Of course there is a direct and negative link between most efforts to reduce GHG and the financial condition of the current Highway Trust Fund (including the Mass Transit Account).   This should not be seen as a problem, however, but merely a call for us to adjust the HTF to meet these new conditions.  The ability to adapt the Trust Fund to new conditions is a concern, of course, since we have not been able to adjust the revenues received by the Trust Fund to keep pace with inflation and growing demand for transportation for some time.  While higher taxes on motor fuel is a good near-term solution – and one that would help reduce GHG emissions – other solutions will be needed fairly soon.  VMT fees are one option.

A more serious linkage not mentioned in this week’s question, however, is the link between meeting GHG reduction targets and long-term economic growth.  5,000 years or so of history show a strong link between growth in accessibility and economic growth.   Some proposals for meeting GHG reduction targets call for sharp reductions in VMT.   Serious debate is needed over the risks invovled in efforts to change how we use transportation in contrast to technology-based proposals such as improved vehicle fuel economy or new sources of fuel.

 

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Rodger James Sillars, a consultant with Effective Melodious Metamorphic Sagacity and former administrater with the Greater Cleveland Regional Transit Authority, offers the following comments:  

 

The short answer is that of course operating expense should be federally funded.  It was funded for a good while as the federal role in funding transit began after the mid sixties.  It simply made good sense.  The problem was that for major players the capital needs were so great at most systems that major efforts were made to fund big capital needs and seek local support for lesser operations needs.  The capital funding needs were just so great.  As systems found the need to add funding for major expansion (largely in capital) or to add resources for new mandates to provide accessible services for the disabled (for example) the capital needs were significantly impacted.  The industry simply let the naysayers win the argument and operating assistance was progressively phased out starting with larger systems and eventually working down to more fragile operations in small and rural population centers.  

 

It was a bad deal from the start. Transit never got anywhere close to full funding for legitimate needs.  Systems were forced to locally fund some capital projects or compete to pay a higher matching percentage to get critical projects done.  It was the American people who suffered in this situation. They never got many of the service choices that they needed.  

 

Even with the generous expansion of support under the current administration the needs in virtually all areas of the country are not being met quickly enough.  The public cannot be allowed to go without existing services because local authorities were unable to foresee or plan for massive cost increases in operations for fuel and massive loses of support from a deeply troubled economy.  Affected areas that due to economic factors well beyond their control suddenly find themselves literally knocked down by removal the local economic lubricant that mass transit provides.  The local economic engine literally gets locked up by an artificial barrier put in place without any rational reason, but accepted by various leaders who could not have foreseen either our present economic distress. Long overdue massive starts on addressing local funding needs are tragically made less effective by the funding restrictions that removed the needed sparks to add in restarting the local economic engine. 

 

The no operations aid was a vehicle to set limits and encourage efficient use of government funds.  Anyone who knows this business is aware of misguided projects and poorly allocated funds, but these are a small part of the whole funding package. Simplistic rules are unlikely to clean up problem spending and the reality is that each areas problems are unique and require a tailored strategic approach that is competently implemented.  Regrettably simple rules like restricting operations support cannot make that happen.  Let's forget simplistic restrictions on operations assistance.

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The issue here is not whether transit is worthwhile in various cities, or even whether it warrants additional funding to enable greater use, but whether more federal funds should be given to transit agencies as local operating subsidies.   But consider:

 The proposed source of such federal funds, the highway trust fund, is facing a shortfall already.

 The proposed use of funds is one that is basically local. Approximately 40% of all transit riders in the U.S. are in one city—New York.    http://www.apta.com/research/stats/factbook/documents08/2008_fact_book_final_part_1.pdf

 Transit is already one of the two most heavily subsidized forms of transportation on a passenger-mile basis, exceeding $100 per 1000 passenger miles, compared to a zero subsidy for automobiles, according to a 2004 DOT study by the Bureau of Transportation Statistics. (http://www.bts.gov/programs/federal_subsidies_to_passenger_transportation/pdf/entire.pdf.)   And transit riders do not pay the gas tax or otherwise fund the highway trust fund, unlike drivers of cars.

