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2013 Law & Public Policy, Commentaries

Charting the MBTA’s path to financial viability

Crocombe_smBy Nigel CrocombeDownload as PDF.  This year, the MBTA faces the most daunting financial crisis in its history.  It must resolve immediate fiscal challenges including a $130 million budget deficit, $5.2 billion of structural debt, and a $4 billion maintenance backlog.  The MBTA is also experiencing surging ridership that threatens to overwhelm its aging infrastructure, and must complete several costly expansion projects.  Three steps are essential to secure the future of the MBTA: finding new dedicated revenue, reducing its debt burden, and emphasizing its proven ability to drive economic growth in Massachusetts.

The MBTA provides an invaluable service that reaches approximately 4.7 million people in 175 cities and towns and provides over 400 million rides per year.  For its riders, who include many of the Commonwealth’s most disadvantaged residents, the MBTA provides an essential, and often irreplaceable, mode of transportation to work, school, and more affordable housing.

The MBTA is also an integral part of the Commonwealth’s efforts to protect the environment.  Millions of MBTA riders help to reduce pollution every day by choosing not to drive to work.  Without the MBTA, catastrophic congestion would lengthen commute times and lower the quality of life in Greater Boston’s urban neighborhoods.  Moreover, the MBTA has proven to be a catalyst for creating new housing, businesses, and even entire communities.  When businesses look to invest in a state, or tourists look for somewhere to vacation, the MBTA is one of the key reasons people choose to come to Massachusetts.

Still, the MBTA and its predecessors have almost always operated at a loss, reliant on large annual subsidies from the Commonwealth.  Two recent decisions by the Legislature have greatly aggravated its financial troubles.  In 2000, when the Legislature passed forward-funding legislation, it made the MBTA largely dependent on sales tax revenue.  When the recession arrived, the sales tax was unable to keep pace with inflation or rising energy and healthcare costs, leading to an insufficient operating budget.  In addition, the Commonwealth saddled the MBTA with $3.6 billion of Big Dig-related debt.  Today, merely servicing this debt devours twenty-five percent of its annual operating budget.

Because of these budget troubles, the MBTA has been unable to maintain its aging infrastructure system, which desperately needs as much as $4 billion to repair and replace vehicles, stations, tracks, signals, and power supplies.  The system is also struggling to cope with steadily increasing ridership, which is projected to increase up to twenty-five percent over the next eight years.  Developers are also eager to build near public transit, putting a strain on the MBTA and threatening to overwhelm the beleaguered system.

The MBTA is also legally obligated to go forward with several major expansion projects.  Over 20 years ago, Massachusetts agreed to complete a series of public transportation expansions to mitigate the Big Dig’s environmental impact.  These projects are vital for the Commonwealth’s economic growth, but the MBTA cannot afford to complete them.

The MBTA has tried to solve its budget problems by cutting unnecessary spending, raising fares, and scaling back services.  It has reduced energy purchasing costs, implemented a single person train operation system, cut staff levels, reduced overtime spending, lowered the cost of employee healthcare plans, adjusted pension rules, and cracked down on fare-evaders.  In July 2012, a budget shortfall forced the MBTA to raise fares by twenty-five percent and reduce or cut services.  These changes were wildly unpopular with the public and led to mass protests from thousands of riders who depend on the MBTA for affordable transit.

Despite these measures, further action is still necessary.  One critical step is for the Legislature to approve new sources of revenue.  Governor Deval Patrick recently proposed helping the MBTA by raising the income tax, but other revenue options deserve consideration.  For example, the MBTA should consider increasing assessments on municipalities within its service area by five percent over each of the next three years to raise $23 million.  These fees have remained relatively flat recently and could help to address complaints from communities outside of Greater Boston that are reluctant to spend more on a system they rarely use.

At the same time, the State should raise the gasoline tax by twelve cents and index it to inflation to restore its purchasing power to 1991 levels.  The Commonwealth’s business community generally supports this idea, which would only cost the average driver $66 per year, while bringing in over $318 million in revenue.  The DOT should also increase biannual motor vehicle registration fees from $50 to $60 to raise $26.3 million.  Finally, the Massachusetts State Police should take control over the MBTA Transit Police, to save $36.3 million annually for the MBTA.  This approach was successful at MassPort, which now has a designated Massachusetts State Police troop responsible for security.

New revenue is only part of the solution to the MBTA’s troubles.  Its structural debt is simply too big to ignore.  The MBTA should transfer half of the Big Dig-related debt back to the Commonwealth.  The State has more resources to address the debt and can better diffuse it among different sources.  This will provide an annual savings of $146 million in debt service payments, allowing the MBTA to concentrate on addressing maintenance issues and mandated expansion projects.

In order to build statewide support for these measures, the Legislature should emphasize the MBTA’s proven ability to facilitate new job creation, housing, and businesses.  In addition, it should stress that these infrastructure improvements are vital to ensure a strong economic future for the Commonwealth.  Furthermore, any proposal should include an ongoing public information campaign about how the MBTA invests new revenue, accompanied by detailed financial reports to promote fiscal transparency.

The MBTA provides an invaluable public service, and it is essential to growing a strong state economy.  This is why fixing the MBTA should be the first priority in this legislative session.  Implementing a combination of measures—new revenue, debt relief, and greater public fiscal transparency—will put the MBTA back on its feet.

Nigel Crocombe is a second year student at Suffolk University Law School, with an interest in environmental law, public policy, and government.  He received a B.A. in Political Science and French from Miami University (Oxford, Ohio) in 2011.  He will be interning with the United States Department of the Interior, Office of the Solicitor this summer as he prepares for his final year of law school.

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