[IMAGE]MET0209p18-large.jpg[/IMAGE]Now is definitely a Dickensian moment in public transport. On the one hand, given its high profile and expected infusion of investment, there could be no better time to be in the public transport industry since its heyday in the last century. On the other, many of the same issues that plague the general economy — a credit crisis, unreliable energy supplies, outmoded labor practices and the inability to adjust quickly to sudden market changes — also make it some of the worst of times for transit.

Identified by policy makers in major developed nations to help the global economy in stopping the economic slide and buoyed by local referenda in many U.S. cities in the November elections, the industry is set to receive unprecedented amounts of money. All this occurs at a time when the federal government, after an historic election and ensuing changes in the government’s role in helping to build long-term, sustainable economic growth, is set to renew or possibly even rewrite its surface transportation policies.

That said, the stimulus legislation announced by Congress just before President Obama took office disappointed many. Although some complained that it will spend three times as much on highways ($30 billion) as on transit ($10.1 billion), it is better than the usual ratio that federal programs have followed in recent years. Environmental groups demanded that transit receive equal treatment with highways.

The critics have good reason to feel a little disappointed, however, given the promise of higher expectations leading up to the bill. Intercity rail would get about $1 billion, only 20 percent of what the House Transportation and Infrastructure (T&I) Committee recommended just after the election ($5 billion). Airports would get about $3 billion, just more than one-half of what the T&I committee proposed last fall.

The rapid influx of unprecedented amounts of money presents a pleasant challenge to industry leaders: how to spend it fast enough to achieve these large and very public goals. To that end, T&I Committee Chairman James Oberstar (D-Minn) met with affected industry groups to urge them to get ready and warned them that the money will have to be spent within the 120-day window or be lost to others that meet the requirements. Conversely, the industry also wants to ensure that any investment made as part of the package enacted to help stimulate the economy not preclude further funding increases and needed changes in federal public transportation policy in the U.S.

Money for “ready to GO” new starts, small starts

Absent from the economic recovery package is a proposal for a $60 billion National Infrastructure Reinvestment Bank, an element of the Obama-Biden campaign platform. The final amounts and strategy will likely be reworked by the time you read this, as Congress develops the complete proposal.

However, both the Obama administration and the T&I Committee insist that very little of this new money will be earmarked, meaning that existing formulas will be used for $8 billion of the $9 billion public transportation total, as well as most of highway portions in the stimulus bill. The $1 billion for the New Starts/Small Starts program is for specifically identified “ready to go” new starts and small starts.

By contrast, during the lame duck session of the previous Congress following the election, Oberstar floated an $85 billion infrastructure proposal. It included $12.5 billion for the “ready to go” public transportation projects mentioned above, while $30.5 billion would be provided to highway infrastructure, $3.4 billion to high-speed and intercity rail grants, and $1.5 billion for Amtrak, with the remaining funds going toward other infrastructure investments.

Although it was hoped that a stimulus bill could be enacted and put on Obama’s desk immediately after he took office, it is now more likely to be completed before mid- to late-February. Ironically, this bill will come before a finished Fiscal Year 2009 transportation appropriations bill, which will be taken up shortly thereafter.

Despite state, local success…

Meanwhile, voters across the country have again signaled their support for transportation-related investment. Voters in November approved more than $75 billion in funding for transportation, a success rate exceeding 70 percent, continuing the high batting average that now stretches nearly a decade. In the fall election, 24 measures in 16 states were approved, 18 of which increased taxes to pay for the investments. In total, voters approved more than $75 billion in new transportation related programs.

The largest of these measures were on the West Coast. In Los Angeles County, a majority of voters said yes to a one-half-cent increase in the sales tax, totaling $40 billion over the next 30 years, roughly one-third of which is for public transportation. In Seattle, voters also approved a sales tax increase for Sound Transit’s $17.8 billion plan for 34 miles of light rail and expanded bus service. In California, a $40 billion, 800-mile statewide high-speed rail plan partially funded with a $9.9 billion bond issue was also approved.

The November success also dramatically demonstrated support in a tough economic year. In fact, all of 2008 will go down as one of the industry’s most successful ever at the ballot box, since 12 of 15 such decisions passed in eight states earlier in the year, worth approximately $40 million a year for local transit agencies.

