Rising housing prices impact all incomes

In cities with strong real estate markets, affordable housing is a big problem. And it’s not just a problem for those with lower incomes, it’s a problem for everyone. The problems aren’t even limited to just their own metro areas.

Note: in this case, the term “affordable housing” refers to the plain meaning of the word: housing that is affordable (not Affordable Housing, in reference to a set of programs designed to subsidize the cost of housing – see this from Dan Keshet on the difference, as well as a better way to think about it: abundant housing).

Expensive housing is squeezing people at all income levels

The DC Fiscal Policy Institute documented the disappearance of DC’s market-rate affordable apartments in a report: Going, Going, Gone. And while the focuses on the dramatic decline in apartments available for an inflation-adjusted $800/month between 2002 and 2013, rents are up for all incomes in that same time period – and they’ve increased faster than income growth.


Rising rents for those with higher incomes presents less of a challenge, since these households can afford it. But simply because higher income households can afford higher rents doesn’t they want to pay more than they have to.

It’s not just a phenomenon in DC, but in lots of strong real estate markets. Richard Florida summarizes some research from Todd Sinai at the University of Pennsylvania, noting that rents in many cities have been outpacing income gains for more than a decade. Like DC, rents are rising and requiring a larger portion of income for a wide range of income brackets:


The upward trend for each of these lines represents a larger and larger portion of household incomes spent on rent in cities across the US. Sinai suggests that any policy response would require a large increase in the supply of market-rate housing (as politically challenging as increasing housing density can be). Because even a large increase in housing units would merely moderate prices, Sinai recommends a targeted program of housing subsidies, as well.

Even with these potential remedies in mind, Sinai isn’t optimistic: “It is hard to conclude that there is an affordability cliff from whence we can step back from the brink.  Rather, the threat to housing affordability in this country is much more fundamental, and more economically pervasive.”

The higher rents are hurting the economy

It’s not just an inconvenience to pay a lot to rent an apartment, even if you can afford it. As Sinai argues, this added rental cost is “economically pervasive.” Put another way, the failure to add housing supply in strong markets is a huge drag on the economy. Kriston Capps summarizes research by Enrico Moretti and Chang-Tai Hsieh:

Hsieh and Moretti came up with a way to measure what local output and national growth would look like if wage dispersion were equalized. They proposed a model that lowered the regulatory housing constraints in New York, San Francisco, and San Jose to the level of a median city. If workers were able to cross over from low-wage cities to high-wage cities—that is, if New York, San Francisco, and San Jose were to lower barriers to new housing and let them in—then GDP could rise by 9.5 percent.

Easier said than done, but it does show the magnitude of the problem. More people would move to these productive metropolitan areas if the housing prices were more affordable.

Affordable Housing vs. affordable housing

Part of the reason to illustrate rising housing burdens for all incomes is to help define what “affordable housing” means. The plain English meaning is simply housing that is affordable. Relative to a household’s income, how much can they afford to easily pay for rent or a mortgage?

Then there is Affordable Housing (capitalized here), referring to a whole host of programs that subsidize housing for lower-income households. Labeling these subsidies under the umbrella of Affordable Housing is an effective bit of rhetoric to earn support for these programs (who would possibly be against affordable housing?) in light of the sullied reputation of public housing.

You can see the confusion in some of DC’s recent debates about the impacts of rowhouse pop-up expansions on housing prices. The DC Zoning Commission recently tightened rules on development in these zones, with one commissioner unconvinced that additional housing units would create more affordability:

But Anthony Hood, the chair of the commission, pushed for the restrictions, saying that he didn’t believe that pop-ups and condo conversions helped bring down housing prices.

“This connection to affordable housing? I’m sorry, I haven’t seen it yet. I’m still waiting for it. It’s not a reality.”

If Hood is thinking of capital-A Affordable Housing, then he’s correct. But that’s not the only meaning of the term; it’s not the only measure of affordability. And while additional market-rate housing units might not directly help lower-income households, they can make a big difference for those middle-income households feeling a squeeze.

Flipping Houses, Zoning Codes, and Building Codes

DC row houses - the first CC image hit for "dc house flips" on Flickr. Photo from Elvert Barnes.

DC row houses – the first CC image hit for “dc house flips” on Flickr. Photo from Elvert Barnes.

Earlier in May, local public radio station WAMU aired a lengthy three-part report on the collateral damage involved in house flipping in DC. Martin Austermuhle’s series offers a window into the nightmare for buyers of newly renovated homes – often converted from single family rowhomes into multi-unit buildings – who soon learn that their dream home is actually a nightmare of shoddy work and potentially illegal construction.

The three-part series focuses on buyers, developers, and the city’s regulatory response.

As horrifying as these stories are, Austermuhle correctly focuses on the challenges of enforcing the building code as the root cause of these problems, rather than the zoning code.

Small-scale development is an important tool in strong markets (like DC) to respond to demand for new housing. So many opportunities for small-scale urban development have already been regulated out of existence in American cities. The people buying these flips aren’t suckers taken by con men; they represent the market for additional housing in a city like DC.

Shoddy flips shouldn’t put those remaining opportunities for small-scale development in DC at risk, because the problem here is with building code enforcement and inspection, not with zoning. But whenever there is outrage, there is a strong urge for the city to do something, even if it doesn’t address the stated problem.

The zoning code is not the building code

Tales of illegal construction in flipped houses might stoke the fears of development opponents, but the problems described in the series involve errors in construction.

Too often, cities attempt to use the zoning code as a catch-all regulatory structure, encompassing economic development goals, social policy, etc. Part of this is out of convenience (I did have at least one proponent express support to me for DC’s recent zoning code changes in rowhouse neighborhoods due to the challenges in enforcing the building code – both for approvals and for construction inspections). I suspect part is also a confusion of the issues, thinking that because zoning deals with the city therefore zoning is an appropriate place for regulations about the city.

