The Antiplanner

Boston Transit System Near Collapse

9th November 2009

Boston Transit System Near Collapse

posted in News commentary, Transportation |

“The Massachusetts Bay Transportation Authority [MBTA] is in danger of collapsing under its own operating expenses and debt obligations, to the point that it can’t even pay for repairs that are vital to basic safety,” reports the Boston Globe. That conclusion is based on an official review of the MBTA that Governor Deval Patrick entrusted to former John Hancock CEO David D’Alessandro.

Up through the 1990s, the MBTA was funded by the state, with the agency effectively presenting a bill for its deficits to the legislature each year. Concerned that this failed to give transit officials incentives to control costs, the legislature in 1999 decided to give MBTA a fixed 20 percent share of state sales tax revenues and told it to operate out of those revenues. This was supposed to lead to reduced operating costs and greater investments in the long-term health of the system.

As the D’Alessandro report documents, this isn’t what happened. First, most costs, such as fuel, were outside of MBTA’s control. Even costs that were under MBTA’s control, such as payroll, ended up increasing far faster than planned. Meanwhile, the sales taxes that were supposed to fund MBTA’s deficits fell short of expectations. The result, over an eight-year period, was a $558 million shortfall.

MBTA dealt with this shortfall by restructuring its debt, allowing it to defer payments. But this only deferred the pain, as deferral led the debt to grow not by $558 million but $2.9 billion.

Meanwhile, MBTA also deferred maintenance (which transit agencies consider “capital improvements”) such as replacement of worn-out track, vehicles, and other facilities. In 2004, the agency estimated that it had a $2.7 billion backlog of projects needed to restore the system to a “state of good repair” (SGR); by 2009 this had grown to $3.2 billion.

D’Alessandro was particularly upset about safety issues. He found that, among the hundreds of projects that the agency had identified for its 2010 budget as needed to bring the system into a state of good repair, 57 were rated as posing an “imminent danger to life or limb of passengers and/or employees.” Yet only six of these projects were funded.

Predictably, Massachusetts has responded by rearranging the deck chairs, creating a transportation superagency to manage the MBTA along with all of the state’s other transportation programs. This does nothing to solve the agency’s overall problems.

The MBTA’s former executive director, who was forced out of his job as a part of the agency restructuring, offers his own comments on the D’Alessandro report. Some of his thoughts are good, but many seem aimed at absolving himself from any guilt regarding the agency’s problems.

The governor did not ask D’Alessandro for specific recommendations, but he did offer a few general ones. One that the Antiplanner likes is that MBTA should “Slow expansion until the safety and maintenance priorities can be addressed.” In other words, fix it first. As D’Alessandro says, “It makes little sense to continue expanding the system when the MBTA cannot maintain the existing one.”

D’Alessandro’s other suggestions leave something to be desired. His top recommendation is to “prioritize safety issues,” in other words, to fund safety projects before anything else. While this sounds good, the only result will be that local managers will give every project a top safety rating, and so some other criteria will have to be used to choose among them.

Another recommendation is to develop “new revenue sources.” While this sounds like a no-brainer, the reality is that, if you give a transit agency more tax revenue, it will simply expand its deficits — by, for example, building new rail lines or granting bigger pensions to employees — to absorb that revenue.

One of the few positive notes reported by D’Alessandro is that fare revenues between 2001 and 2008 were $95 million more than expected. Yet D’Alessandro warns that transit riders should not be asked to pay higher fares until the MBTA has managed to provide them with better and safer service. That sounds reasonable, but maybe the whole problem is that transit riders haven’t been asked to pay the real cost of transportation in the first place.

In 2008, MBTA fares covered 43 percent of its operating costs but only 31 percent of its operating and capital costs. (You can find these numbers in the 2008 National Transit Database file that I recently posted.) If you add the amount D’Alessandro says the MBTA should have spent to keep and restore the system in good repair, fares covered less than a quarter of the total.

