THE FUTURE OF FEDERAL FUNDING IS FINANCE: Move LA returns from Transit Initiatives Conference in Atlanta

Move LA just got back from three hot days in Midtown Atlanta at APTA’s (American Public Transportation Association) Center for Transportation Excellence Conference, where cities and regions from around the U.S. gathered to discuss mounting sales tax initiatives and finding other new sources of revenue for transit.

Detroit, Seattle, St. Louis, Denver, Charlotte, Salt Lake City, Atlanta, Phoenix, Philadelphia and Baton Rouge were among the several dozen cities and regions in attendance. The success of Measure R in Los Angeles has boosted interest in sales tax initiatives in part because the amount of money raised ($40 billion) is so impressive, and because former LA Mayor Antonio Villaraigosa and U.S. Senator Barbara Boxer succeeded in convincing Congress to expand the TIFIA low-interest loan program -- revenue streams from sales taxes can be used to secure TIFIA loans. (TIFIA = the Transportation Infrastructure and Financing Innovation Act.)

Researcher (and conference presenter) Stephanie Pollack, associate director of the Dukakis Center for Urban and Regional Policy at Northeastern University in Boston, analyzes the Measure R campaign and Move LA's role in it in a new study available soon.


Both APTA and the national nonprofit Transportation for America agreed that federal financing -- as distinct from federal funding -- is the future, whether through the TIFIA loan program or a new America Fast Forward bond program that has been proposed by Villaraigosa and LA Metro. T4America Policy Director Nick Donohue said that the TIFIA loan program may be the only new source of money for transportation in the next federal reauthorization. “Why take out a loan when you could get a grant?” Donohue asked rhetorically. “Because when it comes to providing free money for transit, the feds are pulling back. Financing is here to stay.”

The TIFIA low-interest loan program was bumped up from $122 million per year to $750 million last year because of the efforts of Villaraigosa and Boxer. TIFIA will be bumped up again this year to $1 billion, an amount that will allow the U.S. Department of Transportation to provide $10 billion in loans.

Donohue noted that TIFIA loans provide transportation agencies with significant advantages over traditional financing programs because: 1) The interest rates are very low (about 3.44%) and can be locked in before an agency starts to build and then accessed later on. 2) Payments can be deferred for up to five years, by which time the project may be producing farebox returns or other revenues. 3) The low interest rate is available regardless of the agency’s credit rating and regardless of whether the loan is subordinate to other debt — a situation faced by many agencies.

Donohue cited T4America’s 2012 report “Thinking Outside the Farebox” as a good source of information on creative approaches to financing transit projects.


LA Metro, which has applied for a $1 billion TIFIA loan, is working hard to build support for the America Fast Forward bond program, which would create a new class of tax credit bonds that would allow local governments and transit agencies to bond against a secure revenue stream such as a sales tax. Private investors would buy the bonds, the city or agency would pay back the principle over time, and the federal government would pay the interest, providing investors with federal income tax credits in lieu of interest payments.  Mayor Villaraigosa’s 30-10 plan (to build 30 years of Measure R-funded transit projects in 10 years) was built upon these two financing mechanisms — TIFIA and the bond program — but Congress only adopted TIFIA last year.  The AFF bond program could be adopted by Congress this year.

Both Democrats and Republicans in Congress have expressed interest in the bond program this year.


A growing number of regions are mounting sales tax initiatives to provide revenue streams that can be used to secure TIFIA loans or bond sales, while others are increasing property tax rates or even using tax increment financing (TIF):  Charlotte, North Carolina, for example, is investigating using TIF to build five new transit lines — by developing mixed-use neighborhoods along them in order to boost property values and raise the tax increment. Similarly, the notoriously auto-oriented and traffic-congested Tysons Corner commercial center in Fairfax County, Virginia, has increased property taxes by 25% in order to provide a revenue stream that will help finance construction of the Silver Line.

APTA Policy and Research Director Darnell Grisby points out that these creative approaches to financing transit are being explored in part because of an increasing body of evidence showing that property in walkable neighborhoods near transit has increased or held its value across the country despite the recession. He cited APTA’s new study, “The New Real Estate Mantra: Location Near Public Transportation,” which showed impressive gains in property values near transit from 2006 to 2011 in six case study regions — ranging from a 37% increase in Phoenix, which has a small system, to 129% in Boston, which has an extensive system.


State constitutions have different rules governing who can put initiatives on the ballot and what kind: In Massachusetts, for example, there can be no ballot measures regarding money — only policy. For this reason transit advocates can’t put a sales tax measure on the ballot and are pushing for a state gas tax increase instead. In Seattle, in contrast, there have been two successful sales tax campaigns for transit, but because there is no state income tax in Washington sales taxes are already quite high, so advocates there are also discussing a state gas tax increase.

Other states considering raising state gas taxes include New Hampshire, New York, Texas, Michigan and Minnesota.


Speakers at the conference emphasized the importance of making the business case for transit — whether for a sales tax initiative or a gas tax increase —because it is so compelling. “The cost of congestion is like a tax but worse because at least a tax provides revenues while congestion is pure waste," joked conference presenter Richard Voith of Philadelphia.

Greg Leroy of Good Jobs First noted that an increasing number of employers are become transit advocates because they recognize that one prerequisite for a prosperous business climate is a robust transportation system, and because it’s important to provide employees with affordable transportation options. He referred conference attendees to the new Good Jobs First report “Bosses for Buses.”

Voith added that only transit — not highways — allows for the density of jobs, employees and residents that create so-called “agglomeration economies,” which are the most diverse and rich.

Congress will begin consideration of the next big transportation reauthorization bill this summer, but concerns about the budget, the federal deficit, and the pending insolvency of the Highway Trust Fund will stand in the way of a robust transportation funding program. The Trust Fund, which is funded by the national gas tax and is the major source of federal transportation funding, has been depleted due to the greater fuel efficiency of cars, the fact that Americans are driving less, and because the gas tax was set at 18.4 cents per gallon in 1993 and does not rise with gas prices, and because it was not indexed to inflation. Whereas the gas tax represented 17 percent of the price of a gallon of gas in 1993, today it represents just 5 percent. The Trust Fund is projected to be running on empty in 2014 and has required transfusions of about $10 billion a year from the General Fund. This is not sustainable but neither does this Congress appear willing to increase the gas tax.

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