This series helps clarify the differences; Austermuhle correctly gives zoning only a cameo appearance.

Pop up limits

Even with the focus on building code enforcement, that doesn’t stop public calls to address development issues via zoning restrictions. However, it’s not clear that zoning would stop the flips. House flips are hardly limited to structures with the opportunity to increase the total number of units.

Enforcement matters:  One example of shoddy construction also includes blatant violations of the zoning code. What good will modestly tighter zoning regulations do without basic enforcement? Perhaps zoning isn’t the root problem; enforcement is.

Building codes matter

While zoning codes often get the attention, this doesn’t mean building codes aren’t important factors in determining the shape of the city. Houston famously (or infamously) lacks standard, use-based zoning codes. However, Houston’s building code and other regulations still mandate many of the aspects commonly found in zoning codes: minimum on-site parking requirements, minimum lot sizes, etc. It’s not a regulation-free environment.

Even when the building code sticks to more traditional subject matter, there can still be a tremendous impact on the financial feasibility of certain types of construction. In February, Let’s Go LA featured a guest post from LA Architect Tom Steidl about local differences in LA’s high rise building codes that make Vancouver-style towers less financially feasible:

Towers in Los Angeles tend to have significantly larger floor plates than those in Vancouver and US cities that have embraced high-rise design. The primary reason for this isn’t differences in land use or zoning codes. It’s mainly building code and fire department regulations that require additional floor area be added to the core of the tower. In addition to making our towers more bulky, this added floor area increases construction cost and reduces affordability.

One of LA’s quirks (now removed from the code) was a fire department mandate for rooftop helipads. But, as Steidl notes, each requirement that reduces the efficiency of the floor plate adds to the total cost. High rises are already expensive to build and will only pencil out under certain circumstances. Adding costs on the margins only makes the developer’s pro forma more challenging.

The building codes matter. But, LA’s quirky code provides a cautionary tale on policy relying on high rises alone to absorb housing growth. As Payton Chung has written, achieving mass market affordable housing via expensive construction types is a challenge – particularly in DC.

A comprehensive approach to affordable housing in strong markets like DC and LA can’t ignore the key role of small-scale, low-rise development in providing affordably built housing. This means projects of the type taken on by house flippers; smaller scale projects that increase a single lot into 2-4 units.

Poor construction risks eroding confidence in small-scale construction that is vital to meeting housing demand. Likewise, a strong, predictable, and nimble team of inspectors needs to effectively enforce DC’s building codes to manage this period of change.

Lawsuits: the American Way.

Maybe they will help. Writing about some of the same flippers as Austermuhle (and working in parallel), Ian Shapira at the Washington Post notes that some of the same flippers have been sued by DC’s newly elected Attorney General. A more robust consumer protection watchdog can’t hurt, and could even help jump-start a more robust system of code inspections.

Tactical Urbanism – useful procedural hack, or something more?

Cover of Mike Lydon and Anthony Garcia's new book, Tactical Urbanism.

Cover of Mike Lydon and Anthony Garcia’s new book, Tactical Urbanism.

Tactical Urbanism is all the rage these days. There’s an undeniable appeal to the idea of getting the community together to do something rather than drafting another plan. But is the appeal just about the results of these projects, or does Tactical Urbanism offer path to improve how we plan and build our cities?

Earlier in April, the Coalition for Smarter Growth in DC teamed up with Island Press to host a book talk from Mike Lydon at Smith Public Trust in Brookland. I’ve known Mike for years; we attended graduate school together at the University of Michigan.

Early in Mike’s career, he worked on a large-scale planning effort to re-write Miami’s zoning code. While a tremendously important project, Mike felt frustrated by the limitations of the required public process – evening meetings with a small handful of citizens, probably not representative of the city’s demographics. Add to that the challenges of talking about abstract regulations like zoning, and it’s not hard to see a good plan derailed by fear, uncertainty, and doubt. That kind of frustration led Mike to look for a better process.

Tactical Urbanism isn’t just about doing things quick and dirty. The emphasis is on using tactics as a part of a larger strategy (the book’s subtitle: short-term action for long-term change), opposed to art or beautification – short term actions that often lack a longer-term strategy. This process emphasizes working fast to prototype something, measure it, and moving on to the next idea if it’s not successful.

The textbook example of this process comes from New York. The NYC DOT’s pedestrianization of Times Square started as a pilot project with some traffic cones, paint, lawn chairs, and the political will to try something different. After proving successful, expanded sidewalks became permanent. Had the city tried to push the full design from the start, layers of process (each offering the potential to delay) would’ve likely derailed the project.

As transformative as New York’s reallocation of public space has been, it’s worth noting that those projects haven’t required a large physical change. The buildings are all the same; there aren’t any new subway lines; the street rights of way are the same as they were 100 years ago. Instead, these projects represent a change in behavior, a different way to use the same streets.

Likewise, as the city implemented these pilot programs, there’s been plenty of bluster but no real disagreement about the city’s overall strategy: streets that are safe for all users. One of the lessons from NYC DOT’s programs is to emphasize the link between the tactics (pilot programs) and the strategy (safety). It helps to have a strategic goal that is unassailable – After all, who would be against safety? Yet, the existing procedural requirements aren’t advancing a strategy so much as they protect the status quo.

There’s a difference between incrementalism and experimentation, and while incrementalism is important to Tactical Urbanism, it has limits. Larger capital investments require more planning. DC’s streetcar project is struggling to get on its feet due to a history of ad-hoc decisions regarding implementation. For a large, capital-intensive project, this is not the way to go.

