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A Trial Balloon

This topic contains 48 replies, has 26 voices, and was last updated by  CarolynBishop 1 year, 1 month ago.

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    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.


    I migrated to Boston from Austin where this approach is in effect. You can read the full story here:
    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
    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.


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


    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.


    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.

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