Orange Line BRT, at Warner Center. The Orange Line corridor has been identified as a demonstration project to receive SB 375 funding from the Air Resources Board. Photo courtesy of Flickr user resedabear.

On September 23, 2010, the State Air Resources Board (ARB) assigned greenhouse gas reduction targets to California’s regional metropolitan planning organizations (MPOs), moving Senate Bill 375 forward into its implementation phase and setting in motion the first regional planning cycle required under the legislation.  ARB adopted final targets that express each metropolitan region’s goal as a percent reduction in per capita emissions from the year 2005.  Regional targets will be revisited in four years but were provided for the years 2020 and 2035 to guide long-term planning.  The target-setting process (see generally the posts from 2010 in the archives for more discussion) focused principally on California’s four largest MPOs, which were assigned the following targets:

There were strings attached to the Southern California targets.  Voting 29-21, the SCAG Regional Council had rejected these proposed targets on September 2, prior to their being adopted by ARB.  The Regional Council instead supported milder targets of -6 percent in 2020 and -8 percent in 2035, maintaining that targets any more ambitious than these would be appropriate only if several conditions were met.  But ARB, which had a September 30 deadline to meet, affirmed its commitment to the more ambitious targets of -8 and -13 percent proposed by agency staff.

That commitment was, however, accompanied by a compromise facilitated by Riverside Mayor Ron Loveridge, who sits on ARB.  SCAG capitulated on the -8 percent target for 2020, but final acceptance of the -13 percent target for 2035 was conditioned on the outcome of further discussion between ARB and SCAG.  The issue remained unresolved until recently.  What is interesting is not so much the fact that a resolution was reached, but the manner in which it was reached and how it reflects the challenges moving forward.

SCAG region. Original map courtesy of Caltrans.

The Southern California Association of Governments (SCAG) is the analogue in the Los Angeles area to the  Metropolitan Transportation Commission (MTC), but SCAG is notable for the sheer size and population of its jurisdiction (marked in green in the map at right).  SCAG governs more than 38,100 square miles extending from the Nevada state line and the Colorado River to the Pacific Ocean, and almost half of California’s population calls the SCAG region home.  At quadruple the land area of the nine-county Bay Area, the region includes about 190 cities and 6 counties — Los Angeles, Orange, Ventura, San Bernardino, Riverside, and Imperial.

SCAG, in other words, is a key player in this business.  ARB has an interest in seeing that each of the “big four” MPOs, including SCAG, is able to adopt a Sustainable Communities Strategy (SCS) that will actually achieve the targets assigned to each region.  It is adoption of the SCS that aligns each region’s transportation network and funding with a transit-oriented distribution of housing that will help reduce vehicle miles traveled (VMT); an Alternative Planning Strategy (APS) simply does not carry the same benefits.  But it would be difficult to name this effort a success if SCAG, the state’s largest MPO, did not meet its regional target.  The SCAG region generates about half of the total greenhouse gas emissions statewide that are the focus of SB 375 — which means that if the legislation is to have maximum effect, ARB needs to have SCAG on board as a fully cooperative partner.

The Quest for Funding

At least the more strategic members on the SCAG Regional Council must have realized that this dynamic could give Southern California an edge in its dealings with ARB.  Perhaps, then, it’s not surprising that of the “big four” MPOs, it was SCAG that opposed ARB and even went so far as to place conditions.  In particular, the Regional Council indicated that it could not support ambitious targets unless certain conditions were met.  Those conditions included: (1) restoration of State transit funding; (2) acceleration of Measure R transit projects under the 30/10 initiative; (3) providing more money that SCAG can grant to local government planning efforts; (4) commitment by ARB to pursue more funding for SB 375 in the Legislature; (5) commitment to obtain more federal, state, and local funding sources that can be devoted to transportation demand management and pedestrian, bicycle, and transit projects; and (6) continued cooperation from ARB, regional entities, cities, and county transportation commissions.

These conditions manage to be both unreasonable and logical at the same time.  Unreasonable — because ARB does not have the authority to meet these conditions even if it wanted to, nor was it required by the Legislature to meet them in any case.  And yet also logical — in that the conditions collectively recognize the longstanding mismatch in California planning, where state leaders in one breath encourage the construction of transit-oriented development, and then in the next breath deprive transit of the funding it needs to survive, let alone thrive.