However, not all transportation projects are large, expensive pieces of infrastructure. Detailed planning studies and documentation of environmental impacts might be worthwhile for a new highway or a large infrastructure project, but can we really justify that level of analysis (nevermind the what counts as an ‘impact’) for changing the allocation of road space by installing bike lanes? Part of the appeal of Tactical Urbanism stems from this mis-match of onerous processes required for minor projects.

Mike would be the first to talk about the limits of Tactical Urbanism. One is a limit of scope: housing policy? Inequality? Addressing those issues is more complicated than improving pedestrian safety at a few intersections. The scope of the challenge is too large, too complex.

Likewise, Tactical Urbanism’s best examples are in re-allocating space to better match human behavior; where you can physically test the idea, show people how it can work. Often, zoning reforms suffocate under the same kind of lengthy public process with multiple veto points that hamstring safe streets projects. Can you envision a tactical urbanism approach to zoning reform? How can you apply the same lessons about pilot projects, testing concepts, and earning citizen buy-in for an entirely abstract concept like zoning?

Contrast the examples of incremental development in Mexico (highlighted here by Charlie Gardner) compared to the rigid, rule-based urbanism in the US. Our political processes and legal frameworks don’t allow for much incremental change to buildings or to the physical fabric of the city. Allowing that kind of incremental change requires changing laws and regulations; changing laws and regulations requires a legal and regulatory process. None of these potential changes has an obvious analogue to the current applications of Tactical Urbanism.

Tactical urbanism can circumvent rules to achieve a physical change; but can it be used to create a legal change? If not, what lessons can we learn about improving public process for other kinds of changes? Can these lessons be applied to controversial projects?

Is an issue like zoning reform controversial because of our archaic processes (e.g the tactics), or is there a more fundamental disagreement about the overall strategy for our cities? If the latter is true, can Tactical Urbanism provide any useful lessons for resolving disputes about strategic urbanism?

Dispatch from the battle lines over Globalization: US Airlines take on the Middle East Carriers

Dubai International Airport. CC image from Raihan S.R. Bakhsh

Dubai International Airport. CC image from Raihan S.R. Bakhsh

There’s a fight brewing amongst big international airlines. The old guys are complaining that the new kids aren’t playing by the same rules; the new kids argue that the old guys need to step up their game. The dispute represents a fascinating window into a very public battle over globalization. What are the rules, and who gets to make them?

A coalition of the three major American airlines (American/US Airways, United, and Delta) combined with many of the unions that represent their employees are putting on a full-court press (complete with ads in DC’s Metro), arguing that the Big Three carriers in the Middle East (Emirates, Qatar, and Etihad – often abbreviated as the ME3) are undermining the principles of free and fair competition with subsidies that distort the market. The Gulf air carriers are pushing back against the accusations, arguing they provide a superior product at a lower cost. Vox has a brief article that summarizes the arguments for both sides.

The US carriers outline billions in subsidies to these carriers. They include everything from subsidized development of the region’s massive airports to interest-free loans and infusions of capital from the ruling families – who also own the airlines themselves.  The alleged subsidies support Qatar and Etihad to a greater degree than Emirates (the paper alleges that Qatar and Etihad would not be viable commercial businesses without their subsidies; not so for Emirates). You can find the white paper and presentation here.


Summary of the subsidies alleged by the US carriers. Image from the Americans for Fair Skies presentation.

Central to the debate are the United States’ Open Skies treaties with Qatar and the United Arab Emirates. Open Skies treaties deregulate the routes and destinations for international air travel between the two signatories. The US State Department prioritized signing Open Skies agreements since signing the first such agreement between the US and the Netherlands in 1992 (see the full list of agreements here, as well as the text of a sample agreement).

There is an inherent asymmetry in any Open Skies agreement between the United States and Qatar or the UAE; due to the small size of those countries, the agreements only add two or three destinations worth serving for US airlines (indeed, there are only two scheduled flights to Qatar or the UAE from US-based carriers – Delta flies ATL-DXB and United flies IAD-DXB). Gulf airlines, however, earn rights to fly to a wide array of American cities.

Part of the success of the Gulf carriers is due to the geographic advantage of the Middle East hubs. Dubai has long served as a stopover point for refueling along the Kangaroo Route. Now, carriers like Emirates use Dubai as centrally located hub to efficiently connect air traffic between Europe, Africa, India, and Southeast Asia.

However, there’s more to the rise of the Gulf carriers than advantageous geography. For these Gulf states (often, effectively, city-states), focusing on aviation is a deliberate economic development strategy. When you’re talking about state-owned businesses, how do you differentiate between the viability of the various airlines as businesses from the state’s explicit policy of aviation-focused economic development? In their white paper, the US carriers make the case that Open Skies agreements assumed that an open market would provide a superior business model to state-owned airlines (and there is a long history around the world of poorly run state-owned airlines) and that competition would bring this truth to light. However, with the rise of State Capitalism, the US carriers argue, it’s not clear that assumption can be trusted.

It’s the next step in the idea of developing around the aerotropolis. Instead of building your economy around an airport, why not build it around an airline? Dubai’s success in developing their middle-eastern metropolis around a global aviation hub inspired Qatar and Abu Dhabi to do the same – a strategy that not only required the airport, but the airline to feed it.

The Gulf carriers aren’t just looking to their Middle East hub airports, either. Emirates took advantage of struggling Alitalia to earn a fifth-freedom route from Milan to JFK. Emirates makes no secret of their ambitions to offer service around the globe via some key fifth-freedom routes:

President Tim Clark has revealed the first details of what looks like the next step in Emirates’ march to become a truly global powerhouse. On the sidelines of last week’s International Air Transport Association (IATA) annual general meeting in Cape Town, the airline outlined plans to set up a major transpacific operation. Its aircraft would be flying through intermediate points in Asia to destinations in North America. What is making the threat even more serious for Asian and U.S. airlines is that Emirates has another 67 Airbus A380s on firm order, which—like its large incoming fleet of Boeing 777-300ERs—has the range capability to fly from many points in Asia to cities far beyond the U.S. West Coast.

