Linking Users and Producers

After last week’s election, the Antiplanner failed to note that Seattle voted strongly against another monorail boondoggle. More than 80 percent of Seattle voters agreed this would be a waste of money.

At the same time, nearly 60 percent of Seattle voters agreed to increase subsidies to bus service by raising sales taxes and imposing a $60 a year fee on auto owners. According to census data, 21 percent of Seattle commuters take transit to work. It seems surprising that many if not most of the people who drive to work would be willing to tax themselves to support transit, especially since what they are really doing is supporting light rail, to which the Puget Sound Regional Council allocates all the big bucks while bus transit gets cut.

Texas voters agreed to dedicate half of oil & gas severance taxes to road construction and maintenance. This is expected to generate about $1.7 billion a year.

All of these propositions seem poorly conceived. The Texas measure seems especially idiotic, for currently the state siphons about $1.7 billion a year away from gas taxes and motor vehicle registration fees to spend on education and other non-highway programs.

I don’t believe in gas taxes, tolls, or mileage-based user fees for the sake of raising money. I believe in user-fee systems that link users with producers. Such links are needed to give users signals about the true cost of the goods or services they use and to give producers signals about the demand for those goods or services.

When fees collected from some users are given to others, or when taxes collected from one sector is spent on things that could be paid for with user fees, those links between users and producers are weakened. Weaker links mean we are likely to spend too much on some things (such as Seattle buses) and not enough on others. Without solid links, Texas is likely to build too many roads in some areas while it fails to adequately maintain roads in other areas.
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As an example of how states waste money, the Oregon Department of Transportation (ODOT) recently announced that it needs $5.1 billion to seismically retrofit all the bridges in the state. Without such a retrofit, ODOT warns darkly, Oregon’s economy could come screeching to a halt with 100,000 lost jobs in the event of an earthquake.

The Antiplanner is not a practicing geologist, but I do have a degree in geology and I know enough about earthquakes to know that the exact location of earthquake damage is unpredictable. Economically, it makes far more sense to wait for the earthquake and then replace whatever is damaged than it does to undertake a crash program of retrofitting everything on the off chance that some of it might be hurt in a future quake.

ODOT’s proposal is especially absurd considering that in the past 15 years ODOT has replaced almost every major highway bridge in the state under the Oregon Transportation Investment Act (OTIA). This law allowed ODOT to sell bonds backed by future gas tax revenues to replace bridges whether they needed replacement or not. ODOT carefully increased the capacity of few, if any, of these bridges; replacement was simply a jobs program to give money to contractors and obligate future gas tax revenues so they couldn’t be spent on projects that were actually worthwhile.

Now ODOT is effectively saying that all that money was misspent because the bridges it just built aren’t seismically stable, so it wants even more money to retrofit them. Again, this will leave little money for things that actually improve transportation in a state that has more than doubled in population since the last major new highway expansion was built.

The point is that tight links between highway users and highway providers would give the latter incentives to spend the money where it is needed the most, not on social engineering, hugely expensive megaprojects, or diversions to other users. Fifty years ago, we had such tight links as users of all major forms of transportation–rail, air, highway, urban transit–paid their own way. Now few users pay their full fare and producers get money from so many sources other than users that they have little reason to cater to user needs.

One idea for improving those links that received some publicity the day after the election was to turn state road agencies into public utilities. Such utilities would be funded exclusively out of user fees and the fees they charge would be monitored by a state public utility commission. This isn’t exactly a new idea as it was in a report published by the Reason Foundation nearly two years ago. But, when I see and hear state transportation agencies scheme to get as many tax dollars as they can, whether for good intentions (as arguably in Texas) or not (as arguably in Oregon), something like the public utility idea seems like a great improvement.

