A Trial Balloon

[Will BrownsbergerKeymaster]

I want to float a trial balloon. Don’t take my head off, it’s just a thought: What if we were to give the MBTA the ability to raise its own tax revenues regionally subject to periodic voter approval (as in Proposition 2.5)?

Some background first: As compared to other major transit agencies in the United States, the MBTA gets a relatively large share of its revenues from the state, as opposed to regional/local sources (see page 11 of this study from MassINC). Transit services have regional benefits, so it makes sense to fund them regionally.

Arguably, the economic health of Massachusetts, perhaps New England as a whole, depends on the health of Greater Boston. Perhaps, but growth in many other regions of the state has lagged growth in Boston.

A majority of legislators live outside the core MBTA service area (see this study from MassINC at note 22). Rightly or wrongly, they tend to see the disparity in growth as an argument for more state investment in their own regions instead of in Greater Boston. Hence, the basic political difficulty of funding the MBTA operating deficit.

In 2000, the state ended its practice of covering the MBTA’s deficit at the end of the year. Under “forward funding”, the MBTA was placed on a steady funding diet and held accountable for managing its costs. The state pledged 20% of state sales tax revenues as permanent support for the MBTA.

The MBTA board was unable to live within the forward funding framework. Multiple factors contributed to the failure — notably, rising health care costs, wage increases awarded by arbitrators, rising energy costs and, on the revenue side, weak sales tax growth. Additionally, understandable political pressures to limit fare increases and to avoid cutting services contribute to the strain on the MBTA’s budget.

The MBTA’s debt burden was not one of the factors that unraveled the forward funding plan — debt costs remained within projections (see the D’Allesandro report at page 29) and the state’s contribution to the MBTA’s budget more than covers debt service. Nonetheless, debt is a relatively high portion of the MBTA’s budget as compared to other transit agency budgets (see page 16 of this study from the MBTA Advisory Board). Much of that debt was transferred from the state at the time of forward funding.

So, against that background, here is one idea that is in the mix as a long-term solve for the MBTA’s operating budget: (1) Transfer some of the MBTA’s debt back to the state, relieving the immediate financial pressure on the T. (2) Give the MBTA the power to levy a tax in its service area subject to voter approval.

Some have suggested a regional payroll tax, but that would probably run into constitutional problems. More likely, it would be an increment on sales or property taxes within the service area. The increment could start at zero and then the voters would have to approve the new taxes at the biennial election of 2014 and approve any increases at biennial elections thereafter.

This proposal doesn’t necessarily answer the question of how to address the long-term capital needs of the MBTA. One could devolve that challenge to the voters of the service area or, one could keep the state politically and financially involved for major investments.

Putting in place a two-year cycle would support long term planning. Making increases subject to voter approval in regional elections would improve both transparency and accountability.

I’d appreciate your thoughts.

[Scott GutheryParticipant]

I migrated to Boston from Austin where this approach is in effect. You can read the full story here: http://en.wikipedia.org/wiki/Capital_Metropolitan_Transportation_Authority
It’s not pretty. The ability to tax has two unintended consequences. First, it removes all incentive to pay attention to economy and efficiency. Feather bedding is one very apparent cause of MBTA’s difficulties. Granting the ability to tax will let the MBTA continue to ignore this problem. Second, the ability to tax begets an unending stream of unneeded and unwanted transportation projects whose only real purpose is to drive up the tax take. Capital MetroRail in Austin http://en.wikipedia.org/wiki/Capital_MetroRail
is cautionary tale and a case in point. Putting a tax base underneath the MBTA will only make both its financial and its operational problems worse. My view is that the trial balloon is made of lead.

[Will BrownsbergerKeymaster]

Does it give any comfort to you that the tax would be subject to voter approval?

[Scott GutheryParticipant]

I’m afraid not, Will. As far as I can tell every tax is subject to voter approval one way or another and are living the result. Only a truly egregious situation will result in citizen action. It has happened to be sure but it’s rare.

The way the government has found around voter resistance is to levy lots of little taxes rather than a few big ones. This is the strategy of overlay tax districts such as your MBTA proposal. Tax revenue by a thousand cuts, if you will. No one tax is sufficient to trigger a revolt.

