Building the Massachusetts

Economy through Transportation

Investment
presented to
A Better City

Moving the Economy

Forward through Investing
in Transportation

presented by
Marc Cutler, Senior Vice President
Cambridge Systematics, Inc.

March 17, 2009

Transportation leadership you can trust.
 Agenda

Relationship between Transportation Investment

and Economic Growth

Scope of the Transportation Finance Problem

Revenue Options

2
 Relationship between Transportation
Investment and Economic Growth

3
 Transportation Investments
That Changed the World

4
 Linkage between Transportation Investment
and Economic Development

Transportation System Investment

Travel Time Cost Reliability

Productivity Labor and Market Access

Competitiveness

Economic Growth

5
 Linkage Between Transportation
Investment and Economic Development
Nationally

6
 Linkage Between Transportation
Investment and Economic Development
Nationally

$1B transportation
construction = 27,800 jobs

Interstate highway investments

have contributed 25% of total
productivity growth since 1956

Highway bottlenecks cost

truckers $8B per year

7
 What Would the Region Look Like if We Didn’t
Invest in Transportation in the Recent Past?

1967 2008

8
 Linkage Between Transportation
Investment and Economic Development
Locally

“The availability of “The T’s radial network

public transit is a does not work for
factor in our global patients, families, and
site location employees…and drives
decisions” some employees away”

~ Genzyme ~ Children’s Hospital

“Companies want a
“We are terrified Boston address and
that something dire ease of commute is
may happen to the critical to Boston’s
Longfellow Bridge” success”
~ MIT ~ Federal Reserve

9
 Economic Impacts of Transportation Investments
Locally

The cost of congestion in Boston increased from $550m

in 1991 to $1.8b in 2005 ($895/driver)

$70m in $2.5

Springfield
Annual Cost of Congestion (in $billions)
$2.0

$1.5

$1.0

$0.5

$-
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Cost of Existing Congestion Additional Congeston Cost if Public Transit Discontinued

10
 Economic Impacts of Transportation Investments
Locally (continued)

Big Dig generates $165m in user savings

Cost of bad roads in Massachusetts in vehicle repair

costs
• $718M per year
• $300/household

Urban Ring forecast to be worth $4B in economic

benefits (2x cost)

11
 Davis Square
Case Study

Property values in
Davis/Porter
Squares are 24%
higher than in
Somerville as a
whole due to the
Red Line extension
to Alewife

12
 South Boston Seaport District
Case Study

Development
catalyzed by the Big
Dig and Silver Line
• Boston Convention
and Exhibition
Center
• Institute for
Contemporary Art
• Office and hotel
development

13
 Life Sciences Cluster

Competition for
life science
business is
intense

Transit provides
this cluster with
access to labor
and mobility for
effective
collaboration

14
 MAPC’s MetroFuture

Denser development
patterns and more
transit lead to:
• 25% more job
growth
• Slower growth in
vehicle miles of
travel

15
 Scope of the
Transportation Finance Problem

16
 MA Transportation Finance Commission Findings
Summary

State faces a $15-19 billion funding gap over the next 20

years just to maintain the existing system

Virtually every agency is running structural deficits

System conditions are in broad decline

Revenue is squeezed from all sides

We have no money for expansions or enhancements

The Federal gas tax is similarly squeezed

17
 MA Transportation Finance Commission Findings
MA Has Highest Highway Debt in the Nation by Far!

Debt Payments as a Percent of Total Highway Spending

2004

Percent
50
45

40
35
30

25
20
15
10

5
0
ID NE SD WY MT VT AK OR TX MI NV SC WV MD PA WA MS NH OK VA GA HI UT AZ NJ MA
IA ND TN CA MN NC AL DC AR MO LA CO WI ME IN KS IL FL OH KY NM RI DE NY CT

State

Source: “Transportation Finance in Massachusetts: An Unsustainable System,”

Findings of the Massachusetts Transportation Finance Commission, March 28, 2007.
18
 Changes Since the
Transportation Finance Commission Report

2008-2011 State Transportation Improvement Plan (STIP)

disapproved by Feds due to lack of credible financing
plan

Transportation Bond Bills

• $3.5 billion for rebuilding roads and bridges
• $700 million for State Implementation Plan (SIP) transit
commitments
• $500 million for chapter 90 local projects
• $3.0 billion in accelerated bridge repair

Civilian flaggers permitted on state and local projects

19
 Gas Tax Has Lost More
Than 1/3 of Its Buying Power Since 1991
$0.40

$0.35 Consumer Prices

$0.30

$0.25
Gas Tax

$0.20

$0.15
1991 1993 1995 1997 1999 2001 2003 2005 2007
The average consumer good that cost 21 cents in
1991 would now cost 34 cents
20
 Changes since the Commission Report
MBTA

Operating deficit of $160 million for FY ’10

Will result in major fare hikes and service cutbacks

Rising expenses (fuel) offset increased farebox revenue

Borrowing to pay arbitration wage award

Raised parking fees by $2

Swaptions increased debt costs by $55 million

Committed to $3.75 billion in capital spending

Deferred CR locomotive purchase

21
 Changes since the Commission Report
MTA

Tolls increased less than planned in 2008, and traffic

declined

Proposed dramatic toll increases for 2009

Swaptions turned out badly – increased debt service by

$24 million

Laying off 20% toll collectors – save $10 million

Reduced administrative staff by 25% – saved $15 million

Changed FAST LANE financing from transponder

purchase to monthly fees
22
 Revenue Options

Efficiency, through reform is vitally important,

but not sufficient

23
 Revenue Options
Overview

There are no “free” sources of revenue

Innovative finance is often a fancy term for debt

Debt is not revenue in the long-run

24
 Revenue Options
Potential New Sources

Vehicle miles of travel Parking taxes

(VMT) tax
Property tax
Other types of motor
fuel taxes Personal income tax

Other types of vehicle General fund

fees and taxes
Carbon tax
High occupancy toll
(HOT) lanes Development related fees
Container fees Public/private partnerships
Engine displacement
and emissions fees
25
 Revenue Options
Criteria for Evaluating

Revenue yield, adequacy, and stability

Cost efficiency

Equity

Economic efficiency

Promote other desirable policy goals

Technical feasibility

Political acceptability

26
 Gas Tax in Context

Since 1991, MBTA fares have been raised 3 times

At least 10 states are considering gas tax or related

increases

At 60 gallons/month, 19c = $12/month

• Cable TV = $50
• Beverages = $77
• Eating out = $300

Households not owning cars (1 in 9) will pay nothing

Half of all subway/rail riders, and 75% of bus riders, have

incomes under $50k
27
 So…
How will Massachusetts Look in the Future?

28