In 2004, Denver’s Regional Transit District (RTD) convinced voters to increase the sales tax dedicated to transit from 0.6 to 1.0 cents per dollar so that it could build six new rail lines. Now it says tax revenues are falling short of projections, while costs are higher than expected. So it is raising transit fares, which will only reduce ridership and harm transit-dependent people.
This is a completely predictable result of trying to build a rail megaproject. It is one thing to run a bus system where the capital costs are low and don’t require either long-term borrowing or long-term cost projections. It is quite another thing to plan a ten- or more year construction project that requires a thirty- or more year mortgage.
Blocking traffic.
Flickr photo by Jeffrey Beall.
Such planning requires accurate forecasts of future costs and predictable flows of future tax revenues. Neither are possible. Planners almost always underestimate costs. Revenues always fluctuate with economic cycles, which are unpredictable and so planners fail to include them in their cost and revenue forecasts. When the crunch comes, the transit agencies do the only things they can do to control their revenues and costs: first they raise fares, then they cut service.
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Denver’s RTD is publicly blaming increased fuel prices. Gee whiz, who could have predicted that in 2004? It is not as if gasoline prices had ever increased before then.
But RTD also admits that its sales tax revenues are also below projections. Who could have predicted that in 2004? That’s right, I did — and it was fairly obvious because the projections had been made early in a recession that wasn’t built into those projections. But at the time, RTD denied that there could be anything wrong with its projection that tax revenues would increase by 6 percent per year forever.
Like someone buying a house that costs more than they can really afford, when transit agencies embark on rail projects they are betting that they can complete construction before an economic downturn or an unforeseen cost increase. This is bet they almost always lose, as we have seen in Los Angeles, Portland, Sacramento, San Jose, and many other cities. But when the agency loses the bet, only the taxpayers and transit riders, not the transit managers or board of directors. So they have no incentive to care.
Not all transit agencies are funded out of sales taxes, but for those that are, it seems that a half-cent sales tax is plenty to run a bus system. But a one-cent sales tax is inevitably inadequate to build a rail system. Give a transit agency any more than half a cent, and it will try to build a rail line — and the result will almost always prove disastrous.
Moral: For the sake of your transit service, keep your local transit agency hungry.
Hmmm. The conservative paper doesn’t read like Randal’s spin. And what’s with this rising demands thing? Oh, yes:
Ah. One expects Randal to…er…rail against rising gasoline prices, as their rate of increase looks similar…
DS
In 2007 dollars gas averaged $3.08 per gallon. Today it is $2.98.
sorry the above does not make sense. it should read:
In 2007 dollars gas averaged $3.08 per gallon in 1980. Today it is $2.98.
John,
I’m not sure what your point is. That $3.08 was something like 70 cents a gallon higher any time after WWII (up until now). If your point is that gas prices are nearly as bad as they were in 1980 then you’re correct, if your point is that our gas prices aren’t bad because they’re only as bad as they were in 1980 then you’re absurd (and anybody who was alive 30 years ago is going to be able to call you on it).
A comment about half-cent sales taxes:
Phoenix, Arizona voters approved a half-cent gas tax back in the early 80’s, resulting in one of the most successful modern freeway systems in the nation. Three “beltway” type freeways: L101, L202, and L303, two connector type freeways: SR143 and SR 153, and three major freeways: I10, SR51, and US60 [including a recent expansion] were built with this half cent sales tax.
Another interesting fact about the freeway system in Phoenix is that it was funded almost entirely by the half-cent sales tax over the period of 20 years. Almost no federal funds were used [the main reason why Phoenix has no 3-digit interstates].
Funny how a measly light rail system in Colorado could consume most of the same type of tax, require the tax to be doubled, consume large chunks of federal transportation money, reduce standard bus service while charging more, and still not get built. The Phoenix freeway system is around 90% complete.
Anthony,
According to a recent Forbe’s article Phoenix has two of America’s 12 worst “traffic traps”, including #4:
http://www.forbes.com/logistics/2007/06/11/traffic-highways-interstates-biz-logistics_cx_rm_0611traffic.html
On what basis do you consider Phoenix’s free system one of the most successful in the nation?
Doog, I was alive and buying gas (while earning $3/hr) 30 years ago and my point is that Dan was comparing the cost of building rail today going up as fast a gas prices. I would wager that building rail lines was much cheaper in today’s dollars in 1980 than today.
I got my first job pumping gas at Mobil for $2.00/hr 30 years ago, IIRC 67¢/gal.
Nonetheless, I didn’t compare the cost of building rail at all.
I pointed out the rate of the fare increase (the topic) with gas price increase, even though oil is a volatile commodity & does not follow inflation rate (as seen below). Steel is increasingly a volatile commodity as well, as the Chinese buy more and more of it in their building boom, whihc is the reason why not only transit but road costs going up (rebar, steel for bridges).
In 1997 in CA, avg. gas price 1.33/gal.
Constant dollar factor for 1997 = 1.258
And I return to my other point above: ridership is exceeding expectations.
DS
doog:
Phoenix’s “traffic traps” are a result of unexpected explosive population growth, something that couldn’t have been planned in the first place. Mesa, for example, started as a small suburb smaller then the size of Gresham, but over the past 20 years, has expanded to a city larger then Portland!
The Phoenix area has an advantage over Portland as they try and “think ahead” much more reasonably. They do not assume that any absurd number of people will bicycle or use transit. Most arterials are built with 6 lanes [instead of the 2-4 lane messes built here] before any development takes place, and buildings are set back from the road. Freeways there are also built with plenty of room for expansion. The I10/SR51 interchange has a major expansion [will double capacity] in the works. I can almost guarantee it will be completely built before our I5 Columbia Bridge ‘study’ is completed.
To answer your question, I do believe Phoenix has a very successful “free” system, and they continue to make leaps and bounds over Portland’s way of things every day.