The MBTA’s #1 problem isn’t finance; it’s operations. I ride the Green Line a lot so I see the problem “up close and personal” as Howard Cosell used to say. As far as I can tell employees of the MBTA don’t even care they are running a very shoddy — not to say unsafe — service.

I am willing to help a person to the exact degree to which they are willing to help themselves. Were I to see a sign that the MBTA was willing to address their operational problems then, and only then, would I be willing to address the financial problems. Without attention to the operational problems my view is that more money — whatever the source — will only make matters worse.

[brent whelanParticipant]

Thanks, Will, for a characteristically lucid presentation of this intractable problem. Putting the T on a solid financial basis, both annual and capital, is a big priority for me. From the Governor’s proposal I thought the political strategy was to distribute transportation spending projects widely across the state, so that legislators outside the MBTA area had plenty to support. This seems sound to me, not just for political reasons, but because as I understand it those other regions have seriously underserved transportation needs. Making this sort of deal strikes me as the preferred solution.

The regional MBTA tax idea doesn’t bother me in principle–this is a vital need, and users might well pay for it–but I fear that going to the taxpayers repeatedly for revenue will keep the T chronically undercapitalized. (Incidentally, I tend to disagree with your correspondent who sees this plan as an invitation to featherbedding–it’s easy to blame an indifferent T employee here or there, but the real problems are systemic and not all that visible to the impatient T user–and I’ve certainly been one.)

What about a 3rd revenue idea: tax all the free-riding auto commuters from the north and south shores who roll in toll-free on 93? And if we’re half-way serious about climate change, why aren’t we looking even more to gas taxes (I know some rise has been proposed) and other auto user fees? The combination of pricing motorists into the T, while offering a modern, highly functional service, makes the most sense.

[Carolyn BishopParticipant]

Creative thinking as always! I don’t claim to understand this complicated issue but: what if the taxpayers DON”T approve the tax? Tax is a dirty word to many and relying on approval by the payers is a gamble, especially those who don’t use the T in spite of being in a served community. I agree with the proposal re gas taxes and to tax/toll 93 north and south to try to get people off the highways, however if there is no transit service that is equivalent for these people, that would be a problem. I do not know if there is or not….just connecting north and south station has been impossible so connecting north and south shore might be the same! The increase in auto traffic is remarkable in the 38 years we’ve lived here. Concord Avenue, Brighton, Clifton are all stop and go traffic at rush hour and most cars contain only the driver. I wish I had a solution and appreciate your concern and efforts!

[MatthewDanishParticipant]

Isn’t this similar to the existing assessment mechanism? (which has remained fairly flat for the past 12+ years). How municipalities choose to fund the assessment is up to them.

And speaking of which, why regional funding for transit only, while continuing to fund road expansion out of the general fund? I think good arguments can be made for regional and for non-regional. But should we be considering moving to a regional (or non-regional) funding mechanism for all modes of transportation?

Legislators from non-MBTA districts like to complain about funding for the T. But at the same time, they receive a combined total of hundreds of millions of dollars in road subsidies. For whatever reason, they are allowed to pretend as if those subsidies didn’t exist, while making a big stink about the needs of Boston.

For example, the formula for distribution of Ch 90 funding is heavily weighted towards existing centerline miles. That tilts the funding balance in favor of places with lots of roads, even if those roads are not used much.

If road funding were also done regionally then they would have to pay for their own roads (and RTAs), instead of leaning on the economic engine of Boston, and perhaps would spend more judiciously.

On the other hand, we are a Commonwealth, and we should work together. This would argue against regional funding mechanisms and in favor of dispersing general funds in accordance with population and need. Again, there would be regional differences: some would choose to disperse their share on roads more than transit, other areas like Boston would put a higher percentage towards transit.

Speaking of Austin, I recently visited and rode Cap MetroRail. It’s a barebones, barely usable system that doesn’t go where people want to go; it goes where the largely single track, freight right-of-way existed. There might be a cautionary tale here: the alternative transit corridor that is still desperately needed was narrowly defeated in a referendum because of opposition from suburban districts despite strong city support. This probably goes to show that even at the regional level the different interests are too much at odds. On the other hand, Los Angeles has done pretty well with its 30-10 program using referendums.

