Transit: Ridership and Raising Revenues

Transit across U.S. cities face continuous challenges, including shifts in commuter patterns, fare avoidance and major needed maintenance and upgrades. How are agencies managing?

Transcription:

Devin Brennan (00:08):
Hey Matt. Morning everyone. As you can see, we're doing the transit panel here and we have somewhat reduced ridership from the prior panels, so I may actually go sit down at the end here and join the conversation a little bit. So 2025 is a year in which transit faces some familiar and not so familiar challenges. As everybody's very aware following the COVID pandemic, ridership plummeted initially and the work from home and similar flexibility reduced the need for particularly central urban mass transit to get through that period. The federal government provided substantial COVID-19 pandemic related monies. That money is now starting to roll off and has in many cases rolled off. Meanwhile, the transit agencies are facing increased costs, inflation, cost uncertainty, delivery uncertainty, and all the old issues that they had to manage on a daily basis: pensions and other things. So there's a gap that has developed there that's been commonly referred to as the fiscal cliff.

(01:31):
As these monies roll away and folks look for alternative sources of funding today, we have a panel that's going to talk to you quite a bit about how transit agencies are successfully managing through that and what sort of techniques they've been using to get through that, and hopefully we can answer some of the many questions that we face in 2025. What is next for transit? How will systems need to adapt to serve their ridership? Will there be funding changes? Both where will the capital come from to produce the projects? Where will operating funds come from and what is the future of farebox revenue for those agencies? So I think first let's start with Pat since he's got the background here as the treasurer.

Patrick Landers (02:18):
I think a picture's worth a thousand words. So let me advance this for a moment. So you can see the precipitous decline. This is in blue, it's the national, it's the MBTA in that lighter color, Washington Metro, Chicago Transit, MTA, and you can see the trend coming back; we're getting back between 80 and 90%. One of the things about MBTA that's unique is we run many different modes. Our commuter rail is above 90%, our other modes are less. So what's interesting is that our fare recovery ratio—I have a slide about this later—is on a blended basis about 19%. We are a highly subsidized system, but commuter rail fare recovery ratio is about 27%. And the other interesting thing I think that you'll see in this chart is that WMATA is one of the highest systems in terms of recovery of ridership, and if you think about that, that's in the Washington area where all the federal workers are required to come back five days a week. So one of the takeaways there is that there's a very high correlation between what's happening with certain populations, what's happening with their work patterns, and the system delivery. One of the things that we undertook was we did a bus system redesign and we took a close look at certain populations. We know from government statistics and registry information which neighborhoods have households that don't have any cars.

(04:35):
When Governor Healey put together the transportation finance task force (TFTF, we call it), there was a high representation from our major industries—that being healthcare, as Massachusetts is strong in healthcare. Obviously those are jobs you need to be present for, you need to show up for, and people need to get to work—and higher ed. So we know now something about the nature of where those workers come from and what their needs are. And so we're addressing that with changes in our system and one of Phil our new general manager's mantras is about increasing frequency, but doing it with all the background and the information so that the service picks up and does what is needed. And so in that sense, I think it's a real opportunity. I'm going to show you something that was really transformational for us and this is our track improvement program.

(05:48):
When Phil came in, in the chart to the left, all those little black spots were slow zones. He asked because where he comes from, if you had a slow zone, 30 days later they fixed it. In this case we had over 200 slow zones and when he asked how long they were in existence, it was two years, it was 18 months, and he said, "hold everything." We had a CIP program that we were implementing and he said, "listen, we're going to get this done first." And so within just about a year we were able to go from over 200 slow zones to no slow zones. When I talk about increasing frequency, you can see on the red line when trains are now moving at 50 miles an hour where they used to be down to sometimes 20 miles an hour—sometimes less—you can now get more on the system, you can get more utility out of the system. So these capital investments can really be transformative.

(07:04):
Those people on the South Shore will tell you that they really felt a transformation after this work was done. All of a sudden a trip that used to take an hour and 20 was taking 40 minutes. Wait times and headways are down dramatically. The throughput on the system increased dramatically. So just some statistics here from mass transit: we had 26 different shutdowns. There's a period of time when people had to go through the diversions and get on and off to get to their final destination, but once we were through that, the system had really been dramatically repaired and by the end of the project we had about 47 miles of track that had been vastly improved. I'll point out that when I first started here, within a couple months we had two derailments. If you think about what the internal rate of return on an expense like that is, it's dramatic because you have to get equipment in there, you have to get overtime, you have to do diversion.

