Report: 21st Century Transportation

Derailed By Debt

Unhealthy Choices The MBTA Will Be Forced To Make In FY2009 - FY2013
Released by: MASSPIRG Education Fund

The Massachusetts Bay Transportation Authority (MBTA) faces an uncertain financial future over the next five years. With debt service payments increasing, along with other costs, the MBTA will face sizeable budget gaps forcing the Authority to choose among unhealthy options to close these structural deficits. These options primarily include: further dramatic fare increases, service reductions, or more borrowing.

Unfortunately, all of these options would negatively impact the MBTA and its riders by making the system less affordable, less available, less frequent, or more indebted in the long run. The result will be a decrease in ridership.

Decreasing transit ridership will adversely impact the Greater Boston region as a whole. Instead of using transit, many commuters will drive automobiles. The result will be worse traffic congestion and air pollution, greater stress on road and bridge infrastructure, as well as greater oil dependence.

The primary cause of the MBTA’s financial crisis is a huge debt that grows each year of this projection, combined with slow growth in the state’s sales tax, which a portion of funds the MBTA.

Our analysis, confirmed by the MBTA Advisory Board, shows that:

MBTA faces multi-million dollar budget gaps from FY2009 – FY2013 caused by
huge debt.
• Operating deficit of $67 million to $69 million in FY2009.

• Five year funding gap between $357 million on the low end and $438 million on the high end.

• A growing debt time bomb with annual debt service payments that will reach over half a billion dollars in FY2013, threatening the MBTA’s long-term financial stability.

MBTA will be forced to choose among several “unhealthy” options to close budget gaps.
• An across-the-board fare increase of approximately 38 percent over the five year projection, which is more than double the rate of inflation (see Appendix B for fare increase dollar amounts).

• Significant service decreases, including a reduction in service on evenings and weekends and the elimination of some bus routes.

• Debt deferment into the future, thus extending the MBTA’s unsustainable debt obligations and making them greater over time.

Available options have negative impact on MBTA ridership and finances.

• Fare increases at this time would likely result in ridership decline.

• Service reduction would also result in ridership decline.

• Debt deferment could add to the MBTA’s $8.1 billion debt with interest, making the Authority less able to fund its operations, attract or retain riders, and burden future transit riders and tax payers.

• None of these options raise enough revenue or achieve savings to adequately address MBTA maintenance backlog

Debt relief needed to improve MBTA.

These projections show a growing financial gap that will threaten the Commonwealth’s largest transit system and impair its ability to increase ridership, provide quality and affordable service to commuters, foster economic growth, and ease the region’s traffic and air pollution problems. To seriously address the MBTA’s financial instability, Massachusetts policy makers must provide either partial debt relief for the MBTA or new revenue sources to help pay down the agency’s annual debt costs. Not taking these actions will consign the MBTA to a predictable fiscal train wreck.

MASSPIRG supports the September 2007 recommendation of the Transportation Finance Commission to relieve the MBTA of $1.8 billion of debt associated with Central Artery/Tunnel commitments.

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