At the T, reform gives way to revenue

Without new funds, federal Green Line aid unlikely

Gov. Deval Patrick’s transportation chief opened the door to new transportation revenues this week. And while MassDOT CEO Jeff Mullan pointedly refused to discuss where new revenues might come from, he did indicate that the state has a powerful economic incentive for fixing the MBTA’s finances soon: Massachusetts is legally required to extend the Green Line to Somerville and Medford by the end of 2014, and if the MBTA’s budget doesn’t get shored up soon, the state will likely have to cover the project’s entire $950 million price tag.

Speaking Monday at a transportation finance forum hosted by A Better City, Mullan said he’d been avoiding similar gatherings because “I did not want to send people the wrong message that we were off of the reform phase of reform before revenue.” He then said, “I think that we have moved beyond at this point.”

Transportation revenue talk hasn’t gone well for Patrick in the past. He was beaten up over a 2009 plan to raise the gas tax, and those bruises have the administration taking an exceedingly cautious approach to the issue this time around. The governor hasn’t committed any political capital to the issue yet. And Mullan pointedly avoided discussing any and all specifics about new fees or taxes on Monday. Instead, he said the administration wants to participate in a statewide public discussion about transportation finance.

It’s a conversation the administration doesn’t appear eager to lead. “We heard loud and clear from the Legislature, they want to have that discussion,” Mullan said Monday. Look for two recent reports – one from the Conservation Law Foundation, the other by A Better City – to give the administration additional political cover as it wades into the thicket of dedicated taxes, parking surcharges, and new road tolling regimes.

There’s an element of urgency behind the administration’s quest for new transportation revenues. Mullan said Monday he would expect Federal Transit Administration officials to reject an application for federal funds for the Green Line, based on a federal financial feasibility test. The MBTA failed a similar test when it sought a federal New Starts match for its Silver Line Phase III tunnel, and the T’s budget is in rougher condition now.

“Until we get a handle on our operating expenses,” Mullan said, the FTA “will not look favorably on expansion. We’re kidding ourselves if don’t think operating expenses will affect [New Starts].”

The T is legally obligated to complete the Green Line extension by the end of 2014. A New Starts match would potentially cover $760 million of the project’s $950 million budget; without a federal match, the state is on the hook for the whole sum. That’s a significant potential liability for an agency with an exploding structural budget gap.

The T closed its 2011 deficit by restructuring $68 million in debt, and it is covering 2012’s $127 million shortfall by restructuring more debt, selling the North Station parking garage, and bonding out revenue from other parking facilities in return for upfront payments and debt relief. T General Manager Richard Davey has said the opportunities for such financial engineering have been exhausted, and he has no more rabbits to pull out of his hat.

The T’s budget is deteriorating rapidly. The agency is facing budget shortfalls of nearly $900 million between fiscal years 2013 and 2016, thanks to rapid growth in operating costs like health care, energy, and maintenance. The T currently spends 75 cents of every revenue dollar on operating costs; by fiscal 2016, that share is expected to rise to 88 cents, even as debt service payments on its $8.6 billion debt load are scheduled to increase sharply.

“There’s no way to look at these numbers and not come to the conclusion that the T needs new revenues,” said Massachusetts Taxpayers Foundation president Michael Widmer, speaking at Monday’s transportation finance roundtable.

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.

The bureaucratic consolidation that created MassDOT was supposed to save taxpayer money, but savings have been outstripped by the massive transportation finance backlog created by crumbling bridges and decades-old trains and subway cars. In its first year of existence, MassDOT claimed $125 million in savings, and it is on pace to save $150 million this year. Those savings figures are dwarfed by the $1 billion per-year shortfalls highlighted by the 2007 Transportation Finance Commission report. And the savings from the transportation agencies’ consolidation will diminish over time, Mullan said Monday.

“Reform is not enough,” he said. “We know it’s not enough.”

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