ABC Blog

Feb
21

Softening the Blow: Mitigation Strategies

Rich Parr on February 21st, 2012

So far we’ve discussed what a reasonable fare increase might look like, and which services the T — and the larger economy — can truly afford to cut. The good news is that the conversation on this issue seems to be heating up. Last week, the MBTA Advisory Board issued their counter proposal, advocating for a 25% fare hike. On Friday, the Transportation Advisory Committee — a group of advocates, including ABC, that advises Secretary Davey — discussed a similar position. We did our part as well, speaking at a meeting of the MBTA and RTA caucuses on Beacon Hill.

Even if the the T goes with a smaller fare hike and fewer service cuts — a big if, since such a plan would require outside help to balance the books — there will still be some pretty significant impacts. Commuters will be paying more, and some (hopefully not as many as projected) will lose services that they depend on. The T has projected that a 25% fare increase would net $79 million but would generate a 7.2% drop in ridership, and that’s not taking into account the ridership impacts of whatever service cuts the T ends up making. That comes out to roughly 93,000 fewer trips on the T every work day. Some percentage of those trips will be made in cars instead, adding to roadway congestion, delay and pollution.

It’s ABC’s view that the Commonwealth take steps to mitigate the impact of any fare hikes and service cuts, so that we keep ridership losses and added car traffic to an absolute minimum. Fortunately, the T has a ready partner in this effort in the Transportation Management Associations (TMAs) that serve businesses around the state. We have operated an ABC TMA, serving 80,000 employees in the Back Bay and the Financial District, since 1996. We started our TMA to help businesses cope with the impacts of the Big Dig. Today we offer incentives and discounts to encourage walking, biking, and taking transit to work; and to organize carpools, vanpools and ride-matching for workers who don’t want to drive alone. We also offer a guaranteed ride home for commuters who have to work late and miss their ride or train. Other TMAs in the Boston area, like the Charles River TMA that serves Kendall Square, run their own shuttle services. TMAs are great examples of public-private partnerships: they leverage public money from the Commonwealth with private funds from their member companies to provide transportation services more efficiently than either group could alone.

We believe that the Commonwealth should actively engage the private sector, through TMAs and through the T’s Corporate Pass program, to minimize the impacts of fare hikes and service cuts. Existing Corporate Pass companies need to be encouraged to maintain their subsidies, and new companies should be brought in to make transit easier and more affordable for their employees. The T and MassDOT should work with the TMAs to determine whether any of the services slated to be cut could be better served by a vanpool or other private shuttle solution. The TMA are also a great way to communicate directly with employees about changes coming to their commutes.

One concrete step the state can take to help commuters would be to institute a Capital Cost of Contracting Program for vanpools. This would enable the state to receive reimbursement from the National Transit Database for vanpool mileage. In other states, similar programs have helped to cut vanpooling costs and increase ridership dramatically.

Of course, there’s only so much that the TMAs can do. A lot will depends on the size of the fare hikes and service cuts that the T ends up approving. Next week we’ll talk about ways that other transportation agencies, and ultimately the governor and the legislature, can intervene to help the T get by with a more manageable package of cuts and hikes. We’ll also tell you how you can make your voice heard.

 

 

 

 

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Feb
15

Service Cuts: Right-sizing the T

Rich Parr on February 15th, 2012

Last week we looked at the MBTA fares with an eye towards regular, scheduled fare increases so that the revenues the T takes in pay for roughly half of the cost of providing service. Of course, fares are only one side of that equation. If the T’s costs continue to escalate, then asking the riders to pay half may become unrealistic.

Both of the two scenarios the T has proposed for closing its budget gap involve some pretty dramatic service cuts. Both would cut Commuter Rail service after 10pm and on weekends entirely. Both would eliminate ferry service. Both would cancel the E Branch of the Green Line and the Mattapan Trolley on weekends. (ABC is opposed to all of these proposed cuts.)

Where they differ is in the extent to which they cut bus service. Scenario 1, which relies on a steeper fare increase, would cut 23 weekday routes, 19 on Saturdays and 18 on Sunday. It also eliminate some routes that are run for the T by private carriers, including the entire Suburban Bus Program. All of these routes were chosen for elimination because of their cost to the T. On each of them, the per-passenger subsidy — the cost to the T of running a given route, divided by the number of passengers — is more than three times higher than the average across the system.

While Scenario 1 would impact only a small percentage of bus riders, the same cannot be said Scenario 2. Under that plan, 101 weekday routes,  69 Saturday routes and 50 Sunday routes would be eliminated, impacting a quarter of all T bus riders. This would constitute major contraction of the T’s service area and fundamentally change the character of the service. (You can see all the affected routes by community in this document from the MBTA Advisory Board)

Judging by the reaction at public hearings, service cuts are far less palatable to riders than fare increases. ABC’s position is that the conversation should be more about adjusting MBTA service to optimize ridership and economic impact than pursuing cuts alone. It may be that some subset of the proposed services are truly inefficient and should be eliminated. But there are just as many routes that are overcrowded. An argument could be made for actually enhancing service on some of these core routes.