Boston has one of the most heavily used transit systems in the nation, yet it carries only about 13 percent of the region’s commuters to work and only about 3 percent of all motorized passenger travel in the Boston urban area. Why do we think a system like this deserves annual subsidies of more than $1.5 billion a year?

Massachusetts’ mistake a decade ago was thinking that providing MBTA with a dedicated tax instead of annual appropriations would give it an incentive to fix its problems. It didn’t, partly because many of its problems are out of its control and partly because it probably realized the state would come to its rescue anyway (which it has by giving MBTA $160 million on top of its dedicated sales tax).

The Antiplanner contents that transportation systems funded out of user fees provide better incentives and checks and balances than ones funded out of taxes. User fees would tell the agency how much people are willing to pay for transit, and it would provide the kind of transit that it could pay for out of such fees.

The fact that MBTA is so heavily in debt and can’t keep its system in a state of good repair should signal something more than, “transit needs more money.” It should tell people that MBTA’s transit model, which is largely based on funding expensive and inflexible rail systems out of tax dollars, is fundamentally unsound.

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There are currently 18 responses to “Boston Transit System Near Collapse”

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  1. 1 On November 9th, 2009, Dan said:

    First, most costs, such as fuel, were outside of MBTA’s control. Even costs that were under MBTA’s control, such as payroll, ended up increasing far faster than planned.

    At first glance, the cause may be fuel and health care costs. I wonder if a transit agency is the only entity similarly affected. I wonder…I wonnnnnderrrrr….

    DS

    posted on November 9th, 2009 at 4:30 am

  2. 2 On November 9th, 2009, C. P. Zilliacus said:

    The data below are in a table from physical page 10.

    ?MBTA Hourly Wages Comparison of Ten Largest Transit Agencies

    San Francisco $29.19
    New York city $26.92
    Chicago $26.87
    Boston $26.56
    Washington $25.93
    Seattle $25.34
    New Jersey $24.27
    Philadelphia $23.54
    Los Angeles $21.27
    Atlanta $19.25

    Interesting to note that Los Angeles is near the bottom of the list. Wonder if the contracting-out of some mass transit operations might have something to do with that?

    posted on November 9th, 2009 at 4:38 am

  3. 3 On November 9th, 2009, craig said:

    I wonder how many entities could run in the red and expect a massive bailout every year? I wonder?

    posted on November 9th, 2009 at 6:12 am

  4. 4 On November 9th, 2009, Dan said:

    I wonder how the argument stands when not in isolation? That is: is this an isolated occurrence or is it common in our country as we start our decline? I wonder…I wonnnderrrr…

    I wonder about making an argument with a couple numbers not in context.

    DS

    posted on November 9th, 2009 at 6:55 am

  5. 5 On November 9th, 2009, Mike said:

    D’Alessandro’s other suggestions leave something to be desired. His top recommendation is to “prioritize safety issues,” in other words, to fund safety projects before anything else. While this sounds good, the only result will be that local managers will give every project a top safety rating, and so some other criteria will have to be used to choose among them.

    For anyone who has not worked in government, just so you know, this is 900% the truth. I was once a soulless government legal drone, and I remember on licensing projects we were ordered by the agency director to bend over backward to find any justification we could muster to get past thresholds where “preventing a threat to public health, safety, or welfare” was an exception to the theoretically default level of red tape. I don’t think we ever actually passed any significant project “the long way” — anything more than trivial legislation or regulation seemed to find itself within the exception. Hey, whaddya know!

    Dan,

    Rhetorical questions are never compelling arguments. To the contrary, they completely undermine the point you’re trying to convey, communicating instead that you aren’t competent to articulate your position. If you have something to say, just say it.

    I remember back in law school when I clerked for a judge, the judge had the other interns and I compile the best rhetorical flourishes from pleadings and responses so we could all enjoy a good laugh at lunch. It was very, very rare for a legal argument to prevail when it contained rhetoricals. An argument requires assertions of fact backed by evidence and/or authority… period. Anything else you do is just wanking.