The SCAG conditions emphasize that there are at least two distinct categories of funding that are crucial to the success of SB 375, and yet are currently in short supply.  The first category is transit funding, which includes both capital dollars to extend high-quality transit to new places and operating dollars to keep the system running.  The bottom line here is that if we want to reduce driving by encouraging “TOD,” we need to have enough “T” to support that TOD.  Proposition 26 complicates the task of setting up new revenue streams for transit, but as Damien Newton recently reminded us at Streetsblog Los Angeles, an additional challenge will be coping with already existing revenue streams that are now reduced in magnitude thanks to the economic downturn.

The second category, which interfaces directly with SB 375 implementation, is the funding that governments need to do planning.  Whether taking the form of general plan updates, neighborhood specific plans, or corridor plans, cities and regions need money to do this work.  It is, after all, these very planning efforts that will be incorporated into the SCS and will ultimately create the desired land use changes on the ground.  Unless local governments have the resources to plan and zone for the sustainable communities envisioned in the SCS, SB 375 will fall flat on its face.

It is this second category of funding that was the focus of SCAG’s recent discussions with ARB.  SCAG has now agreed to accept the more ambitious -8 and -13 percent targets that ARB adopted in September.  But in exchange, SCAG was able to extract at least a little funding from ARB.  The SCAG Compass Blueprint is a program providing competitive grants to local governments that propose exemplary sustainable planning projects.  Because the program has attracted a great deal of interest, SCAG can fund only a fraction of the applicants.  ARB, to fulfill its agreement with SCAG, will provide contract funds for three Compass Blueprint demonstration projects, two of which could serve as models of statewide interest: (1) a specific plan to examine how existing industrial land uses can be adapted for mixed use development; and (2) a corridor plan for stations along the Orange Line, a 14-mile bus rapid transit corridor running from the North Hollywood Red Line station to Warner Center.  The latter plan, which would study both the existing BRT corridor and the extension under construction, was selected to examine TOD and multimodal access in the context of an important transit corridor.  No similar demonstration projects were selected from other regions of the state.

The money that ARB is contributing, which looks to be just shy of a half million dollars, is really just a tiny fraction of the funding that local and regional governments throughout California will need to do more SB 375-related planning.  This isn’t to say that no other funding has been made available.  The Strategic Growth Council is distributing three cycles of Proposition 84 money to fund these efforts, and has in fact already distributed over $7 million to MPOs to fund their work on SB 375.  Moreover, federal grants, including those sponsored by the USDOT-HUD-USEPA Sustainable Communities partnership, have been awarded to projects nationwide in furtherance of goals that are harmonious with SB 375, and California projects could be competitive to receive these grants.  Yet the future status of these funding sources is uncertain.  Although the ability to fund planning is critical to SB 375′s success, we lack a dependable revenue stream that is adequate to meet the demand for these funds throughout California.

Prop 26 is a topic that I was planning to write about before the election, but unfortunately I wasn’t able to get to it.  We know it passed — though it wouldn’t have, if only Prop 26 were subject to the same voter approval requirements that it seeks to impose.  Anyway, now we’re stuck with yet another set of amendments to the California Constitution that tie the hands of state and local governments, make it more difficult to raise necessary revenues, and make California even more of a broken state than it already was.  There will be far-reaching implications in many areas, including the state budget, but I thought I would go into some more detail here about the exact changes that Prop 26 has made, and what those changes might mean for the always challenging task of funding transportation in California.  At this early point in the process, some guesswork is required, and there are still open questions that may eventually be clarified in the courts.

What is a tax?

Prop 13 and related propositions have created a few decades of confusion over when a government charge is a tax requiring a 2/3 vote and when simple majority approval is good enough.  Part of the reason for the confusion is that until Prop 26, the word “tax” was not defined.  Proposition 218, which voters approved in 1996, changed voter approval procedures for local government charges, among other things.  Prop 218 defined “special taxes” requiring a supermajority vote and differentiated them from “general taxes,” for which a simple majority is sufficient.  But we didn’t really know what a “tax” was.  Now, thanks to Prop 26, we do.

Or rather, we know what it isn’t, because it’s defined in the negative.  There is short list of charges that aren’t taxes (more on that later).  And if the charge in question isn’t on that list?  Then it is a tax, and it needs a supermajority vote if levied for a specific purpose.  So if the state or local government wants to pass a charge with only a majority vote (or thinks it will fail to collect a supermajority of votes, as is a regular problem in the Legislature), it will have to try to shoehorn the proposed charges into one of these special categories.  The government also better be able to make a good case for whatever it does, because if the charge is eventually challenged, the burden of proof is on the government.

What was a fee (before Prop 26)?

