A short and long-term plan
Calls for debt transfer, highway fund reallocation, and congestion toll pricing
THE RECENT MBTA meltdown has impressed upon the general public the critical importance of a reliable transit system to their daily lives. The T’s utter failure to provide reliable service during and following the recent extraordinary winter weather conditions signals an urgent need to address the issues that led or contributed to the crisis – issues that, if not properly and fully addressed, will recur with potentially devastating impacts on our economy, our public safety and our overall quality of life. I want to use this opportunity to address these issues candidly and in some depth, in an effort to set the stage for what could become a bipartisan approach to MBTA recovery and renewal. Reliable and safe transit mobility is not a left or right issue. It is in our collective best interests to bridge the ideological divide to develop and implement solutions that respond directly and effectively to critical needs.
The MBTA needs a short-term plan directed specifically to the next several winters, and a longer term, sustained renewal plan. The short term recovery plan is necessary to address the problems we have faced this winter, to ensure that they do not occur again – or at least that they do not recur in such an overwhelming and system-wide way. The renewal plan is designed to affirm and help implement Gov. Charlie Baker’s admonition that “we cannot continue to do the same thing and expect a different result.”
A lot of progress can be made this year to prepare for the 2015/2016 winter season, but it will take a much longer period to renew the MBTA’s equipment and systems to a point where they can be as reliable as they ought to be. This is as much a time issue as it is a money issue. As Transportation Secretary Stephanie Pollack pointed out recently, even if a benefactor were to magically give the T $2 billion in cash, it would not accelerate the production and delivery of new subway cars. New Red and Orange Line cars are on order, but the earliest they arrive is 2018 (Orange Line) and 2019 (Red Line). And they don’t all arrive at once; they dribble in over a period of three years. So we need to find ways to work around this for coming winters through 2018.
I would designate certain locations in Greater Boston (including locations in Cambridge, Brookline, and Somerville) as mobility hubs. By way of example, in Boston there could be a hub at or near each major hospital (MGH, Beth Israel Deaconess, Boston Medical, Tufts, and Brigham and Women’s), a hub in the Seaport District, a hub in Government Center, and a hub in Back Bay. The MBTA would lease a fleet of reliable buses and be able to quickly and efficiently get people from an original point to a destination point, where they could then complete their commute on foot or otherwise. An interactive smartphone app should be developed and specifically designed to provide reliable real-time information in connection with these mobility hub routes. This system is neither perfect nor completely elegant, and it comes with some cost (leasing buses and building some infrastructure around each hub), but it would be designed to ensure that people can get to key locations in the metro area with a guaranteed measure of reliability and frequency.
These mobility hubs could operate year-round, offering opportunities for new multi-modal centers where a person could pick up a Hubway bicycle or purchase a Charlie Card and get real time information regarding the best options to connect from a mobility hub to any chosen destination. They would become integrated into our municipal mobility structure, serving the city and region in non-weather related emergency conditions (and perhaps could be eligible for Homeland Security funding). This mobility hub/mobility corridor plan would also relieve some of the overcrowding causing strains on the subway system.
I propose a renewal plan with five components: funding, governance, maintenance, performance and capacity. My hope is that many elements of this plan can be embraced across the ideological spectrum. I’ve been struck over the past weeks by how aligned some of my thinking has been with the thinking coming out of the Pioneer Institute, particularly with respect to debt relief and governance. We may not agree on every detail or nuance, but I believe there can be broad agreement on the major elements of a plan. Perhaps we have reached an opportunity moment to come together in common purpose to set our transit system right. I offer these ideas with my policy hand stretched out in an effort to build consensus and get something important done.
My funding plan has four steps. The first two steps, which would free up over $300 million annually in available cash for the T, would require no increase in any tax, fee, or fare. Reducing this topic to four steps isn’t meant to exclude a broad spectrum of actions that could be taken to improve the T’s fiscal situation, including enhancing non-fare revenues and leveraging T real estate assets. However, these four steps are designed to provide the substantial net new revenue that the T needs in order to effectively renew itself on a reasonably prompt schedule, and become the truly reliable, safe, and first-rate transit system it must and ought to be.
