Deciphering T-speak on fare-free bus, capital transfer

No FTA impediment exists to Wu proposal on 3 bus routes

RECENT REPORTS coming out of the MBTA illuminate deeply flawed thinking about Boston Mayor Michelle Wu’s free bus plan and raise serious concerns about the transit agency’s ability to leverage federal capital funding potentially available to the T via the new federal transportation bill.

While there’s a lot to unpack here, it really isn’t as complicated as it may seem at a quick glance.  So stay with me as I address the following issues:

(1) Whether Mayor Wu’s free bus initiative will trigger an Federal Transit Administration determination that the two-year pilot must become permanent;

(2) The possibility that the new MBTA board will raise T fares in the near future; and

(3) The MBTA’s staff recommendation to shift $500 million from the T’s operating budget to its capital budget.

First, let’s look at the free bus pilot. Wu has laid out a plan to offer free bus transit on three routes during a two-year pilot. Those routes carry a large number of riders, including many of the most disadvantaged and poorly served riders on the system. To be sure, there are many other riders on other routes who are also disadvantaged, but the mayor’s plan does not worsen their situation in any way; indeed, it offers the realistic hope that their trip might also soon be free.  When it comes to introducing new ideas, you have to demonstrate the efficacy of new ideas somewhere – you rarely experiment on a system-wide basis – and you need more than a mere six months to do it right.

Some at the T are cautioning that the FTA’s Title VI regulations somehow make this plan risky, because free transit on those three routes will become “permanent” after 6 months. That is not correct. Let’s parse this out.

Title VI of the Civil Rights Act of 1964 protects people from discrimination based on race, color, and national origin for actions taken by those receiving federal financial assistance. Title VI acts as a constraint on actions that have inequitable consequences or outcomes. The Federal Transit Administration has issued rules that are its primary enforcement mechanism to protect transit riders. Those rules, in a document called FTA Circular 4702.1B, operate under additional guidance provided by various executive orders issued by Presidents Clinton, Bush, Obama and Biden.

The Title VI rules apply to any “fare changes regardless of the amount of increase or decrease.” In such circumstances, the FTA requires transit providers to “evaluate the effects of fare changes on low-income populations in addition to Title VI-protected populations.”  This is called an equity analysis.  The requirement to perform an equity analysis is tied to “fare changes,” which are presumed to be changes that will be “permanent “or long lasting. There are exceptions to this rule, and the exception that applies here reads as follows:

“If a promotional or temporary fare reduction lasts longer than six months, then FTA considers the fare reduction permanent, and the transit provider must conduct a fare equity analysis.”

I underscore the word “considers” because it is a clue to the intent of the rule. The rule does not say, nor could it, that any temporary fare reduction becomes permanent in the sense that it can never be changed. It says that the FTA will consider the change permanent in order to trigger the requirement of an equity analysis.

I believe the folks at the MBTA agree that there’s no plausible argument that fare free bus won’t pass an FTA fare equity analysis – as I said, it dramatically improves access (which is a cornerstone of equity) among a uniquely and historically disadvantaged community of riders, and it does not worsen in any way the fare payment situation for all other riders.  Think about it: how can it possibly be an equity issue if the data clearly shows that making bus trips fare free increases ridership and access to opportunity? Also, the T is not losing money during this pilot; it and every other rider is held harmless financially.

The T may be concerned that a return to fares after the two-year fare-free pilot couldn’t pass an equity analysis. That’s an entirely different issue, and one with sufficient doubt attached to it that it should be no barrier to moving forward with the mayor’s plan. First, the T doesn’t know who will be leading the executive branch of government in two years, or indeed who will be leading either branch of the Legislature then. It can hardly predict what direction the Commonwealth will be taking on this issue, but it seems likely it will be more encouraging of the free bus transit movement.  Alternatively, there’s no evidence that transit fares, once lifted and subsequently restored, can’t pass an FTA equity analysis. If the two-year pilot produces data that demonstrates significant downsides, it’s not a given that saying “the experiment didn’t work as we hoped and we are restoring riders to the same status quo ante position” would be problematic, as there would be no disproportionate impact. And if restoring fares under such circumstances couldn’t pass an equity test, that may say something about the inequitable impacts of transit fares.

