Tag: transit

The New York Times Is Wrong About Transit’s Effect on Urban Development

The New York Times has once again published a report claiming that transit hubs are a “growing lure for developers.” The Times published a similar story eight years ago, and I quickly showed that subsidies from tax-increment financing (TIF) and other government support, not transit, was what stimulated those developments.

So has anything changed since then? Nope. The first development described in the recent story by Times reporter Joe Gose is Assembly Row, in the Boston suburb of Somerville. Is it subsidized? Yes, with at least $25 million in TIF along with other state funds. Far from being “free money” as its advocates claim, TIF steals from school districts and other agencies that rely on property taxes to subsidize developers.

Then Gose mentions Chicago’s Fulton Market, downtown Kansas City, Austin, and Denver’s RiNo neighborhood. Fulton Market just happened to receive at least $42 million in support from the city of Chicago, much of which comes from TIF

Supposedly a new streetcar sparked a revitalization of downtown Kansas City. But could it be that revitalization was due more to Kansas City’s twenty-four downtown TIF districts?

Gose doesn’t specify a particular neighborhood or development in Austin, Texas. Of course, Austin is one of the fastest growing cities in America, so anything that’s open for development is going to be developed. But not satisfied to let the market work, Austin has heavily bought into the use of TIF districts. Transit is an afterthought in Austin, carrying less than 1 percent of the passenger travel; the city’s sole rail line was a huge flop that cost way more than expected and now carries fewer than 1,500 round-trips per weekday.

Denver’s RiNo neighborhood–RiNo being short for River North–is growing thanks to at least $44 million on infrastructure improvements in that neighborhood, plus additional TIF funds for special projects.

In Washington, DC, Gose mentions a $3 million project “in Washington’s fast-growing Capital Riverfront neighborhood.” That’s the same neighborhood that received at least $198 million in TIF subsidies.

An Electrifyingly Bad Decision

Transportation Secretary Elaine Chao’s decision to give $647 million to California to electrify a San Francisco commuter rail line tells states and cities across the nation that they should plan the most expensive and wasteful infrastructure projects they can and the Trump administration will support them. The Caltrains electrification project had no political, economic, social, or environmental justification, so Chao’s support for the project despite its lack of virtues does not bode well for those who hoped that the Trump administration would take a fiscally conservative stance on infrastructure and transportation.

The California project had already been funded by the Obama administration, but it was a last-minute approval by an acting administrator who immediately then took a high-paying job with one of Caltrains’ contractors. When Chao took office, every single Republican in the California congressional delegation asked her to overturn the decision, and she agreed to review it. Even some Democrats opposed the project, meaning there was far less political pressure to fund it than many other equally wasteful programs.

Caltrains carries just 4 percent of transit riders in the San Francisco Bay Area, and based on the dubious claim that electric trains would go a little faster than Diesel-electric trains, the environmental assessment for the project predicted that electrification would boost ridership by less than 10 percent. It would save no energy and have a trivial effect on air pollution. 

Instead, the main purpose of the Caltrains project was to wire the way for California’s bloated high-speed trains, which at least initially would use the same electric power to get to San Francisco. Normally, high-speed trains would not use the same track as ordinary commuter trains, but the costs of the high-speed rail project have risen so much that the state’s rail authority is cutting corners wherever it can. One result is that the project, if it is ever completed, won’t really run trains at high speeds for much of its route.

10 Reasons to Stop Subsidizing Urban Transit

As the Trump administration debates whether to help fund a $1.75 billion transit project in California that will do almost nothing to increase transit ridership, it is time to reconsider whether transit should be subsidized at all. Here are ten reasons to end those subsidies.

1. It’s the most costly transportation we have

In 2015, the transit industry spent $1.15 to move one person one mile, of which $0.87 was subsidized. No other major form of transportation is so expensive or so heavily subsidized. Auto driving cost about 26 cents per passenger mile of which subsidies were 2 cents. Flying was about 16 cents a passenger mile of which subsidies were also about 2 cents. Intercity buses cost about 12 cents a passenger mile of which subsidies were about 3 cents.