Step 1: Debt Transfer
In order to understand why the MBTA needs substantial net new revenue to undertake a meaningful accelerated maintenance and repair program, it’s helpful to understand the basic contours of its budget and cash flow. Using rounded numbers, the T takes in about $1.95 billion annually from a variety of sources: fares ($600 million); local assessments from communities served by the T ($160 million); the sales tax (nearly $1 billion); direct state assistance ($135 million); and lesser sources including non-fare revenue. The T spends about $1.5 billion on operating expenses, and another $450 million on debt service. Now let’s take a more granular look at a few items to understand why there isn’t much flexibility in these numbers, and why significant net new revenue is needed to accomplish what everyone appears to agree must be done.
What is clear is that the MBTA needs new revenue to accelerate its maintenance and equipment renewal programs. This requires significant new money, not small amounts at the margins. That is why I have called for the Commonwealth to relieve the T of a significant portion of its debt burden. The MBTA has about $5.5 billion in debt. It pays about $450 million a year in debt service. To put that in perspective, fare collections are about $600 million annually – so substantially over half of your T fare payment is going to pay off debt. That is not sustainable, nor should it be acceptable at a time when there is widespread agreement that the T needs a sustained period of renewal.
The $5.5 billion of MBTA debt can be divided into three categories: legacy debt (debt that precedes forward funding); “Big Dig” debt (debt that results from legally binding transit commitments that were required in connection with the Central Artery/Tunnel project); and all other capital debt (capital projects undertaken after forward funding). Paying the interest on the legacy debt costs around $108 million annually; Big Dig debt service costs about $141 million each year.
The legacy debt issue requires a bit of explanation. When the Legislature enacted the so-called forward funding legislation in 2000, it gave the T a dedicated small portion of the sales tax in order to set it on what was proposed as a realistic funding path. But the Legislature did not start the T with a clean fiscal slate. Instead, it saddled the T with all of the transit legacy debt going back to the 1960s. So the T started life under forward funding with a significant debt burden. On top of that, sales tax projections in 2000 were quickly proven to be significantly exaggerated, as the rise of Internet sales and other factors meant that the rosy projections made in 2000 have never been realized. Thus the T was left behind the fiscal eight ball from almost day one of forward funding. That solution, which was intended in good faith to be both responsible and successful, was seriously flawed from the start.
I propose that the Commonwealth relieve the T of the legacy debt and the Big Dig debt. Together, that amounts to relieving the T of annual debt service payments of about $250 million dollars. This would likely require a restructuring of almost all T debt which currently includes a mix of fixed rate, variable rate, and commercial paper (typically short-term debt instruments). I would then require the T to use the freed-up $250 million to embark on an intensive pay-as-you-go accelerated transit maintenance and repair program.
As this strategy proposes no net addition to overall Commonwealth debt, I doubt that the transfer of responsibility for this debt would have any meaningful negative impact on the state’s bond ratings. That doesn’t mean that debt relief is painless. Having the CommonWealth absorb this debt probably means that other needs will be deferred or crowded out for a period. But if we are going to implement a solution that offers up meaningful available cash in a relatively short period of time without having to raise a tax, fee, or fee, then debt relief must be considered as the best way to do that.
Step 2: Flex Highway Dollars
For decades we have lavished transportation dollars on our highways. We accepted this disproportionate spending approach because we were living in an auto-centric time and because highway users had more powerful voices in the halls of power. Times have changed, and with them mobility patterns and preferences. There is a clear trend away from driving and toward a more multi-modal mobility platform, where younger people especially prefer to walk, bike, or take transit to school, work, or entertainment. This changing paradigm is accelerating for a variety of reasons, including cost considerations and new attitudes about personal health. This paradigm shift should trigger a sustained effort to level the funding playing field by flexing highway money to transit. We should do that in the short term, starting this year, as part of an accelerated transit maintenance and repair program.
If we flexed as little as 10 percent of available and eligible highway funding to transit, it would give the T about $60 million a year in new revenue. If you combined that $60 million with the roughly $255 million that could be freed up from debt relief, the T would have over $300 million in cash every year without raising any tax, fee, or fare. Modal equity, which ought to be a statewide goal, begins with funding equity. Funding equity can begin by flexing a relatively modest portion of highway funds toward transit. There are no legal impediments to doing this. To ensure regional equity, I would identify highway projects within the MBTA serviced district area (which encompasses approximately 75 percent of the CommonWealth’s population) for postponement or elimination in order to enable this flexing of highway dollars.
