- Projections with respect to ridership levels, including dealing with losses associated with rider fare avoidance in major cities
- Credit implications for the sector
Transcription:
Peter Shellenberger (00:11):
Well, good morning everybody, and thank you for sticking it out to the final session of the Bond Buyer, California. Give yourself a round of applause. Yeah, we appreciate it. We got that coveted final slot. So we're here to talk about transit sector challenges and we have our first challenge of the day, which is one of our panelists had an emergency, which is Bree from San Francisco MTA. So we're without Bree, so we're pivoting a little bit. Let me take a minute and introduce the rest of our fabulous panel. I'm Peter Shellenberger, Managing Director from PFM here in San Francisco. I'm joined with Greg Richardson immediately to my left. He's the Assistant General Manager and CFO of Santa Clara VTA, and next to him is Matt, Matt Brown from Moody's Vice President at Moody's, and then Pascal St. Gerard, a Senior Director from Fitch. So we look forward to a great discussion this morning.
(01:21):
We were going to start off with a presentation that laid out the details for San Francisco MTA, but rather than do that, we're going to sort of pull back and take a national perspective and start with Pascal. And Pascal, if you could give us an overview of transit nationally. It obviously was seeing a decline in ridership leading up to the pandemic. The pandemic really reset the table in terms of ridership and the current status for transit. The recovery is underway, but it's slow, hopefully steady. Maybe within that context you could give us a national view of how transit's faring.
Pascal St. Gerard (02:05):
Sure. Thank you again. Good morning everyone. In terms of I guess a national view for transit, it's been really interesting. I'd called the recovery a mixed bag. If you think about where we came from coming out of the pandemic where you had ridership in most trans agencies, like maybe 40, 50, a hundred, 200 agencies. I mean there are 200 alone in California, but when we hit the pandemic, the federal government stepped in and provided 70 billion nationwide for transit agencies to support their operations to avoid mass layoffs. And since we've reopened the economy, ridership has come back for a good number of agencies. And when I say come back, we're still talking 60 to 70% compared to pre pandemic levels, but even that's not been sort of evenly distributed across the board where you've had, let's say SF BART, which has sort of been lingering in the 45 to 52% range while you'll get another agency.
(03:28):
New York MTA has been in the 65 to 70% range. Then you have transit system in Poughkeepsie, New York at 150% of pre pandemic levels. So it's definitely been a mixed bag from my perspective in terms of the ridership recovery. The other thing to consider is that many of the agencies have fared differently depending on what their funding mix has been. Those that were mostly supported by either dedicated taxes or some sales tax seemed to have sort of been able to navigate the post pandemic era much more smooth than those that were highly dependent on fair box revenue. So that was the other, that continues to be one of the big challenges that remains for those that are in that latter category. So I do think you will see continuing recovery, but that's going to be a function of those entities resolving the financial picture and also enticing the ridership recovery to come forward. And I think we're going to get into some of the reasons why they're not seeing the same level of ridership come back, even though the economy is sort of back and it's full footing. But we can discuss some of that later. But I do think I would say it's a mixed bag as far as the recovery and the funding piece.
Peter Shellenberger (05:06):
I just want to pick up on that notion of the fair box recovery. Maybe Matt could add to that. I mean pre pandemic, you would look to the strength of the farebox recovery to sort of reflect the strength of a particular agency. Those with a higher farebox recovery tended to be viewed more favorably from a credit perspective. And now as you note Pascal, I mean now it's viewed as an over-reliance on ridership, which is slow to come back. And so those with a strong dedicated funding source viewed more favorably from a credit perspective. Can you draw on that, how you're looking at ridership recovery, how you're looking at farebox recovery and the mix of funding from an agency from a credit perspective these days for Matt?
Matthew Butler (05:54):
Oh sure. Yeah. I mean I think the starting point for thinking about any transit agency is exactly how are they getting their revenue right? What is that mix? And I think that ahead of the pandemic, the nice thing about fares was having more direct control over the revenue bringing in, and you tended to see that be a fairly stable revenue source. But I think even before the pandemic, we were in a world where there was a trend more and more towards relying on other revenue sources. And one thing I like to think about within the transit sector is thinking about the relationships that the transit agencies have with other governmental entities. I think a lot of times we think of transit agencies being fairly independent and a lot of times they are. But there are a lot of agencies out there that could be considered related entities to a state government or a local government.