(08:20):
The problem of having a system that had really been disinvested in for a number of years became something that not only affected safety and reliability, which are major tenets for us, but it becomes exceedingly costly to spend good money after bad like that. In one case, one of the derailments happened underneath a bridge next to an electronic system, so you couldn't even get a crane to lift it out of there, and it was in a very sensitive place. So getting ahead of your capital and doing the right thing just does a lot to bring ridership back and to improve the system.

Devin Brennan (09:24):
In terms of the nationwide landscape, Julie, for federal transit agencies, what do you see impacting them this year? Are transit agencies concerned heading into next year's reauthorization of the IIJA? What sort of support are you expecting from the feds?

Julie Burger (09:43):
Yeah, this may be a better question ultimately for Pat, how he's feeling about federal funding these days, but I think the short answer is probably "not great." We've gone through this period where during the pandemic the federal government was pumping money into transit agencies and so that gave the sector some time to figure out solutions. Some systems figured out solutions, others are still working on it, and I think you've seen this rise of federal funding and now you're really starting to see it decline. So you're seeing a lot of the pressure of federal dollars now being put on state and local funding sources, and I think that's a challenge because raising taxes is always a challenge. It's even more challenging when ridership is declining and you're asking states or cities to start increasing taxes to pay for public transit.

(10:36):
So that's really been the challenge on the federal side. You add to that, it used to be that discretionary grants were the uncertain grants. Now pretty much any federal grant is a little bit uncertain, even the formulaic ones. It used to be that transportation and transit was really bipartisan and that has changed a little bit. We're seeing some threats around withholding funding for cleanliness or safety, so I think it's been a challenging time for transit agencies trying to work through all of this. Reauthorization is obviously starting to pick up as we head toward 2026. Anybody who pays attention knows that the Highway Trust Fund doesn't work anymore. It will be insolvent by 2028. And so that means one of two things: either we're going to need a general fund transfer, which is what's happened in the past—though I personally think that's less likely in the current political climate.

(11:34):
If that doesn't happen, you're going to be looking at either a shorter program rather than say five or six years, or a smaller program. If it's a smaller program, you could easily see a circumstance where the short end of the stick goes to transit agencies and mass transit starts to see less funding under the next reauthorization. So there's a lot of focus on local funding sources, but I am also personally very focused on reauthorization and what will that mean for transit agencies who do rely on federal funding even as there's more of a focus on state and regional funding. Pat, I'd love to hear your thoughts as you think about the T on this topic.

Patrick Landers (12:13):
Well, I'd agree. There was a letter that came out from the Secretary of Transportation relating to formula grants that said they were conditioned on some things that came from the White House, frankly, and the state of Massachusetts, along with a handful of other states, contested that in court. But you see the same thing with what happened in California when that high speed rail project began and then got pulled. So there's a level of uncertainty and there's a long gestation period for capital projects and a lot of commitment and soft costs that go into things before the funding that becomes disruptive.

Julie Burger (13:01):
Which is a great point. A lot of the federal dollars you get are for capital, but a lot of your costs are operations. So finding that mix is tough. Unfortunately, the federal government wants to cut ribbons and is not so excited about funding operations. So yeah, I think it'll be a challenging year ahead of us.

Devin Brennan (13:17):
Agreed. Just following up on the grant conditions side, there've been a number of lawsuits filed both over additional conditions and specific grants. Just a few days ago out of the Northern District of California, there was a decision in the Fresno case that delivered a preliminary injunction against enforcing some of those additional requirements that have been in place through executive order this year. Randy, from your perspective, are there current revenue sources that might be reduced in terms of their funding rules other than some of the ones we've talked about like farebox? What are you seeing on the revenue side?

