Transit Dispatches

Contributing bloggers discuss a variety of topics geared toward the transit and motorcoach sectors.

Back to the list

June 15, 2012

Transit fare hikes getting you down? Blame the banks.

by Nicole Schlosser

This week, the Refund Transit Coalition, a group of transit advocates, workers and supporters, including the Amalgamated Transit Union and the Transportation Equity Network, released an interesting report. It alleges that a major cause of many recent fare hikes and service cuts is due to interest swaps: financial arrangements that transit systems across the U.S. made with banks on a percentage of their debts, which ended up working in favor of the banks when interest rates plummeted in 2008 and were kept artificially low because of the recession.

We got wind of the report, “Riding the Gravy Train – How Wall Street is Bankrupting our Public Transit Agencies,” through WNYC, which ran a story on how the deal has caused the New York Metropolitan Transportation Authority (N.Y. MTA) to lose almost $114 million a year and how the agency will likely continue to lose money on the deals for the next 30 years.

Since the transit systems need to pay for operations, they have to raise fares and cut service to make up for the substantial losses, which are further exacerbating budgets alongside lower tax revenues. Adding insult to injury, many of these Wall Street banks, which were bailed out with taxpayer money, the report pointed out, “use their profits to lobby against laws that aim to curb their abuses, to create and inflate the next economic bubble, to find ways to avoid paying their fair share in taxes and pay out billions of dollars in bonuses.”

Other affected systems, according to the report, include the Los Angeles County Metropolitan Transportation Authority, with $19.6 million in annual swap losses; the Southeastern Pennsylvania Transportation Authority and the City of Philadelphia, with $39 million in losses; and the Chicago Transit Agency, which suffered the second-highest loss after N.Y. MTA, hemorrhaging $88.2 million.

The report also noted that the Massachusetts Bay Transportation Authority (MBTA), another system burned by the deal, has “the highest debt burden of any U.S. transit agency,” and nearly every dollar MBTA collects in fares goes toward paying down the debt. “This crushing debt burden has helped contribute to a FY 2013 deficit of $160 million,” the report adds.

This isn’t the first time we’ve heard this claim about how Wall Street’s high-risk practices have negatively impacted transit. Last October, during the height of the Occupy Wall Street movement, a union official said that he joined the protests because of how these practices were impacting N.Y. MTA’s budget.

However, a N.Y. MTA official disputed the union's calculations to WNYC. He said the swaps “brought predictability to the authority's budget, which needs to be balanced each year,” that the comparison of transactions the agency entered into years ago with “risky variable rate debt right now” is “misleading" and that the swaps enabled the authority to save $248 million.

WNYC also pointed out, though, that the report indicated that was true only until 2007, “when the arrangement allowed the MTA to pay off its debt at nearly a full point below interest rates that were relatively high.”

Meanwhile, whether or not the report is right about the degree of impact the deals have had, the fare increases and service cuts continue to weigh down transit systems, as they struggle daily with rising ridership and less money from local, state and federal sources and are facing yet another transportation reauthorization bill deadline at the end of this month. It just makes me wonder: can transit agencies claim that they’re “too big to fail?”

In case you missed it...

Read our METRO blog, "Courting the next generation of transit riders" here.

Nicole Schlosser

Senior Editor


Write a letter to the editor
deli.cio.us digg it stumble upon newsvine


  • Kenn Winegar[ July 18th, 2012 @ 8:08am ]

    When you put somebody's foot on your neck, odd to complain about the weight.

E-NEWSLETTER

Receive the latest Metro E-Newsletters in your inbox!

Join the Metro E-Newsletters and receive the latest news in your e-mail inbox once a week. SIGN UP NOW!

View the latest eNews
Express Tuesday | Express Thursday | University Transit

Author Bio

Heather Redfern

Public Information Manager, SEPTA


Marcia Ferranto

President/CEO, WTS International

Marcia Ferranto is President/CEO of WTS International.


Scott Belcher

President and CEO, Intelligent Transportation Society of America (ITS America)


Joe Zavisca

Joe Zavisca is an independent consultant specializing in paratransit service.


Paul Mackie

Communications Director, Mobility Lab

Paul Mackie is communications director at Mobility Lab, a leading U.S. voice of “transportation demand management.”


Rob Taylo

Founder/CEO SinglePoint Communications

Rob Taylo is founder/CEO of SinglePoint Communications, an exclusive U.S. distributor of WiFi in Motion.


Joel Volinski

Director, National Center for Transit Research at CUTR/USF


Zack Shubkagel

Partner/Creative Director of Willoughby Design

Zack Shubkagel is partner and creative director for the San Francisco office of Willoughby Design, a strategic branding and design firm.


White Papers

Factors in Transit Bus Ramp Slope and Wheelchair-Seated Passenger Safety Nearly 3 million U.S. adults are wheelchair or scooter users1, and as the population ages this number is expected to rise. Many wheelchair users rely upon public transportation to access work, medical care, school and social activities.

Mass Transit Capital Planning An overview of the world-class best practices for assessing, prioritizing, and funding capital projects to optimize resources and align with the organization’s most critical immediate and long-term goals.

The Benefits of Door-to-Door Service in ADA Complementary Paratransit Many U.S. transit agencies continue to struggle with the quality of ADA service, the costs, and the difficulties encountered in contracting the service, which is the method of choice for a significant majority of agencies. One of the most basic policy decisions an agency must make involves whether to provide door-to-door, or only curb-to-curb service.

More white papers


 
DIGITAL EDITION

The full contents of Metro Magazine on your computer! The digital edition is an exact replica of the print magazine with enhanced search, multimedia and hyperlink features. View the current issue