Emirates can choose from several geographic points that offer the necessary aeropolitical framework. The United Arab Emirates (UAE) has an open skies agreement with the U.S. “It allows us to take passengers on a fifth-freedom basis from the West Coast and central points in the U.S. to points in Asia,” Clark says. In Asia, there are open skies agreements with Thailand and Singapore. Emirates also has similar rights for some destinations in Japan.

Bold added. This is the root of the entire debate: a battle over the details of a global aeropolitical framework. A battle over the rules.

When it comes to Emirates, their Dubai hub isn’t the concern from the US carriers. The real concern is these aspirations to cover the globe with fifth-freedom traffic. Delta claims that the ME3’s cheap connections in Dubai make it difficult to serve India directly from the US (and presents strong competition for the European joint venture partners if connecting to India in Europe). Flying to US cities from Europe or Asia directly (e.g. the current New York-Milan service, if expanded to other airports) threatens to undermine direct service to Europe; additional fifth-freedom routes across the Pacific could do the same. Brett Snyder notes the concern about hurting the overall network:

If the Middle East carriers skim the international markets with the most traffic, then the US carriers will have to cut back service. When international flights get cut, the whole network becomes vulnerable. The end result is probably less service for smaller and mid-tier cities. It’s just the way the network effect works.

While the American carriers are asking the US Government to revisit these agreements, the Feds must balance other US interests in the region beyond air travel. Qatar and the UAE host a number of US military facilities. The US has a large trade surplus with both nations, partly due to companies like Boeing selling lots of widebody airliners to the Gulf Carriers. American cargo airlines like FedEx take advantage of Open Skies in a similar fashion to the Gulf carriers, facilitating global cargo movement. In other words, it’s not clear the US carriers have a sympathetic ear from the Federal government.

The PR campaign from the US carriers is an attempt to change policy by influencing public opinion, but it will be an uphill climb with the general public. Counter-arguments from the Gulf carriers ask why the American carriers are afraid of competition. US airlines aren’t exactly earning lots of sympathy from the public.

The PR battle is also getting nasty: Qatar Airways’ CEO accuses Delta of flying “crap” planes without a hint of irony: it’s not hard to buy nice, new aircraft when you can fall back on massive capital infusions (as alleged in the white paper) to buy those expensive aircraft. Lufthansa’s CEO, facing a strike from his unionized pilots, joked that he should hire Qatar’s CEO as his union advisor (unions being illegal in Qatar and the UAE). And while customers might like the product and the price point offered by the Gulf carriers, it’s not clear than anyone in the US would be willing to accept the trade-offs that make that product possible.

The white paper notes that the subsidies documented meet the World Trade Organization definition. However, even though both Qatar and the UAE are part of the WTO, aviation isn’t a core part of the WTO’s agreements.

If aviation were a part of the WTO, there would be a specific process to raise and resolve disputes. In other trade areas, the WTO can authorize the use of ‘counterveiling measures’ against subsidies and dumping, such as tariffs or restrictions on trade volume. But here, there aren’t any specific rules governing aviation – hence the PR campaign.

In essence, this is a battle over the rules. If the story of the aerotropolis is the story of globalization, is this a tide that lifts all boats? Or is it a race to the bottom? Competition is good, but what if the basis for that competition is based on the rules governing labor markets in Qatar or the UAE? Will the fight over the rules of the game lead to improvements in working conditions for migrant labor in the middle east? While the US airlines are certainly acting in their own self-interest, is this battle similar to the public scrutiny over Qatar’s labor practices in advance of hosting the 2022 World Cup? Could this battle over the rules not only find room for fair competition, but also leverage an improved quality of life elsewhere in the world?

Or is all of that wishful thinking?

Backlit Metro Train

Metro Center Station – Friday, March 27, 2015 – Red Line to Glenmont








Perimeter rules – DCA, LGA, and the challenges of regulating both airline and passenger behavior

Recently, the Port Authority of New York and New Jersey floated the idea of eliminating LaGuardia Airport’s 1,500 mile perimeter rule. Only two major airports in the United States have perimeter restrictions that ban flights beyond a certain distance: LaGuardia and Washington National.

Both National and LaGuarida airports share a common history: both pre-date the jet age. both were constructed with the assistance of the Works Progress Administration, both later proved too small for jet traffic and the boom in air travel, requiring the construction of newer, larger airports.

Today, there are also several characteristics in common: both National and LaGuardia are governed and operated as a part of an airport system (administered respectively by the Metropolitan Washington Airports Authority, also operating Dulles International; and the Port Authority of NY and NJ, operating Newark and JFK airports), both airports are popular with business travelers, and both airports are subject to perimeter rule restrictions that limit the distance of scheduled flights.


The evolution of DCA perimeter restrictions. Rings around DCA show the 1965 650mi rule, the 1981 1,000mi rule, the 1986 1,250mi rule, and the current beyond-perimeter destinations. Image from the Great Circle Mapper – www.gcmap.com

The rule first appeared with the dawn of the jet age. National Airport had non-stop long-distance airline service via propellor-driven aircraft, prior to the rise of jets in commercial aviation. However, DCA was not equipped to deal with the different geometry required for efficient operations of jet aircraft. Dulles International Airport, purpose-built for the jet age, opened in 1962. Noise from jet aircraft was a large reason behind the perimeter rule, but part of the reasoning for the rule was to drive jet traffic to Dulles as well.

The first version of the rule, put in place in 1965, limited flights to a 650 mile radius of Washington, DC. This range just barely includes Chicago; airports that already had non-stop service into DCA (such as Minneapolis and Denver) were granted exemptions. Long-distance flights, exploiting the rapidly growing capabilities of jet aircraft, were forced to use either Dulles or neighboring BWI airport.