 Where additional expenditures for transit are warranted, state and local governments are in the better position to decide such spending, with funds from their own taxpayers and system users.   Not only is that more efficient, but it provides more accountability and transparency than a situation where the spending is done by state political officials but the taxing (or borrowing) is attributed to the federal government. Why should residents of a state want their tax dollars sent to Washington, D.C. to be forwarded back to government authorities in their own state to spend with federal “strings” attached?

 Finally,  it is often true that state and local governments have tight budgets and scarce resources.     But the federal government’s fiscal condition is no better.   The Obama Administration expects to run a record budget deficit of approximately $3 trillion for its first two years.  We want good transit systems as part of our overall transportation system, but should we significantly expand the federal role to address local operating budgets?  Perhaps there are special situations that might warrant exceptions, but in general, where local transit operations need more funding, the pragmatic response is that it should remain incumbent on responsible state and local officials to devise the necessary funding and spending solutions.

 

 

 

 

 

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Thanks so much to Nathaniel P. Ford, Sr., executive director/CEO of theSan Francisco Municipal Transportation Agency (SFMTA) and treasurer of the National Association of City Transportation Officials (NACTO), for submitting the following response:

If the nation is to achieve it’s economic, environmental and mobility objectives, the answer is a resounding “YES.” As chronicled in reports across the country, public transportation ridership has been growing significantly in the past 10 years, soaring to historic highs last year when gas prices rose to over $4 per gallon. Unfortunately, simultaneous with this unprecedented demand, transit agencies have been forced to cut service, raise fares and layoff employees due to budget shortfalls.  

The San Francisco Municipal Transportation Agency (SFMTA), which operates the City’s public transit service—Muni—carries over 700,000 customers daily. This figure is nearly equal to the entire population of the City and County of San Francisco. Muni service is a lifeline for many of our residents, providing affordable, reliable access to jobs, schools and healthcare facilities.   It is also a critical service for the thousands of commuters who enter the City every day from surrounding counties. As a result of the global economic downturn, a national recession, the recent elimination in California of state funding for transit operations and a City budget deficit approaching a half billion dollars, the SFMTA is facing an unprecedented budget deficit of nearly $130 million in the fiscal year beginning July 1, 2009.   The SFMTA is not alone. Almost every major transit agency in the United States is either considering or planning layoffs, service reductions and/or fare increases.

While we are considering every possible alternative within our control to close this gap, it is time for the federal government to reengage in its support for transit operations. Dedicated transit operations funding would directly contribute to helping us achieve the nation’s energy goal of reducing greenhouse gas emissions and reinforce the federal investment in public transportation infrastructure made under the American Recovery and Reinvestment Act (ARRA) of 2009.

While transit service is primarily provided locally in communities across the country, effective, reliable public transit service is fundamentally in the federal interest. This role stems from the direct interest in maintaining mobility in the nation’s metropolitan areas--a connection of cities, suburbs and counties which are the home to eight in 10 Americans and their jobs. All 50 states contain these critical metropolitan areas which are the economic engines of the country and the 100 largest of these metro areas alone generate 75 percent of the nation’s gross domestic product and notably, represent 95% of public transit passenger miles. (source: Brookings Metropolitan Policy Program).    Investment in infrastructure, including the building and operating of public transportation systems is critical to ensure the on-going and future prosperity of these metro areas and thus, the Nation.   

As we head into reauthorization of federal surface transportation law, now is time to put transit operations back in the equation.

 

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I would welcome additional funding coming from the Federal government to cover a portion of our transit operating costs. But it is imperative that first, the funds provided to cover operating costs be entirely new funds and not taken from existing, or proposed new sources of capital funding, second, these funds should not bring with them more layers of Federal oversight and process. Being able to obtain operating funds from the Federal government, especially for new initiatives and services that are in the national interest, such as those addressing environmental and energy concerns, would go a long way to insuring the reach and frequency of transit services are improved.
 

