Finance Social Justice

Local Funding for Public Transportation Operations: Producing Inequitable Results?

» Less wealthy regions may be more likely to spend less on transit, leaving the poor there with higher transportation expenses.

One of the unique features of the American transit funding system is that the federal government chips in significant sums each year for capital expenses, such as for the purchase of new buses or the construction of new rail lines, but the law forbids significant involvement in subsidizing operating expenses. This means that local and state governments must find the means to pay for service day-in and day-out.

This could offer the benefit of a considerable range of local political decision-making: Some cities may choose to prioritize transit, while others don’t — people can choose to move between cities based on whether or not they want to take advantage of such transportation offerings. Yet the provision of transit for impoverished people is a redistributive service, and there is considerable theoretical support for the argument that redistributive public functions should not be funded by local governments. Cities that choose to aid their poor, scholars like Paul Peterson have argued, will simply attract more of the needy into their city limits; other municipalities without such aid will be able to escape with lower taxes and no aid to the poor.

A review of evidence from American cities on transit operations funding suggests that neither of these arguments is substantiated. Rather, the current funding system results in highly inequitable results that result in worse transit service in places with higher poverty rates and lower median household incomes. Differences in metropolitan wealth are highly positively correlated with levels of funding for transit service. In other words, the places where residents need transit service most are those that are providing the least of it. Median household incomes, at least based on the regions reviewed here, are prime determinants for the level of public services offered.

To conduct this quick study, I considered data from 15 American cities. I selected all central cities with populations of between 600,000 and 1,000,000 in the 2010 U.S. Census, producing a broad sample of cities throughout the country with varying demographic profiles.* I assembled data at the metropolitan (MSA) level (from 800,000 to 5.6 million in population) from local transit systems (for operating funding data), the Brookings Institution (for 0-vehicle households, metropolitan area poverty rates and median household income), the American Public Transportation Association (for ridership in July 2011), and the U.S. Census (for central city population, poverty rates, and median incomes).

Comparing statistics across this group of cities indicates that by requiring operating funding to be assembled at the local level, people living in poorer metropolitan areas are likely to be denied the quantity of transit services that their peers in wealthier regions are offered. This will only increase the transportation costs faced by people living there. This indicates that there is a strong equity argument to shift operating funding of transit services away from the local level and towards the federal government, which would be more likely to spread resources equally across metropolitan areas, regardless of local incomes.

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The most devastating data, as shown in the charts above, demonstrate that metropolitan areas with higher poverty rates and lower median incomes are likely to spend less on operating their public transportation networks than peer cities with lower poverty rates and higher median incomes (R-squared correlations of positive 0.72 and negative 0.49, respectively). A 50% increase in the poverty rate is associated with a 49% decline in per-person transit operations funding. The differences in transit funding are even more significant when compared with differences in income. The regression shows that a 50% increase in regional median income is associated with a 220% increase in per-person transit funding.

This suggests not only that less-wealthy metropolitan areas do not have the funding capacity to ensure good transit for their populations, but that they are providing disproportionally less public transit than their wealthier peers.** Local funding results in considerably varied service provision, based almost directly on the wealth of each respective region.

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This is not to suggest that people in poor areas are not able to get around at all. The evidence in the chart above shows that there is no correlation between the poverty of metropolitan areas and the rate of zero-household vehicles (R-squared correlation of 0.07). People who live in areas with poor transit offerings will simply find the means to drive. This comes with a grave consequence: Driving costs the average person more than using transit, so impoverished people in transit-poor areas are in effect forced to spend more for transportation than their peers in transit-rich areas.

On the other hand, there is a strong relationship between the number of zero-vehicle households in a region and the ridership on transit there (R-squared correlation of 0.66). The regression implies that a 50% increase in the rate of zero-vehicle households in a metropolitan area is associated with a more than five-fold increase in transit ridership. This suggests, perhaps unsurprisingly, that people are more likely to abandon their private vehicles when good transit is offered. Giving up on using personal cars lessens personal transportation costs, but ironically the evidence shows that this is more feasible in regions with lower poverty and higher median incomes. Regions that are already well-off are making themselves better off, while those that are poorer are reinforcing their economic problems.

