. A .20% sales tax rate has the transit system
operating in the red for 6 out 10 years and the transit system would only be
able to partially address its capital needs.
Staff believes it would be highly likely that the transit system would
require additional resources within the 10-year period to maintain existing
service levels and to fully address its capital needs. A .15% sales tax rate has the transit system operating
in the red or running deficits for the entire 10 year period unable to maintain
status quo level of service and unable to address its capital needs. A
lower sales tax rate could possibly work if service is reduced, revenues from
other sources are higher than projected or expenditures are lower than
projected.