There may be another way to control the T’s costs other than outright elimination of an entire service. The ferry service, for example, is very heavily subsidized. It is also extremely popular, and given the demographics of its ridership, it’s likely that many ferry riders would be willing to pay more. It might be worth continuing the ferries but asking riders to pay closer to the true cost of the service, even if on a pilot basis. The T might consider a similar approach for Commuter Rail service, in the form of a surcharge for riding on weekends or after 10pm.

Service cuts should not be a one-time fix but rather part of a strategy to constantly fine-tune and right-size T service. Just as the T should be scheduling fare increases out into the future, it should also continue to evaluate its service on a regular basis, adding and cutting as needed. Fortunately,  the T already has a means of doing that. Every two years, the T conducts what’s called a Service Plan: evaluating each of its routes to determine which are overcrowded and which are going unused. The T should continue this practice and act on the findings, adjusting service accordingly. Then it can use the resulting level of service to help plan future fare increases that keep revenues on track to cover half of expenses.

Of course, it’s easy to cut a bus that 5 people ride every morning — unless you happen to be one of those 5 people. Next week, we’re going to look at steps the T can take, working with businesses and Transportation Management Associations like ours, to provide transportation options to riders who are forced off the system by fare hikes or service cuts.

 

 

 

 

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Feb
9

A Fairer Fare Hike

Rich Parr on February 9th, 2012

Last week we posted on how the T found itself in its present fiscal mess.  This week, we start thinking about how to get out of it. If you missed it, or if you’re more a visual learner, you can check out this interview about the T which we taped this week:

“A Better City” on MBTA Fare, Service Plans from Chris Lovett on Vimeo.

 The consensus emerging from the the public hearings on the T’s two proposals is that fare hikes, while still unpopular, are more palatable than the very severe service cuts that have been proposed. It seems that people are somewhat willing to pay more, but they’re less willing to pay more for less. How much more they are willing to pay, and how that increase is structured, is a more complicated issue.

Comparing T Fares to Other Transit Systems

As part of its efforts around the current hearings, The T has compared its current and proposed fares to those of other major transit systems:

There is some daylight between the current T fares and other systems, all of which have raised fares over the past 5 years. The lower of two proposed fare hikes, Scenario 2, would bring the T’s bus fares in line with the lower fares charged in other cities; the subway fares would end up somewhere in the middle of the range. But of course, even Scenario 2 is a big jump up from current fares — 35% on average. That may be too much for riders to stomach, especially since, according to the T’s own financial projections, the current proposals are a one-year fix at best. It’s one thing to ask riders to pay a third more if it will fix the problem; it’s quite another when riders will have a pay another third more a year from now.

Revenue Recovery Ratio: Paying a Fair Fare

One way to think about fares is to ask, what percentage of the true cost of the T should riders be asked to pay? In policy-wonk speak, the percentage of a transit agency’s expenses (minus debt) that are covered by the revenues it brings in (fares, advertising, etc), is called its “revenue recovery ratio”, or RRR. In 2007, the state’s Transportation Finance Commission recommended that the T adopt a policy of maintaining a 50% RRR. At the time, the TFC predicted that the T would need to raise fares by 10% every 3 years to keep pace with rising expenses. If we’d followed that recommendation, a subway fare would have gone from $1.70 to $1.85 in 2010 and up to $2.05 in 2013.

Of course, that’s not what happened, and it’s been more than 5 years since the T last raised fares. As a result, the T’s current RRR is estimated to be only 39%.  It would be a lot to ask riders to make up such a large gap in one year, but the T might consider setting a 50% RRR as a target, to be achieved over time through a series of scheduled fare increases.

And even though debt payments are excluded when calculating this statistic, there’s no getting around the real-life effect that the T’s massive debt load has on its budget. Roughly 30 cents of every dollar the T spends goes to paying its debt; pretty much every dollar that goes into the farebox goes right back out the door to pay the T’s creditors. Until we fix this problem, the T’s revenue recovery ratio is little more than a statistic.

One final word on RRRs: some may wonder, why not ask riders to pay 100% of the cost of transit? The fact is, no transit agency in America turns a profit; all of them are subsidized, and most have RRRs in the 40- or 50-percent range. The true value of a transit system isn’t measured by whether it can turn a profit but whether it can make the rest of the economy run more efficiently.

