McDonnell Team Pushes New Transit-Funding Scheme

Thelma Drake

by James A. Bacon

Virginia should overhaul its funding formulas to reward local transit companies for superior productivity and performance, argued Thelma Drake, director of the Department of Rail and Public Transportation (DRPT) during a presentation yesterday of the McDonnell administration’s funding reform plan to the Commonwealth Transportation Board.

“The current system dates back to 1986,” Drake said. “If you were inventing it from scratch, you wouldn’t do it this way.  … He who spends the most money gets the most money. There’s no rewarding performance.”

Under the proposed “hybrid” approach, which must be approved by the General Assembly, DRPT would allocate roughly $150 million per year in state operating assistance based upon a balance of ridership numbers, operating expenses, and performance-related metrics such as costs and the number of customers per revenue mile. The formula would be “a 21st century model for funding transit.”

But the hybrid model received heavy push back from the Virginia Transit Association (VTA) and individual transit companies. Performance metrics are a great management tool but not a basis for allocating funds, said Linda McNiminy, executive director of the VTA. The DRPT proposal would pit transit companies against one another, make funding more volatile and ignore unique circumstances in each enterprise.

The DRPT proposal does recognize that there are big differences between transit systems serving the Washington metropolitan area and the town of Chincoteague, said Drake. The idea is to put the state’s nearly 40 transit systems into one of five peer groups based on population, population density, ridership, operating costs and other criteria. Each peer group would receive its proportional share of the state allocation based on operational expenses, and each smaller pie would be divvied up between the enterprises in the peer groups.

The state should “reward and incentivize our transit systems to be more efficient,” Drake said. The proposed approach would hold them more accountable.

Transportation Secretary Sean Connaughton described the presentation as “positive, upbeat.”

McNiminy countered that peer-group comparisons could be unfair. Consider Blacksburg transit, which serves a large captive ridership of university students and has access to a workforce of part-time student drivers. How fair is it to compare that situation with, say, the Roanoke bus service, which is spread over a much larger area and does not have access to a large pool of part-time labor?

Fran Hooper, representing the Charlottesville-area JAUNT public transportation service, said the service is unlike any other. Riders, many of them wheelchair-bound, must call a day ahead of time. According DRPT’s metrics, which are suitable for conventional bus companies, JAUNT would be judged inefficient and its $5.7 million budget would be cut. The DRPT would “create winners and losers,” Hooper said, but not necessarily on the basis of productivity.

The state pays a modest fraction of operating costs and an even smaller fraction of capital costs, yet through this proposal it would “take control over local transit systems,” said Stewart Schwartz, executive director for the Coalition for Smarter Growth. “It would be like a minority shareholder taking over a company.” The real issue, he added, is the need to find more transit funding.

One benefit of the proposal, said Drake, is that it would allow DRPT to go to the General Assembly and more effectively make the argument for more funding by addressing widespread concerns about inefficiency in the transit industry. “We’re not trying to punish anyone,” she said. “We want to encourage people to make good decisions.”

18 Responses to McDonnell Team Pushes New Transit-Funding Scheme

  1. re: ” Virginia should overhaul its funding formulas to reward local transit companies for superior productivity and performance,”

    what has happened to the free market advocacies?

    Does this mean the McDonnell administration supports transit subsidies?

    bonus question:

    Is the amount of subsidies that NoVa receives for transit, including METRO …. MORE than they pay for ROVA education?

    anyone got numbers?

    Does DJ think these subsidies do NOT come from ROVA but instead from a undisclosed bank vault in Richmond?

  2. you got that right DJ – now tell me what the non-local funding levels are.

    Do you think NoVa gets more transit dollars for infrastructure and operations?

    How many other cities in Va get sufficient funding for subway type infrastructure?

    Who do you think funds METRO? just NOVA?

  3. Oh – the other question would be – if we fund according to performance would METRO come out ahead or behind?

    Has Virginia determined what other metrics would be added to “class” of system?

    and right now it feels like most of the transit systems are OPPOSED to this idea – the are making the “we are unique” argument to evade being rated.

