How the Feds COULD help urban transit operations*

*without spending any money.

I put “COULD” in all-caps because it’s not clear there is much interest in DC for doing so, for various reasons. It took forever to pass a transportation bill, and the one that did pass wasn’t particularly friendly to transit: the Administration wanted any sort of stimulus it could get and the House GOP is particular to highway interests, and so the resulting compromise was highway-friendly.

But were one to assume a bizarro universe where local transit was an important priority of a critical mass of those in DC, here’s a few things that could be done without–without increasing federal outlays. (It goes without saying that increasing federal outlays would have a positive effect even without policy changes).
Funding for operations

The federal government hasn’t funded transit operations for quite some time. Back in the 20th century, much local government funding came from Uncle Sam; but as taxes were cut in the latter half of the century, general funding for local government dried up. A prohibition on funding operations has been in effect for some time; a widely believed reason is concern that such funds would be used to finance pay raises for transit workers, rather than additional service. This is a profoundly stupid reason–money is fungible, for one thing. For another, nobody seems to worry that capital funding will drive up wages (or prices) in the construction industry–obviously, the Amalgamated Transit Union needs better lobbyists. (The bottom line: The difference between pork and bacon is how you cook it).

A better reason is that proper funding of operations requires a continuous revenue stream, which isn’t compatible with the grant-based funding process currently used at FTA (and the DOT as a whole).

Assuming that grant-based funding will continue, there are still several ways to help with operations:

  • Recession backfilling. Many transit agencies, including TriMet, have had to slash service as tax revenues have gone down, despite increased ridership demands. (Not all of TriMet’s financial issues are revenue-related, of course). A few transit agencies have shut down. Unfortunately, some in Washington seem to be relishing the forced austerity the Great Recession is imposing on local governments. (Expect, if and when the economy recovers fully, for there to be calls for more tax cuts when revenues go back up, instead of restoring previously-reduced service levels). But were we to assume a reasonable polity, an excellent use of the US Government’s access to deficit financing would be emergency operations grants to keep the busses running during an economic downturn. As such things would be temporary in nature, they would be appropriate to award as grants.
  • Endowments. We’ve talked about endowments being funded from Salem and local governments; but Uncle Sam can do this as well. A proper endowment program could also double as funding for pension plans. Operating endowments (requiring a local match) could also be part of capital project grants–when the Feds fund a project, it also includes endowment for the operating costs (or some fraction thereof).
  • Efficiency projects. This last item is not direct funding of operations, but a different way to help. One other issue with the federal funding criteria is that there is a big emphasis on projects which add new service and attract new riders. It would be useful for it to be easier to do capital projects which improve the cost-effectiveness of existing service–things such as signal priority or bus lanes or even a revamped ticketing system–but don’t have substantial direct impacts on ridership of capacity. (That said, if the resulting savings is used to fund additional service and improve the overall quality thereof, ridership might still go up). There are countless bottlenecks in the Portland street grid which could be improved for not very much money, speeding up (or making more reliable) the transit that passes through them. Many of these don’t even involve pouring concrete. There is probably a lot bigger bang for buck in spending $20M to implement electronic ticketing than there is in any physical project that could be done.

Get-out-of-boondoggle free card
Somewhere, in the Community Chest, there’s a yellow card that has a drawing of guy in prison stripes riding a DMU, and which says “Go to Wilsonville. Go directly to Wilsonville. Do not pass go, do not free up millions of dollars”. One of the longstanding rules of federal funding is that once a project is built, it needs to be operated. If it turns out to be a bad idea–tough, keep operating it. Otherwise, the FTA will want its money back.

Much as the NBA’s recent collective bargaining agreement included an amnesty clause, which the Trail Blazers used on injury-plagued former superstar Brandon Roy, an FTA amnesty clause–permitting public agencies to abandon a bad project without penalty (either temporarily, or for the duration of the mandatory grant period), would be beneficial to agencies around the country, forced to continue operating poorly-performing projects while cutting services that are more useful, but which don’t have operating commitments attached. The FTA has shown some flexibility, of course–the Green Line opened with reduced service levels, and the FTA said that was OK when the Cascade Policy Institute complained. But a complete amnesty program would be a major improvement.

Ending the tolling embargo

Another obnoxious practice that Uncle Sam has is making it very hard to attach tolls to highways, particularly Interstates. Existing turnpikes are grandfathered in, and tolls can be used to finance new construction, but more comprehensive tolling schemes–either to raise revenue for other road projects (including maintenance), or to reduce congestion, are generally prohibited.

There are some good reasons. Some roadway agencies have historically engaged in abusive tolling practices (the Pennsylvania Turnpike Commission is a notorious example), and the state of Arizona’s ill-fated attempt to impose tolls on a short stretch of Interstate 15 in its far northwestern corner (the highway briefly passes through Arizona on the route between Las Vegas and Salt Lake City) was an obvious attempted shakedown of out-of-state residents and commerce. But there are many legitimate reasons to permit tolling on Interstate highways. In particular, interstate commerce (in particular, freight) would benefit from reduced congestion on urban freeways. The Arizona proposal was part of a three-state pilot project, which should be expanded (with safeguards in place to prevent flagrant abuse).

Changing the funding formula

Many federal programs have fixed funding levels. Interstate highway construction was long funded at a 9:1 match (states came up with 10%, the Feds would come up with 90%). New Starts, which funds large transit projects, will match at 60% for projects less than $1 billion, 50% for projects which are over that level. Different project proposals are rated and racked and stacked, but the ratings affect eligibility for funding, not value.

