According to pro-rail transit Metro magazine, American cities face a dilemma: the demand for rail transit continues to grow, yet there is a scarcity of federal dollars to pay for it. Fortunately, writer Cliff Henke continues, cities have come up with innovative ways to get around this scarcity.
In fact, most of the things the article says are wrong or, at least, they indicate that cities have too much money, not a shortage. If it weren’t for this surfeit of funds, cities wouldn’t plan ridiculously expensive rail lines that, in most cases, do nothing for transit riders or transportation users in general. This is shown by all of the examples in his article.
The Overpriced Los Angeles Subway: The first example in the article is Los Angeles’ Westside Subway, which will be less than four miles long yet is expected to cost well over $2.8 billion, or more than $725 million per mile. This insane project is expected to attract just 7,700 new transit riders per day. That means the cost of getting one person out of their car for one trip on the subway will be $65. (I calculated this by amortizing the capital costs over 30 years at 2 percent interest, multiplying the daily new trips by 315, which is the average weekday trips per year on L.A.’s existing subway, and dividing annual new trips into the sum of the annual operating and annualized capital costs.)
Far from suffering from a scarcity of federal funds, this project will get 44.8 percent of its capital costs from the Federal Transit Administration. The “innovation” was that much of the rest of the capital costs will be loaned to the Los Angeles transit agency by, you guessed, it, the federal government. Doesn’t sound like much of a shortage to me.
RTD’s Subversion of Its Authorized Debt Limit: The second example is even a poorer example of the supposed scarcity of federal funds: Denver’s Eagle public-private partnership, which is building two rail lines and part of a third. In 2004, when Denver’s Regional Transit District (RTD) asked voters to fund six new light-rail lines in 2004, critics (including the Antiplanner) argued that the system would suffer from severe cost overruns. But RTD officials promised that there would be no overruns. Almost as soon as the votes had been counted, costs rose by 67 percent from $4.7 billion to $7.9 billion. “No one could have predicted” the increase in costs, claimed RTD general manager Cal Marsella–never mind the fact that many people did.
However, there no shortage of federal funds in this case, as the FTA gave RTD a $1 billion grant–the largest single grant ever given for a rail transit project in one year–to assist the project. This grant, which wasn’t supposed to be needed under the original plan, made up for part, but not all, of the cost overrun.
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To cover the rest of the overrun, RTD had to borrow several billion dollars, but this would have violated a debt limit that had been included in the ballot measure. So RTD found a private partner that would borrow some of the money, and agreed to pay the partner enough each year for 30 years to repay the debt. Legally, the debt was not on RTD’s books, but Denver-area taxpayers are still on the hook to repay the loans. In other words, the innovation celebrated in the Metro article was merely a way to get around the law. Even with this subterfuge, RTD will likely never build one of the six rail lines promised in 2004.
Portland’s Non-Existent Bridge: The next example reveals just how hard rail advocates work to make up success stories out of failures. When the Washington legislature failed to fund its designated portion of the Columbia River Crossing, says Henke, the Oregon legislature reached a compromise that would still build the bridge with available funds, but delete some projects on the Washington side of the river.
Once again, there was no shortage of federal funds in this project. The FTA was going to provide almost a billion dollars, or virtually 100 percent of the cost of the planned light-rail line that would be a part of the bridge crossing. Federal loans would amount to another $900 million.
The real problem with the article is that the compromise it celebrates never happened. In March–a full six months before the Metro article was published–Oregon decided not to build the project. In his eagerness to brag about rail transit success stories, Henke neglected to mention this little fact.
Tucson’s Stupid Streetcar: Tucson wanted to build a streetcar line, but how to do it in the face of a shortage of federal funds? First, it got a $25 million grant from the FTA. Second, it got another $63 million federal grant under the stimulus program. Which raises the question: what shortage?
If the federal government wasn’t making all of these funds available for absurd rail transit projects, there would be no shortages of funds for real transit–namely bus transit, which costs less yet can carry more people and reach more destinations than trains. In fact, while there is very little demand for rail transit per se, there will always be an insatiable demand for “free” federal money, and cities will go to insane lengths to get “their share” of that money. All Henke’s article proves is that those lengths include violating the spirit of the law and ordinary common sense.
