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Second in a series
THE MBTA, like every other transit agency in the US, has suffered severe revenue losses since the pandemic first caused an unprecedented and massive fall in ridership. If you remember, there was virtually no mobility, even on our highways, for the first month after the state of emergency was announced in early March 2020.
Driving has rebounded with a vengeance, as everyone knows by the relentless and growing traffic congestion throughout metro Boston. Transit ridership has recovered, but not anywhere close to pre-pandemic levels. Pandemic effects have changed the ways many people travel. The significant increase in remote work and flexible work hours has changed journey patterns and journey times. Ridership has plateaued and, with it, fare revenues are significantly down from 2019 levels. This is a serious problem because the MBTA, before the pandemic, relied on fare revenues for a third of its operating budget.
All this being said, it would be a serious mistake to believe that the T’s fiscal challenges are all connected to the pandemic. They are decidedly not. The MBTA and the Commonwealth’s Regional Transit Authorities, RTAs, were chronically underfunded for decades. And let’s be honest, the massively poor service quality of the T’s subway system, combined with the effects of the Federal Transit Administration’s safety inspection review, have actively suppressed transit ridership.
The MBTA operating budget crisis might be fueled by reductions in ridership, but that’s not the only issue that needs to be addressed. Remember, there are two budgets to consider when approaching how to fund the MBTA. There is the capital budget, which is the money used to build things, purchase trains, and make significant repairs. Then there is the operating budget, which is the money used to pay employees, compensate certain contractors, and pay down bond debt.
The capital budget is typically funded with revenues generated by issuing bonds (debt). This private sector investment capital is the lifeblood of capital budget sourcing. The operating budget is a wholly different matter.
The T’s operating budget is funded primarily by a dedicated portion of the state sales tax, and this has been the case since the “forward funding” legislation of nearly a quarter century ago. While this sales tax source provides about half of the T’s operating budget, it is inherently unstable (as sales tax revenues are sensitive to larger economic forces) and historically underperforming. It is also highly regressive.
The balance of the T operating budget is funded by fare revenues (about one third of the entire budget came from fares before the pandemic), annual contributions from the state and from municipalities via a local assessment (Boston pays about $90 million a year to support the T), and from what’s called “own source” revenue – modest amounts from advertising and parking fees.
Thanks to federal action providing significant COVID relief funding to transit agencies, every US transit agency has been able to avoid operating budget collapse since the ridership decline. That federal funding is about to be exhausted and not replenished. Hence the T, as well as pretty much every transit agency in the US except New York’s MTA, faces a “fiscal cliff” – when the federal funding is depleted, each will face a significant operating budget shortfall.
Transit agencies typically have only two ways to deal with operating budget shortfalls: they can raise fares or cut back on service. These are inherently toxic responses, leading to further reductions in ridership, and further reductions in fare revenues and investment, creating what some people call a “death spiral.” In other words, agencies have no tools available to them that can resolve an operating budget shortfall without doing significant further damage to ridership and revenues.
Let’s take a step back from this and look at the larger picture. We in Massachusetts have built a consensus around a variety of shared values that include reducing air pollution, reducing traffic congestion, building a stronger and more inclusive economy, and increasing social and regional equity. If we mean what we say, if we truly believe in these values, then they must be the anchors of our policymaking. When it comes to transportation and mobility, our investments must meet our consensus values.
Here is the exercise I would like to recommend to the governor and her leadership team, and indeed to each of us: What is the public transit and rail system we want operating in metro Boston in 2040? That’s roughly 15 years from now. What is the public transportation system that will respond to our presumed shared values of building and maintaining a strong, inclusive economy, a resilient infrastructure, a net zero emissions mobility system, a reduced and manageable level of traffic congestion, and doing all this in a socially and regionally equitable way?
What does that metro Boston public transportation system look like? Does it provide high-frequency electrified intercity rail? Does it provide reliable all-day inner core transit services (bus and subway)? Does it support redesigned urban streetscapes that support a sustainable, multi-modal transportation system that reduces inner urban auto mobility and promotes safe cycling, walking, and a renaissance of small business anchored by sustainably accessible neighborhoods?
