Management & Operations

Follow the money

Posted on January 1, 2006 by Frank Di Giacomo, Publisher

Though still young, 2006 holds great promise for public transportation. With SAFETEA-LU’s belated approval last year — and its guarantee of $52.6 billion in transit funding — the industry can rest assured that federal dollars are available for qualified transit projects (barring any shifts of funding due to hurricane-related budget items). And there’s no doubt that the transit industry — especially its rolling stock manufacturers and suppliers — needs an infusion of cash. The economic slowdown of the past several years has placed a tremendous strain on the resources of the supplier community, even forcing one bus manufacturer to close its doors recently. Railcar manufacturers are also straining to keep their collective heads above water. Invest wisely — and soon
Transit properties that are now in position to procure new buses or railcars are encouraged to take the initiative. Manufacturers are sorely in need of new business to keep their assembly lines moving and their workforces employed. When we talk about the transit industry contributing to the nation’s prosperity, we need to remember that industry suppliers are key contributors to the economy’s overall health. Having spoken earlier of the federal dollars available for transit funding, I would be remiss if I didn’t emphasize that the federal investment is only one part of a larger whole. The necessary matching dollars from local and state funding sources are the other part of the equation. And here is where, in many cases, transit systems need to push harder than ever. Many transit properties are seeing their capital projects delayed by an inability to come up with local matching funds to the federal dollars. That’s why it’s imperative that transit agencies pursue every opportunity to fill their coffers with local funding. Now is a great time to make that your top priority, especially since local and state governments are regaining their budget footing after years of backsliding. Options for your consideration
Relying on the traditional sources of local and state funding isn’t enough, however. Here are a few other ideas that you should consider: Don’t forget how successful transit-related ballot initiatives were in 2004. About 80% of the measures were approved. In all, voters approved $55 billion in transportation referenda, of which $22 billion goes directly to transit. These recent successes at the ballot box signal greater local support for transportation projects. If applicable, take advantage of this trend by considering a transit referendum in your own backyard. Consider public-private strategies to help stretch your local match. For example, you might want to look into installment financing or leasing for procurement of rolling stock. Payments can be applied as capital-eligible expenses. Transit systems with cash-flow limitations might want to consider this option. Also, squeeze every possible dollar from ancillary revenue streams. Offering sponsorship and naming rights to rail stations has generated significant amounts of funding for some properties. Even small things like cart concessions at BRT and rail stations can generate a meaningful revenue stream. One of the key benefits is that this ancillary revenue can be counted as local match funds. Finally, use the supply community as a resource. As you probably know, the business arm of the transit industry has a tremendous knowledge base and intimate understanding of funding issues and mechanisms. And, as I’ve already mentioned, they’re hungry for business and will be highly motivated to provide you with funding solutions.

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