    Wait a minute, why am I helping you? Never mind.

    posted on November 9th, 2009 at 8:04 am

  6. 6 On November 9th, 2009, prk166 said:

    Dan, you’re right. Health care costs isn’t 100% within their control. But it’s not entirely outside of their control, either. We do need to keep in mind though that we’re talking about an 8 year period. Not long enough to do a lot but enough time to address the issue. Then again, look at what happens when the state tries to steer them into more efficiency and have them combine monitoring operations with he turnpike, a move that could save something like $25m (not a silver bullet but it adds up). The unions sue and raise a huge stink (rightly so, they have a contract). Change on that front can’t happen very quickly. That said, there are plenty of other organizations out there that have found a way to be profitable while facing similar cost issues.

    Which is why I’m going to ask that we stop accepting “but we couldn’t have foreseen the _insert some commodity_ price rise”. There are ways of reducing the cost of these fluctuations, ways of insuring against unanticipated increases. It’s time we expect these organizations to start doing something about the issue instead of merely offering it as an excuse.

    What strikes me most is what MTBA has to say about it’s debt :
    “If it were not for this line item, the T would be in fine shape.”

    Yes, that’s right, they realize that if they weren’t running a deficit year after year after year that they’d be just fine. The problem of course is that, at least with a quick look, they don’t seem to have a plan for addressing this problem.

    posted on November 9th, 2009 at 8:59 am

  7. 7 On November 9th, 2009, Dan said:

    communicating instead that you aren’t competent to articulate your position…

    If you have something to say, just say it.

    I say:

    I’ve already said in the past that this weak tactic is relied upon by dim-bulbs and doesn’t work except in low-wattage minds. I’ve already addressed the dim-bulb rhetoric in #4.

    ——————

    prk, if we cast our view more widely, and ask these same questions in a larger context, we find such instances occurring across the spectrum of the economy and across societies. Recently, why didn’t USX see it coming? Why not Detroit? Why not the Congress when loosening banking regulations? Why doesn’t anyone remember history?

    In my view we are incapable of solving these problems until a crisis occurs, then reactionary band-aids are put in place on arterial bleeding. We’ve done this for thousands of years. It hasn’t changed and the gauze is leaking through.

    2¢

    DS

    posted on November 9th, 2009 at 9:36 am

  8. 8 On November 9th, 2009, msetty said:

    Dan is correct about absurdly high percentages for medical costs, particularly compared with other Western countries that have nationalized health insurance.

    In some transit agency operating budgets I’ve seen, health care accounts for 20%. Also thanks to the political pressures brought about by civil service unions, at many transit agencies the annual payout in benefits including health care and pensions is higher than pay.

    However, the biggest culprits are absurd pension provisions, such as 3% over 30 years, or 90% of the last year’s full pay. As someone who used to work for Vallejo, the cause of their bankruptcy was exactly this sort of b.s. “negotiated” by the fire and police unions.

    Transit operating expenses are also not helped by the government lying about the “real” rate of inflation ever since the Clinton Administration. See http://www.shadowstats.com/, for example, for an attempt to track more honest statistics.

    Wendell Cox is correct in one area: transit system operations should be contracted out, for exactly the above reasons.

    posted on November 9th, 2009 at 9:38 am

  9. 9 On November 9th, 2009, Dan said:

    However, the biggest culprits are absurd pension provisions, such as 3% over 30 years, or 90% of the last year’s full pay. As someone who used to work for Vallejo, the cause of their bankruptcy was exactly this sort of b.s. “negotiated” by the fire and police unions.

    Yes, hence my specifically using USX. And I forgot about Vallejo, else I would have used that for the public side.

    And note how no one mentions in the current debates why Toyota et al are more competetive than Detroit – Japanese companies do not pay employees freight. I wonder why we don’t mention that in our health care debate…I wonder…do we want our jobs to go away?

    DS

    posted on November 9th, 2009 at 10:28 am

  10. 10 On November 9th, 2009, C. P. Zilliacus said:

    MSetty wrote:

    > Wendell Cox is correct in one area: transit system operations should be contracted out, for exactly the above reasons.