Before Prop 26, government assessed regulatory fees, which need only a simple majority vote.  These are sometimes also called “Sinclair Paint fees,” named after the Supreme Court case that they’re most often associated with.  What happened there was that the Legislature established a program to provide medical services to children who were potential victims of lead poisoning.  The program was supposed to be funded by fees paid by anyone whose industry contributes to lead contamination.  Sinclair Paint Company was one such entity, but then protested that because Sinclair itself received no direct benefit from the fee, the fee was actually a tax in disguise.  The fee created a benefit for society at large, but no particular benefit accrued to Sinclair or others paying the fee.  

But the fee was still found to be valid, because the proceeds collected from the fee would essentially be used to “clean up” the damage caused by industry.  Regulatory fees could be charged to set up mitigation programs like this, and it wasn’t important that Sinclair didn’t directly benefit from the fee.  What was important?  Mainly this: First, that people paying the fee have somehow contributed to the problem that the fees were designed to solve, and second, that the government didn’t end up collecting more money than it needed to solve the problem.  Sounds pretty logical, right?   Even small children are taught that if they make a mess, they have to clean it up. 

What isn’t a tax (after Prop 26)?

However logical that might sound, it is exactly this type of mitigation fee for the public benefit that Prop 26 is designed to stifle.  Prop 26 says that if the government imposes a user charge for a specific government benefit, privilege, service, or product that is “granted directly to the payor” and that is “not provided to those not charged,” then the charge is not a tax.  The government can also recover the costs of issuing or investigating permits and licenses, and the fees collected are not a tax. 

There are a handful of other things that aren’t taxes, including fees to enter or use government property, and court-imposed fines.  Specific to local governments: development fees, assessments, and property-related fees are also not taxes.

And that’s basically it.  Everything else is a tax.  As you can see, Prop 26 is really a direct response to the Sinclair Paint regulatory fees endorsed by the Supreme Court.  Under Prop 26, those charges are now taxes, not fees, because they do not confer any direct benefit, privilege, service, or product only to the people paying the fee.  Rather, the money collected benefits the environment or society at large. 

Many fees that could once be passed with a simple majority are now classified as taxes under Prop 26 and will require a supermajority to pass.  In spite of voters also passing Proposition 25 this election — which enacts a very good policy, by allowing a simple majority of legislators to pass the state budget — Prop 26 may end up swallowing Prop 25, by making it even more difficult to find revenue sources needed to balance the budget.  It just goes to show that California is so broken that individual one-line bandage fixes, even if they are good ideas in and of themselves, aren’t good enough.  The entire structure of governance needs an overhaul from top to bottom.

A close accounting of benefits and burdens 

In deciding whether a charge is a tax, it’s necessary, but not sufficient, to ask whether the person paying benefits directly.  You also have to ask whether the people paying are the only beneficiaries.  If someone not paying still benefits, then the charge is a tax.  Also, you have to make sure that the fee is fair, taking into consideration the benefit they are receiving or the burden they place on the regulatory program.  And then, you also can’t collect more money than you need to run the program.

Here’s a real-life example.  The State Water Resources Control Board is the state agency that administers water rights and water quality.  The Legislature authorized the SWRCB to collect regulatory fees so that General Fund dollars could be directed elsewhere.  The SWRCB charged the permitholders it regulates — but the many water users in California who don’t have permits or licenses weren’t charged.  And yet, everyone benefitted, including those who didn’t pay the fees, because the fees funded the permit and enforcement work that helps manage the state’s waterways for all users.  This is the type of concern that Prop 26 makes more explicit.  If these charges were assessed now, they would be taxes under Prop 26.  It’s a little different from the Sinclair Paint fee, because here, the people paying the fees do benefit directly.  The problem is that people not paying also benefit, and there were other problems with the fee formula that made it unfair.

This suggests that, practically speaking, Prop 26 will require government agencies to have a strong understanding of the situation when taking the position that a charge is not a tax.  The agency should have a good estimate of how much it costs to run the program, and it should produce a fair, well-reasoned formula to allocate those costs among the entities that benefit from or burden the program.  In addition, the agency should be certain that only those paying the fee benefit from the program.  Otherwise, the agency runs the risk of having revenue cut off, if the charge turns out to be a tax supported only by a simple majority.

What does all this have to do with transportation funding?

I’ve probably rambled enough here already for one post.  Discussion of how all this relates to transportation will be deferred to Part 2, coming soon. 

