Choose your own MBTA budget adventure

Oh do I ever love stuff like this. Fun. Go click the link. - promoted by charley-on-the-mta

Much has been written on BMG about the MBTA funding woes lately. We’ve suggested a number of possible fixes, some far more complex than one would expect in an MBTA Choose your own Adventure. But, that’s what we’ve got. Check it out, and let us know what choices you picked!



Discuss

14 Comments . Leave a comment below.
  1. Here's my fix

    1. 10% fare increase
    2. RIDE fare $3
    3. $10 annual fee for each college student
    4. End MBTA remittance to MassPort
    5. MassPort subsidizes SL1
    5. MBTA Police become staties
    6. State pays for operation of homeless bus route
    7. Increase MBTA assessment on cities and towns
    8. Raise gas tax by 2 cents

    Final gap: $2.8M, and none of it is “one time savings” like selling property or transferring the snow money.

    9*. This wasn’t a choice, but I would in fact *require* Harvard, MIT, BU, Northeastern, Suffolk, and any of the small schools on MBTA subway lines to purchase a full monthly pass for each undergraduate student. The schools are welcome to charge the students full, partial, or no fare for the service. I know, I don’t like leaning on students either but the schools are well served by the T, and they can think of it like a payment in lieu of taxes (PILOT). $65*9=$585 per student times something upwards of 40,000 is $23.4M. Note that I didn’t include Tufts nor UMass. Tufts isn’t on the red line, nor is UMass. Both require bus service to get to the Red Line, so that’s where I drew my line in the sand. Besides, UMass is a state school, so a PILOT scenario makes less sense.

    Also note the 10% fare increase. Personally, I think fare increases should come out to 2.5% per year, locked in, each and every year. This discussion of a 25% fare increase or a 43% fare increase is insane. If 2.5% is good enough for those who own property, it ought to be good enough for those who ride mass transit. 2.5% compounded five times is 13.1%, slightly more than the 10% I selected [picking up another $10M]. To that end, I have no problem increasing assessments to cities and towns, though I’d prefer to keep it as small as possible. Since the citizens of cities and towns with service benefit even when individuals don’t use it, I don’t see a problem with they paying more. It would be nice to see the lege allow them to levy the [one time] increase without requiring a 2.5 override though, since otherwise it could really squeeze budgets without giving cities and towns much opportunity to adjust.

  2. Interest Rate Swaps?

    A Coalition called Transportation for All led in democratic style by Mass Senior Action and a number of Disability groups is looking at something called “Interest Rate Swaps” that certainly contributed to the MBTA’s problems and may, just may, provide a partial solution.

    Here’s a press release from Joe DeNucci’s office in 2008 documenting the problem.

    Outsmarted by big banks again.

    • Indeed

      The MBTA had some variable rate interest at 4.something percent. They “traded” it for fixed rate interest at 5.something percent. It’s not much different from choosing a mortgage that is 30 year fixed with a higher interest rate than a 7 year ARM (adjustable rate mortgage).

      The idea is that the interest rate could go in either direction, but IF it goes upward the costs could be very very high. If you settle on a fixed, you will probably pay more than the ARM but the worst case isn’t nearly as bad.

      That’s effectively what the MBTA did — made sure the worst case wouldn’t be awful. The market went the other way, and as a result the MBTA didn’t collect the savings they would have with the lower interest rates.

    • BMG 2.0 discussed this at length.

      But the upshot is that the MBTA entered into to several complicated swaps for up-front money and then tried to get out of them when they went south and incurred significant termination fees. DeNuccis office figured a net loss of 55 mil and said it would have been better to simply not have entered the swaps in the first place.

      Outsmarted by big banks again.

      This is, very strictly speaking, clearly true: minimal competency with basic arithmetic, percentages and accounting were lacking at the MBTA. Let us hope THAT particular issue has been resolved.

      Interest rate swaps likewise contributed to the demise of the Pike Authority and the subsequent folding of it’s assets into the the new transportation board. Governor Patrick and his administration had to do an unhealthy amount of 11th hour negotiations with UBS, however, to save the CommonWealth a great deal of money, greater than half a billion, if I recall correctly. The MBTA isn’t in that position, but the idea that the State holds the ultimate responsibility here is the principle re-enforced by the Pike debacle.

