Comments on: Transit Agencies Facing Huge Deficits http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/ Thu, 11 Mar 2010 21:15:52 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Norman Brown http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/#comment-442 Norman Brown Fri, 20 Feb 2009 03:03:37 +0000 http://thetransportpolitic.com/?p=1304#comment-442 An increasingly important counterweight to Tom's position is the bigger and bigger bite that debt service, mostly for capital projects, takes out of these same operating budgets. And that is another side of the "Contract on America" agenda. Since it forced transit operating funding down to the state level where there is much greater resistance to actually taxing and spending for transit purposes the operating budgets became increasingly starved by the systems capital needs and the debt service thereon. It became much easier for states to pass bond issues for capital needs than it did to raise revenues, or taxes, to pay off those bonds. Like all the other sectors of the economy the transit agencies basically were weighed down by debt. Some systems 20% of the operating budgets are eaten up by debt payments on the capital. The systems need both capital and operating to provide service and the prohibition on Federal Operating support, regardless of the preventative maintenance exemption, is still a very important drag on creating a solid system. Now under crisis economic conditions the operating budgets, often funded by sales tax receipts, are being crushed. An increasingly important counterweight to Tom’s position is the bigger and bigger bite that debt service, mostly for capital projects, takes out of these same operating budgets. And that is another side of the “Contract on America” agenda. Since it forced transit operating funding down to the state level where there is much greater resistance to actually taxing and spending for transit purposes the operating budgets became increasingly starved by the systems capital needs and the debt service thereon. It became much easier for states to pass bond issues for capital needs than it did to raise revenues, or taxes, to pay off those bonds. Like all the other sectors of the economy the transit agencies basically were weighed down by debt. Some systems 20% of the operating budgets are eaten up by debt payments on the capital. The systems need both capital and operating to provide service and the prohibition on Federal Operating support, regardless of the preventative maintenance exemption, is still a very important drag on creating a solid system. Now under crisis economic conditions the operating budgets, often funded by sales tax receipts, are being crushed.

]]> By: Tom Rubin http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/#comment-439 Tom Rubin Thu, 19 Feb 2009 16:08:33 +0000 http://thetransportpolitic.com/?p=1304#comment-439 Actually, there is very little problem in utilizing the transit "capital" funding coming from the Federal government for operating assistance. Technically, most of the additional transit funding is going to larger urban areas -- such as those listed in the article -- under the rules for 49 USC 5307 "formula" funds -- which can be utilized, at the option of each recipent area, for transit operating subsidies. This is one of those areas where you have to understand how to actually "read" the law. As part of the 1994 "Republican Revolution," one of the elements of the "Contract with America" was to do away with Federal transit operating assistance, which the new Republican majority in Congress believed was going primarily to increase transit labor costs. The result was a prohibition for transit operating assistance for larger urbanized areas and, if you read the law, or visit the official Federal Transit Administration website, that is exactly what you will see. However, if you go to the FTA's National Transit Database for 2006, you will see that there was $2.5 billion in Federal transit operating assistance in that year. What happened was one of those wonderful inside-the-beltway political deals. The Republicans got the change of law they wanted, which allows them to get up and state they got the law changed so that there is NO Federal transit operating assistance. What the Democrats got was a change in the definition of a "capital" project that made "preventive maintenance" a capital cost -- for purposes of Federal law only. For all other purposes, including the agency's published financial statements and FTA's own web site, it is operating assistance. Here are the numbers for Federal transit operating assistance for 2006 a few of the agencies you list above (most, but not all, of this was "formula" funds in large urban areas): Atlanta MARTA $ 38 million Los Angeles MTA: $207 million Miami MDTA $ 39 million Portland Tri-Met $ 44 million All of these areas will be getting large sums of added "formula" funding; the preliminary number for LA is $388 million, for example. (By the way, although there are supposedly limitations on how much formula money you can use for operating subsidies under a different name, the dirty little secret is that no one really cares -- or is watching.) I am most certainly NOT saying that these and other transit agencies have no financial problems, particularly in the long term (the "stimulus" money is extremely unlikely to be a regular thing); I am saying, there is a lot more here than meets the eye. Any questions, comment here and I'll respond. Tom Rubin Actually, there is very little problem in utilizing the transit “capital” funding coming from the Federal government for operating assistance.

Technically, most of the additional transit funding is going to larger urban areas — such as those listed in the article — under the rules for 49 USC 5307 “formula” funds — which can be utilized, at the option of each recipent area, for transit operating subsidies.

This is one of those areas where you have to understand how to actually “read” the law. As part of the 1994 “Republican Revolution,” one of the elements of the “Contract with America” was to do away with Federal transit operating assistance, which the new Republican majority in Congress believed was going primarily to increase transit labor costs. The result was a prohibition for transit operating assistance for larger urbanized areas and, if you read the law, or visit the official Federal Transit Administration website, that is exactly what you will see.

However, if you go to the FTA’s National Transit Database for 2006, you will see that there was $2.5 billion in Federal transit operating assistance in that year.

What happened was one of those wonderful inside-the-beltway political deals. The Republicans got the change of law they wanted, which allows them to get up and state they got the law changed so that there is NO Federal transit operating assistance.

