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Council questions levy hike for Duluth transit system

Property tax concerns are prompting a closer look at a doubling of the Duluth Transit Authority's funding request.

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Passengers wait to board a bus at the Duluth Transit Authority downtown transit center July 7, 2021, in Duluth.
Clint Austin / File / Duluth News Tribune
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DULUTH — As they work to rebuild ridership in the wake of the COVID-19 pandemic, local transit authority officials aim to substantially reinvest in operations. But their proposal to more than double the amount of local property taxes collected in support of the Duluth Transit Authority has drawn scrutiny.

While the DTA is part of a special taxing authority whose dedicated tax revenues don’t flow into the city’s general fund, 3rd District City Councilor Roz Randorf noted that when the authority raises its levy, local taxpayers take a hit.

She pointed out that while the DTA levied $1.6 million in 2022, it proposes to collect $3.9 million next year. That’s a $2.2 million jump in property taxes.

Randorf said the levy for the special taxing district currently amounts to $150 in taxes on her residence, and that charge would jump to $343 if the DTA’s current request is fulfilled.

A pair of proposed amendments could trim the anticipated increase in the city property tax levy by 1-2% next year.

The DTA is one of several organizations that receive funding through what’s called a special taxing district. The other four members include the Duluth Housing and Redevelopment Authority, the Arrowhead Regional Development Commission, the Duluth Seaway Port Authority and the St. Louis County Regional Railroad Authority.

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Randorf said all those other taxing authorities kept their levy requests for 2023 relatively flat, with the exception of the DTA, which she said could have “a huge impact on taxpayers.”

She pointed out that the DTA received $18.2 million in pandemic-relief funding and noted that about half those funds remain unspent.

“So, the way I see it, this is their cushion for stormy times like this, when ridership is down and gas prices are up, because you’re virtually running half-full buses on very expensive gas,” Randorf said.

She suggested the DTA should draw more heavily on its relief funds and reduce the burden placed on local property taxpayers. Randorf proposed the authority levy just over $2.17 million next year, which is still an increase of more than $500,000 from this year.

DTA General Manager Rod Fournier said the impact of the decision to seek a larger levy was not lost on authority members.

“The pandemic affected everybody. There’s no question about that. But public transit was hit particularly hard, and we look toward the future, we are trying to develop strategies to get to where we were pre-pandemic,” he said.

Duluth Transit Authority General Manager Rod Fournier at the DTA's garage
Duluth Transit Authority General Manager Rod Fournier poses in the DTA’s garage Feb. 15.
Steve Kuchera / File / Duluth News Tribune

As for the pandemic relief funds the DTA has received, Fournier said the authority has taken a conservative approach to their use, opting not to spend them quickly on large capital improvements, as some others in the industry did.

“We realized quite quickly that we needed these funds to shore up our operations,” he said.

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Fournier acknowledged some basic capital expenditures were made using the relief funds, with an eye toward maintaining public safety. These included the installation of driver barriers and air purification systems on all DTA buses.

“So, that’s really the only capital projects that we used these funds for,” he said, noting that they instead have been used to supplement operations.

Even though the pandemic has eased, Fournier said ridership has not yet bounced back, with buses carrying only about 60% of the passenger load they did before the COVID-19 outbreak. He said that reduction in use is comparable to what other peers in the industry have experienced.

Fournier said the DTA is currently using about $230,000 per month in COVID-relief funding just to backfill and cover operating expenses.

While he acknowledged the $9 million in reserves is a large sum, Fournier said, “We’re proud that we were very judicious with these funds. We’re using them as a safety net right now, because we don’t know where the pandemic is going next. Nobody does.”

Fournier said the relief funds combined with assistance being made available through the Infrastructure Investment and Jobs Act, could help the DTA recover.

“We anticipate that we’ll be able to use these funds as a springboard to rebuild our ridership and to get to a point where we were before,” he said.

Fournier said the levy funds are necessary to keep a number of key investments on track, as well.

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“We have buses on order. We have improvements that need to be made to keep our facility in a good state of repair. These are already projects that are on the books that are yet to come, and adjusting the levy would have a great impact on that,” he said.

The COVID-relief funds cannot be used as a local match for any capital projects that are already in the pipeline, explained Chris Belden, the DTA’s director of planning and grants.

“We’d likely have to turn back some funds for capital projects that we’ve been granted. Where we typically turn a dollar into $5; or in operations with our levy, we’re taking 50 cents and turning that into $5 by leveraging all these other investments. So, with that we could be forfeiting a significant amount of money,” he said of lost access to state and federal funding.

Council Vice President and 5th District Councilor Janet Kennedy asked whether jobs would be lost if the DTA’s proposed 2023 levy were lowered to the level Randorf suggests.

Fournier said the DTA would certainly make every effort to retain staff for as long as possible.

But Belden said that over the longer haul, “We’d have to really look at the whole picture and see how to readjust, which might mean fare increases or a reduction in service.”

He said both of those moves would certainly result in lower ridership, long term. “And that’s the problem we’re trying to avoid, where even adding back service later on, you’d never get that ridership back.”

The stakes are high, according to 1st District Councilor Gary Anderson.

“As everybody knows, I drove bus for the DTA for nine months. I have that butt-in-the-seat experience, and I know the importance of this work, and I also am very cognizant of the fact that we are a community and a culture that’s in transition. Therefore, this discussion is really pertinent,” he said.

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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