  3. Simple and effective

    I checked off the “State reassumes all debt it transferred to MBTA in 2000″ item.

    Bingo. Budget surplus of $130.9 M.

    Enough to allow the MBTA and commuter rail to begin investing in, instead of borrowing from, tomorrow.

    • Well sure

      but now the Commonwealth has to bridge that gap. How should they do it, given that they’ve got a deficit too? I’m not suggesting that your choice *shouldn’t* be the one chosen, but merely that it seems only fair that you find the actual revenue/cuts, not just kick it to another portion of government.

      • The "tax expenditure" vein looks like a mother-lode

        I think I could probably find $300 M between decreases in “tax expenditures” and increased taxes/fees.

        I was just playing the game, though — shifting the Big Dig debt service was an option, so I chose it. I sort of thought that was the point of the website — and I agree it’s a bit disingenuous (on the part of whoever put it together).

      • The tax expenditure budget is huge

        and, unlike the general budget, once something gets penciled in the tax expenditure budget… it stays there, unless removed. There is no yearly tax expenditure budget made, it just rolls in from one year to the next. No wonder the itemizations within the tax expenditure budget have become a sacred cow on Beacon Hilll…

        So it keeps building and building and building, and as Deb keeps pointing out, there’s well over $20 billion in that budget each year now… with no checks and balances, and very little accounting done to see if what”s being spent makes sense.

        Now, a lot of the items in the tax expenditure budget are things that make sense or would be popular with residents. However, we could easily find a billion or more that isn’t, starting with the Film Tax Credit, which cost about $150 million last year.

        I simply don’t buy the notion that the state can’t buy back the MBTA debt, and then some.

        RyansTake   @   Sat 10 Mar 5:16 AM
        • Indeed

          I think the state could too, and should… and indeed you’ve selected how they’d cover the deficit [though not the debt]. My point was simply that finding *that* money seems to be a reasonable extension of the exercise.

          You could use pot o’ golds at the end of rainbows too if you explain how you’ll find ‘em.

          • True enough, and yet ...

            Our state is faced with a number of competing priorities.

            I think most of us agree that destroying public transportation will make our other economic issues far worse, and we are on (or past) the brink of doing just that. The state has a $20+ B “tax expenditure” budget, for which funding is begged, borrowed, or stolen from somewhere. The state will have that $20B tax expenditure budget with or without the 1% diversion needed to satisfy the check-off in this fun web exercise.

            With the check-off, the state has a better shot of addressing that shortfall with a sustainably-funded public transportation system. Without the check-off, the shortfall is 1% larger and the state has lost a key pillar of its economic foundation.

            Perhaps “pot o’ golds” is a bit harsh? It seems to me that, instead, using the tax expenditure is a bit like an engineering approximation — yes, of course, the funds have to come from somewhere, but that incremental source is lost in the noise bar of funding that $20B item.

            Of course, at the end of the day, the state must raise taxes.

          • But that's not on the menu

            The comprehensive solution is not within the scope of the exercise. Other than raising the gas tax by 2%, which might be small part of that.

            Kind of like the extremely limited choice between deep cuts and huge fare increases currently under consideration by the T.

            So it’s not as though Ryan is irresponsibly calling for some kind of free lunch. He just isn’t allowed to pay for it the way it ought to be paid for.

      • For revenues, how about fairness via sales-taxing real estate, too?

        http://bluemassgroup.com/2012/03/fairly-applying-mass-sales-tax-to-real-estate-too/

        • Meh.

          The sales tax applies [in general] to consumables. We don’t resell very many of the things for which we pay sales tax. Meals, clothes, and so forth. Sure, there are a few heirlooms and some durable goods like furniture, but not much.

          Real estate is different. We all intend on reselling our real estate, either directly or indirectly. Even if one of our children move in when we die, it’s still a transfer of ownership.

          Exempt the first $1M and let’s talk about it… and don’t forget commercial property…

          • Headed in the same direction

            I chose $250K/500K (single/married) based on the current capital gains exclusion, but there’s nothing magic about that. I agree that commercial property is interesting.

            I think the discussion might be interesting, wherever we land on the sales tax question.

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Fri 24 Mar 12:17 AM