Step 3: Local Option and the Transit Improvement District
I have called in prior articles for legislation allowing local option to create Transit Improvement Districts (TIDs). The idea is simple: cities and towns could impose a carbon assessment on non-residential parking spaces (mostly those in garages) over a certain limit, and they would be required to use that money as a dedicated fund for local transit, bike, and pedestrian improvements. As a stable revenue source, money generated from the TID could be leveraged to issue bonds, thus enhancing its purchasing power. The TID achieves multiple goals. First, it begins to charge automobile drivers for their carbon impacts. Second, the money goes directly to other modes, perhaps encouraging modal shift. Third, the money supplements the work the T is doing, and places a special focus on local non-vehicular mobility. If there is one thing we have learned this winter, it is the importance of safe pedestrian pathways in all of our communities. The TID helps place a needed focus on that.
Step 4: Congestion Pricing
We will soon be adopting an all-electronic toll system in Massachusetts. Many, myself included, have called for the state to implement a pure user-fee pilot program – a so-called VMT (for “vehicle miles traveled”) approach to charging people for highway use. Once implemented, AET and VMT systems can easily employ dynamic pricing protocols – i.e. the price per mile or the toll changes depending on time of day or traffic congestion conditions. Dynamic pricing is happening across the globe and in the United States in places as politically diverse as Florida and California.
I would dedicate the entire amount of money derived from congestion pricing to transit, as a way to invest in the system and improve it to the point that you would encourage modal shift. This makes sense for mobility and for the environment. The Transportation Finance Commission in 2007 determined that a 5-cent-per-mile user fee on the interstate system alone would generate $550 million each year. Why are we leaving such substantial transportation revenue on the table? It simply doesn’t make sense for Massachusetts to lag behind in pursuing what states like Oregon and California are pursuing aggressively.
The public will likely come to see VMT as the fairest approach to charging for use of our highways: you pay only for what you use. An education process is necessary to dispel misconceptions. People who are concerned about privacy, fearing that their movements will be tracked, can be assured by a carefully crafted law that no origin and destination tracking will take place and any attempt by a government official to violate a person’s privacy by using any VMT data would come with a severe punishment. My guess is that a younger generation increasingly accustomed to Facebook, Twitter, and smart phones has different, more relaxed expectations about privacy, and these attitudes are growing. In any event, this is a solvable issue, and should not be a barrier to entry into 21st century approaches to transportation funding.
We elect governors to be accountable. Governors want to be accountable. If we are going to start streamlining government, let’s start with the MassDOT board. Having a MassDOT board (which also serves as the MBTA board) in between the governor and the MBTA general manager is a mistake and needs to be corrected. I have called for abolishing the board, which has no counterpart in any other secretariat, and which was created in 2009 for political, not policy, reasons. Moreover, the board itself has no performance metrics that it must meet – it reports to no one, and lacks the time and resources to act as an effective governing body. If there is a view that a board of some kind is a useful thing (although I do not share that view), then at least make the majority of the board appointees coterminous with the governor. In that way, every governor has a chance to set the agenda and control one of the most important agencies in state government.
I do not support the notion of receivership for the T for two reasons. First, receivership can become a Trojan horse to exempt the T from the so-called Pacheco law, the state law that enables the public sector to compete with the private sector on a level-playing field. In any event, there is likely no way politically that the Legislature (particularly the Senate) will support Pacheco law repeal or exemptions for the T, so why go down a path that will lead nowhere? Second, the term receivership is a pejorative that will cause more harm than good. What will it mean for future bond ratings? It could end up costing the T more in the long run through higher debt service payments. The signal we should be sending to state residents, the business community, and the bond market is not one of defeat or failure, but rather one that expresses that we are in full control of the issue and have a strong plan to deal with it. Receivership is a label that brings nothing with it except stigma, higher debt service costs and political division.