Randall Bauer (13:53):
Well, I think Julie's right that counting on federal revenues is difficult for transit agencies at the current time. If you look at the revenue sources other than fare revenue, federal revenue, or some of the smaller portions, the tax revenues that are generally funding the transit systems, the most common are sales and use taxes. That's understandable because that seems to be the tax that most taxpayers are least uncomfortable with; you pay it in small increments. I see that still as a source that's going to exist. I think it's very interesting that Massachusetts was able to pass an income tax because that, of course, nationally and ideologically, is the source that's declining in use, particularly in red states. Target campaigns in some places are going to be what are effective in terms of reduction in revenues.

(14:55):
The other issue is anything with a nexus to transportation. The road building lobby is very strong and they're going to want the share of whatever transportation-related revenues exist in a system. If VMT becomes a national source, that's where it's going to go more likely than transit. So I think transit's going to have to pick its spots and it'll depend a lot on local constituencies and how they make their case. Austin, Texas with Project Connect was able to make a case for a property tax increase, which is the second largest source of local tax revenue for transit, so it's possible to make that case. Now the GM from the system in Austin, Texas is now at WMATA and is working to build that same kind of case for a dedicated funding source.

Devin Brennan (15:49):
Yeah, one of the difficulties for transit agencies is kind of cobbling together all of these revenues, but one of their strengths and resiliencies is that they've got a broad range of revenue sources from farebox, grants, sales tax, and property tax. Pat, Randy alluded to something that I think Massachusetts has been very successful with—other states and regions have been trying it but have not found as much success. Can you tell us a little bit about the Fair Share program and other revenue sources that the MBTA is looking for and success on that side?

Patrick Landers (16:21):
I'd love to. But just to rest on what Randy said, this is the mix of revenues that we have and I think most people are a little bit surprised, first of all, that the federal portion is as small as it is. Second of all, that the section to the right is own-source revenue and that we run a very much subsidized system. A large part of what we do is subsidized by the sales tax and we also have a local assessment which is about equal to the federal portion. But to the Massachusetts experience with the millionaires tax: this played out remarkably for us. When the governor first came in, she put together a transportation funding task force, which was about 45 people from all different industries—some were transit-related, some were academic, some were from healthcare.

(17:43):
They're very reliant; their workforce is very reliant on public transit. Over a number of months they put together a report and in January of 2025, they submitted their final report, which showed a tremendous amount of need and underfunding in our system, and they had identified a series of different revenues. Well, by referendum in 2022, the Fair Share Amendment, which is a surtax on millionaires essentially of 4%, went in. The Department of Revenue, being conservative and not knowing what the effect would be or how many people would practice tax avoidance by going to Florida for six months and a day, projected that revenue source at 990 million. By the time the task force had reported, the fiscal 24 take from the millionaires tax was 2.4 billion. By the end of 24, that had gone up to 2.9 billion. So we had this confluence of two things.

(19:03):
We had this report that says there's all this need and at the same time, we had an abundance of revenue in a particular source. What the governor said is that she would not kick the can down the road, but she would tackle this problem of sustainability. I think we're in a rarefied position of being one of the few transit authorities right now, after the fiscal cliff and after the pandemic, of having a multi-year solution to these problems. I'll show you here how it played out for us: from 24 and 25, if you take a look at the total take, our portion of the millionaires tax was about just under 25%—it was 24.67%, or about $900 million. So that has been really what is giving us the ability to redesign our buses and fix our track improvement plan.

(20:22):
There's another source—I see Sue Perez out there who will be pricing a CTF deal next week—of which the MBTA will get a significant amount of the proceeds, and there's a dedication of the millionaires tax to the CTF as well. The Millionaires Tax was sold to the public in Massachusetts as being for both education and transportation. As it began, the breakdown was two-thirds to one-third because the referendum was funded largely by the Mass Teachers Association. They said, "let's do a third K through 12, let's do a third to higher ed, and let's give a third to transportation." Well, as time went on, the advocates for transportation said, "this ratio and this funding has to change," so now we're more to a 50/50 breakdown. You can see education over its inception is at 51% and these others are the residual.

Devin Brennan (21:40):
Since I sit in both Orrick's Boston office and our San Francisco office, I can tell you that that's a very good example of success. In California, in the Bay Area, they've been struggling more with achieving additional revenue to solve fiscal cliff issues. They've had SB 63 and a number of other initiatives looking at sales tax or additional state funding for transit. It sounds like your perspective is that the citizens took action to save it; it was a citizen referendum, not something that came out of the legislature, and that may be one avenue for others. Randy, are you seeing similar things nationwide? What's the opportunity here?