(06:54):
I think of in particular in New York, the MTA right has a very, very close relationship both from a governance and financial standpoint with the state of New York, the MBTA kind of similar situation with the state of Massachusetts. And then if you look at the District of Columbia and it's kind of multi-party management arrangement with Wada, Virginia, Maryland and the district itself, they all have this combined financing agreement for the operations of the system. And then out here with San Francisco Municipal Transit Agency, it really is a department of the city and county of San Francisco. So I think these relationships, they set the course for a very seamless way to looking at different resource potentials when other revenue sources start to dry up. And I think at the height of the pandemic and with farebox revenues coming down and now that we're in this area coming out of that, there's more and more reliance on these other revenues and those are really stabilizing the operations and I think the capital planning of the agencies as well.
Peter Shellenberger (08:09):
Thanks, Matt. We'll channel Bree for a minute, and I know those agencies without a dedicated funding source, San Francisco, MTA, one of those and one of the larger ones, I bit of a double whammy there. They are suffering a decrease in ridership and therefore a decrease in farebox revenue. They're also heavily dependent on parking revenues. And so the folks that are not coming in via and using transit and paying for that are also not coming in and using those parking garages. And so they have unique issues without a dedicated funding source to look to. But Greg at Santa Clara VTA, you do have a variety of sales tax revenues and that's not a panacea either. There's quite a few demands and there's limitations even with funding sources, especially delivering significant and large projects. Maybe you could talk about how Santa Clara is working in the new normal and balancing this challenge.
Greg Richardson (09:11):
No, I'm not going to do that. No, I'm just kidding. So I think what I want to do, I might take a little more time than you had envisioned probably, but I think part of this conversation is to, Bree was going to provide some information as it related to MTA and there was going to be this comparison and contrast that was probably going to be going on between the two of us and Peter references the revenue streams that existed or that exist for S-F-M-T-A, and you would probably think that there was some protection in the diversity of some of those revenue streams. And so the impact that has been felt because of the pandemic ultimately hit from Bree's perspective every one of her revenue streams. And so that changes the dynamic for them tremendously and the impact that it has the pandemic has had on the city and then ultimately, and everyone knows it and we all talk about it, the work from home or the return, the return to work sort of policies that have been implemented within a lot of the companies and here in the Bay Area, I mean there's a lot of jobs that can be done from home and a lot of folks are not as anxious to come back to the offices.
(10:42):
And so that has had of course a tremendous impact on folks like Bree and others within the region, BART as well. And for VTA, we've had the same impact. I mean, when you look at where we are today from a ridership perspective, our bus operations and what's interesting, and again, a lot of this stuff has been happening I think throughout the country weekend service has changed dramatically. Saturday and Sunday from a bus perspective, we're over a hundred percent of what we were pre pandemic. And from a bus perspective, even during the weekdays, we're approaching a little bit over 90% of return to where we were pre pandemic. At some point we're going to lose that pre pandemic sort of exercise, but for now, it still as a reference point, but it tells you that from the bus perspective and really those essential needs, those essential workers that need that transportation are back and they're utilizing that service.
(11:43):
Our light rail is sitting at about a 60% return. And again, it's the same concept for the most part as the other rail industries or rail agencies because a lot of those folks were the ones who were going to their businesses. And so they're the ones who are now working from home. And for us, that creates some opportunities for us because the cost of running the light rail is pretty significant and it is kind of the spine of what we do. So we're not going to eliminate it, but it is something that we've got to evaluate as to the long term when they go back to the revenue streams. For us, for VTA, we do have several sales tax measures. One in particular is specific to operations. What's good about that one? It is a sales tax that is in perpetuity, so that's one I don't have to worry about.
(12:35):
So it's kind of nice, but at the same time, what it produces for us is steady but still not enough to cover all of our operations. And so when farebox goes down or farebox doesn't come to where we need to, even though for us, farebox fair revenue for us is in the $30 million range, don't want to lose it, but $30 million means something to us as far as our day-to-day operations. And so having that dedicated source is good. There's also the downside, and this is where we are as an agency. Several years ago, and I'll say several, many years ago when sales tax was hitting kind of a rough patch, revenues weren't that great for us. And there were some difficult decisions that were made by VTA due, some reduction in force, but at the same time also reduce our service. And so those were cuts that we had to make as an agency many years ago simply to survive.
(13:33):
And it's the same sort of exercise that a lot of the agencies are facing today, but we made those decisions 10, 15 years ago. And the unfortunate reality is we've not had the opportunity to build that service back up and to do that would require more funding. And so right now we're able to sustain the service that we've got for now, but costs are going to go up and that's going to generate a need for us to have some other revenue sources and what's happening for us today throughout the region and really some of our peers, when you look at a metric which is service per capita, we have been below one. So the amount of service hours that we provide per population within the county, we're not meeting that number. We're not even at a one ratio most in the region. For us in the Bay Area, they're probably approaching anywhere from one four to one five to one six.
