Can Regionalism Save Philly Transit?

PHILADELPHIA’S METROPOLITAN region is defined by the rail infrastructure that links its downtown to suburban communities in every direction. Its network of commuter rails, subways, elevated trains, trolleys, and buses—all operated by the Southeastern Pennsylvania Transit Authority (SEPTA)—is the fifth-largest mass transit system in the United States, serving a 2,200-square-mile service area that extends into New Jersey and Delaware. Some 325,000 people in the metropolitan region commute on SEPTA, including 70 percent of office workers in Center City, the core area of downtown Philadelphia. In addition, 15,000 college students in the region take SEPTA to their educational institutions, and about 19 percent of summer visitors in 2004 said they used SEPTA to get around.

In recent years, the region has struggled to fund SEPTA. Until a state bailout last spring, the agency was forced to consider massive service cuts and fare increases due to a $62 million budget deficit for fiscal year 2004 and projected deficits of as large as $180 million in the next few years. SEPTA’s financial woes are a symptom of economic stagnation throughout the region, owing in large part to urban-rural and inter-municipal wrangling. A growing number of civic- and private-sector organizations in greater Philadelphia recognize that saving SEPTA means looking farther than state and federal hand-outs. Building on the momentum of a new regional commitment to cooperate on economic development issues, these groups hope SEPTA can help transform the area’s struggling economy and shape its future.

Seeing Beyond the Municipality

Parochial interests have always kept the Philadelphia metropolitan area from developing a strong, unified identity. This is hardly surprising, since the metropolitan area includes scores of municipalities in eleven counties across three states. Even within Philadelphia itself, many lifelong residents have never been to neighborhoods in other parts of the city. The region’s communities have focused on competing for each other’s businesses, jobs, and residents, resulting in no net growth for the region, losses in tax revenue for the so-called winning localities (who use tax subsidies to lure businesses), and a continued spiral of decline for the losing ones. As Laurie Actman, director of regional growth strategies for the Greater Philadelphia Chamber of Commerce (GPCC) notes, “Political and physical boundaries loom large here.”

The editorial board of the Philadelphia Business Journal sees this adversarialism as reactionary: “A problem with the Philadelphia area is that too often the voices of innovation and cooperation—the sounds of the new—cannot be heard over the noises made by the doubters and traditionalists.” Actman agrees, pointing to the region’s conservative Quaker origins as a possible source of its aversion to risk and change. While acknowledging that Philadelphia’s reputation for stability can at times be an asset, she laments, “The region has too many people who are sedentary, who are content with the status quo.”

The ongoing fractiousness has not only hurt towns individually, but undermines any kind of cross-border endeavors to reduce the region’s tax burden or to improve government services, transportation infrastructure, and environmental quality. This lack of coordination weakens the region’s ability to compete at a national level for new businesses, resulting in lagging population and job growth despite the region’s impressive geographic, educational, and cultural assets. A survey published in the April 2004 issue of Site Selection magazine ranked Philadelphia as the most expensive city of 315 surveyed to start a business in the United States. A poll of seventeen site selection consultants in summer 2004 found that nearly 60 percent of consultants rarely consider the Philadelphia region as a place to locate or expand a company. And few college graduates not originally from the region—just 29 percent—stay there after graduation, according to an October 2003 study by the Pennsylvania Economy League (PEL). By contrast, 42 percent of graduates from schools in the Boston area—a region similarly endowed with higher educational facilities—choose to stay there.

Planning for a Regional Economy

After decades of equivocation, greater Philadelphia recently embraced a regional approach for its struggling economy. For many years, Peco Energy Company, an investor-owned electric utility, was the lone advocate. Recently, however, the civic sector has done an admirable job of drawing attention to important regional issues. Three of the more effective non-profit groups—the Pennsylvania Economy League, a tax reform advocate; 10,000 Friends of Pennsylvania, a smart growth group; and the Reinvestment Fund, an urban-market financial intermediary—banded together in 2000 to create the Metropolitan Philadelphia Policy Center (MPPC). The MPPC’s research and advocacy work culminated in the 2002 production of Flight or Fight: Metropolitan Philadelphia and Its Future. The widely distributed book used effective illustrations and charts to send a clear message: the bleak economy, poor schools, and high crime in the city have driven residents and businesses to sprawling newer suburbs, and not even those suburbs can compete for new businesses without the attraction of a thriving central city.