Randall Bauer (22:25):
Well, the most interesting thing that's happening in terms of new revenue sources is of course MTA with congestion charges, which has been very successful. They're on track to raise the $500 million that they expected for 2025, and it's also had significant positive externalities because you've now got fewer cars in Manhattan and that's improved travel time for buses and for the subway. Ridership is up because of that; buses were up 12-15% the last time I looked and the Subway was up 7%. So that's a win-win because not only do you get the revenue from those that are still going to be driving into Manhattan, but your fare revenue is going to go up as well. It's certainly something that WMATA is considering, even though there are already tolls. CTA has considered it and the mayor of Chicago has come out in favor of it. Of course, the problem is the headwinds from the federal government, which doesn't seem to want to go that route.

(23:34):
There are certainly infrastructure costs associated with that, but the fact is that you've got cameras all over the roads and highways in big cities already, so developing the necessary infrastructure and the process for collecting is something that will take time. It's not like being able to throw a switch from a tax increase, but I think that will be an area, particularly in densely populated cities, that is going to be one of the options. Certainly, BART appears to be going that way; there's going to be a referendum in the counties in the Bay Area. If you can get legislatures to go that route, that's great. I do think the opportunity for citizens to take more control of that process is a good one. Unfortunately, or fortunately, depending on your perspective on referendums, they're mostly concentrated in the Western states, so not as much in the East, but that's certainly one option as well.

Julie Burger (24:31):
I would add to what Randy said. We talked a little bit about congestion pricing, but tolls just more generally have been a pretty major source for transit. I think in Chicago, one of the discussion points was Illinois Tollway starting to contribute toward transit. My home state New Jersey Turnpike is a big contributor toward transit; the GWB is obviously a big contributor. So I also think you're going to see a little bit, as toll roads do really well, some more pressure on them to contribute. Obviously that's a balancing act as well, but I think that's another revenue source. It wouldn't surprise me if you start to see that—Pennsylvania being another good example as well.

Devin Brennan (25:08):
In particular, toll revenues and toll traffic came back faster, at least in many places, than did the transit ridership. So there's more demand there, more need to control congestion, more need to be able to deliver that service, and then that has the possibility of making other service more efficient. We've talked a lot about the revenue side of things at this point. Pat, on the expense side of the budget, as these revenues are changing, how is MBTA thinking about managing its operating budget and its capital plan going forward given the revenues that we've talked about?

Patrick Landers (25:43):
I think this is really interesting because some people look at a dichotomy of revenues or expense reduction and what they miss in that is there's a level at which these places run efficiently and that's what we should be trying to reach. Now, we've seen the opposite; we've seen what happens when you have many years of disinvestment and you run down your assets. When I first started here, we were fixing things just to get them running again, knowing that they would break again. We have a group of mechanics and metalworkers that are making bespoke parts for those trolleys that you see that go around. That's the point at which we were keeping rolling stock that was way past useful life running. And so you can spend good money after bad.

(26:50):
So I think what's very encouraging is that with the millionaires tax, with the commitment of the legislature, and the governor's leadership... I saw Peter Zuk the other day—Peter Zuk's a name some of you might know, he was the project manager on the Big Dig—and we were talking about the MBTA and he said that funding source has been wrong for over 20 years. When we first did forward funding, it was based on growth—depending on if you look at 10 or 20 years history—with a constant annual growth rate in sales tax revenue between six and 8%. What happened since then was of course internet sales. It took states until 2019 to figure out how to get their hands around that and many other things. So when you looked at the actual growth in that sales tax up to 2022 from 2000, it was 2.8%.

(28:03):
There are a number of things that happened in addition. The legislature said, "listen, you're not even going to have to borrow or do debt anymore because you'll have so much PayGo revenue coming in at a rapid pace." So they said, "why don't you take these bonds with you?" And those bonds were done during the Dukakis era that had the full faith and credit pledge on them—what we call legacy debt. So we took an enormous amount of that. The other thing we were asked to do with the Central Artery is Central Artery mitigation. In order for the Central Artery to get its environmental permits, the offset for all this vehicular traffic coming into the city was to do more transit. Well, when you do expansion projects in transit, if you increase the system, it's a subsidized system.

