C-Tran’s Proposition 1 Sales Tax Initiative – The Numbers Tell the Story

Submitted by Tiffany Couch

Are you confused by the conflicting statements related to C-Tran’s Proposition 1 initiative? Some have said that the initiative will give the Agency “twice as much money as they need!” Others have said, “the sales tax is not enough!”

So what are the facts?

In my business, the numbers tell the story. And thankfully, C-Tran has reported numbers which tell voters how the agency intends to use your sales tax funds.

Just a year ago, C-Tran came to the voters asking for a .2% increase in sales tax, claiming the funds were necessary for the Agency to maintain current levels of bus service. The initiative was passed, providing C-Tran with an investment of $10 million annually from local taxpayers.

This year C-Tran is asking voters for an additional .1% increase in sales tax to pay for Bus Rapid Transit (BRT) and Light Rail Transit (LRT). If passed, voters will be investing in C-Tran by an additional $5 million per year. Passing this year’s Proposition 1would effectively give C-Tran a $15 million annual revenue increase in just over one year.

Will that $15 million be enough to sustain current levels of bus service, BRT, and LRT?

C-Tran has provided that answer. And that answer is No.

Their current financial plan (http://www.c-tran.com/assets/HCT/HCT_System_and_Finance_Plan-Final.pdf) includes three different scenarios (“optimistic”, “pessimistic”, and “realistic’). Each of these scenarios shows the following:

• C-Tran will come back to voters as early as 2019 and ask for an additional .2% (or $10 million +) sales tax increase (see Page 33 of their plan).

• Even with $10 million in annual sales tax increases last year, a proposed $5 million in annual sales tax increase this year, and an additional $10 million in annual sales tax increase planned in 2019 (a total of $25 million per year), all of C-Tran’s financial plans show the Agency operating at a loss (i.e. expenditures will be more than incoming revenue), requiring them to deplete cash reserves (see Pages 37 – 42 of the plan).

Some may say these are “doomsday” or “worst case scenario” projections.

But, consider this: during 9 of the last 10 years (2002-2011), C-Tran has been unable to sustain profitable operations. C-Tran has shown significant net losses on the operation and maintenance of their current levels of bus service. In fact, in a year in which they received a nearly $10 million dollar increase in revenue from the passage of a sales tax initiative (2006), they were only able to eke out a $1.6 million dollar net income.

C-Tran may claim that I am being unfair in my analysis because I am not including the grant revenues they received in each of those years, which appear to “alleviate” these losses on their income statement. However, let’s be clear. Those grant revenues were strictly for purchases of capital assets (e.g. new buses). Those grant revenues are separated from the rest of C-Tran’s operating results for a reason: so that the reader of the financial statement (i.e. you, the investor) can understand the revenue and expenditures related solely to the operations of the Agency. And those numbers are clear: C-Tran continually operates at a loss.

C-Tran may also claim that I am being unfair in my analysis because as a result of the 2006 sales tax increase they were able to “bring back” services that had previously been taken away. Even with a restoration of services and an extra $10 million per year, why did C-Tran consciously decide to operate at a loss?

C-Tran has claimed that because of their large cash reserves and lack of long-term debt that they have been a “pay as you go system.” An observer during a recent community event made the following comment, “C-Tran is a pay as you tax system.” His observation is correct. A pay as you go system ensures that an agency maintains operations with current levels of revenue, and expenditures that do not exceed that available revenue. C-Tran’s entire future financial plan hinges on its ability to tax voters now and in the future. Even with a 2011, 2012 and 2019 tax increase, C-Tran’s own financial plans fail. And when those plans fail, C-Tran will be forced to come back to the voters yet again.

Tiffany R. Couch, CPA/CFF, CFE is Principal of Acuity Group, PLLC. A Vancouver, Washington based forensic accounting firm. She can be reached at tcouch@acuityforensics.com

Blog author note: The above Op-Ed was submitted to the Columbian's editorial page editor, John Laird and rejected with the reason given, its "too late."

Something voters need to be made aware of that hasn't been mentioned a lot: "Resolution BR-12-009 and RCW 81.104 authorize a proposition to increase the sales and use tax by 0.1 percent, or one penny on a ten dollar purchase, to fund the C-TRAN share of the maintenance and operations costs only of the Columbia River Crossing Project light rail extension between Expo Center and Clark Park & Ride and the local capital share and operations and maintenance costs of the Fourth Plain Boulevard Bus Rapid Transit project."

Of note in the statement from the voter pamphlet, BETWEEN EXPO CENTER AND CLARK PARK & RIDE.

Yes, if this passes and they force light rail on us, we will be paying for operations and maintenance inside Oregon as well.

Even more money to be drained out of our struggling community to bail out Portland’s folly of light rail.