The same goes for other modes of transportation. In theory, our national highway system is funded by tolls and the federal gas tax, but in practice, Congress has had to supplement those revenues with general funds the past several years. This situation will likely get worse as the bulk of our highway infrastructure, which was built in the 1950s, approaches the end of its useful life. Many policy experts would prefer if we set these “user fees” — fares, tolls, gas taxes, or some new charges based on mileage — so that they better reflect the true cost of our transportation choices. But for now, we choose to subsidize transportation — driving and transit — because it is a public good that enables economic growth and development. (For more on the relationship between transportation investment and the economic, check out our white papers on the subject on our publications page.)

Taking the Long View

Ultimately, the T needs to adopt a smart fare policy that schedules a series of smaller, regular increases that keep fares in line with the agency’s expenses. That’s what the transit agency in Oakland, California, voted to do last year, adopting a 10-year plan of 25-cent increases every 5 years. Unfortunately, the immediate problem the T faces is so severe that, absent some outside help from the legislature or the administration, there’s no time to implement a longer-term fare strategy. And even with some outside help, the immediate fare increase may still have to be larger than desired, so as to get the T into a position where smaller hikes can keep pace with costs.

A smart fare policy would also address problems like fare evasion and to try to minimize ridership loss. The T is already tackling fare evasion by proposing to do away with the 12-ride tickets for the commuter rail. While these tickets are convenient for occasional-but-not-daily riders, they can often become 14- or 15-ride tickets when conductors mispunch the ticket, or forget to punch it at all.

The T can also deal with this problem by encouraging monthly pass use. The T already has a higher percentage of monthly pass usage than most transit systems. Monthly passes mean guaranteed income for the T, and they should be encouraged by working with businesses and institutions to enroll their employees.

Distance x Time…

One idea that won’t work for the T is to charge riders varying amounts depending on how far they are traveling. (Washington, D.C., is a prime example.) That sort of scheme doesn’t work with monthly passes, where riders have already paid a flat rate for their use of the system. Also, the T would have to reconfigure the station gates to make riders “tap out” when they exit, which would be expensive in its own right.

On the other hand, the T does have the ability to change the times when passes are valid and to charge more for certain periods, like on weekends. The downside is that this would complicate life for monthly pass holders and would likely mean the T would have to charge less for its monthly passes. After all, a pass is worth a lot less if you can’t use it anytime you like.

Ultimately, though, fares are only one side of the equation. Next week, we’ll take a deeper look at some of the cuts the T has proposed and parse out which ones, if any, truly make sense. After that, we’ll look at how the T can work with businesses and groups like our Transportation Management Association mitigate the impacts of whatever service cuts and fare hikes end up being enacted.

 

 

 

 

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Feb
2

History Lesson

Rich Parr on February 2nd, 2012

In the first installment in our series on T fare hikes and services cuts, we look at how the T has found itself in its current fiscal straits. But first, we want to mark the passing of a giant figure in the history of our city, Mayor Kevin White. ABC chairman Larry DiCara served on the Boston City Council during White’s tenure; over the weekend, he spoke to WBUR at Faneuil Hall (revitalized under White) about the impact the Mayor had on the landscape of the city.

The Massachusetts Bay Transit Authority was four years old when Mayor White first took office in 1968, but the origins of the T’s current financial woes are more recent. Ironically, it was an attempt to make the T self-sufficient more than a decade ago that has left the agency with the structural deficit it faces today.

The Failure of Forward Funding

Up until 2000, the MBTA was funded in arrears by the state legislature: the T would provide service, and at the end of the year, the Commonwealth would pay the bill. In 2000, the legislature decided to implement “Forward Funding” for the T. The agency would receive one penny from the state’s sales tax, but in return it would have to live within its means. For the first time, the T would have to balance its budget using money from the sales tax, the assessments paid by the cities and towns served by the T, and revenues from fares, advertising, real estate and other sources.

Forward Funding was supposed to get the T off the Commonwealth’s books and make the agency  lean and efficient. In practice, it put the T in a hole it’s been struggling to get out of ever since. Sales tax revenues, which were expected to go up 3% every year, have instead limped along at around 1%. Expenses, especially energy, health care for workers and the cost of providing The Ride paratransit service, have far outpaced projections. The result? A structural gap in the T’s budget.

“Born Broke”: Saddled with Big Dig Era Debt

As part of Forward Funding, the T was granted the ability to issue its own bonds to pay for capital projects like buying new equipment. But as part of the deal, the Commonwealth shifted $3.3 billion in debt onto the T’s books. The rationale was that this was debt accrued for public transit projects, including $1.8 billion for projects mandated by a legal settlement associated with the Central Artery/Tunnel project. Taking this so-called “Big Dig debt” off the T’s books would save the agency over $100 million annually — more than half of the current deficit.

