» President Obama plans to launch a major jobs initiative next week, and it will likely include an effort to expand spending on infrastructure. But is that the right policy approach?
The Obama Administration’s planned announcement of a jobs stimulus will not be welcomed by the anti-investment Republicans in Congress, but in a country desperate for jobs and with disintegrating infrastructure, it seems wholeheartedly necessary. Throughout his Presidency, Mr. Obama has argued strongly for using federal funds for upgrading the nation’s highways and transit networks, so he seems likely to further his push for federal expenditures on capital programs such as these.
What the proposals likely will not match are the hundreds of billions of dollars for all sorts of mobility-enhancing programs over the next few years the Administration promoted with great fanfare this spring, only have them fall apart as it became clear that the White House had no proposal for actually funding the program and the country became obsessed with a completely wrong-headed effort to cut the deficit. More recently, Mr. Obama’s big dreams of an Eisenhower-like infrastructure effort seem to have collapsed almost entirely: This week’s news that he will back an effort to extend the existing transportation funding program rather than immediately expand it because of a lack of agreement in Congress about where to go from here suggests that he understands the limitations of his bully pulpit.
Is that such a bad thing, especially if states and cities play a more significant role in funding their own transportation programs? Would Washington be doing the most with its limited funds by continuing to invest in infrastructure, or should it focus on direct service provision?
The stimulus bill passed in early 2009 did increase the number of jobs available; while it was not perfect, the current weakness in the economy is more a result of that original legislation being too small than a reflection of poor government decision-making. A new jobs-centered stimulus would likely improve the unemployment situation and expand the economy as a whole.
While the stimulus made a number of major investments in infrastructure possible — virtually all of the nation’s recent spending on intercity rail and the advancement of several major transit capital projects — it did so as transit agencies were suffering tremendously from the consequences of declining local tax receipts. While cities could spend hundreds of millions of dollars on new rail lines paid for mostly by Washington, hiring thousands of construction workers, they were forced to cut back on essential pre-existing transit routes mostly funded by municipal taxes and fire thousands of drivers, maintenance workers, and other service-providing personnel. For the jobs situation, this environment was decidedly mixed. For the transit-using customer, the environment arguably got worse because most of those capital investments will only pay off years from now.
If President Obama is serious about investing in a proposal that not only increases the number of jobs available but produces a valuable benefit for the public, a focus on paying for transit service rather than infrastructure could arguably be the best approach. By ensuring that public transportation agencies are able to provide adequate, day-to-day bus and rail operations, the federal government would be not only guaranteeing fewer job losses in the public sector (local governments have lost about 500,000 jobs since the official end of the recession) but also making it more feasible for the average person to rely on transit, since increasing frequencies makes it far more appealing.
Some might argue that the federal government should not be getting involved with the subsidy of local transit services, since this would set a dangerous precedent in which municipalities are unable to fend for themselves. But imagine a shift in which Washington takes over far more of the costs of operations, and localities assume the obligations for capital expenses. For the average rider, dependent on transit service recession or not, this would be an improvement, since the federal government is able to assume a deficit during economic declines, while local governments are not.
For sure, at the moment big improvements like new rail lines are unlikely to be pursued just about anywhere in the United States without an infusion of new dollars from the feds. With its large receipts from the nationwide gas tax, Washington is able to distribute funds to projects across the country and allow construction to occur far more quickly than would be possible were states and localities to go at it alone. The use of federal funds prevents a fight to the bottom in which a competition over lower and lower taxes intended to attract business from other parts of the country create a less-than-optimal provision of public services. In addition, the concept that the federal government is the primary investor in the funding of roads and transit projects is too engrained for a quick transition to another model.
But for the sake of actually spurring job creation and providing the types of services people need, a transition of federal government spending priorities away from capital projects and towards transit operations could be an important step forward.
55 replies on “Spurring Jobs through Infrastructure?”
When did it become ok to refer to our president as “Mr. Obama?” It seems very recent, because I never recall reading “Mr. Bush”.
Otherwise, really great article as always!