The efforts of the MPPC and organizations like it across the nation have helped the private sector to recognize the importance of regional promotion of sustainable growth and economic opportunity. In a study for Boston-based consulting firm FutureWorks and the Alliance for Regional Stewardship, Steve Michon and Malo Hutson reviewed the activities and operations of what they call “regional business civic organizations”—organizations composed of CEOs and other business leaders whose aim is to improve a region’s economic and social standing—in twenty-nine of the largest metropolitan regions in North America. They found that an older business climate, in which chambers of commerce and similar organizations were only concerned with reducing taxes and regulation and with conducting business in their own backyard, has given way in the face of national and global competition. Business leaders are learning that they must collaborate for the economic good of their region, even if that means incurring more regulation and addressing social issues, like transit and water quality, beyond the daily affairs of business.

In October 2003, the Greater Philadelphia Chamber of Commerce (GPCC) announced a new $16 million fundraising and marketing campaign to attract companies to and retain those in the region. New GPCC President and CEO Mark Schweiker, a former acting Pennsylvania governor, sought to build on the momentum from successful city-suburban cooperation on tourism over the previous decade, which resulted in a revived hospitality industry, hotel-building boom, and resurgence of downtown restaurants. He refocused the 6,000-member GPCC from traditional membership services—holding functions for business leaders to network and lobbying to reduce taxes and government regulation—to promoting regional economic development. He also created a 40-member CEO Council for Growth under the chamber’s umbrella to retain existing companies in the region and to improve relations between Philadelphia Mayor John Street and the business community.

These private-sector actions have in turn encouraged more coordination among public-sector leaders. After his reelection in 2003, Mayor Street invited representatives from the city and suburban counties to discuss regional cooperation. Then in December 2004, the chambers of commerce of Greater Philadelphia, Southern New Jersey, and New Castle County, Delaware, held a “State of the Region” conference officially launching a campaign called “Select Greater Philadelphia,” partnering business executives and government officials from the eleven counties in the region. Their plan, patterned after successful programs in metro areas such as Atlanta and Washington, calls for the addition of at least 150,000 jobs to the region by 2010. 

At the “State of the Region” conference, Pennsylvania Governor Ed Rendell proposed that all three states sign a formal agreement to stop poaching jobs from one another through huge tax subsidies. Perhaps most significantly, Rendell suggested sharing tax revenue generated by the new jobs, regardless of their locations.

The Partisan Impediment

With a more cooperative business climate, the region’s economic outlook will likely begin to improve. The transit system will be crucial to the growth of business and population in the city and its suburbs, but SEPTA is currently suffering financially. Half of SEPTA’s $920 million operating budget comes from state funding, the rest from fares, advertising, and parking fees, as mandated by Pennsylvania law. Since the mid-1990s, however, the dedicated taxes—including car rental, tire, periodical, public utilities, and sales taxes—which are supposed to provide one-quarter of SEPTA’s funding have consistently yielded less than forecast. Moreover, appropriations from the state’s general fund have increased only one percent a year on average.

In the state capital of Harrisburg, a partisan fight among Pennsylvania’s elected officials, growing out of a traditional urban-rural rivalry, has thwarted progress on the funding problem. Democratic legislators from the metro region proposed several funding solutions—some realistic, others not—but the Republican leadership, representing rural interests, rejected each one. Republicans insisted on linking increased funding for mass transit to badly-needed repairs for the state’s aging bridges and highways, as well as new roads in rural areas. It sounded like a reasonable compromise, but because SEPTA continued to face shortfalls, the governor has been forced periodically to transfer back some of the funding designated for highways—at the cost of offending rural voters—without any guarantee of a long-term funding solution.