(29:07):
We need then to get more operating revenue. I've showed you the chart showing we're only getting 19% fare recovery, so where does operating more happen? The other thing is that an explicit choice to do one thing is an implicit choice not to do another. And what it meant is we were spending our capital dollars on expansion and we weren't doing state of good repair, because you can't spend the same dollar twice. So all of those things together, along with many years of people saying "reform before revenue," it was a way of not facing the fact that the revenue picture was just not properly adapting to our needs. It was fine when it was put into place, but that's not the way the revenue source performed in the end. There was no accountability for that. We had many years of disinvestment in the system and now I feel very encouraged because we can finally get our arms around this and build a system for the future.

Devin Brennan (30:22):
And for the non-transit nerds—very few of you among the infrastructure group out here—the story that I've always heard was the transit system that was running an 11:00 PM late night train and they realized no one was riding, so they cut that train to save costs. Then they realized that the 10 o'clock train no longer had ridership because people were planning their trip around not being on the last train because they didn't want to get stuck. That way in which people approach the transit system and how you assess that and deliver service accordingly, as you said, is clearly quite important for public buy-in. Are people going to support their transit system? Is it something they're going to want to use and be willing to pay the sales taxes or vote for property taxes? On that cost side, Julie, what are you seeing transit agencies doing to address costs? Are they impacted by inflation? Are they slowing their capital programs?

Julie Burger (31:33):
Yeah, I think it's on two fronts. One is with inflation, you're certainly seeing capital plans be impacted. Sound Transit is probably a great example for those who've been following: voters in 2016 passed a huge measure of taxes to expand the system. They now are saying they have about a $30 billion shortfall in delivering all the projects that they promised voters, which is largely attributed to inflation, the pandemic, and all of that. So you are seeing some capital plans be impacted. I feel like the word du jour is "descoping." Santa Clara VTA, who is working on the BART extension to Silicon Valley—that project cost has ballooned, so they've been looking for ways to achieve cost savings. I think some of it beyond just inflation is that the way people travel and use transit has changed. Whereas there used to be a lot of large light rail plans, I think I'm seeing more bus rapid transit.

(32:31):
Harris County Metro is a really good example. They had a huge MetroNext plan and part of their consideration, as Pat said, was that they can build all these things but they can't pay to operate them. You have to balance those two things. I think they've seen travel patterns within the area change as well. So you've seen a shift toward bus rapid transit and I think you're going to see more of that. This also goes back to the federal funding discussion. If you don't have certainty of federal grants, it's really hard to plan large projects that in many cases have construction periods that could span multiple administrations. So I think it's challenging and you're seeing maybe not a total scale back, but certainly a rethinking of what types of projects make sense and which ones don't.

Devin Brennan (33:21):
As we heard before our panel, one aspect of that is how are you going to deliver those projects? Are you going to do design-bid-build? Are you going to do something along the scale of risk transfers like P3, and how are you going to both manage that kind of risk as well as more efficiently deploy your capital? What are you seeing in that area, Julie?

Julie Burger (33:44):
Yeah, the one unfortunate thing is, as I think the panel before said, P3s are not a magic bullet to a funding solution. You hear certain transit agencies say, "I can't pay for this project, why don't we try a P3?" and that typically doesn't work. I do think there've been some successful P3s and Pat can talk about a few that MBTA has done. The most common, and to me the ones that make the most sense, are transit-oriented development or TOD. WMATA and MTA have both done P3s around Wi-Fi, and I think those can make good sense. MBTA and Chicago Transit did a fare card system P3. So there are certain projects where it makes really good sense, but you've got to find the right project where risk transfer really makes sense. Maybe Pat, you can talk about a few that the T has done.

Patrick Landers (34:39):
Yes, we did with Cubic and our fare collection system, which is keying in on a specific company that has capabilities that we couldn't do internally. But I think looking forward, the speed to market related to EV is going to be an issue because when you enter into these contracts for new rolling stock, there's large variables as to when they come off the line. Particularly now with tariffs, we have a shell of cars that should be manufactured in Springfield that are sitting in Baltimore right now waiting for some judgment on tariffs. There are often delays, and to try to coordinate new rolling stock with the infrastructure necessary to run them is something that I think the private sector could get at a lot quicker than we could—particularly where you have the ability for shared savings and energy efficiency. To be able to get speed to market with that and proper coordination makes good sense.