Referring to the president (in the third person) as Mr. So-and-so (or Ms So-and-so should the time come) is perfectly acceptable style; many media outlets (including the New York Times do this as a matter of course). “President Obama” is also acceptable, of course. “Mr. President” is generally only used in the second person–i.e. when addressing the President directly.
Yonah isn’t the sort of blogger which engages in flagrant disrespect and name-calling of public figures, even those he disagrees with.
Should have been a response to Carlos above…
Most classic style, from what I can tell, is to use “President Obama” on first mention and “Mr. Obama” on subsequent mentions in the same article (for space-saving I assume). That’s in highly formal writing; in other writing it’s just “Obama” in subsequent mentions.
If the Federal government takes on operating subsidies, it should be on a mode neutral passenger mile basis, leaving localities to sort out differences in operating costs and assorted benefits/drawbacks of different modes.
However, it does remain a Federal responsibility to fund capital works on intercity transport in general and on oil conserving and oil independent common carrier local transport, and sound policy would involve increasing those grants during a recession or, as at present, Depression, due to the lower macroeconomic opportunity costs of pursuing those capital works during periods when there is substantial spare productive capacity and unemployed labor resources.
I really don’t think it would be a good idea for the federal goverment to take on the role of paying for operating subsidies in that it could lead to ghost rail lines or some real out of control pet protect rail lines that go to meaningless places. The reason why I say this is that right now if a local goverment is going to go though the effort of getting federal funds and is willing to pay the regular operating subsidies to run a rail line then they are most likely going to spend a lot of time to study if the rail line would get the ridership to make it a good idea if they are going to use local funds to pay to operate it.
But I would fully sport the idea of say if a old existing rail line has a old bridge or falling apart catenary or needs a subway tunnel to replace a street level crossing of projects like this getting some type of federal good rail line repair funding. I would though be open to the idea of the fed buying a city bus fleet new buses or rail cars but not outright a check federal subsities.
Paying per passenger mile would seem to address that ~ if nobody goes there, there will be few passenger miles and so most of the operating costs would have to be covered locally.
It would be easy to “cheat” such a system: lots of free passes for students or symbolic fares off-peak, for instance, in routes with low frequency and ever lower usage.
Especially in case of light-rail, the marginal costs of operating a train 10% full or 40% full are slim. So just let all high-school and college students ride the system for free, you will get a boon in ridership, without increasing the costs, and a bigger check from Washington.
It would create a lot of incentives for cities to roll out subscription passes with unlimited travel, because once a service is running, it cost little to double the usage of an otherwise semi-empty vehicle to attract more subsidies.
In fact, here in Europe this is a major issue in countries with central or regional hand-outs for local services. I see it particularly in Belgium, Netherlands and Germany: too many free-loaders attracted to boost squalid services and thus justify their existence.
You make it seem like this is a bad thing – as if overall high mobility due to transit was a bad thing, rather than helping people to be independent of cars. Because it is cheap to run off-peak service once a line already exists, you should encourage the highest ridership during all times. Sure, the incremental income of giving people monthly passes and letting them ride all the time is really low, but the incremental cost of offering service all the time is also low – but the overall mobility outcome is desired.
I think the passenger/mile metric might be bad in some cases because it could encourage really long lines with low ridership. Basically helping transit-sprawl.
This all sounds great but there’s just no way in Hell that the President’s going to get anywhere with the TEAbaggers on this kind of spending. He’s in for one hell of a polical fight on this one.
And it will be a fight he will not win. He will be a 1 term president because of his never-ending spending binge. You can’t spend your way to prosperity… or everyone would do it. And please, stop with the childish name calling. It makes you look bad!
Pretty much have to agree with Ocean Railroader and Buckeyeman, first in principle that local transit ops really needs to be funding by local taxes and that the current political reality, as Buckeyman suggest, is that it will be a victory if they can even pass a two transportation bill that funds at current levels before the whole mess gets shut down at the end of this month.