The perimeter expanded to 1,000 miles in 1981, allowing non-stop service to South Florida, Kansas City, Saint Louis, and others. In 1986, the perimeter expanded again, to 1,250 miles, far enough to allow non-stop flights from Dallas and Houston.

In 1999, Senator John McCain of Arizona campaigned to remove the perimeter rule entirely. As a compromise, Senator McCain’s hometown airline, America West (later merged with US Air, and now American Airlines) was granted new beyond-perimeter exemptions to serve Phoenix and Las Vegas.

In 2012, the FAA granted several new beyond-perimeter exemptions for new flights to Portland, San Juan, and Austin. The FAA was directed to allow these exemptions by Congress as a part of the FAA’s reauthorization.

Each successive modification of the perimeter rule involved direction action from Congress. As a quirk of DC’s status as a federal enclave, both DCA and IAD (despite both being located outside of the District of Columbia) were built and operated by the Federal government, acting in its capacity as the local government for the National Capital. Both airports were the only airports directly operated by the Federal Aviation Administration.

Since then, several conditions changed. In 1973, Congress granted limited home rule to the District of Columbia, thereby differentiating local government services from those provided by the Federal government. In 1987, Congress created (in conjunction with DC and Virginia) the Metropolitan Washington Airports Authority to operate both National and Dulles. The federal government retains ownership of both airports.

However, despite the move for increased local control for the region’s airports, much of the regulation surrounding them is still codified in federal laws and regulations.

1500 mile perimeter around LGA, with one beyond-perimeter exception for Denver. Image from the Great Circle Mapper - www.gcmap.com

1500 mile perimeter around LGA, with one beyond-perimeter exception for Denver. Image from the Great Circle Mapper – www.gcmap.com

Unlike National, LaGuardia’s perimeter rule is entirely self-imposed. The Port Authority imposed LaGuardia’s 1500-mile perimeter rule (with an exception for beyond-perimeter flights to Denver) in 1984 as a means to manage congestion at the airport and force some traffic to either EWR or JFK.

When looking into additional perimeter exemptions for DCA, the Government Accountability Office argued that the potential loss of flights from Dulles and BWI wouldn’t be catastrophic, and additional competition at the most central airport (in this case, DCA) would be good for consumers.

However, both MWAA and the Port Authority are tasked with managing an airport system, not just maximizing value at one particular airport. Data from MWAA shows a strong correlation between additional capacity for beyond-perimeter flights at DCA with reduced capacity for those same destinations at Dulles.


Dulles is now caught in a vicious cycle. To deal with growth in the mid-2000s, Dulles began a series of massive capital improvements to increase the airport’s capacity and address some of the inherent flaws in the airport’s design (e.g. replacing the plane-mate ‘moon buggies’ with the Aerotrain APM). Unfortunately, since MWAA took on these costs domestic passenger numbers are down, thanks to the collapse of Independence Air, the Great Recession, and the merger of United and Continental (making Dulles is no longer United’s primary east coast hub). All of these factors are driving up the cost per passenger for each remaining enplanement at Dulles. Add in the increase competition from new slots at DCA, and Dulles is struggling.

In response, MWAA is not only dealing with falling traffic at Dulles, but with DCA’s growing pains. The Authority’s new use and lease agreement with the various airlines that use the airports includes a substantial capital program over the next 10 years at DCA to accommodate additional passengers. Part of the Authority’s response is to argue vociferously against any additional exemptions to the DCA perimeter rule; however, they are at the mercy of Congress.

The Port Authority might not need to protect JFK to the same extent that MWAA would like to protect their investments in Dulles, but MWAA’s current experience should provide a cautionary tale. Removal of the perimeter restrictions at LGA would certainly produce winners and losers among both airline tenants at each airport and for the passengers that use them; it’s certainly unlikely to decrease passenger loads at LGA. In fact, American Airlines’ president argues that any changes should wait until upgrades to LGA’s terminals are complete so that they can handle additional passengers.

First, it’s also worth remembering the reason for the imposition of the perimeter rule in the first place: managing demand for one particular airport. True, it’s a somewhat crude tool to manage demand (many are already predicting that DCA-style exemptions to the rule is where the PA will end up), and even without the perimeter rule, there are still slot rules to contend with (another tricky subject).

A second challenge is addressing uncertainty: with airport funding dependent on revenues from airline traffic, a small change can have a big impact. Dulles’ capital program has been greatly affected by changes in traffic levels and by mergers in the industry that shift the airport’s importance to their main tenant in an instant. The need for several of the projects (as well as Dulles’ unaddressed capital needs, such as a new C/D concourse) stems from the airport’s original design, unable to foresee the changes in security requirements, airline boarding practice (jet bridges instead of plane mates), or airline business models (deregulation, leading to the adoption of the hub and spoke model, requiring large concourses for transferring passengers). Dulles was planned and built for the jet age. The original decisions on runway geometry and airfield characteristics have proven to be very accurate; the decisions based on predictions about the behavior of both passengers and airlines has been less successful.

Finally, there’s the need to manage the behavior of two different kinds of users: passengers and airlines. Look at the comments in just about any thread about DCA’s perimeter rule and you’ll find plenty of frequent flyers arguing against the rule. Yet, MWAA can’t successfully implement any changes to their airports without the cooperation of their tenant airlines, acting based on their own set of incentives and preferences. In asking about DCA’s ideal role in the DC region, David Alpert asks:

Should DCA be a sort of niche airport with smaller planes to many little destinations, or an airport that tries to serve as much of the travel demand, close in to the center of the region, as possible? There’s no obvious answer.

Not only is the answer not obvious, but the question itself is more complicated: an airport’s role is only as good as the service that airlines provide; the economics of the kinds of service airlines can provide at any given airport will depend a great deal on a number of factors: airport capacity, costs per enplanement, demand for travel, location/role in an airline’s network, etc.

