Transportation investments needed one way or another
Even without new tax revenue, here are 6 options
AS THE OLD saying goes, “where there’s a will, there’s a way.” But here in Massachusetts, despite a growing chorus of support for increasing investment in infrastructure, we are not demonstrating the strong will required to improve and modernize our Commonwealth’s fragile transportation infrastructure. The argument for increased investment has been made in recent years by a range of prominent economists – Lawrence Summers, Jeffrey Sachs, Paul Krugman, and the editorial board of MassBenchmarks (a group of prominent Massachusetts-based economists). It boils down to a few key themes that drive the rationale for increased investment:
- We are badly under-investing in public infrastructure and have been for decades. Infrastructure investment is now a much lower share of our economy than in previous decades, and the American Society of Civil Engineers recently gave the United States a lowly D+ for the state of our infrastructure. This lack of investment is felt throughout Massachusetts in our bridges, outdated MBTA equipment, and transit failures, and the struggles to implement new investments that are capable of improving and expanding Massachusetts’ mobility infrastructure.
- Interest rates are still at historic lows, so the borrowing costs are low compared to the return on infrastructure investment. With interest rates so low, borrowing costs (bonds) continue to provide a good financial environment to invest. And the beauty of transportation investment is that we reap the benefits for decades. Most facilities have at least a 30-year life.
- Transportation investment provides both a near-term economic boost in terms of construction activity (and jobs) as well as long-term productivity-enhancing mobility improvements that enhance our broader economy, role in global trade, and the day-to-day well-being of our residents. In simpler terms, this kind of investment will help a number of domestic industries (steel, construction, manufacturing) that could still use a lift, and is badly needed to handle our growing economy, population, and demand for transportation – passenger and freight.
To make this case more directly for Massachusetts, it’s crucial to understand two things about our economy. First, and this might still surprise a lot of people, but we are a growth state. We have led the Northeast states (New England, New York, New Jersey, and Pennsylvania) in population growth for five straight years. In particular, the Greater Boston region is a booming metropolitan area and economic engine that is creating a residential-based building boom not seen in decades. Suffolk County grew by 7.8 percent from 2010 to 2015 (see Figure below). And while not as rapid, population growth is steadily occurring in Central Massachusetts (centered on Worcester), the Pioneer Valley (Hampden and Hampshire counties), and other parts of the state (with some declines in our most rural counties). This growth means that our already stressed and congested transportation system is facing growing travel demand with more trips occurring across all modes.
Second, as much as our state economy appears to be doing well by many indicators, there are two fundamental lingering challenges: a) a lack of economic opportunities for those without a bachelor’s degree; and b) a large number of Gateway Cities outside of Greater Boston are still not fully participating in this economic recovery and expansion. On the first challenge, infrastructure investment and its inherent construction activity and need for various raw materials and equipment, provides a direct boost to more “blue collar” occupations. As an interesting example that should be applauded, when the state determined that it needed to purchase new Red and Orange Line subway vehicles, it was able to use only state funds and therefore require that the new vehicles be assembled here in Massachusetts. The result is the new CRRC rail equipment assembly facility being constructed in Springfield that will lead to hundreds of direct jobs, a new US headquarters facility, and the prospect of additional “multiplier” effects in terms of supplier purchases.
So, where do things stand in Massachusetts in terms of funding critical transportation investments? Unfortunately, we are essentially stalled in neutral. The last effort to increase transportation revenues by raising the state gas tax in 2013 was badly blunted by a ballot measure to prevent “inflation indexing” of the gas tax that would have provided more revenue. Even a liberal-leaning state like Massachusetts is so averse to taxes that, given the chance, our residents will vote against any tax they have a chance to reduce. And unlike previous administrations that advocated for additional transportation investment funding as a centerpiece of their statewide vision and policies, the Baker administration has prioritized finding more value from existing resources, and thus has been reluctant to raise additional revenues to boost transportation infrastructure investments. While it is certainly admirable to try to get more benefit from limited resources (and finding ways to reduce the costs of the Green Line extension was absolutely the right move), this hard line against new revenues boxes the state into a corner with little chance to invest.So, what should we do? At a high-level, like all states, we should be supportive of efforts to increase infrastructure investment at the federal level so we can bring more federal resources to our Commonwealth. Until that happens, there are some things we can and should be doing:
- Given the formidable challenges to further gas tax increases, we should aggressively explore the future implementation of mileage-based fees as a viable, new source of transportation system revenue. Like Oregon and California, we need to recognize that more fuel-efficient vehicles (especially electric cars) will continue to produce much less revenue per mile traveled. So, we now need to find ways to compensate for this increasingly inadequate funding source.
- Increase public-private partnerships – especially for freight transportation, we should continue to increase public-private investments that recognize that public investment in privately-owned infrastructure produces a mix of public and private benefits.
- Implement and expand value-capture funding (in strong market areas where it makes sense) – following the Massachusetts legislative proposals of 2016, the state should aggressively expand its use of value capture to help pay for transportation improvements that are likely to result in increased property values. The most obvious example of this is the Green Line project into Somerville and Medford where value capture is critical to cover funding gaps and has very strong potential given the robust real estate markets. Less obvious, perhaps, is using value capture as part of the funding strategy for other transit and passenger rail projects likely to lead to transit-oriented development (as was estimated in a 2010 South Coast Rail study).
- Pursue competitive federal funding programs and seek bi-state partnerships. For example, the 2015 transportation act created the FASTLANE freight investment program and Massport was able to win $42 million to contribute towards seaport improvements to handle larger cargo ships. This program will create additional rounds of funding, and Massachusetts should be prepared to propose strong, multi-modal projects that demonstrate a strong return on investment.
- Similar to the requirements of the US DOT TIGER program and recommendations from Jeffrey Sachs of Columbia University’s sustainable development initiative, the state should develop an ongoing ability to evaluate the return on investment of projects from the triple-bottom-line perspective of economic, social, and environmental impacts. These methods and tools are increasingly available.
- Allow sub-state regions to implement local option taxes. Throughout the country, transportation improvements (highways, bridges, transit) are partly funded by local option taxes, such as a small increase in the sales tax. Voters, even in deep red states like Alabama, are agreeing to increase taxes when they know the funding will go to improvements in their local area’s infrastructure. Some leaders in Massachusetts are pushing this idea but it’s time the Legislature act on this idea to allow local areas to supplement available federal and state dollars to help build a 21st Century transportation system that can deliver both enhanced mobility as well as lasting economic, environmental, and equity benefits.
Dan Hodge is the principal of Hodge Economic Consulting in Northampton and Tim Brennan is the executive director of the Pioneer Valley Planning Commission.