[D.KittySimmsParticipant]

I think its great having this discussion. I’ve attended several MBTA meetings and often left with more questions. The state moved debt onto the MBTA with the expectation of higher revenue to the state which the MBTA would receive a potion to cover the debt that was moved off of the State books. Now you are suggesting that part of that debt be transferred back to the state.

“The MBTA’s debt burden was not one of the factors that unraveled the forward funding plan — debt costs remained within projections and the state’s contribution to the MBTA’s budget more than covers debt service. Nonetheless, debt is a relatively high portion of the MBTA’s budget as compared to other transit agency budgets. Much of that debt was transferred from the state at the time of forward funding.”

When I ride the #1 Bus up or down Mass Ave I get on a bus thats late and crowded on top of that I’m paying more to cover a debt that’s not mine. The state should transfer all of the debt back to the state.

Next, property tax has nothing to do with transportation. You guys should man up and determine a tax amount that can fund the MBTA. Such as taxing drivers from NH and Conn many of whom work in the Greater Boston area. Increase the amount of gas taxes sold at the pump. Also allow the MBTA to issue permits to small shuttle services. Example if I want to go to the beach on the South Shore instead of renting a z-car I could take commuter rail get off and go to and return from the beach by a shuttle using my MBTA Charlie Card. The shuttle would operate under a MBTA permit. MBTA permit fees for special services would increase ridership this would be a cash cow. If permit program was created, the MBTA be helping to create jobs across the state, and it would help get more people out of their cars because they would have service that benefit them.

Finally, why can’t MBTA employees as well as all state employees be a part of Mass Health? This would save the MBTA and the State money.

Thank you.

[Terry DoughertyParticipant]

Senator, first a compliment. In my nearly 40 years of working between the private and public sector I haven’t met too many elected officials willing to float trial balloons, let alone ask people for their reactions. Well done.

MBTA debt was always a state responsibility until the Weld administration. They needed headroom for the Big Dig, so they pushed it back to the T. Yes operating systems are lousy, trains and rails in need of maintenance, yet the fares are not comparable to the DC Metro, probably the best publicly operated system. A reasonable fare system, with the entire state paying the capital costs, is better than a local property tax. Municipal budgets aren’t any better than the T’s, so pushing it down to localities doesn’t really address the issue.

[Mark BaconParticipant]

I agree with sguthery’s comments. We should learn from the debacle in Austin. I also think we need to do much more to reform operations of the MBTA. We still have people retiring in their 40′s and 50′s and receiving very large salaries for semi skilled work. I understand this policy has been changed for new hires, but it needs to end period. The contracts should be overturned as they are a product of decades of unfair agreements which were rigged against the taxpayer from the beginning. There has also been massive mismanagement which goes unchecked. We need an oversight body of the MBTA that is not politically connected that can dismantle the organization and reorganize it from top to bottom.

Also, some of the expansion plans need to be curtailed or stopped altogether.

[MarkKaeppleinParticipant]

Will, thanks for a great forum and great comments here.

Its clear the current funding model needs work. City and town MBTA assessments and Ch. 90 distribution formulas are overly simplistic and inaccurate, much like the vehicle excise tax formula.

Take Cambridge for example. Zoning policies force more workers to use the MBTA without increasing their assessment to the MBTA, nor decreasing their Chapter 90 distribution. At the least, much of their Ch. 90 distribution parts for residents and employees needs to be diverted to the MBTA since they more heavily use the MBTA and less heavily use roads than average communities. I suggest the population part of Ch. 90 assessment be replaced by registered vehicles and trailers (to recognize extra road wear), and the workers part by parking spots.

Quincy is another stark example where benefits are much greater than what is paid via MBTA assessments. These funds, however come from the property owners in communities, not the people riding the MBTA, and thus still less fair.

An employer will pay property taxes on land used for employee parking. If they cut back on their costs by reducing parking, they save money while workers burden the MBTA with the MBTA having no way to access any money the employer saved by not offering parking. So, if anything, employers and retailers should be charged by the MBTA for not supplying parking.

