The recent hubbub around operations on a decade old runway at Minneapolis-St Paul International Airport (MSP), operated by the Metropolitan Airports Commission (MAC), have unearthed a few interesting nuggets. I’m not really an airport or airplane operations buff. I mostly just appreciate that we have a fairly nice airport that I use relatively infrequently (though my previous job had me traveling several times a year) located fairly conveniently in our metro area with a light rail line connecting it to our region’s economic engine (more on that light rail later).
Compared to many airports I’ve passed through in the US, MSP is modern, clean, well laid-out, and spacious. (Image Source: CBS Local)
Also, the runway in question, 17/35, was completed while I was still in college, with the planning process done over a decade prior to that. I was vaguely aware of the proposal for a new airport in Dakota County from my dad’s ramblings, but any details about the process and outcome were mostly lost on me.
So it was interesting to see this tidbit buried in a MinnPost update on the runway 35 suspension:
Costing about $700 million, it was one of the state’s priciest public works projects when it opened in 2005, roughly as expensive as the Hiawatha light rail line. It’s considered in excellent condition.
This led me to look into the history of the runway as well as the MAC’s governance and finance structure, and how they relate to transit. I have thoughts!
Comparing the Blue Line to Runway 17/35
I’ve played this game before. Here we have a public entity with “Metropolitan” in its name with an annual operating expense in the hundreds of millions. The MAC has the ability to issue debt and even levy property taxes against the entire MSP region (though they don’t). Plane operations at MSP serve almost entirely leisure or business travel – just 3% of departures and arrivals were cargo planes. Honestly, how MSP serves the public good isn’t much different than a transit provider, but the MAC and MSP receive far less scrutiny than the Metropolitan Council and Metro Transit. I have a non-provable theory that most people think expensive infrastructure moving rich people in suits from around the globe is more economically important than moving regular people who can’t afford cars around our metro. Who knows?
Anyway, these two massive capital projects were completed at the same time for roughly the same budget, so they offer a good case study. Let the chart below sink in for a second:
The Blue Line has netted a better cost-per-user and has showed consistent growth in annual ridership, while MSP operations and revenue passengers have slid this century. Of course, I don’t necessarily blame MSP and MAC officials, there have been massive changes in the airline industry since 2001, to say nothing of a long economic downturn, things no one could really have predicted in the 1990s when this $700 million runway was concocted.
But, can you imagine the uproar if the Blue Line had seen steadily declining ridership over the same period? Would we have given the Green Line the go-ahead?
Instead, we’re treated to a week-long string of hit pieces on transit fare evasion, a completely overblown “problem,” and the word “choochooboondoggle” uttered just a few times too many. It’s part of a societal double standard towards transit. Many leaders and citizens deride transit for shortcomings in operations or cost recovery, even though the numbers aren’t that different from other transportation modes.
Still, A Worthy Funding Model
I don’t highlight the numbers above to imply the MAC or MSP are poorly run.They’re doing some great things on the sustainability front (if you ignore the climate impacts of flying itself, of course). Despite the challenges our airport has faced in the last decade, budget documents show they are very well run and manage to nearly balance their budgets with very little subsidy from outside sources.
Just over a third of MSP’s revenue, which covers both operating expenses as well as capital improvements (and debt repayment for large projects), comes from airline rates and charges. This includes things like landing fees, terminal rental charges for airlines, and other passenger fees that you, the airline passenger, pay through your ticket directly or indirectly. That’s not orders of magnitude different from most transit system fare recovery ratios.
Half of MSP’s revenues come from “concessions,” which include vendor rents along with a percentage of food & beverage and other retail sales, on-site car rental fees, and mostly parking charges. Those giant ramps are huge cash cows for the airport:
Yes, people who park at the airport, rent cars, and buy food at the airport are all users. But those are secondary functions in providing the infrastructure necessary for airlines to transport people to other destinations. However, in the case of MSP, parking really does help keep the lights on, bringing in 30% of all revenues (!!).
How does all this relate to improving Metro Transit’s budget? Right now, the transportation division is funded mainly through these sources:
It’s easy to spot the differences. Mainly, MSP has a captive customer base willing to pay to park or with few other ground transportation options, and a need to eat or shop once they arrive at the airport (or layover). In the case of Metro Transit, they hold very few real estate properties (it’s tough to sell crepes out of a bus shelter) whose value is enhanced by the thousands of daily passengers that board and alight buses and trains each day. Cities and counties get that benefit in the form of property taxes on residential and commercial property, and the great State of Minnesota collects sales taxes on most purchases (both similar to concession revenues). State general funds and unrelated motor vehicle sales tax pick up the slack in Metro Transit’s budget.
Here are some tweaks I’d propose to allow Metro Transit to control its own budget a bit better. Some will sound familiar if you’ve read David Levinson’s transit utility model:
- Cities and counties chip in more for operations via property taxes. Cities build and maintain streets and bike lanes and parks and do many other things that improve private property. Transit allows denser, less expensive development that yields more per acre with fewer negative external costs than other modes. That’s real value, and local units of government should come to an agreement over how to pay a transit agency for it.
- Do the same for transit expansion via Value Capture. Minneapolis sees it as a viable path for its streetcar, why not light rail and bus enhancements?
- Reform and expand CTIB to fund more general bus operations rather than just transitway expansion and operations. Or allow municipalities or counties to implement their own sales taxes to fund transit directly.
- Charge for parking. Verily I say unto you, people will pay to park their cars. It may not cover 30% of operating costs, but any amount helps.
The MAC model mainly relies on a mix of direct user fees, ongoing value capture via concessions, and parking to cover nearly all its operating and capital expenses. Metro Transit should be able to do the same and lessen the negative stigma of funding shortfall that holds it back in political theater. And yes, Metro Transit should also be doing things like all-door boarding, wider bus stop spacing, pre-payment, and other improvements that speed buses up and lower operating costs.