AB X8 6 and AB X8 9 form the pair of budget bills (explained in more detail in this earlier post) executing a gas tax swap.  The Governor initially proposed a completely inadequate gas tax swap measure, which the Legislature then modified with these two bills.  The Legislature’s version allocates a one-time sum of $400 million of operating funds for transit agencies, and then generates about $350 million annually for agencies statewide, starting in FY12.

The initial allocation will provide critically-needed funding for the Bay Area’s transit agencies in these tough times — including $36 million for Muni, $26 million for BART, $15 million for VTA, and $13 million for AC Transit — to be put to use through the upcoming fiscal year.

As we have discussed before, that sum does not come close to restoring funding that the State has repeatedly appropriated in the past to balance its budget, and the bills do not accomplish all that they could.  Therefore, this legislation neither can nor should end the important conversation about how the State ought to fund transit operations in the future.  Still absent from the discussion are stable revenue streams that prioritize transit service in a way that is consistent with the State’s goals of reducing greenhouse gas emissions and encouraging smart growth. Nonetheless, this allocation is a small step in the right direction, in that it will provide transit agencies with some assistance to weather the budget deficits that loom in the upcoming fiscal year.

I would strongly encourage transit agencies to use this money in a way that preserves service for riders to the maximum extent feasible.  Transit-dependent riders have already experienced significant hardship during this economic downturn, having been obliged to pay higher fares for inferior service.  I particularly direct this comment to my home transit agency, the San Francisco MTA.  The MTA Board is once again discussing a possible declaration of fiscal emergency, which would allow the agency to cut service without preparing the environmental documentation that would otherwise be required under CEQA.  When given such a flexible tool, the MTA Board has historically demonstrated a willingness to put it to use, by cutting service and raising fares.

However, worth noting is that the initial $36 million allocation from the State, when combined with some of the FY11-12 revenue measures that the MTA Board has begun to evaluate, would be enough to obviate the need to declare fiscal emergency.  Obvious measures (PDF) to examine at this point include extended Sunday meters ($2.8 million), a general parking meter extension ($6.3 million in FY11), elimination of free reserved on-street spaces ($2.8 million), adding one thousand new metered spaces ($0.8 million for a half-year), enforcing existing laws regarding parking garage charges in the C-3 zone ($3 million for a half-year), a possible extension of that policy to garages citywide ($2.6 million for a half-year), and a reduction in work orders ($6.5 million).  Consolidation of transit stops, which would save about $3 million per year, is another measure that will be considered by the MTA Board.

There are good policy reasons to implement this suite of measures, quite apart from raising revenue.  But these measures are also necessary to close the gap between the State’s initial allocation and the MTA’s total FY11 budget deficit.  They should be evaluated thoroughly before riders are made to suffer any further cuts to service or increase in fares.

It is nice to see the Governor finally agree to give some money back to transit, and the Legislature should also be recognized for its work in pushing through a partial fix for transit agencies, in spite of the Governor’s reluctance to support a revenue-neutral piece of budget legislation.  Imperfect though it may be, this legislation and the funding it promises will be a welcome booster shot for California’s cash-strapped transit agencies.

I unfortunately do not have any time right now to to provide a more detailed post, but I did want to at least alert readers to this development.  There were flaws with the legislation, and the transit funding scheme passed by the Legislature would not have restored to transit nearly the amount of money that the State has taken away.  But pragmatically, the proposed state assistance, while diminished from prior years, would have eased the widening budget deficits of transit agencies.  As we discussed previously, even the $36 million that the San Francisco MTA would have received through the end of next fiscal year (and $31.4 million in the following fiscal year) would have been more than enough to offset the money that the MTA expected to save with the 10% system-wide service cut that is planned to go into effect starting May 1.  The Governor’s denial of that funding means transit advocates must continue to push the MTA Board to pursue measures that will realize savings and increase revenues, ideally without the declaration of fiscal emergency that would pave the way for further service cuts and  fare increases.  The bill would have provided about $13 million for AC Transit and $15 million for VTA through the next fiscal year. The bill would have also provided about $26 million to BART through the next fiscal year, and almost as much in the following fiscal year, which would have helped that agency weather a projected deficit of more than $60 million over the next four years.  Instead, it looks like transit agencies throughout California will have to continue on as they have this year, with the STA zeroed out.

