Glenn Tepke, Senior Policy Associate, Massachusetts Taxpayers Foundation.
We need to have a financial plan to envision transportation priorities. Transportation planning can inform political decisions. The State puts a cap on transportation bonds. Currently there is a $1.2 billion per year budget for capital projects, half of that ($600M) can be spent on transportation projects. Many other projects are being proposed. Many projects originally outside the cap are now included in the cap and the current fiscal situation is very tight so there is not going to be any increase in available money at this time. We are not going to see any relief in the near term. $1.5 billion of our federal aid will be taken off the top to pay for the Artery.
Tolls are another source for key projects financially. The Mass. Turnpike Authority is under pressure to take down toll booths on the western part of the state. They are looking to sell road side service plazas for revenue. Meanwhile, commuter discounts are being paid for by the one-time sale of land [at Beacon Park in Allston]. Tolls are supposed to increase again in 2008 as part of the promises made to the Federal government to secure funding for the Big Dig.
Meanwhile, at the MBTA, there are high operating costs and low revenues. The T should get out of the expansion business. They should use all their capital funds for maintenance. Indeed, there is only enough money from operations to support operations and not enough excess to do system expansion. The T is required to do projects such as the Red Line-Blue Line connector which were promised as part of the environmental commitments for the Big Dig. It does not appear that the T can afford to do these. The State should have a greater role in funding T expansion.
We should think holistically about the funding sources we have. Transit projects should compete with highway projects for funding. We should look at alternative sources of funding as well. Tax increment financing. The State needs to do this not on a project-by-project basis, but to take a longer view than we currently have. Three years ago there was a tax planning commission passed as part of the Bond Bill, but it was vetoed by the Governor. This should be revisited.
Alan Macdonald, Executive Director, Massachusetts Business Roundtable.
The Business Roundtable works with health and education issues generally, but economic issues as well. We are a twenty-five year old organization. Commerce and business issues usually lead to transportation. The economy grew to 3.3 million workers. But we couldn’t have reached that without the critical transportation infrastructure we have here and have added over the past two decades.
To the business concern, transportation decisions seem largely political. We are concerned about the bond cap. In 1991-1992, Massachusetts had to put the cap on; before that we had the lowest bond rating of any state in the country. We [commissioned] a study by Price Waterhouse/Coopers, together with the State, Moody’s and Standard & Poor as to the level of bonding we can do without affecting the bond rating. We found that Massachusetts can go higher, 1.3 to 1.5 billion without affecting the bond rating. We believe the bond cap should be raised.
I think we made the case for spending more money. But where would we spend the money? Parenthetically, we have 75 members, but they are distributed throughout the State. For example, if we could have a better airport in Pittsfield for $10 million, we could attract a corporate headquarters and make a big difference to that community for small money. How we choose which projects to do is a very important issue. We should have criteria.
We should look at how to spend our money, and the State should look at this as well. We did a survey of other states in positions similar to Massachusetts, chiefly northeast industrial states. Other states have centralized planning. They don’t have different organizations, all of which might have a part in the state planning process. Some states have set criteria for selecting projects with little flexibility. There may be a point system to evaluate each project, e.g. so many points for public safety, or 20% to economic development, 20% open for ‘public support’, i.e. political. The important thing is that these criteria are visible and known to the public. In some states, you can even check the web site to see how projects stack up and which projects are the highest priority.
Our aim is to increase the transparency of the process. Planning should take place in the Executive Office of Transportation and Construction, but it is not visible to us that it is being done that way. Establishing planning criteria is important to us.
Design/build should be watched as a part of the planning process, but you don’t want to use it to get around the planning process.
Richard Dimino, President and CEO, Artery Business Committee; Lecturer, Harvard School of Design
We are at a very significant crossroads. We should look at our assets.
1. A new central highway system coming on line. This is a very positive factor. We should take advantage of it.
2. Infrastructure investments undertaken during the last twenty years to support economic opportunities:
- The South Boston Waterfront and the Fort Point Channel Area.
- The Bulfinch Triangle.
- Port facilities.
- The Massachusetts Turnpike Extension.