    Mr. Setty, I about fell on the floor when I read the above (and that would have done severe damage to the floor!).

    We may not agree on other things, but on this we seem to be in agreement.

    I can offer another reason beyond cost control (which is a sufficient reason, BTW) for contracting out transit services – better customer service.

    If the tendering documents are written correctly, companies that want to provide transit service should provide significantly better creature comforts (including, in most U.S. transit markets, working air conditioning for bus patrons). I certainly saw better service to transit patrons when services in several EU nations were let to the private sector through a competitive tendering process.

    posted on November 9th, 2009 at 1:17 pm

  11. 11 On November 9th, 2009, bennett said:

    Craig said: “I wonder how many entities could run in the red and expect a massive bailout every year? I wonder?”

    I can think of at least 3.

    posted on November 9th, 2009 at 1:55 pm

  12. 12 On November 9th, 2009, msetty said:

    C.P. Zillacus spake:
    Mr. Setty, I about fell on the floor when I read the above (and that would have done severe damage to the floor!).

    Well for 19 1/2 years for the 20 I was at Vallejo (1985-2005), I worked for a super progressive from Berkeley who ran the transit program. She actually is a CHEAP super progressive, who knew exactly what would happen if we had public employees running the buses and ferries.

    We’d quickly have inherited the worse of both possible worlds, i.e., grossly inflated pensions and other benefits like the Vallejo cops and fire, PLUS the worst aspects of Bay Area transit labor contracts that prevail at AC Transit, BART and S.F. Muni.

    With such arrangements, we could have only provided about 60% as much bus service as we did over that 1985-2005 period. A peer system in Santa Rosa does pay about 50% more for bus drivers overall, with unit costs about 50% higher, too, than Vallejo, since the drivers there are all city civil service.

    posted on November 9th, 2009 at 5:20 pm

  13. 13 On November 9th, 2009, msetty said:

    C.P. I’ll get your name correctly spelled…someday, after a dozen attempts, I suppose…sorry…

    Also, periodically, there are rumblings in the Bay Area about the “need” to merge all the transit systems here into one giant blob, a la Boston. The problem, of course, is that the entire region would inherit the most expensive, restrictive labor contracts, e.g., S.F. Muni, BART and AC Transit. Like in the case of Vallejo, this would require big cuts in transit services now provided by lower cost agencies–generally small systems in the suburbs and surrounding smaller urban areas. Because of this, the “consolidation” idea is likely to remain a brainchild of San Francisco politicians.

    What the Bay Area has NEVER considered is Swiss- or German-style fare and schedule integration and coordination, with most operators remaining separate and focused on their individual service areas. This sort of efficient European example has worked for decades in the Rhein-Ruhr region, Canton Zurich, and many other useful examples.

    In Canton Zurich, fares and schedules are fully coordinated, but there are still something like 30 different operators in an area of about 1.3 million, public and private.

    posted on November 9th, 2009 at 5:31 pm

  14. 14 On November 10th, 2009, C. P. Zilliacus said:

    MSetty posted:

    > Also, periodically, there are rumblings in the Bay Area about the “need” to merge all the transit systems here into one
    > giant blob, a la Boston. The problem, of course, is that the entire region would inherit the most expensive, restrictive
    > labor contracts, e.g., S.F. Muni, BART and AC Transit. Like in the case of Vallejo, this would require big cuts in
    > transit services now provided by lower cost agencies–generally small systems in the suburbs and surrounding smaller
    > urban areas. Because of this, the “consolidation” idea is likely to remain a brainchild of San Francisco politicians.

    I agree. And beyond the (high) labor costs, it would, I assert, lead to an unhealthy fixation on the transit services that run
    on steel rails (especially BART but also SF Muni) at the expense of patrons that ride rubber-tired transit service.

