Special Briefing: The Future of Mass Transportation as US Pandemic Aid Nears an End

Transit Agencies Must Rethink Funding, Adapt Services as Pandemic Relief Ends

• Efficiencies, tax increases help New York's MTA sidestep fiscal cliff.
• California transit agencies face $9 billion in shortfalls over five years.
• SEPTA seeks cost savings to offset fiscal cliff of up to $270 million annually.
• S&P sees strong transit credit, has concern about overreliance on fares.
• Technology may enable door-to-door service as transit agencies adapt.

With bus and rail ridership stuck below pre-pandemic levels and billions of dollars of relief money about to expire, US public transit agencies need to rethink funding strategies and adapt services to the post-COVID era, panelists said at a Special Briefing hosted by the Volcker Alliance and Penn Institute for Urban Research.

The July 27 discussion came at “the most urgent time, perhaps, in the history of transit in America,” former US Transportation Secretary Anthony Foxx said. As US pandemic aid nears an end, “we’re seeing a cliff in front of us that can devastate transit agencies all across the country.”

Moderated by William Glasgall, Volcker Alliance senior director, public finance, and Penn IUR fellow, and Eugenie Birch, co-director of Penn IUR, the briefing was the forty-fourth in a series of sixty-minute online conversations featuring experts from the national research networks of the Volcker Alliance and Penn IUR, along with other leading academics, economists, and federal, state, and local leaders.

Panelists paid tribute to Richard Ravitch, the former chairman of New York’s Metropolitan Transportation Agency (MTA) and member of the Volcker Alliance’s board who died in June at age 89. “Dick Ravitch represents everything that everybody on this call is interested in, which is how do we meet the challenges of the moment for mass transit,” said Janno Lieber, current chair and CEO of the MTA. He said Ravitch became one of his “secret weapons,” helping persuade state officials approve a combination of cost efficiencies, increased payroll taxes and casino revenue “to solve the MTA fiscal cliff now, rather than wait for the money to run out.” As a result, he said, the MTA was able to unveil a financial plan for five years with no deficits.

In addition to Lieber and Foxx (who is also an Alliance board member), panelists included Kurt Forsgren, managing director and sector lead for transportation in US Public Finance at S&P Global; Frank Jimenez, senior fiscal policy analyst, California Legislative Analyst's Office; and Leslie Richards, general manager and chief executive officer, Southeastern Pennsylvania Transportation Authority (SEPTA).

While S&P sees the transit sector’s credit as strong, at AA levels, the rating company in January changed its outlook to negative due to “stubbornly slow” ridership improvement from the early days of the pandemic, Forsgren said. He noted “positive actions” in New York, California, and Minnesota, which have provided additional tax support or onetime subsidies.

“We see a tale of two transit operating types,” Forsgren said. “One is those who benefit from significant tax revenues to be able to fund operations. On the other side we have those that really need access to sustainable revenues, which they can’t really control autonomously. They can’t really raise fares, practically or politically, and they don’t have other sources currently at their disposal.”

Jimenez said California’s transit agencies, which received $9.8 billion in federal relief, are estimated to face a statewide funding shortfall of $6 billion over a five-year period. The legislature has approved $5.1 billion in transit funding over four years and provided flexibility in the way agencies can use their money, he said, allowing them to use a $4 billion capital fund for either operations or capital spending. The legislature also created transit task force to come up by with policy recommendations by October 2025 to boost ridership.

Richards said SEPTA’s fiscal cliff will occur when covid relief money runs out in April, 2024, leaving the agency with shortfalls of more than $50 million for the fiscal year and up to $270 million a year after that. SEPTA is working to make up some of the shortfall from state, local, and federal grants. An employee-led efficiency project has found $38 million of annual savings and is expected to increase that to $100 million this year, Richards said. She also said 60,000 area workers are now riding to work for free under a SEPTA program that offers employers discounted fares.

Foxx urged transit agencies to find ways to generate income from local and state sources and to be creative in serving the new generation of customers who are less attached to their cars and more open to mass-transit alternatives. He favors a move toward a more on-demand transit future, using technology and building on paratransit and senior ride models.

“The idea that a transit trip can actually be door to door trip is a pretty radical idea,” Foxx said.