Step 1: Audit
There should be a rigorous investigative audit of the MBTA’s maintenance practices. The audit would answer a number of questions: Are we performing maintenance and repair activities according to all known best practices? If not, why not? Does the T follow proper protocols for both routine and programmed maintenance? How does it keep track of both quality and timeliness of performance of these activities? Are the employees properly trained? Do they have all the resources necessary to perform their jobs? If not, why not? Are there lessons the T can learn from best practices and experiences across the globe that can be brought to good use here? For all we know, the MBTA maintenance program would get an A+. But let’s have an independent expert verify that, and if the grade is something less, let’s find out what protocols we ought to put in place for the future.
Step 2: Accelerated Maintenance and Repair
As we know, deferred maintenance is budgetary fool’s gold. Short-term savings result in exponentially higher costs – or failures – later. One of the important and costly initiatives of the Patrick Administration was its accelerated bridge program. I am calling now for an accelerated MBTA maintenance and repair program. The T should already have a list of critical state-of-good-repair needs (the Red Line power and signal system ought to be at the top of that list), and this list should be scrubbed, prioritized, and acted upon with dispatch.
We must also recognize that there are issues that no maintenance program can fully address, issues like age of equipment and availability of parts and resources. For example, one important factor effecting maintenance of buses is the inadequate size of our bus maintenance facilities which are generally not large enough to store the full fleet, leaving many buses outside to the elements. This means that they are exposed to all manner of weather conditions, including the winter snow, ice, and cold. It’s the difference between your car in a garage versus your car on the street in the winter – magnified many fold in the case of T buses. Money to enlarge and improve those maintenance facilities is just one of the many critical needs that must be attended to if we are to renew the MBTA.
Here’s another example that will give you an idea of how formidable the task ahead is. MBTA bus maintenance costs have been pegged as among the highest in the nation. One reason for those costs is the fact that the T doesn’t have one or two different types of buses but many more than that. There are compressed natural gas buses, hybrid diesel buses, all-diesel buses, electric buses, and dual-fuel buses – each with its own separate maintenance needs, parts, etc. The manufacturer of the relatively new articulated dual-fuel buses (those used on the Silver Line to the airport) is no longer in business. There is, in short, no uniformity in bus type that would enable maintenance ease or efficiency. A new equipment purchasing protocol that begins to establish such uniformity would go a long way toward making the system more sensible and easier (and less costly) to manage and maintain. And just to underscore the need for substantial net new revenue to properly renew the system, buses are very expensive: hybrid diesel buses can cost $700,000 each.
The MBTA ought to be held to performance metrics that are both rigorous and realistic given their resources. As part of the 2009 transportation reforms that we inaugurated when I was transportation secretary, MassDOT now has an Office of Performance Management and Innovation. It is capably led, and it should be integrated into the process of establishing new, enforceable MBTA performance metrics. The data is available, and the tasks should be clear. These performance metrics should be made available and transparent to the riding public in ways that are accessible and that encourage feedback and input.
It’s important to acknowledge that we are all in this together, and performance is not always fully within the control of the MBTA or its employees. We have a culture that does not respect such things as an MBTA-only lane or bus stop. People who park or double park on dedicated bus lanes or in front of bus stops are preventing the T from doing its job, and are doing a serious disservice to transit riders. There needs to be stronger enforcement by local and state public safety officials to end once and for all the persistent disregard for T bus lanes and stops.
On this same topic, Boston and Cambridge need to step up by offering traffic signal priority to MBTA buses along designated routes. A simple thing like making the traffic light at D Street automatically turn green at an approaching Silver Line bus would make a measureable, positive difference in the ride to and from Logan Airport. Having traffic signal priority along the entire Silver Line route from Dudley to South Station, and the #1 Bus servicing a critical corridor in Cambridge and Boston, would be a game changer in mobility (and in public safety as the traffic signal priority would also work for emergency vehicles). The technology to do this is available, and if we mean to be a center of innovation let’s prove it by making designated city intersections smart.
The MBTA system at various points on every line in the system except the Blue Line is at or over capacity. Riders know that even in the best of weather conditions they may have to wait for one or two trains to pass them by before they can get on a train at rush hour. This capacity problem is growing and it threatens to keep the system unreliable and underperforming. The only effective solutions to this are to significantly improve headways, which realistically cannot be improved very much on these lines (but which we should strive to maximize), and strategically expand the system. Connecting the Red and Blue Lines and adding Bus Rapid Transit along Summer Street are two expansion strategies that will reap enormous capacity improvements, making the system overall more reliable and responsive to people’s transit needs.
