More on Credible Commitment and Transit Investment

I recently highlighted credible commitment as a factor that influences political support and coalitions for transit investment. In Los Angeles Measure J failed by a small margin in part because groups who should be natural allies of the MTA did not find the agency a credible recipient of dedicated sales tax revenue through 2069. Independent of the merits of any investment priorities, transport agencies need to be much more aware of how trustworthy they are in the public view in large part because of the changing structure of transport finance.

Federal funding is declining as a share of overall transport investment. As a response, local, regional and state actors have to take a larger role in taxing and spending for transport, as well as assessing priorities for investment. Voters are not likely to support new taxes, road fees, transit fares and other revenues if they think their money will be spent foolishly or dishonestly. For instance, in the New York region the Port Authority of New York and New Jersey damaged it's reputation after raising tolls on their Hudson River crossings in 2011. The dramatic increase in tolls was widely perceived to be needed for reconstruction of the World Trade Center site, and AAA filed a lawsuit on these grounds. Here is more from the Wall Street Journal with some details that the WTC site is diverting money away from existing infrastructure. Overall, the actions of the Port Authority will make it more difficult to raise revenues for required maintenance and new investment in the future regardless of the merit of the WTC project. Also in New York, the MTA is still negatively affected by the myth that they used to keep two sets of books. There never was a second set, but the MTA is less credible because of the perception and has trouble gaining political support at the state capital. I wrote about credible commitment and the MTA last year here and also highlighted distrust toward the Twin Cities Metropolitan Council because of investment choices the agency made.

So when I read stories such as this one from San Antonio, where the transit agency is swapping money with the highway department to avoid a lawsuit about improper use of sales tax revenues, I worry that the agencies involved are causing long term harm for short term gains. From the San Antonio story:

In a funding swap, $92 million in state money previously set aside to add nontoll lanes on U.S. 281 and Loop 1604 would replace local money reserved for the streetcar project.
In turn, the local money assigned to streetcars would go to adding the nontoll lanes.
The local money comes from the Advanced Transportation District, funded by a 1/4-cent sales tax approved by voters. The state money is from the Texas Mobility Fund.
The Texas Transportation Commission, which governs the Department of Transportation, is expected to vote Nov. 15 on shifting the state money.
Whether the new funding plan will crush any potential court challenge to streetcars remains to be seen.
Jeff Judson, a staunch opponent of rail and the use of ATD funds for streetcars, questioned the legality of spending TMF funds instead.
“I just don't think TxDOT should be accommodating the expenditure on transit, when it's just not their role, and transit will do nothing to reduce congestion,” said Judson, director of the Heartland Institute, a free-market advocacy group.
TxDOT Executive Director Phil Wilson said the agency's proposal to assist with the streetcar funding reflects its increased focus on partnerships.
“We want to find the best opportunity to take dollars and extend them as far as we possibly can,” Wilson said, adding that TMF money is among “the most flexible of funding sources the state has.”
Bexar County, VIA and the city voted last fall to fund the 5-mile streetcar system along with park-and-ride and transit centers.
But the streetcars — the centerpiece of the plan — generated the most controversy.
ATD money was just one of the funding sources, but streetcar opponents, including several Republican elected officials, said it could not be spent for streetcars because voters were promised it wouldn't go to light rail when they approved the sales tax in 2004. Streetcars and light rail, opponents contend, are the same thing.
Longtime rail advocate Judge Nelson Wolff disputes the similarity and believes officials were in the right to use the ATD money. But he didn't want to risk a lawsuit that could delay streetcar construction.

Again, my point is not about the relative merits of streetcars or light rail or roads or park and rides. Rather, the convoluted process of swapping money to achieve a desired result is problematic. In this case, streetcar investment. I will note that the most likely reason that the voters were not asked about streetcars on the 2004 ballot is that at that time the federal government didn't provide funding for streetcars. A change in how projects are evaluated put in place during the Obama administration opened the door for lots of streetcar projects. Cities had no idea what they were missing until the feds starting picking up the tab. Back to my point, as transit agencies become more responsible for raising money and prioritizing investments they have to become more accountable for those decisions, and they must act is ways that enhance credibility rather than reduce it.  Money swaps, poor investment decisions and other actions are problematic for good long term governance of transport investment.