We can blame the court system and lefty lawyer groups for heaping debt on the MBTA with the Green Line Extension, south east rail extension, and inner loop as some sort of bargain for the sin of providing added roadway transportation in the big dig. Instead of promoting public transit, these lawyers added strain to it.

As to the MBTA gaining efficiency, how about a compensation method like that in the private sector where performance and efficiency are rewarded. A food server or sales person usually has a salary with a tip or bonus plan. Other workers take part in profit sharing. Imagine if T workers and management had incentives!

As to voting on the MBTA being able to tax, this is still a problem in a one-party state.

[Tommy VitoloParticipant]

Regarding the trial balloon, here’s my suggestion: calculate the cost to build, maintain, and repair roads by community. 351 of ‘em. Then, calculate the amount spent by the Commonwealth [state gov't] on that, again by community. Just for yuks, go ahead and calculate the state tax revenue from each of the 351 communities.

My bet is that you’ll find that those legislators who live outside of the core MBTA service area are getting many more roadway dollars per resident (and per tax dollar paid by their constituents!) than the communities within the core MBTA service area. I don’t know if this is true or not; it is just a hunch.

If it is true, then the fair way forward is to treat roads and rails the same: the Commonwealth gives each community $X/person [or some other formula] which is divied up between roads and rails. Of course, we ought to also consider number of employees on payroll within each community to reflect not just where people live but where they work.

My point is simply this: Central and Western Mass have no problem with my tax dollars going to build their roads, and, per person, they’ve got a whole lot more roads. Yet when it comes to their tax dollars paying for my mass transit, suddenly they’ve got a problem.

By allowing the MBTA to have a regional tax, you’re exacerbating that phenomenon unless you also require a regional tax in less populous areas to fund the additional tax dollars per person that they spend on roadways.

I’d add that every time the MBTA provides a paratransit service, every time they shelter victims of a burnt down apartment building in a few buses, every time they provide a discounted fare to a senior, a student, or a blind citizen, that they’re providing service *above and beyond* mass transit, and that some other government [state or local] ought to give them a transfer payment for the service. I like all of those things that the MBTA does for the community, and I think that the MBTA should continue doing them… but I also think that the government agency which gains the benefit of that MBTA gesture should pay for that gesture.

[Judith FeinleibParticipant]

I understand that there needs to be a way to deal with the problem and that more revenue will be needed.

That said, I shudder to think of yet another addition to the property tax. Property taxes are already high enough so that people are having a hard time paying the. Some towns are reducing needed services now. I don’t think more reductions are a great idea.

In addition, I should like to know more about how you propose this be administered. Is the T to levy the tax on each town or municipality? Will this be outside of the jurisdiction of these units?

Adding to the sales tax has its own problems. The sales tax is a regressive tax and it hurts those who have least the most. Many of them are T users and will be impacted by higher fares.

[Victor PrestonParticipant]

I have not read everything here, but I note that the highways are substantially subsidized by the Federal Government. Since the MBTA is a MUCH more efficient use of resources than cars are it should be subsidized MORE than cars are, if only to reduce carbon emissions. The proposal here is a good idea, but how about this: charge a “congestion” charge on cars coming into the city like they do in London and use the money to fund the MBTA? Personally, I would be in favor of REDUCING the fairs on the MBTA to increase ridership (preferably to zero!), which I consider only fair since people should be compensated for giving up some of the convenience of automobiles.

[MarkKaeppleinParticipant]

People who live in NH or RI and work in Boston already pay a tax to use the roads. Its the MA income tax levied on their MA earnings. Perhaps this needs to go to the MassDOT for roads and MBTA instead of the general fund!

As to a congestion tax, NYC and Boston have toll booths, though Boston lacks them on inbound I-93 North and South, as major routes. Any reduced traffic volume resulting in less pollution could then be used to fight the court decision forcing the Green Line Extension project and unsustainable debt on the MBTA!

[jjmaynardParticipant]

Those who only use public transportation have been neglected long enough. Any driver who commutes into the MBTA area must pay a tax to support public transportation. They are using our roads and highways and parking in our streets not to mention poluting our air. They must be taxed heavily to support the MBTA then perhaps they will use it and cease freeloadingg in our towns.

[loisjacobsParticipant]

I like that you float trial balloons and share them with the citizens of the Commonwealth. The thoughts from all these people are thoughtful. We really live in quite an intelligent state.