That list represents thousands and thousands of job opportunities. We have a lot of work in front of us, and need transportation. We have an investment of billions of dollars in transportation facilities. And lots of peripheral parking spaces. There are substantial additions to our public transportation: The Blue Line and the Silver Line.
What are our existing transportation assets?
We also have a planning process, which was a revolutionary idea in 1991. We should take advantage of it.
Somewhat of a good thing is the restructuring of the finances of the T, however it is only one step to adjust their finances. It is not a panacea. The evolution of T financing must continue.
We have done good things for clean air, standing up to the Bush Administration.
But we have to fix our own process. The requirement for Mass. Highway to look at their fleet and make it cleaner is positive. Another asset is a new low of drunk driving. It will save lives and also permit continuing Federal aid.
We have investments in our port facilities.
We should be proud of these assets, and we should take advantage of them.
[On the other hand,] we have a serious issue in the [state] of our pavement and of bridge conditions. A mass transit system in need of much capital investment for bridges and track beds. We are basically able to take care of it, but there are limited funds for expansion and enhancement.
The new Central Artery is going to have a high cost of maintenance. We have not seen this sort of thing in the past. We should address this, e.g. pricing the highway.
Regarding the issue of governance, WE have been simplistic. The governing structure in the state: Some units are private, some are authorities and some are state departments. We must step back and deliberate on this subject. It is not just a shell game. We should look at what we want and what we’ll get out of it. Not just moving the Turnpike Authority under the Mass. Highway Department.
We have a human resource problem. The way we structured compensation: [For example, the Mass. Highway Department. There are not enough engineers to oversee projects. As a result,] we turned over the keys [of projects to contractors.] But we need more competent managers and engineers in public employment.
There is an inequity in pricing for Massachusetts. We should step back and look at it in a statewide transportation [view] and look at the financing, like the Boston Transportation Planning Review, but this process needn’t take a long time. It might require tolls and a gas tax increase. We should address it, not dance around it.
We should look at the procurement process and make it more efficient. We spend billions of dollars for transportation: It should be a source of excellence.
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Curtis Davis, President of Move Massachusetts and Moderator: There was an article "How will we live in 2010?" 300 mph trains, houses that talk, etc.
Robert O'Brien: You are correct, Rick [Dimino], to enumerate our assets. I can think of three others:
1. Renewal of our utilities by the Big Dig.
2. Cleanup of our harbor.
3. Citizens’ participation to the Central Artery process has let the genie out of the bottle and it won’t be put back. Public participation in planning projects is here to stay and that is very positive.
What do you think of the future of tax increment financing? How does the business community look at this?
Tepke: There is tremendous political resistance to taking a slice of taxes.
Regarding Fall River/New Bedford: If the cities and towns at the other end want it, they should put up part of the addition tax revenue they would derive as part of the financing mechanism.
Macdonald: In the 1970’s and the 1980’s there was support for an increase in the gas tax. Still, part of the Roundtable supports this.
Look at the Urban Ring. Look at the 1800’s, when mainly private interests paid for these type of projects. Why not talk with the Sun Micros and tell them we need their participation? There there is not one point of view among the business community on tax increment financing.
Rick: One of the things that motivate people is when they realize it is a crisis. The State finance banks and tax increment financing are ways. Remember that the T is a general public good. There should be state money here as well.
We need to do better. Be honest about it. It is still complicated. We need to make financing simpler. It is unreasonable to simply shift this to cities and towns.
There is a question of price equity across modes. What is a proper balance among modes?
Q. Fred Salvucci: I agree with you all—as unusual as that is. I am particularly struck by Rick’s comment about technical proficiencies among the agencies to get things done. Mass. Highway has a lovable, but tragic history. The T can deliver things. The Mass. Turnpike can deliver things. I suggest one of the things that Commissioner Jane Garvey [did. She made] a list of things and made people believe that a certain percentage actually would get done. The engineers in the public agencies designed these projects and had them ready to go and when we went for the gas tax increase people could accept it because they could see what the money would be used for. We need to get quality engineering back in the public sector.
