February 2, 2009
Pennsylvania Pioneers Act 44; Legislation Grants Public Transit More Clout and Long-Term Support
By PAUL KOSCAK, for Passenger Transport
These are challenging times for public transit.
Last summer, volatile fuel prices drew commuters in droves to buses and trains, pushing service to the limit in some regions. Now, with the economy in a downward spiral, not only must aging roads, bridges, and other connectors compete for limited funding – forcing rural and urban stakeholders at times to square off in a political tug-of-war – but other areas such as education, public safety, and healthcare are also fighting for scarce dollars.
Until the economy improves, this battle over financial resources is not the sort of problem that gets better over time. It's happening throughout the country; here is how one state met the challenge facing public transportation head-on.
“We live in a system where the car is king,” stated Jeanne Nesse, legislative counsel for Philadelphia’s Southeastern Pennsylvania Transportation Authority. “We get no respect until gas prices go up. It’s extremely difficult in any state to raise taxes, and some legislators view Pittsburgh and Philadelphia as Sodom and Gomorrah!”
Can there really be a meeting of the minds with that kind of acrimony?
Pennsylvania officials apparently thought so, finding an innovative way to reach middle ground to support the state’s 75 public transit agencies. An 18-month study by Gov. Edward Rendell’s Transportation, Funding, and Reform Commission concluded that there is a funding crisis in the state. A perfect storm of static state and federal funding, dwindling gasoline taxes caused by a decline in vehicle miles traveled, and a financially staggering public transit system wrestling with soaring energy, operational, and health insurance costs and higher fares meant that something different was needed.
That something was Act 44.
A New Approach to Public Transportation Funding
Passed in 2007, this legislation nearly rewrites how the Keystone State funds and manages public transportation. Through Act 44, transportation is a shared responsibility where the state offers incentives for agencies that become more efficient and raise more money on their own, in addition to a guaranteed subsidy. The new simplified rules and regulations make it easier for agencies to operate—and there is even a provision for one authority to receive local tax support.
This legislation came about through a series of informal discussions rather than a single champion or coalition. Many scenarios led to its final version, noted Democrat Joseph Markosek, chairman of the state House Transportation Committee and the act’s sponsor. He formed several ad hoc groups to explore new ways to support Pennsylvania’s transportation systems, attended by state transportation and municipal transit officials, the turnpike commission, committee staff, and private stakeholders including transit unions.
Some ideas, such as raising the cap on the oil franchise tax by 10 percent—what dealers pay when they replenish their tanks—died when the governor and state Senate leadership refused to support them. But increasing tolls on the Pennsylvania Turnpike by 25 percent and raising money through bonds sailed through. “We didn’t get much opposition because people are already used to paying tolls on the turnpike,” said Markosek.
Further, bond financing for public transit was a breakthrough because it had not been legal in the past, according to Bob Mustin, the transportation committee’s legal counsel.
“It’s all new money,” said Markosek, “about $1.2 billion per year.” It also heralds a new entrepreneurial approach.
The legislation establishes a formula that rewards transit agencies for raising more revenue. The agencies are guaranteed an annual base subsidy, but may receive additional state money if they exceed certain passenger and operational thresholds. One target, for instance, requires authorities to collect at least 5 percent more than the annual state contribution.
Because Pennsylvania municipalities are prohibited from tapping into the gasoline tax, the state sales tax continues to support public transit along with a cadre of miscellaneous taxes that keep changing, such as revenue from hotel tabs and tire sales. Act 44, however, provides a dedicated sales tax of 4.4 percent so, as sales increase, so will funding for public transit.
But the legislation could not pass, according to Markosek, without the support of delegates from Philadelphia and Pittsburgh, regions that depend heavily on public transportation: “We couldn’t get their votes unless you had something for transit.” At the same time, delegates from Pennsylvania’s rural areas demanded more accountability from public transit agencies before they would support more subsidies.
Act 44’s new formula-based system not only satisfies both of those demands; it also allows public transit authorities to plan ahead, eliminating the annual uncertainty and scramble for funds. It’s a balancing act SEPTA’s Nesse remembers all too well.
In 1991, public transit in Pennsylvania began receiving revenue from car rental taxes and, later, taxes from real estate owned by utilities, such as land used for substations and power lines. But when utilities were deregulated, that money stream ended. What followed were many lean years of state support and no local funds, except for fares, because the state’s counties do not tax for public transit. “We struggled with layoffs and rising fares,” Nesse said.
Even the latest source of transit revenue, bonding from the turnpike commission, was an uphill challenge, she admitted: “It took four years of agony to make it happen. There was a public perception we were falling apart.”
