Let’s not let this crisis go to waste

Match T’s expenses to the revenue it generates

AFTER DECADES OF underfunding the T, it finally collapsed completely under the weight of repeated winter storms and, as I write this, is still badly crippled.  The T does not get enough funding to do everything we expect of it, but why?  Let me suggest that what we have here is basically an accounting error.

But the most common answers to this question usually point to the Legislature’s and the governor’s reluctance to raise taxes and fees, union concessions such as overly generous pensions, inept management, and ( always) “waste and fraud.”  I’ve worked in four different state and local government organizations in two different states and I’ve certainly seen plenty of waste, countless examples of inept management, and bad decisions made in the face of collective bargaining agreements because it simply wasn’t worth the fight.  And it goes without saying that no one likes to pay more taxes or higher user fees when you think that part of that money is being wasted.

Certainly there are union agreement issues, management issues, and waste issues at the T, and we are right to expect the T management, and its board, to work diligently to rectify those issues, root out the savings, and to apply those funds to more fruitful uses and for the benefit of riders.  But even if we squeezed out all those savings, the T would still be underfunded as an ongoing concern, and woefully underfunded to allow it to be anything like the first class – and expanded – system we’d all prefer.  Instead, we hobble along with 40-year-old trains and expand service in fits and starts.

The T, like all infrastructure, is an investment.  And investments pay dividends.  Dividends in terms of quality of life, sure, but more importantly dividends in terms of economic development and the tax revenues economic development generates.  It’s terrific that you can take a train to a North Shore beach in the summer, or the subway or a bus to the MFA, and it probably factors in many people’s decision whether to reside in greater Boston (it certainly does in mine).  But it is infinitely more important that the throngs of people who take the T to work, or to a meeting across town, are able to do so.  I’ve long argued that if the T were to fail, the entire economy of eastern Massachusetts would collapse.  Maybe that’s overly dramatic, and it will be some time before we understand the economic effects of the T’s collapse and still crippled performance this winter, but I’m guessing it’s been pretty profound.

To me, the problem we never talk about is this.  There is little connection between the funding that the T receives and the economic benefits it generates, including tax revenues.  For instance, it’s fairly obvious that property located near public transit is more valuable.  If you doubt that, just look at what’s happened to property values along the planned Green Line extension in Somerville, long before even a single station opens.  Not only are neighborhoods served by frequent, reliable public transit more highly valued, they are more lively, safer, and more economically robust.  More people shop in these neighborhoods, there are more restaurants, and rents are higher.

The T extended the Red Line to Davis Square and today there are more property taxes generated for the cities of Somerville and Cambridge, there are more sales taxes generated, more meals taxes, and more state income taxes on salaries of the people who work there.  And year after year, here comes the T, hat in hand, begging for money.  We account meticulously for what the expenses of the T’s investments are, but the resulting revenues collected by the state and its cities and towns, with some exceptions, don’t appear as income on the T’s books.  It’s like we have one division of a corporation spending on investments and a different division collecting the revenues.   If the T captured the revenues generated by its investments, not only would it be adequately funded, but I bet they’d be expanding all over the place, because the return on investment is high.  Instead, here they come again with their hand out.

Economists can quantify the economic activity that transit creates, and even quantify the specific increases in tax revenues.  There are ways to match tax revenues back to the investments that generated them, such as tax-increment financing and dedicated revenue streams.  For instance, a portion of hotel and rental car taxes go to pay for the Boston Convention Center (which of course is made easier by the fact that the people paying them generally don’t vote here).   So let’s not let this crisis go to waste.  Instead, let’s take it as an opportunity to recognize how much revenue public transit investments create, figure out a way to send more of it back to the T, and finally start building the public transit system we all want and deserve.

Meet the Author

Peter O'Connor

Lawyer and economic development consultant, Self-employed
Otherwise, year after year, it just won’t add up.

Peter O’Connor is an attorney and real estate consultant based in the South End of Boston.  He can be reached at peteroconnorboston@gmail.com.