Other than transit, the most expensive passenger transport was Amtrak, which cost about 53 cents per passenger mile in 2015 of which 19 cents was subsidies. Not coincidentally, Amtrak is also government owned, suggesting that government ownership either makes transportation more expensive or government is stuck with the obsolete clunkers in the urban and intercity transport markets.

2. Subsidies haven’t increased ridership

Federal subsidies to transit began in 1965, when transit carried 60 trips per urban resident. Since then, federal, state, and local subsidies have exceeded $1 trillion (in today’s dollars), yet annual ridership has dropped to 40 trips per urban resident. Ridership responds more to changes in gasoline prices than to increased subsidies.

Since federal subsidies began in 1965, transit ridership has declined from 60 annual trips per urban resident to 40.

3. Few use it and fewer need it

In 1960, when most of the nation’s transit was private (and profitable), 7.81 million people took transit to work. By 2015, the nation’s working population had grown by nearly 130 percent, yet the number of people taking transit to work had declined to 7.76 million.

The share of households that owns no vehicles has declined from 22 percent in 1960 to 9 percent today, while the share owning three or more vehicles has grown from 3 percent to 20 percent.

In 1960, 22 percent of American households did not own a car and transit subsidies were partly justified on the social obligation to provide mobility to people who couldn’t afford a car. Since 2000, only 9 percent of American households don’t own a car, so the market of transit-dependent people has dramatically declined.

Half the households with no cars also have no employed workers in the households. Of the 4.5 percent of workers who live in households with no vehicles, well under half–41 percent–take transit to work, meaning transit doesn’t even work for most people who don’t have cars.

Why Few Americans Use Transit

In 1964, most transit was privately owned, earned a profit, and was used by the average urban American 60 times a year. Then Congress passed the Urban Mass Transportation Act, offering capital grants to cities that took over their transit systems. Since then, most transit has been municipalized, we spend nearly $50 billion a year subsidizing it, and today the average American rides transit just 40 times a year.

Transit advocates complain that Americans have some sort of irrational love affair with their automobiles. But Americans have excellent reasons not to rely on transit. Here are nine of them.

1. Transit is slow.

Most transit is much slower than driving, and a lot of transit is slower than cycling. While the average speed of driving in most American cities is more than 30 mph, and in some it is more than 40 mph, the American Public Transportation Association’s Public Transportation Fact Book admits that the average speed of rail transit is just 21.5 mph while the average speed of buses is 14.1 mph. That doesn’t count the time it takes to get to and from transit stops.

2. It doesn’t go where you want to go.

Most transit is oriented to downtown, a destination few people go to anymore as less than 8 percent of urban jobs and 1 percent of urban residences are located in central city downtowns. If you don’t want to go downtown, transit is practically useless as hub-and-spoke transit systems can require hours to take you to destinations that are only a few minutes away by car.

3. It’s expensive.

The transit industry claims that transit saves people money. But the truth is that, for most people, it costs a lot less to drive than to ride transit. Transit fares in 2015 averaged 28 cents a passenger mile. That’s less than the cost of driving if you count all the costs of owning a car and are the only person in the car. But if you already own the car, the cost of one more trip is less than 20 cents a mile, and you save even more if you carry any passengers.

Trump and Democrats Issue Competing Infrastructure Plans

Senate Democrats have proposed an infrastructure plan that calls for $1 trillion in federal deficit spending. In detail, the plan calls for:

  • $100 billion for reconstructing roads and bridges;
  • $100 billion to “revitalize Main Street,” that is, subsidies to New Urbanism and affordable housing;
  • $10 billion for TIGER stimulus projects;
  • $110 billion for reconstructing water and sewer;
  • $50 billion for modernizing rail (Amtrak and freight railroad) infrastructure;
  • $130 billion to repair and expand transit;
  • $75 billion for rebuilding public schools;
  • $30 billion to improve airports;
  • $10 billion for ports and waterways;
  • $25 billion to improve communities’ resistance to natural disasters;
  • $100 billion for a next-generation electrical grid;
  • $20 billion for broadband;
  • $20 billion for public lands and tribal infrastructure;
  • $10 billion for VA hospitals;
  • $10 billion for an infrastructure bank;
  • $200 billion for “vital projects” that “think big,” such as building “the world’s fastest trains.”

