Joseph Krist

Publisher

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MOODY’S AND THE MTA

The transportation space increasingly finds itself at the center of many of the larger debates underway as the nation’s urban landscape develops. One of those issues is the need for significant investment in the nation’s urban mass transit infrastructure. How to pay for it is a question which dominates the discussion on the federal, state, and local levels. So we were intrigued to see Moody’s weigh in on how it thinks transit should be funded at least in the case of New York’s MTA.

First, some context. Funding of the mass transit system in New York has been a constantly evolving process. Initial private investment was ultimately accompanied by public investment and over time the funding responsibility became all public. Each iteration of fun ding policy was accompanied by a variety of funding methods including general obligation debt from the City for the Independent lines. There was always a variety of revenues derived from a variety of sources that matched the diversity of the passenger base.

Over time the realization was achieved that the lifeblood of the economic engine that drove New York State was the City’s mass transit system. It fueled unprecedented levels of development in the City and beyond and the impact was reflected in the source of funding. Fares always generated a higher level of operating revenues than was the case in other cities for years. Those fares, however, were always accompanied by taxes and tolls which effectively accessed much of the income derived from the city economy.

That compact began to fray as the financial recovery of NYC was competing with agencies like MTA for financing. Under those circumstances, a series of dedicated taxes and the authorization of $800 million in fare-backed bonds. The money allowed the agency to buy new cars and fund urgent structural repairs. As time went on bonds became a way to provide political cover to artificially hold down fares and taxes. Taxes are constantly subject to change as the result of one county’s historic intransigence against having to fund the MTA. It is, as they say, no way to run a railroad.

So too it is important to remember that the MTA fare box credit has been remarkably stable given the challenges the system faces daily. This in the face of enormous capital needs, lack of funding consensus, and significant pressures to increase subsidized or even free service. So we find it interesting that after such support of the existing, failing funding model we hear this. “Lagging income growth among the lowest-earning residents of its service area will weaken the MTA’s ability to raise fares and balance its operating budgets,” Moody’s  said in a press release. “However, the essential role of mass transit in the New York economy provides a strong incentive to tap the region’s high and growing overall wealth to subsidize transit operations.”

That’s the sort of leap from rating credit to making policy recommendations that gets the agencies into trouble. Essentially by supporting good ratings for the MTA fare box credit for a long time they unwittingly aided and abetted the effort to postpone funding choices.  When the debate first began essentially in the 80’s, issues of fairness and equity were at the heart of the transit funding debate. That has not changed in the era since but the politics have. This comes off  jumping on the bandwagon. A Brooklyn councilman wants the MTA to offer free service on holidays. He compares is to suspending alternate side of the street parking on holidays. Christmas Day, New Year’s Day, Memorial Day, Independence Day, L​​abor Day and Thanksgiving would be the days. Admittedly, MTA ridership is significantly lower during major holidays. It’s reflective of the political headwinds facing the agency.

If you’re Moody’s is that a train you want to be in front of?

MEDICAID EXPANSION SPEED BUMP

It appears that the Utah state legislature’s effort to have its cake and eat it too as it responds to a voter initiative expanding Medicaid will not fly. At least not from the standpoint of the Centers for Medicaid and Medicare (CMS), the agency with oversight over Medicaid expansion waivers. In November, 2018, Utah voters authorized he expansion of Medicaid eligibility under the terms of the Affordable Are Act. Republicans in the Legislature agreed to expand the program to include people making up to 100% of the federal poverty income line. Under the Affordable Care Act, states can expand Medicaid to people making up to 138% of the federal poverty line. 

And therein lies the rub. Utah was asking for full reimbursement although it was not expanding the program to the same extent. It essentially wanted full coverage even though it was – based on the income limit – only making three fourths of the effort. CMS takes the position that while it remains committed to its goal of allowing states additional flexibility in Medicaid, it would reject plans that would limit expansion enrollment while requesting full Medicaid funding available from the government.

At its core, the action is another in a chain of them coming from the federal government in a continuing effort to gut the Affordable Care Act. CMS approved a version of the plan to serve as a “bridge” ahead of a full expansion, allowing Utah’s Medicaid program to begin enrolling individuals April 1. Those who have enrolled will be able to keep their coverage as the state finds a new solution. It’s worth noting that the program failed to pass even though it contained the current Trump Administration work requirements.

All of this occurs against the backdrop of pending litigation in the Fifth Circuit Court of Appeals which seeks to have the ACA declared unconstitutional.  A District Court determined that the ACA is unconstitutional now that Congress has rolled back the penalty requiring everyone who did not carry health insurance to pay a fine. Other court action generated a third loss for the Administration’s efforts to impose work rules. For a third time the same federal judge who ruled against Arkansas and Kentucky’s work rule schemes ruled that federal health officials were “arbitrary and capricious” when they approved the New Hampshire’s plans, failing to consider the requirements’ effects on low-income residents who rely on Medicaid for health coverage.

Data came out this week in a study by the General Accounting Office (GAO) which shows what might happen if the ACA goes away and the ranks of the uninsured grow again. Medicaid, the joint federal-state program that finances health care coverage for low-income and medically needy individuals, spent an estimated $177.5 billion on hospital care in fiscal year 2017. About a quarter ($46.3 billion) of those hospital payments were supplemental payments—typically lump sum payments made to providers that are not tied to a specific individual’s care. States determine hospital payment amounts within federal limits. In fiscal year 2017, DSH payments totaled about $18.1 billion. 