State, local budgets in crisis

These heady victories come at a time when states and cities weather the financial firestorm ignited in 2008. According to figures compiled by the National Conference of State Legislatures, states have already closed a cumulative gap of nearly $40 billion as they prepared their FY 2009 budgets, yet still face another $30 billion chasm that has opened since these budgets were enacted, and a cumulative shortfall of $63.7 billion projected for FY 2010. This deficit will undoubtedly grow because half the states had yet to release budget forecasts for the coming fiscal year, which begins, for most, in June.

More than one-half the already projected amount is in two states: California and New York. It is thus no coincidence that both governors have asked President Obama for a rescue plan for state governments, similar to what has been provided to the financial system and the U.S. auto companies.

Accordingly, the stimulus legislation will waive the requirements for at least a 20 percent funding match by project sponsors. The lack of ability to provide a local share is what many believe to have been a major contributor to the industry’s last recession in 2001, even though there were record amounts of federal transit assistance available then as there is now.

[PAGEBREAK]What of (re)authorization?

Although industry officials are behaving as though renewal of the federal surface transportation law scheduled for consideration this year will go as planned, both history and current circumstances are likely to put it off at least a year.

This has not stopped various interest groups, ranging from APTA to the National Governors Association to several broader pro-investment coalitions, from making proposals for massive increases in the federal commitment. The APTA proposal, for example, contains such an expansion toward reaching five overall objectives:

  • More than doubling total federal expenditures over the next six years;
  • strengthening funding guarantees put in place in previous legislation;
  • streamlining the rules governing project delivery and simplifying the program’s structure;
  • enhancing transit’s role as a tool for reducing greenhouse gas emissions and U.S. dependence on foreign energy sources, particularly oil; and
  • promoting the development of a skilled industry workforce.

Other groups are even more strident in both recognizing transit as a tool in sustainable development and energy security as well as providing a means to make a difference. Both the Friends of the Earth and Reconnecting America, among others, think that these proposals are too timid, given the urgency of the concerns being faced.

Some of them point to what other nations are doing to address the economic crisis. Ironically, however, a percentage of regional economic activity in many U.S. cities compares favorably with many international cities more famously known for their urban transport systems. Denver, for example, spends more money as a share of its economy (12 percent) than does Paris or London (9 percent each) and more than twice as much as Hong Kong (5 percent), according to UITP data. The real difference is in population density;Denver is four times less dense than Paris and 21 times less dense as Hong Kong.

Nor are these plans as aggressive as the American stimulus package or the rate of increase in longer-term public transportation investment that could be considered in reauthorization. The European Union’s, for example, is similar to the U.S. strategy in that it is based on two synergistic aspects; short-term measures to boost demand, save jobs and help restore confidence in the financial system; and longer-term targeted “smart investments” to foster sustainable development.

Moreover, the European plan only calls for its member nations to enact temporary fiscal stimulus bills of around 170 billion euros (just over $300 billion USD), which at 1.2 percent of the EU’s GDP, is barely one-third of the American actions. The European Investment Bank would kick in another 30 billion euros ($50 billion USD).

Federal program reform wanted

In addition to the levels of spending, various factions of the industry want to reform how that money is delivered to transit systems. Most, like the APTA position, want to simplify the distribution and, most of all, speed up how new projects proceed through the FTA’s “evaluation” pipeline. This is especially so since the federal share of capital spending in the industry is now around 40 percent, far less than for highways and far less than the statutory maximum federal share. Yet some experts have testified that it takes somewhere between two years longer — some argue twice as long — for a project to go through the federal system as it would if it was funded entirely out of state and local funds. It is one of the major reasons why the number of projects in the federal evaluation process has fallen dramatically in the past several years.

Because it is uncertain at this point, how and when the federal program will be changed will have to be the topic of future articles. What is clear, however, is that the program will grow, and dramatically so. The real challenge may be in whether local transit systems and the agencies that govern them can handle all the new money so quickly.                  

Cliff Henke, a contributing editor to METRO, is senior analyst at PB. His views herein are solely his own.

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