Maybe Yonah’s next posting should ask. What project should go to the first in line after House/Senate finally settle on a short transportation extension that accomplishes nothing? or maybe, should federal transit funds be redirected to intercity projects – either Amtrak, NEC or those corridors still actively wanting HSR funding? In other words, take a break on first starts if local can’t fund operations.
Otherwise, you will probably see a couple big transit projects in New York City/Los Angelese still move forward but only a select city here or there will get some scraps. So why not focus on city to city connections that will most likely improve our railroad freight network to boot?
Since the local transit funds are to compensate urban areas for the cross-subsidy they provide to outer suburban and rural areas in highway funding, it seems like shifting those funds to intercity transport would increase rather than reduce the subsidy to sprawl development, at a time when we can’t afford the sprawl development that we already have.
I would have to agree in some respects. In other respects, Intercity rail corridors have limited number of stops and you could argue that the sprawl might consolidate around nodes, in most cases around city centers, versus what a beltways/tollways have created. Nor could you argue that transit projects are really limiting sprawl. In most cases, new starts are being built where the sprawl has already happen as in the case of Denver and Salt Lake City.
“Limiting sprawl” was not what I said: increasing the subsidy to sprawl development is what I said.
The highway portion of gas tax funding funds sprawl development, via its cross subsidy from more densely settled neighborhoods with more non-highway funded streets per highway-funded “highway” (which, remember, extends down to “township highways” in unincoporated areas). Shifting the balance of the funds from a transit pool that is biased toward the sources of the highway funds cross subsidy to a pool that is mostly neutral is, as a net effect, increasing the net subsidy to sprawl.
And of course, whether a new transit corridor in an area where sprawl development has occurred reduces or increases sprawl depends on whether it leads to more shared trips and/or more infill development. A new transit corridor that leads to more infill development, more mixed use development and a net reduction in VMT results in less sprawl, whether it is sited in an inner city or the sprawliest of new development.
Creating New Jobs is the primary focus of the CTA Gray Line Proposal – providing new transit options/alternatives is secondary: http://bit.ly/GrayLineInfo
At a total estimated Capital Cost of approx. $200 Million for a new 25 mile Heavy Rail system (about $8 to $10 Million per mile), it is the most “Shovel-Ready” Project in the country, as the trains are already in operation every day.
In two weeks on Monday September 12th, the Regional Transportation Authority and Chicago Department of Transportation will hold the second Public Meeting of the “South Lakefront Corridor Transit Study”:
This Study includes the Gray Line among other Proposals and Ideas.
The Meeting is being held in the Apostolic Church of God’s Banquet Hall on East 63rd St. in Chicago’s South Side Woodlawn neighborhood; this location is directly across the street from the Metra Electric District’s 63rd St./Woodlawn Station: http://g.co/maps/fdp7
I have contacted Metra Administration/Police to seek permission to take small groups to the street and platform levels of the Station to showcase the rapid transit characteristics of the MED infrastructure – and the modifications that would be required for a CTA ‘L’ type operation.
The Gray Line would create thousands of New Jobs in the neighborhoods it passes through – by attracting Transit Oriented Development in proximity of the many new ‘L’ stations; permanent walk-to-in-the-neighborhood jobs, keeping funds earned and spent within the neighborhood – creating the stability and growth needed to attract future Residential and Commercial Development – meaning JOBS.
Your comments are welcome; if you live in the Chicago area, please attend the September 12th CDOT Meeting – I hope to see you there,
I think you misinterpret what “shovel-ready” means. It doesn’t mean cheap; it means all the design work and the environmental clearances have been completed, so that construction can start as soon as someone finds money for it.
I don’t think they would even need a FONSI to install turnstiles. That’s mostly what they would have to do, that and run trains more often.
Isn’t that the church that got the 63rd street el torn down? Where exactly would the new jobs be located? South Shore isn’t exactly blessed with tons of vacant land (Woodlawn has a good amount). I can’t see anyone moving big job creating businesses to these areas for a lot of reasons not related to converting ME to CTA (which probably would hurt rather than help, since the local perception is that ME is FAR FAR safer than the CTA).
