Tag Archives: Boston

Lessons for transit agency funding, finance, and governance – MBTA

It’s been a rough winter for transit in Boston. The agency’s general manager resigned; they’re buried in 90 inches of snow – it’s a natural disaster in slow-motion. All of those problems are piled on top of the MBTA’s structural deficiencies, outlined in this 2009 review of the agency’s finances. The review, led by former John Hancock CEO David D’Alessandro, paints a bleak picture.

Prior to 2000, the MBTA was backward-funding – sending a bill to the state to cover the organization’s annual operating deficit. A reform program sought to make the MBTA fiscally self-sufficient by dedicating a portion of the state’s sales tax revenue to the agency in exchange for a requirement that the MBTA balance their budget every year. This requirement to balance the budget every year would serve as an incentive for the MBTA to control costs and grow revenues.

Often, similar conversations emerge around WMATA, noting Metro’s lack of a dedicated funding source. However, the MBTA case study shows that dedicated funding alone isn’t a silver bullet. There are other elements to the MBTA’s structural deficit beyond funding.

The MBTA blueprint for self-sufficiency was based on several bad assumptions: The plan called for the MBTA to decrease operations costs by 2% a year. In actuality, they increased by an average of 5% per year. Fuel and energy costs account for a large portion of the shortfall as oil prices rose dramatically (and unexpectedly). Sales tax revenues were expected to grow at 3% per year, the actual growth averaged to 1% per year. The net impact, even with rising fare revenue, is a sea of red ink:

Cumulative impacts from the MBTA funding plan, showing large net negative impacts from the baseline.

Cumulative impacts from the MBTA funding plan, showing large net negative impacts from the baseline.

There are two different kinds of error here: one is a failure to account for uncertainty in the forecast. Sales tax revenue is strongly influenced by the larger economy; fuel and energy prices are similarly based on much larger and unpredictable energy markets. The size of the error also increases with time from the original plan. Error in the MBTA’s fuel cost assumptions gets larger with each successive year from FY01 to FY08 – beware the cone of uncertainty.

The second type of error stems from wishful thinking. While it’s nice to plan on reducing operations costs, and there’s value in budgeting accordingly in order to set a goal to do so, it’s not clear that the legislation had a clear idea for how the MBTA would reduce those costs. Another analysis from the MBTA shows binding arbitration between the MBTA and labor unions imposed substantial wage increases with no regard for the MBTA’s operating deficit. In that light, assuming the MBTA’s operating costs would decrease seems like wishful thinking at best.

The D’Alessandro review notes that the MBTA’s headcount is actually down, yet wages are up. The agency showed progress in reducing costs, but they “could not pare staff below the number needed to move hundreds of thousands of riders across hundreds of routes each workday.” Baumol’s Cost Disease in action – increasing costs without a corresponding increase in productivity.

To meet the requirement to balance their annual budget, the MBTA sought to lower their annual debt service payments by refinancing their debt to push the principal into the out years and lower near term payments. Much of this refinancing simply ‘papered over’ the agency’s structural deficit. Again, the faulty assumptions of the financing plan exacerbated that structural deficit.

The MBTA’s debt load is also a major issue, one that dates back well before the Forward Funding plan. As a part of a 1991 consent decree to get approval for Boston’s Big Dig, the courts required a broad array of transit expansion projects as “environmental mitigation.” The decree did not identify any funding for those projects. Now, the MBTA has a massive amount of debt, of which approximately 2/3rds is dedicated to prior obligations before the Forward Funding agreement or towards state-mandated expansion projects.

(It’s worth noting the decision-making priorities involved in the Big Dig – the massive tunnelling project was only approved because the transit mitigation projects, backed by transit advocates as a way to hitch their wagon to omnipresent highway funding – yet those projects were never fully funded and now play a large role in exacerbating the agency’s stability. Imagine a project that simply removed the Central Artery and ‘replaced’ it with the long-imagined North/South rail link instead; or where the response to the Big Dig proposal was focused on re-defining the project itself rather than just tacking on ‘mitigation’ transit expansion.)

D’Alessandro’s conclusion is stark: “A private sector firm faced with this mountain of red ink would likely fold or seek bankruptcy.”

Yet, at the same time, the MBTA is “too big to fail.” Transit provides a critical service for any large city’s economy. Given the subsidized nature of public transit in the US, any reform must involve the public sector.

Airlines provide an interesting point of comparison: While US airlines operate for-profit businesses, the nature of air transport is deeply intertwined with the public sector. However, US Airlines are private, for profit corporations. Unlike the MBTA, they can seek legal protections to restructure their business through bankruptcy – and every major airline has done precisely that over the last decade. Airlines used bankruptcy to reduce operations costs from long-term labor agreements. German transit agencies have achieved fiscal stability using similar tools.