(14:32):
Bri's not here. So I can say this, but I think 2022 numbers because we did this comparison, they were sitting at above four, and now I think they're at about three, a little over three. But that's the amount of service that's being provided within the area that is being able to meet the demands of that population. And we VTA need to be able to do the same thing. But to do that requires a tremendous amount of operators, a tremendous amount of investment in the overall system. And again, that's not going to come from the current fixed sales tax measure. So those things are, when you talk about the fixed piece and especially on the operations side, it becomes difficult. Some of the other sales tax measures are dedicated to certain capital programs, other, I'll call 'em, capital programs, more funding programs that are really throughout the entire county.
(15:27):
That's our 2016 measure B. And so some of the stuff that we start thinking about from a funding perspective, and again trying to figure out some diversification and things that exist in our current portfolio. And so the two things that we're going to focus on, knowing that maybe there'll be a regional measure, maybe there won't, we'll still have our sales tax piece that is a fixed component from an operations perspective, we'll hopefully retain the fare. And so we're going to develop as best we can, our transit oriented development properties develop a way in which those are generating enough cash that over time they'll help support the transit operations overall. And actually we sort of indirectly did that already.
(16:16):
We recently put notice out that we were purchasing a new corporate facility and we'll close on that hopefully within the next four to five months. And the way we're going about doing that is actually using our TOD revenue as the support fundamentally for paying for the debt that's going to be issued for that, the 1976 sales. Sales tax will be the security that's provided, but ultimately we want TOD to reimburse the operation side for that. And so we're going to utilize that revenue stream in support of the transit side. And if we didn't do that and we had to invest in our current corporate facility, that would've required us to use the capital dollars from our transit side. So we've actually been able to shift some of that responsibility or that need from the capital to the TOD side. And then also we'll hopefully get quicker at developing our express lanes.
(17:13):
That'll be another opportunity for us to develop some revenue or create some revenue that, I don't know who's in the room right now, but we talk about it's got to stay within your corridor when they talk about express lanes. My corridor I think is Santa Clara County, so that's what my corridor is. So I mean we're going to try to make it to where most of the express lane revenue can help support the operations that exist within Santa Clara County. And I know there's some things we got to work through some hoops for that, but that's fundamentally what we're trying to do. So we're trying to identify those other revenue streams to help support that because again, sales tax and we're seeing it now, sales tax is a little bit lower than we had anticipated. It started hitting a decline probably about six, seven months ago, and we were able to get through fiscal year 24 pretty well.
(18:02):
But fiscal year 25, it'll be a little bit of a challenge because we're going to miss probably about 20, 25 million dollars of revenue that we had anticipated. And then lastly, if I could, I'll just reference this because again, a lot of the conversation in the Bay area has been about the fiscal cliff, and as I talked to the CFO group throughout the Bay Area, I've had to apologize because we've, we've sort of stayed out of that conversation. Part of that is because we've got the Bard phase two project and we're in the middle of trying to secure an FFGA. And so part of that exercise is we've got to show fiscal solvency as far as our operations, as well as the Bard project. And so we've stayed away from some of the concerns that might exist in the near to long term from a fiscal perspective.
(18:48):
But during that exercise or during that process, we have been able to, for fiscal years, 22, 23 and 24 actually generate a surplus in our operating budget. Now again, some of that is because we're not ramping up service, we're not able to put the service back on the streets, and so we're able to generate that simply by cost reduction or not spending as much as we probably would like to. So we've been able to generate that surplus fiscal year 25, fiscal 24 and 25. We did pass a balanced budget 25. It's going to be a challenge. We're in the early stages of fiscal year 25. And then as I said, fiscal year is 26 and 27. We're a biennial budget process. There's going to be some challenges for us to meet a balanced budget again because of sales tax and just some of the cost measures.
(19:40):
Last thing on the cost, you're okay with me doing this? We were struggling for all the time. You can. That's what I thought. This is winging it, man. This is winging it doing well. Some of the other things that I think most of the operators are facing, and I know we're seeing it, is a lot of the changes that have gone on legislatively within the state. One of the biggest ones that really is affecting us is SB six one, I think it's 6 1 6, which is basically the sick pay. And for us, it is generating some serious issues for us because of the flexibility that is now provided to a lot of the operators to just simply take sick and you can't, I'll call it penalize, you can't have points affecting them. And so it's generated some issues for us that has created some service issues and it's creating opportunities where our utilization rates that we like to monitor from an operations perspective for years before the pandemic our folks would show me for, it could be for probably for the last 15 years before the pandemic, we had what we looked at as a utilization of about 1,650 hours per operator.
