(The following story by Dan Hirschhorn appeared on The Evening Bulletin website on February 6.)
PHILADELPHIA — When Harrisburg enacted a landmark transportation funding law last summer, it was supposed to mean an end to SEPTA’s perpetual fears of running a budget deficit.
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Finally, state, city and SEPTA officials said, the transit agency could stop worrying about bare coffers and use dedicated funding to invest in service improvements.
But when SEPTA found itself with an unexpected windfall last year, it did not use the money to cut into a long wish list for service upgrades. Instead, the transit agency quietly tucked the $81.5 million surplus into a restricted account, apparently to guard against exactly the kind of rainy day the transportation law was supposed to prevent.
Some current and former city officials were incensed by the decision, feeling it flew in the face of why they had lobbied so hard for passage of Act 44, the legislation that promised SEPTA its first dedicated funding stream in a decade.
“I think it just runs against the letter and the spirit of Act 44, and is almost an insult to the governor and the legislators who crafted the law,” one person with knowledge of the matter said on condition on anonymity.
The surplus arose shortly after the state legislature enacted Act 44 last summer. SEPTA had already finalized a budget for the fiscal year that began in July, one that planned for about $437 million from the state. But Act 44 created a new formula for the state subsidies, and the state department of transportation told SEPTA in late August that it would receive about $508.8 million for the fiscal year.
By law, state subsidies have to be matched by local subsidies, which are largely paid by Philadelphia, though surrounding counties also contribute. When all was said and done, a transit agency that had expected about $503.3 million in total state and local taxpayer subsidies was instead flush with over $585 million.
SEPTA spokesman Felipe Suarez confirmed yesterday that the agency had created the restricted account in case of future budget deficits. But SEPTA officials gave differing descriptions of the nature of the account and why it was created.
One SEPTA board member briefed on the matter predicted Act 44 would not provide the long-term funding solution needed unless surpluses were carefully saved, an explanation sharply at odds with public statements by a SEPTA leadership promising new investment to accompany the new funding.
The comments by the board member, Michael O’Donoghue, were the first time a SEPTA official has publicly described Act 44 as in any way insufficient.
Meanwhile, SEPTA’s chief financial officer said some of the money could still be used for service upgrades over time.
“Yes, Act 44 is certainly going to be used to stabilize our finances, and also to give us the opportunity to improve,” said CFO Richard Burnfield. “But it’s not something you can immediately do overnight. You have to look at budgets on a multi-year basis.”
Mr. Burnfield was reticent to even describe it as a surplus.
“To say they have no surplus is double-speak,” the person with knowledge of the matter said. “They have a surplus. It seems to me that it’s SEPTA’s job to use the money to improve service. Let future years play-out as they will. This new money is calling their bluff.”
SEPTA is implementing modest service improvements, like extended service on the Market-Frankford Elevated Line and purchases of new regional rail cars. But the wish list for service enhancements is far more ambitious, and $81.5 million could make at least a sizeable dent in that list. It’s enough to fund about half of the agency’s largest impending project: implementing a modern fare collection system.
Matthew Mitchell, of the Delaware Valley Association of Rail Passengers, said it wouldn’t take much of the surplus to lower the price of paper transfers and eliminate ticket surcharges for regional rail stations without ticket windows.
“If they had been more transparent about this, then they wouldn’t be getting into quite as much trouble,” Mr. Mitchell said.
City officials have been hesitant to criticize SEPTA in recent weeks, with new Mayor Michael Nutter and his incoming transportation deputy pledging to shore up the city’s often-contentious relationship with the transit agency. That relationship hit a low point last summer, when the Street administration successfully sued SEPTA to stop it from eliminating paper transfers.