Reform before revenue was the wrong answer

Second of three parts


[Read the first part of this series, on the case for funding transportation, here, and the third part, on five transportation funding solutions, here.]

THERE IS A VIEW among some that MBTA deficits are something of fairly recent vintage.  That is not true.  In fact, since its very beginnings at the turn of the last century, the MBTA (and its predecessor agencies) has almost always operated at a deficit. There are many explanations for the deficits, but the primary reason is that building, improving, maintaining, operating, and expanding such a system is a hugely expensive proposition, and fares alone can never cover costs.  Some forms of additional non-fare revenue and subsidy are required, and indeed, have almost always been required to keep the system going.

This subsidization is neither bad nor undesirable.  In our society, we constantly make policy decisions about the importance of certain services to the larger common good – to economic growth, stability, and quality of life.  A reliable public transportation system – a system that, for the most part, takes you safely where you want to go when you need to get there – has been a critical component of most successful cities since the late nineteenth century.

The other reality that informs our current MBTA funding crisis is the failure of the 2000 forward-funding legislation to fulfill its intended purpose of setting the T on a path of fiscal stability.  Forward funding made two mistakes: it saddled the MBTA with significant debt, and it tied T funding to 20 percent of the state sales tax, a revenue source that has proven to be both unreliable and inadequate. No effective and lasting MBTA funding solution can be crafted without dealing with each of these issues head-on.

Over the past decade, three separate and highly credible reports have explained the facts underlying the MBTA’s financial crisis, and have made specific recommendations regarding structural, long-term solutions.  It is useful to understand the important lessons and solutions offered by those reports.

A Transportation Finance Commission was established in 2004 to develop a comprehensive, long-range finance plan for the Commonwealth’s transportation assets.  The bi-partisan Commission (on which I served) dug deeply into the details and devoted countless hours to crafting a report that would be taken seriously and acted upon by state decision makers.  The Commission eventually issued two reports in 2007. The first report described a transportation network that was characterized as an “unsustainable system.”  The second report made specific recommendations designed to address our transportation funding shortcomings.  Those reports remain today the best and most reliable expression of what is wrong with our approach to transportation funding, and how to fix it.

The Finance Commission explained the genesis of the problem, offered specific suggestions for reform, and laid out specific recommendations for net new revenue.  Many of the commission’s recommendations for reform were adopted, in one fashion or another, in the 2009 Transportation Reform Legislation.  However, those reforms, I – and many others – predicted, would not on their own come close to solving the MBTA funding crisis.  Unfortunately, a desire to “reform before revenue” took hold of the Legislature, and the necessary net new revenue that we urgently needed to begin turning the funding crisis around was not forthcoming.  I was right when I said that reform without revenue would not solve the problem.  We faced a crisis in 2012, and we are going to face yet another one in 2013, despite the much-vaunted reforms of 2009.

The MBTA Advisory Board, in its 2009 report Born Broke, re-affirmed that “no amount of reorganization, reform, or efficiencies can generate the [funding] needed to close the budget gap, let alone the even larger deficits projected in the future.”  Born Broke explains in detail how the Legislature’s decision in 2000 to “forward fund” the MBTA and to burden the T with a little over $5 billion in accumulated debt has exacerbated the problem.  Forward funding has failed for three reasons: the state saddled the T with billions of dollars of debt right from the start, including so-called Big Dig related debt; the finance plan’s expectations of revenue that would be generated from the sales tax was unrealistic, and the finance plan did not take into account the volatility of such large cost drivers as energy costs and The Ride.

Forward funding has also underscored fundamental inequities in how we raise transportation revenue in the Commonwealth. Providing the T with a penny of the sales tax created significant and legitimate resentment on the part of citizens residing outside the MBTA service area.  Why is it fair to ask people in Pittsfield or North Adams or Springfield to pay a sales tax for the T when they have urgent and unmet public transportation needs of their own?

Use of the sales tax to fill a public transportation funding gap also began a dangerous precedent of dedicating non-transportation revenue to transportation needs.  This is a slippery slope, as best evidenced by the decision in 2009 to avoid a necessary gas tax increase by once again raising the sales tax and dedicating another portion of those retail revenues to transit. We have a government that must raise revenues for a variety of important purposes, ranging from public safety to health care to education.  We should not dilute or divert funds that should be dedicated to those important needs when we can find meaningful and sustainable ways to raise transportation revenues from the transportation sector.

