City lets millions in federal transit subsidies go unused

By Jeff Rapsis
HippoPress.com

Maybe it's not by chance that the Manchester Transit Authority wishes its patrons "Good Luck!!" on the few time tables and maps it distributes around the city. The system's limitations are well known - the buses run once an hour at most, service is reduced on weekends, some routes are circuitous and nearly all are one-way, and the system shuts down after 7 p.m.

And then there's the challenge of providing public transportation in what's become a largely decentralized suburban landscape. To many folks, Manchester's bus system is the Rodney Dangerfield of city services - in the largest city in "Live Free or Die" New Hampshire, public transportation just don't get no respect.

But behind the scenes, the bus system is hobbled by still another obstacle. It's a budgeting process that's allowed millions of dollars in federal funds to lapse without being used to improve service in the Queen City. It's money earmarked by the U.S. Department of Transportation specifically for Manchester that could be used to build ridership though new routes, more frequent trips, or night service.

And it's not being used at all.

So where's the money going? If not used by Manchester, the money reverts to New Hampshire's Department of Transportation, where it's used for rural transportation projects such as senior buses or handicapped-accesible vans in the state's smaller communities. The amount varies from year to year, but the city is giving up hundreds of thousands of dollars annually in federal transit subsidies by not using them.

How much money? It depends on the cost of MTA capital projects (such as buying new buses or equipment) that are included in each year's city budget. But in fiscal year 2001, of $1,290,809 in federal matching funds available for transit in Manchester, the city is currently leaving $868,799 on the table.

Even if some of that money eventually gets used, MTA officials estimate that next year, another $1.4 million in matching funds will be made available to the city. In 2003, the amount will rise to $1.5 million. A portion of it will be used each year, but if things stay the way they are, hundreds of thousands of dollars from each block of funds will eventually lapse after a five-year waiting period.

Why isn't the money being used? Essentially, it's because the money comes in the form of matching funds. In order to use it, the city must first pony up scarce local funds, which generally come from one source - property tax revenues. And public transit simply hasn't ranked as a top priority of Manchester's municipal government since the city took over running the bus system in 1972.

How did it get this way?

The MTA is governed by a five-member board of commissioners, which oversees the agency's staff and operations. But the local bus subsidy is part of the city's annual budget, and is subject to review and approval of the Board of Mayor and Aldermen. While the city supplies the annual operating subsidy ($725,000 this year), aldermen have no control over how the MTA manages or uses the funds. They do, however, appoint the members of the MTA commission.

The lack of direct control has prompted city officials to take a cautious and conservative approach to the MTA, which some aldermen privately call a financial "black hole." A 1998 audit painted a bleak picture of management systems and financial controls then in place at the MTA. The attitude of the board in recent years has been to provide enough money to continue the current level of service, but no more due to what some aldermen say is a lack of accountability.

And then there's the constant pressure on city officials to keep the property tax rate low. Just because more federal money is available for Manchester, many feel the city should still be very careful about using it if it requires additional local funds.

"There's a lot of federal money that doesn't make it to the communities," said Ray Wieczorek, the city's mayor for five terms during the 1990s. "It never gets there. I think you have to weigh each case and make sure it's something you need. You can spend a lot of money on things that do nothing for us. The key question ought to be, what are we going to do with it? How are we going to benefit?"

Missed opportunities

While some applaud this stance as frugal management, others look more closely and find missed opportunities. For instance, a change in federal regulations in 1998 made it easier for the city to make use of more of the matching funds to add routes or improve service. But instead of taking advantage of this opportunity, the city that year cut its annual bus subsidy from about $900,000 to about $700,000. The bus routes stayed the same, but the local tab for the system was reduced.

"The result was we kept the service the way it was, but we (local taxpayers) now pay less," said Bill Cantwell, the MTA's superintendent of administration.

Supporters of improved bus service say this was shortsighted. If the city had kept its funding at the 1998 level instead of cutting it by $200,000, by now Manchester would have earned close to $1 million in 50-50 federal transit matching funds. That would have provided a significant boost to an agency that has a $2.1 million annual budget for public transportation. The money, officials say, would have given the MTA the flexibility to try new programs to improve service for the state's largest city.

