Tax hike seen as key to Valley Transit funding

The agency faces an $800,000 shortfall and needs new revenue to avoid cuts, officials say.

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WALLA WALLA -- The Valley Transit board room was packed full Wednesday morning, but rather than board members going through their normal deliberations, the room was populated primarily by customers.

Valley Transit held public hearings at 10 a.m. and 6 p.m. on Wednesday to address financial shortfalls and discuss options for developing new streams of revenue. These options, including doubling the current rate of sales tax revenue, could stave off budget cuts of up to 25 percent.

The hearings were hosted by Valley Transit management and attended primarily by concerned residents and others with a stake in the services that Valley Transit currently provides.

After a July budget meeting, Valley Transit concluded that under the current economic conditions it will be unable to pay monthly expenses and wages by 2010. Finance Administrator Ed McCaw confirmed the organization's woes.

"We are in a dire financial situation," he said. "We will be facing an $800,000 deficit this year."

The hearings, in part, were an opportunity for Valley Transit to describe the reasons for their financial situation to customers.

Foundation for trouble

According to General Manager Dick Fondahn, the problems started in 1999. In November of that year, Washington voters approved Initiative 695, repealing the motor vehicle excise tax. The tax, which subsidized local transit organizations across the state and was removed by 2000, provided a significant portion of Valley Transit's funding, Fondahn said.

"We have been in a financial shortfall since 2000 with the repeal of the motor vehicle excise tax," he said. "We lost 53 percent of our funding."

After responding to the reduction of funding by doubling the single fare charge, cutting back service time and dipping into cash reserves, Valley Transit placed itself in a relatively stable financial position, and continued to receive funding from a .03 percentage of the local sales tax and from state and federal grants.

Throughout the decade, Valley Transit continued to borrow from the reserves understanding that the booming local economy would continue to bolster sales tax revenues. But in the current economic conditions, prospects have changed rapidly.

"Sales tax revenue looked good until three months ago," Fondahn said. "With construction projects coming to a halt, we project these revenues will drop by 15-20 percent."

Valley Transit also had the 2010 Census approaching, which was expected to move Walla Walla from a rural area into a small urban area in the eyes of the federal government, resulting in an increase in federal funding, according to Fondahn.

Again, Valley Transit's financial planning was thwarted by broader economic problems. The federal government, facing deficits of its own, recently raised the population requirement far out of Walla Walla's reach. Fondahn relayed this information to the people in attendance at the Wednesday morning hearing.

"Hope of increased federal funding is gone," he said.

These recent developments, compounded by a likely reduction in grant funding over the next few years, has placed Valley Transit in its current situation -- calling upon customers to bring concerns, ideas and priorities to the organization and their board.

While a portion of the morning hearing informed attendees of the reasons for the current financial situation, a main goal of the meeting was to discuss options for increasing revenue.

Increasing fares would accomplish little, according to McCaw, who added that fares are only 4 percent of revenue and that a price hike would do more to decrease ridership than plug the growing deficit.

Where to turn?

By the end of the morning hearing, the most fruitful possibility appeared to be increasing Valley Transit's share of sales tax revenue. Although the Public Disclosure Commission requires that no organization like Valley Transit can lobby for an increase in sales tax, Fondahn and McCaw provided factual answers to questions about what a revenue stream such as an increased sales tax could accomplish to ensure the continuation of service.

"We currently receive $2.1 million from taxes and if we had an additional $2 million from a new or old source we could be sustained," Fondahn said.

Valley Transit currently receives only a third of the maximum 0.9 percent of local sales tax revenue that could be had.
McCaw made it clear that without an additional source of revenue, budget cuts will become a necessity.

"If we had to balance the budget, yes there would be cuts in staff and operations," he said. "Routes and staff have been cut in the past so we are already understaffed."

To accomplish any sort of increase in sales tax revenue, it became clear that the very customers concerned with the continuation of service might be called into to action to preserve Valley Transit. Stanley Green of Walla Walla made a call to the people attending the hearing making their roles clear.

"Citizens will need to get together to get a tax increase under way," he said. "We need to build support in the community."

To propose any sales tax increase, community members would need to place the issue on a ballot without the support of Valley Transit and get approval by Walla Walla voters. This issue could be voted on as early as February. The deadline for November voting was Tuesday.

Freda Tepfer, a Walla Walla resident and regular user of Valley Transit's service, took a step back from the number crunching and problem solving to make her voice heard.

"When I ride the bus it enriches my life," she said. "On the bus, I feel like a part of the community because a full community has reliable transportation."

FYI
A third public hearing will take place next Tuesday at 7 p.m. Valley Transit will also hold an open board meeting next Thursday at 7 p.m. to bring the collected findings of the hearings to the board. These will both take place at Valley Transit, 1401 W. Rose St., Walla Walla.

Comments on proposed service changes and fare increases can be e-mailed to info@valleytransit.com or mailed to Valley Transit, 1401 W. Rose St., Walla Walla, WA, 99362.

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