    > What the Bay Area has NEVER considered is Swiss- or German-style fare and schedule integration and coordination,
    > with most operators remaining separate and focused on their individual service areas. This sort of efficient
    > European example has worked for decades in the Rhein-Ruhr region, Canton Zurich, and many other useful examples.

    Helsinki, Finland comes to mind.

    > In Canton Zurich, fares and schedules are fully coordinated, but there are still something like 30 different operators
    > in an area of about 1.3 million, public and private.

    The Washington (D.C.) region has made some progress in this area, given that it has WMATA, plus county- or city-based
    service providers in nearby Northern Virginia and several more in suburban Maryland, including the Maryland Transit
    Administration’s bus and commuter rail services from the “far” suburbs.

    I think the best example of regional mass transit coordination is Stockholm, Sweden’s SL. It’s one well-coordinated
    system of heavy rail for the city and some of its closer-in suburbs, a few suburban light rail lines, a
    very far-flung regional rail system which is mostly for longer trip lengths, all supplemented by a huge rubber-tire
    bus network that reaches far, far into the countryside. All of SL’s services are run by the private sector, with
    contractors winning the business through competitive tendering.

    posted on November 10th, 2009 at 7:08 am

  15. 15 On November 10th, 2009, mdudek said:

    What I never saw mentioned in the article or the comments is why the MBTA has so much debt. It has nothing to do with how the organization has been operated. In fact, Dan Grabauskas (form MBTA director) had done a fantastic job at keeping operating costs as low as possible.

    Instead, the issue was a lawsuit brought by the Conservation Law Foundation against the state for expanding the highway system without also expanding transit. The basis of the lawsuit was the Clean Air Act and some other environmental regulations. The MBTA was forced to expand with no additional funding for the increased capital costs. In fact, part of the backlog of projects are legally mandated expansions which the CLF had won in their lawsuit.

    The main issues here the underperforming sales tax, and unfunded mandates. And lastly, you’re not taking into account the traffic mess that Boston would be without the MBTA. The city couldn’t function without the transit system. If those 13% of commuters were forced to drive mayhem would ensue, it’s hard enough finding parking. And additionally, if the MBTA didn’t have to spend 33% of its budget on debt service I think ridership would be greatly increased.

    (just for the hell of the argument, if you’re going to compare the T to driving, then drivers should have to pay their fare share for driving into the city. Actual costs + negative externalities. Then the T would have more revenue, Boston would be a nicer place to drive and ride the T, and we wouldn’t be worrying about the Longfellow bridge falling into the Charles River.

    posted on November 10th, 2009 at 11:51 am

  16. 16 On November 11th, 2009, prk166 said:

    “And note how no one mentions in the current debates why Toyota et al are more competetive than Detroit – Japanese companies do not pay employees freight. I wonder why we don’t mention that in our health care debate…I wonder…do we want our jobs to go away?” – Dan

    Except that most of the cars they sell here, they build here with US employees. The Japanese government doesn’t cover those costs.

    Speaking of Japan, can we all agree that a country that economically fell apart 20 years ago and for whom the economic equivalent of being able to furiously tread water is the crowning achievement for a generation is a country we should not be looking to for ideas?

    posted on November 11th, 2009 at 9:37 am

  17. 17 On December 7th, 2009, kereru said:

    Goodness! I seem to have stumbled upon anti (or it is pro?) transit web site. This is going to be interesting. Let’s see. We begin with three basic principles:

    - city transport should be as efficient as possible to maximize economic return.
    - city transport should be as convenient as possible to maximize usage and thereby economic return.
    - city transport should be as affordable as possible to maximize usage and thereby economic return.

    To what conclusions do these lead us?

    posted on December 7th, 2009 at 10:39 am

  18. 18 On June 14th, 2010, Transit Agencies vs. Transit Unions » The Antiplanner said:

    [...] Washington — and agencies with newer or no rail systems. The agencies with older rail systems desperately need money to bring their systems up to a state of good repair. Since such maintenance is included in the [...]

    posted on June 14th, 2010 at 12:01 am

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