Standardizing Service, Operations, and Performance
Still, Nesse praised how Act 44 consolidated Pennsylvania’s five classes of transportation into one, creating a common benchmark to compare performance and operations. The new rules allow authorities to learn from each other by using a single standard when measuring service, operations, and performance throughout the state.
Rich Farr, chairman of the Pennsylvania Public Transportation Association, agreed. Transit policies and regulations were complex and difficult to understand, he said. “Now, we can do benchmarking and make comparisons such as passenger miles, operator expenses, and total ridership per hour,” said Farr. “It’s been a huge help working with other systems and sharing information that will make us more efficient. We’re funded by taxpayers, so we need good stewardship.”
The act is particularly good for Allegheny County, home to one of the state’s largest transit systems in Pittsburgh, because it allows the county to enact public transit taxes. Since the steel industry collapsed in the 1970s, Pittsburgh has lost 30 percent of its population. Unlike transit systems in Lancaster, State College, and Philadelphia where ridership has grown, Pittsburgh has lost market share. Allegheny County now imposes a $2 tax on car rentals and a 10 percent tax on drinks purchased in bars and restaurants to support mass transit.
In addition, the county is using the act’s new provisions to improve service, according to Stephen Bland, Port Authority of Allegheny County chief executive officer. “We’re going through new systems, studying models for cost recovery and looking at routes to see if they’re profitable,” he said. “We’re redesigning fares and adding a Smart Card. We have more leverage now.” Those evaluations have justified adding more connections to bus and rail terminals, he said.
Smaller Systems/Rural Areas
It’s clear that Act 44 has been a boon to large, urban agencies. But what does it mean to smaller, more rural systems?
The legislation saved services about to be chopped just as high fuel prices pushed people from their cars and into buses and trains. “Our ridership increased by the double digits,” said Rose Lucey-Noll, general manager of the Cambria County Transit Authority (CamTran) in Johnstown. She said the agency was preparing to hike fares 3 percent, cut service by 10 percent, and terminate three workers if Act 44 didn’t pass, but it did pass, boosting CamTran’s urban operating fund by an extra $1.3 million, from $2.9 million to more than $4.2 million. CamTran’s rural operating fund jumped from more than $880,000 to $1.32 million, an increase of more than $440,000. The relief went immediately to payroll, maintenance, and other operating costs and saved jobs, said Lucey-Noll.
In State College, Act 44 allowed the Centre Area Transportation Authority (CATA) not only to replace services it already cut, but even to expand them, according to General Manager Hugh Mose. CATA had received about $1.9 million in federal funds under the previous legislation, but Act 44 boosted the budget to $3.4 million, he said, allowing the agency to rebuild its aging fleet of 52 buses, purchase 10 new vehicles, and equip them all with Global Positioning Satellite systems to enable customers and schedulers to track buses in real time.
Before the Act 44 rescue, CATA significantly reduced its bus service from 12-minute headways to running every half hour. “State College is perhaps the most underfunded agency in the state,” Mose continued. “Act 44 levels the playing field,” allowing CATA to use current mile and hour figures—a “not historical precedent”—in predicting future needs, which is a more realistic calculation for growing districts.
For officials in other states who might consider similar legislation, Port Authority’s Bland advised them to “be prepared for the accountability argument.” Authorities should expect to be reviewed by the governor, labor, and other private interests and, most importantly, he stressed – should press for legislation that allows localities to raise funds. “You must have the political will to raise funds locally.”
An Update on Act 44
While Act 44 was successful in its first full year at putting some funds into transportation projects, not all of its proposed revenue streams became operational—mainly when the Federal Highway Administration rejected the state’s application to introduce tolls on Interstate 80.
State lawmakers, therefore, did not quite fix their revenue shortfall to pay for roads, bridges, and public transit programs. But, according to state Rep. Joe Markosek, chair of the House Transportation Committee and sponsor of Act 44, they made a dent.
Also in 2008, the Pennsylvania Turnpike Commission approved a 25 increase in tolls to ensure it met its obligations under Act 44. This marks the first year that the tolls will help fund infrastructure improvements in every Pennsylvania county; more than 90 percent of the toll-increase proceeds will benefit non-Turnpike road and bridge projects and transit operations. The toll collection began in January.
But the shortfall still exists, and local transportation officials are looking for federal support if President Obama achieves his goal of implementing a massive infrastructure jobs program. In preparation for that eventuality, officials across the state are thinking ahead by prioritizing projects that would be ready to start as soon as funding arrives.
Act 44 will sustain public transit funding through 2009. After that, it drops by half, from $500 million to $250 million, without another revenue source.