It might work better if the merit of a project affected its level of funding instead of just the eligibility–with highly-effective projects eligible for higher levels of funding, and lower-level projects getting a smaller match. This might be beneficial: It might reduce the lottery aspect of federal funding–the incentive is for local governments to swing for the fences to get the biggest possible match to goose the local economy–in some cases, it seems that the purpose of such projects is to win federal grants, transit outcomes notwithstanding. More specifically, it might reduce the excess bagged placed into transit projects. Many “transit” projects are larded up with ancillary stuff as possible, to get these things partially paid for as well. One frequent commenter likes to complain about bikeway enhancements related to the Green Line; part of the reason that was done was to get the federal match on something planners want to do anyway. Many other states lard of transit projects with HIGHWAY improvements–project elements which are nominally part of transit projects, but which benefit motorists and not transit users, such as bus pullouts or grade-separation of rail crossings (where transit enjoys priority).

12 responses to “How the Feds COULD help urban transit operations*”

  1. You have some good ideas, however I have misgivings about the boondoggle free card. This could easily be used by certain political elements to shut down an project.

    While this is unlikely to happen in Portland there is many cities that certain radical political elements could take control and decide to use this to shut down a useful project because it goes against their political bent.

    Its one of those things that sounds good but you also have to take into consideration the unintended consequences also.

  2. I agree with John about this. While it could be argued that WES is such a boondoggle, what about political elements coaslescing in Clackamas County to use “get out of boondoggle” to shut down PMLR?

  3. Certainly, abuse of such provisions might be a concern. I wouldn’t worry about PMLR at this point–something would have to open and run to be eligible, and given that the other MAX lines all actually do reasonably well from a performance and efficiency perspective, I don’t expect it to be different.

    The sort of abuse I would worry about would be a Scott-Walker-ish scenario in which ideologues try to dismantle highly successful projects; say a transit-hostile governor attempting to close down the Blue Line and convert the ROW to freeway lanes. I think the chances of that happening are extremely remote, but it’s certainly a possibility.

    OTOH, many have proposed the reverse–converting freeway lanes or existing highway infrastructure to transit-exclusive use. A few places, it has happened (E Burnside, N Interstate), but in many places it isn’t legally permissible. Right now, far more of our built-out infrastructure is used for cars–is preserving the status quo a good thing, or not?

  4. TriMet could shut down WES right now and pay back all the money to the FTA + interest, and possibly pay some penalties to Washington County, Wilsonville, the railroad, etc, and still come out ahead.

    The agency is on a path to spend upwards of $140 million for operations alone over the remaining 17 years of the guarantee period, when background inflation is considered. That doesn’t include any capital expenditures for FRA “surprises” or necessary upgrades and replacements. It’s hard to imagine that TriMet wouldn’t save at least a few $10’s of millions by shutting WES down right now.

    The window is closing on this option. Each passing day reduces the amount that could be saved. We can expect it to be shut when interest rates start rising again.

  5. Good story, info and ideas. It may be small comfort, but let’s remember that a number of House members (including Republicans) fought to maintain transit funding when some House Republicans tried to change the transit funding formula. That idea could have greatly reduced transit funding in the future (but was dropped).

  6. Well , I sympathize with the desire to think out of the box to fund a full transit system , tolling is bound to invite the greedy hands in government/ future private partner corps. to ratchet it up , every time they need an excuse for pay raises/pensions etc. Once a politician gets his/her hand in your pocket , they will invent a reason to take more. It is this sentiment that drives our complete rejection of sales taxes over and over.

  7. Perhaps for some. Personally, I don’t object to the idea of higher taxes, but I do object to a sales tax, because it is very regressive and makes it more difficult to pay with cash, thus supporting the credit card companies.

  8. See, the beauty of a sales tax, especially for a state like ours, is that you make the tourists pay for what they are using.

    As for the regressive part, if you exempt food and medical supplies, it goes a long way toward alleviating that.

  9. A high gas tax would accomplish much of the same. You would miss taxation on tourists that do not drive, but you would also tax many that drive through and are not tourists. It also helps to fund highways and encourages fuel efficiency. I’m sure it is much simpler to implement than a state-wide sales tax with exemptions like food and meds.

  10. Chris,

    Sales taxes with exemptions are vanishingly easy to implement. Since very nearly every retailer uses computerized cash registers, the barcode is a nearly fail-safe way to determine taxability.

    There are always pro and con arguments for any tax, but “implementability” of an exempted sales tax is not one of them.

  11. Chris,

    You’ll find that with reduced driving that is already becoming a reality, increased fuel efficiency, as well as what is going to become a big push in the next decade to get off gasoline altogether, a fuel tax doesn’t really have a lot of a future as a consistent funding model.

  12. Great Recession
    Your using the paradigm, the correct word is

    Somewhere, in the Community Chest, there’s a yellow card that has a drawing of guy in prison stripes riding a DMU, and which says “Go to Wilsonville. Go directly to Wilsonville. Do not pass go, do not free up millions of dollars”. One of the longstanding rules of federal funding is that once a project is built, it needs to be operated. If it turns out to be a bad idea–tough, keep operating it. Otherwise, the FTA will want its money back.

    AMEN !

    The federal government is the enemy of the citizens from where I sit.

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