(20:49):
And it stayed at that number pandemic hit, and of course everything just went nowhere and it dropped dramatically. What's happening is we've been trying to get it back up and we are not able to get back up to that 1650 number and not getting back up to 1650 means to get to the same level of service, we got to have more operators. And that's just to maintain that service. So to grow, it's just going to require more. And we've been pushing, trying to get up to it, but now some of the new measures that have been coming through the state are creating pressure on that. And so we're struggling to really find that efficiency within our operation. So it's a struggle across the board from that perspective. So with that, I'll leave it unless you wanted me to talk about capital.
(21:31):
Did you want me to talk about capital too?
Peter Shellenberger (21:33):
You will be back up.
Greg Richardson (21:34):
Okay. I'm going to shut up now and y'all can have the rest of the day back. Goodbye.
Peter Shellenberger (21:38):
I appreciate that. Greg, you mentioned you're a different revenue mix and the sales tax and the TOD revenue and of course the farebox never a huge component but, and then the express lanes, which is increasingly popular. I know LA County, MTAs here, that's sort of reflective of what they have. Sales tax TOD revenue, they're busy doing the same thing, express lanes throughout the county, all of which are sort of local agency controlled revenues. And so I just want to pose this to Pascal to sort of step out of California for a minute and I will come back to you just to think about this regional measure. Is there a larger scale, a larger, higher level that we need to think about planning for transportation in California, but Pascal sort of stepping outside of California? Is it less locally focused? Is there more state help? Is there a different funding strategy for both operations and capital elsewhere in the US?
Pascal St. Gerard (22:35):
There's definitely more state involvement. I'll start there now. That translates into a different governance structure where the state definitely plays a much heavier role in the decision making process as far as resource allocation, either through specific state programs for funding targeted transit activities. But I think in California what I've observed, not just California, also just sort of the western states where the state legislatures have tended to allow their respective agencies to fund things locally. So the revenue source tends to be a two-thirds mix locally, whether it's a dedicated tax or a property tax or some other locally generated revenue source. And maybe the state will step in and provide some capital funding grants. But for the most part, my observation has been that a lot less is being done directly at the state level in California compared to elsewhere.
Peter Shellenberger (23:35):
And Matt, maybe you could highlight examples elsewhere. Pennsylvania I know has a fairly good state structure, funding and supporting transportation. What's your observation and just other funding models outside of the state?
Matthew Butler (23:48):
Yeah, I think Pascal hit it on the head. You look at Pennsylvania, most of the grants that they're providing to, let's just say their two largest systems in Philadelphia and Pittsburgh, most of the money coming from the state are from statewide taxes that are then dedicated for these transportation purposes. In Chicago, you have the state of Illinois providing some direct support through grant funding of the regional transportation authority or the Chicago Transportation Authority. But where those entities really, the RTA is levying its own tax. It's a very, very broad region. We're talking six counties or so. It's a very wide sales tax base. And so there's a very large geographic base from where that revenue's coming from. I mentioned earlier DC again, you have three governmental agencies, really state governments in the district that are just providing general revenue to the agency itself. They're not putting in place a particular sales tax that's on a particular geographic location and that becomes the transit tax. It's these governments that are stepping up and providing that revenue directly to them. And I think the situation is the same with Massachusetts and Boston and the MBTA large portion or at least a portion of the statewide sales tax is available for the transit agency.
Pascal St. Gerard (25:15):
Can I add one more point? I think the other big distinction, if you look at the Bay Area, you also have a significant larger number of players involved compared to similarly sized area in other major metro areas where locally we have upwards of 26 to 30 different transit agencies in what we would consider the Bay Area proper, which might seem unusual, but each one of those agencies have their service territory, they have their revenue territory as well. So it makes it a little more challenging than to fund things more broadly or more regionally. So I do think that presents a unique challenge in an era where you do have agencies that are experiencing fiscal cliff deadlines going forward.
Peter Shellenberger (26:15):
Again, channeling Bree, I mean she's managing and responsible for delivering projects and service in San Francisco, but I live in the East Bay. Most of us are hopping on various, various, whether it's BART to get into San Francisco and then on to Muni or BART down to Caltrain and heading down to VTA. I mean, it is really a regional travel pattern. And our funding sources are, as we've just noted, very much localized. And I'll ask Greg, does that support the effort and recent discussions for a regional tax measure, a stronger regional approach to funding transit? What's your view or VTA a's view or your personal?
Greg Richardson (27:00):
I don't like you anymore.
Pascal St. Gerard (27:11):
No, I think, is this where I use the word organize.
