New ways to pay mass transit's fare
Mass transit in America is at a crossroads.
After almost a decade of steady gains, ridership has leveled off or declined. The Reagan administration is backing the federal government out of the business of providing annual operating subsidies to public transportation, although it remains committed to assisting in the purchase of equipment and building of facilities.
This signals some major changes for millions of Americans who rely on mass transit to commute to their jobs, to shops, and to recreation facilities. Already many systems have been forced to curtail services and increase fares, and more of the same can be expected.
Yet the picture is not entirely dark.
Some transit supporters say they believe that weaning public transit from the federal dole is the best thing that can happen. Even those who do not go this far say that the Reagan administration's position is causing a shake-up in the nation's public transportation systems that will leave the survivors leaner and more efficient. It is causing transit managers to rethink their systems from the ground up and to reach out for innovative ways to provide service.
Rather than continue to sharpen their federal grant-writing skills, transit officials have begun to work harder at building local constituencies for support , especially the local business community. In many cities, local businessmen are awakening to the fact that a viable public transit system is vital to their own self-interest.
Interest is also intense in innovative forms of financing. These include: provisions of the new Economic Recovery Tax Act that make it possible for transit systems to sell and lease back equipment solely for tax purposes; Industrial Development Bonds; special assessment districts; and joint development, where the transit authority leases space above terminals to developers who construct office and retail buildings on the site.
All these topics were under intense discussion at a small but influential gathering of transit officials, members of downtown business communities, and city officials from around the nation meeting here to share their experience and ideas and to discuss the future. The conference was sponsored by the American Public Transit Association (APTA), the International Downtown Executives Association (IDEA), and the National League of Cities (NLC).
''It's been a sweet ride, but the end of the line is coming,'' exclaims Larry Fonts, vice-president of Central Atlanta Progress Inc. Mr. Fonts has been closely involved with the development of Atlanta's transit system.
Gary Brosch, special assistant at the federal Urban Mass Transit Administration (UMTA), counters, ''The administration believes mass transit is an essential part of the nation's economy,'' he asserts. However, Reagan is against giving transit systems annual operating subsidies, he explains. These subsidies have been detrimental to productivity, and there are many things systems can do to control their operating costs, he claims. On the other hand, federal support has not driven up the cost of buses, transit cars, and other capital costs, so the administration is still dedicated to supporting transit systems in this fashion, he adds.
Mr. Brosch admits that this will make life difficult for many transit systems. Yet he expresses doubt that things are going to be as bad as a recent APTA survey indicated. The survey found that such a back out would cause 89 percent of the systems to raise their fares, 67 percent to reduce service, 56 percent to seek new local taxes, and 21 percent to consider going out of business.
There are some, like Robert Lockridge, city auditor of Gainesville, Fla., who say they believe that federal cutbacks may be a blessing in disguise for the nation's transit system. But there are others, like Thomas Brigham, executive director of the Greater Bridgeport [Connecticut] Transit District who says, ''I am very concerned by the rapid withdrawal of federal funds. This will have a greater effect on small systems than on large systems because, in general, they are more dependent on federal money.''
If transit systems have to raise fares drastically to make up the difference, then they may find themselves in even worse financial shape. This happened recently to public transit in Eugene, Ore. The fare was raised from 35 cents to 60 cents. As a result, they experienced a 30 percent drop in ridership and an overall loss in revenue. In fact, APTA analysts say they believe the recent spate of fare increases is the major cause of the leveling and decline of ridership evidenced recently.
So public transit managers have begun looking seriously for other ways to raise revenue and for innovative approaches to cutting cost. Mr. Brigham is one of those who has been most active in exploring alternative approaches. ''We look at ourselves as 'facilitators of mobility' and try to find the least expensive way to meet this social obligation,'' he explains.
For instance, Bridgeport is using private contractors wherever possible to provide service during rush hours and are even thinking of leasing buses to private contractors to meet peak demand. They have gotten a private, nonprofit operator to provide service to the elderly and the handicapped at half what it would cost the transit authority. They are backing a change in taxi regulations to permit shared rides. This will provide a cost-effective service to outlying areas, Brigham argues.
Here, too, they have experimented with different forms of marketing. Instead of selling monthly passes at a discount, they sell them at full price. However, they have been fairly successful at getting employers to subsidize the cost of these passes to their employees. Some companies pick up the entire tab for their workers because it is equivalent to the cost of providing employees with parking. The system has conducted a successful campaign to get merchants near transit stations to offer discount coupons to those buying monthly passes on their own.
Provisions of the new tax act will help transit systems make up a little of the federal subsidy the administration is withdrawing, explains tax lawyer Bruce Kirschenbaum. This allows them to sell buses and subway cars, property, and other assets for tax purposes and lease them back. This will give the investor a good tax shelter and provide the transit system with as much as 25 cents on the dollar. He also suggests transit systems explore the possibilities of Industrial Development Bonds. This is a way to raise capital at a low interest rate. Transit officials might consider using one of these bonds to buy new buses and then rent them to private contractors to operate for the cost of the loan. Then, under the new tax laws, they can ''sell'' the annual depreciation on the buses to businesses in need of additional tax credits.
''There's a whole new game out there -- for better or for worse -- and you have to get up to speed on it,'' he tells transit officials.Mr. Kirschenbaum is one of a number of transit experts who say they believe the business community is developing a new respect for public transportation.
''For too long public transit has been confused with welfarism. A major public information effort is necessary to set this straight,'' advocates Kent Moore, executive director of IDEA.
In Miami, businessmen assessed themselves and offered $20 million before construction began on their transit system, Kirschenbaum reports. Also, in several cities recently local chambers of commerce have been instrumental in getting tax measures passed on behalf of rapid transit. And in Denver downtown businessmen have agreed to a special assessment district to pay for the operation and maintenance of a new transit mall and are backing a light-rail system for the Mile High City.
In cities such as Atlanta, where 45 percent of all work trips are taken by transit, it is relatively easy to make an argument for the necessity to the business community of maintaining the public transportation system. But even in southern California's rapidly growing Orange County, ''the evangelical support for transit on the part of the business community that is necessary to its future is beginning to happen,'' reports Santa Ana City Councilman Daniel Griset. People are beginning to realize ''you either pay the price for public transportation or you pay the price of economic stagnation,'' he says.
One way that businessmen and transit systems cooperate to their mutual benefit is in joint development projects. These projects, which are being extensively pursued by the Washington Area Metropolitan Transit Authority, involve the leasing of air rights above stations to developers who build office and retail space on the site.