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Nonetheless, the relatively strong correlation between transit operating dollars spent per person in the metropolitan area and voting share in the relevant county for Barack Obama in the 2008 presidential race (see above; R-squared correlation of 0.66) suggests that through political action, people have the ability to alter the level of service offered by transit services in their area. More strongly Democratic-voting populations appear to benefit from better transit offerings.

There is a direct correlation between investing in improved transit and the rate of ridership in the regions evaluated (R-squared correlation of 0.85), suggesting that higher funding for public transportation services is associated with more users. This is hardly a surprising result (one would hope that transit funding is roughly proportional to the number of riders!), but it reinforces the contention that transit ridership levels are not simply a result of socio-economic conditions and land uses, but also a consequence of direct political decision-making about how much to spend on transit.

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I also considered another possibility: That transit funding in regions is to some degree dependent on differences between central city and suburban populations within each metropolitan region. This question seems particularly relevant considering the recent situation in Detroit, in which suburban reluctance may have led at least in part to the canceling of a light rail line down Woodward Avenue. But a comparison between the central city share of zero-vehicle households (when weighed in terms of the city’s share of the metropolitan area population) and transit funding — where a larger share of zero-vehicle households in the city should theoretically indicate less funding — shows a weak positive correlation (R-squared of 0.34), which is unexpected. An increasing divergence between central city and suburban poverty rates and transit funding shows the expected negative correlation (R-squared of 0.33), indicating that a significant difference in poverty rates within the metropolitan area is associated with somewhat of a decline in transit funding, though it cannot account for most of the differences between regions.

This evidence is purely correlative, not causative. This means that I cannot conclusively show from these data that the lower level of transit funding in poorer metropolitan regions results from those regions’ economic difficulties.

Even so, these data suggest strongly that people living in cities with high poverty rates and low median household incomes are likely to suffer from inadequately funded public transportation systems compared to their peers in low poverty rate and high median household income metropolitan areas. This produces an inequitable funding distribution that further disadvantages lower-income households in lower-income regions by forcing them to resort to the use of expensive private automobiles rather than cheaper transit. This certainly should put in question the assumption that it is in the best interests of residents for funding decisions about public services to be made at the local level.

We should reevaluate whether it is reasonable for metropolitan areas to take responsibility for funding transit, or whether such funding concerns would be better placed in the hands of national government decision-makers, who might be more likely to prioritize equal spending on transit across regions.

* This list includes Austin, Boston, Charlotte, Columbus, Denver, Detroit, El Paso, Indianapolis, Jacksonville, Memphis, Nashville, San Francisco, San Jose, Seattle, and Washington. I did not include Baltimore because I could not find funding data for Baltimore’s transit services apart from those of Maryland in general, since the state has a unified transit system. I did not include Fort Worth because it shares its MSA with larger Dallas.

** One could also argue that the lack of transit provision is strongly correlated with a reduced median income in the regions studied.

Bus Detroit Light Rail

In a Failure of Municipal Ambition, Plans for Detroit Light Rail Shut Down as Focus Shifts to BRT

» More people will be served by the bus lines than would have been affected by rail, but new plans are predicated on a regional accord on funding improved regional service.

In early 2010, the U.S. DOT announced that it would award a $25 million TIGER grant to Detroit to begin construction on a new light rail line along that city’s central spine. For two years, hope spread through America’s most notorious shrinking city: This project, perhaps, would provide the boost to resurrect the Motor City.

Last week, just as the latest TIGER grants were being unveiled for other cities, local leaders announced they would reneg on that promise due to a fear that operations costs would be impossible to cover. A less aesthetically pleasing — but far more extensive and regionally funded — BRT program would be inserted in its place.

This situation speaks two realities: First, Detroit continues to be a mess — both politically and financially. Leaders of surrounding counties have shown themselves unwilling to compromise, expressing hostility over the idea that local tax funds might go to aid the transportation system adjacent city rapidly descending into zombie mode. Second, the U.S. DOT rushed its initial selection of TIGER grant recipients and showed that it was incapable of following through. Detroit’s fiscal situation in 2010 was not much better than it is today; how could the government have expected the city to fund the project’s operating costs then if it can’t now?