Greg Richardson (27:13):
This is a good one. This is the good one. So who is in this room? Is there anybody that's going to talk back to my boss or my board? Please don't. So I'm going to say this from my perspective, and again, I'm someone who has been here for, I've been in the Bay Area now for three years, been at VTA for three years prior to this I was at the Atlanta Airport for about 12 years. And so coming from the airport to transit, this whole funding piece has probably been the biggest education. And I still do not understand all of the things that go on. I'm still trying to figure out between the state to the various MPOs that exist ultimately to the agencies, the competition that exists. And again, as Pascal said, I mean the thing that I realized at the airport when the FTA was providing grants or monies or anything else from that perspective, there's 435 airports, major airports in the United States.
(28:20):
So dividing money amongst 435 is relatively easy. And then you get into the PFC grants and stuff like that. There's not that many. You got the number of transit agencies now, again, they're capital programs are not going to equal what the 435 airports are, but you've got enough transit agencies throughout the entire United States that even if you've got the same pile or bucket of money that the FTA has, the distribution that goes to all these agencies just doesn't do it. And so it's just an amazing exercise in this whole process. Now, am I trying to skirt the measure issue? No, I'll get to that one right now. So from my perspective, the region, we all need to be a part of some regional effort. And that's been my position when I've had conversations with a lot of folks. Now there's some subtleties about that and there's some issues amongst some of the counties and how we go about doing that.
(29:20):
But we all have to recognize, and this is a conversation that I've had with our folks is we're in the midst of doing a BART phase two project. And the reality of that project is it closes various agencies, but it effectively closes a loop around the entire bay. And we have folks and the conversation that goes on within Santa Clara County, and it's true. I mean, when you talk about VTA close to 90, it's probably more than that. Over 90% of the folks who utilize VTA are utilizing it within Santa Clara County. So that's when the conversation comes in about when we're raising money within the county, we've got to support the people that are utilizing the system. And that becomes a difficult conversation because we also recognize that we are regional partners with some of the other agencies and we need to be a part of that.
(30:17):
And so what I'm hoping that most of our folks realize is there are certain projects that we have going on one project in particular, east Ridge to BART Regional connector. It's a light rail extension, 2.4 miles light rail, but it's connecting the east side of San Jose. And these are folks that need this service. They're relying on the bus, but they're relying on the roads. Now they're going to have a light rail system that right now will get 'em to the mill pita station for BART. But just imagine down the road, the connection that that community will have to not only the east side of the Bay, but ultimately when BART phase two is done, the connection they're going to have then to the west side of the Bay and then the entire bay. And so that access is critical. And what we need, and this was a point I made Monday during a public comment, is I need BART to succeed.
(31:16):
I need Muni to succeed. As much as people don't feel like Muni is connected to us, I need Muni to succeed because I like to say this a lot. I don't have a car in San Jose. So today I took BART. Luckily enough I was able to walk here, although I took the wrong exit out of the Powell station, so I walked about a mile to get here. But when I bring friends to San Francisco, we get on Muni bus and I show them how we do stuff around here. So I need that connection. And so as much as it might pain a lot of folks to feel as though we've got to be contributors to that process, we've got to figure out that solution now, how it's ultimately going to be done. I know that there's going to be some wrangling that's going to go on over the next little bit, but I think something does need to get done.
(32:10):
And I'll say this, this is a conversation we just had before about the sales tax measures I need, I'll say it. I could use that additional revenue stream that would come in, it would be helpful for us from an operations perspective. So I want something to work for everybody, but there's going to be some conversations that are going to go on, whether it's by counties, by agencies, whatever the case may be, to find a way to make that work for all. So that'll be sort of the next phase, I think. Did I answer your question?
Peter Shellenberger (32:41):
Diplomatically so well done.
Greg Richardson (32:43):
Okay.
Peter Shellenberger (32:43):
No, that's a great, you're right. Regional solutions are required, particularly in the Bay Area, but increasingly all urban cores.
Greg Richardson (32:56):
If I could just, oh, please. I know Derek's in there. So he's questioning me when it comes to the MTC side, but I do think there are regional efforts that are going on right now, and I think that's as important. I mean, there's conversation about consolidation and we need one group that manages the whole thing. Those conversations can go on, but there are efforts that are going on within all of the agencies to find ways in which to make the travel for that passenger more seamless. So those efforts and that work has been going on since I've been here. It's gotten a little bit better with the whole Clipper program and how we're trying to come up with the Bay Pass and trying to make it simpler for folks who need to navigate multiple systems. So that work is going on between agencies Now, will there ever be one agency like a New York MTA or something like that? I doubt that's ever going to be the case, but as long as we're working together within the region to find ways in which ultimately the goal is to make the passenger experience as best as it can be when they have to ride multiple systems. And so if we can solve that equation amongst ourselves, sharing the revenues, passing the revenues as it needs to be, however that works, that's really to me, the critical piece that we have to do.