Shifting an airport’s role can’t be imposed on the airlines; it takes a partnership.

Transit as a regulated public utility: myopic?

Cap’n Transit looks at my recent discussion of transit governance structures (summarizing a good back and forth between David Levinson and Lisa Schweitzer) and sees transportation myopia:

They were all three suffering from transportation myopia: the condition of seeing transit as a self-contained system rather than as an option in competition with private cars and other modes, and of seeing transit as an end in itself, rather than a means to an end.

The Cap’n defines transportation myopia as follows, complete with this illustration of the bigger picture:

Cap'n Transit's virtuous cycle - a reminder of the big picture.

Cap’n Transit’s virtuous cycle – a reminder of the big picture.

Essentially, transportation myopia involves people forgetting that transit competes with cars. As a result they often forget why they care about transit, and treat transit as a goal in itself.

I both agree and disagree. It can be hard to not be a bit myopic when transit operations fail to meet their potential. On the other hand, the accusation of myopia also strikes me as unfair:

What we need to talk about is how to get full cost pricing for roads, including potential challenges and ways to overcome them. But for some reason Levinson doesn’t talk about any of that, he just goes on to talk about smart cards and land value capture and bond markets.

Levinson’s initial post wasn’t an unlimited forum; he noted his word count limit in one of his blog follow-ups. He’s also written extensively on road pricing (including some really in-the-weeds stuff).

These policies did not go unmentioned. Looking to other examples of good transit governance, the cases from Germany explicitly mention the key role of policies that both make car use more expensive, less convenient, and less detrimental to urban life and ‘last mile’ transportation modes (e.g. biking and walking) complimentary to transit. From Ralph Buehler and John Pucher:

Transport, taxation, and land-use policies at all levels of government have helped to make German public transport more attractive compared to the automobile. For example, area-wide traffic calming, car-free pedestrian zones, increased fees for car parking, and reduced parking supply slow down car travel, raise its cost, and make it less convenient. Similarly, federal taxation policies have helped make car use more expensive…

Since the 1970s, most German cities have improved conditions for cycling and walking by traffic-calming nearly all neighborhood streets to 30 km/h or less, pedestrianizing downtowns, and expanding networks of separate bike paths and lanes (Pucher and Buehler, 2008). The vast majority of German passengers access public transport by bicycle or foot…

City planners deliberately connect sidewalks, crosswalks, and bike paths and lanes with transit stops…

German land-use laws and regulations encourage dense and mixed-use settlements, which facilitate transit use…

When considering Boston, I included this parenthetical about the cause of much of the MBTA’s debt and the failures of the Massachusetts decision-makers in prioritizing a massive urban freeway undergrounding project:

(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.)

It’s true that I could’ve put more emphasis on the complimentary policies that go with good transit governance. However, that doesn’t address the broader questions of how to better govern, fund, and operate our transit systems. Looking at governance models for transit operators is certainly narrow in focus compared to debates about the bigger picture priorities, but I don’t think it deserves the negative connotations of myopia.

That said, I still welcome the critique. In the Cap’n’s page on transportation myopia, he closes with this:

A lot of transit advocates that I know and respect have demonstrated transportation myopia. If I call you out on it, it’s nothing personal. We’re on the same side, and I’m doing it to help you accomplish a goal that we all share.

I appreciate the reminder. Seeing the forest for the trees can be a challenge, and it always helps to have a reminder about the big picture.

Governing transit: the regulated public utility

Public utilities, from Chris Potter. CC BY 2.0

Public utilities, from Chris Potter. CC BY 2.0

The MBTA is struggling, but they’re not the only transit authority facing both near and long-term challenges. The MTA in New York is trying to find the funds for its capital plan; WMATA is facing systemic budget deficits while trying to restore rider confidence in the system.

For-profit corporations such as airlines aren’t the right answer to govern transit in an American context. So, what kind of structure could work?

Writing at Citylab, David Levinson made the case for structuring American transit operations as regulated public utilities, able to pull the best elements of private sector management and pair them with the fundamentally public purpose required for urban mass transit.

David cites seven key elements of this model:

  1. Competitive tendering for services
  2. The ability to raise fares (with regulatory approval)
  3. Using a smartcard as a common platform for fare payment
  4. Specific contracts with local governments to operate subsidized service
  5. Ability to recapture land value through land ownership and real estate development
  6. Access to private capital markets
  7. Local governance, funding, and decision-making

These elements aren’t substantively different from the elements of German public transport governance reforms outlined by Ralph Buehler and John Pucher: competitive tendering for many services, increased fares, investments in technology to improve capacity, efficiency, and revenue. Public regulation oversees these efforts to operate the core business more efficiently.

Lisa Schweitzer (USC Professor focusing on urban planning and transportation) offered extensive feedback on her blog (in several parts). All are worth reading, I’ve linked to each and included a short summary and/or quote:

1. On the regulated public utility concept: “First of all, even though quangos [a British term: quasi-autonomous non-governmental organizations – what we’d usually refer to as a public authority] are somewhat insulated from voters and politics, they still have play with budgetary politics, and those games are where lots of stupid enters into transit provision.”

Schweitzer identifies three main problems with applying the concept to transit. First, unlike water or electric service, the demand for transit use isn’t universal. Aside from a few dense cities, there isn’t necessarily a built in customer base. Second (and related to the spotty demand for transit service), some jurisdictions can/do opt out of transit service, hurting the overall network. Third, unlike water or electricity, there are many different levels of transit service.

2. The challenges of competitive tendering: the devil is in the details for how to successfully structure operations contracts: “And that’s a really the key point for competitive tendering and service quality gains you hope to achieve: if you are going to to do this, you need to be clear on service expectations. The reason the cable guy gets to treat you like crap is that’s not part of the franchise agreement which centers on channels and rights for particular sports events–not customer service response times.”