Devin Brennan (36:17):
Julie, you'd mentioned TOD and obviously there'd been a number of successful projects along that front. TIFIA had at a time been trying to enter that area; they'd been working through a couple issues in the statute around rating requirements and things like that. It's not clear if their interest in that market will still be as strong. Do you see TOD as a future of other alternative sources of capital to finance it?

Julie Burger (36:48):
Yeah, I think when the Biden administration announced the TIFIA TOD or RRIF TOD, there was a lot of optimism that it could be a really popular program. That has turned out to be a bit more of a challenge for some of the reasons you just went through, Devin, though I still am optimistic that there's some projects that can build some type of TOD and then have a resulting positive impact on transit. Typically in cities like New York or Boston, the TIFIA and RRIF programs—and Pat can talk about this because MBTA has been one of the bigger users—can have really great advantages: prepayable at any time, draw down, etc. It can also be challenging. A transit agency that can access the bond market pretty quickly has to weigh those things.

(37:42):
In some environments it makes great sense; in this environment for a highly rated transit system like MBTA, it doesn't quite make as much sense purely from an economic basis. So I think you're seeing a little bit less interest, although BART closed on a fairly large TIFIA loan before the Biden administration left, and the Port Authority of New York and New Jersey accessed the TIFIA program for the new bus terminal. There are other transit agencies working on TIFIA and RRIF loans. So I still think you'll see it used, but definitely we've seen a little bit of change in behavior—part of it's market-driven, part of it's administration and not wanting to put effort into something that may not ultimately come to fruition. Pat, you can talk as well.

Patrick Landers (38:32):
We like the program. We've used it a lot. We're kind of frequent flyers there and what I can tell you is once you crack the code, the second one's easier and the third one's easier. One of the things I'll say about it is that a lot of their regulation and processes are developed for low-rated borrowers. One of the things that we put effort into—and they've been receptive—is modernizing their loan agreement for AAA borrowers. I'd say that is a wonderful program. When we were at historic lows and I was able to lock in a rate at 1.28 when the market was at four, it priced off of 30-year treasury plus one. The way I look at it today in this market is it's essentially a rate lock. But when I look at what a rate lock would cost if I were to go to an investment bank, my transaction fees are about 700k-750k. A rate lock for the last deal that we did, if it was done on the street, would be nearly 3 million in transaction fees.

(40:30):
So I think it's a very good tool to limit your rates going forward. The way I utilize it now is: the last deal I did at a certain rate is kind of one bucket of money, my Build America loans are at another rate, and so long as the cost of funds of the money that I've got in proceeds is lower, I'll utilize that. But there might come a time when the capital market solution is a higher rate than what I'm able to attain through my TIFIA or RRIF loan.

Devin Brennan (41:20):
We've seen similar things with the issuers that we advise, particularly on the sales tax side, that there's the potential to issue interim financing bans that you can use with the TIFIA loan, and therefore you're fully funded, but you've got this rate lock effectively at the end of it because it's immediately prepayable. They're not like a 10-year par call; you can take them out and they are truly flexible. Similarly, their covenant package was designed in many cases for lower-rated toll and revenue risk and greenfield construction projects, which doesn't work as well with a AAA sales tax revenue credit that's not dependent on a project. So you have to figure out how to make it work for the issuer. Similarly, we helped Sacramento airport close the first TIFIA for airports loan earlier this year. That had to work into an existing airport indenture, which differs significantly, and required education on both sides but came to a good result.

Patrick Landers (42:29):
And it can be a great source of capital for a TOD partner.

Devin Brennan (42:32):
Right.

Patrick Landers (42:33):
Which is the other aspect.

Devin Brennan (42:36):
Randy, as we talk about transit and buy-in from various stakeholders, there have frequently been tensions between urban, suburban, and rural constituents, particularly in large transit agencies that might cover an entire county, and even the choice between transit and highways. Is there a solution to bridging this divide and bringing people in to support core competencies?