Escalating costs and an underperforming sales tax made is very difficult for the T to balance its books on its own, but paying down this mountain of debt has made it virtually impossible. Ironically, Forward Funding and the Big Dig transit commitments — both intended to strengthen the public transit in Boston – have instead put the T in an untenable position. As our friends at the MBTA Advisory Board noted in a report on the T’s finances, the agency was “born broke”.

Transportation Reform: A Helping Hand, But Not Enough

Since Forward Funding, the T has managed to balance its budget by selling off nonessential assets and refinancing and restructuring its debt. These actions kept the agency in the black, but they made its finances worse in the long run.

In 2009, the Governor and legislature passed landmark Transportation Reform legislation, rolling the state’s transportation agencies into MassDOT. At the same time, the legislature raised the state’s sales tax from 5% to 6.25%, appropriating to the T an additional $160 million each year since. But even that extra help hasn’t been enough to keep pace with the T’s mounting deficits. Last year, the T closed its budget gap by selling bonds backed by revenues from its parking lots and garages — creating new debt to pay off old debt.

Cost Cuttings: Important, but Not Enough

Some critics have complained that the T should lay off  employees or cut salaries before asking riders to pay more. In fact, since 1994 the T has shrunk its workforce by about 670 employees, while actually increasing the amount of service it provides. The T has done this by shifting administrative workers into operational roles, and by pursuing efficiences like moving to single operators on Orange and Blue Line trains. It has also shifted employees into the state’s group insurance plan, saving about $30 million. The deficit the T is trying to close for the next fiscal year was actually $185 million before the agency found $24 million in efficiencies. Cost cutting and reform are important, but they won’t be enough to close the large gaps the T is facing.

Even the fare hikes and sevice cuts the T has proposed, as harsh as they are, only buy the agency a year, maybe 18 months. Unless we want public hearings about fare hikes to become an annual event, we need to come up with a solution for the underlying structural problem. And it’s not just the T; the pattern of underinvestment and overreliance on debt is just as bad or worse in our highway program. Overall, 45 cents of every dollar Massachusetts spends on transportation is going to pay down debt, while the backlog in needed maintenance projects is estimated to stand at over $1 billion this year alone.

Despite its stark finances, the T is the only major transit system in America not to raise fares or cut service in the past 5 years. While it’s impressive that the T was able to spare riders during tough economic times, putting off tough choices has made the problem worse. Given the size of the problem, it’s likely that fare hikes and service cuts will have to play some role in the solution. Next week, we’ll take a look at what a smart fare policy for the T might look like, and the week thereafter we’ll examine which services, if any, the T should consider cutting.

 

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Jan
23

Welcome!

Rick Dimino on January 23rd, 2012

Hello, and welcome to ABC’s blog. This is a new project for us, but it fits in with a lot of what we’ve been doing lately. Over the past year we’ve revamped our newsletter and emails to be more user friendly and timely, updating our members about projects like the Fast 14 bridge replacements in Medford this past summer. We’ve also expanded our presence on Facebook and Twitter, where we’ve been posting brief updates on our work and the latest news from our core areas. We are going to continue to be active on all those platforms, and we think that this blog will complement those efforts as a platform for us to go into more detail about our work and our organization’s mission and goals.

We’d been thinking of starting a blog for some time around the office, and the MBTA’s proposed fare increases and service cuts to close its budget deficit seemed like an natural first topic. We’ve already written a policy brief for our members about the T’s two proposals, and just last week I was on Channel 2′s Greater Boston talking about the issue with Secretary of Transportation Rich Davey:

The T will be making its final decision about what fares to raise and what services to cut in early April. In the meantime, there’s a lot more to be said about the issue. To that end, our first few blog posts will be  a multi-part series on the issue. We’ll start next week with a look at the history of the T’s financial woes. Then we talk about fares – should they go up? If so, by how much – and then service cuts. Then we’ll talk about mitigating the impact: if something like what the T’s proposed goes into effect, what steps can we take to soften the blow? Finally, we’ll look outside the MBTA’s toolkit to ask, how else can we make up the shortfall and put the T on secure financial footing? And we’ll give you some ideas as to how you can get involved in the process.

In between blog posts, we’ll be posting the latest on the MBTA issue via our social media outlets. Behind the scenes, we’ll be working with our members and other advocates to develop an official position, which we’ll unveil at a public event in early March.

Eventually, we’ll be folding in updates from our other work. Expect helpful green tips from our sustainability team, commuting advice from the ABC TMA, and alerts about changes to your commute from our planning department. For now, though, we’ll be focusing on the T, which we feel is appropriate given its absolutely essential role in the state’s economy.

Since this is a blog, we also encourage your thoughts and comments. We hope that this will become a forum of sorts for people who care about transportation and city building in Greater Boston. All that we ask is that you keep your comments respectful and on message. We look forward to hearing from you!

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