Friday, August 28, 2015

The future of our regional transit - Part 4: Money

Money, of course, is at the core of cutting the Baltimore area Red Line. So in this article about the future of transit in the region, we have to talk about money. The MDOT budget and the Transportation Trust Fund are very complex matters, so we will just focus on two issues: the roads versus transit split in the capital budget and the three billion dollar price tag of this particular transit project.  Or the official reasons for the cancellation of the Red Line:  "We simply can't afford it" and "it is not fair to spend 50% on transit with so much of the revenue coming from cars and driving".

Baltimore is not alone with those questions. Bostonians may be asking themselves the same after their Green Line extension project was three days ago announced to cost a newly estimated $3 billion as well. Their line is only 4.3 miles long, adds only six stations, has no tunnel segment just a new maintenance facility, a spur and some bridges, so it is actually much more expensive per mile than the 14 miles scrapped in Baltimore.
Boston Green Line expansion: 4.3 miles for $3 billion?

Are these new rail transit lines simply not affordable, a bad investment and all around boondoggles of rail-happy romanticists who just can't get over their hang-up with streetcars when with the same money one could build roads all across Maryland?

Or is the opposite true, that we can't afford not to invest in better transit? Are expensive intensive rail investments even including tunnel long-term strategies of maintaining mobility in the region's heart?

Different people will answer this in different ways, obviously there isn't one answer that applies to all transit systems and there may not even be just one right answer for the Red Line.

The way the two issues of affordability and fairness are usually posed, though, they are too open ended to be answered, there are too many variables to have a solution. At a minimum we must define what is "affordable" and what is "fair". For that it is necessary to put the expense in the context of
  • the overall available transportation budget
  • the annual revenues and their sources
  • the annual capital and operating expenses
  • other obligations of the agency (in the case of Maryland and Massachusetts the state transportation agency is  multi-modal and in charge of metropolitan transit as well as roads and airports)
  • the transportation needs and alternatives to transit to meet the needs
  • external costs and benefits that don't show up in a transportation agency budget but in the overall health of a region
What can we afford?
From the report of the 2012 blue ribbon panel on
transportation funding in Marylanmd

With  an annual operations budget of about $700 million and estimated annual revenues of $4.9 billion (MDOT) an expense of $3 billion (RED Line) is comparable to a household with an annual income of  $60,000 buying a $37,000 Chevrolet Impala. Doesn't seem overly frivolous, does it?

Chances are good that a car dealer or a bank would easily provide a credit for that expense because the expense can be divided into manageable chunks over several years (the car payments). And indeed, the feds DID buy into the deal and private companies had expressed a great amount of interested in the possible public private partnership as well. With about one billion coming from federal and local sources and another chunk coming from private equity, the State exposure would have been much lower than the full three billion, even if cost would have gone up further.

With the 2013 transportation investment bill, Maryland had increased its annual transportation revenue by about $660 million annually with the sole purpose to finance the large "New Starts" projects on its plate and still properly face the large challenge of maintaining the existing transportation network.

On the other hand, it is true that the additional rail line would have create additional annual operation costs for a long time and also true, transit doesn't recover its full cost at the fare box anywhere in the world. (In Hongkong, where the transit agency makes a profit, it is due to its large real estate holdings). For the investment to be consiered effective, there would have to be large external benefits, i.e. benefits that don't show up in the transportation budget. Which gets us to the second question:

What is fair?

A look at the revenues clearly shows that the bulk of them comes from the motoring public. So how can it be fair to spend about half the revenues on transit? (per the capital budget inherited by the current administration). This looks like a reasonable question on the face of it, until one realizes that fairness in transportation cannot mean spreading the expenses around until each County in the state gets the same amount of money per square mile, or per mile of roadway or per resident. Such an approach makes as little sense as giving your one year old the same allowance as your high-schooler, no matter their age, needs or contributions. But that is exactly what happened. The transit share was dropped to 35% so roads can be built in every corner of the State.
·         More than 20% of registered vehicles in Maryland are registered to households in Baltimore City or Baltimore County.
·         More than 20% of Vehicle Miles Traveled in Maryland in 2013 was attributed to Baltimore City or Baltimore County.
·         Roughly 25% of the population of Maryland resides in Baltimore City or Baltimore County.
·         Roughly 26% of the jobs in Maryland are located in Baltimore City or Baltimore County.
·         Roughly 23% of the total income in Maryland was reported by residents of Baltimore City and Baltimore County. (CMTA)
Money allocation cannot ignore where the bulk of the economic output occurs, where the transportation needs are the largest and where the jobs and the growth are located. And that happens to be the Baltimore and Washington metro areas. Most transportation experts would argue that mobility in the economic heart of the region cannot be maintained with roadways alone. Even the beltway around Baltimore has reached the limit when it comes to adding lanes and it is still congested. Inside the beltway opportunities for added roadway capacity is mostly entirely absent unless one would want to return to the failed policies of large scale demolition and urban expressways which have wreaked havoc in so many cities during the seventies when those policies were popular.

Even car-centric cities and regions such as Houston, Phoenix, San Diego and Denver have turned to rail transit as the mobility solution for better air, smaller footprint, more social justice and better, more vibrant and economically successful cities.
"The governor is shifting the funds to more highway projects. Building more roads in a congested region like Metropolitan Baltimore and the Washington, D.C., suburbs is not a sustainable plan. Maryland needs more mass transit, not more roads." Pam Beidle, chairwoman of the Sub-Committee for Motor Vehicle and Transportation
As long as transit is funded in cities and towns across Maryland and as long as the maintenance and upkeep of the roads and bridges is not neglected, the several hundred million dollar that were set aside in the annual State expenses to cover the annual capital costs of the Red and Purple Line projects were fair expenses. They were quite in line with the economic product generated in these areas and with the revenues generated in the areas based on motor vehicles, residents and miles traveled without short-changing other regions.

In conclusion, the seemingly shocking sticker price of the $3 billion Red Line and the $2.5 billion Purple Line would not have sunk the MDOT budget. You don't have to take my word for it, it was the federal government that approved Maryland's funding scheme. Base on thorough review the feds offered their own about 30% share to these plans. It would not have done so with hundreds of applications to choose from, if it were convinced that the financing of these projects was nothing but a house of cards.

Bottom line: Once the context of the available budget context and some criteria are applied, "affordability" takes on a very different meaning. Same for "fairness": Considering where wealth is created in this State, it makes little sense to build big roads in places where those will do very little for value creation and nothing to make the poor any better off.

Klaus Philipsen, FAIA

Governors Blue Ribbon Panel on Maryland Transportation Funding
Brief Economic Facts, Maryland

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