Fiscal Cliff Bill Helps Commuter Costs A Little Less Taxing

By Laurel McJannet, Online Content Specialist

If you rely on alternative modes of transportation to get to work (transit, train, ferry, bike) and take advantage of your company’s commuter incentive program, you could realize a savings of up to $2,940* thanks to a recently amended federal tax code that was part of the Fiscal Cliff Bill passed late last year. (AKA Internal Revenue Code Section 132(f)).

First, a little history.

According to commuterbenefitsworkforus.com, commuter benefits have been around for at least 25 years, joining health, retirement and disability as some of the voluntary benefits workplaces can offer. Over the years, the monthly tax-free cap commuters could spend on transit has been raised and lowered by Congress. In 2009, it was raised to $230 to equalize transit and parking, which are both covered under the commuter benefit. For tax year 2012, the monthly cap is $240. For tax year 2013, the monthly cap is $245.

The amendment Congress passed late last year allows employers to receive tax benefits for providing certain types of employee transportation benefits. The IRS calls these benefits, “Qualified Transportation Fringe Benefits” or “Commuter Tax Benefits.” Or, as the National Center for Transit Research puts it, “Employers save on payroll related taxes. Employees save on federal income taxes.”

What’s In It for Me?

If you are an employee, you are eligible for this benefit as long as your employer offers it. If your employer doesn’t currently offer this benefit, consider sharing this post or contacting our Community Transit staff (their information is available at the end of this post).

If you are a Washington State employer, you are eligible for a credit against your business and occupation (B&O) or public utility tax (PUT) liability if you provide a commute trip reduction incentive to (or on behalf of) your employees. The credit is equal to 50% of the benefit cost up to $60 per employee per year.

For tax year 2012, employers have three options on how they can reduce their employees’ cost of commuting via public transportation (bus, train, ferry or registered vanpool) or qualified parking for employees:

1. A tax-free employer-paid subsidy
2. A pre-tax employee-paid payroll deduction, or
3. A combination of the above (shared employee- employer paid)

Tax-exempt and pre-tax limits are set by the IRS. The following are the limits for the 2013 tax year, but the effective date may allow for retroactivity back to January 1, 2012 if an employer so chooses:

• $245 per employee per month for vanpool, bus, ferry, rail (all public transportation)
• $245 per employee per month for qualified parking, or
• $490 per month per employee for both public transportation and qualified parking.

When the employee pays part or all of the cost of public transportation via a pre-tax payroll deduction, s/he can set aside up to $245 a month of pre-tax income. The employee saves federal withholding and FICA payroll taxes on the amount deducted. The employer saves paying FICA on the amount deducted. Employees may also share the cost with employers using after tax income.

If you are interested in learning more about how a Qualified Transportation Fringe Benefits program may work for you and your workplace, please contact Debbie Anderson or Mark Melnyk at Community Transit.

* Tax savings are for informational purposes only and are based on upon monthly pre-tax deductions of $245 for a transit benefit. $245 is the monthly cap for tax year 2013. Individual savings may vary based upon income, individual tax rates, state of residence and other factors. Please consult your tax advisor.

State Transit Funding Campaign Started

By Martin Munguia, Public Information Officer
 
The Washington State Transit Association, which represents the state's 31 transit agencies in Olympia, has kicked off a Keep Transit Moving! campaign to get more state transit funding.

A news release features quotes from agency directors across the state, including Community Transit, Metro, Pierce Transit, Sound Transit and the Spokane Transit Authority. The release states three ways the state can better invest in transit:

• Provide up to $400 million per year for 10 years in new state investment in transit (or a minimum of 25 percent of any new state funding package) distributed directly to the state’s 31 public transit agencies to meet local and regional priorities.
• Authorize additional financial capacity for new locally-approved transit funding including motor vehicle excise tax, vehicle license fees, and/or extension and expansion of the Congestion Reduction Charge.
• Maintain the state’s current transit funding that provides for critical regional and rural mobility, vanpool, special needs and commute trip reduction grant programs.

Before Initiative 695, the state motor vehicle excise tax provided Community Transit and other transit agencies with about 30 percent of their total funding. After the legislature did away with the MVET in 2000, state funding has dropped to about 2 percent for transit agencies, and much of that is through the competitive Regional Mobility Grant program, so it is not guaranteed money.

Community Transit is one of the few transit agencies at its legislated maximum for sales tax authority, so there is no way to get more funding without state authority. While the agency had to cut 37 percent of its bus service to weather the recession, finances are stable going into 2013 and there are no plans for further cuts. However, restoration of Sunday service and other service expansion will not happen unless significant new funding comes in.

To Add Bus Service, We Need New Funding

The Washington State Legislature began its 2013 session this week, so it’s a good time to review how bus service in Snohomish County is funded. Community Transit will be asking legislators for new funding, or authority to seek additional funding, so it can add bus service after several years of cuts.