For Detroit’s civic ambitions, the death of the $528 million light rail plan is devastating news. Over the past two years, as it has become increasingly apparent that the current situation is far from sustainable, business, political, and community leaders have staked their hopes for the future of the city on the rail project. Not only would the 9.3-mile transit line running up Woodward Avenue provide substantially improved access to downtown, they argued, but it would spur a major increase in development in the area. Mayor Dave Bing suggested that the population of the city would be encouraged to relocate to more transit-accessible neighborhoods, especially along the corridor. The light rail line would give the city a competitive advantage.

This outlook was never realistic: No rail project, no matter how nice, can singlehandedly reverse the systematic decline of a once-huge city. Development will come to downtown Detroit when there is a demand for housing units and employment there, not when there are tracks along Woodward Avenue. Moreover, the city’s existing employment-housing imbalance, in which 60% of the city’s job holders go to the suburbs for work, means that a downtown-focused project would likely be ineffective in resolving the commuting needs of many people.

The decision to cancel the project, however, came down to the fact that Washington was worried that the City of Detroit would be unable to subsidize the costs of operation. The city’s existing transit services are in turmoil: The downtown People Mover, a one-way automated elevated loop line, practically shut down this month due to a lack of agreement about funding it. Fewer than half of the city’s buses are in operation, due to neglect and maintenance issues. Suburban bus services, offered by SMART, have declined considerably faced with less-than-expected revenues. To make matters worse, there is little fare or service integration between the three operations.

The Federal Transit Administration expressed concern that the situation could get even worse if the light rail line’s operations costs required the elimination of some bus services. Several months ago, FTA head Peter Rogoff argued that Detroit’s goal to use annual state and federal grants as the primary source of funding was an untenable long-term approach.

But an alternative providing a steady revenue source would require regional cooperation, and indeed the government hoped that the Detroit region would integrate its transit offerings into a single regional authority. Yet disagreements across county lines have imperiled the concept of a regional transit authority repeatedly; a $600 million effort to build a regional rail system in the 1970s, for instance, was scuttled when surrounding counties refused to join in. Oakland County Executive L. Brooks Patterson argued against a regional transit tax this summer and in fact has been a stated proponent of, as he says it, sprawl.*

The new bus plans, serving surrounding Macomb and Oakland Counties as well as Detroit’s Wayne County, apparently will relieve that tension because, unlike the light rail efforts, they would not be focused on the central city’s downtown. The regional transit authority is again being promoted, this time by Michigan Governor Rick Snyder.

Four BRT corridors would run 83 miles between the region’s largest destinations (local leaders say “110 miles,” but maps revealed by the News only show 83). 34 stations would connect downtown with the airport, Birmingham, Troy, and Selfridge, primarily along Woodward Avenue, Gratiot Avenue, Michigan Avenue, and M-59. The extensiveness of the network as proposed will provide a level of service an order of magnitude more significant than would have the light rail.

The project is in the earliest stages of planning, so the levels of service to be offered by this BRT network are unclear. How many exclusive lanes will be provided for the buses, for example?

This proposal is similar to the 67-mile “Golden Triangle” announced by suburban leaders in Spring 2010. Yet while that less-lengthy plan would have cost about $800 million, Governor Snyder has suggested that this new BRT network, referred to as the “Metro Connection Tri-County Triangle,” could be built for $500 million. That price seems too low for 83 miles of exclusive busways — and it certainly would not allow for particularly ornate stations. Meanwhile, the state legislature must still approve a regional funding plan if the project’s operations costs are to be covered.

Let it be clear: Even if the BRT project provides a lot more services than the light rail for a similar capital cost, its operations costs will be far higher. Under the existing legislation, in which the federal government is prohibited from providing operations support for transit services, the only way this project will get off the ground is if the suburban counties agree to massive increase in transit funding. That may seem like an unrealistic prospect, but it is probably more feasible than assuming suburbs would agree to fund the operations costs of a city-only rail line.

