The Boring, Crucial Topic of Transit Governance

A couple of weeks ago, I went to Transportation Camp New England, a transportation unconference. Basically, the idea is you get a whole lot of smart people into the same place and let them lead the workshops, round tables, breakout sessions, etc. Leave lots of time between the sessions for exchanging ideas, challenging conventional wisdom, and otherwise generating the kind of valuable interaction that breeds innovation.

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The Transit Governance Session at Transportation Camp NE

One of the sessions that I attended had to do with transit governance, and how to design effective systems for high-quality, reliable, efficient service. The discussion was good, if a bit meandering, and there were several interesting take-aways. For me, though, the part focusing on funding stuck the most.

What is Transit Governance, and Why Should I Care?

To start with, let me admit that transit governance is not exciting. It ranks up there with procedural votes in the senate, or the US Tax Code. But governance is really important. At its core, governance structure outlines who has authority to decide how money gets spent, and that’s something we all care about.

For example, transit governance is going to impact whether the Green Line Extension gets built or shelved. It’s going to determine if South Coast Rail is ever going to move forward. Closer to home, it will decide if the State Street BRT project in Springfield gets implemented, or ends up just being another report collecting dust.

Governance dictates who has the final word on project, or a particular service, or whether you can even appeal a decision if your pet project or service is cut. Governance dictates who builds the project list to begin with.

eno report
Eno Report: Getting to the Route of It

There are a lot of governance arrangements used around the country, and the Eno Foundation produced a series of case studies about transit governance called Getting to the Route of It: The Role of Governance in Regional Transit. The report compares the MBTA quite favorably to other transit governance systems around the country. This is for a couple of reasons:

 

  1. The MBTA is a unified system, in contrast to the San Francisco Bay Area for example, which has 27 distinct transit providers in the region.
  2. Because of the economic and political importance of Boston, the state has a vested interest in keeping the MBTA solvent and operational.

Anyway, this is an interesting report and I encourage anyone interested in this topic to read through it.

How Massachusetts Transit is Funded

Getting back to the Transportation Camp session on transit governance, the main issue that stood out for me was the discussion on funding. Over half of all MBTA operating revenue comes from the state, and the numbers aren’t that different for the other regional transit authorities (like PVTA).

MBTA revenue sources
Source: MBTA FY15 Budget

We discussed at length the challenges of relying so much on state funding. The biggest problem is that it disconnects who pays and who benefits. In economics, there is the principle of user pays/user benefits. This means that people who use a service should pay for that service, either directly through user fees (think electric bill) or indirectly through taxes (think municipal taxes for garbage collection).

However, the MBTA is given 20% of statewide sales taxes through the system called “Forward Funding.” This means that sales tax revenue from Pittsfield is subsidizing transit service in Cambridge. This is one of many reasons why the politics of funding the MBTA have been so fraught. The people who are paying for the service aren’t the ones benefiting (at least directly*).

A much smaller share of revenue comes from local assessments, which are paid by member communities based on a formula (I’m not sure what the formula is, but I think it’s a combination of population, ridership, route miles, and probably other factors as well). It should be noted that state-originated funding comprises 55-60% of MBTA revenue, while local assessments are just 8%.

Regional transit authorities (RTAs), such as the Pioneer Valley Transit Authority, have more or less the same financial arrangement as the MBTA, though less of their funding comes from the state. Some RTAs also use federal funding for operations, typically for paratransit. Here is the FY13 PVTA budget breakdown as a comparison:

PVTA Revenue sources
Source: 2013 PVTA Annual Report

The MBTA and RTAs do differ in how their oversight boards are constituted. While the MBTA has a governor-appointed oversight board, RTA boards are composed of elected officials from the member communities. On the one hand, that probably makes RTAs more responsive to the needs and concerns of their constituents; on the other hand, it means that the governing entity (municipalities) has little control over the bulk of their funding (from the state).