The Grey Line isn’t shovel ready in the least – it’s totally half-baked as it is and would cost FAR more to implement than it’s backers claim.
Adirondacker – I think it’s a bit more than installing turnstyles – I think converting ME to CTA would probably require ADA compliance, reconfiguring most of the existing stations to accommodate South Shore and U-Park suburban service and CTA service (in some cases, such as 57th Street, this would require a third platform and relocating most of the tracks, including the CN tracks, etc, according to the “plans” presented by the Grey Line people)- something the backers always forget, that there are already two different fare systems on many platforms and that they are adding a third which requires manned stations, which means every station would have to be rebuilt.
But that sure would provide a lot of jobs… hmmmm…
Note that this is a bit misleading: “Would Washington be doing the most with its limited funds …”
Limited funds would normally imply an external constraint on the ability to fund programs, and Washington faces no such constraint.
“Would Washington being doing the most, given its unwillingness to increase funding, …”
… would be far more accurate.
The ability to print money indefinitely does not imply the non-existence of external financial constraints, unless of course you believe Gideon Gono to be a smart guy.
Neither does the ability to borrow. There are reasonable limits to borrowing, and anyone who says otherwise is delusional.
Yes, you are correct in the first part: the lack of external financial constraints requires that overseas sellers of non-replaceable critical imports accept the currency, as well as the ability to tax and the ability to regulate commercial banking.
All of which is in place for the United States, so the United State is not presented with any external financial constraint at this point in time. Which is contrary to the implication in Yonah’s phrasing.
The borrowing point is a red herring, since unlike state and local governments and, for example, Greece, Spain, Portugal and the other members of the EU Eurozone, the US borrows by political choice rather than due to financial necessity.
There are far more financial constraints than the willingness of sellers of imports to accept our currency.
Our currency is propped up by its own legitimacy. Nobody has a loyalty to the dollar. They have loyalty to their families and their own wealth. They will drop it (and plenty of people already have) if they feel it betray them and their wealth. You may think that inflation isn’t a bad thing, but people…the people that elect presidents, hate it. There is a reason why Mugabe has a security detail thick enough to invade Iraq.
Furthermore, our currency is the worlds premier exchange currency. We are the worlds largest trading nation, and as such, our currency is the most liquid among stable currencies. What happens when people with Argentine Pesos stop using US Dollars as a way of efficiently buying Brazilian Reals? It took two years to stabilize our currency after stagflation…how long would it take to stabilize after that?
The borrowing part most definitely isn’t a red herring. Borrowing costs right now are low…but will they be low when they come due and we haven’t paid them off yet? No, they will be replaced with much higher rates, especially considering the inevitable insolvency of our social welfare systems. Our country might be able to afford more debt right now, but they can’t afford the austerity measures that would result from that double whammy.
Danny, what you’re saying would be true in a normal setting, outside a liquidity trap. I’m pretty sure Bruce agrees; he’s a Keynesian, not an MMTist. Under present conditions – and only under present conditions – countries can borrow without causing inflation, and, if their currencies are sovereign, without raising borrowing costs. Right now the US can borrow money at a zero real rate for the medium term, and has low inflation.
In a future in which the US economy is growing at a healthy rate, this is no longer true. However, in that future, the US doesn’t need to engage in savage austerity. Balanced budgets for a decade coupled with normal inflation and growth are enough to erode the debt-to-GDP ratio to level acceptable to creditors, who by then (but not now) will have other safe options and could demand high interest rates. Nominal GDP ought to grow at least 50% over the decade, eroding the debt ratio by a third; in the 2000s (top of the business cycle to bottom) it grew 47%, and in the 1990s (top to top) it grew 70%.
While I certainly don’t put credence in many Keynesian assumptions, I can at least recognize that Keynesian economics isn’t fringe or whacko economics.
I’m not disputing the Keynesian ideas behind his arguments, I dispute the absolutism that he conveys. Even by strict Keynesian or Monetarist standards, there are still boundaries to both printing money and borrowing…even within liquidity traps and deflationary periods.
