People who use Metro Transit might be looking at cutbacks or fare increases as the Metropolitan Council grapples with a projected $89 million budget shortfall in its transportation operating budget over the next two years.

The regional planning body hopes that instead state lawmakers will provide a long-term source of revenue to pay for bus, light rail and other transportation services and projects, said Met Council Chairman Adam Duininck.

That revenue could come from a half-cent transit sales tax in the seven-county metro area.

Duininck said the council will be “working around the clock” to avoid raising bus and LRT fares, which was last done in 2008. And council members, at a briefing Wednesday, clearly found the prospect of raising fares distasteful.

Council Member Jennifer Munt said it would be “a nightmare” to raise fares and cut transit service at the same time. “People will just say, ‘I’ll buy a car,’ ” she said.

Council Member Gary Cunningham said a fare increase and service reduction would most affect low-income residents — “the most needy in our population.”

Any change in Metro Transit’s fee structure or route map would take six to nine months to complete and involve numerous public hearings. Met Council Chief Financial Officer Mary Bogie was quick to note that changing both would not entirely solve the revenue shortfall.

Too few new cars

The main issue confronting the council is a $43 million projected decline in motor-vehicle sales tax revenue through fiscal 2019.

Consumers pay a 6.5 percent tax whenever they buy a new or used vehicle, but revenue projections keep falling because people are holding on to their cars longer in lieu of buying new, Bogie said. The motor-vehicle sales tax “relies on consumers buying big-ticket items” in an uncertain economy, so it’s inherently uncertain, she added.

This tax revenue makes up about 44 percent, or $225 million, of the council’s overall transit operating budget for 2016.

And transportation makes up about two-thirds of the council’s overall $1 billion annual budget.

Duininck said the council was expecting less motor-vehicle sales tax revenue, but that relevant economic projections for 2017 by the Minnesota Management and Budget office were worse than expected.

Metro Mobility use up

At the same time, demand for Metro Mobility bus service, which serves the elderly and disabled, is likely to increase in the same period, due largely to aging baby boomers in need of transport.

A $24 million deficit is projected for Metro Mobility — whose services are mandated by the federal government — over the next two years.

The remaining $22 million deficit over the next two years is related to “inflationary pressures” and the possible use of $9 million in certificates of participation, an obscure financing tool that may help pay for the Southwest light-rail project over the next two decades.

Tax would fix deficit

The Met Council supports a half-cent transit sales tax for the seven-county metro area to raise money, a proposal that Gov. Mark Dayton unsuccessfully pitched during this year’s legislative session.

Such a tax would raise about $280 million a year, and would eliminate the council’s deficit.

With the Legislature now entirely controlled by Republicans, many of whom oppose public transit spending, it’s unclear how a similar proposal this year will play out should the governor propose it.

For now, the council has enacted a temporary hiring freeze on certain positions within its transportation department — excluding Metro Transit bus and LRT operators — reduced administrative costs.

It’s also taking a hard look at 2017 projects.

It’s unclear how the Met Council’s transit deficit will be affected by the possible dissolution of the County Transit Improvement Board, which already levies a quarter-cent transit tax in Hennepin, Ramsey, Washington, Dakota and Anoka counties.

That board pays about half the annual operating costs of the Green and Blue light-rail lines, and is expected to pay a third of the cost of the Southwest and Bottineau LRT projects.