Medicaid disproportionate share hospital (DSH) payments are one type of supplemental payment and are designed to help offset hospitals’ uncompensated care costs for serving Medicaid beneficiaries and uninsured patients. Under the Medicaid DSH program, uncompensated care costs include two components: (1) costs related to care for the uninsured; and (2) the Medicaid shortfall—the gap between a state’s Medicaid payment rates and hospitals’ costs for serving Medicaid beneficiaries. As we go to press, plans to delay cuts to the DSH program are under negotiation as a part of the federal budget process. Medicaid DSH payments covered 51 % of the uncompensated care costs nationwide. In 19 states, DSH payments covered at least 50% of uncompensated care costs.

MARIJUANA – FACTS OR FEARS?

In the wake of recent efforts to legalize marijuana, it helps to look at the facts behind some of the claims made especially by opponents of legalization. Any debate is always ore useful and illuminating when it is a debate based n facts. Two concerns are almost always cited. One is the potential for increased use by teenagers and the other is the specter of thousands of newly impaired drivers on the roads. No matter one’s position on the matter, it is always useful to look at data to evaluate these claims. In that light, we view the findings of two sets of data from dispassionate sources.

The first issue is that of increased access to marijuana by minors. A recent report from the Journal of the American Medical Association deals with this issue. In the United States, 33 states and the District of Columbia have passed medical marijuana laws (MMLs), while 10 states and the District of Columbia have legalized the recreational use of marijuana. A 2018 meta-analysis concluded that the results from previous studies do not lend support to the hypothesis that MMLs increase marijuana use among youth, while the evidence on the effects of recreational marijuana laws (RMLs) is mixed. 

The estimates generated for the report showed that marijuana use among youth may actually decline after legalization for recreational purposes. This latter result is consistent with findings in prior studies and with the argument that it is more difficult for teenagers to obtain marijuana as drug dealers are replaced by licensed dispensaries that require proof of age. The data is not necessarily consistent.

One study found increased marijuana use among 8th and 10th graders after it was legalized for recreational use in Washington State. However, the same authors found no evidence of an association between legalization and adolescent marijuana use in Colorado. A third study using data from the Washington Healthy Youth Survey, found that marijuana use among 8th and 10th graders fell after legalization for recreational purposes.

On the issue of safety, the Nevada Office of Traffic Safety recently released new data which shows that marijuana related fatalities in Clark County had gone down. The number spiked in 2017 immediately after the legalization of marijuana. However, within a year, those numbers decreased by about 30%. This reflects patterns seen in other jurisdictions.

A study sponsored by the Society for the Study of Addiction, after the legalization of recreational marijuana showed that in the year following implementation of recreational cannabis sales, traffic fatalities temporarily increased by an average of one additional traffic fatality per million residents in both legalizing US states of Colorado, Washington and Oregon and in their neighboring jurisdictions.

LEADING BY EXAMPLE – ELECTRIC BUSES

The Los Angeles County Metropolitan Transportation Authority (Metro) has received its first zero emission electric bus that will be used on the Orange Line later this year. The Orange Line will be the first line to receive these electric buses with a total of 40 buses to be delivered to the agency and deployed on the Orange Line by the fall of 2020.

The buses will be purchased from the US subsidiary of BYD, the Chinese manufacturer of electric buses. China is way ahead of the US in terms of its development and production of electric buses. Bus purchasers are not experiencing the same type of intervention being experienced by rapid transit operators who wish to purchase Chinese made subway cars. The federal government and Congress have acted to intervene in those purchases on national security grounds.

The vehicles are not cheap even from the most competitive vendor. The electric buses cost $1.15 million each in a contract valued at $80,003,282. This contract includes the deployment of the electric buses and associated charging infrastructure. The new buses will be capable of being recharged at various points along the Orange Line to support its 24/7 operation.

Metro hopes to extend its deployment of electric vehicles. In a separate purchase, Metro ordered an additional 65 zero emission electric buses from the manufacturer BYD with five of those buses being 60-foot articulated buses earmarked for the Orange Line and the remainder to be used on the Silver Line that operates between the El Monte Bus Station and the Harbor Gateway Transit Center in Gardena. Metro plans to convert the Silver Line to zero emission buses in 2021.

The electric buses cost $1.15 million each in a contract valued at $80,003,282. This contract includes the deployment of the electric buses and associated charging infrastructure. The new buses will be capable of being recharged at various points along the Orange Line to support its 24/7 operation.

In Atlanta, MARTA has announced that it will replace six diesel buses with zero-emission battery electric models. Funding for the purchase will come from a $2.6 million grant from the U.S. Department of Transportation. The grant is one awarded under the U.S. Department of Transportation the Low- or No-Emission (Lo-No) Grant program run by its Federal Transit Administration (FTA).

Overall, the FTA will award $84.9 million in grants to 38 projects for the deployment of transit buses and infrastructure that use advanced propulsion technologies. These include hydrogen fuel cells, battery electric engines, and related infrastructure investments such as charging stations. The 38 awarded projects are from 38 states. Some other municipal recipients include the Vermont Agency of Transportation and the Prince George’s County, Maryland Department of Transportation.

The use of electric vehicles by transit agencies and governments is a great opportunity for municipal entities to take a leadership position in the transition from internal combustion engines. The involvement of the federal government in funding these projects is a positive development.

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