Donoghue (and Beacon Hill) Is Very Wrong on the MBTA

(Cross posted from LiL of course. This is such a fundamental issue of fairness, about who pays for what, and the Beacon Hill CW is just not cutting it. Take responsibility, or else we can elect people who will. Because whatever happens with the MBTA, you will take the blame.)

I am totally sorrowful in having to ask this question. I really am. You all know how I like Senator Eileen Donoghue. But what I want to know is, is she going all Beacon-Hill on us? Is she now living in the Beacon Hill bubble, espousing Beacon Hill talking points, instead of offering real solutions? Because that’s what it sounded like during her March 6th appearance on WCAP where she talked about the MBTA and its chronic budget woes (begins at the 6:36 mark).

This has been bugging me for days but I finally have time to write it all out.

Teddy Panos puts the question to Donoghue, about an idea being floated by a business group that the legislature should tap into the rainy day fund to help the MBTA budget this year. While I agree with the first part of Eileen’s response, she said some things that make me very angry. Because she is smart enough to do basic math, in my opinion. Let’s start with the answer to the specific rainy day question:

I don’t really think it’s a great idea, it’s a short term fix. I don’t think the MBTA is an emergency or a one-time thing, it’s a chronic problem with the MBTA, and you still have to fix the problem.

She’s totally right, here. This isn’t just a chronic problem, it’s been a decade-long chronic problem, with the can kicked down the road again, and again. However, where she and I part ways is that she appears to be relying on pat Beacon Hill “conventional wisdom.” Her next comments:

…you still have to fix the problem. And they just seem incapable of doing it. …One of the things, when they reorganized and changed…you know, forward funding for the MBTA, over ten years ago, I think the whole notion was to give the Board authority; they also took on some debt, but give them authority to start making…system-wide changes. And that doesn’t seem to have happened. So now when the MBTA comes up short for – and again, what could be their lack of action in making real important revisions to the way they run the system – they just turn to the legislature, put out their hand, and say “give us more money.”

I think until…we hear from the MBTA, from their Board how they’re going to fix this, what kind of changes they’ve implemented, I don’t think continuing to pour money when they come up short is the solution.

God, am I disappointed in our state Senator! Donoghue even mentions the forward funding and Big Dig debt problems, but glosses over them in order to blame the Board for not coming up with a miracle solution that doesn’t involve steep, steep cuts in services or huge rate increases, or both.

Pathetic, totally Beacon-Hill pass-the-buck bullshit.

Let’s review the history of the MBTA. Shall we? In the Wiki article, we have a nice outline of what happened to the MBTA in the year 2000:

A turning point in funding occurred in 2000. Prior to July 1, 2000, the MBTA was reimbursed by the Commonwealth of Massachusetts for all costs above revenue collected (net cost of service). Beginning on that date, the T was granted a dedicated revenue stream consisting of amounts assessed on served cities and towns, along with a dedicated 20% portion of the 5% state sales tax.[citation needed] The MBTA now must live within this “forward funding” budget.

The Commonwealth assigned to the MBTA responsibility for increasing public transit to compensate for increased automobile pollution from the Big Dig. The T submerged a nearby portion of the Green Line and rebuilt Haymarket and North Stations during Big Dig construction. However, these projects have strained the MBTA’s limited resources, since the Big Dig project did not include funding for these improvements.

Let me repeat:

Prior to July 1, 2000, the MBTA was reimbursed by the Commonwealth of Massachusetts for all costs above revenue collected (net cost of service).

OK, so the MTBA has fares, advertising revenue, station-naming-rights, etc, just to name some of its incoming revenue. Let’s call that amount “Bob.” Bob is limited, in that the ad and naming rights can only fetch so much (as much as the market will bear), and, if you want to keep fares affordable (and we had one of the most affordable public transit systems in the nation, and surprise! the one with the most ridership, too) you have a limit to what you can charge for fares. Poorer people can’t pay a lot of money to move around, even though moving around is key to finding and holding jobs.

If operating and capital investment costs are Bob + 20% (a made up number, BTW, for illustration purposes), that means that that extra 20% in cost is a shortfall in the MBTA’s budget. Got that math in your head? OK. So prior to 2000, that 20% shortfall was made up for in the general budget of the state (or federal or local, on some projects). This is based on the premise that public transit is a net common good, and we should encourage it and keep it affordable. It takes cars off the road (ask the Mr. how he commutes every day), it lowers traffic congestion, our carbon emissions, and gives the working class choices as to how many places they can live and work, a very important component in building economic equality.

All right. Let’s move on to the post-2000 world of the dumb idea of forward funding. We now have a fixed amount for the shortfall after revenues are collected from fares and ads and such. Not only is this a fixed percentage of the sales tax along with the assessment from served towns, but it is the fixed percent of a tax which, particularly in downturns like the one we’ve just been through, means fluctuating revenue for operating costs even while they are trying to serve pretty much the same, or even in some cases, more riders. After all, in a downturn, people might choose to get rid of the cost of an automobile and opt for public transit.

All of this was happening exactly while the MBTA was handed a huge debt load for expenses obligated by the Big Dig. (It’s a complicated history, where the MBTA became obligated to make capital improvements in order to increase ridership, so they could “offset” the increase in auto traffic due to the highway expansion. This was to qualify for a large chunk of federal money, and was set up prior to “forward funding” in 2000.)

Once forward funding comes in, you have created an agency which, if it had complete control over its capital investments, would choose only those investments that paid for themselves. After forward funding, the state’s credit is no longer available to the MBTA. It has to float bonds on its own credit. Credit is given to you when you can prove to a credit agency that you have the means to pay a loan back. In the state’s case this is due to being able to levy taxes. In the MBTA’s case it is due to the ability to raise rates (though that is a rather difficult process) and other fees, or building a capital project that increases its ridership, and hence its revenues.