I live out of the immediate area of the MBTA but I drive into areas where I can pick up the T. Getting the MBTA on solid ground is a solution but how do we get there is the problem. Voting for a tax means a campaign and money spent to either support or defeat the proposition. For me, mounting a battle is a waste of money. How many times have we seen Prop 2 1/2 overrides bring out warring factions in communities? I have always hated that law but we are stuck with it. Let’s not inflict a vote on the T.

Though I don’t right now have the formula, I trust there is an answer out there by experts. How do other cities run their transportation systems? There are so many cities to study either here in the United States or Europe to study .

[John-WParticipant]

By this logic why should any taxes I pay in Greater Boston go to support services in some other part of the State? Getting so local on how revenue for shared state services are raised and spent puts us on the consumer model of government — just pay for what you use. Following that to its logical conclusion is not a pretty picture, and I don’t see the underpinnings of this argument in the MBTA situation to be any better. Are we too self-centered to see that the investments we make in a COMMONwealth benefit us all? Are our elected officials too afraid to step out and do what is right, even if politically it means a lot explaining and convincing?

We need to invest in regional transportation investments AND in the Greater Boston system as well. People can distrust govt and complain about one-party rule and hacks all they want — eventually a bridge is going to collapse, brakes will fail or an employer will decide to relocate to a state where they actually invest in the infrastructure necessary to do business and attract employees. We need to be conservative about maintaining and investing in our transportation infrastructure and progressive about doing it in a way that brings the system into the 21st century to compete globally.

[Yuval ShavitParticipant]

Firstly, Will, I would like to second all those who have thanked you for treating us as adults by bringing up this solution.

But I’d also like to second tjvitolo’s thoughts, as well as John-W’s. Taking the argument a bit further, one could argue that people who don’t use the MBTA shouldn’t pay taxes that support it, either; fares should cover the full amount.

That argument seems odd, because it’s obvious to everyone that the vitality of Boston depends on its metropolitan benefits, of which the T is one. I would argue that the same is true of the state as a whole; it would not be what it is without Boston.

If constituents outside of the Boston area want us to shoulder more of the price of the T, do we get to insist that they shoulder more of the price of their roads? When the question of a gas tax comes up, those same people point out that it would disproportionately affect them, since their cities are less dense and don’t have as much access to public transportation; do we now get to tell them that their argument holds no water — such is the price of living where they do, just as paying for the T is the price for living near Boston?

In short, if this is a step towards greater but symmetric nickel-and-diming, then that’s one discussion. But if it’s an asymmetric discussion in which Boston’s bills are itemized while the rest of the state’s aren’t, that doesn’t seem fair.

I don’t think it’s a coincidence that Massachusetts, which is more willing to invest to benefit the common wealth of all, weathered the economic downturn better than the US as a whole. We’re all in this together.

[pricearmstrongParticipant]

I used to work at Lane Transit District in Eugene, Oregon, which was funded through a special district payroll tax (0.7%, I believe). TriMet in Portland, Oregon, is funded the same way. Both transit systems are held up as national models. It’s not clear why there would be constitutional problems with this system in Massachusetts, but I like the idea.

[IsabelBestParticipant]

If the idea of an MBTA own tax base can’t get through, maybe the debt relief can. Why should public transport users have to help pay for the Big Dig, which only benefits the drivers of cars? That would be some progress.

[MichaelMenzieParticipant]

I drive and use the T, I think a small increase in the gas tax marked specifically for mass transit (outside greater Boston also, since it’s a statewide tax) would be part of the solution. As a T rider I welcome anything that helps improve service and keep fares down, and as a driver I realize every person using the T is one less car on the road, possibly in front of me

[Harry S. MargolisParticipant]

Will,

I think a regional approach makes sense, but it’s not clear to me how any taxes would then be assessed. I don’t think too many people would accept the MBTA doing so on its own.

I’m a strong proponent of raising the gas tax which, except for a small fund to clean up underground storage tanks, hasn’t been increased for over two decades. During the same time, the MBTA has raised its fares five times.

Is there any way the gas tax could be raised solely within the MBTA service area?

[Author]

Posts