3. Farecards and technology: Schweitzer notes that most transit agencies already offer smart farecards, but perhaps a regulated utility would have more incentive to invest in technology to collect additional revenues or adopt policies (such as all-door boarding, or proof of payment) that would speed operations and improve efficiency. This is really a matter of institutional incentives rather than simply adopting farecards.

4. Capital cost recovery: While Levinson argues that new transit lines should only be built if they can break even on fare revenues and value capture from adjacent land, Schweitzer counters that this formulation depends on the mode and the type of transit line:”Right now, you have jurisdictions with people who are very avid about wanting rail transit. We must have rail now.”

“You want a train? Fine. Either let us build 70 100-story apartment complexes next to the station (if it pencils for us) or you pay whatever portion of the capital and operating costs that apartment complex would have covered for the utility. Your choice. Again, rich districts can have their single-acre lots if they want, and they can have their trains if they want them–even if nobody wants to take the train and they just use it as decoration. They just can’t stick the rest of us with the bills for those trains.”

5. Asset values and access to private capital: This isn’t exactly a silver bullet. For as well as competitive bidding worked for London’s buses, the similar deal for the Underground flopped:” The Metronet-London Underground deal came about in 1998 in part because the transit provider, Transport for London, was financially stretched and their capital stock decayed. This is a big deal: taking over large capital stocks is risky, let alone doing so because you have to bail somebody out. It means you probably have crumbling assets with an uncertain price tag to fix.”

In London’s case, one rail company delivered on their agreements while another operator came back to the public for additional funds and eventually went into bankruptcy: “While newspapers blamed the public sector partner for failing to manage the contracts properly, the public audit on the deal cited Metronet’s own corporate governance and poor management as the primary reason for the failed partnership.”

6. Local funding: While Schweitzer sees the virtues of local funding, there are risks to completely forgoing federal funds. If there is a chance to reform things, it will likely involve the feds: “If we really do believe that there are normatively better ways for cities to be, then there is a role for federal governments to play in setting standards and incentives.”

David, freed from the space constraints of Citylab when writing via his own blog, responded in depth:

1. The regulated public utility model: “I imagine like most reforms, it would be phased in, tested, refined, and revised in the various laboratories of democracy. Some city has to go first, some other city has to go second, and hopefully learn from the first, before every last city does.”

2. Competitive tendering: “…the answer is quite complicated about how to configure to maximize consumer welfare, and experimentation is probably required. Just giving the system away is certainly not the answer. Having the franchises be of a limited duration (5-7 years, e.g.) is better than a 20-30 year franchise. This is feasible for buses where the capital is the ultimate in mobile capital. It would be much harder for a traditional utility where the infrastructure is expensive, embedded in the ground, and long-lived.”

In other words, it’s a lot easier to structure a deal for competitive contracts for bus operations than it is for fixed, naturally monopolistic rail services – both in terms of structuring the deal, and in terms of attracting operators.

3. Farecards: “I would go further and say we should have pre-payment via stop-based farecard reader, i.e. all significant bus stops should have arterial BRT like payment”

4. Capital cost recovery: “Capital investments are new stocks while operating expenditures are continuing flows. From a public policy perspective, continuing with existing commitments (which may be an implied social contract) may be more important than making investments that bring about new commitments. Thus new commitments (such as new rail lines which have irreversibly embedded immobile capital) should only be undertaken if we believe at the outset (admittedly a forecast, which have problems) that they have cost recovery.”

5. Asset values: “Investing in new infrastructure is a lot riskier than investing in already built infrastructure (thus the early financiers of the Channel Tunnel got wiped out twice, similarly the Dulles Greenway and many other privately funded pieces of new infrastructure that were either more expensive than expected, or built too far in advance of demand.”

The broad concept of a regulated public utility has a lot to recommend: it threads the needle between the public purpose inherent to modern transit, while also pulling the best elements from private enterprise and the benefits of running a service-oriented business like a business.

While demanding additional efficiency from transit operators, German public policy worked in concert with these reforms – traffic calming, dense development around transit stations, and increased taxes and fees on car-based transport both improved transit’s attractiveness and also provided new revenue sources.

As Dr. Schweitzer notes, the single biggest take-away from Levinson’s article is the concept of transit as a public utility in the first place. Getting over that mental hump can open doors to plausible reforms.

What might those reforms be? In addition to Levinson’s list, Ralph Buehler and John Pucher offer their lessons from the German experience:

  • Encourage regulated competition; take advantage of private sector expertise
  • Collaboration between local governments, transit operators, and labor unions
  • Focus on profitable services – not to ignore ‘equity’ services. Jarrett Walker would refer to this as a focus on ‘ridership’ routes instead of ‘coverage’ routes – and building political consensus around this isn’t an easy task!
  • Collaborate with other transit operators; encourage easy exchanges between systems for passengers, interoperable systems, etc.
  • Improve service quality; focus on customer service.
  • Increase transit’s competitiveness with complimentary public policies – for example, increased fees on driving/owning a car, encouraging dense development near stations, etc.

All in all, the list is quite similar to Levinson’s.

However, in Germany, the push towards some of these reforms came from the outside (EU regulations); existing transit operators viewed them as a threat forcing reform and a new focus on customer service, efficiency, and overall quality – all while working to reduce costs. Similar to an airline facing bankruptcy, German operators used the EU mandate to find common purpose with their unions to improve efficiency and reduce overall costs.

Both Schweitzer and Levinson sing the virtues of local funding, but reform of this magnitude might require outside stimulus. In the same vein as Schweitzer’s defense of federal experimentation in policy, the federal government is well suited to fill that role. However problematic the federal focus on streetcars may be, the federal focus has certainly shifted the attention of local governments; the TIGER grant process shook up the traditional relationship between the FTA serving a few transit authority grantees. The projects might not be the best investments in mobility, but it does reveal the potential for the feds to drive change in transit governance.