In response, someone has leaked what is supposedly the Trump administration’s own list of 50 infrastructure priority projects. It includes such boondoggles as a Dallas-Houston passenger rail line, the congestion-inducing Maryland Purple Line, the $14 billion Hudson River tunnels, and completion of the $2.2-billion-per-mile Second Avenue Subway. Except for the Dallas-Houston line, most of the passenger rail projects were already pretty well decided, but they are still foolish investments that will cost a lot and return little to the economy. There are supposedly more than 250 other projects on a priority list, but it isn’t absolutely certain that this list was endorsed by Trump or merely proposed to him.

Update: While I am now certain that the supposed Trump priority list was really “fake”—that is, not really from the administration—it appears that the reason why the Dallas-Houston line was on the list is that it is supposed to be entirely privately financed. While I am skeptical that private funders could profitably build and operate such a line, if they could, it would be appropriate (though unnecessary) to have it on such a priority list.

What most people have been calling Trump’s infrastructure plan calls for giving tax credits to private investors who spend money on these kind of infrastructure projects. This has some virtues over the Democratic proposal of direct federal spending:

  1. While the Democrats take a top-down approach dictating where the money will go, Trump leaves the setting of priorities to state and local governments, which have already approved most of the projects on his top-50 list;
  2. Where Democrats would commit the federal government to spend an arbitrary amount of money whether it needs to be spent or not, Trump lets state and local governments decide how much to spend and how they will pay for it;
  3. Where Democrats would add $1 trillion to the deficit, Trump relies on a tax credit program that will cost the feds no more than $167 billion per trillion in spending (less, obviously, if less than $1 trillion is spent);
  4. Where a lot of the Democrats’ money would go down a rat hole, at least some of federal tax credits that Trump’s plan would issue will be offset by the reduced use of tax-free municipal bonds and taxes paid by companies and workers earning the money.

Typical of central planners, the dollar figures in the Democrats’ plan are completely arbitrary.

  • Why should trains and transit, which carry 1 percent as many passenger miles as roads, get roughly as much money as roads and bridges (and probably more considering much of the $200 billion “vital infrastructure” fund would go for high-speed rail)?
  • Why spend $40 billion expanding transit and no money expanding highways when highway use is growing faster than transit in most places and most years?
  • Why no money for upgrading the air traffic control system (which is on Trump’s top-50 list)? I don’t support the use of tax dollars for such things, but it is a huge oversight from a plan predicated on the idea that federal central planners know the best places to spend your money.
  • Why $110 billion on water and sewer, and not $100 billion or $120 billion? It seems the point of these numbers is to add up to a nice round $1 trillion while divvying up the money to special-interest groups.
  • For that matter, why any at all on water, sewer, and the electrical grid when these should already be adequately funded through user fees?
  • Why is education even on the list when the federal government has never spent more than token amounts of money for school infrastructure?

My complaints about the Trump plan have been:

  1. It’s not really a plan—it’s just one funding tool;
  2. It doesn’t prevent state and local governments from spending the money on completely looney projects such as the aforementioned Dallas–Houston high-speed rail; and
  3. The private-partnership aspect has confused many people into believing that it will only fund projects that can be paid for out of user fees when in fact most projects would require state and local taxpayers to ultimately repay the private contractors out of tax dollars.

While these are valid complaints, the Trump plan is more bottom-up than top-down, as most if not all of the projects on the possibly fake priority list are supported by state and local officials. And while Trump brought a new idea to the table, the Democrats’ plan is the same old borrow-and-spend formula that they have used in the past. This is actually worse than tax-and-spend because taxing and spending doesn’t leave huge debt problems and interest payments for the future.

While we can hope that Trump’s projects will rely more on user fees more than taxes, at the moment the score has to be Trump 1/2, Democrats minus 1.

Privatize Washington’s Metro System

Some members of Congress are considering restructuring DC Metro’s management and oversight. Big reforms are needed given the disastrous service, safety, and financial performance of the system in recent years.