Having too much money for stupid road projects is a much bigger problem that too much money for transit.
http://www.strongtowns.org/journal/2014/9/17/roads-and-debt
I don’t often agree with much of what the Antiplanner says, but I do marvel at how planning agencies seem to always find money for the really dumb projects. In the Bay Area, for example, planners somehow managed to come up with huge piles of money for the Oakland Airport Connector and the Central Subway while more cost effective projects like bus rapid transit are stalled for lack of funds.
No mention of schools? Not even the $578 million LA school that has a 50% dropout rate? Dozens of schools have spent more than $100 million on shiny new campuses.
No mention of these government school boondoggles or government schools coping with too much money?
BRT sucks here in Lane County. After they put it in, they removed all the bus stops around it. I wish I’d snapped a picture down Harlow with all the white poles where bus service used to be. The BRT bus they use, cannot use normal height bus stops, so anywhere it stops has to have a special double height curb. Also, unlike a normal bus it can be so fast that it is early occasionally. The worst thing a bus can be is early. I leave on time to be what I think is early to the stop and when I’m half a block away, I see it leaving my station. Also during the last snow storm, I counted 3 southbound buses in 45 minutes, but no northbound bus that I needed. I finally gave-up and drove in.
msetty, weren’t you supposed to go to your own private little blog and never return here to suffer us ungrateful hillbillies and our insistent ignorance of the supposed superiority of horribly expensive rail transit boondoggles?
msetty links this this
http://www.strongtowns.org/journal/2014/9/17/roads-and-debt
“Brainerd has more roads to fix and maintain than it has tax base to pay for them.”
~CHARLES MAROHN
As a rul of thumb when something claims that something is obvious, it’s a flag that they’re well off the mark. In this case msetty references an article in which Charles Marohn claims that his above claim is obvious. He couldn’t be further from reality.
How do we know this?
1) open a web browser
2) go to city of Brainerd web site
3) pull up the city budget
You’ll see that a city that spends @$7million per year spent a 1/9th of that on both streets & sewer. They don’t break the two out. It’s preposterous to claim that it is obvious the city doesn’t have the tax base to pay for them when less than 10% of the cities annual budget goes toward streets.
Mahon does have some good points but he uses those to imply his overall claim is correct. Debt creates fragility. Brainerd should be looking to reduce that debt. And the city, like too many in Minnesota, is overly dependent on the LGA ( Local Government Aid; an invention of the #mnleg to get cities latched on to it’s teet ). But he has nothing to share for the above claim. Unfortunately over the years that has been par for course with Mr. Mahon.
BTW, since Brainerd was mentioned, here’s it’s tie in to the Northern Pacific
https://www.princeton.edu/~achaney/tmve/wiki100k/docs/Crow_Wing_County,_Minnesota.html
Brainerd township was founded in 1870 when the Northern Pacific survey determined that the crossing of the Mississippi should be there. It became a city on November 19, 1881. The name was chosen in honor of the wife of J. Gregory Smith, the first president of the Northern Pacific Railroad Company. Mrs. Brainerd Smith was the author of novels, books of travel and other works.
You’ll see that a city that spends @$7million per year spent a 1/9th of that on both streets & sewer. They don’t break the two out. It’s preposterous to claim that it is obvious the city doesn’t have the tax base to pay for them when less than 10% of the cities annual budget goes toward streets.
I got suckered into clicking on that link too. Imagine my surprise when, contrary to Mr. Marohn’s assertions that Brainerd’s road maintenance expenditures would send it rocketing to the poorhouse, he provided no evidence that either 1) the city is facing a particularly dire financial situation (it is in fact still growing) or 2) the city’s road network is the cause of this supposed financial peril.
I guess we are just supposed to take it as an article of faith that the city is in big trouble because, you know, he’s a planner and a ‘visionary’ kind of guy.
MJ, you’re so wise in trying to debunk Marohn.
<a href="http://www.brainerddispatch.com/content/13-million-shortfall-projected-2015-brainerd-budget"<$1.3 million shortfall projected in 2015 Brainerd budget.
Makes one wonder how much general fund money is siphoned off to road maintenance and construction.
Randal, an edit function would be greatly appreciated.
MJ, you’re so wise in trying to debunk Marohn.