You can resurface roads twenty-five times to make it visible that you are doing things, but bridges are not being fixed. Regarding the T, if you don’t get the Silver Line connected and the Red-Blue lines connected, there will be gridlock and we will not see the growth potential of South Boston. You cannot add another third to the T ridership. The Mass. Turnpike has tremendous planning capacity that should be tapped into.
It doesn’t cost a lot of money to get projects ready to be constructed. Get the engineering done so that projects are ready. The people who have plans ready get the money first. As opposed to getting money, then starting to spend five years doing the planning.
Part of the engineering process is to get things real.
Macdonald: I had forgotten how important personal relationships are in all this. We were great fans of Jane Garvey, and still are. We believed her when she said the gas tax increase would be put to good use. It is important what happens with the money.
We must capture those skills.
Dimino: Engineering these projects and making sure they are ready to go is important. They are looking us in the face; and it makes one wonder why they are not ready to go, e.g. the South Boston Transitway under D Street. This must be done and we are wasting money in not doing now.
Tepke: Forward funding at the T. It is clear that the T cannot finance expansions. The problem under the old system was that the T had no incentive to raise fares or reduce operating costs. Forward funding has corrected that. If we are looking at a tax or broader revenue increase without ear marking these funds ahead of time it is a mistake. You just can’t collect money and then figure out what to do with it. You must have a plan for the money before you raise it.
Barbara Lucas: At the MPO, we see a lot of money spent on projects that will never get built, for example in reviewing alternatives as is required by MEPA. We should direct these design expenditures to things that will get done. We have to keep in mind that the big projects must be privatized. We should build, rather than design.
Larry Rosenblum: This discussion refers to transportation, but it could also apply to education and many other aspects of public policy. Both the City of Boston and the Town of Plymouth are called on to pay for these things from the property tax. We should look at other schemes to pay for projects based on what we get, which is very visible. People have a hard time connecting their tax payments to what they receive for their tax dollars.
If we have this level of intelligence, why can’t we solve these problems? This involves change in perceptions to change the political process.
George Bailey: We are not even paying for our current expenditures to pay for projects. We are getting some of these things out of general revenues. It is not enough to even keep even. If we said we aren't going to spend money at all, it would prod actions.
Curtis Davis: TRANSPARENCY + COMPETENCE = WILL. One of the drivers is to support economic growth. Let’s talk about equity in project selection. If I look at two sides of the economic benefit stream, a CEO who wants to locate a plant vs. a drug offender getting out of jail. Which project do we do? The one benefiting the CEO’s company or the one benefiting the ex-drug offender? How do we balance these things?
Macdonald: We do these things through user fees. The property tax has no relationship to the benefits, i.e., a tax on property that pays for education supplies a disconnect between what is taxed and what is funded. State aid has shielded the true influence of proposition 2½ so far, but in the long term prop 2 ½ will be dismantled.
The user fee concept: Where certain employers benefit, if it is the only way to get a project done, the employers would participate. There are ways we could bring in more private participation.
Rick Dimino: Transportation is very much like a utility. Other transit systems have found that it can be priced like a utility. At least they are working toward this.
We would need political will for a system where users across modes and those who benefit from infrastructure pay for it.
Marc Draisen: The question on how you look at equity influences the projects you choose to do. I can easily round up ten people who think that user fees are the most equitable way to go and ten who believe that user fees are the antithesis of equity. It is critical we have a group of people who can come up with a list of projects that take into account the priorities and how to pay for them.
The MPO has done an excellent job looking at the plan, but they are looked at as a T or Mass. Highway project. There is not a holistic approach to transportation project planning. If we could have more political influence behind it, we could send it over the goal line.
Rosenblum?: Transparency. Not only what we put in, but what we get back. Simple models on how you assign value. In addition, there is the question of how we relate to our society. These are big issues.
Macdonald: It is a giant issue. Education: Business pays 50 % of tax throughout the State. 60% of tax goes to education—obviously much of this from property taxes on business. Businesses question this use of the taxes they pay.
If we supported our local governments in other ways, we could get private funding for transportation projects from businesses.