Of all that objectives we face in rethinking our federal transportation program, allocation of scarce financial resources is one of the central challenges of crafting an authorization this time around.  In making these decisions, which will affect our communities for years to come, we need to think carefully about the goals of the national transportation system, what it makes sense for the Federal government to fund, and under what circumstances.

Contrary to Bob Poole’s contention that public transit serves no national interest, transit operations provide vital support for transportation goals that have national implications, as expressed in current federal transportation planning law: supporting economic development, improving mobility, enhancing transportation safety, reducing harmful pollution, and advancing energy independence through reduced fuel use. Most importantly, as one of our most efficient travel options, transit will continue to play a vital role in the US effort to address climate change.

While the immediate impacts of any one transit system may be most apparent locally and regionally, these benefits support progress on areas of clear national interest. With this in mind, it’s time to make transit operations eligible for broader federal support as part of a shift to a more goal-oriented, performance-focused federal transportation investment program.

A recently released Environmental Defense Fund report, Reinventing Transit, shows that transit is becoming a vital transportation option for a growing cross-section of America.  Innovative policymakers and transit operators are extending transit access to more and more households, whether in rural, suburban, or urban communities, while also using innovative tools to make transit operations more efficient.  Record transit ridership growth over the past few yeasr shows that American families are responding enthusiastically to these new, affordable transportation options that enhance their lives by making their communities more livable.  Finally, the clear national imperative to enhance our energy security and reduce climate change dictates that more Americans must have access to efficient, convenient, and reliable transit service.

However, only in limited cases can local transit agencies now receive federal assistance for operating expenses under current programs outside of small urban and rural areas. In recent months, an overwhelming number of transit agencies around the country have raised fares and cut transit services to close budget gaps caused by the flagging economy. Especially in a tough economy, we should strive to ensure that the employees who provide America’s transit service have a job, and do that job productively, so they can continue to provide working families with one of the most affordable transportation options.

To satisfy the increasing demand for transit, Congress should expand opportunities for federal financial support for transit operations where this supports meeting national transportation goals.  However, policymakers should proceed carefully, keeping three things in mind if we go down this path.

First, any federal operating support should be designed to ensure maintenance of existing transit service, as well as to foster efforts to fund transit operations through state and local sources and through the farebox.  The Federal government cannot provide our nation’s transit needs without strong state and local partners.

Second, transit operating support should provide incentives for local efforts to expand transit operations and access, and boost overall transportation system productivity through service improvement and smarter system management. Transit agencies should be given ready access to grants so they can plan, engineer, and invest in system innovations to expand access, cut costs, and boost efficiency. Transit providers that accomplish this should be rewarded with expanded access to federal operating support.

Third, support for programs to support transit operations should not be combined with programs that support transit capital investments.  Capital and operations are very different budget activities, and should not have to compete with one another; treating them the same would be a recipe for disaster for both.

If we proceed thoughtfully, Federal support for transit operations could be one of the key pieces of a more sustainable national transportation system.

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Urban Mass Transit is not a National Problem

At a time of unprecedented federal deficits, the idea of expanding the federal government’s spending into what is basically a local issue requires a very high level of justification. The others who have posted on this blog, arguing in favor of federal funding for transit operating costs, have failed to meet that standard.

Merely desiring federal money and having something nice to spend it on is hardly a justification. Not when, according to the Government Accountability Office, “the federal government’s financial condition and fiscal outlook are worse than many may understand. Specifically, the federal budget is on an unsustainable path—raising questions about whether people should assume federal funds will be available to help solve the nation’s current infrastructure challenges.” (GAO-08-763T, May 8, 2008)

Recently-retired Comptroller General David Walker devoted much of his energy in recent years to calling on the nation to rethink the role of the federal government. A sensible rethinking should ask which functions are truly national in scope, such that they serve all Americans and can best be carried out at a national scale. National defense is one such function. The Interstate highway system is another.

The federal government got into surface transportation funding in the 1950s on an interstate-commerce rationale. And indeed, it would have been difficult to build the nationwide Interstate system without the federal funding mechanism of highway user taxes that redistributed funds from high-traffic states to lower-traffic states for that specific purpose. But urban mass transit is a local and sometimes regional function. Its beneficiaries are primarily those who use it and secondarily those in that urban area who receive secondary benefits (such as slightly less traffic congestion and miniscule improvements in air quality). There are no national benefits.

