The Antiplanner is no fan of tax-increment financing (TIF), which was supposed to rehabilitate blighted neighborhoods but more often is used for crony capitalism and social engineering. The Colorado legislature was considering a bill to expand the use of TIF to allow cities and counties to use incremental sales tax revenues to pay for transportation projects to “underserved areas.”
An article on Monday argued against such an expansion, saying that it was likely to be abused to support projects that probably would not truly generate new economic growth (and thus no new taxes to pay for the projects). Fortunately, the bill died in the state house of representatives yesterday.
The article didn’t say so, but transportation projects should be paid for out of user fees, not out of imaginary economic growth. The transit industry makes a big deal of the “rate of return” on transit spending, when in fact that rate is negative. Transit advocates say that transit increases property values, but what they don’t say is, when this is true at all, it is a zero-sum game: any increase is balanced by a decrease (or slower rate of increase) elsewhere in the urban area.
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For a transportation project to produce a net increase in taxes, it must lead to faster urban growth than without the project. Any transportation that saves time or money might do this, but most transit projects do neither. In fact, they tend to be slower and more expensive than the alternatives. Thus, it shouldn’t be surprising that urban areas that spend more on transit tend to grow slower than ones that spend less.
The Colorado bill would have allowed cities to subsidize transit or other transportation projects and use sales taxes generated near the projects to pay for those subsidies. In fact, those sales would likely have displaced sales elsewhere in the region, so there would be no net new taxes. That’s why paying for transportation out of user fees works best: if people are willing to pay the fee, there’s no question that the transportation is producing a benefit.
“That’s why paying for transportation out of user fees works best: if people are willing to pay the fee, there’s no question that the transportation is producing a benefit.”
The problem is that “the fee” for transit boondoggles would be so high that people won’t pay it. The Sounder is used by about 1,100 people per day, making its cost per user $330,000. Good luck getting users to pay that fee!
Whether TIFs are a good idea or not, I don’t know, but the idea that user fees should pay for transit ignores the central problem in transport planning. Roads are not properly priced, especially not during peak times. Absent that, we are left looking for second-best solutions to congestion.
Arguing exclusively for user-fees leaves you arguing against subsidized buses, which (as you often point out) are by far the most cost-effective means of decreasing congestion.
To be intellectually honest, we need to assign a value to each avoided car ride during peak hours, then compare those costs to the per-rider subsidized costs.
quirkyllama,
The Antiplanner has argued for paying for roads exclusively through mileage-based user fees here and for funding transit, including bus transit, exclusively out of user fees here.
Asking transit agencies to “assign a value to each avoided car ride” is asking foxes to guard hen houses. They will always come up with an answer that suits them. The reality is that, except New York and maybe one or two other cities, transit doesn’t take enough cars off the road to make a difference and it isn’t clear that spending more on transit, even in New York, would make a difference in traffic congestion.