Airlines: the strengths and weaknesses for corporate transportation governance

CC image from Christian Junker.

CC image from Christian Junker.

David D’Alessandro’s review of the MBTA’s finances came to a stark conclusion: “A private sector firm faced with this mountain of red ink would likely fold or seek bankruptcy.” That red ink is thanks to a systemic operating deficit; yet as a provider of a key public service, the MBTA was also “too big to fail” and therefore cannot simply cease operations. Likewise, though municipalities and public authorities can declare bankruptcy, they seldom do.

However, there are examples of transportation operators declaring bankruptcy in the face of systemic deficits: airlines. Comparing for-profit airlines to subsidized urban transit might seem like a stretch, but consider the similarities:

  • Both provide a transportation service
  • Both require capital-intensive operations
  • Both are historically a low-margin business; transit has been largely subsidized for generations in the US; historic profitability for airlines is slim-to-nonexistant.
  • Labor is a significant cost for both; both featured highly unionized workforces.
  • Both are sensitive to swings in energy prices
  • Both include a high level of coordination with the government (regulations, funding for facilities, etc)

Reform proposals for the MBTA set goals for reducing operating costs, but didn’t necessarily give the MBTA the tools to reach that goal. Compare that to the major airline reform – the Airline Deregulation Act of 1978. Prior to deregulation, all air routes needed approval from the Civil Aeronautics Board (CAB). Matt Yglesias explains:

Passenger aviation clearly needs some regulation for the sake of passenger safety, pollution control, and the community impacts of airports. But in the early decades of the industry, CAB went far beyond that to regulate what fares airlines were allowed to offer and which routes they were allowed to fly. This became a classic case of regulatory capture. Airlines cared a lot about the actions of CAB while ordinary voters had bigger fish to fry. As a consequence, the board ended up creating a cozy cartel where airlines didn’t compete much and certainly didn’t compete on price. With price competition off the table, airlines invested lavishly in offering a high level of service. Labor unions got in on the act, using their clout to force managers and owners to share with workers some of the excess profits generated by CAB.

Removing regulatory approval for new routes unleashed new competition, dramatically lowering airfares for consumers. Airlines explored new route network concepts, eventually leading to the dominance of today’s hub-and-spoke system. Existing airlines still had to work within their cost structure, based on the old regulated business model. Soon, many airlines also faced a sea of red ink. Faced with the same choice David D’Alessandro saw for the MBTA, many airlines either ceased operations or entered bankruptcy.

Today, airlines use bankruptcy as a tool to lower labor costs by renegotiating contracts. Yglesias, writing about the 2011 bankruptcy of American Airlines, notes “the real aim of the filing, in the words of S&P 500 analyst Philip Baggaley is to ’emerge as a somewhat smaller airline with more competitive labor costs.’ ”

While the MBTA Forward Funding plan set goals to reduce operating costs, it did not include the tools to make those cost reductions happen. Using bankruptcy as a tool to reduce structural costs, as airlines have done, might technically be available to a public authority like the MBTA, political pressure often prevents this course of action.

In a look at sustainable transit funding, Ralph Buehler and John Pucher study the fiscal sustainability of German public transport systems. The abstract:

Over the past two decades, Germany has improved the quality of its public transport services and attracted more passengers while increasing productivity, reducing costs, and cutting subsidies. Public transport systems reduced their costs through organizational restructuring and outsourcing to newly founded subsidiaries; cutting employee benefits and freezing salaries; increasing work hours, using part-time employees, expanding job tasks, and encouraging retirement of older employees; cooperation with other agencies to share employees, vehicles, and facilities; cutting underutilized routes and services; and buying new vehicles with lower maintenance costs and greater passenger capacity per driver. Revenues were increased through fare hikes for single tickets while maintaining deep discounts for monthly, semester, and annual tickets; and raising passenger volumes by improved quality of service, and full regional coordination of timetables, fares, and services. Those efforts by public transport agencies were enhanced by the increasing costs and restrictions on car use in German cities. Although the financial performance of German public transport has greatly improved, there are concerns of inequitable burdens on labor, since many of the cost reduction measures involved reducing wages or benefits of workers.

The outcomes aren’t all that different than those achieved by airlines utilizing bankruptcy. Unlike either US airline deregulation or the MBTA’s Big Dig deal on transit expansion as mitigation for a massive increase in urban highway capacity, German reforms also included policies aimed to shift the market in favor of public transportation. Fares and schedules are coordinated though a verkehrsverbund, or transport association.

Setting fares, coordinating routes and timetables sounds awfully similar to the Civil Aeronautics Board. However, because air transport is expected to operate profitably and urban mass transit is not. The middle ground is a structure that can combine the best elements of a for-profit corporation (“run it like a business”) with the public purpose of a government agency or public authority. Writing at Citylab, David Levinson makes the case for governing transit as a regulated public utility, operating as a business and billing the public for the full cost of services:

Like any other enterprise, transit should be successful and cover its costs. This is entirely feasible if we change the model of transit finance from a branch of government to a regulated public utility, as is done in much of Europe and Asia. A public utility provides a service, and in exchange, it is compensated for that service. The compensation comes from consumers (e.g. users, riders), and from the public for any unprofitable services that it wishes to maintain for other (e.g. political) reasons.

Just as the public sector pays the electric utility for street lights, it should pay the transit utility for services that the government insists on but that the transit provider cannot charge users enough for.

The public utility model provides a more realistic model for mass transit than airlines do. The lack of an inherent profit motive makes the direct comparison for airline governance a mis-match; yet there are elements of the private corporation that would inherently benefit public transit, thanks to the similiar roles for airlines and transit agencies.

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.

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