Unfortunately, the simplified narrative in the wake of the T’s failure to function normally in the face of Boston’s record snowfall has been to set up a false dichotomy between transit system expansion and system maintenance. In spite of the Big Dig deal, the challenge isn’t between expansion vs. maintenance, but between the political governance and funding mechanisms and the technical requirements to operate and maintain the system.

This political challenge isn’t limited to transit. Highway spending is overwhelmingly focused on expanding the system, at the expense of maintaining the system we already have. Angie Schmidt at Streetsblog put it bluntly: More money for transportation won’t matter if we don’t change how that money is spent.

A visual survey of selected elevated rail viaducts: part 3 – Els that gave Els a bad name

For more, see the series prologue, part 1, and part 2

A look at some of the Els that gave Els a bad name:

Chicago: The city’s rapid transit system’s elevated lines are ubiquitous; the system is named for them. In the Loop, the Els run above city streets. In other parts, some Els run above alleyways or private rights of way, away from streets:

Chicago El over an alley. Photo by author.

Chicago El over an alley. Photo by author.

Under the Chicago El. Photo by the author.

Under the Chicago El. Photo by the author.

Chicago El 1

Intersection of Wells and Lake in Chicago. Image from Google Streetview.

Owing to both the size of the structure, the relatively narrow streets, and the enclosure provided by the buildings, the Els loom over Chicago’s streets.

Adams/Wabash Station. Image from Google Streetview.

Adams/Wabash Station. Image from Google Streetview.

To be fair, most of these Streetview images are from directly under the structures, while many of the others are views from the side. Part of this is due to the street width, and part due to the buildings fronting the street. If you were looking for examples of suitable elevated viaducts for retrofitting suburbia, or for less dense urban neighborhoods, this isn’t a great example. Nonetheless, as noisy and obstructive as the Els can be, you can still find light and air above the sidewalks:

Intersection of Monroe and Wabash, Chicago IL. Image from Google Streetview.

Intersection of Monroe and Wabash, Chicago IL. Image from Google Streetview.

Philadelphia: The number of American cities with legacy heavy rail transit systems (meaning pre-war) is fairly limited (Boston, New York, Chicago, and Philadelphia). Over the last decade, Philadelphia reconstructed most of the Market St elevated, replacing Chicago-style structures with a single pier supporting a steel structure:

Market St El, prior to reconstruction, CC image from connery.cepeda

Market St El, prior to reconstruction, CC image from connery.cepeda

Market El, reconstructed:

Finishing work on the reconstructed El. Image from Google Streetview.

Finishing work on the reconstructed El. Image from Google Streetview.

On the other side of Center City, the El above Front Street almost reaches from building face to building face along Philadelphia’s narrow streets:

Elevated rail above Front St. Image from Google Streetview.

Elevated rail above Front St. Image from Google Streetview.

Boston: Much of the post-war transit investment in Boston focused on re-arranging infrastructure, tearing down Els and replacing those lines with subways. Few elevated sections remain, such as this portion of the Green line near Lechmere Station:

Green Line El near Lechmere Station. Image from Google Streetview.

Green Line El near Lechmere Station. Image from Google Streetview.

Perhaps the only reason this portion survives is because it’s directly attached to a river crossing:

Aerial view of Boston from Google Maps.

Aerial view of Boston from Google Maps.

Table of contents:

Managing on-street parking: zoning is not the way

Park sign. CC image from Pixel Jones.

We don’t manage our limited parking resources very well. However, that leaves us lots of room to improve our policies.

A recent Freakonomics podcast entitled ‘Parking is Hell’ provides a nice entry-level synopsis of the challenges involved in using market forces to better manage this valuable resource. The podcast features interviews with parking scholars, including Don Shoup. They address the fallacy of the idea of ‘free’ parking, the idea of using price to better allocate this resource, and the practical challenges to better management of on-street parking (such as the abuse of handicapped parking placards, as well as the rampant illegality in parking practice).

Despite the cold, hard logic behind the idea of performance parking, it’s not an easy political sell. Similar experiences with de-congestion road pricing in Stockholm show reluctance at first, and then broad support for the program once the benefits can be demonstrated, and revenues directed towards locally-controlled improvements. Still, no one likes the idea of someone proposing an increase to your daily costs in exchange for uncertain benefits.

That risk-aversion applies to parking, too – and perhaps explains a great deal of the reluctance to embrace a whole host of parking reforms, both for on-street parking management, but also for zoning code off-street parking requirements. The evidence for the ineffectiveness of these requirements in managing on-street parking is huge; the unintended consequences are large.

