For John, BLUF:
. Nothing to see here; just move along.
Over at
MassterList was this article, which we are all free to publish.
Regards — Cliff
It will take more than an Olympic effort to deleverage the T
JANUARY 14, 2015
By George Donnelly
Here’s an interesting coincidence about the Olympic price tag of roughly $4.5 billion: That’s about how much the commonwealth’s public transportation system is in debt.
But the T’s $5.4 billion in obligations is a moving target, and really a lowball number. When one factors in interest on the debt (almost $4 billion), repairs from years of deferred maintenance (at least another $2.5 billion), unfunded pension obligations (estimated at $700 million). That’s almost $13 billion, and doesn’t count the extra operational costs that will come with the planned extensions and improvements on the Green Line and the Fairmount Line.
Boston already has won the gold medal for the most indebted public transportation system in the country. As Boston begins to ponder the Olympic dream, one that compels the city to conjure an array of new investments, it already has failed to properly invest in one of the most basic services.
Of course, one of the selling points of the Olympics is to force the region to confront its infrastructure shortcomings. But the T’s woes, even when considering John Fish’s impressive power of persuasion and fund-raising, require far more than Olympian treatment. They require new revenue, and the restructuring of crushing debt.
The T has been trapped in financial quicksand for almost 15 years, burdened with debt and interest payments that eat up over 20 percent of the annual operating budget. It operates deeply in the red, despite significant fare increases over the past few years. Without $100 million-plus subsidies from the state budget every year, the T would have to significantly hike fares and radically reduce service.
One would think that a state with an economy whose future hinges on the brains of young workers who often depend on subways and buses wouldn’t let such a critical economic tool fall into disrepair. The state came to the rescue in 2013 with a transportation financing plan – the 3-cent gas tax increase is mostly paying for it – and fresh money has begun to flow to address some of the T’s pressing maintenance issues and other neglected transportation infrastructure. The state also took on a heap of transportation debt last year. The T, however, can’t afford to pay its share of the repair budget without piling on even more IOUs.
The T has been on the wrong track since 2000, when, tired of runaway costs, the Legislature gave the system a new funding source – 20 percent of the sales tax. It also transferred about $3.3 billion in debt to the T, and the transit authority has since borrowed another $2 billion since for capital improvements. The sales tax failed to grow at the anticipated rate, and has never generated enough revenue to allow the T to balance its books. Thus the T has been running a deficit, still beholden to the Legislature to write it a check. This year that number has been budgeted at $135 million.
The result of the year-to-year tin cup rattling is a massive system that is fraying at the seams, one that is unworthy of Boston and its image of itself as a 21st century city. It’s beyond bizarre to descend into Park Station on a pleasant June evening, only to marinate in temperatures underground in the mid-80s, thick with humidity, as if ventilation had never been invented. Add in sardine-like conditions, commuter rail cars that lack air conditioning in the summer, and the constant screech of ancient steel on ancient steel, and far from appearing primed for 2024, the T looks like it’s trying to escape from the 1970s.
Our public transportation system is the nation’s fifth largest. It serves 1.3 million daily riders with an annual budget of about $1.9 billion (debt service this year will be about $424 million, or 22 percent of the operating budget). A look at the T’s capital improvement plan from 2013 tells a complex story about a large, multifaceted, needy system. It owns about 1,000 buses, 630 subway cars, and 490 commuter rail cars. The plan notes that some of those Green Line cars date back to 1946.
The T has been asked to generate more revenue — fare increases are now limited to 5 percent per year, and you can bet the T won’t miss a chance to raise them. The cost of expanding service, such as the Green Line extension, are being covered by the Feds and the state. But they promise to strain the T’s budget once they’re operational.
The answer is to steadily retire the T’s debt with new, dedicated funds. With gas prices plummeting, perhaps the Legislature could tack another 3 cents on the gas tax that would be dedicated to paying down the T’s debt. No one would notice, right? One way or the other, Boston’s public transportation system must get out of the red and have the resources to begin to think about the future – Olympics or not.
George Donnelly, former editor of the Boston Business Journal, is a regular contributor to MASSterList. Reach him at gdonnelly67@bizjournals.com.