Community Transit is a special purpose municipal corporation, separate from the county, cities or state. It was created by voters in 1976 under state authority to provide public transportation service to Snohomish County residents. Our service area, or public transportation benefit area (PTBA), includes unincorporated Snohomish County and all cities in the county except for Everett, which has its own transit agency.

Service is paid for by a 0.9 percent retail sales tax – the state maximum – in those jurisdictions. That’s nine cents on a $10 taxable purchase. In many parts of the county, the sales tax is above 9 percent, so Community Transit gets about one-tenth of that sales tax collected.

When the recession hit in 2008, sales tax revenues fell as people in the county reduced their buying, especially on big-ticket items like homes and cars. Tax revenue for transit dropped 18 percent that first year and pretty much stayed at that level for four years. In real dollars, that meant about $14 million less money each year.

After cutting internal costs, reducing administrative staff and freezing wages, Community Transit implemented two service cuts, reducing bus service by 37 percent and laying off 206 employees. Those painful actions have hopefully put the worst behind us; now it is a matter of funding new service.

Meanwhile, modest fare increases help keep pace with inflation. The $1.75 fare for local bus service pays for less than 20 percent of the cost of a local trip. The extra 25-cent increase in February will bring that farebox recovery up to about 21 percent.

While people’s buying habits have started to improve, 2012 revenues were still $10 million below 2007 levels. At this rate, it will take several years until there is enough guaranteed sales tax revenue to add significant service.

That is why new funding is needed to add service.

This year we are asking the state for direct funding for transit operations. That may be a pie-in-the-sky request, but before Initiative 695, the state provided directly about 30 percent of transit service funding. Today, that state funding is about 2 percent, some of which comes through competitive grants that are not guaranteed.

We are also asking the state for a local option – the authority to ask our voters to fund service. Two years ago, the state gave King County Metro authority for a $20 car tab fee that kept Metro from making some major service cuts. We’ll see what legislators are willing to support in terms of transit funding this year.

Fares for All Services Will Increase February 2013

Beginning February 1, 2013,fares will increase for all Community Transit services. The new fares are posted on our website. If you are an ORCA monthly passholder, please remember these new fares as you reload your ORCA pass or E-purse in January.

As we mentioned in a past post, the fare increases on buses, vanpools, and DART are necessary to pay for current service levels and not new service. This move also puts Community Transit’s adult local fare on par with other transit agencies. The new adult fare will be $2; Pierce Transit also charges $2 and Metro charges $2.25 for non-peak and $2.50 for peak-hour local service.

Raising fares helps Community Transit:

• Keep pace with cost increases, including fuel prices, wages, benefits, and inflation.
• Pay for approximately 21 percent of the cost of riding the bus. This means 79 percent of each trip is subsidized by sales taxes, grants and other revenue.

The agency will launch some new trips in February, thanks to grant funding. But to pay for significant new service, we need new funding.

The State Legislature convenes Jan. 14 and may consider ways to fund transit this session. Community Transit will be asking for direct funding, or the ability to take a measure to local voters to authorize additional funding for the agency. After cutting 37 percent of our bus service since 2010, we want to do the best job we can of providing the transit service our customers want. Fare increases help keep pace with inflation, but don’t give us the financial room to bring back Sunday service nor add trips where many people want them.

We recently updated our six-year plan forecasting our financial revenues and service levels in the near-term future. The report asserts the same point as last year— we are still waiting for a strong economic recovery and sales tax revenues. We encourage you to review our Transit Development Plan, 2013-18 and participate in the public comment period which is now underway.

Six Year Plan = Not Enough Funding

Community Transit has released is draft six-year Transit Development Plan, 2013-18 for public comment. The plan updates the agency's forecasts for financial revenues and service levels in the near-term future. Because the impacts of the recession greatly changed the outlook for the agency, the six-year plan has had major updates each of the past three years.

The new report repeats last year's assertion that strong economic recovery is not on the horizon, and sales tax revenues will not grow to the point that any significant service will be added in the next six years.

As the report points out, any modest revenue margins above costs that the agency sees in the near future will be spent on backlogged facilities and maintenance projects that were delayed when all available funding was put toward service. Reserves also need to be replenished to be ready for the next downturn.

In the midst of this dire forecast, the agency is putting forth a goal to increase ridership by 25 percent - to 12 million annual boardings by 2017. Transit demand is growing faster than the economy is recovering, and the agency will be looking at various ways to get more people on our buses. Replacing old 60-footers with new Double Talls is one way. A state Regional Mobility Grant request was ranked 5th out of 27 projects by the WSDOT, but awaits legislative approval. That grant would be used as a local match to federal capital funding to buy 17 Double Talls at no expense to the agency.

But the bottom line in the report is that the gap between service needs and service delivered is growing in Snohomish County each year. As the state legislature convenes next week with K-12 education funding on its mind, Community Transit - as well as Pierce Transit, Metro and other transit agencies in the state - will make the case for new transit funding. Whether it is a statewide funding solution or a local option that each agency can take to its voters, new funding is only way that Community Transit can begin to significantly meet its community's service demands.

Read the report, follow the legislative session and join the conversation.