If any or all of these visions for 2040 resonate, then the revenue task is pretty straightforward – back away from 2040 to today and determine what levels of investment supported by net new revenue are needed over the coming 15 years to get us there. It isn’t more complicated than that, although building the political will to act on this will require much skill and persistence.
This is not simply about understanding the capital needs to get us there. A capital needs assessment to get us that 2040 metro Boston public transportation vision is probably in the range of $75 billion – a figure that encompasses both state of good repair work (which the T has estimated as about $25 billion) and new investments in non-discretionary initiatives like regional rail, the Red Blue Connector, the Grand Junction line, and some preliminary infrastructure resilience efforts.
When I say non-discretionary, I mean it: you can’t have that 2040 metro Boston transit system without committing to pay for and build and operate these systems.
Beyond this, there needs to be an operating budget that can attract, keep, and pay for the human capacity that enables you to fulfill the vision. This includes the planners, procurement officers, project managers, quality control and assurance team and the many other professionals who will need to be hired to carry out the vision. Not to mention the bus drivers, dispatchers, and subway operators who keep the system going.
We need to understand clearly and candidly what levels of operating budget revenue will be needed to sustain that capacity, and the solution to the short-term fiscal cliff needs to be the platform upon which that funding future is built – in other words, solving the fiscal cliff crisis cannot be either a one-off solution or a wholly inadequate one.
Adequacy is the word I want to drill home here. Operating budget adequacy is a key element of how we need to think about solving the T’s fiscal cliff crisis. There’s a fiscal hole to be filled, but before we fill it and walk away, we should first plant a tree in that hole, and then fill it properly and nurture the tree. That tree, metaphorically, is the shared 2040 vision for a metro Boston transit system that promotes the values I mentioned earlier. If we simply solve the fiscal cliff as a one-off exercise and walk away, we will miss the moment and fail to approach the task in a policy-coherent , generationally-responsible way.
Frankly, what I’d like Gov. Maura Healey to do is announce a decade-long investment commitment, committing the Commonwealth to spending more on transit and rail in metro Boston over the next decade than we will spend on highways.
That doesn’t mean we will spend less on highways over the next 10 years; it means we will spend more on transit and rail. This is not a radical proposal – it is the only way to redirect our status quo mindset and policies and make them match our shared vision for the future.
You may ask: what do I propose for a new transit operating budget paradigm? Glad you asked. I offer a plan to achieve a stable, ample, and sustainable transit operating budget. If my recommendations were followed, the T’s current annual operating budget of $2.7 billion would come closer to meeting actual needs at least initially because annually at least a half billion dollars currently tied up paying for paratransit and bond indebtedness would be shifted to the Commonwealth, and certain staff positions might be filled by municipalities if they were empowered to raise revenue and undertake certain activities as I describe below. But $2.7 billion will be needed need to grow to meet future personnel, labor, and other needs. Over 15 years, the T’s cumulative operating budget needs could total a minimum ballpark figure of at least $40 billion. Here are my five steps:
Municipal empowerment and devolution — The future of urban transit will require a larger role on the part of municipalities. We are witnessing this even today, as cities are stepping up with their own limited financial resources to introduce dedicated bus lanes and level boarding platforms. The future of bus transit in particular, which will include more dedicated lanes, level boarding platforms, and traffic signal priority systems, will be driven and funded at the municipal level.
Yet we constrain cities with antiquated home rule requirements that prohibit them from raising revenues as they see fit in order to fund these initiatives. Step 1 in a new transportation funding paradigm should be to lift the home rule constraints and empower cites to raise the revenue they need to accomplish their transportation and “complete streets” goals. This includes funding for protected cycling lanes and the inevitable need to support the adaptive re-use of gas stations as e-mobility hubs, places where residents can access e bikes, e scooters, and shared electric vehicles.