    That’s bogus. I think I actually support McDonnell and Drake on this.

    this is another example of Dillon putting performance strings on funding – not too different from the Feds doing similar for their funding of transit. Too bad – neither the Feds nor the State are proposing similar approaches to ALL transportation infrastructure including ports and roads AND commuter rail – like VRE.

    There needs to be criteria standards and incentives for efficiency and effectiveness.

    right now – a lot of funding is formula-based, i.e. – you get your regular allocation no matter your performance.

    We’re spending ROVA money from a lot of people who have no transit – to pay for folks who do get access to transit.

    That’s worse than a generation or wealth redistribution. That takes
    money from one group – unilaterally and gives it to others.

    and the other thing is that Smart Growth groups favor transit – and in doing that – they want external funding – which ends up coming from RoVa both in terms of Federal and State taxes – redirected to areas like NoVa, Hampton and Richmond.

    I’d note here that the transit in Fredericksburg including commuter rail is funded from Federal and State gasoline AND income taxes and I strongly suspect this is the case wherever Virginia has transit.

    and I still ask DJ – how much of METRO is funded externally and how much of RoVa schools are funded, in effect, by NoVa?

    what if RoVa traded their school funding from NOVA for their transit subsidies to NOVA?

    How would that compute?

    • Very interesting questions, LarryG. My guess is that the NoVa’s educational subsidies for RoVa would far outweight RoVa’s subsidies of NoVa mass transit. However, it would be good to see the numbers and know for sure.

      On the other hand, I would conjecture that the numbers would not support Don’s narrative. They would show that the core jurisdictions of Hampton Roads and Richmond were also subsidizing the rest of the state. The numbers would reveal that NoVa isn’t subsidizing downstate Virginia, it’s subsidizing rural Virginia. (NoVa’s subsidies to rural school systems are bigger than Richmond’s and Hampton Roads, to be sure, but it’s the urban/rural dichotomy that’s important, not the NoVa/RoVa divide.)

    • Agencies are opposed to the peer groups, because they are ridiculous.

      WMATA Rail, VRE, and Hampton Roads Rail are all in one “peer group” simply because they’re rail.

      WMATA bus, GRTC, Fairfax County, Hampton Roads bus, Alexandria, PRTC, Arlington County, and Loudoun are all lumped together. These services are all wildly different.

      Go here for all of the peer group listings:
      http://www.drpt.virginia.gov/activities/files/100112%20Peer%20Group%20Spreadsheet.xlsx

  4. @LarryG, I did some initial digging, but I didn’t have a chance to pull all of the numbers. Based on my early numbers, it looks like Northern Virginia is getting the worse end of the deal regarding education versus transit subsidies.

    According to the Department of Taxation (link below), Fairfax County, Arlington County, Loudoun County, City of Alexandria, City of Falls Church, and City of Fairfax combined paid $3.4 billion in personal incomes taxes. Across the state, the total income tax receipts were $6.6 billion. So here, NoVa is contributing more than half of state tax revenues while housing less than one quarter of the state population.

    According to the Department of Planning and Budget (link below), the state spent $15.7 billion on education, while only $380 million went to the Department of Rail and Public Transportation (I believe WMATA funding comes through here). The years here are different from the tax receipts numbers, but its the percentages and scales that are relevant.

    Given the high percentage in taxes being paid by NoVa and the small amount of money being spent on transit statewide (relative to education), I think NoVa is the loser in the transit/education subsidies deal.

    http://www.tax.virginia.gov/site.cfm?alias=AnnualReports
    http://dpb.virginia.gov/budget/buddoc12/index.cfm

  5. Paul- thanks… I need to go through the numbers but have we looked at the LCI?

    http://delegatedavealbo.wordpress.com/2009/10/14/school-funding-local-composite-index/

  6. @larryg, eesh, that is some kind of formula they have there. I looked for budget numbers from the Department of Education and found the page linked to below. The interesting bit is at the end, in the pdf titled “Adjustments to FY 2012 Basic Aid Payments”

    It looks like the same NoVa counties I used before receive 13% of basic state education aid (much smaller than the 50%+ that they contribute in income taxes).