Why not privatize Metro? Countries around the world have been privatizing their transportation infrastructure in order to improve management and efficiency. Privatizing Metro buses would be straightforward, but even privatizing the subway system would not be an unheard of reform.

Hong Kong privatized its subway system in 2000. In a recent study on infrastructure, McKinsey reported:

Hong Kong’s MTR Corporation has defied the odds and delivered significant financial and social benefits: excellent transit, new and vibrant neighborhoods, opportunities for real-estate developers and small businesses, and the conservation of open space. The whole system operates on a self-sustaining basis, without the need for direct taxpayer subsidies.

MTR’s railway system covers 221 kilometers and is used by more than five million people each weekday. It not only performs well—trains run on schedule 99.9 percent of the time—but actually makes a profit: $1.5 billion in 2014. MTR fares are also relatively low compared with those of metro systems in other developed cities. The average fare for an MTR trip in 2014 was less than $1.00, well under base fares in Tokyo (about $1.50), New York ($2.75), and Stockholm (about $4.00).

That sounds pretty darn good. The average fare on the DC Metro is about $3. The on-time record of Metro is unclear, but in technical terms I think “crappy” best describes it. Note that Hong Kong’s 99.9 percent on-time record means that “of the average 5.2 million passenger trips made on the MTR heavy rail and light rail networks on each normal weekday, 5.195 million passengers safely reach their destinations within 5 minutes of their scheduled arrival times.” In 2014, “the system ran for 120 consecutive days without a single delay over eight minutes.” Wow.

That stellar performance induces strong demand for the Hong Kong system, which in turn generates high fare revenues. The ratio of passenger fares to operating costs is a high 185 percent, which means that fares fully cover operating costs and part of capital costs. MTR raises other funds for capital from real estate deals under which it gains from land value increases near stations. The Hong Kong system is profitable and unsubsidized. By contrast, the average ratio of fares to operating costs for U.S. subway systems is just 46 percent, and the systems are heavily subsidized.

The MTR is probably the best-run subway system in the world. The system is an “immaculately clean, well-signposted, cheap, regular, convenient system.” And there’s free Wi-Fi in most stations.

The system is so admired that MTR has been contracted to run systems in other cities. CNN says: “MTR Corporation now operates the London Overground, and two lines of the Beijing Metro, as well as parts of the Shenzhen and Hangzhou Metro systems in China, the Melbourne Metro in Australia and the Stockholm Metro in Sweden … London Overground enhanced its punctuality from 88.4% in 2007 to 96.7% in 2013 after MTR took over its operation for a year.”

Can we get MTR Corporation to expand into Washington? Metro Board Chairman Jack Evans wants a federal takeover of Metro, but how about a private takeover?

Trump’s Trillion-Dollar Infrastructure Plan

On the campaign trail, Donald Trump promised to spend twice as much on infrastructure as whatever Hillary Clinton was proposing, which at the time was $275 billion. Doubling down again in a speech after winning the election, Trump now proposes to spend a trillion dollars on infrastructure over the next ten years.

President Obama had proposed to fix infrastructure with an infrastructure bank, though just where the bank would get its money was never clear (actually, it was perfectly clear: the taxpayers). Trump’s alternative plan is for the private sector, not taxpayers, to spend the money, and to encourage them he proposes to offer tax credits for infrastructure projects. He says this would be “revenue neutral” because the taxes paid by people working on the infrastructure would offset the tax breaks. In short, Trump is proposing tax credits in lieu of an infrastructure bank as a form of economic stimulus.

America’s infrastructure needs are not nearly as serious as Trump thinks. Throwing a trillion dollars at infrastructure, no matter how it is funded, guarantees that a lot will be spent on unnecessary things. As Harvard economist Edward Glaeser recently pointed out in an article that should be required reading for Trump’s transition team, just calling something “infrastructure” doesn’t mean it is worth doing or that it will stimulate economic growth.

Infrastructure more or less falls into three categories, and Trump’s one-size-fits-all plan doesn’t work very well for any of them. First is infrastructure that pays for itself, such as the electrical grid. Private companies and public agencies are already taking care of this kind, so if Trump’s plan applied to them, they would get tax credits for spending money they would have spent anyway. That’s not revenue neutral.

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