Sound Transit

Of Hong Kong and TIF

By Frank on January 17, 2008

Daijimin asks about the Hong Kong method of transportation finance described here.

The big problem that I see, which I alluded to in a comment to David Brewster’s article, is that the financing scheme described — tax increment financing — is illegal in Washington State.

I wrote about this a few months back in the context of I-747. Tax increment financing (TIF) is the idea that you borrow money to finance, say, a transit project, and the resulting increase in property taxes around the project can be used pay back the loan (this is a bit different than LID, which financed the Seattle Streetcar, and which involves assessing an up-front tax on the property owners).

In speaking with folks who know more about this issue than I, I’ve come to thnk that there are too many barriers in the state constitution vis-a-vis property taxes to actually implement TIF in the way Brewster describes. Which is too bad.

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The Mother of All Agencies

By Frank on December 18, 2007

Ted Van Dyk “reports” that regional leaders are coalescing around a post-Prop-1 transit plan that looks — surprise! — mirrors Van Dyk’s personal wishes and desires almost to a tee. It’s hard to know where the reporting ends and the navel-gazing begins:

In all of this, a new consensus is emerging about a post-Prop 1 agenda. It centers on moving aside turf-oriented, self-serving agencies such as Sound Transit and transferring power to a more objective, more responsive regional body. It would stress immediate priorities such as addressing the urgent Alaskan Way Viaduct and Evergreen Point Bridge, which are aging and structurally vulnerable. It would not stop light rail construction in place, but it would limit construction to a line running from Seattle-Tacoma International Airport to either Convention Place, Husky Stadium, or Northgate. Future funding would be focused more greatly on express bus, bus rapid transit, and normal bus service; dedicated transit lanes; HOV lanes; tolling; and selective repair and expansion of long neglected local roads and lifeline highways. Citywide trolleys definitely would not be part of the scheme.

You’ve got to love the use of the passive voice here (“a consensus is emerging”), implying that the whole thing is just coming together as God and nature intended. It’s a miracle!!

But I really have to take this opportunity to rant against this idea of a regional “superagency” that’s getting so much press these days. The Puget Sound Regional Transportation Commission (PSRTC) — which would combine RTID, Sound Transit, and the Puget Sound Regional Council (PSRC) — was the subject of the Rice-Stanton report (.pdf) that forms the basis of Van Dyk’s article. It is an idea that is intuitively appealing, but fall apart spectacularly upon deeper examination.

Let’s not mince words here: the PSRTC is not just a silly idea, it’s a dangerous distraction from the real transportation problems facing our region. Like the Department of Homeland Security at the federal level, the PSRTC’s main purpose will be to make us feel like we’ve accomplished something, while formerly effective independent agencies (e.g. FEMA) are gutted and politicized as part of the new, unwieldy mega-bureaucracy.

For example, the PSRC, Rice and Stanton argue, “is charged with planning regionally, but has limited authority. Although it articulates a regional vision and attempts to plan for the region, the PSRC lacks the power to prioritize needed projects due to its governance structure.” But this is a feature, not a bug! The PSRC’s insulation from politics and taxing is exactly what makes it so valuable and objective as a planning agency.

Also, the proposed PSRTC would have “life cycle responsibility” for construction and maintenance of “regional projects.” I assume this means it would have its own construction crews and maintenance facilities, or at least be responsible for subcontracting them. But why? Ostensibly, the PSRTC is being created for regional priority road projects like the ones specified in the RTID: I-405 widening, the “Mercer mess,” the 520 bridge, and others. But design and maintenance for those already rests with specific agencies. Unless you’re going to abolish KCDOT, SDOT, and all the other local DOTs, you’re adding bureaucracy, not removing it.

Finally, we don’t need yet another elected board overseeing something. Our ballots are far too large already. As it is, we must elect a couple of Port Commissioners, a few city councilmembers, a school board, some county councilmembers, federal judges, state reps and legislators, and maybe soon an elections chair. We need fewer of what Knute Berger wisely derided as “designer governments.”

What might — might — make sense is to combine the various regional transit agencies (Everett Transit, King County Metro, Community Transit and Sound Transit) into one transit agency, like Portland’s Tri-Met or New York’s MTA. But that would have the effect of giving Sound Transit even more clout, and that must be avoided at all costs, according to Van Dyk and his ilk (despite the fact that the people of the region view ST more favorably than, say, WSDOT).