The State Legislature, as part of the ongoing state budget effort, has passed a pair of bills, AB X8 6 and AB X8 9, which would establish a tax swap and restore State Transit Assistance (STA) funding, a critical source of money that transit agencies throughout California had previously relied on to fund operations until it was suspended by the State.  While there is no doubt that transit agencies across the nation are struggling, California’s transit agencies have been hit particularly hard, thanks to the elimination of the STA funds.  But relief may be on the way, if Governor Schwarzenegger cooperates.  This is a prime opportunity for the “Green Governor” to show his quality.

AB X8 6 makes various adjustments to the taxes that are assessed on motor vehicle fuel and diesel fuel.  Currently, gasoline is subject to both sales tax and per-gallon excise tax.  Article XIX of the California Constitution generally requires that the proceeds from the excise tax be applied to fund road maintenance, as well as the “research, planning, construction, and improvement” of transit guideways, streets, and highways.  The revenue may also be used to maintain physical transit guideways, but it may not be used for other transit operation and maintenance costs.  This constitutional provision was of interest to the Governor, because it would allow him to take a revenue stream technically dedicated to transit and replace it with an increased excise tax, the proceeds from which could instead be used to patch up the General Fund.

As set forth in the Revenue and Taxation Code, an excise tax of 18 cents is currently assessed per gallon of motor vehicle fuel (§ 7360) and diesel fuel (§ 60050).  Starting July 1, 2010, AB X8 6 would exempt motor vehicle fuel from the sales tax.  Also on July 1, 2010, the excise tax per gallon of motor vehicle fuel would be increased by 17.3 cents, and retailers would pay a 17.3-cent storage tax per gallon of motor vehicle fuel stored.  For diesel fuel, the per-gallon excise tax would decrease to 13.6 cents starting July 1, 2010; a 1.75% tax would also be imposed starting July 1, 2011.  Finally, the State Board of Equalization would be responsible for ensuring each year that these amendments remain revenue-neutral.  That is, the revenue gained by the motor vehicle excise tax increase should not exceed the revenue lost by eliminating the sales tax.  BOE would also be assigned an analogous task for diesel fuel.

The revenue generated from these adjustments would then be used in the gas tax swap mechanism.  I can explain this in more detail if someone is really fascinated, but to skip straight to the juicy part, AB X8 9 provides for an infusion of STA funding for transit operations.  Initially, the bill appropriates $400 million of STA funding statewide that would last through FY11.  An estimated $350 million would then be distributed by formula each year thereafter.

San Francisco MTA’s recent budget-balancing exercise helps demonstrate how this influx of funding will have a tangible effect.  The MTA Board recently approved a 10% system-wide service cut, expecting to save $4.8 million this fiscal year (accounting for the months of May and June).  Cutting 313,000 service hours each year was projected to save $28.5 million annually.  But MTA estimates it would initially receive $36 million of STA funding if these bills are passed — $7.2 million for the remainder of this fiscal year, $28.8 million in FY11, and $31.4 million in FY12.

In other words, San Francisco’s share of the proposed funding more than covers the money that the MTA expected to save by implementing the 10% service cut.  Although the $179 million of STA funds that the MTA has lost over the past three years would not be fully restored in the next three years, this legislation, if signed into law, will nonetheless make a valuable contribution.

But the Governor — naturally, being the Governor — is reluctant about signing these bills.  To justify his reluctance, he offered the nearly brain-dead explanation that the Legislature has “failed to address job creation,” overlooking that new STA funding will allow agencies to preserve service and thereby avoid laying off operators.  His lackluster response, while disappointing, is not surprising.  After all, this legislation aims to mitigate the damage that he is personally responsible for propagating — most recently when he flagrantly ignored state court decisions that invalidated transit funding raids.

But you, the transit-savvy reader, can still help the Governor see the light.  At least we can try.

Here’s where you come in: Please call the Governor’s office as soon as you can.  Urge him to sign these bills into law, so that agencies throughout the Bay Area and California can be provided with much-needed relief, and vital transit service can be preserved:

Governor Arnold Schwarzenegger
State Capitol Building
Sacramento, CA 95814
Phone: 916-445-2841
Fax: 916-558-3160

Alternatively, you can email the Governor by clicking this link. Thanks in advance for your participation.

Included in the transit funding are the New and Small Starts grants, which set aside a total of over $1.8 billion for capital investments in transit around the nation. The bulk of the New Starts funding is proposed for major transit projects outside of California.  Three major projects serving New York City (Second Avenue Subway, East Side Access, and ARC) are allocated $612 million.  Other allocations include those for Salt Lake City projects ($180 million), Houston projects ($150 million), Denver projects ($120 million), Seattle University Link ($110 million), Dulles Metrorail ($96 million), Dallas Northwest/Southeast light rail ($86 million), Honolulu Rail Transit project ($55 million), Hartford busway ($45 million), Twin Cities Central Corridor ($45 million), and Orlando’s Central Florida Commuter Rail project ($40 million).  A total of $200 million of Small Starts funding is also included for distribution to several other projects, mostly bus rapid transit.

