Wednesday, May 13, 2015

Regional Rail in PA and MN

Considering the strong aversion at both the state and federal level to raise the gas tax, it is refreshing to see bipartisan action to fund transportation infrastructure in Pennsylvania based on a fuel tax. Recently, the state of Pennsylvania approved a bill called Act 89 to eliminate the state gas tax and move entirely to an Oil Company Franchise Tax (OCFT). The new law requires an annual increase in both “the millage rate and the average wholesale price of fuel on which the tax rate is determined.” According to TASG, an advisory group, “the millage rate is increased by an additional 64 mills in calendar year 2014, 49 mills [in] 2015, 48 mills [in] 2016, 41 mills [in] 2017, and 39 mills in each succeeding calendar year” (TASG). Pennsylvania gas taxes are now the highest in the nation, at 68.9 cents ( Throughout the state, gas prices are still below $3 per gallon. To put this in perspective, Norwegians paid almost $8 per gallon this month (

After 5 years, Pennsylvania's Act 89 will provide $2.3 billion in funding for transportation, $500 million of which will go towards transit. SEPTA provides transit service including 13 regional rail lines and receives funding from federal, state, and local sources. Prior to 2007, the financing formula has not worked well since SEPTA was subject to the annual appropriations process. With the passage of Act 89 in 2013, SEPTA is better able to confront its serious backlog of deferred maintenance especially for its regional rail division.  

The federal Highway Trust Fund (HTF) supports transit throughout the nation and is insolvent.  SEPTA will need to be proactive about financing to maintain its aging system. I recommend that they pursue more innovative value capture policies. These include joint development (JD) at transit oriented developments (TODs). JD can take many forms and can involve the federal government or not. Transit agencies have sold or transferred air rights for development projects or shared operating costs for shared equipment with adjacent buildings (such as HVAC ).  Long term ground leases can provide stable revenues for a transit agency in a transit station area while also increasing ridership.

Minnesota’s Northstar Commuter Rail is only a small fraction of SEPTA's regional rail. Metro Transit, the Twin Cities regional transit agency, is a branch of the Metropolitan Council which is the planning organization for the Twin Cities. The Northstar system benefits from Metro Transit’s connection to planning since TOD goals are linked to transitway planning and community planning.

Ultimately, political discussions of regional rail are a subset of public transit discussions.  Public transportation and road infrastructure projects often compete for funds rather than being seen as complements to the other. Until the U.S. rectifies the artificially low cost of driving, both transit and road infrastructure funding will be a challenge.

Interesting Links:

World Class Greater Philadelphia provides an insightful analysis of Act 89 here

Plan Philly provides a summary of the doomed predecessor (a combination of turnpike funds, sales tax, lottery money, and others) to Act 89 here.

A pertinent article about about the pending bankruptcy of the Highway Trust Fund here.

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