Are Transit Agencies Credible?

Transportation finance is politically challenging in the best of times. These are not those times. In the New York region, the New York MTA has responded admirably to the damage caused by Hurricane Sandy. Will their efforts and effectiveness in restoring most service in the aftermath help the credibility of the authority with the public and elected officials? We'll see. What about New Jersey Transit, which is also working hard but has not had the same success restoring service?

Credibility matters for agencies more than generally thought. Mike Manville and I wrote a paper about credible commitment as a barrier to congestion pricing, where we argue that agencies that are not viewed as credible have particular challenges with politically difficult policies. In Los Angeles, credible commitment is a major issue facing the ballot Measure J to extend a dedicated sales tax 30 years to pay for transit improvements. Specifically, LA bus riders, who are the overwhelming majority of transit users, don't think the new revenue will be spent on improving bus service. Rather, they think that the LA MTA will spend the new money on expensive rail projects. From the LA Weekly story:

"The potentially devastating impacts of Measure J -- combined with the MTA's record of shamelessly ignoring the needs and concerns of working class Latinos and blacks as it advances a corporate-driven agenda -- has moved leaders of major churches to speak out," said the Bus Riders Union in a press release.

The Measure's supporters don't understand the opposition:

Denny Zane, a leading advocate for the 2008 countywide sales tax hike approved by voters -- and a key force behind this proposed 30-year extension of that tax hike just four years later, finds the Bus Riders Union's position galling.
Zane says that both Measure R from 2008 and the proposed Measure J on the November 6, 2012 ballot send 20 percent of the tax hike into the bus system.
"All around the country, bus systems had major dramatic cutbacks," Zane says. 

 To which the Bus Rider's Union responds:

But Measure J opponents point out that to the millions of bus riders, 20 percent of this latest tax hike is chicken feed.The vast majority of the millions of mass transit users in Los Angeles and its suburbs use the bus -- not the subways and light rail. But, they note, under Measure J, the subways and rail get the lion's share of this proposed sales tax hike to 2069.

There are good reasons to be skeptical of the LA plan. Here is a overview of service and investment since the sales tax measure first passed in 2008:

Since 2009 the MTA has added eight miles of train service, at a capital cost of about $2 billion. These new trains, the Expo Line and an extension of the east-county Gold Line, carry a total of about 39,000 people a day.

In the meantime, the cash-strapped authority radically reduced bus service twice: It cut bus lines by 4 percent in 2010 and 12 percent in 2011. These cuts were made even though buses move more than four times as many Angelenos as trains do.

 Bus riders in Los Angeles have a long history of feeling like they are not a priority. They have genuine reasons to oppose Measure J. The MTA also needs to recognize that they have credibility problems that they have to address. Is the MTA credible enough to trust with dedicated sales tax revenue until 2069? That's a lot of required trust. Damien Goodmon of the Crenshaw Subway Coalition has an answer:

"Can you trust these guys with that much money?" asks Damien Goodmon of the Crenshaw Subway Coalition. "Hell, no!"

And he likes transit spending:

Goodmon favors transit spending but hates the way Metro has gone about it. He's pissed off about the gobs of money being lavished on the Purple Line Westside Extension, which will run under Wilshire Boulevard.
The $6.3 billion to $9 billion Westside Extension will suck up a hefty chunk of the sales tax collected from consumers countywide, yet it falls miles short of the "subway to the sea" once promised, and it won't be completed until 2035.
Meanwhile, the planned Crenshaw Line in South L.A., serving mostly black and Latino riders, will be built on the cheap, at ground level. Goodmon has pleaded with Metro to address safety concerns at points where the line will intersect with streets.
Other black leaders were outraged when Metro's board chose not to build a Crenshaw Line transit stop at Leimert Park, which, in the eyes of many, is the business and shopping heart of black Los Angeles.
Goodmon says the Metro board's unfairly tilted votes on where to spend Measure R taxes amount to "basic economics: We're getting jacked."

Getting jacked, indeed. It is possible and reasonable to support transit investment and oppose Measure J (or any other similar measure). The agencies responsible for collecting and spending the money must be credible. It is not clear that this is the case in LA.