Capital spending on transportation is an area where the city could get even more bang for its buck. Funds for capital projects such as new vehicles are matched at an 80-20 ratio, meaning the federal government picks up 80 percent of the tab of the cost of, say, a new bus.

But in many years, the Board or Mayor and Aldermen have postponed or cut capital projects requested by the MTA - projects that wouldn't have used up all the available matching money even if all were approved. Last year, the MTA submitted $84,800 in capital spending for items that, with the 80-20 match, would have bought the city $424,000 worth of equipment, including at least one brand new bus. But the city approved only about $30,000 in capital spending, Cantwell said.

Some feel it's time for the city to be more aggressive about the federal funds.

"We could use some improvements in service, and we should go after that money," said Eugene Boisvert, chairman of the board of commissioners that governs the MTA. "There is always room for improvement."

But other city officials feel the problem is rooted in the commissioners and the MTA management, which some say simply aren't up to their jobs.

"The aldermen would certainly listen if the MTA came in and made a proposal for additional funds," said long-time alderman Bill Cashin. "But I can't remember that ever happening."

Cashin, who agrees that the city should "be more aggressive and go after every federal dollar," believes there's nothing wrong with having the bus system run by a semi-autonomous commission. The system worked well for years, but only in recent years have things gone awry - due mostly, Cashin says, to problems with current MTA management.

While acknowledging that "it's a two-way street and the aldermen are at least partly to blame," he feels the MTA needs more professional management to serve the city better.

Alderman Real Pinard agrees, and looks to recent changes in the five-member commission as the starting point for improving the bus system, which he says is plagued by labor unrest, employee mistrust and poor morale.

"The commission should look at the management very closely and try to make it better," Pinard said.

A tale of two cities

Manchester's attitude to federal transit funds stands in contrast to Nashua, where officials haven't let one dime of matching money lapse in the past two years.

"There have been occasions when some of the funds have lapsed, but in the last couple of years we have not experienced a loss of funds," said Paul Newman, manager of urban programs for Nashua's city government.

The result? The federal government this year is kicking in $385,000 of the $1.2 million budget for Nashua's bus system this year, or 32 percent of the total.

Manchester actually receives a higher proportion of its operating funds from the feds - this year, it'll be $947,560 of the $2.1 million budget, or about 45 percent. But if the city took full advantage of matching funds, the amount could be larger. Besides the feds, other sources of income for Manchester's bus system this year include $725,000 from the city, $39,600 from the town of Bedford (for a route that runs to the Bedford Mall); $267,000 from fares, and $106,000 from other sources such as advertising sales and maintenance work on other city vehicles.

One reason Nashua scooped up its total share of federal matching funds was because the city keeps careful track of available federal money and tries to be creative in preventing any from lapsing. For example, the city obtained some transit matching funds by using the value of in-kind staff time by a regional planning commission as the city's "seed money" to trigger the matching federal funds, Newman said.

"Part of it is keeping track of the running stream of grants that have been approved and are still active, and at what point in time those funds were locked in," Newman said. "We can't exceed our budget, so when a project's done, there are funds that become disencumberered. These funds go back into the pool, and tracking when those lapse can be difficult."

Creativity is nice, but such solutions are harder to come by in the highly politicized environment that surrounds Manchester's bus system. While MTA employees weren't reluctant to provide information for this story, at the same time they were very particular in desiring not to be placed in a position of criticizing aldermen or other city officials. The many battles have taken their toll, and the result is an atmosphere that's something less than a hothouse for new ideas and cooperation.

Behind the numbers

How, specifically, is Manchester losing out on federal funds? To understand what's happening in more depth, it helps to know a little something about how the federal government provides matching funds for urban transportation centers. It's a process that's more convoluted than some of the bus routes that snake around Manchester.

Manchester is one of three areas in New Hampshire classified as "urban" by the feds, meaning a city population area home to less than 200,000 people. The other two areas are Nashua and Portsmouth-Dover-Rochester in the Seacoast region. All are eligible for federal matching funds for transit programs directly from the U.S. Department of Transportation.