What the Democrats got was a change in the definition of a “capital” project that made “preventive maintenance” a capital cost — for purposes of Federal law only.

For all other purposes, including the agency’s published financial statements and FTA’s own web site, it is operating assistance.

Here are the numbers for Federal transit operating assistance for 2006 a few of the agencies you list above (most, but not all, of this was “formula” funds in large urban areas):

Atlanta MARTA $ 38 million
Los Angeles MTA: $207 million
Miami MDTA $ 39 million
Portland Tri-Met $ 44 million

All of these areas will be getting large sums of added “formula” funding; the preliminary number for LA is $388 million, for example.

(By the way, although there are supposedly limitations on how much formula money you can use for operating subsidies under a different name, the dirty little secret is that no one really cares — or is watching.)

I am most certainly NOT saying that these and other transit agencies have no financial problems, particularly in the long term (the “stimulus” money is extremely unlikely to be a regular thing); I am saying, there is a lot more here than meets the eye.

Any questions, comment here and I’ll respond.

Tom Rubin

]]> By: Yonah Freemark http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/#comment-438 Yonah Freemark Thu, 19 Feb 2009 01:19:19 +0000 http://thetransportpolitic.com/?p=1304#comment-438 Norman - I like to think that I had that file too... maybe I will someday! Norman -
I like to think that I had that file too… maybe I will someday!

]]> By: Norman Brown http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/#comment-441 Norman Brown Thu, 19 Feb 2009 01:13:52 +0000 http://thetransportpolitic.com/?p=1304#comment-441 Excellent chart Yonah. I like to think you have an Excell somewhere on your drive that has other relevant factors like Farebox Recovery Ratio or Farebox Operating Ration, total riders, total miles, cost per rider, cost per rider v. service are population, % of commuters taking mass transit. There are many ways to slice it up and the relative crisis is in the eye of the beholder. Excellent chart Yonah. I like to think you have an Excell somewhere on your drive that has other relevant factors like Farebox Recovery Ratio or Farebox Operating Ration, total riders, total miles, cost per rider, cost per rider v. service are population, % of commuters taking mass transit. There are many ways to slice it up and the relative crisis is in the eye of the beholder.

]]> By: Kyle http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/#comment-440 Kyle Wed, 18 Feb 2009 18:28:56 +0000 http://thetransportpolitic.com/?p=1304#comment-440 The MBTA is facing serious problems, yet the plans in Massachusetts talk about reform and cost savings through these reforms are not immediate and are instead spread over the long-term. This is good in some sense, but revenue is needed immediately. The Governor and some in the legislature support an increased gas tax (the Governor's proposal would make it the highest tax in the nation), but too many think that would raise the price of gas too high and say that they can't afford it. Well, what were they doing when gas was over $4/gal.? Not going anywhere. The other possibility is raising tolls in certain areas and using some of that to support the MBTA, but that places the burden on a "few" and not "all". It basically comes down to state politicians not wanting to make the tough decision, because although it will make things better in the long run, they could lose their seat in the next election. Not only does the MBTA have a major debt problem, but service continues to get worse and worse. So, the increased funding would only keep the MBTA running, rather than actually really improving the system. Priorities are so backward. The MBTA is facing serious problems, yet the plans in Massachusetts talk about reform and cost savings through these reforms are not immediate and are instead spread over the long-term. This is good in some sense, but revenue is needed immediately. The Governor and some in the legislature support an increased gas tax (the Governor’s proposal would make it the highest tax in the nation), but too many think that would raise the price of gas too high and say that they can’t afford it. Well, what were they doing when gas was over $4/gal.? Not going anywhere. The other possibility is raising tolls in certain areas and using some of that to support the MBTA, but that places the burden on a “few” and not “all”.

It basically comes down to state politicians not wanting to make the tough decision, because although it will make things better in the long run, they could lose their seat in the next election.

Not only does the MBTA have a major debt problem, but service continues to get worse and worse. So, the increased funding would only keep the MBTA running, rather than actually really improving the system.

Priorities are so backward.

]]> By: Yonah Freemark http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/#comment-437 Yonah Freemark Wed, 18 Feb 2009 14:56:44 +0000 http://thetransportpolitic.com/?p=1304#comment-437 Michael - Points taken. I've added that information, though I admit it's a little rough around the corners as I looked up the information quickly. Michael -
Points taken. I’ve added that information, though I admit it’s a little rough around the corners as I looked up the information quickly.

]]> By: Michael Perkins http://www.thetransportpolitic.com/2009/02/18/transit-agencies-facing-huge-deficits/#comment-436 Michael Perkins Wed, 18 Feb 2009 14:14:54 +0000 http://thetransportpolitic.com/?p=1304#comment-436 Any chance these could be expressed as a %age of FY 2008 operating expenses or some similar metric? It's hard to figure out who's in the worst shape based on nominal figures. BTW, Washington's transit authority is officially "WMATA", rather than "Metro". Any chance these could be expressed as a %age of FY 2008 operating expenses or some similar metric? It’s hard to figure out who’s in the worst shape based on nominal figures.

BTW, Washington’s transit authority is officially “WMATA”, rather than “Metro”.

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