To be sure, there is a real funding problem in the region. With round after round of anti-tax initiatives crippling the state’s budget (which must also fund important things like education and health care), it’s getting harder to fund transportation projects. But creating another agency doesn’t solve this problem, it just redirects it. If the state, cities, and counties can’t come up with the revenue, they need to raise taxes, or elect leaders who will. Redrawing lines on the map doesn’t magically make money appear.

In other words, creating the PSRTC does not restore these funds. It simply proposes to acquire them from a smaller bloc of voters, including Tim Eyman (who lives within the PSRTC’s proposed boundaries, let’s remember). Does anyone think that he’s just going to sit on his hands while we try to raise $70B or so in new revenue?

I encourage everyone to download the Rice-Stanton report and skip to Page 114, where Commissioner Dan McDonald writes a highly intelligent and accurate “minority report,” that calls into question the logic of the whole thing. A monster bureaucracy like the PSRTC will face stiff political opposition that will be every bit as difficult as simply trying to raise the revenue through existing agencies.

All of which makes you wonder why we’d even do it in the first place.

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LID vs. TIF

By Frank on December 7, 2007

EvergreenRailfan asked in the comments section here what the difference was between Tax increment financing (which is illegal in WA) and Local Improvement Districts (which funds the SLU streetcar). There’s a clear answer in the .pdf I linked to in my previous streetcar post:

Tax increment financing approaches (TIFs) are similar to LIDs in that they define areas within which private property owners will benefit from future infrastructure improvements. In the case of LIDs, the private sector is assessed a direct tax to support the development of the new infrastructure. In the case of TIFs, the public sector is able to increase its borrowing powers on the basis of the added tax revenues that can be anticipated as a result of the improvements.

So TIF is the government saying, “we’re going to make captial improvements in this area, the property values will rise because of that, and so we can float a bond to pay for the improvements and pay it off as the higher tax revenue come in.” LID says “we’re going to make improvements by taxing the residents of this area directly, but they also will probably see their property values rise, which will make the tax more palatable to them.”

TIF doesn’t require you to actually levy a tax on the land owners, but it assumes the city will have more revenue down the road because property values go up. So it’s riskier. But it doesn’t require you to have an existing tax base in the area you’re going to improve. This is why it’s probably used most often with eminent domain cases, where the government is coming in and condemning a whole bunch of land for a big project.

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America's Crumbling Infrastructure

By Matt on October 8, 2007

Great op-ed in WaPo today about why America’s infrastructure is falling to bits. Apropos of our transportation discussion on B&P yesterday, thought I’d post some of it here.

Thomas Donohue, head of the U.S. Chamber of Commerce, writes:

You’d be hard-pressed to convince the American people that we don’t need to spend more on infrastructure after the tragic collapse of the Interstate 35 bridge in Minneapolis in August. Signs of decay are everywhere, from crumbling bridges to pothole-ridden streets to exploding manhole covers and underground steam pipes.

Yet Transportation Secretary Mary Peters is making precisely that argument. She has said that we could meet all of our transportation infrastructure needs if we spent current funds more wisely. She is only half right. Spending money wisely is important, but it’s not nearly enough.

There are three things we must do to ensure that our nation has a superior physical platform capable of serving a growing economy: stop diverting dedicated transportation funds to wasteful or unrelated projects; unleash private infrastructure investment by removing regulatory impediments; and invest more federal, state and local dollars in infrastructure.

He continues:

What must our nation do to meet the urgent infrastructure funding challenges? Where is the money going to come from?

We can start by unlocking potentially hundreds of billions of dollars in private investment just waiting to be spent on power plants; pipelines; shipping and hauling routes to railroads and airports; privately constructed and operated roadways; and more. The money is there if government regulators would get out of the way. Countries around the world use an array of innovative financing approaches and public-private partnerships to bring key projects on line quickly. It’s about time America did the same.

There must also be a significant increase in government funding for infrastructure, which means we will have to consider an increase in the federal gasoline user fee. This could mean a straightforward increase in a fee that hasn’t been raised in 14 years, or it may be in the form of a carbon fee designed to address global warming. Either would work as long as the proceeds are dedicated to transportation and other infrastructure.

What will we get for these investments? We will save lives, create American jobs and set the foundation for a more robust, productive, globally competitive economy.

Now, I don’t want to get too partisan (check out B&P for that), but I do find it extraordinary that the leader of one of America’s venerable business organizations goes out of his way to propose a increase to the gas tax as the only way to get enough funding to rebuild our infrastructure. Put another way, our infrastructure is in such bad shape that business leaders are calling for tax increases in order to raise the funds to fix it.

America may be great, but our infrastructure is no longer extraordinary. Good to see the business community — if not yet the median voter — starting to recognize that.

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