Peter Shellenberger (34:13):
Well, thanks Greg. We'll open it up for questions in just a minute here. I just wanted to say Pascal, Matt, do you have anything to add in terms of the regional funding discussion, the need for regional planning strategies that you're seeing outside of California that are working to get writers back in the buses and the trains, et cetera?
Pascal St. Gerard (34:36):
I think basically agencies are trying everything. The ones that have been successful or the ones that are not saying we have a solution, they just keep trying different approaches, whether it's sort of partnering with some of the private transportation network like the Ubers or Waymo's or what have you, to try and sort of bridge the gap to their routes, increasing service levels, marketing the service. So I do think the places that are relatively successful, the ones that have continuing ongoing functional economies where people are either commuting to work on a regular basis or if the pattern of commute is different, they're able to adjust their scheduling and their routes to accommodate that. But I do believe that eventually they'll have to look at their business model. I've had several conversations with people about transit in particular, just the idea, I threw it out there to someone I said, is transit a utility?
(36:00):
Is it something that not just the user pays for, maybe everyone pays for as far as identifying funding streams? Do we think of it that way? What do we do with the way people are working now? Is it sticky? Is it going to change? I mean, from a credit perspective, I see all of these variables that have come into shape sort of in a, again, post pandemic environment. And how do I think about it from that perspective? I mean, what are the credit pressures? What are the metrics doing? What will the metrics say in this new environment over a longer period of time? When I think of Fitch, our view so far is that we have, I think we have a neutral at outlook on the local government sector, which includes transit. And I think that in large part was due to sort of the relative improvement from the year prior and the year before that.
(37:01):
So when we sort of think out next year or the year after, we really have to take into consideration the decisions that are being made or the approaches that are being considered. At the same time, there are individual system realities that have to be confronted. We have to look at what each agency's saying, or this is our drop dead fiscal cliff date. This is the amount. And we are working on different strategies to address those. But at the same time, from our credit perspective, we're still looking at, okay, how does that affect the credit? How does that affect their operations? How does that affect their IDR rating? Are the securities impacted in any way? So we definitely do expect improvement over time since so many people are working on this. And I do agree that a regional approach makes the most sense, but you do have to have all the parties around the table and working in the same direction.
Matthew Butler (38:07):
Yeah, the only thing I'll add is I think what happened in 2020 and the large reduction in fares, and as agencies and parties have gotten used to it, I think it's also brought them around to thinking, okay, we've dealt with this immediate crisis to begin with, and the federal government was a huge aid there. And now that we're starting to identify these other revenue sources that will allow us to bridge the gap between what we were collecting in fares and what we're collecting now in fares, there's also an opportunity to get a little bit creative and think beyond that, right? What's our long-term sustainable funding structure going to be? And can we actually leverage the state grants that exist or the regional tax base that's generating revenue for us? Maybe expand that and set ourselves up for much longer term sustainability and expansion and improvement of service. And I think a lot of those things and that way of thinking is putting more things on the table. And you have a lot of parties that have interest in this. You have a lot of minds coming together and collaborating and thinking not just a few years down the road when we try to get through this fiscal cliff, but 15 years down the road, 20 years down the road, how do we want our systems to look at that time?
Greg Richardson (39:25):
Do you mind if I add, oh, please do. This is the last time he's going to ask me to be on his panel. So part of my process, this when I was at the Atlanta airport, when the pandemic hit, and this is what I've realized, I think from a transit perspective, we need to get creative. We need to start thinking about how we communicate to not only the passengers, but to those within the community who may not be using our system. And I say that because when the pandemic hit from the airlines perspective, what you found most of the airlines doing, and the airports were supportive of this, is you helped people understand they needed and they wanted to go somewhere. And so those who were afraid of flying or fearful of the process or whatever, you ultimately help them understand that there was a place they really wanted to go, and the way to get there was to fly.
(40:25):
And so you saw, again, you saw the leisure travel increase dramatically, but you created that destination mindset. And I think as transit agencies and San Francisco as I'm sitting here thinking about it is a great example of where the partnership between the cities, the transit agencies of creating that destination spot that people can appreciate that yes, I want to go and whether it's local or whether it's tourists, I want to go to that place or I want go to that show, or I want to go to that event. And you help them understand, yes, I want to go to this. And now by the way, the best way to get there is on transit because then you can avoid, traffic can avoid. And so it's just this exercise of really trying to become more forceful, more aggressive in trying to help people understand that one, you want to go someplace, you really do. You really want to go to that show. And when you go to that show, you really do want to take transit the best way to get there. And that's the education piece that I think that we've got to start stepping up a little bit more to help that process.