And it’s not as if no other means of transit funding are available. Local transportation sales taxes exist in a growing number of urban areas and are a robust funding mechanism. All of California’s urban counties have such “self-help” taxes, providing a larger share of their budgets than federal transit aid. There is considerable potential in real-estate value capture that very few transit agencies have even attempted to exploit.

There are also perverse incentive effects when cities and their transit agencies can get “free” federal money. In a growing number of cases, when faced with the choice of a very costly light rail project or a far more affordable bus rapid transit (BRT) project, being able to get a large fraction of the cost as a gift from Washington biases the choice toward the more costly alternative. If the cost of the project had to be raised locally, there would be stronger incentives for cost-effectiveness to play a major role in such choices.

Finally, there is the question of whose money it is. Currently, most federal transit funding comes from the transit account of the Highway Trust Fund. In other words, the source of that funding is motorists and trucking companies, paying what are supposed to be user taxes in order to have a high-quality highway system to use. Ever since the 1964 Urban Mass Transit Act, the fraction of highway user taxes that can be diverted to non-highway uses has been steadily increased. Yet study after study in recent years has documented the poor condition of our highways and bridges, and the horrible congestion plaguing urban roadways. Taking an even bigger slice of the pie for urban transit would condemn the vast majority of Americans—for whom cars and trucks are their only viable alternative—to ever-worsening highway hell.

 

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The current economic and financial situation in the U.S. has had far-reaching effects on public transit agencies. Yet, while transit ridership is increasing in the face of high gas prices and falling disposable income, transit agencies are being forced to implement service cuts, fare increases and layoffs as a result of declining state and local revenues. As Chair of APTA and General Manager/CEO of the Metropolitan Atlanta Rapid Transit Authority, I believe that in order to promote a more multi-model transportation system, it is critical we invest in our public transportation systems by permitting the use of federal transit funds for operating assistance.  

At MARTA we are experiencing the same financial challenges that are facing transit agencies throughout the country. MARTA’s main funding source - a 1-cent sales tax from the two counties in its service area and the City of Atlanta – leaves the agency highly susceptible to fluctuations in the economy. In addition, MARTA is the largest transit property in the country that receives no operating assistance from the state.  

Exacerbated by the current economic conditions, MARTA is facing a $441.5 million budget shortfall over the next 4 fiscal years. In order to balance our FY 2010 budget, which will be implemented July 1, MARTA is currently proposing to its Board of Directors a number of internal cost savings/containment recommendations, a fare and fee increase, and transit service modifications. If approved by our board, these measures will carry us through the next fiscal year; however, MARTA will be forced to make even more severe cuts beginning in FY 2011 if additional sources of operating funding are not identified. 

Unfortunately, these financial challenges are occurring at a time when there is an even greater demand in the Atlanta region for increased transit services and infrastructure expansion. The region continues to be one of the fast growing areas in the country, which has contributed to increasing transit ridership. Last year in the face of rising gas prices and growing frustration over traffic congestion, MARTA’s ridership jumped significantly, and in the current fiscal year, our ridership is up 5.92% over the same time period last fiscal year.

Faced with these converging challenges, I believe that permitting the use of federal transit funding for system operation costs is a pragmatic option to address the current crisis. If we are serious about finding and maintaining efficient ways to get Americans to work, reducing our dependence on foreign oil, improving our air quality, and combating global warming, Congress should provide the operating funds flexibility to help the public transportation industry thrive. An investment in the operation of our transit systems is an investment in our country and our economy. 

In order to address this urgent need, we are encouraging Congress to support the FY 2009 Supplemental Appropriations bill, which contains language to allow transit agencies to use up to 10 percent of their transit formula funding from the American Recovery and Reinvestment Act (ARRA) on operating expenses. This very important piece of legislation would help sustain our transit system in Atlanta and other struggling transit agencies across the country.  