    I also found some nice looking pie charts on the state budget (link below). Only 12% of state funding is going to transportation. Even if that entire 12% went to NoVa, those counties and cities would still be getting less back in combined transportation and education funding then they put in.

    http://www.doe.virginia.gov/administrators/superintendents_memos/2012/146-12.shtml
    http://dpb.virginia.gov/budget/faq.cfm

  7. NoVa counties also receive a subsidy for cost of living stipends for teachers.

    re: State funding for transportation – it’s supposed to be funded from the gas tax – not the general fund. looking at it as a percent of state funding is not a good approach.

    You need to be thinking about how much NoVa contributes to transportation and how much they get back.

    and they get back millions, perhaps billions for Metro – over and above what they get for roads AND the METRO money comes from both Fed and State … outside of traditional transportation funding.

    you can find how much NoVa contributes to education via the “formula” and how much they get back.

    you can’t just grab any numbers.. they gotta be right numbers.
    too many in NoVa grab whatever numbers that fit their view – too easily.

    The other thing to keep in mind is that a SCOTUS decision many years back REQUIRED all states to assure that each kid in their state – regardless of geography or local wealth to get an equivalent amount of education resources.

    So this is what Va does. They do it primarily with a 1% sales tax that they collect state-wide and then re-distribute it on a per kid equitable basis.

    You can call this a NoVa “subsidy” but it’s really state tax policy – and not just for Va – but across the nation.

    I’m interested in facts … which are A. – how much is the “difference” between what NoVa pays in specific education taxes and how much do they get back – the actual differnce

    AND how much does NoVa get for METRO – from Fed and State sources

    now compare the two numbers.

  8. larryg, hmmm, looking at the pie charts for total revenues and expenditures, it looks like VA pays out more in education funding then it receives in sales taxes. So limiting the calculations to the designated 1% sales tax seems to ignore an important source of funding – the general fund.

    I agree that things get messy in the general fund because things are going every which to way to who knows what program. That’s why I fell back on looking at total revenues paid in by the counties, and then education payments and (potential) transportation payments paid out to the counties.

    If you want to calculate the specific education taxes paid in and compare that against benefits from the state, I’d be interested to see what you come up with. My guess is that all counties/cities would be in the red looking at it that way.

  9. re: ” seems to ignore an important source of funding – the general fund.”

    Paul – how much is the TOTAL FUND that the LCI allocates?

    I THINK it is the sales tax money alone, not the general fund money.

    This illustrates how vague the claims about NoVa getting screwed really are.

    I could be more convinced by a solid array of data.

    right now – we have the state collecting a 1% sales tax and allocating it on a basis to allocate equitable resources to localities regardless of geography.

    NoVa gets “screwed” in that scenario ONLY if you consider the process of equitable access to education resources for Va kids to be a wrong idea – The SCOTUS thinks this is not only right – but has ruled it to be the law of the land.

    So some folks in NoVa still believe that this 1% “belongs” to them but it’s a wrong idea.

    the question is what other money is involved ?

    It’s not transportation in my view because by the time you add in the METRO money, NoVa surely gets more than it’s share of money for transportation since it is the only jurisdiction in Va with a regional subway system and that’s not cheap.

    Finally, NoVa gets something from the general fund that no other jurisdictions in Va get and that’s a cost-of-living stipend for it’s teachers.

    what are the actual numbers of these things?

    So far , no on in NoVa has really taken the time to put ALL the numbers together in a true transparent accounting that includes education and transportation – and in my view, likely because it will show that NoVa does not get nicked badly and may well end up with the better end of things.

    anyone heard of these folks:

    Sunshine Review

    http://sunshinereview.org/index.php/Virginia_state_budget

  10. @larryg,

    I agree that funding for metro is a direct benefit Northern Virginia receives that many other places in Virginia do not.