None of these funding dilemmas have prevented private and non-profit supporters of the rail project, who had collectively submitted $100 million for the line, from complaining about the needs of the downtown. They suggest that a 3.2-mile line, costing $225 million and running from the river to New Center, could be funded with federal New Starts funding. Yet the U.S. DOT seems to have made clear that there will be no dollars for light rail in Detroit.

Meanwhile, Mayor Bing, unfortunately, continues to use fantastical rhetoric when it comes to promoting the BRT system: “With Detroit’s rich history of innovation,” he wrote in the Free Press, “There is no doubt we can build a system that competes with other successful BRT lines in Cleveland, Pittsburgh and Los Angeles.” Yet the development of the BRT plan should have little to do with competition; its primarily purpose must be to serve the transit-dependent population of the city. Will it get the chance to do so, or relegated to the dustbin like most other transit plans for Detroit?

* Though Patterson has said that he would allow citizens to vote on such a tax if it were put up to referendum.

Boston Commuter Rail Light Rail

Facing Funding Shortfalls and Protest, Better Rail for Boston Region is Delayed

» Opportunities for rerouting commuter rail via the Grand Junction in Cambridge are criticized by community members who fear increases in pollution. Meanwhile, the long-planned Green Line extension in Somerville is threatened by budget limitations.

Just northwest of Boston, Cambridge and Somerville are some of the nation’s exemplar cities when it comes to promoting transportation alternatives. In Somerville, 48% of the population rides transit, walks, or bikes to work; in Cambridge, 57% do. The explanation likely comes down to a strong commitment to livable streets in both cities, a large student population, high residential densities, community activism against limited-access highways, and big concentrations of jobs both in the traditional office center of Downtown Boston but also in the walkable Kendall Square-MIT and Harvard Square areas, both along the Red Line rapid transit corridor.

Yet, with the exception of the Red Line — extended north of Harvard Square in the early 1980s — reliable transit access in the two cities is limited. Buses crisscross the area, but they are stuck in traffic at all periods of the day due to the lack of reserved lanes. Commuter rail lines that extend through the area only stop once, at the Porter Square Red Line station. These limitations have strained the Red Line, which now suffers from overcrowding at peak hours, and limited the potential for growth. In addition, partially because of the penury of transit stations around which to build up, the Boston region is one of the nation’s most expensive housing markets.

For years, plans for transit access improvements, clearly merited considering the area’s demographics and potential, have been under development by the Boston-area transit agency, MBTA. A circumferential bus rapid transit line, the Urban Ring, would have allowed commuters from Cambridge and Somerville to get to Boston’s jobs-heavy Longwood Medical Area or Logan Airport without passing through congested downtown — but it was put on indefinite hold last year due to a funding shortfall. Now, an extension of the Green Line light rail line into Somerville is threatened by similar concerns. And the reactivation of the Grand Junction commuter rail corridor through Cambridge has been put off by community resistance.

The Green Line extension is one of the most promising transit projects in the country. It is expected to carry about 45,000 daily riders along its four-mile, two-pronged route, with termini in Somerville’s active Union Square neighborhood and Tufts University, just across the Somerville city line in Medford (see map below of the green dotted line), following two existing commuter rail corridors in a fully separated right-of-way. The state has previously said it plans to begin construction at the end of next year, with the opening of the first stations planned for 2016. The program is expensive — about $1 billion for its completion.

The Grand Junction, meanwhile, is a lightly used railroad that runs from Boston University, across the Charles River, through Cambridge, to the existing commuter rail corridors in East Cambridge; it is the only link between the commuter rail corridors emanating from Boston’s North and South Stations, which are on opposite sides of downtown. The Grand Junction, purchased from CSX in 2010, runs through the Cambridgeport, Kendall Square, and Area IV neighborhoods of Cambridge and past MIT, as seen below dotted in purple. The plan developed by MassDOT — abandoned for now — would have routed some commuter trains from Worcester to North Station along this route in order to provide better access to Kendall and decrease congestion at South Station, which is expected to see increasing use due to higher ridership on the commuter rail network and plans for expanded Amtrak Northeast Corridor operations, which end there.

Neighbors of the Grand Junction have opposed the commuter rail rerouting project from the beginning, suggesting that it would increase air pollution due to diesel emissions from the heavy, long, unelectrified trains. State Representative Tim Toomey, in concert with many of his neighbors, hailed MassDOT’s announcement last week that it would cancel the program.