A third report, also published in 2009, was prepared under the leadership of former John Hancock Chief Executive David D’Alessandro. D’Alessandro wrote a detailed report that dramatically demonstrates the drivers of the MBTA shortfall.  Those drivers include volatile energy costs, unpredictable and increasing costs for the Ride service, and the failure of forward funding. The D’Alessandro report also highlights how the use of debt service gimmicks has masked the depth and scope of the T’s structural funding problem.

As the D’Alessandro report summarized it, forward funding “was destined to fail.”  D’Alessandro also addresses the myth of inordinately high MBTA wages, making the important point that the MBTA’s wages and benefits are not significantly out of line with comparable systems in the United States. The D’Alessandro report offers statistics that demonstrate two key take-aways:
“Wage increases for [MBTA] union workers are comparable to the 3.5 percent annual growth in the Consumer Price Index-Urban Boston and Massachusetts median household income for the same time period.”

“The MBTA’s wage rates and total wage costs are similar to those of other top US transit systems.”

Contrary to public perception, the D’Alessandro report makes clear that the T has tried mightily to keep costs low. “Contrary to not trying, we found evidence that the MBTA did make some hard expense choices,” the report says. “Across-the-board cuts were routinely made to departmental budgets.  Periodic layoffs and hiring freezes restrained the headcount.”

The chronic pattern of avoidance and short-term, ineffective band-aid solutions for the T’s funding crisis is often accompanied by calls for a moratorium on expansion projects – projects that are vital to economic growth, equitable mobility, and clean air.  Those projects – extending the Green Line to Route 16, connecting the Blue and Red Lines along Cambridge Street, introducing true Bus Rapid Transit along Blue Hill Avenue, extending the Blue Line to Lynn, and beginning to connect communities along an “Urban Ring” – are critical components of ensuring that the system remains vital and responsive to our ever changing demographics, and that it continues to support economic growth.  They are equally important to ensure both social and environmental justice.

Expansion need not necessarily be expensive or unachievable. A good example is the way we connected the Silver Line in 2009.  As Transportation Secretary, I was faced with the decision to either continue to lie to people about the feasibility of building a $2.1 billion tunnel under Essex Street, or to find a more creative solution.  At the urging of my deputy secretary for economic development, and with some creative work by our planning department, we decided that an effective way to connect the Silver Line would be to add buses to the Washington Street corridor and have them take people directly to South Station.

With Boston Mayor Thomas Menino’s support, we eliminated the entire parking lane along the left side of Essex Street in Chinatown, including parking meters. We transformed it into a “bus only” lane, and built a waiting station across Atlantic Avenue from South Station.  With $1.3 million in federal stimulus money, we were able to purchase new buses, do all of the street work, and install the bus station.

Today, thousands of people each month fill the new “Silver Line 4” service and are able to access South Station and nearby destinations.  We did this by adding bus capacity to the existing SL 5 service, thus also decongesting the Washington Street bus system and offering riders in Roxbury and the South End a more robust system.  This is what is called “doing more with less.”  It takes some creative thinking and it takes settling for solutions that are not perfect or elegant but that are workable and sustainable and affordable.  If we match that kind of thinking with our resources, we can surely find ways to strategically improve and expand the system.

Meet the Author

Strategic expansion projects – projects like the extension of the Green Line to Route 16 in Medford, the extension of the Blue Line to Lynn, the connection of the Blue and Red Lines along Cambridge Street in Boston, and the introduction of bus rapid transit along a dedicated right-of-way along Blue Hill Avenue – will create and attract jobs, improve air quality, and establish important new mobility hubs enabling people from across the metropolitan region to have quicker access to jobs and destinations at major employment drivers like Logan Airport, Massachusetts General Hospital, and many of our colleges and universities. A well planned, focused, strategic expansion program is perhaps the most important way to ensure that our multi-modal transportation network continues to have the capacity to satisfy pent-up mobility needs and continues to thrive in an equitable and efficient manner.

James Aloisi, a former state Secretary of Transportation, is a senior vice president at KCUS Inc., a transportation consulting firm.