Although the Bay Area was not in a position this year to receive as much funding as some other parts of the country, the budget nonetheless recommends $50 million for use on three major Bay Area transit projects.  The Central Subway, Van Ness BRT, and East Bay BRT are all considered by FTA to be priorities for funding:

• Central Subway: The $20 million New Starts sum in this budget is a small portion of roughly $950 million in federal funding that the Central Subway is ultimately slated to receive, amounting to 60% of the $1.57 billion project cost.
• Van Ness BRT: The $15 million sum in this budget is a partial allocation of up to $75 million Small Starts for which this BRT corridor would be eligible, assuming that San Francisco opts to construct one of the two serious center lane BRT alternatives (rather than side lane BRT, which would be cheaper to build but would provide only diluted transit benefits).  The maximum $75 million federal contribution would represent 57-63% of the total capital cost of $118-132 million.
• East Bay BRT: The $15 million sum in this budget is a partial allocation of up to $75 million Small Starts for which this BRT corridor would be eligible.  The maximum $75 million federal contribution would represent about one-third of the total capital cost of $235 million.  The exact status of the project is uncertain, in light of a requested swap for operations money. Nonetheless, AC Transit continues to move forward with environmental work and has not abandoned the project.  A match of local funding has also been retained for the time being, so it is good to see that FTA has prioritized this BRT corridor.

It’s quite clearly the case, Green Governor, that we need to
fix California’s transit systems, which are broke and breaking.
Under-served areas had critical lifeline service put to the chopping block, but
climate change demands that we reduce vehicle miles traveled statewide.
Killing the gas sales tax and raising the excise tax will only facilitate
your relentless theft of transit funding, in this budget, as in so many
others — though your action now undermines the rulings of state courts.
Undeniably, you have started down the wrong path. For shame, Arnold, for shame.

Sincerely,
Transbay Blog

P.S. Rest assured that any message you may find hidden in this letter is merely coincidental.

The AC Transit Board of Directors held a meeting to confront head-on the risk that the agency’s current financial crisis poses to its planned 17-mile bus rapid transit (BRT) project, which would extend from downtown Berkeley to San Leandro, via Telegraph Avenue, downtown Oakland, and East 14th Street. The State has postponed allocating an important chunk of funding for BRT, which will delay the project. AC Transit also plans to cut about 15% of its service hours to set right its operating deficit. The agency is thus considering using BRT funds to enhance its operating budget. Doing so would alleviate the pain of service cuts, but it would also put on hold a major regional project that is the centerpiece of AC Transit’s planning vision.

The directors finally decided upon a compromise solution, authorizing some of the money to be redirected toward operations and restore some service that was to be cut. However, they also decided to hold onto another portion of the funding, at least for now. That likely won’t be the end of the story.

The discussion revolves around the two pots of money that AC Transit has considered tapping into. The first pot of money is from the Congestion Mitigation & Air Quality Improvement Program (CMAQ), which is a federal program that provides money for surface transportation projects that improve air quality and reduce congestion. The second pot of money is Regional Measure 2 (RM2), a bridge toll increase authorized by Bay Area voters in 2004, the proceeds of which are spent on transportation projects that have some nexus to improving congestion in a bridge corridor.

AC Transit staff recommended that $35 million of CMAQ funds and $45.6 million of RM2 funds, both slated for the BRT project, be reallocated toward operations. This would provide an additional $80.6 million for operations — preventing layoffs and restoring about half of the service slated to be cut. It is possible for the funds to be reprogrammed from capital to operations, although doing so requires some effort and bureaucratic maneuvering.

CMAQ and RM2: A Smelly Bowl of Alphabet Soup

The CMAQ chunk of money is relatively uncontroversial. There is general agreement that the CMAQ funds should be redirected toward operations, because doing so would give AC Transit access to an additional source of operations money that could lessen the severity of the planned service cuts. The agency was essentially forced to implement these cuts by the State, which left transit operations out in the cold by zeroing out State Transit Assistance (STA) funds from the budget. Redirecting CMAQ funds for operations would require the approval of both MTC and the Federal Transit Administration (FTA). There is also the caveat that CMAQ money must be used within a 3-year period, and only for new or expanded service. This means that technically, AC Transit could only use CMAQ money to operate the new routes it has proposed as part of its service adjustment plan; but that would free up more non-CMAQ money to restore service that doesn’t qualify as new or expanded. Thus, if reallocated, the CMAQ money would offset part of the service cuts and reduce hardship to riders who depend on bus service as their lifeline.