For urban areas in this category, federal matching funds are provided for two basic kinds of expenses: operating expenses, meaning money used to run the bus routes and perform other day-to-day services; and capital expenses, meaning money used to replace buses or make other long-term improvements.

Operating expenses are matched 50-50, which means that for every dollar the city spends running its bus system, the feds kick in a dollar.

But with capital expenses, it's an 80-20 match, meaning the city's dollars have much more leverage. For every dollar the city spends on equipment for the MTA such as a new bus, the feds pay $4.

This means a $250,000 vehicle (the going rate for a new urban transit bus these days) costs local taxpayers $50,000; the rest is paid through federal monies.

Prior to 1998, Uncle Sam capped the amount of matching funds that could be used for operating expenses, meaning there was a limit on how much of the money could be used to actually run bus routes or improve service. In 1997, the last year of the old method, Manchester was eligible for a total of just over $1 million in federal transit matching funds; of that, the city could use about $400,000 for operating expenses (reimbursed 50-50) but no more. The rest could only be used for capital expenses.

After 1997, however, the federal government revised its guidelines for transportation matching funds so cities had more flexibility to use the money as they saw fit. The biggest change? They removed the cap on how much could be spent on operating expenses, leaving it up to local authorities to determine how much of the total might be used to run the bus system and how much would be used for capital equipment.

The idea at the time was to allow municipalities the chance to use more of the existing federal funds to add bus service or add routes. Manchester, however, chose to take another direction. Instead of using increased federal matching funds to increase bus service or routes at no additional cost to taxpayers, the MTA's service was kept at the present level, only now the city didn't have to pay as much to support it.

When the numbers were done, it turned out the same bus system could be supported with a smaller contribution from the city, and that's exactly what happened. In 1998, the city's operating subsidy for the MTA plunged from $900,000 to $700,000. This helped keep the city's tax rate down, but it also meant that Manchester lost out on an opportunity to improve local transit services at no additional cost to local taxpayers.

It's stayed that way ever since - the city's operating subsidy for the bus system has been $700,000, though another $25,000 was added recently to run shuttle services for visitors to the city's new arena. The route system was reconfigured a couple of years ago, but service hasn't increased or improved.

In the years since federal regulations changed and the city responded by reducing its subsidy, the city has saved about $1 million. By not spending the money, however, the city has given up about $1 million in additional transit funding that could have been used to experiment with new routes, add night service, increase frequency to more than once an hour, or make other improvements to build ridership.

The role of public transit

Still, there seems to be room for a solution. Even those city officials who take a hard-nosed approach to subsidizing public transit would support efforts to use more federal matching funds to improve bus service in Manchester - provided the MTA could come up with a convincing plan on how the money would be used and what results could be expected.

"You know, the challenge has always been how to increase ridership," Wieczorek said. "They've tried many different things over the years, and they could never do it. In New Hampshire, unlike a real metro area like Boston, people here get in their cars. Where does that leave people without cars? It makes it very difficult for them."

Not everyone supports the idea of subsidies for public transit, but most agree that it's a necessary government function. In Nashua, it's seen as part of a balanced community transportation system necessary not only for economic development, but also for the city's quality of life.

"Our take on that has been that there are certain parts of the population that can't take advantage of our highway or street network, whether for reasons of affordability or disability," Newman said. "And there are those who prefer to live a life that's less impacting on the environment. The notion in Nashua is that we would provide a transit system that serves enough of the city so that you would have a choice of where to live, access to jobs, and be able to reach essential services."

In letting large sums of federal matching money lapse, is Manchester meeting the needs of its citizens? It's a debate that will apparently continue for some time. Even with the revitalization of downtown and the opening of the city's new arena, there's been no detectable groundswell of interest in improving public transportation, though federal money remains available.

On the bright side, at least things are better than they once were. The 1998 change in the way the federal government awarded matching funds allowed the city to actually boost its use of federal dollars to a higher proportion than during most of the 1990s.

In earlier years, "they were probably giving up more money than they are now," Cantwell said. "It's always been part of the landscape around here."