We are extremely grateful to the federal administration for its commitment to public transit and for providing much needed capital funding assistance this year through ARRA. We look forward to continuing our work together to improve and expand transit services, which will further contribute to the health and vitality of our nation. 

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Updated at 11:16 a.m. on June 2.

Under the heading of great minds thinking alike, I wanted to let everyone know that Secretary LaHood has posted an entry on his Fast Lane blog about the benefits of public transportation. Of course he isn't commenting on the policy question we're debating this week, but like us he is thinking about public transportation and the role it plays in our national transportation system. Click here to read LaHood's comments.

Despite record ridership, mass transit systems across America are in crisis. When the cost of gas spiked last summer, ridership soared and high volumes have continued ever since. But the weak economy is causing huge shortfalls in state and local revenues. Transit agencies are facing the budget ax just when their services are in highest demand.

In cities and regions across the country, mass transit agencies are being forced to not only cut jobs, but eliminate the services so many commuters need to get to their jobs. Employee and service cuts can easily translate into a corresponding number of commuters who can’t get to work.

St. Louis’s Metro just laid off 550 employees and plans to eliminate a significant portion of its bus service. Cleveland’s RTA plans to cut 300 jobs. WMATA in Washington, DC is considering $13.5 million in service cuts. And in California, literally thousands of workers are at risk of being laid off and massive service cuts are imminent. 

The recently passed stimulus legislation didn’t solve this problem. The American Recovery and Reinvestment Act included funds for transit capital projects, but not for operating assistance. Unfortunately, new buses aren’t going to expand capacity if there are no employees to drive them.

We fought for a provision in the Senate’s FY09 Supplemental Appropriations Act includes that would allow transit agencies to use up to 10 percent of their stimulus funds for operational expenses. Giving transit agencies this flexibility will help address widespread budgetary shortfalls – without any additional cost to the American taxpayer.

When the House and Senate meet this week to finalize the Supplemental Appropriations bill, Congress will decide what remains in the bill – and if public transportation systems can use some of their stimulus funds for operating assistance. This legislative remedy will avoid or minimize service cuts and save thousands of good paying transit jobs – while helping those who rely on mass transit to get to work.

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Failure to support operating expenses is just another way that the federal transportation funding system is skewed against public transportation. Compared to highways, operating expenses comprise a much larger portion of total spending for public transportation. Transit agencies must pay for bus drivers, train conductors, station agents and a host of other operating expenses that don't exist on the highway side.

The embedded bias against public transportation would be bad enough if it were not compounded by three other features in the current system that systematically discourage public transportation. The interaction of these biases with the lack of operating funds make world-class public transportation harder to achieve:

1. State gas taxes -- despite the fact that public transit relieves road congestion and makes it possible for road projects to comply with air standards, most state constitutions limit use of gas taxes to highways. Gas taxes are typically the largest source of state transportation funds. So not only are states forced to fund transit operations on their own; but their best and most sensible tool for doing so is placed off-limits. These states have no choice but to patch together agreements between local governments for new sales taxes or other fees. Revenue agreements between localities that badly want transit projects nonetheless often collapse because of disagreements over the proper share that each cash-strapped jurisdiction should pay.
2. Federal matching – While the federal government will cover 80 percent or more of highway projects, a new transit expansion is lucky to get 50 percent federal match. Transit starts at an artificial disadvantage because projects will leverage fewer federal dollars.
3. Uneven process – As other commentators have noted, the process for applying for federal transit projects is much more arduous, lengthy and uncertain compared to highway projects. States must pay up front for expensive additional studies, wait through long delays, and then compete against projects in other states – with no certainty that New Starts or Small Starts money will be forthcoming no matter how good their projects are.

Increasing the share of travel on public transportation should be an explicit goal of national transportation policy. That will be harder to accomplish without support for operations. Current policy is much like if the federal government were to ask states to foot the bill for national border crossings and then only paid for the toll booths and security signs. Making public transportation a priority will require support for major expenses, especially the operating bottlenecks that continue to stifle transit around the country.