Randall Bauer (43:04):
Well, that division is definitely real. In both the cases of SEPTA and CTA, part of their not being able to figure out the solution is because they have to go to the legislature and there is an urban-rural divide. Some of that may go away just by the nature of the fact that the rural population in most states is declining and the urban population is growing. But it's kind of like Keynes saying that in the long run we're all dead; you have to deal with the short run in the meantime. One of the things that besides talking about dedicated campaigns is getting the legislature to let local governments tax themselves. It doesn't necessarily have to be a state tax, which in some way may usurp what they're using revenue for. One of the things that has happened with sales taxes over time is that the basis eroded because services are such a larger part of the economy and most services aren't subject to sales tax.

(44:05):
So legislatures are going to be concerned about giving away that possible revenue source. One of the opportunities that exists besides just local governments asking for local option sales tax or a property tax increase is what the Canadian futurist who writes on mobility issues, Andrew Miller, says: you should treat transit as a utility in the same way that you have rate regulation with utilities and they're required to provide a certain level of service. You could do the same with transit. Of course, the concern then is that you've got so many people that rely on that service who would be taxed so much greater. His idea is that rather than subsidizing the agency, you can subsidize the customer. Because so many agencies now use fare cards, you can have income limits and at certain limits the actual fare would be reduced. The other option would be rather than subsidizing the agency, you subsidize the route—this gets into the issues you raised about the last route of the day being necessary so that the next-to-last route will have the ridership you need for it to be profitable. That's a different approach to transit, and certainly rate regulation would be one way around the argument of the rural-urban divide because they would then not be paying for a service that they don't necessarily use.

Devin Brennan (45:39):
Great. Well, I think we've got a couple of minutes for questions left if folks have questions for our panelists on the topics that were presented today.

Audience Member 1 (45:52):
It seems politically not popular to do. If you look at the rate of inflation for construction, labor costs, all that kind of stuff... we never talked about how the fares rarely are increased with anything that even resembles inflation.

Devin Brennan (46:20):
So the question—if anybody couldn't hear it—was why is it a political issue to raise rates in the face of inflation and other things that are raising costs at the same time? Go ahead, Julie.

Julie Burger (46:36):
I was going to say, it's politically unpopular, but the other problem is even if you start raising fares, it's still not going to cover enough of the cost to build and then operate transit. Part of it is just, from a real-world perspective, it's almost not worth it because you still need this other subsidy. I think that's part of the reason when you look at the base of different transit agencies and who's riding, you want to make it affordable. I think transit is an essential service; we all solidified that during the pandemic. So you're also trying to balance that consideration as well. Now, I ride New Jersey Transit and I pay $14 each way, so I guess they have felt more comfortable raising fares, but it really depends a little bit on the system. Pat, maybe you can talk about the T.

Patrick Landers (47:26):
I think it's a great question. I go back to this area chart here and you can see that own-source revenues are not going to swing it, obviously. But then one of the things we care about and look at is the total cost of commute, including parking and everything else associated with it. There's some inelasticity of demand, but our enabling act actually has a limitation on how often we can raise revenues. I think the reason the legislature would do that is because transit is providing a service to those that ride it, but it's also providing a service more generally to the whole MSA to make the city and the whole region work better. There are obviously environmental benefits—we're a coastal city—but beyond that, the ability to get in and out of the city is key, particularly for those people that most need it. What's interesting is that there has been a push for free buses that happened with our RTAs, and Mayor Wu made it an essential tenet of her election campaign. We do have certain routes that are free buses.

(49:11):
The MBTA does not pay for that; the City of Boston has it as a line item and they pay for that annually. They found a couple lines that were entirely contained within the confines of the city of Boston and they happened to be underserved neighborhoods. So I think there's clearly a benefit when I was talking before about us identifying where there are zero-vehicle households that don't have cars. There's certainly a societal benefit for that. I think the other thing I'd say is that this happened with South Coast Rail: when we did expansions into Kingham for Greenbush and then we did South Coast Rail, there was some pushback about why we were doing that. I think we have to be really careful not to say that certain zip codes deserve frequent service and high-level transportation resources while neglecting those people that really need it in Mattapan and other parts of the city. So I think that's also an element: where we put our resources reflects our values.

Devin Brennan (50:49):
Well, I think that's all the time we had. No more than one question, but thank you very much. Let's thank our panelists