Zoning requirements won’t manage on-street parking for you. Consider this case from Boston, where air quality regulations capped the total supply of off-street parking garages, but the city fails to manage on-street parking effectively:

The steep costs at our garages mean that only the well-off and the truly desperate ever wind up parking in them. The rest of us find ourselves in a never-ending chase for metered street parking, which is an absolute steal. Because the price is absurdly low for such a rare commodity—there are around 8,000 metered spaces in Boston—drivers are willing to circle the block for as long as it takes to find an opening, like vultures in search of prey. The $10-an-hour difference between a garage and a metered spot in Boston gives “drivers a license to hunt,” says Mark Chase, a local parking consultant,“but it’s not a guarantee of a parking place.” The result, naturally, is congestion. Studies from around the country have shown that as much as 34 percent of all traffic in downtown areas involves drivers just looking for parking spaces.

Meanwhile, Boston has set aside a ton of spaces for resident-only parking in neighborhoods, and it charges nothing for the permits to use them. And what happens when it doesn’t cost anything to keep cars parked on the street? They stay there. Today more than 311,000 vehicles are registered in Boston, and more than 87,000 of them have residential parking permits. Each of those cars takes up around 160 square feet—the size of a street spot—of prime city real estate.“You have some of the most valuable land on earth, and you’re giving it away for free to cars,” says Donald Shoup, a professor of urban planning at UCLA, and the author of The High Cost of Free Parking. “It’s preposterous.”

Enter a new development proposal, aiming to build car-free, promising not to rent to car owners and therefore not make Boston’s off-street parking problem even worse:

Paul Berkeley, president of the Allston Civic Association, said residents support Mariscal’s plan for an airy, green building, but said the no-car idea would not fly.

“It’s well-intentioned and it could be successful, but people felt that in that location there was too much of a risk of people having cars and just putting them in front of houses nearby,” he said.

So, they tried to reconfigure the development with 35 spaces for the 44 units. Even that is not enough to satisfy the zoning code, as the article notes that the current code requires an absurd two spaces per housing unit. Patrick Doyle notes that the real problem here is not with community skepticism about all the new residents being car-free, but with the absurdly low price for on-street parking. Such ignorance of the basics of supply and demand is not a recipe for good management.

Consider the opportunity costs. It’s not as if requiring parking only hits a developer in his/her pocketbook (though it does). Parking takes up a lot of space, and the geometric requirements for cars to circulate into a garage and have appropriate turning radii to get in and out often do not match up with the geometry of small urban lots ripe for infill development. In Atlantic Cities, Emily Badger writes about the same Boston development:

His proposal also highlights the hidden reality – true in cities everywhere – that our modern buildings largely take their first architectural cues from cars.

“When you remove the car component as the main design challenge,” Mariscal says, “your way of thinking about design is completely different. The possibilities that open for a more environmentally friendly and human design – they are endless.”

Furthermore, the kinds of older neighborhoods we love in our cities usually pre-date zoning requirements for parking. Their very existence is non-conforming. When you suddenly add a very different geometry to design around as a legal requirement (the car and associated parking), you fundamentally change the shape and design of the kind of buildings you build and of the city that will result.

Do your requirements actually make sense? It seems like a basic question to ask. However, lots of requirements exist because they were the default when a code was written, often without much in-depth consideration or any easy mechanism to regularly re-evaluate them.

Consider New Haven, CT. The City asked some out-of-town developers what it would take to make New Haven an attractive place for them to do business. In the vein of a dating game show, the city wanted to know what a developer’s ‘turn offs’ might be:

Demands for lots of parking ranked high on the turn-off list.

“You asked what is an automatic turn-off. … Market research shows [the amount of parking] needed is X. We flip open the zoning code and we find out the requirement in the zoning code is two times that,” replied Patrick Lee, co-founder of a Boston firm called Trinity Financial. “It is a lightning rod … Oftentimes we often just say, ‘That one is too, too hard.’ … When the zoning catches up with the market or gets close to it, we’ll come on back and have the conversation [about building]. Even if you’re doing surface parking, it eats up so much land it ends up being a cost-driver in your pro forma.”

This raises the question: why even require parking at all if the market is a) willing to forgo it, or b) willing to build it? Eliminate that problem, and you don’t have to worry about forcing your zoning to “catch up” to the market. At the very least, some mandatory periodic review of the requirements (in the same vein as the zoning budget idea, but for a specific provision of the code) would help ensure the requirements in place make sense.

None of this changes the need for rational management of on-street parking. Zoning requirements cannot do that for you.