Peter Shellenberger (41:36):
As I visit the leaders throughout the transit agencies, and I was up in Portland this week, and I think everybody's moved from shellshocked during the pandemic, and you're right, we sort of referenced the Great Recession forever. We'll eventually stop referencing the pandemic, but it feels like we're still in the post pandemic era here. But they've moved beyond being shell-shocked to really being creative in this sort of persistent optimism with the leaders within transit. And I was impressed it was up in Portland. Triad has a very stated policy of Vision 2030, they have 65 million writers currently up to, they had 120 pre pandemic, and they want to double that by 2030. They want to get up to 130 million. So folks, I think to your point, are moving beyond just holding on and clinging to sort of thinking creatively, how are we going to grow? And they could point to some recent successes.
(42:33):
I mean, ridership has incrementally grown, and again, just pointing back to Portland 12% in the last year. So it's not happening overnight. I mean, to Matt's point, it's going to take a long-term vision, but the vision I think is really, really key. And it's there. And this is persistent optimism that is critical to transit right now. And I always say that your greatest friend in transit is traffic congestion. So that's coming back. So I think we're all, we're going to move to buses. I ride a train every day before I thank the panel, we'll open it up for questions. Any questions for our esteemed panelists this afternoon, this morning? Oh God, thank you, Jessica.
Audience Member Jessica (43:20):
Yeah, I was going to say, does anyone want to comment on housing? We've had all these panels on housing and it seems like density and that could be part of the solution is, and then maybe also talk about the transit oriented development projects of the federal government, and does that play into your thinking at all?
Greg Richardson (43:40):
Yes. Yeah, I think from our perspective, we've got 20, 27, 29 one of those two numbers properties that are identified for TOD and that is necessary. The housing is necessary for the density that exists in all for encouraging more transit riders in that process. And so that's in fact the statement I made before about us moving our corporate headquarters. Our current corporate headquarters on First Street in San Jose was already identified as a TOD site. So the board already approved that back in 2009 as TOD. So now what we're going to be able to do is get that developed faster than what was originally planned. And that area could really benefit from more housing and get people on transit. So yes, that is definitely part of our effort and our plan.
Matthew Butler (44:39):
Well, it seems to me that there's a queer feedback loop there. You improve the transit, you make an opportunity to engage in these housing development, transit oriented oriented developments, the housing's there, then the transit becomes even more important and it starts to feed on itself.
Greg Richardson (44:54):
And I'll add where we want to be helpful in that process. The county will have its funding and everything else, but this is where we're going to do our best to utilize some form of TIFIA for the development of these properties. And even if we're not in almost, I think in all cases we're not going to be the developers. So we're going to ground lease these opportunities for others. What we want to be able to do is provide that opportunity for them to get the TIFIA loan. And if we need to that process along, that's what we want to do. And that might help close the gap and close the deals for some of these opportunities.
Pascal St. Gerard (45:31):
And I'll just add that from the perspective of the state, I mean they've definitely shown their commitment to this just like three piece of legislation, AB 32, which deals with the state sort of greenhouse gas approach and transit is a big piece of that and has to be a piece of that if they want to be successful. The second one is SB 375 looks at sustainable communities and trends is also a big part of that. And the last is SB 35, which is really sort of streamlining the housing production process. And again, transit is sort of part of that as well. And if you look at what the state did with this most recent budget cycle where the transit operators may disagree with this, but the fact that they did provide so much more funding than typical, but part of that funding was allowing for flexibility in how they could use the money funds that would've normally been used are restricted to capital. They said, well, you can use it for operating and you make that decision. So I do think there is recognition that housing needs to be part of the recovery, and I think that the agencies are okay with it. They'll have to figure out what the right approach is, whether it's a ground lease or do they own and operate these, but no one wants to be in the housing business who's not a housing developer. I can appreciate what was just said.
Peter Shellenberger (47:05):
Another question.
Audience Member 2 (47:08):
Oh, it's loud. I'm wondering if you can help, those of us who aren't transit experts understand the politics in California, but it's a little perplexing that New Yorkers, Chicagoan, people in Washington DC have taken these broad regional state approaches to solving the problem. And we with our greenest most activist legislature, don't seem to be going that way. So one, I want to ask about that. What's going on there? Maybe it's just Rich Bay area, why should we pay for you? But secondarily, practically, can we just keep layering on sales taxes? We hit a limit.
Peter Shellenberger (47:55):
That's the next panel. I believe that's an excellent question. That's a complicated question. It's a fabulous, but I will open that. Anybody want to take a stab at explaining California politics?