 

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March 2016 PVTA Advisory Board Meeting

Connecting Money to Decisions

A key point that came out of the discussion at Transportation Camp was the funding sources should be connected to the governing body. And, furthermore, that the governing body should be representative of the people benefiting from the service. The Massachusetts model of transit funding, with so much support from and/or control by the state, doesn’t quite hit the mark.

To provide a contrast, transit agencies in Oregon are funded through a regional payroll tax. This adheres more closely to the user pays/user benefits principle, by creating a regional revenue source for a service that benefits the region. There was a lot of speculating on whether the MBTA could transition to a funding model more like that – phase out some state funding and replace it with regional funding, like a small payroll tax or a regional sales tax, for example.

Given that the MBTA and RTAs only recently went through transportation reform in 2009 which bound them more closely to MassDOT, I find it unlikely that any transit governance devolution is coming soon. But if we have another winter like 2014, or some other major transit failure, it is entirely possible that the state may want to rethink how it supports transit. Such an effort would be tedious, boring, and, of course, crucially important.

 

*There is a lot of argument about this point. Those who support Forward Funding argue that the economic engine of Massachusetts is Boston, and so people around the state benefit from the city having functional transportation. I’ll let people continue to argue about it, and just make the point that this funding mechanism severely complicates the politics of “fully funding” the MBTA.

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Sewage of the Pioneer Valley

Often thought of as the Number 2 issue in urban planning, where we put human waste is usually a subject that most people don’t want to think about. But it’s a topic that has potentially epidemic consequences if bungled. Fortunately, we’re pretty good at disposing of our waste water, with billions of dollars of infrastructure dedicated to that purpose alone.

Crappier Times

As sophisticated as our systems are today, the field has not always been so flush with effective sewage infrastructure. Public roads up until the 20th century were really disgusting places. All kinds of animal poop (primarily horse manure, but also human, dog, and livestock waste) littered the street. Super-Freakonomics noted that in New York City the horse manure piled up so high that when there was heavy rain, there would be a literal wave of feces washing down the street.

horse manure
Source: The Great Horse Manure Crisis of 1894

To further demonstrate the importance of modern sanitation, consider Chicago. As an interesting article put it, “The city was literally shaped by excrement.” As the city grew explosively in the 19th century, it had to constantly adjust where it evacuated its waste vis-à-vis where it drew its freshwater. This was an imprecise science at best (there were frequent cholera epidemics when human waste drifted to the drinking-water intake location, in one instance killing off 6% of the city’s population).

Chicago ended up having to jack up the entire city by three feet to improve drainage; reversed the flow of the Chicago River to pipe its sewage away (and into the Mississippi River); and eventually built the largest sewage treatment plant in the world.
In short, it took a lot of engineering, money, and effort to make Chicago the Windy City, and not the Stinky City.

Where Pioneer Valley Waste Water Goes

Fortunately, we no longer live in such crappy times.

I was curious one day, and looked up exactly what the end-point of that flush-initiated journey is. So here is the list you’ve been waiting for: the sewage treatment plants of the Pioneer Valley.

  1. Bondi’s Island – This sewage treatment plant is located in Agawam, and serves Springfield and surrounding suburbs. It was built in the late 1930s and has been expanded over the years to comply with the Clean Water Act, add service to surrounding communities, and even hosts the area’s landfill.

    Also, it’s not an island…

    Bondi_Island

  2. Holyoke Sewage Treatment Plant – Like a lot of old cities, Holyoke has a system that combines its sewage and storm water. This system worked fine back when it all went directly into the Connecticut River. Today, it puts a terrible strain on waste water treatment plants when there is heavy rain. This is why some areas have “high bacteria days.” The treatment plants can’t handle all the rainwater coming in with the sewage, and so release the untreated overflow directly into the river, or lake, or bay. Holyoke’s plant has been working to reduce those overflow events, and treats about 500 million gallons of waste water per year.

    holyoke sewage

  3. Northampton Wastewater Treatment Plant – Northampton, like Holyoke and Springfield, dumps its effluent into the Connecticut River. There is a pretty interesting report on the system here. There is even a nice little diagram included of all the parts of the plant:

    Northampton Treatment Plant

    And I also found a cool video of how the plant works:

So where does our “waste” go? The bottom line is that most of it winds up in the Connecticut River, hopefully after going through several cycles of treatment. It may seem gross, but modern sanitation is really what makes urban living possible. Next time you don’t get cholera (which should be always), remember to thank your toilet.

