Sales taxes slide; CATS considers cutbacks

The half-cent sales tax that is the main source of funding for Charlotte's buses and light rail continues to weaken, causing the Charlotte Area Transit System to consider cutting some bus service.

“Today it's worse than I thought,” said CATS chief executive Keith Parker, who plans to discuss cuts at Wednesday's Metropolitan Transit Commission meeting. “We're now looking at a flat year, with no growth. That's a multi-million-dollar hit.”

Earlier this year, CATS expected the sales tax wouldn't grow as quickly as it had earlier this decade, when the local economy was booming. But sales tax revenues for August and September were down compared to the same two months in 2007, and CATS doesn't know when people will start spending again.

Last year, the half-cent sales tax in Mecklenburg generated $12.6 million for CATS in August and September. This year, those two months have brought in $11.7 million for CATS.

For the first nine months of the year, CATS has received $54 million from the tax – compared with $54.8 million in the first nine months of 2007.

The tax pays for 65 percent of the transit system's budget.

CATS is also bracing for as much as a 10 percent cut in money it receives from the state, which has also seen tax revenue decline. The N.C. Department of Transportation gives CATS $13 million a year for its operating budget.

“That's the other big hammer out there,” Parker said.

There is some bright news: Fuel prices have dropped precipitously. Earlier this year, CATS had projected it would have to spend an extra $4 million a year because of $4 a gallon diesel prices. It raised bus and train fares, but was still about $2 million short.

The lower fuel prices could erase that deficit.

CATS generally socks away about $25 million annually for its capital budget, so it's in no danger of running an overall deficit. Parker said CATS has no intention of dipping into those funds, which are slated to help expand the rapid transit system.

CATS is trying to build three large rail projects: An extension of the light-rail line to the University City area, a commuter rail line to Lake Norman, and a streetcar through central Charlotte.

“We don't bleed the capital budget,” Parker said.

CATS already is under a hiring freeze, except for the essential positions, Parker said. He said he hasn't drawn up a list of possible cuts, but service on marginal bus routes could be reduced.

When CATS drew up its long-range plan earlier this decade, it assumed the tax would grow on average by 5.75 percent annually. A sales tax that funds Atlanta's transit system in Fulton and DeKalb counties grew by a similar amount over 30 years, which included recessions in the early 1980s, 1990s and after 9-11.

In January, after taking over for Ron Tober, Parker lowered the assumed growth to 4 percent for the next two years.

After 9-11, transit revenue in Charlotte fell in 2002 and 2003. But as the economy recovered, and the region began adding tens of thousands of people a year, the tax grew by as much as 11 percent annually.

This story was originally published November 18, 2008 at 12:00 AM with the headline "Sales taxes slide; CATS considers cutbacks."