 

 

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 It's time to re-think the Federal government's failure to support mass transit operating expenses. The reasons are simple: the beneficiaries of mass transit ridership rider extend well beyond the riders themselves. Good old fashioned micro-economics would tell us that when people are affected by a transaction other than the buyer and seller, there need to be ways to capture the value and costs external to the deal.  In the case of mass transit, the riders certainly benefit -- and should pay some portion of the cost -- but others benefit too:  commuters who gain more road space when people use the train, families who breathe cleaner air, and a nation that finds itself a step closer to energy independence with every rider.

The only hard question becomes which level of government should provide what share of the operating subsidy appropriate for mass transit systems.  Since some of the benefits accrue to commuters in the region served by the transit system, they should certainly chip in, as should residents of the areas served (a balance found in the thoughtful proposal for transit system funding made by former New York MTA Chair Richard Ravitch).  But there is a national interest here too.  First, since the communities that benefit from cleaner air and less crowded roads often encompass more than one state, there is a role for national government.  Even more importantly, shifting riders from cars to transit makes America more secure and less dependent on foreign oil.  And perhaps most important of all, a more just distribution of transportation services is an appropriate national policy goal, just as is the equitable distribution of educational or health care services. Indeed, as transportation has become one of the largest household expenses, mechanisms to reduce this cost while achieving other important national benefits may prove highly efficient uses of federal dollars.

One last point:  the use of federal transit dollars solely for capital as opposed to operating expense can skew local decision-making away from core maintenance towards system expansion.  The federal government should be using the power of its purse to encourage rational decision-making at the local level. While, in the end, all dollars are fungible, a more thoughtful use of federal funds could not only advance the national good by creating a more secure and just America over the long-term, but could improve the quality of our existing transportation  systems today.    

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This week’s question is one that is timely and under much discussion in the public transportation industry. This is a time of great opportunities and great challenges for America’s public transit systems. Last year 10.7 billion trips were taken on public transit – the most in 52 years – and a modern ridership record. Since 1995, public transportation use has grown by 38%, a figure that is almost triple the growth rate of the population (14 percent) and up substantially over the growth rate for the vehicle miles traveled (VMT) on our nation’s highways (21 percent) for that same period.

The paradox of this is that at a time of record demand for public transportation, state and local revenues are declining and many public transit systems are facing severe financial challenges, and America’s transit riders are paying the price. Raising fares and cutting service may seem an odd thing to do in light of record ridership, but fares, both here and abroad, cover only a portion of the cost of operating a public transit system.

Funding from all levels of government – federal, state, and local – is essential for maintaining and expanding public transit services for our citizens. Unfortunately, public transportation has been underfunded for years at all levels, and the recent economic hardship is making a bad situation even worse.

The decline in operational revenue is creating budget crises for many public transit systems – leading to fare increases and service cuts. The American Public Transportation Association (APTA) and its members believe that the federal government has two legislative opportunities that could provide funding for public transit system’s day-to-day operating expenses in the short term.

The first opportunity involves the recently passed economic stimulus bill – the American Recovery and Reinvestment Act (ARRA). APTA supports a provision in the supplemental appropriations bill, recently passed by the Senate, which would permit transit systems to use up to 10 percent of their ARRA funds for operating purposes. This provision is expected to be considered in a conference committee and by the entire Congress in the next two weeks.

The second opportunity is the climate change legislation, entitled the American Clean Energy and Security Act (ACESA), which unfortunately, at this moment, has no reference whatsoever to public transportation. Public transportation is part of the solution to addressing climate change and with an annual savings of 37 million metric tons of carbon dioxide emissions, should be included in any climate change legislation. Congressional leaders should include an allocation of cap and trade revenues for public transportation in this legislation, including an ability to use this revenue allotment for operating expenses. It is inconceivable that Congress will miss this opportunity as public transportation is one of the most effective solutions to reduce our nation’s carbon footprint.

The bottom line is that additional funding for both capital and operating costs are urgently needed, and that all levels of government – local, state, and federal – must step up and expand investment in America’s public transportation systems to meet our country’s economic, energy, and environmental challenges, while increasing mobility choices.

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