Should the MBTA use some of its future parking revenues to help rescue the agency from its latest financial crisis? A group of independent transportation experts who advise the state Department of Transportation is dubious.
The Transportation Advisory Committee has expressed “grave reservations” about the MBTA’s latest proposal to begin to chip away at its mammoth debt service costs, which are contributing to the T’s $127 million deficit for 2012.
The 28-member committee, established by Gov. Deval Patrick as part of the state transportation reform effort, brings together experts in transportation, economic development, law, and business in a public forum to provide advice and feedback to state transportation officials and the board of directors that oversees the T and the state Department of Transportation.
In a brief statement sent last week to Secretary of Transportation Jeffrey Mullan, the advisory committee conceded that the idea, known as parking revenue securitization, helps the MBTA’s bottom line over the next five fiscal years. But the committee members said they fear “a negative impact” on future MBTA budgets, and suggested that the proposal’s longer-term implications needed more study.
To say the group has grave reservations about the plan “may be an understatement,” says Stephen Silveira, the advisory group’s finance subcommittee chairman. “When you see an organization about to take a step that, from all accounts, will adversely impact them over a 10-to-20 year timeframe, it’s very hard to sit there and say, ‘Ok, that’s fine.’ Because it’s not.”
Under the securitization plan, to help balance its 2012 budget and pay off future debt expenses, the MBTA or a specially created entity would issue tax-free bonds secured by a little more than half of the agency’s annual net parking revenues. The MBTA would still own the parking garages and control decisions about the parking rates.
The T’s debt service obligations for 2012 currently total close to $450 million. Debt service payments hit a peak in the next several years. The MBTA could use the lump sum payment (estimated at about $300 million) to help pay off some of those expenses. Even if the plan is approved, the MBTA still has to make cuts in order to balance its books for next year.
Ferdinand Alvaro, the chairman of the state transportation board’s finance subcommittee, compares the MBTA’s problems to the dilemma of a college student who carries hundreds of thousands of dollars in loans, but sees most of his or her part-time income eaten up by loan payments. A student might leap at the chance to push off as much debt as possible until after graduation and when he or she is earning a larger salary.
“We get a cash advantage at a time when we’ll have our most serious cash challenge; and get a cash disadvantage at a point when we will be well past the serious cash challenge,” argues Alvaro, who says he suggested that MBTA officials look at several financing strategies, including securitization.
However, in exchange for slashing some of that short-term debt, the MBTA relinquishes a portion of one of its few revenue streams for the life of the bonds, which could run up to 30 years. The agency also will have to pay back those bonds.
T officials admit that when the plan is “looked at over a 10, 15, 20 year timeframe, it’s likely to cost them money,” says Silveira.
Alvaro said the advisory committee statement did not change how he viewed the parking proposal. “We cannot find the efficiencies that will give us the magnitude of cash that this arrangement will give us,” he says. “This may be the best alternative among a number of less than perfect alternatives.”
MBTA spokesman Joe Pesaturo declined to comment on the parking plan.
Paul Regan, the MBTA Advisory Board executive director, who also sits on the advisory group’s finance subcommittee, sees the plan as “a little bit” of a gamble. “You’re giving up additional revenue at a time when you don’t have enough revenue and the reward for this doesn’t fix the problem,” he says.
In the past several years, the MBTA has restructured its debt and cut other costs to balance its budget rather than raise fares or trim service. The parking-fee securitization proposal is yet another move in that vein. “They chose to do this largely because it’s going to be invisible to the riding public,” Regan says of the parking fee plan. A fare increase carries less financial risk for the agency, but would be very visible – and unpopular – with the riding public.