Barely afloat through these funding infusions, SEPTA proposed fare hikes and service cuts, in response to which Mayor Street’s administration sued for an injunction. Motivated by Street’s actions, a broad group of labor, religious, and other organizations announced the formation of the Pennsylvania Transit Coalition and held a 2,000-person rally in Harrisburg. Participants included Action Alliance of Senior Citizens, Black Clergy of Philadelphia and Vicinity, the Sierra Club, and the Greater Philadelphia Hotel Association. Lance Haver, the city’s consumer affairs director, praised Street’s efforts: “Mayor Street decided to use the influence of his office to organize constituencies to fight for what they need.”

At the end of February, just days before transit agencies throughout Pennsylvania were to vote on the fare hikes and service cuts, Governor Rendell made a surprise announcement: an unexpected windfall of federal transportation funding would provide enough cash to keep SEPTA and other transit agencies operating for the next two years without fare increases. Unable to authorize a new federal transportation bill, Congress had extended the old one to ensure that states continued to receive their share of federal funding for transportation projects. Pennsylvania received a larger share under the old bill’s disbursement formula than state officials were expecting under the new formula. Revenues from gas taxes were also higher than expected.

While transit advocates breathed a sigh of relief, Republicans accused Rendell of keeping the additional funding secret so he could play it for a political gain; administration officials repeatedly failed to disclose any details about the additional funding even after federal officials authorized the state to spend it. Growing political animosity in Harrisburg makes some think that the problem of transit funding has merely been postponed. The Philadelphia Inquirer reported that “Rendell supporters say the move marks a change in the governor, who is realizing that he will never win peace with Republicans.” State House Transportation Committee Chair Richard Geist said he expects to hold hearings on why the administration deceived the legislature.

Nonetheless, regional transit advocates are optimistic; they take the failure of the fare hikes as a sign that urban regionalism is breaking down the partisan divide. Consumer Affairs director Haver points out that New York and Chicago recently increased fares, but not Philadelphia: “This model—a large coalition leading the fight—needs to be the model for cities throughout America.” Also promising is an executive order issued by Rendell that created a state commission on transit reform and funding. The commission is due to report its findings and recommendations by the fall of 2006. It remains to be seen if Republicans will cooperate by filling their two seats on the nine-member panel.

Learning to Think—
And Act—Regionally

Perhaps what is most significant is that more people, including members of the Pennsylvania Transit Coalition, are no longer content to defer to Harrisburg to solve regional problems such as mass transit. Marc Stier, a spokesman for the coalition, says that the regional movement is “building momentum. A lot of us are talking now about how we can improve the region.” He also sees the potential to gain the support of urban Republicans in Harrisburg who understand that SEPTA is just as critical to the state’s economy as it is to the region’s.

For instance, the Bush administration’s recent proposal to end federal subsidies for Amtrak concerns Philadelphia, since SEPTA shares several of Amtrak’s rail lines. But through Philadelphia the rest of Pennsylvania is connected to the other states of the Northeast Corridor. The GPCC is currently working with other Northeastern chambers of commerce to weigh in on the proposal. “Philadelphia’s location between New York and D.C. is one of our greatest assets,” says Laurie Actman. “We need to strengthen these connections, not lose them.”

Right now other metropolitan areas, such as Denver, are investing billions of dollars to expand their rail infrastructure while Philadelphia has barely had funds to continue operation. In order to remain competitive with other regions Philadelphia needs to maintain the infrastructure and improve service of its transit system. A group of several prominent civic and private sector organizations have begun meeting to develop a strategic plan for SEPTA’s future. Looking beyond just the agency’s current woes is a critical first step. As one participant says, “Someone needs to provide a vision for our region’s transit future.”