And the city should not be forced by the T to engage in a burdensome Charley Card purchasing scheme that would make Rube Goldberg blush, a scheme that might have the perverse effect of creating equity concerns by inevitably leaving people out by not having the practical ability to adequately reach all riders and potential riders. Equity is most easily attained through a process with maximum ease of use; it is rarely reached by imposing complex, burdensome constraints on people.

My bottom line: there’s no FTA-based impediment to implementing Wu’s plan other than one reached by reading the FTA rules in such a way as to anachronistically confound their purpose. I find it hard to believe that the FTA under Joe Biden and Pete Buttigieg will support such a reading.

Finally, it’s important to note that the FTA is aware of the inadequacy of its current circular. It recently invited stakeholders to comment on ways to revise and improve the circular, whose provisions have been criticized by many respected transit advocates. The FTA Circular was not written at a time when the issue of free transit was even remotely being considered. Applying a constrained interpretation of rules that were never written in contemplation of what Wu is calling for is exactly the wrong way for the T, or anyone, to address this matter.

Let’s move on to the second issue, the MBTA staff recommendation to shift $500 million from the operating budget to the capital budget. As most of us understand, the T has 2 budgets: the operating budget (for paying people, some maintenance, and debt service) and the capital budget (for construction, repair, and most maintenance).  When you hear transit agencies like the T say they will hit a “fiscal cliff” when their federal COVID relief money runs out, they are talking about the operating budget.

The stability of the operating budget has been a chronic problem even before COVID.  The federal government ended its support for transit operating expenses in the Reagan era, and Massachusetts has not been able or willing to properly fund a robust operating budget ever since. The T relies on fares for a third of its operating budget, which is about average for transit agencies in the US.

The reason why the T and other US transit agencies have been able to survive the COVID-induced drop in ridership has been the infusion of funding from the various COVID relief acts under the Trump and Biden administrations. When this federal relief money runs out in a few years, the dreaded fiscal cliff will emerge. That fiscal cliff is clearly within our sights now – we know it is coming – and we aren’t doing anything to prevent it.

What’s worse, ideas like transferring out $500 million of operating funding will accelerate the approach of the cliff. If that is an intentional effort to induce a fare increase, it is fiscal manipulation of the highest order. If it is an effort to resolve or mask the lack of state capital funding match for incoming new federal capital funding, then it ought to be transparently described as such. Whatever the motivation, it is seriously misguided.

To make this worse, the new MBTA governing board chair mused publicly that a fare increase was not out of the question. That’s a remarkable thing, considering the T is currently awash with federal relief money, and ridership is approaching or meeting the T’s most optimistic estimate of ridership return. Perhaps floating the fare hike balloon was a way to point out that the state – the Legislature and the governor – have failed to address the chronic, continuing elephant in the room: the reality that fares are a highly unstable, unreliable revenue source. No private business with the same historic and current fare revenue profile as the T would continue to rely on fares for anywhere near a third of its operating budget. Why should the T?

State legislative and executive leaders can either make a deliberate choice to live in the Groundhog Day of recurring T operating budget crises, or actually do something to fix the problem.  I have supported Wu’s plan not simply because I think it is a way to bring more access to those who are the most disadvantaged in our city, and because it will improve service delivery, but also because it appropriately casts light on a larger, albeit wonkier issue: that transit agencies need to rely less on fare revenues for operating expenses. This is a structural change in how operating budgets are set, and one that requires deliberate state action to solve. Unless it is resolved, we will have recurring operating budget deficits without regard to post-COVID ridership return.

Let me wrap this up by summarizing:

(1) Mayor Wu’s proposal to make three bus routes free for 2 years will not make free transit on those routes irretrievably free, although that ought to be the goal of every policy maker in Massachusetts. Her plan will likely require an equity analysis, and it should pass that test with ease;

(2) The T should not under any circumstances be transferring a half billion dollars from its operating budget to its capital budget; if the T needs more state funding to provide state matching share of capital projects enabled by the recent federal infrastructure bill, it should ask the Legislature to provide that funding; and

Meet the Author

(3) The threat of another fare increase should be an alarm bell for the Legislature: new revenue sources are required to replace the historically unstable fare revenue component of the T’s operating budget.\

James Aloisi is a former Massachusetts Secretary of Transportation and serves on the Board of TransitMatters.