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About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

11 Responses to Linking Users and Producers

  1. ahwr says:

    Speaking of highway users or transit users as cohesive groups is wrong. High use transit lines that average short trips can operate at less than two dollars per passenger, a reasonable fare in many places. But grouping them with charity lines or vanity rail lines that cost $20 per passenger trip can give you an overall average cost of five dollars or more that may not be reasonable. Same with highways. All funded out of the gas tax but some roads see at least moderate congestion all day, and all those users might collectively pay for the road, or if not they likely could for a reasonable toll. Some roads see few cars at any time, and if users had to pay for the road the toll would be exorbinate. Never mind all the cars that drive exclusively on urban roads but still pay the same gas tax.

    With highways there’s a disconnect that was born with the interstate highway system. Tollbooths may not have been feasible in the 50s, but electronic tolling solves that problem. The gas tax should be retired and tolls introduced to connect users to producers as the AP desires.

    For transit users you have the complication that transit agencies are generally used to offer mobility as a last resort to those who can’t afford their own transportation costs. The answer there I think is to sell franchises, let private operators have the exclusive or non exclusive right to offer service on a corridor. They can charge a regulated fare to cover their costs. The barrier to entry won’t be as high as building an entire road, but likely high enough that as with toll roads letting a private operator have full discretion to set prices would end badly. On those routes there would be a link between user and producer. On charity and vanity routes that are not profitable the state can decide case by case how best to offer mobility to those in need. In some cases a limited number of taxi vouchers may be more appropriate. On others on demand vans or minibuses. Or selling franchises for the routes with the state paying subsidy. And in some cases if the two or three dollar profitable fare is too much then cash payments to subsidize X trips per day to individuals might be the best system.

    This doesn’t deal with local roads however. What does the AP think is a good solution there? How do you link road users with producers to decide whether buses should pull to the curb at stops vs having bulbouts so buses don’t have trouble pulling into the lane after? Or dedicated bus lanes, or signal priority etc…? Or bike lanes or sidewalks?

  2. Fred_Z says:

    ahwr makes some good points.

    Up here in Alberta Canada we have had a long term oil boom leaving the provincial government with lots of money. The local elections are heavily gerrymandered in favour of rural voters. Rural voters want paved roads and they got them.

    Money wasted. The rural folk usually drive pickups and heavy vehicles which do fine on gravel.

    Even so, the place has become a motorcyclists paradise. I can ride my bike all over the countryside on nicely paved and largely deserted roads.

  3. bennett says:

    “Texas voters agreed to dedicate half of oil & gas severance taxes to road construction and maintenance. This is expected to generate about $1.7 billion a year.

    All of these propositions seem poorly conceived. The Texas measure seems especially idiotic, for currently the state siphons about $1.7 billion a year away from gas taxes and motor vehicle registration fees to spend on education and other non-highway programs.

    I don’t believe in gas taxes, tolls, or mileage-based user fees for the sake of raising money…”

    You’ve completely missed the mark here Mr. O’Toole. Currently Texas already generates the $1.7 billion, they just put in into what is dubiously called “The Rainy Day Fund.” That is, the State of Texas taxes its citizens for no apparent reason at all, not even for government boondoggles. It taxes the people of Texas and puts the money under the mattress. What the constitutional amendment does is take a portion of that money, a large portion that is collected through gas tax and registration fees and uses it as intended, to support roadway infrastructure. The amendment does exactly the opposite of what you’re alluding to Mr. O’Toole. I understand that you don’t really favor the idea of the gas tax, however the Texas amendment is helping ensure that gas tax and registration fees are not used “for the sake of raising money,” and instead used to maintain highways. Isn’t that what you want?

    I oppose that “Rainy Day Fund” on the face of it. The State administers many grants and other programs, state, federal or otherwise. If an agency doesn’t use all of the grant money as intended the funds are revoked. Why isn’t the State held to the same standard? Taxes are not intended to be a savings strategy for the state. Putting aside billions a year while TxDOT is breaking it’s bank trying to maintain the state highways is criminal. The voters of Texas (overwhelmingly conservative voters) recognized this and took corrective action.