While I’m sure there is room for disagreement as to the range that is allowable, but it is ridiculous to talk like there are no constraints at all. Even from a theoretical level there is no room for that…let alone a practical level.
Whether there is a risk of a higher rate of short term demand-pull inflation as a result of a policy depends on how much demand it generates versus how much capacity is available. Whether there is a risk of longer term ongoing demand-pull inflation as a result of a policy depends on how much demand it generates versus how much capacity it generates. If the infrastructure investment being pursued is sound, then there is only a shorter term risk, and under current economic conditions that risk is non-existent for amounts per annum in the frame of discussion.
After all, whether countries can create money or borrow without creating inflation is an issue in the setting of prices.
If by “Keynesian” you mean those who reject Keynes’ General Theory arguments on uncertainty in order to accommodate utility theoretic fantasies as their micro-foundation, no, of course I am not that kind of Keynesian. I’m an Institutionalist, and (as is common though not universal among Institutionalists) a Post Keynesian. Since much of MMT is derived from a sound description of the operation of monetary institutions, I of course accept much of MMT, though I argue that it is government regulation on the operations of commercial banks in addition to the taxation authority which underpins domestic demand for a fiat reserve currency and that most MMT’s are a bit one-sided in assessing the advantages and disadvantages of currency pegging versus floating exchange rates.
To make a point, the Swiss government, which is in a more extreme version of the US situation in currency terms, just announced that they will print as much money as necessary to bring the value of the Swiss franc down.
“Strong currency” or “hard currency” isn’t desirable for a country most of the time. If people really start to flee the currency, we get an instant export boom.
Remember that since over 90% of foreign exchange transactions are in the capital account, not the current account, “people” here are the individually wealth and large corporations.
The US$ is not at present at a threat to melt down in the face of a decline in value of the US$, because such a large proportion of US obligations are denominated in US$, and so there is no positive feedback mechanism where ever larger amounts of currency must be traded to meet an obligation fixed in overseas currency. However, given our oil dependence, we are at threat of a substantial contractionary impulse from a drop of the US$ to, say, 40 euro cents, given that oil, while priced in dollars, is primarily priced against overseas flexprice markets. The Federal government has ample capacity over the short and medium term to offset that with public works and direct employment, but the public works must be directed to reducing the oil dependency, if the exposure to imported recession is to be reduced over the long term.
In the current economic situation, the reference to inflation is a red herring.
And “Our currency is propped up by its own legitimacy.” ignores the fact that fiat currency is required to pay taxes and government requires dollars to be used by commercial banks when making official settlements through the reserve bank.
If we had a large stock of public debt owed in another currency (Weimer Germany, Brazil in the 1970’s hyperinflation, Argentina in the turn of the century hyperinflation, Zimbabwe today) or in a real asset (the cotton bonds of the US Confederacy in their hyperinflation), then the above would not necessarily be enough to maintain all functions of money. But with all but a tiny percentage of Treasury obligations denominated in US dollars, taxes and bank requirements for reserves suffice to provide a demand certain to obtain US dollars.
If job creation is the goal then give the money to laid off transit workers, who will immediately spend it to support their families.
Otherwise, give it to large rail projects that will support a battery of agency higher-ups, lawyers, and engineering firms long before any money trickles down to a guy holding a shovel.
Seattle is a great case in point. The feds have been poring billions into local transit projects from Sound Transit, with tunnels at $600 million a mile, while the local bus agencies have been cannibalizing service to the tune of 20% or more because sales tax receipts have tanked. A lot of these mega-projects won’t be used for years, and not at capacity for decades, if ever.
If a region wants to gold plate something, let them do it to themselves. FTA $$ for big shiny buses and trains, with all the bells and whistles is fine, but not at the expense of having transit service ‘eat their own’ after delivery takes place.
