MBTA Debt: Out of Control and Getting Worse

So all of you who testified at the various MBTA public meetings in opposition to the fare increase that took effect in January—the largest increase in its 100-year history—we need your help.  The MBTA remains in a serious fiscal state.  Since forward-funding legislation was passed in 1999, it has relied on the sales tax, town assessments, and fares for virtually all its revenues.   

At the heart of the MBTA’s  huge—and growing—problem is its massive $8 billion debt burden.  The authority devotes 27 percent, or $363 million, of their annual budget to debt service payments, which represent the authority’s largest single expense.  If this debt debacle goes unaddressed, over 30% of its expenses will go to debt service by 2010.

Download mbta_expenses.doc

The MBTA’s debt service by far the largest in the country; as disturbing as its size is its origin.  Much of this debt can be attributed to central artery tunnel transit commitments.  While other parts of the Central Artery Project were paid for up front, these Central Artery-related commitments were shifted with little debate to the MBTA as part of the 1999 legislation.  The Central Artery could not have been built without these transit expansion projects that allowed the Big Dig to comply with federal Clean Air Act requirements by offsetting increased pollution from traffic. Ordinarily, federal transportation money would have largely paid for those projects. But as Big Dig construction went billions over budget, it swallowed up these state and federal dollars. These transit expansions will greatly benefit the Commonwealth, but the cost should have been part of the Big Dig’s overall budget, not dumped on the T.

Our current revenue stream means that the increasing debt service can only be accommodated by raising fares.  Why?  The MBTA’s other funding sources have fallen short of the Legislature’s expectations. In 2000, the Legislature allocated to the MBTA 20 percent of the state’s 5 percent sales tax as a way to replace most annual allocations. Projections to the legislature were that the sales tax would grow by 5 percent each year as it had during the 1990s, providing the T with adequate revenue to meet operating expenses and pay down its debt. But revenues remained flat—or even fell.  In 2002 sales tax declined by 1.6%. By 2007, the T had been “shortchanged” by hundreds of millions of dollars. 

Download sales_tax_projected_vs. Reality.doc

So we need to act…but how?  Continued fare hikes are not the solution.  Further fare increases will continue to jeopardize T revenues:  Since 2000, T fares have doubled, resulting in flat to falling ridership numbers.  I have filed legislation with Alice Wolf, Carl Sciortino and MASSPIRG directing the Commonwealth to assume the portion of the MBTA that was connected to the Central Artery commitments.  It’s the only way to relieve the MBTA of debts it didn’t incur and can’t afford to pay. 

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[John G]

It seems to me that an important piece of the MBTA and road infrastructure problem is to increase the revenues from taxes on gas sales by increasing the gas tax. It hasn't increased since 1990. With gas price of at least $2.50 a gallon most of the time and probably to go up a .10 cent increase would be only a 4% increase on people's gas bills. The gas tax could be even higher on premium gas. Doing this would help promote the use of more energy efficient cars and make the use of public transportation slightly more attractive as well which would increase its revenue a bit.

[Charlie D.]

Thank you for addressing this very important issue. Transportation is an important part of everyone's daily lives, and the MBTA is a key part of this. We should be doing all we can to keep Boston a livable place and reduce our dependence on the personal automobile as much as possible.

I truly hope the T can have its debt taken care of and have a solid funding mechanism put into place.