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Navigating the Fiscal Crisis in Public Transit

Two transportation-focused think tanks held back-to-back events last week, bringing transit advocates, scholars and industry leaders together to discuss solutions for the fiscal cliff many agencies are facing.

New York City's transit system has weathered the current fiscal crisis by securing a new sustainable funding source that will bring in over $1 billion a year to the MTA, but also won, for the first time in decades, an increase in subway service.
In Brief:
  • The Eno Center for Transportation and TransitCenter both held webinars looking at ways for transit agencies to address financial challenges.

  • Most big agencies had steep ridership and revenue losses in the wake of the COVID-19 pandemic.

  • Federal relief is set to run out, leaving many agencies with big budget gaps.

  • The biggest crisis facing U.S. transit agencies since the COVID-19 pandemic began is the so-called fiscal cliff — the steep drop in fare revenue that resulted from ridership losses and the looming expiration of federal relief funds that were provided to temporarily fill the gap.

    In separate events on Wednesday, two of the biggest transportation-focused nonprofits in the country convened discussions on how agencies can navigate their financial challenges, with perspectives from transit advocates, researchers and industry leaders. The Eno Center for Transportation, a Washington, D.C.-based think tank, held an event called “Climbing Down From The Fiscal Cliff: Lessons From Transit Advocates.” TransitCenter, a New York-based advocacy group, hosted a webinar called “Transit’s Last Fiscal Crisis: Identifying Sustainable Funding Solutions for Agencies.”

    The events emphasized the urgency of the fiscal crisis in the transit industry, while highlighting a range of options that advocates and leaders can explore to demonstrate the continued relevance of public transit in post-pandemic cities.

    Transit Advocates Share Tactics

    The Eno Center’s event brought together four advocates whose cities are in various phases of addressing the transit fiscal cliff. Danny Pearlstein, policy and communications director for the Riders Alliance in New York, described how advocates navigated a “tough” political season to secure new funding for the Metropolitan Transportation Authority (MTA), even as state leaders let some other progressive priorities languish.

    “We in some respects overperformed,” Pearlstein said. “We won not only a new sustainable funding source to bring in over $1 billion a year to the MTA, but we won, for the first time in decades, an increase in subway service. We were able to make the argument that transit needed to be better than it was before.”

    New York has by far the biggest transit system with the highest ridership in the U.S., and its leaders are uniquely attuned to the value of transit to the city and state, noted Philip Plotch, an Eno Center researcher who moderated the event. How can advocates make the case in other places?

    Sam Rockwell, executive director of Move Minnesota, where the state Legislature included big boosts to Twin Cities transit funding as part of a landmark transportation package, said it’s useful to advocate for transit as a boon to other policy priorities, like meeting carbon reduction and climate goals. There’s a strong economic case to be made, too, said Amy Rynell, executive director of the Active Transportation Alliance in Chicago. Illinois lawmakers are currently debating a range of responses to the transit funding crisis in the Chicago metro. Even though many lawmakers represent communities far from Chicago, they understand the city’s importance to the state economy, Rynell said.

    “[Illinois] is huge geographically, but folks in the southernmost point of the state are benefitting from the Chicago region’s economic output, and the Fortune 500 companies that come here are coming in part because of quality of life and transit, which is what younger workers want,” she said. “I think there’s a benefit to folks who live nowhere near a robust transit system.”

    California provides more transit trips than any other state but New York, said Eli Lipmen, executive director, Move LA, but the state’s transit agencies are on different trajectories. Los Angeles Metro, which is expanding its rail service but is largely built around bus lines, is seeing ridership nearly reach levels of the pre-pandemic era. Meanwhile, BART and other Bay Area transit agencies are still seeing much lower ridership. Agencies banded together statewide in the spring to push for additional state support, and the Legislature agreed to provide funding to help agencies weather the next few years. But transit, especially in the Bay Area, still faces a crisis.

    “We still have a challenge,” Lipmen said. “This money that we got, while it was a big victory, it’s one time. Our public transit agencies, which should be a public good, are basically going to be required to be fiscally sustainable within two or three years, which isn’t going to happen.”

    Diversifying Funding Sources

    Diversifying sources of subsidy will be key to making transit agencies more resilient in the future. That’s one of the conclusions of an Urban Institute report, Surmounting the Fiscal Cliff, which was the subject of TransitCenter’s event on Wednesday. The report aims to identify strategies that can help agencies avoid the “vicious cycle” of ridership declines, revenue losses and service cuts, and instead generate a “virtuous cycle” of better service, higher ridership, more fare revenue, greater political support and more public subsidy.

    The report, which was funded by TransitCenter, recommends that state lawmakers can “flex” highway funding to support public transit. Local leaders should look beyond fare revenue and sales taxes, and explore “property taxes, income taxes on high-income individuals and charges on driving” to support transit agencies, the report says. Meanwhile, transit agencies should increase service frequency and speed, it says.

    “In every state across the country, we should be asking whether the state government is doing as much as it can to devote its own funds or federal funds for public transportation,” said Yonah Freemark, a senior research associate at Urban and co-author of the report. “If it’s not doing that, we should be asking why. That’s the biggest option we have — the most realistic option in terms of adding a lot of revenue.”

    Still, Freemark acknowledged, it’s tough to convince state lawmakers to invest in transit in many places. While states have more money, the politics are often more favorable for transit at the local level. Local and regional ballot measures to fund transit have enjoyed a number of victories lately, including in Kansas City this past election day. For transit agencies, it’s important to use available funding to run the best service they can, rather than running bare-bones service out of fear of running out of money, said Lindiwe Rennert, a senior research associate at Urban and co-author of the report.

    “The strongest stance that agencies can take right now in convincing their local partners to invest in them is by demonstration of continued need and continued demand,” Rennert said.

    One system currently putting that theory to the test is the Washington Metropolitan Area Transit Authority (WMATA). Facing a $750 million budget gap, WMATA is running more train service than it ever has before and seeing steady ridership gains, especially on weekends, as it urges leaders in Maryland, Virginia and Washington, D.C., to create new, stable revenue sources for the system. The agency’s leader, Randy Clarke, spoke at the TransitCenter event Wednesday, urging advocates to keep up pressure on political leaders. He sounded an optimistic note about the future of the transit agency.

    “Some people think I’m a little off by saying this, but I think, long-term, COVID will turn transit into a better industry and therefore better for our communities,” Clarke said. “We have shifted from a utilitarian, commuter-centric kind of industry to serving everyone all the time. I think that is crucially important.”
    Jared Brey is a senior staff writer for Governing. He can be found on Twitter at @jaredbrey.
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