Redirecting the RM2 funds is another issue entirely. Earlier in September, Rick Fernandez (AC Transit’s General Manager) contacted MTC Executive Director Steve Heminger, proposing the idea of reprogramming funds. The response from MTC more or less tied together the fate of the CMAQ and RM2 funds: if CMAQ is to be reprogrammed, then so must RM2. This condition was ostensibly issued on the ground that AC Transit should produce an operating plan that is “sustainable” for some length of time, and that redirecting only part of the money would be an insufficient emergency stopgap measure. It was basically this directive that led to the staff recommendation to reprogram both CMAQ and RM2 funds together. Reprogramming RM2 funds would be problematic, however, for a few reasons, beyond just the fact that shifting money around, while technically permitted, nonetheless appears dodgy to voters.

First, there is the “swap” mechanism that would be used to reprogram the money. RM2 money is used for both capital investment and operations, but MTC cannot simply decree that an RM2 capital dollar be switched to an RM2 operating dollar. Rather, AC Transit must undergo a swap with another agency’s project. MTC would facilitate a transfer of AC Transit’s RM2 capital share to another project, and then the agency sponsoring that other project would commit to AC Transit the same amount of operating funds. It was suggested in so many words that the other agency in question here could be BART, and that the swapped capital funds could shore up the dreadful Oakland Airport Connector. (The OAC still has a 20% funding gap, which BART plans to fill using a TIFIA loan from the federal government.) Even if some AC Transit service is restored in the bargain, there would still be something ironically tragic about cannibalizing BRT to build the worst-than-useless airport connector.

Another problem, though, is what shifting RM2 would mean for the BRT project. Reserving this store of money for BRT demonstrates that the Bay Area has made a financial commitment to the project. This strong local match has made the BRT corridor an attractive candidate for federal Small Starts funding, which was planned to supply almost one-third of the $235 million project cost. Rick Fernandez suggested that reprogramming RM2 is not unduly problematic, believing that once AC Transit had that pot of money at its disposal, it could use it for a variety of purposes, including BRT. This is really a red herring, as it’s extremely unlikely that cash-strapped AC Transit would redirect precious operating funds in this fashion. The more likely scenario is that RM2 would simply fund operations, not BRT. To the extent that losing RM2 also means losing out on federal funding, what we have on our hands is an evaporating BRT budget. Work on the environmental document will continue, with an estimated completion date in Spring 2010 — and it’s also possible to reduce the scope of the project, by focusing on the high ridership East 14th Street segment of the route. But withdrawing these critical sources of funding would realistically postpone BRT indefinitely.

Where Things Stand (For Now)

The Board ultimately decided to support the redirecting of CMAQ, but it refused to disturb RM2 for the time being — instead wanting to take a few months to evaluate the issue further and explore other potential sources of funding. In light of how little notice was given to the public about this special meeting, holding off on such a major reprogramming of RM2 funds was the correct decision. Indeed, given the precarious circumstances of this meeting, the Board’s vote here was just about as good as we could hope for at this time, and the directors should be commended for not immediately giving way to MTC’s directive. But the vote also means that this issue remains unresolved. MTC will likely not be pleased to learn that the directors held back on RM2, and we may see another showdown over this issue in the near future to decide the fate of this funding, and the fate of BRT.

But leaving aside alphabet soup for the moment, what’s at stake here? Although San Francisco has as a number of transit corridor projects in the works, the Telegraph/East 14th BRT corridor is the only true transit expansion project in the eastern half of the Bay Area’s urban core. (We omit the Oakland Airport Connector, which, for all intents and purposes, is closer to a toy than true transit.) For an urban area with more than a half million people, which is projected to absorb significant future growth, it will not be sufficient in the long-term for AC Transit to merely grasp onto any straw it can find, in a desperate (and, in this case, unsuccessful) attempt to maintain current service levels. That approach is merely defensive. Indeed, the long-term health and viability of the agency may well depend on its ability to go on the offensive, by delivering more robust service on trunk corridors. That service must be more reliable, faster, and more comfortable than current bus service to entice a significant number of people from their cars. Investing in some form of dedicated transitway will be necessary to eliminate transit delay due to congestion, streamline operating costs, and to ensure livability on the major avenues that are well-suited to absorb higher density.

