Panel 2: Financing Transit for TOD
Ian Carlton, Reconnecting America (Moderator); Rob Puentes, The Brookings Institution; Matt LaTour, Government Accountability Office (GAO); Art Guzetti, American Public Transportation Association (APTA)
There is a $250 billion backlog in funding for proposed transit projects in the United States. If we continue with business as usual, this backlog represents more than 50 year's worth of transit funding. In doing their part to meet the tremendous demand for expensive transit infrastructure, states and locals often utilize complex layers of diverse funding sources. The Federal Government can play an important role by accommodating and supporting transit finance diversity and innovation at state and local levels. The Federal Government can also help expand state and local transit finance by using its financing toolbox: direct loans, lines of credit, guarantees, and other credit enhancements. Such financial tools have been closely associated with two proposed multibillion-dollar programs that could support transit finance in the future — the administration's proposed National Infrastructure Innovation and Finance Fund (NIIFF) and the long discussed National Infrastructure Bank (NIB). These financial tools have also been successfully used since the late 1990s by DOT's Transportation Infrastructure Finance and Innovation Act (TIFIA) program. The $125 million a year program has used direct loans to help locals leverage substantial private transportation investment, including financing for several transit projects. TIFIA can provide $10 in transportation funding for every dollar in federal budget allocation. This financial leverage may be a useful federal tool to help the United States meet its demand for new transit infrastructure as well as the burgeoning demand for housing and jobs near transit.
First question for panelists: Do you agree that there is a transit funding shortfall relative to demand and where is the shortfall, federal, State, or Local levels and what kinds of financing ideas should we explore?
Art Guzetti: According to APTA’s survey of transit agencies there’s demand for $50.9 billion a year across all levels of government. Ninety percent of transit systems are looking at flat growth. The level of need means we need an all-of-the-above solution. Financing is not funding. Value capture could be funding, same with a tax-increment financing. BAB is a credit enhancement; TIFIA is a loan program that’s now really kicking in. RIIF is also now starting to work. When there are real estate options that equals a local source of funding. We shouldn’t diminish the federal role. The key to making a partnership work is a stream of funds. Spend now, pay later is dangerous. Look at New Jersey transit vs. Los Angeles’ 30/10 program.
Rob Puentes: In this market no good ideas are off the table. As a result, innovative ideas will become routine. All funding packages will be different, made up of many types of sources. The good thing about TIFIA is that it is for large projects of national and regional significance. It’s not just for toll roads. The Infrastructure Bank is related to TIFIA. However, the I Bank can focus on more than just transportation. It can be made to be more competitive than TIFIA. Build America Bonds (BABs) fund slightly smaller projects. There are some questions about the debt loads of BAB barrowers. The federal government can look to help those helping themselves such as Phoenix, Salt Lake City and Denver.
Matt LaTour: Value capture takes strong markets to work. Credit enhancement helps bridge the funding gap. An Infrastructure Bank can help share risk. The TIFIA transbay project in San Francisco will bring tons of state land on the books that’s going to be producing tax revenue now. Federal strings on money can hamper TOD and value capture.
There was also an organization taking out the loan that had no credit history. It takes time for patterns of development to develop.
Second question for panelists: How can you balance the quality of a deal with economic concerns when it comes to program creation?
Rob Puentes: The Federal government needs to decide what its role will be. There’s a gap in nationally significant projects. It then needs to relate those goals to projects and funding structures developing around the country.
Matt LaTour: People we talk to always bring up flexibility. Maybe the federal government should be providing a menu of options. When it comes to Los Angeles, it’s going to be hard to create a program that can lend $40 billion that will meet others’ needs as well. Too many criteria can create perverse incentives.
Art Guzetti: Given the authority and funding it has, FTA accomplished its job. It turned the transit sector around from a death spiral to growth. The interstate system had a goal. How about as a goal every city having top-notch transit choices? We do need to make sure that the federal government isn’t just rewarding those who already have the money.
Scott Bernstein: It’s great what LA’s doing, putting skin in the game. St. Louis recently passed its bond measure, perhaps in some ways in response to emerging federal role around partnerships. Flexibility is different for every place. Long-term funding is also one of transit’s big issues.
Third question for panelists: What about TIFIA? Is it a problem that it’s housed in the Federal Highway Administration (FHWA), that the projects need to be large? Should we create a parallel credit enhancement program to work alongside with New Starts specifically to support transit investments?
Matt LaTour: FTA regional offices don’t have a lot of experience handling projects in this area of financing. Value Capture and the farebox are examples of a user-pays system. It can help with accountability.
Art Guzetti: The federal government should help leverage the local role.