$1.3 million shortfall projected in 2015 Brainerd budget
Makes one wonder how much general fund money is siphoned off to road maintenance and construction.
“Makes one wonder how much general fund money is siphoned off to road maintenance and construction.”
~msetty
A budget shortfall doesn’t mean a lot. Politicians regularly budget for automatic increases and then pare back from there. Look at the budgets the city has online, they’re looking at revenues more or less the same that they’ve had the last 5 years. It’s not an awesome situation to be in but it’s not dire.
Mahon is right to warn them about the fragility that debt creates. But he refuses to acknowledge that 90% of the budget goes to things other than street & sewer maintenance. Brainerd clearly is not in situation where it does not have the tax base to pay for them.
Once again we have a case where someone sees something less then perfection and behaves as though it’s an utter disaster. To frame it in another domain, the city broke it’s pinky finger and Mr. Mahon is frantically running around claiming the arm needs to be amputated. It’s a puerile reaction that does nothing to contribute to the public discourse.
MJ, you’re so wise in trying to debunk Marohn.
$1.3 million shortfall projected in 2015 Brainerd budget
Makes one wonder how much general fund money is siphoned off to road maintenance and construction.
You didn’t ‘debunk’ anything. Much like Marohn, you assumed your own conclusion. Here is the City of Brainerd’s budget which, had you spent another 30 seconds on your Google search, you could have easily accessed and examined.
Since I doubt you’ll take the time, I’ll point it out for you. The entire street and sewer budget for the city in 2014 is just under $890,000. It is about 65K larger than the previous year, probably owing to larger tax revenues from rebounding property values.
If you were serious about trying to make your point, you would not only have to provide evidence of several consecutive years of budget deficits (and serious ones, not deficits of less than 10% of the total budget, which are manageable), but you would also have to provide evidence that these deficits were directly linked to spending on road provision and maintenance.
Bankruptcy is not in Brainerd’s immediate future, nor is it likely to be any time soon. In fact, contrary to Chuck’s dire warnings, it seems to be on a pretty sustainable path. You and Chuck will just have to keeping casting about for boogeymen to convince people that the world is coming to an end.
A friend gave me the link to this discussion. I’ll be thick skinned on the anonymity-induced hyperbole, bluster and name calling and give you guys a shot.
The suggestion you seem to be putting forward is that my little home town of Brainerd has plenty of tax base to cover their long term road maintenance obligations, particularly since they only spend 10% of their budget on road and sewer maintenance. I’m not sure I follow the logic of that argument, but let me offer a few observations.
Brainerd is dependent on local government aid in the extreme. It makes of 42% of their budget. When times have been tough in the past, the legislature has seriously looked at eliminating this aid. It is the lowest priority of the major things the state funds (healthcare, education, public safety, transportation, etc…) and, given how far overextended the state is, I can’t see it surviving another serious downturn.
Add to this the fact that the city is a partner in the pension problem the state suffers from. Minnesota’s pensions are doing “really well” compared to other states; we’re only 25% underfunded assuming an 8% annual return into the future. Maybe not all of this liability will fall on the cities, but it will fall on taxpayers (and/or public employees, present and retired) putting even more limitations on funds available.
So starting with those two major sources of fragility – of which the city staff and elected officials reflexively deny – we can add (1) a significant amount of existing debt, (2) an aged electric utility system with accelerating costs, (3) an aging water system with some big ticket expenditures on the near horizon (4) the fact that our only special revenue opportunity (sales tax) is already committed into the future for past sewer improvements and (5) a tax rate that is nearly double the state average. If the suggestion is that more revenue for roads is easily available, that’s crazy talk.
If the suggestion is the opposite – that we can cut other things out of the budget to raise the percentage going to road maintenance – then there is a little bit stronger argument, but this is a city that has been cutting desperately for more than a decade. Even when other places were flush, Brainerd was bleeding red ink. There is a long list of deferred maintenance and an even longer list of missed opportunities, our attentions obsessing on how to make it through the next budget cycle.
The article that prompted me to write the post you have referenced was one reporting on a proposal to borrow millions for road maintenance along with some new construction. The city is already illegally assessing their poor neighborhoods to make up their budget gaps for maintenance – not the debt payments for the road/street budget – and has been forced to extend those payments out over longer and longer periods to keep people from rebelling.