    I also agree that redistribution of income to provide every child an equal opportunity is a good thing.

    I’m not sure what you mean by a full accounting of education and transportation. I already tried to assess the relationship among tax revenues, education aid payments, and the transportation budget. My review did not take everything into account, so I am interested to see what a full review would reveal.

    I disagree that Northern Virginia gets its share of money for transportation. Congestion in the DC area is considerably worse than anywhere else in the state – in fact, its worse than most other places in the country. In some respects, this is a consequence of simply being in a city, because cities inherently create congestion. However, it is also a consequence of inadequate investment in the transportation system.

    Sure the subway is expensive, but I don’t think it costs the state as much as you think it does. The total state transportation budget for Virginia in 2013 is $5 billion. Of that total, $380 million (~8%) is going to public transportation. Of that 8%, only a fraction of that is making it’s way to the metro system.

    Given that Northern Virginia is generating on average more than 3 times as much tax revenue per capita as residents outside of Northern Virginia (more than 50% of the revenue with only 25% of the total population), I have a hard time assuming that receiving a fraction of 8% of the transportation budget (1% of the total budget) in dedicated funding for metro puts Northern Virginia over its fair share.

  11. NoVa is not generating anything other than money sourced from the Federal Govt. It benefits from Federal Spending not non-govt entrenurial efforts.

    in terms of congestion and transportation investment -you act like those things DESERVE to be subsidized by others.

    Nope. If you have congestion, and you are prosperous why should others subsidize you?

    If you want better roads – pay for them or show how you really do have less transportation funding.

    I’m pretty sure you not only get more for roads, you get millions/billions in addition for METRO – capital and operational.

    You also receive cost-of-living subsidies for your teachers.

    Much of the rest of Va just wants to be able to pay their own costs with their own taxes. Once you rattle their cages about giving more money to NoVa, it’s going to not end well for NoVa since RoVa will likely always rule the House of Delegates as long as RoVa is bigger than NoVa.

    If you AGREE that the 1% should be equitably distributed – do you have other numbers that back up the assertion that NoVa subsidies RoVa?

  12. @larryg

    I don’t understand what you’re looking for. Are you looking for a county by county breakdown of what each jurisdiction pays in taxes to the state and what each jurisdiction receives in benefits? Do you want that computed independently of the 1% of sales tax that goes to education? How are you defining subsidy – is it a subsidy to get more money back than was paid in, is it a subsidy to get money for something no one else gets?

    You should be able to track down that information (or at least enough of it to make a case one way or the other) in the state budgets and links I’ve been sending.

    The question you’re trying to answer is an important one, and I encourage you to track down the budget numbers in which you are interested.

  13. @larryg

    You do make an interesting point about the NoVa economy being based around the federal government, which in turn is based on taxes paid by people doing non-government work. So I suppose you could argue that in that sense, the entire region is being subsidized be the entire country.

    A counter to that argument is that people working for the government are working to provide public goods (defense, clean air and water, food safety, …) that the private markets simply can’t provide. I concede that taxes are involuntary payments for these services and that the federal government spends more money than it has to. However, the claim that government work provides no benefit or that somehow it should not be paid for, strengthens the argument that public goods are undervalued. Government is a necessary evil for providing public goods.

  14. re: what I’m looking for:

    If you AGREE about the 1% for the state to allocate – something others here will not agree to – then we’re down to real numbers about transportation ….roads and transit -yes.

    re: working for the government – my view is that the ” we provide for the rest of the state” argument is much more powerful if the economic engine is private and entrepreneurial – like New York or Seattle or LA, etc but NoVa is not an economic engine in that sense and so in a way – RoVA – and RoUSA is what really funds NoVa and RoVA gets a little trickle down.

    Government IS a necessary evil and yes it must be paid for – but when you’re running a trillion dollar deficit and 16T in debt – and your regional economy is based on that – … not good.

  15. larryg, Thanks for the conversation. Next time the NoVa/RoVa tax debate comes up, I’ll definitely keep in mind the ultimate source of area incomes.

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