While many of the public speakers in favor of the funding shift were people from Berkeley who have been vocally opposed to BRT all along (and thus showed a less than good faith interest in preserving transit service), others were transit-dependents who were genuinely worried about how the service cuts would affect their lives. I do not want to discount these concerns. The Board’s support of reprogramming CMAQ while maintaining RM2 for the time being is a good compromise that favors riders, while acknowledging the need to take the time to collect more information. Even if the RM2 money is ultimately diverted to operations as well, at least that decision would theoretically follow a more thorough investigation and public process, rather than being rushed with little public notice.

It is incredibly sad that the State of California’s theft of transit funds has put AC Transit into such a difficult position, pitting the hardship of a disenfranchised ridership against a good project that will attract more people to transit. If we lived in a state and nation that truly recognized the value of good transit — and that put its money where its mouth is on the same — we would not be allocating untold billions of dollars to new freeways, while artificially forcing transit agencies to make the difficult and unfair choice between running current service and setting aside a modest sum of money for future investment.

Install photovoltaic capacity to generate “green” hydrogen: Install multiple PV modules at its Central Maintenance Facility in Hayward. Combined with AC Transit’s already-installed solar capacity, this solar installation will produce the renewable electricity equivalent to what will be required to produce 180 kg/day of “green” hydrogen.

Separately, the FTA also announced that the Central Subway has received a $9.9 million grant, which will the SFMTA will apply toward carrying out further design of the T-Third Street light rail extension from 4th & King, through South of Market to Chinatown. The federal government will ultimately supply roughly $950 million toward this project (about 60% of  the $1.57 billion that is now believed will be the total cost). To date, the Central Subway has received $66 million of federal New Starts funding.

Finally, no hard cash, but some good news, for the Transbay Transit Center. The most recent dispute between the TJPA and the CHSRA about where high-speed rail should terminate in San Francisco may have jeopardized our chance to secure a $400 million high-speed rail discretionary grant to build to the Transbay subway station box, but that is not the only piece of federal funding that the TJPA has sought. Since long before the stimulus plan, the TJPA planned to pursue a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan as one of many sources of money for the transit center. (The TIFIA loan is the same funding mechanism that BART will use so that it can build everyone’s favorite transit project, the Oakland Airport Connector. This recent post on the OAC is an illustrative cross-reference for those who delight in the minutiae of TIFIA.) Anyway, in October 2008, the TJPA applied for a $171 million TIFIA loan, which would cover a little over 14% of the capital costs for the first phase of this two-phase, $4.2 billion project. And just last week, the Credit Council unanimously recommended approval of the $171 million TIFIA loan. The Secretary of Transportation will produce a term sheet and loan agreement, which the TJPA Board is expected to approve this November.

But it is not useful to expand transit networks and purchase new vehicles unless we have the tools in place to successfully operate and safeguard the security of the existing network in the long-term. That can be in part achieved by giving operators the flexibility to use federal dollars for operating costs, if not by funding operations outright. And as we have seen, transit ridership in this country has reached its highest point since 1956. Now is the time to capitalize on that success, not to shy away from it.

The report also documents — painfully — how the defects of this policy have played out across the country, clarifying how cutting off lifeline transit routes directly contradicts our alleged commitment to equity, increasing mobility, and improving the environment. The report includes several case studies that demonstrate the need for a true paradigm shift in the next transportation reauthorization.

Fare increases around the nation. Courtesy of Transportation for America.

Unsurprisingly, in light of the zeroing out of State Transit Assistance (STA) operating funds in the current (and future) budgets, California has the dubious distinction of containing within its borders an especially high concentration of the worst fare hikes. California, despite passing landmark climate change legislation, has repeatedly robbed supposedly safeguarded transit funds to balance the state budget, and the effect is pronounced, as the above map (excerpted from the report) shows. That situation will hopefully be set right at least in part, if the state’s highest court deems those raids to illegal.

Meanwhile, the report lists Muni and BART as having two of the highest deficit projections in the nation, as a percentage of operating costs (17% and 8% respectively). Muni and BART have also instituted some of the steepest increases in the nation to base fare (33% and 17% respectively). This is, as we know, only part of the story here in the Bay Area — where numerous operators, large and small alike (including AC Transit, Caltrain, County Connection, SamTrans, Tri Delta Transit, VTA, and Wheels) join still further operators throughout California in raising fares and/or slicing service in response to budgetary challenges.