  4. Sandy Teal says:

    Here is another interesting story of planners projecting a need for a large investment in water desalination on the Hudson River, when there are many 90% cheaper alternatives and the planner forecasts (straight line projection) turned out very wrong.

    http://www.nytimes.com/2014/11/13/nyregion/desalination-plan-draws-ire-in-rockland-county.html?src=recg&_r=0

    Desalination Plan Draws Ire in Rockland County
    By JOSEPH BERGERNOV. 12, 2014

    It would be the first desalination plant on the Hudson River, converting the brackish waters of the lower Hudson salted by ocean tides into fresh water that the residents of Rockland County would drink.

    But county residents are infuriated by the plan to spend $150 million building the plant, with 26,000 people signing petitions to block construction. For one thing, opponents say, there is no need. Rockland County receives, on average, 49 inches of rainfall annually, one of New York State’s highest amounts, they say, adding that there are ways short of desalination to either provide or conserve water.

    As important, they say, the plant location on Haverstraw Bay is three and a half miles south of the Indian Point nuclear power plant. Critics say the desalinated water will contain trace amounts of radioactive particles like strontium 90 that they and their children will consume for their lifetimes. The local water utility says the water would meet all federal and state standards.

    On Thursday, the state’s Public Service Commission is scheduled to decide whether there is a need for desalination. The ruling could set the stage for the plant’s development by United Water New York, the utility that supplies 90 percent of Rockland’s water (the villages Nyack and Suffern have separate systems) and a portion of Orange County’s, serving a total of 300,000 residents. The Rockland Water Coalition, which includes environmental groups like Riverkeeper and Scenic Hudson, has called on the commission to state clearly that there is no need.

  5. gilfoil says:

    Regarding Proposition 1, there is nothing in the text regarding light rail versus buses – it’s to prevent cuts to existing public transit service that would have gone into effect in 2015, not to transfer money from buses to light rail, as the Antiplanner seems to think. The Antiplanner seems concerned about the funding balance between buses and light rail, but why would he care? Since both are subsidized and not paid for completely by user fees, aren’t they both equally bad? If he’s concerned about fairness between poorer bus riders and richer light rail riders, why would he insist that bus riders pay the full cost of their bus rides, since this would increase the amount that the poor transit riders are paying, both absolutely and relative to their income?

  6. ahwr says:

    If you want to talk about planners wasting money in Rockland the elephant in the room is the massively overbuilt new tappan zee bridge that is being built with no financing plan in place, with the governor refusing to release state documents that show just how high tolls will have to rise to pay for it.

  7. metrosucks says:

    government planners are subhuman scum.

  8. msetty says:

    Metrosucky:
    government planners are subhuman scum.

    Anonymous Internet trolls are chicken-shit mouth-breathing loudmouthed louts who are such cowards they’ll never engage in a fair fight with their opponent online, in a boxing gym or otherwise. In an old-fashioned 18th Century duel, they are the ones who would either stab their opponents with a knife hidden in their sleeves in the back, or shoot them before the referee finished counting to 3, let alone 10.

  9. Frank says:

    Enough with the trolling.

    We don’t need to hear over and over the opinion that “government planners are subhuman scum.” Statements like these derail discussion and provoke flame wars. They also undermine the other credible contributions.

  10. gilfoil says:

    msetty, supposing you beat metrosuck’s ass in a gym, what would that accomplish? He’d be back posting the same stuff the day after he recovered from his black eyes enough to read his screen.

  11. metrosucks says:

    msetty can barely beat off (recent rail boondoggle plan failures interfere with his pleasure centers), much less beat anyone in a gym. And he DID promise to never come back to this blog, only cowering on his own, criticism and critic-free echo chamber, where he and his cronies can complain about the Koch Brothers and how civic minded light rail contractors are to accept such gigantic profits for building the boondoggles.

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