The state’s own studies suggested that the new train services, including a $30 million upgrade at Kendall Square, would do little to improve ridership; only about 300 new riders would be expected to use them. And the line’s six street grade crossings would have posed a significant problem, especially at Massachusetts Avenue, along which a huge percentage of the automobile traffic between Boston and Cambridge travels. And yet the Urban Ring, which would have partially run along the same corridor, was expected to attract 184,000 daily riders, many of them in Cambridge. What gives?

Fundamentally, the problem with the current commuter rail plans for the Grand Junction was that they would have provided infrequent, limited-stop service in an area of the region that demands frequent operations with many stops. Connecting Boston University with MIT and North Station without running through downtown remains a good idea. And neighborhood groups might get on board if the plan is adapted to include stops in Cambridgeport and Area IV, two neighborhoods with only minimal connections to the existing network. This project deserves to be resurrected using low pollution diesel multiple unit trains, electric light rail vehicle, or BRT on its ridership merits alone. Fortunately, MassDOT left the project’s development open as a future possibility.

Community opposition, on the other hand, is certainly not a problem for the Green Line extension, which has nearly universal support from Somerville residents and politicians, who are excited about the opportunity for better and faster connections throughout the city and into downtown. But funding this huge infrastructure program is the bigger concern. Following a lawsuit over the Big Dig project (which interred a highway through central Boston), the state agreed as a form of air pollution mitigation to fund a number of major transit projects, including the Green Line extension. But the costs of the project were forced on the already debt-ridden MBTA; no alternative funding plan has yet been developed.

Though the state is required by legal settlement to improve transit into Somerville, the fate of the Green Line remains up in the air; earlier this year, there were rumors that its completion might be delayed until 2018 or later. U.S. Representative Michael Capuano of Somerville sounded the alarm last week, suggesting that the state should limit its ambitions to reflect funding realities, especially while pro-transit Democratic Governor Deval Patrick remains in office. Mr. Capuano’s proposal would be to build the extension only to Union Square and Washington Street, failing altogether to address connectivity deeper into Somerville. New stations would be built on the commuter rail line to make up for the loss of light rail access.

Yet this proposal would fail to provide the all-day frequent service rapid transit lines offer the rest of the Boston region. And it would force those using the line to transfer at North Station, preventing them direct access to other destinations in downtown Boston as well as further out to Northeastern University, Boston University, the Longwood Medical Area, and Brookline. Using heavy diesel trains rather than electrified light rail vehicles — just as in the Grand Junction case — would likely increase air emissions in the area, defeating the mitigation aspect of the project altogether. Replacing the Green Line with commuter service operating less frequently would doubtless attract far fewer riders.

Like in many metropolitan areas, funding for transport in Boston and its close-in suburbs is always tight. The exciting opportunity to improve on the fantastic transportation use patterns already present in Cambridge and Somerville, however, should encourage local leaders and politicians to fight for new revenue sources. And in the process, they should argue for the refinement of existing transit plans to better serve communities along their routes.

Image at top: Very short freight train running along the Grand Junction near Massachusetts Avenue in Cambridge, from Flickr user SignalPAD (cc)

Charlotte Commuter Rail Finance

Innovative Financing Points the Way Ahead for a Rail Project in Charlotte

» In addition to transit-oriented development, Charlotte’s planners envision a system that appeals to freight users.

In the case of Charlotte, necessity may be the mother of invention.

Lacking sufficient revenues to construct the planned Red Line commuter railroad designed to connect Center City Charlotte with its northern suburbs, planners working for local transit agency CATS have developed a unique vision for its financing.

The $452 million upgrade of the existing Norfolk Southern O Line would allow a significant expansion of capacity not only for passenger trains, but also for freight trains running on the same tracks. In doing so, this agency’s planners are suggesting that the sometimes rivalry between the two types of transportation should really be approached hand-in-hand, especially for a project whose primary right-of-way extends far beyond dense urban neighborhoods that characterize the zones around most successful transit links. Perhaps for the first time so directly, transit-oriented development is proposed to be joined by “freight-oriented development.”