S’Thievin Stetson and the Mortgage Interest Deduction

10403247_818327637918_449473574942174590_nMy wife and I recently closed on our new home in Holyoke, and we couldn’t be happier. We had been wanting to purchase a home for a long time, for a variety of reasons:

  1. I am a firm believer in the notion of building equity rather than paying rent.
  2. We were tired of the annual rent increase haggling with our landlord.
  3. We couldn’t really personalize our living space, since it wasn’t ours.
  4. Owning a home makes me feel more invested in a community, which as a civically engaged kind of guy, is important to me.

And on and on. But the biggest reason to buy a home for many is strictly monetary – we can now deduct our mortgage interest from our federal income taxes. On top of that, we can deduct municipal property tax from our federal income taxes. All told, according to a tax calculator I used at bankrate.com, we’re going to end up saving over $1,200 per year on our federal taxes on average for the next 30 years.

Wait, what?

Introducting S’Thievin Stetson

robin hood
Source: A.V. Club

We in the Anglo-American tradition tend to venerate the figure of Robin Hood, who stole from the rich and gave to the poor. This is reflected in our income tax policy, which progressively taxes higher incomes more than lower incomes. Well, I want to introduce “S’Thievin Stetson”, Robin Hood’s alter ego. S’Thievin inspired the Mortgage Interest Deduction (MID), one of America’s most regressive, costly, and (unfortunately) sacrosanct tax policies.

The MID was codified into the beast that it is today in the 1986 tax reforms that eliminated many specific deductions and exemptions, in addition to lowering the overall tax rate. For whatever reason, the MID survived those reforms. Today, the deduction costs American taxpayers over $70 billion per year in lost tax revenue, with the majority of the benefit going to households making over $100,000 per year.

regressive tax policy
Source: Center on Budget and Policy Priorities

The argument in favor of the MID most commonly used is that home ownership is a fundamentally good thing that we as a society should be supporting. It encourages community cohesion, promotes investment in the built environment of the town, and is a tool for investing wealth into a stable market (er… forget about that period between 2008 – 2010).

Except that research has shown other countries, like Canada, have similar home ownership rates without the MID. Whoops!

The Political Third Rail

So why do we have it? And why is it so sacred?

I suspect it has to do with who benefits: a whole lot of upper-middle class households.

income bracket
Source: The Atlantic

Much of the current political debate has to do with the 99% versus the 1%. Sure, that seems cut and dry enough. But what about when it’s the 80% versus the 20%? And what does it mean if that 20% produces many of the elected leaders who ultimately make these policy decisions?

I suspect that the MID is going to continue being a “political third rail” (ie touch it and die). Brookings proposed an interesting solution that would seek to shift some of the benefit away from the very wealthy and toward the middle class, but I doubt anything will come of it in the current federal political atmosphere. That doesn’t mean we shouldn’t try anyway.

Why You Should Care

Ultimately, this matters because when the wealthy pay less in taxes, the rest of us have to pay more. When a household making $200,000 decides to buy a home for $750,000, the renters making $40,000 have to pick up the slack in the federal balance sheet. Medicare, Medicaid, Social Security, roads and highways, education – all of these public goods fall increasingly on the backs of those less able to shoulder the burden.

Put differently, renters in Holyoke are subsidizing home owners in Longmeadow. That just doesn’t seem right. Lousy S’Thievin.