Greg Richardson (48:10):
Well, again, I'm still learning it, to be honest. Again, I've been here for three years, the regional component, and again, Derek's back there, but he hasn't been with MTC that long. When I first got here, what I started reading up on MTC, I wanted to understand what its role was and what it was designed to do. And again, this is me speaking, so please someone back there, don't yell at me when I'm done. But the opportunity for the regional effort, in my opinion, when I read what was done with MTC, that opportunity existed when MTC was created 1970, 1980s, whatever timeframe you want to go with. Now, why they didn't do that? What was the political environment then? I don't know. And whether they didn't have the political will to fight that battle to gain that regional component that I think they were given the authority to do, why that wasn't done. I don't know. The issue today is now you've had 30, 40 years worth of different agencies being in existence, creating their product, being what they're going to be. And now you've got these individual agencies where if a regional player wanted to take over a region and take over, that's a bad word, but they want to be that regional component and that means seeding some of your responsibilities and your power.
(49:49):
That is one of the most difficult things I think to do now because again, we're dealing with 27 agencies in the Bay Area. And so that's the difficulty. So now what we've got to figure out, as I said before, is how do we work together to help the passenger and make that experience better? And so that's where I think that's the struggle that we have within the Bay Area from that perspective. So that's where I would say that.
Pascal St. Gerard (50:11):
I think the other thing to consider is, so you're looking at history. I mean BART just celebrated what its 50th anniversary four years ago. So still a relatively young system by comparison to other major metro area transit agencies. And I think the other factor to consider as far as the West coast is concerned is if you look at just the trajectory of economic growth in California and in the Bay area. So we've had explosive growth over the last three or four decades, but I don't think people expected or built out the transit system ahead of that. So we're in a situation where these various networks existed, but the growth factor sort of outpace the system. These smaller units kept growing incrementally, but there was not sort of the overarching major regional transit player that was the dominant entity to kind of really guide the development of transit in the region.
(51:21):
And I also do believe that they're not having been here as long as perhaps other people in the audience, but I would imagine that there are very different communal perspectives on your local bus network or the county bus system operating within the county. How challenging it was to go from one county to the next 30 years ago, 40 years ago. But elsewhere where I think the systems grew out from within, it just kept growing out. You definitely had many more systems being established locally and operating just within a defined boundary, which is the local county until you had your light rail system. So I do think that just the origin of the different networks here has made it difficult, at least from today's perspective, to really sort of, I dunno, coordinate, harmonize in an environment where funding is pressured. The nature of work has changed, commute trips to downtown are no longer what they used to be. So all these factors influence the various state of fiscal health for all these different agencies.
Greg Richardson (52:51):
You're absolutely right about sales tax, and I think this is your second question, so I didn't want you to think that I was going to avoid that one, but it goes back to what we were talking about before from a state perspective. And yes, there are state funds through TDA and STA and stuff like that, but when you think about what Pascal said about the east coast and the amount of funding that is, I don't know the exact numbers, but my sense is that the states on the east coast, whether it's New York or Pennsylvania, they are providing through, I'll call it the general fund, a dedicated source that's going to transportation or to transit. And that's not necessarily, which is odd. Again, from the east coast coming out here, I would've thought that would've been a major supported effort because of all of the benefits it provides to the environment, to the people, everything else.
(53:48):
So the state's engagement and the funding of that, without that, there is really no other way to do it. I mean, you can do parcel taxes, payroll taxes, things of that nature. Those don't seem to do well in the Bay Area. And so you find the one we're doing polling now to figure out what is the best approach to go to figure out how we can get some money in. But that's the issue. It becomes a local issue to solve in a lot of cases. And there's just so many, only so few things to do. So
Peter Shellenberger (54:21):
I'll pile onto that as well. Through the state, in the state authorizing legislation that provided for the county transportation authorities and the self-help counties, I think therein they thought, okay, we've provided you the tool to go tax yourselves and deliver transportation. And sure enough, most counties have done that, all the larger counties. The challenge there is the counties take your pick, go ahead and pass that half cent Alameda County full cent tax. And with that they have to fund local streets and roads, major major capital highway improvements. And then you start looking at the slice that goes off to transit and Sacramento is 35%, and in San Diego it's similar, 35% San Francisco, they get a portion of the measure, and with that they have to fund operations and maybe some capital. And so yeah, you're delegating down this local funding mechanism down to the localities and they're passing it and it generates pretty good revenue, but it's got such a broad based demand on it and that the portion, the slice that goes to transit is insufficient to cover operations. And then you have to deliver your multi-billion dollar capital projects and then you're leveraging your slice all of a sudden. And so there is both fairly high sales tax revenues at the local level in California, and it turns out to be insufficient in the long run to meet all the sort of statewide transportation needs. And so, yeah, it's a challenge that needs a solution.
(55:57):
With that, we miss Bree, and I'll give a huge shout out to Greg and Matt and Pascal for carrying the panel today. So thanks so much and thank you all for hanging out for the final session.