Using the city’s numbers for what it costs to maintain our local streets (something they presented in a powerpoint – costs per foot data), I calculated that we need $14.8 million in private tax base (not including all of those with tax subsidies) for every 1,000 feet of roadway in order to stay solvent. Guess how many segments of roadway in the city meet that criteria? Zero.
Okay, let’s pretend we make some massive policy changes and double the percent of the budget we are spending on roads while simultaneously increasing taxes by 100%. That results in a quadrupling of the road maintenance budget. The number then goes to $3.7 million. Any places in the city that are generating enough revenue for road maintenance now? Nope. There are a handful of properties in the downtown and some of the historic neighborhoods that are financially productive – small lots with viable buildings on them – but no significant stretch that comes anywhere close.
The large swaths of land that the city annexed on the outskirts of town – the hundreds of acres of new growth areas – fare the worst in this analysis. We might have some wealthy property owners there, but they also have really huge lots. Ten homes each on a 200-foot lot (1,000 on each side of the street) would need to be worth $1.5 million each to make the math work. These are crazy numbers.
It is worth pointing out here that the sewer and water systems are dramatically more insolvent. We’ve used state and federal money to run them all over the place, putting miles of pipe in to get new connections and help pay for the huge sewer plant and water treatment systems. Nobody ever considered that it would cost a lot to fix all these pipe and pumps someday.
In my article (and please – the newspaper gives me 800 words which limits my ability to write a technical manifesto with each piece) I called on the city to inventory their road system before even talking about taking on more debt. How we can add more debt when we have no accounting of what our long term liabilities are? The response is something along the lines of what was suggested here: well, we are making our payments today and so what is the big fuss.
The fuss is that the city is insolvent. If it is going to meet all of its long term obligations, it needs a much larger tax base. And that assumes a rosy scenario where local government aid continues to flow, the pension fund magically gets 8% compounding returns and someone else steps in to fill the its funding gap. The reality is that there is no way to increase the tax base to the degree that is needed. The future for Brainerd – and most of America’s cities – is going to be one of rising taxes, reduced services and systematic default on obligations.
I’m not sure what the flash point here that prompted this conversation. I agree with O’Toole’s thesis that more transportation money from the feds is delaying the difficult decisions and allowing us to make investments that are low-returning and generally wasteful. This thinking applies equally to roads as it does to transit. Both are subject to human-nature’s inclination to want more today when we can promise to pay for it tomorrow. If we want to be intellectually honest with ourselves (and hold the respect of others), we have to ensure our critiques are not domain dependent.
Isn’t it weird how smart (sic) growth advocates find religion when the topic is building or maintaining roads? How odd that they agonize over cent spent on a automobile project, but when it’s some 200 million a mile boondoggle rail nonsense, money suddenly appears from the heavens and every corner of the suddenly healthy budget to support the building of the rail obelisk.
I’d excuse these sort of screeds if the people writing them weren’t flaming hypocrites.
I hope you are not talking about me. If so, that’s intellectually very lazy of you.
I’m not a smart growth advocate, don’t subscribe to the smart growth ideology and have written many times about my discomfort with build-it-and-they-will come transit boondoggles. I want the federal government out of transportation funding or, if they won’t get out, that they at least apply market principles to how they allocate communal funds.
If you want to be respected, cut the name calling and address the substance. I’m here, but I’m not going to take all of you seriously if there is no substance to your critique. You are all using a lot of smug, flaming rhetoric. Please tell me there is more to the conversation here than that.
clmarohn, the Antiplanner’s view is that any money spent on roads increases mobility and therefore freedom, even if (or especially if) it weakens city or town centers’ ability to fund and maintain them. In fact, if cities or towns are driven to bankruptcy, that removes them from the picture so that the private sector can maintain the roads instead. Freedom!
The reality is that there is no way to increase the tax base to the degree that is needed. The future for Brainerd – and most of America’s cities – is going to be one of rising taxes, reduced services and systematic default on obligations.
That’s a awful lot of hand-waving. Next time show your work. I’ve got $1,000 that says Brainerd will not go bankrupt in either of our lifetimes. Somehow these metaphorical time bombs never seem explode.
I’m also not interested in buying any of your gold. Good day.