But due, in large part, to its previous obligation (that the Big Dig imposed on it) and also political pressure, a capital improvement by the MBTA might wind up not paying for itself. No where is this demonstrated better than with the Greenbush south shore expansion.

A project like Greenbush flies in the face of forward funding. South Shore politicians wanted it, and wanted it bad, and it might have been been a great idea and a desirable project from a long term economic development view – over the next couple of decades, more development might be possible along its corridor, increasing jobs and housing and maybe, eventually, ridership. However, from the MBTA’s forward funding standpoint, it’s a dismal failure. According to the above-linked Boston.com article:

Three years after the Greenbush train made its inaugural run, ridership on the $534 million commuter rail extension is far below the MBTA’s projections, and those who do take it are more likely to be former passengers of the T’s own commuter boats than motorists lured away from the South Shore’s congested highways.

Last week, according to the T, an average of 2,133 weekday customers rode the line toward Boston, about half the 4,200 riders the transit agency had expected within three to five years of opening Greenbush.

That is certainly not paying for itself.

If you’re going to force an agency to forward fund, then you cannot dictate where it decides to put its capital investments. Even if it’s politically popular to add track or stations in your neighborhood, doesn’t mean the MBTA will be able to afford it in a forward funding scenario. And if the MBTA does decide on a station in your neighborhood, you shouldn’t force it – by political pressure – to make it some kind of intermodal economic-development extravaganza if the MBTA doesn’t think it will make its investment back. And yet, this is what is happening.

If we as a Commonwealth want to think beyond what will make the MBTA its investments back, then we need to invest extra public monies to its capital investments when those costs go beyond the scope of the MBTA’s forward funded budget. End of story.

Of course, the MBTA might be able to survive in a forward funding, willy-nilly-capital-investment world if it decided to go with enormous rate increases…but that has the potential to damage the ability for much its ridership to use the transit system. Thereby decreasing ridership, and the main revenue source of the MBTA. So, that would be kind of stupid. Also deeply unpopular.

So now the MBTA is obligated to take on more debt for capital improvements (improvements, you could argue, that were needed and desired, but we should have thought about how to pay for them first), on top of what is essentially a capped revenue from public sources.

So what the hell miracle solution is the frapping MBTA Board supposed to come up with? Are they supposed to apply bloody pixie dust to the thorny problems dropped on the MBTA by the legislature?? What solution is there other than the areas they have control over?? Which would be, huge rate increases and huge service cuts. Neither of which is good for the Commonwealth.

The state legislature, aka Beacon Hill, are a bunch of whiny asshole babies over this issue. They caused this problem in several ways, and now that the structural budget problems have come to a head for the MBTA, they’re like, “they need to stop coming to us with their hand out.” And yet the solutions floated, like a big jump in fares, or stopping its likely-revenue-losing weekend service, are not only wicked unpopular with the public (duh) but unacceptable to the politicians who have to take responsibility for a pissed off public!

What other math works, other than “we need to increase revenue by increasing fares, or decrease services drastically”??

I can tell you one thing. The MBTA, while being shite at its own PR and making huge gaffs in that arena, is one of the leanest-run public organizations out there. I dare anyone to find more than a piddling inconsequential amount of “fat” in the way they run the public transit system that millions rely on.

What miracle of “revisions” to the system can possibly fracking fix this?

Apparently, if you buy into the Beacon Hill conventional wisdom, it’s someone else’s miracle to produce. Luckily, being smarter and more informed than the average Beacon Hill bubblehead, I have some ideas.

My solution may not resolve the existing debt burden problem (personally, I think the legislature should grow up and help dig the MBTA out of the hole the legislature dug for them). But…IF they want to continue with the forward funding model for the MBTA (I’m not convinced ditching it would be a bad idea but there are reasons to think it could work) then the legislature needs to change the law to ensure that forward funding be limited to being spent on operating costs, maintenance, and pay-for-themselves MBTA-driven capital improvements (ie keep the politicians from meddling and adding scope to them). If the politicians want a project akin to the operating-at-a-loss Greenbush expansion, something that is not projected to pay for itself in a reasonable timeframe, but which is desired for other reasons like expanding economic opportunities, access for underserved neighborhoods, etc, then that should be paid for outside of the MBTA’s forward funding obligations.

The MBTA, under forward funding, should not have to consider how a project benefits a community, the environment, or traffic congestion. Remember, any side-benefits that the MBTA can create by its very existence don’t show up as credits on the forward-funding balance sheet – the MBTA just get the costs. Communities, the state, citizens, we might see benefits, but the MBTA in many of these projects only sees some return.

Under forward funding, the MBTA’s only consideration should be: can it pay for its own loan on a given project? That is the way that forward funding works. By putting such outside considerations and obligations upon the MBTA so that it winds up paying for projects of more benefit to other entities other than itself, you are asking it to do too much with the fixed amount of money it can produce and borrow. The legislature is bankrupting the MBTA with the obligations it put on it prior to 2000, and the pressure for big, giant, baby-kissing sorts of expansions now. You cannot have it both ways, Beacon Hill. Either you let the MBTA decide on all the expansions it will undertake under forward funding (keeping revenue generation and budget in mind) even if those projects aren’t good for ribbon cuttings or sucking up to your electorate…or pay for the capital investments in the system some other way.

The alternative is to trap the MBTA between a rock and a hard place, and then blame them when they can’t extract themselves. Which I guess is where we find ourselves. I just thought that Senator Donoghue was a lot better than your regular Beacon Hill insider. But it’s not too late for her to change her approach to this complex problem to something a little more nuanced than “I blame the MBTA Board for not performing miracles.”

Serious problems call for serious leadership. That’s all I’m sayin’.