As a part of this process of empowerment and devolution, the Legislature should enact into law a regional ballot initiative that enables cities to join together to impose regional fees that can be invested in a coordinated sustainable mobility plan. Imagine if Salem, Lynn, and Beverly were able to do this, or the possibilities of Boston, Cambridge, Somerville, and Watertown joining in a regional effort.
Municipalities ought also to have the ability to charge a fee for parking, and impose fees on companies making home deliveries of goods and food. The volume of these home delivery services has exploded since the pandemic, causing significant urban traffic congestion, emissions, and competition for limited curb space.
Those who are able to afford the convenience of Amazon Prime deliveries or Uber Eats and other services can surely pay a modest fee for the negative impacts their deliveries are having on the urban public realm. This is not bold thinking; this is modern thinking, and it is reflective of the realities of our times, when we are increasingly turning to municipalities to act on local transport and streetscape issues that often have larger regional consequences.
Paratransit cost shift to the Commonwealth — Paratransit costs were imposed on transit agencies as an unfunded mandate without any thought given to whether transit agencies had the financial wherewithal to pay for these expensive services.
Obviously, paratransit is an important way to provide vulnerable populations with access to key destinations. The question is, who ought to pay for this? Shifting paratransit costs to the state is a straightforward and sensible way to relieve the T (and every RTA) of a substantial cost item (in the case of the T about $140 million every year).
Paratransit (what the T calls “The RIDE”) is essentially offering vulnerable residents of the transit service area a human service in mobility form. As a human service, its costs should be borne by the Commonwealth, not transit agencies charged with managing the operation of the system.
Bond debt shift to the Commonwealth — Transit bond indebtedness is related to investments in essential infrastructure that redound to the benefit of everyone in the region, including drivers and others who never take transit.
These investments should at least be shared equally by the Commonwealth, as they provide massive benefits to everyone and not just transit riders. For example, investments in electrifying regional rail can help reduce traffic congestion, reduce carbon and particulate emissions, and improve access to key job centers. This is a benefit for everyone in metro Boston and indeed the Commonwealth, and asking the Commonwealth to pick up all or a large share of the bond indebtedness payments is a fair and appropriate way to relieve pressure on the T’s operating budget.
A realistic and fair 21st Century fare policy — Fare policy in the 21st Century ought to be fundamentally different from the old 20th Century paradigm, which set “fare recovery ratios” placing unrealistic expectations on riders and on the stability and robustness of fare revenues.
Fare policy today should be viewed as a way to raise a realistic amount of revenue by asking riders to pay a share of the costs according to their ability to pay. This is public transportation, and fare policy needs to reflect its role as a public good and as a critical mobility necessity for many people. For me that means lower fares across the board and free unlinked bus transit, but I understand that there are many ways to approach fare policy.
The one thing that is certain is that transit agencies can no longer be expected to rely on fare revenues for 30 percent or more of their operating budgets. If the pandemic taught us lessons, one of them is this: transit agencies cannot and should not rely heavily on fare revenues to fund their operating budgets. No private sector business would fund its operating needs with a historically unstable revenue source – why should transit agencies be expected to do so?
New revenue sources tied to traffic and emissions reductions — A high functioning transit system throughout metro Boston is essential to inducing a meaningful level of mode shift (moving people from driving to taking intercity rail or another form of transit) and reducing emissions, not just carbon emissions but particulate matter and other emissions (which do not go away when we’re all driving electric vehicles).
A post-gas tax road user charging system ought to be designed to provide metro Boston transit systems (the T and RTAs) with a new dedicated revenue source in order to provide more people within the T service area viable public transportation alternatives.
In the next article of this series, I will discuss road user charging as a method of raising revenue and influencing driver behavior. I’ve recently observed a disquieting amount of misunderstanding among political leaders and others in Greater Boston regarding the topic of road pricing, so I’m hoping to clarify things in the next installment.
James Aloisi is a former Massachusetts Secretary of Transportation. To read the first article in this series, click here.
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