There is a narrative that suggests MBTA expansions have been a significant cause of the T’s fiscal condition. That narrative fails to take into account the importance of strategic expansions to our regional economy. Some of the recent expansion projects undertaken by the T were required because the state for decades did such a terrible job investing in a sufficiently robust and reliable transit system. The state’s persistent underinvestment in transit mobility directly degraded our ability to comply with clean air standards, including Clean Air Act and other requirements. This fundamental failure to offer people reliable transit mobility choices was more than an environmental issue, it was also an economic and social justice issue, depriving thousands of people a chance to affordably and conveniently get access to jobs, health care, and education.
Which expansion projects would you say “no” to? The Silver Line extension to the Seaport district and Logan Airport was a lynchpin of the massive private sector investments that have developed the Seaport and Innovation Districts into one of the region’s great economic engines. Extending the Green Line to Tufts University is happening with almost a billion dollars of federal funding support and is important both for air quality and because it serves a corridor with substantial demand. Worcester is the second-largest city in Massachusetts and, because of poor decisions made in the middle of the last century, is not connected to our only east/west interstate highway. Reconnecting Worcester with Boston and MetroWest via commuter rail was our generation’s recognition of this urban center’s importance to the Commonwealth. How can we advance the notion of regional equity if we deprive our second-largest city of transit connectivity?
These projects support local and regional economies, and access to jobs and education, and they strengthen our ability to offer regional equity in connection with our mobility platform. Strategic expansion projects encourage modal shift and help maintain a cleaner, more liveable environment. Can anyone reasonably say that these projects are not in the Commonwealth’s best interests, if not critical to our future?
Finally, there have been recent questions about the wisdom of another type of “expansion” – late-night MBTA service. This is a good example of expansion critics knowing the cost of everything and the value of nothing. Late-night transit service is the trifecta of good public policy. It is good for the economy, particularly the restaurant and entertainment business, as a younger cohort of citizens and students want to enjoy the city at night. It is good for social justice, as many people who work after “normal working hours” need a way to get home. These are the people who are cleaning offices, tending to the sick in hospitals, serving you a meal in a restaurant at 8 p.m. or later. Finally, late-night service enhances public safety because it puts more eyes on the street. The idea that we would seriously consider stopping such a useful service on the altar of some sort of retrenchment program misses entirely what we ought to be doing – renewing the MBTA so that it can offer a diverse population safe and reliable mobility. Yes the T needs to be run with fiscal prudence and proper frugality, but those virtues do not require bad policy making.
This plan for MBTA recovery and renewal is based upon a candid appraisal of what needs to be done to make a meaningful, lasting difference in the operational reliability and safety of the MBTA. We cannot play at the margins any longer. What is required is a comprehensive and synergistic set of actions on a large scale with emphasis on the areas I have outlined: fFunding, governance, maintenance, performance and capacity.
These ideas are meant to offer solutions that are, or ought to be, politically palatable and that will achieve real short- and long-term positive results. For the most part, they do not require or call for any tax, fare, or fee increase. If there is one paramount lesson to take away from this winter’s MBTA meltdown it is that adopting a policy of retrenchment and disinvestment has been proven time and again as short sighted and self-defeating. We cannot use this crisis as an excuse to take action that will have a disproportionately negative impact on today’s and tomorrow’s transit users. If we think we can solve the T’s problems by cutting back on service, deferring strategic expansions, or failing to fully modernize and renew the system, then we will have squandered this opportunity to finally stop the historic pattern of disinvestment, stagnation, and decline. History does – and will – repeat itself.We cannot and should not settle for a “normal” MBTA that simply reverts to what it was before the winter meltdown. That is not good enough, and not fitting for a city and region that seeks to attract private sector investment in sectors like innovation and health care. We must do better, and we can do better. The time for modal equity has come. There is no time to waste.
James Aloisi is a former state transportation secretary and a principal at the Pemberton Square Group.