You could also look at it from this prespective, a big chunk of stimulus money went to states who used it in turn to prop up their budgets for two years, maybe three at best. The plus side was number of layoffs where minimal until this year. However, when the funds were used up the state and local labor forces have taken a beaten. I wouldn’t expect any different if fed started funding transit ops. Yes, money would go to immediate use but could be gone as soon as the next election cycle came around. Federal capital investments goes towards fixed assets that give locals value for ten, twenty yrs to several decades out. Some years have been better, some years worse but what gets built is around for a while.
Now that I think about it, just switching the accounts around so that the feds pay what they now pay in capital costs to operating cost accounts and having states and cities make up the infrastructure spending is a great idea, since it would relieve capital projects of the obligation to abide by Buy America procurement guidelines. In other words, we could get transit at market costs rather than inflated Buy America costs, which the Obama admin isn’t giving any waivers for anymore, even on cost grounds.
Then again, this could backfire if local pols looking to boost their reelection prospects turn Buy America into, say, Buy Los Angeles.
Don’t worry, its already happening in a lot of cities. My new employer is loving the Buy San Fran mentality that has taken over that city. Throw in the fact that we had to fight just to qualify for s Buy Richmond bid letting even though our company has a materials facility within its city limits. We are truly becoming our worst own enemies
Do you work for a transit manufacturer? If so, do you mind me asking for details? Or if you can’t say so in public, maybe email me? email@example.com
Nope, a marine contractor whose employer from time to time has worked on Port of San Fran projects, etc. My Transit/Infrastructure interest goes back to my civil engineering degree/college days.
Natural phenomenon when the federal government stops functioning (which, incidentally, is quite explictly the Republican goal) — people start thinking of themselves as members of a much more local unit.
Eventual result is the collapse of the central government. At this point, I don’t even think that’s a bad thing, but then I live in one of the states which would probably do OK (NY). People from California may feel similarly; people from Texas would probably feel abandoned.
@Stephen, one problem with feds switching from capital accounts to direct operations assistance is what the FTA’s role now becomes.
Just as FTA, by virtue of being the funding bursar, has become the monopsony buyer of transit capital and infrastructure, it will now become the de facto management-side bargaining agent in labor agreements.
In other words, every transit system in the U.S. will be run like San Francisco Muni.
Transitioning FTA funding from capital projects to operations assistance could be done on a gradual basis. It wouldn’t be fair to cancel expected New Starts funding, nor would it be wise to suddenly prop up inefficient transit systems to prolong their agony.
But it does offer a way to strike a balance. Consider that New Start full funding grant agreements usually require a before and after study at two years of operation. There doesn’t seem to be any penalty for grossly overstating your case to get some cash. If results were tied to projections, and gave more points for getting it right for operational grants, I suspect local managers would do a much better job.
Also systems that offer services for reasonable cost per rider, or rider miles, or some other metric could be rewarded to do more. Again, more FTA ‘sticks and carrots’ in the incentive bag.
As things currently stand, FTA offers huge incentives to go out and spend a lot of cash, then seem ambivalent to the outcome.
Again, I point to Seattle. Light rail trips costing $14.00 a rider to the airport (incl. debt/depr.) replaced an express bus that did it faster for under $4.00 a rider. Is that progress?
It was my understanding that federal dollars already make up a modest chunk of operational funding for mass transit agencies, though I’ve always had trouble tracking down those sorts of details.
I’d probably only support the idea of expanding federal operational funding if the source of funding was very stable. Here in Minnesota, we’ve watched transit appropriations make some fairly wild swings over the years. If the question of increasing funding has to come up in Congress every two years or so, it will just become a constant battle to keep those dollars flowing.
I think a decent middle way would be to invest in the simple infrastructure of neighborhood bus stops. There are something like 14,000 bus stops in the Twin Cities region (according to the data feed to Google Transit). The federal government is paying us $450 million or so to build a light-rail line right now—which is great—but if that same amount of money were to be spread out across the system, it could pay for really fantastic stuff everywhere (and if someone could be bothered to do some stop consolidation, the stuff could be twice as good).
