trainhq writes:
Having the T's debt transferred over to the state has been discussed. What this essentially means is funding the T debt directly from state revenues, i.e. raising taxes. Which gets us back to what I said earlier...
I hadn't heard that discussed, but I don't read the Boston papers every day, so I don't doubt it. I am rather shocked, though. While it's terrible transportation and fiscal policy, making the T responsible for the debt it has incurred over the last 30 years is politically brilliant. It's very easy for the state legislature and governor to sell the idea that the MBTA should be able to pay its own way. Of course, we all know that such a proposition is pure fantasy.
Trainhq, I'm not trying to pick on you, but this is a neat discussion, so I think it would profit from another minor point of order. If the T's debt were transferred back to the Commonwealth into the same pool as the Commonwealth's debts-- the bonds that the state incrementally pays back to its bondholders each year-- it probably wouldn't produce a noticable difference in bond service payments. In the long run it could actually save money. Say the charade of forward funding goes on for another ten years and the T has to default on a class of bonds to maintain a bare minimum of service. The authority's credit will be ruined and debt service will increase at an astonishing rate, much as the Commonwealth's did in the late 80s and early 1990s. If the T's debt gets thrown in with the rest of the state, it will benefit from the state's good credit and long term financial stability (even in it's most austere days, the state has a far greater diversity of revenue streams to draw from). So, I would disagree that simply transferring the T's debt to the Commonwealth would necessarily mean higher income, sales or property taxes.
What could result in higher taxes is the total end of forward funding. Remember, forward funding has, in basic terms, two parts. One is that the T assumes the liability on its capital debts. As discussed above, this debt is of little actual cost to the state but cripples the T; but it's also great political hay making. The second part of forward funding-- the part that actually does save the state some money, but again, hobbles the T, is the prohibition on approprations for the MBTA from the Commonwealth's general fund. Rather than recieving a line in the budget each year, the T is required by statute to pay its operational expenses from a percentage of sales taxes collected in the cities and towns the Authority serves, plus a fee from each of said cities and towns. This produces some pretty weird power dynamics.
For one thing, it makes the T dependent on fares and fees to cover expenses. I don't need to tell anyone who has been riding the T over the last 7 years about fare increases. The price of a ride has seen a staggering increase-- and we can say all we want about how it was underpriced before, but fares have just about doubled in a decade. That is simply astounding. Imagine if the price of milk or beer had doubled in ten years. There would be riots in the streets. OK, but that's only half of it. The other dynamic is driven by fees the T collects from cities and towns it serves. Fares, in theory, eventually reach a point where they are too high and ridership declines, so the only revenue stream the T can theoretically forever expand (or at least expand until it serves all 351 cities and towns in the Commonwealth, plus Rhode Island and even southern New Hampshire) is the city and town fees. Hence: the sudden interest in expansion to Fall River, New Bedford, Springfield, Nashua and unserved points in between. The way the funding mechanism is set up now, the T only spends money when it improves existing service or expands within cities and towns it already serves. New revenue only comes from new expansion.
What could (not would) lead to higher taxes (assuming the legislature and governor wanted to properly fund public transportation, a dubious proposition to begin with) is the complete and total dismantling of forward funding-- if the T was once again allowed to recieve appropriations from the general fund, if the state assumed liability for the authority's debt, and if the authority were able to draw funding from revenue streams additional to sales taxes and fees. Is one possiblity an increase in the income tax (the largest revenue source for the general fund)? yes, but it's politically the least likely. Even the most liberal of Democrats knows that a bald faced tax hike is political suicide. It's a mortal lock that the sales tax rate isn't going up-- businesses would never allow it and it's the most regressive tax out there, punishing the most those people who can least afford it. The most likely scenario, IMHO isn't higher taxes, but NEW taxes. Massachusetts doesn't levy much in the way of meals taxes, hotel taxes, commuter or congestion taxes. To the indiscriminate eye, new taxes and higher taxes may seem like the same thing, but they aren't.
Funny, when I first heard the accouncement of the FR/NB expansion, I was immediately skeptical. It seemed to me like a troubled governor trying to appeal to his base rather than a chief executive trying to make good long term decisions for the Commonwealth, but I'm coming around a little. Clearly the governor and maybe even the legislature realize what we already know: that forward funding is totally untenable, that public transit is absolutely key to economic growth even in a metropolitan area with flat population growth, and that in 30 years the world is going to look and operate very very differently than it does today, most conceretly in terms of energy consumption. My sense right now is that the fiscal problems associated with expansion and operation of public transit are short term problems and comparatively small and cheap compared with the problems the Commonwealth will have to face if public transit is allowed to wither on the vine. Perhaps the best way to end forward funding is to more or less bankrupt the T first.
