Sunday, December 12, 2004

Some more thoughts on SEPTA

I did obtain a copy of the SEPTA lease. I have absolutely no background in contracts,or anything of the sort, but, there are some key things I think are important to take from it, especially this one:

1) Section 1.08: Fares and Other Charges
The Authority shall have the absolute right to fix its fares and other charges.

That, obviously is pretty key in all of this. SEPTA, an organization governed by a 15 person board, of which the City has 2 members, has absolute power in Its fare structures. The City, which pays an approximately 56 million dollar subsidy to the organization a year, gets no say whatsoever, other than a largely symbolic veto that is easily overridden.

The whole issue is pretty complicated, but, I think a good way to think about the City's position is this: We paid for the Subway. I don't know the full details of the funding, but since the system was built before the large federal transportation bills were passed, I would guess that the City paid for a large percentage, if not 100 percent, of the construction. (Unlike today, where a city and state only have to pay a combined 20 percent, with the Federal Government paying the rest.) So, this was a huge system built by Philadelphia for Philadelphia residents. And therefore, we own this asset, and can charge a rent, a large rent, to someone for its use...

So, in 2004, how much does the City project to get from SEPTA in rent? How does zero sound? As far as I can tell, the City gets absolutely nothing for it. (I got this from the city's operating budget for fy 2004 .) The city has generally collected a million or two per year, but it looks like that has gone down to zero this year. When rent was paid from the city, it appears to come out of SEPTA's operating budget. (This point, in of itself is problemtatic. If SEPTA and the state had constructed the system, the money to pay for the tracks and stations would come from a seperate capital budget that includes huge federal infusions of money. But since we built, and they use it, they use operating expenses to rent it. That is why we should think about forcing them to buy it, it can force money out of a seperate money stream.)

So, we let SEPTA rent the subways for zero. And, apparently, we may be able to force them to buy it since the lease expires in December of 2005. How much would they have to pay? I have no idea. But, one aspect of the "worth" of the system of would be the replacement costs of building the same thing over again. Lets say SEPTA did have to start building all over, but SEPTA chose to build something far cheaper than a subway system, such as a light rail. Well, light rail, the cheaper alternative, costs an average of 70 million dollars per mile to construct. We have, between the Broad Street Line and Ridge Spur, the El, and the subway-Surface tracks, what have to be at least 25 miles of tracks. Just replacing these with the cheaper light rail would cost 1.75 billion dollars. That is billion with a B. Now, is it realistic that the State could or would come up with the up to 20 percent of that cost that they would have to contribute, 350 million dollars? No. But, we should just be clear that what we built and paid for is a huge, huge asset. If our reward for that asset is no say on how transit is conducted on those tracks, we have a serious problem.

Do any policy people have any thoughts about this? Do any lawyers/law students want to read the lease?


At 11:26 AM, Anonymous Anonymous said...

Some thoughts on the two previous posts –

You may want to contact DVARP (Delaware Valley Association of Rail Passengers, for more information on the history of who paid for the construction of the Broad Street Line. In addition, they often publish very knowledgeable essays about recent rail transportation policy decisions and events.

I am in complete agreement that the lease of the subway system could be used for leveraging more control of SEPTA for the city and I think that is a very good idea. More control of SEPTA’s board is a great starting point for ensuring that public transit in Philadelphia remains viable and to start on improving on the current system.

In your previous post you linked to the councilman Goode op-ed. I think that focus should center on efforts to improve the on long term funding for SEPTA. One line that struck me as important was this, "So I now call on the governor and state legislature to create a dedicated source of funding for mass transit in Philadelphia." There has been a trend in public transportation funding in the past 20 years throughout the country of agencies being forced to provide more and more funding locally instead of from a state and federal source. There was an excellent article in the New York Times article on October 25th, called October 25, 2004 "In Transit Crisis, a Cash Bind Many Foresaw" By RICHARD PÉREZ-PEÑA which highlights how the New York City MTA's current financial problems are the result of placing more and more of the financial responsibility on the riders and the local municipalities and less and less from the state (and though the article does not discuss, the federal sources). The article focuses on the MTA but I think a lot of the ideas are analogous to the Philadelphia situation.

It is my belief that transportation should not be thought of as a profitable endeavor; it is a public service like a school. there are subsidizes for both pubic transit and private transit (cars), but public debate focuses mainly on funding for transit, even though the money involved is far far less than the money spent on building roads and highways. The money for highway funding is almost completly exempt from regular debate. But this is a much much longer discussion.

SEPTA and fairbox revenue - i am pretty sure that the SEPTA charter which has some very restrictive clauses about operation costs having to come from fairbox revenue.

At 1:37 PM, Blogger DanielUA said...

I appreciate the post, and will look into the construction costs of the subways.

While I have not seen the SEPTA charter, I dont think it can say that all operating costs come from the farebox. Because while SEPTA does depend on the farebox more than most transit systems, it certainly does not depend on it fully, hence the need for the 60 million dollar city subsidy, as well as the larger state subsidy.

At 2:04 PM, Anonymous Anonymous said...

Farebox - i did not mean to imply that all of the operating costs have to come from the fairbox. i think the charter says that roughly half the operating costs have to come from the farebox. i'm not sure the exact percentage, but i think it is about half.


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