California Dreaming Up New Ways to Fund Public Transit

From turning off idling locomotives to asking China for the money, Richard Katz has some fresh ideas for funding transit.

By Sarah-Joyce Battersby

Hollywood/Vine subway station. Photo by {a href="http://www.flickr.com/photos/joebehr/5927469406/"}Joe Wolf{/a}

These days, the prospect of getting permission from voters to increase taxes seems like a fantasy, but for Richard Katz and his colleagues at the Los Angeles County Metropolitan Transportation Authority, it’s a dream come true. With the help of a half-cent sales-tax increase, approved thanks to a 2008 ballot initiative, the L.A. Metro is planning 12 new transit projects.

Now, Katz—who also chairs Metrolink, southern California’s regional commuter rail system—is helping to spearhead innovative new approaches to financing public transit and easing gridlock in what he calls “the car capital of the world.” Ahead of his sold-out keynote address at the Munk School of Global Studies this afternoon, he spoke to us about how L.A. is managing to build public transit, while Toronto stands (mostly) idly by. Our edited, condensed interview is below.

Torontoist: What’s so hard about financing public transit? Everyone likes the idea of efficient, accessible public transit, right? So why doesn’t anyone want to pay for it?

Richard Katz: People think of mass transit in places like L.A. as “something other people use, not me.” And as long as it’s something other people use, they don’t want to pay for it. So there is unfortunately a lack of recognition, even though this is changing.

People don’t understand that all modes of transportation are subsidized to some extent. And that every person we get out of a car benefits not only bus riders, bicycle riders, and the population in general because of cleaner air—it also benefits the people who still insist on driving, because it gets other cars off the road and out of their way. So it takes a combination of solutions. But transit sort of develops in spite of everybody, because there’s such a huge unmet need.

What are the existing revenue tools for public transit in L.A.? And what are some of your newer ideas?

At the [Los Angeles County Metropolitan Transportation Authority] we currently have multiple sources of revenue. We get a percentage of gas tax dollars. We have also passed, in L.A. County, three one-half-cent sales-tax measures. So people in L.A. County pay an extra penny and a half on the sales tax, and that goes to transit and transportation.

The newer ideas for us are, we’re looking at a number of public-private partnerships. We’re looking at potential for design-build-finance-operate-maintain on a project.

And [Los Angeles Mayor Antonio Villaraigosa] has been very aggressive. We’ve been in Washington for the past three years trying to enact a program known as America Fast Forward, which is modelled after a smaller program called 30/10 that we started in Los Angeles. The idea was to take the 12 mass transit projects proposed in Measure R and build them in 10 years instead of 30 years. The idea is to accelerate those because, from a benefit side, you take air pollution out of the air 20 years earlier. You put 156,000 people to work almost immediately. But if we’re to build them in 10 years, we need an advance of roughly $9 billion, so, to move it up, we’d either have to cut two projects or get creative with financing.

Three years ago we started working with Congress to get funding for the Transportation Infrastructure Finance and Innovation Act increased from $127 million a year to $1 billion a year. That bill has not passed yet, but the amount it’s been created at is the result of the advocacy of the mayor, and all the support from the environmental, the labour, and the business communities.

The piece that we’ve not been as successful getting going in Washington is a transit bond that we want to be able to sell on the bond market to help us pay for the cost of bringing those projects forward.

Because Congress hasn’t acted yet and we’re a city of impatient people, we went to China last December to talk to the the Chinese sovereign fund [that is, the China Investment Corporation] about investing in transportation in Los Angeles. We’ve been meeting with representatives from the Korean government, and with Samsung, who is interested in investing in transportation projects.

What we’re trying to do is get out of the box of how it’s always been done and see what is out there in the new economy that’s interested in participating in the transportation space.

When you are pursuing these public-private partnership possibilities, how do you pitch it to companies like Samsung or foreign governments? What would be in it for them, investing in L.A. transit?

When we met with the Chinese in December, we were pitching a number of things. With a government like China, for instance, they don’t need a return-on-investment in cash so much as they need an ROI in goodwill these days. There’s talk of a trade war over solar or manufacturing, so as part of our pitch to them we said, “This is an opportunity for you to create jobs in southern California, to help the economy, and what you get, in addition to your money back eventually, is significant amounts of goodwill and good PR.”

LAist reported that Metrolink came in under budget last year, and yet managed to add services and features without raising fares. Can you explain how you guys pulled off that enviable feat?

The funny thing is, it’s not necessarily enviable at this point. We didn’t do the fare increase last year because of everything that we had gone through [with the deadly crash in Chatsworth]. Suffice it say, over the last four years, Metrolink has undergone significant changes.

The year we came in 10 per cent under budget, we spent a million dollars on inward- and outward-facing cameras [for increased safety], we fired our operator and contracted with Amtrak to provide our engineers and conductors, we changed training and safety-inspection procedures, and we changed the configurations of the seats and the tables—all designed to make it safer.

We started all that and still came in 10 per cent under budget for a couple reasons. John Fenton [CEO of Metrolink] brought a lot of what he learned in the private sector. His devotion to safety and fundamental best practices were how we cut money. Sometimes just having new eyes—especially new eyes that are creative and pretty smart—is what it takes. For instance, John was on the job about 30 days. He goes out to our central maintenance facility and walks around and notices all the locomotives are idling. And he asks, “What’s the shutdown procdure?” There wasn’t one. So we stopped [idling the locomotives]. That saved us 800,000 gallons of fuel, which from a cost standpoint and environmental standpoint was pretty significant. Fuel is at about $3.50 per gallon, so it saved us a couple bucks.

He also did significant reorganization and we spent two years with forensic accountant types, because frankly as a public agency it wasn’t a very well-run one.

In terms of what sorts of things? Labour costs?

Well, labour costs are labour costs. It was more about how [the agency] thought about doing things, or didn’t think about doing things, or how they just did things the way they’d always been done even if newer technology was available. There were a lot of sloppy practices and things that needed to be tightened up.

This year, we’re under budget, but not by as much. We are looking at a fare increase. We have a $13 million gap in our $178 million operating budget. We’re in the middle of our budget process, so we’re deciding right now how much of that will be filled by member agencies, how much will be a fare increase, or if there’s some other pot of gold.

And about Measure R, which you mentioned earlier, how did you manage to get public support for a tax increase?

Well, first we chose the worst year of the economy to go on the ballot [laughs]. And because California does nothing easy, there’s a two-thirds vote requirement to pass a tax increase, not just a simple majority. So we not only had to go to the voters, we had to get two-thirds of the vote in the middle of a recession.

But I think part of the reason it passed is because the voters in L.A. knew that this transportation system had to be fixed. And I think what they liked about the plan was that it recognized the need for regional solutions. The voters understood that when they’re stuck on Sepulveda or San Fernando Road, they don’t care what jurisdiction they’re in if they’re not going anywhere. They just know they’re not going anywhere.

So you presented it as a solution for everyone, not just public-transit users?

Transit was part of it, but the sales tax also had a highway component. And 15 per cent of the money that was generated went back to the cities that generated it under what’s called “local returns.” They need money as well; they have roads that are in need of maintenance. In a county like L.A., the city of L.A. doesn’t need highways because there’s no place to build them. We need rail and we need transit. But in parts of L.A. County, highways matter because there isn’t transit out there; there isn’t enough density for transit. So we had to put together a program that had something for everybody, and then we had to convince two-thirds of them to vote for it, and fortunately they did.

Richard Katz will be delivering the keynote address this afternoon at the Munk School’s “Moving Our Region: Transportation for the Future” lecture series. The sold-out discussion begins at 4 p.m.