Charlotte’s ambitious transit plans — once scheduled to include five rapid transit lines radiating from downtown — have been significantly scaled back by the economic downturn, which hit this financial hub especially hard. Sales tax revenues have fallen far below initial expectations, delaying the completion of anything other than the initial Blue Line light rail corridor, which opened in 2007 between downtown and the southern suburbs. While the northeastern extension of the Blue Line and a short version of the downtown streetcar will move forward thanks to federal funding guarantees, the Red Line’s ridership forecasts of about 4,000 to 5,000 a day were not sufficient to meet relatively tough guidelines from Washington.

The Red Line’s 25 miles of new service, though, will be made possible thanks to a combination of state contributions (25% of the cost), local sales taxes already collected by CATS (25%), and value capture (50%), which would come in two forms. A tax-increment financing (TIF) district around stations would allow increases in property values in the area to be directed toward paying back the cost of the project. This would be done with no increase in the property tax rate but rather through a redirection of increases towards the project.

Similarly, a special assessment district is being considered to pay for the service. Unlike TIFs, these districts* would require property owners to agree to pay a marginal increase in their property taxes to be devoted directly to the Red Line.

The new “Unified Benefit District” that would be affected by these value capture mechanisms would take advantage of both the significant population growth expected north of Charlotte over the next few years and encourage freight-oriented development — which would together make the project financeable. The plan would include significant space to locate new development around stations — indeed, 10,000 housing units are either already under construction or planned. Certain developments would be built in collaboration with CATS.

More intriguingly, businesses that require rail freight access would be encouraged to locate between stations. They would be able to connect their own tracks directly to the main rail line. The argument made by the project’s planners is that the area along the line’s right-of-way includes plenty of space for infill industrial space. Why not take advantage of the increase in rail capacity?

As the map below demonstrates, it does seem logical to encourage walkable residential and office space around stops and freight-based industrial space between the stations.

Transit services, taking a total of 40 minutes, would be provided every half-hour at peak and every hour off-peak. The improvements planned for the corridor would therefore make it possible to run more freight trains at off-peak hours without disrupting the primary travel needs of riders. Operations will have to be coordinated, but with positive train control and other safety measures in place, it is hard to see what would prevent this project from adapting to the needs of both passengers and freight.

Ten stations, several of which will be within Charlotte city limits but others of which will serve suburban towns including Huntersville, Cornelius, Davidson, and Mooresville, will be connected by 2017 if construction begins as planned in 2014. In order to make that possible, however, each of these municipalities — in addition to Mecklenburg and Iredell Counties — will have to get on board with the tax plan. That will not necessarily be an easy task, at least considering debates in recent years over the relative importance of different transit projects in the Charlotte region. Commissioners of Iredell County, significantly, have been less than thrilled at the idea of sacrificing tax dollars to aid CATS.

In addition, the special tax districts that will be necessary to complete the line will require at least half of affected property owners, controlling two-third of land value, to agree to the deal. It is not altogether evident that there is universal agreement on the need to improve access for passenger and freight railroads in the metropolitan area. Will they agree that the benefits of the new rail line are worth the increased taxes they are being asked to contribute to construct the project?

Nonetheless, these plans point to a potentially groundbreaking financing deal that could reshape the way commuter rail lines are built throughout the United States. Running along a corridor that is not particularly dense, it would likely be too costly and inefficient to provide very frequent passenger trains between stops. Yet connecting Charlotte to its northern suburbs, allowing the central city to expand its core and promoting dense downtown districts in the outlying town, is in the region’s interest.

Freight rail transport is more ecologically friendly than its truck-based competitor, but there is not enough capital in industrial activities in the Charlotte area alone to invest hundreds of millions in new tracks.

By combining the Red Line project’s public transport mission with that of encouraging economic development in industrial activities, the project becomes more realistic. Half a billion dollars in track improvements will go not only to passengers but also to freight. Incentives for new development will go not only to residential but also to warehousing. Those represent an exciting pooling of resources towards mutually beneficial goals.

* Similar to those often used in downtowns as Business Improvement Districts, or BIDs.

Image above: Red Line corridor map, from CATS