Healthy Transit Requires Strong Partners – At All Levels

Local transit agencies rely heavily on state, federal and local funding to help them maintain or make modest expansions to their bus fleets, technology systems and other physical infrastructure.

Over the coming six years, state funding is projected to account for about 42 percent of HRT’s capital program.

Capital grants are provided by the Virginia Department of Rail and Public Transportation which in 2018 will invest over $236 million in the Commonwealth’s transit agencies. Most of these funds are devoted to the replacement of existing assets — typically buses — or to maintain them in a state of good repair.

But soon major changes in how these transit capital funds are raised will directly affect all of Virginia’s transit providers.

An evaluation of Virginia’s documented funding needs and projected revenues has conservatively identified an average revenue gap of $130 million annually over the next ten years, representing a drop of over 40 percent from existing levels. In 2019, the estimated gap will be $42 million, and it will grow to an estimated gap of $178 million by 2027.

Consequently, the state transit capital program is facing a significant budget crisis.

A reduction in state funding along with increasing uncertainty in federal support has the potential to affect transit riders and local governments across Virginia. If new funding isn’t found to fill the coming gap, localities will be asked to either step in with additional funds, or implement significant reductions in, or the elimination of, transit services across the Commonwealth.

In Hampton Roads, there is already a severe shortage of funds available to achieve and maintain its fleet in a state of good repair. At HRT, the average age of its buses is 10.5 years old; 65 percent of them are older than 10 years, 9 percent are between seven and nine years old. Only 26 percent are less than six years old. Thirty-three buses have between 700,000 and 950,000 miles on the odometer.

Older buses require more maintenance. When buses are not available because they are being repaired, service suffers and customer frustration grows.

Recognizing this impending concern, the 2016 Virginia General Assembly enacted HB1359, creating the Transit Capital Project Revenue Advisory Board and asked it to assess the impact to transit agencies of the loss of these funds, assessing revenues needed to replace the bonds as well as future transit capital needs, potential revenue sources to fund these needs, and strategies for prioritizing and allocating the transit capital program.

“The Revenue Advisory Board was tasked with identifying shortfalls in transit funding and to recommend a suite of possible revenue enhancement solutions for the General Assembly to consider,” said Advisory Board chairman Marty Williams, also a former state senator. “The hard work has just begun as the issue of raising revenue is always the toughest work the General Assembly tackles.”

The group’s final report is due by August 1. Its recommendations will be guided by several key principles, which the Commonwealth Transportation Board (CTB) recently endorsed. Among them:

It is desirable to prioritize transit capital projects using technical scoring/ranking based on quantitative and qualitative measures; the policy and provisions of such a process should be developed by the CTB to allow for ongoing process improvement.

In addition, Virginia’s transit capital program should be split into two programs — one for State of Good Repair/Minor Enhancement and one for Major Expansion, with a minimum of 80% directed to State of Good Repair/Minor Enhancement. The CTB would have discretion to move additional money to State of Good Repair as needed.

The board also wants a single, consistent match rate applied across asset types to provide greater predictability in funding, with State of Good Repair/Minor Enhancement matched at a higher rate than major expansion projects; and Local matching requirements (minimum of four percent) should remain part of the program structure.

“To avoid the fiscal cliff, we must identify funding to replace existing resources provided by capital revenue bonds,” said Advisory Board member Jim Spore, the former Virginia Beach city manager. “It’s not about additional revenue but about replacing existing funding that has been consistently available.”

On July 19, the CTB approved a resolution based on the work of the revenue board that endorsed the idea that Virginia should consider the following funding approach:

  • The Commonwealth needs a steady and reliable stream of dedicated revenues for its transit capital program to meet state of good repair and transit expansion needs;
  • The Commonwealth should consider a combination of revenue sources to spread the impact or a single statewide source that is predictable and sustainable;
  • Revenue sources that increase gradually to address future gaps and needs;
  • A combination of statewide and regional sources with the majority coming from statewide sources;
  • Regionally derived funds shall be directed to prioritized needs within that region;
  • A floor on regional taxes; and Excess Priority Transportation Fund revenues after debt service dedicated to transit capital as this source becomes available.

“I encourage all who are advocates for enhanced transportation to let your General Assembly members know your feelings on the importance of all modes of transportation to the success of the Commonwealth,” Williams said. “I was very proud to chair this important panel and we could not have had more educated and experienced members assigned to this task. I want to thank them all for their wisdom and participation.”