Fair transit
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Thousands of area workers and businesses who depend on public transportation endured a long, hot summer — and their problems are far from over.
St. Louis is in the depths of a public-transit crisis with no certain relief in sight. Will the U.S. Department of Transportation — keeper of the federal transit coin — take notice? In a meeting last week, Transportation Secretary Ray LaHood told Post-Dispatch editors and reporters that he is on the case.
Metro, the regional transit agency, had the grim distinction this year of suffering the steepest service reductions among the nation’s major transit systems. Beginning in April, 44 percent of bus service and 32 percent of the MetroLink light rail service were dropped. Sleeves were placed over 2,300 of Metro’s 9,000 bus stops informing commuters that service had been suspended.
The cuts were made because Metro faced a $35 million budget deficit. Last November, St. Louis County voters narrowly defeated a transit sales tax increase that would have bridged the gap.
Taxpayers, though, did not let Metro down. They have been shouldering their load for decades, picking up the slack for the state, which chronically defaults on its mass-transit responsibilities.
Les Sterman, former executive director of the East-West Gateway Council of Governments, noted that if Missouri paid “any kind of reasonable share — as Illinois does in Chicago (21 percent) — of operating costs, (or as) Tennessee does in Nashville (35 percent), Indiana in Indianapolis (21 percent) or North Carolina does in Charlotte (20 percent) … there would be no need to impose this added tax.”
In fact, Missouri contributed less than 1 percent of Metro’s more than $200 million in operating expenses in 2008. When crisis hit and bus lines were being taken out of service, lawmakers and Gov. Jay Nixon came up with a one-time $12 million contribution; it helped restore some service, but it is only a short-term fix.
Missouri didn’t even use its own money; it spent federal stimulus funds.
Missouri’s failure to provide meaningful support for transit isn’t just unfair, but it also is counterproductive and an embarrassment to the state. It also works against federal transportation policy, which Mr. LaHood, a former Republican member of Congress from Peoria, says now strongly favors mass transit.
Mr. LaHood noted that Congress enacted and President Barack Obama signed a law earlier this year that permits transit agencies to use up to 10 percent of federal appropriations to pay for operations — a marked shift in a policy that long restricted such funds for capital expenditures.
“This idea that you allow transit districts to buy all kinds of new buses and you don’t have the money to pay the bus drivers is silly,” Mr. LaHood said.
Missouri receives millions of dollars in federal transportation dollars each year. If the state is undermining its cities’ transit systems through neglect, the feds can encourage the state to provide more support by talking to them, Mr. LaHood said. “They come to us for money and we have an obligation, if they are short-circuiting or shortchanging certain parts of the state, to talk to them about that,” he said.
Maybe a call from Mr. LaHood, around check-writing time, is what it will take to get Missouri political leaders interested in public transit.
An email exchange w/ Metro - June 2, 2009
Mr. (egoist):
Thank you for your interest in Metro. I will try and respond to your inquiry concerning Metro’s lease transactions.
It is true that since Metro is a tax exempt governmental agency, depreciation is not an expense that reduces taxable income, as with a for-profit corporation. Beginning in the mid-nineties, many large transit systems, including Metro, entered into long term lease/leaseback transactions which essentially “sold” the rights to the depreciation expense, for certain of their fixed assets, to for-profit enterprises. The transit systems then leased the asset back from the lease investor. Typically the transit system received a large upfront NPV cash payment from the investor for the depreciation rights. These payments were in turn used to fund operating expenses and/or capital projects. All of Metro’s lease/leaseback transactions involved federally funded assets and were approved by the Federal Transit Administration (FTA).
While each transaction is structured differently, all included a form of an annuity/guaranteed investment contract with a AAA rated insurance company. The annuity provides the necessary annual lease payments. Furthermore, each agreement includes a surety agreement which insures Metro’s performance. Both the annuity and the surety agreements have rating thresholds. Metro is required to replace the provider, or provide acceptable collateral if the ratings fall below the threshold. The insurance companies discussed above are no longer rated AAA and Metro is currently working with the investors to resolve the situation.
Metro currently has three lease/leaseback transactions for some of its facilities and rolling stock. It is not know with certainty at this time the exact cost to Metro for providing a remedy. Certainly, no one was anticipating the magnitude of the current financial crisis which has created this problem, and Metro is not alone in this situation. More than 30 transit agencies nationwide are facing challenges because of these transactions–the most visible being Washington Metro Area Transit Authority (WMATA) which had some 16 very large transactions.
You can find more information in the footnotes (#7 & #17) to Metro annual audit financial statements. The financial statements can be downloaded from the Metro website.
(Metro)
Hello (Metro), I read your letter in SLPD today. I’ve long been curious about a PBS Newhour that had a report showing yet another mess: Because transits are not-for-profits, they can’t right off wear & tear on their assets. So they sold some / much of them to banks - which can right them off - and leased them back. As usual, these complicated schemes come back to bite you. The various transits owe banks money, that the banks (some foreign) are starting to demand default penalties on, due to the fact that the likes of AIG (backing up these risks) have virtually collapsed.
They mentioned St. Louis [Metro] in the piece. Is this true?
http://www.pbs.org/wnet/blueprintamerica/reports/transit-in-trouble/overview/481/
(egoist)
> Missouri’s failure to provide meaningful support for transit isn’t just
> unfair, but it also is counterproductive and an embarrassment to the state.
Why should people in Joplin and Hannibal pay for transit in St. Louis? Seems like the city and county should be the ones paying - and if the voters don’t want it, it shouldn’t get done.
The fact is, if Metro would focus its resources on the areas it already serves, instead of trying to expand to sparse suburbs which can’t efficiently be served by transit, it wouldn’t have financial problems. This isn’t the state’s fault, and it isn’t county voters’ fault either - it’s Metro’s fault, plain and simple.
Why should the burdon be spread? That is a good question. The answer is that tax revenue generated here in St. Louis pays for services and transportation infrastructure in Hannibal and Joplin, as well as throughout the rest of the State. St. Louis, and KC, are the economic drivers of Missouri. Part of a comprehensive plan for the future of a state is having a diverse economy, made up of rural and urban employment centers. Without roads, bridges, and yes, public transit, the state as a whole suffers.
If we were to follow Mr. Kassoff’s logic, then Hannibal and Joplin would be left with only the infrastucture and service which their local taxes could support. So unless small rural municipalities throughout the state plan on only having gravel roads and no utilities, fire, or police services, perhaps we should all start realizing that we are in this together.
Actually, local areas in teh state can and should support their infrastructure needs. State highways are one thing. Local infrastructure should stay local.
There is one easy solution. Raise rates. That’s the Democrat way. If you raise the rates you will get more revenue, just as if you raise the taxes you will get more revenue. Seems logical to implement a liberal solution to a liberal problem.