Tax tag team

DeLeo, Murray rebuff Patrick with smaller transportation tax plan

HOUSE AND SENATE LEADERS issued an unusual united rebuke of Gov. Deval Patrick’s sweeping transportation finance proposal on Tuesday, countering a wide-ranging billion-dollar transportation pitch Patrick made in January with a much narrower $500 million package

The joint House and Senate package fulfills House Speaker Robert DeLeo’s recent vow to float a transportation plan “far more narrow in scope and of a significantly smaller size” than Patrick’s. It also limits legislators’ exposure to what they view as politically toxic tax votes, since the legislative proposal is built largely on cigarette levies, corporate tax code changes, and a modest three-cent increase in the gas tax. But in doing so, it appears to meet a transportation finance crisis point with short money, potentially setting up another transportation showdown a few years down the road.

Warnings about transportation crisis points have been floating by Beacon Hill for years. The 2007 Transportation Finance Commission report charged Massachusetts with systematically underinvesting in basic maintenance for roads, bridges, buses, and subways. The commission, chaired by Republican lobbyist Steve Silveira, called the state’s transportation system “unsustainable,” and estimated that the state would have to spend $15 billion to $19 billion over the following 20 years just to meet its maintenance backlog. A 2009 report by former John Hancock CEO David D’Alessandro cast the MBTA’s financial future as “bleak.” D’Alessandro detailed how years of middling revenues and skyrocketing costs had caused the transit system to push off debt payments, skimp on basic maintenance, and run buses and subway cars years past their scheduled retirement dates. 

Transportation watchers have known for years that the state’s transportation tab – aging buses and subway cars, balky subway signals, and hundreds of structurally deficient roads and bridges – add up to a big number. The Department of Transportation still finances $234 million worth of employee salaries with borrowed bond funds. Last year’s round of MBTA fare hikes and service cuts left a stubborn structural deficit at the agency intact. It’s been clear for several months that the Legislature was going to have to tackle transportation finance, and that when it did, the bill would add up quickly.

Patrick met this tab in January, with a $13 billion transportation bond proposal. Patrick’s plan, paid for with $1 billion per year in new taxes, backfilled operating deficits at MassDOT and at the T. It funded new subway and rail expansions across the state. But roughly 80 percent of the borrowing was dedicated to fixing a crumbling system – fixing roads and bridges, and modernizing subway systems. Patrick caught legislative leaders off guard by tacking $900 million in new annual education spending onto his transportation request, swelling the size of the governor’s tax proposal to $1.9 billion.

In unveiling the joint House-Senate proposal, DeLeo talked about families and businesses still struggling with a recessionary hangover, and “still sensitive to any additional burden.” Senate President Therese Murray spoke about balancing the “need to invest now” against the fear of “bankrupt[ing] the current generation.”

They erred on the side of caution. The Legislature’s proposal moves DOT employees off the bond program and covers MBTA deficits, but leaves far less room for capital spending than the governor’s did. According to legislative leadership, the joint House-Senate plan will free up $300 million in new capital spending by fiscal 2018. That’s a far smaller figure than Patrick’s proposal envisioned; since four-fifths of Patrick’s bonding was devoted to maintenance, the Legislature’s finance plan leaves billions in maintenance spending unfunded.

Regional transit authorities, which were to receive $100 million in additional funding under Patrick’s plan, would get between $12 million and $18 million to divide amongst themselves.

“They’re claiming it’s enough,” said Somerville Mayor Joe Curtatone, expressing “strong concerns” about those claims. “We’re going to have a debate about that. It’s not clear to me now, but I want to be respectful. We’re going to have a debate about whether the number works.” Curtatone noted that the Legislature’s proposal wasn’t just smaller than the governor’s plan: It’s also far smaller than the $800 million suggested by the Massachusetts Taxpayers Foundation.

There also appears to be some financial jujitsu at play. Current MBTA budget figures peg this year’s deficit at $140 million, rising to more than $425 million in fiscal 2018. The Legislature changes that baseline by using lower inflation estimates and stripping out several costs, including payments related to the governor’s $13 billion capital program, and the costs of operating expansion projects like the Green Line extension to Somerville (which the state is legally obligated to complete).

Rafael Mares, a staff attorney at the Conservation Law Foundation, told CommonWealth the Legislature’s finance package isn’t big enough to cover outstanding maintenance needs, let alone pay for maintenance while meeting expansion needs. The CLF sued the state to enforce a commitment, under the federal Clean Air Act, to extend the Green Line; Mares said the Legislature’s $500 million tax plan would wind up either abandoning the Green Line, or shortchanging the rest of the transportation system. “It’s not enough,” he said. “The plan doesn’t say what goes to maintenance, or whether the expansion should be covered. We can’t say they’re leaving it out, but either way, the blanket is too small to cover the whole body.”

Mares also noted that the Legislature’s plan may be bigger than it appears to be, but only if MassDOT significantly ramps up tolls, transit fares, and fees. The fine print of the Legislature’s transportation proposal directs MassDOT and the T to raise far more revenue on their own than the governor’s plan envisioned. “This shifts how the money is raised,” Mares argued. “There’s a lot more pressure on fares, fees, and tolls, and that was not made explicit today.”

 

Meet the Author

Paul McMorrow

Associate Editor, CommonWealth

About Paul McMorrow

Paul McMorrow comes to CommonWealth from Banker & Tradesman, where he covered commercial real estate and development. He previously worked as a contributing editor to Boston magazine, where he covered local politics in print and online. He got his start at the Weekly Dig, where he worked as a staff writer, and later news and features editor. Paul writes a frequent column about real estate for the Boston Globe’s Op-Ed page, and is a regular contributor to BeerAdvocate magazine. His work has been recognized by the City and Regional Magazine Association, the New England Press Association, and the Association of Alternative Newsweeklies. He is a Boston University graduate and a lifelong New Englander.

About Paul McMorrow

Paul McMorrow comes to CommonWealth from Banker & Tradesman, where he covered commercial real estate and development. He previously worked as a contributing editor to Boston magazine, where he covered local politics in print and online. He got his start at the Weekly Dig, where he worked as a staff writer, and later news and features editor. Paul writes a frequent column about real estate for the Boston Globe’s Op-Ed page, and is a regular contributor to BeerAdvocate magazine. His work has been recognized by the City and Regional Magazine Association, the New England Press Association, and the Association of Alternative Newsweeklies. He is a Boston University graduate and a lifelong New Englander.

 

Photo of House Speaker Robert DeLeo and Senate President Therese Murray on home page from State House News Service.