So, rather than building commuter rail and light rail out to the fringes, I’d rather see more investment in the relatively unsung core networks which carry the majority of passengers anyway. It could even spur some TOD along those routes (I think it’s pretty dumb to wait until a streetcar, LRT, or BRT line comes along before considering TOD, so if this sort of thing could give planners the dope-slap they need to just do it anyway, it’d be more than worthwhile).
The substantial problem with ordinary city bus routes in terms of attracting TOD is the flexibility of bus routing. A route that has received substantial corridor capital investment is less likely to be shifted as someone’s brilliant idea how to “fix everything” five to ten years down the track. The other problem is, of course, the perception that ordinary city buses are more heavily weighted toward the bottom of the income ladder than LRT or BRT.
I’m always amazed at how little the bus routing has changed over the years around here. For the most part, buses still go down the same roads as the streetcars did 60 years ago—it’s just that many routes are now twice as long (extending farther into the suburbs) and only run at a fraction of the old frequencies. In cases where routes have changed, the old stops often didn’t really go away—they usually just began to be served by new routes.
But since the mode share is lower, and the mode share among those with the capacity to buy residential properties ~ including urban condos ~ rather than rent is even lower, those routes tend to be invisible to those whom the infill development is being marketed to.
Put in a “BRT” with actual street furniture supporting it, or a trolleybus route, and the route becomes visible, as well as appealing to a larger share of the target residential property market. Make it a streetcar or rapid streetcar or “light rail” or mass transit, and that share goes up even higher.
I don’t think the feds should be paying for operation costs of transportation. There are more important reasons for it not to happen, the mainly one being to avoid cities up-fronting money to pet capital projects, then sending the operation bill to Washington, DC.
Moreover, it would create a race-to-the-bottom in regard of fares: there would be continued pressure for the feds to take an ever-increasing share of operation costs, as a form to keeps fares low. All sorts of comparisons of fares between cities would emerge, and blame-Washington-because-your-subway-costs-more-than-thy-neighbor-subway would become commonplace.
As the system stands now, cities have a vested interest in selecting projects that make at least some sense with their 20% matching (should be at least near 35% though) of federal funds and the obligation to pay for the system.
We can even draw a parallel: having the feds pay for operation costs would be like social housing programs paying for utilities’ bills while the family comes up with money for construction (= build the largest possible house because someone else is paying the heating).
If the intention is to promote jobs, better to invest heavily in bringing existing infrastructure to a good state-of-repair, for instance.
Marcella: If I offered you a huge grant, with you paying only 20 cents on the dollar, what kind of home would you likely build? Probably one much larger and grander than if you had to borrow all the money yourself.
Now that your house is built, you’re faced with huge utility bills and property taxes that you can’t afford.
That’s where many of our transit agencies have ended up with all the FREE money for grand projects from the FTA.
The four bus agencies in the Puget Sound are drastically cutting services, while our FTA poster child agency gleefully throws billions down tunnel holes with abandonment.
That’s what gives you rail systems that cost $23.38 and $17.35 per rider for new Commuter Rail and Light Rail lines. Adding over $13 bucks of cost over displaced bus trips for every rider will bankrupt any system – which is what Seattle is experiencing. Meanwhile the 3 TBM’s are scheduled to keep grinding away for at least another 10 years, with the FTA cheering them on.
Just out of curiosity what amortization period are you using when calculating your per rider costs? Should we assume you are using current year ridership figures? How do you expect the per rider costs to change over time?
@Bob: I used Sound Transit’s 2010 Budget for all the numbers (soundtransit.org)
ie: Central Link Light Rail was $48.1 mil for ops and $73.0 mil for ‘Depreciation and amortization’ for a total of $121.2 mil for actual ridership of 6.989 mil riders, or $17.35 each. Same calculations for Commuter Rail.
They don’t footnote how much debt or depreciation schedules are, but I’m pretty sure they follow FTA guidelines on stuff like that.
If you ignore debt and depreciation than the cost gets down to about $7 per rider. But that’s foolish accounting as the debt has to be repaid and everything but the ROW eventually wears out or gets upgraded.
Thank you Wad for clearing that up for me. I can see where the competition for the nearly free grants only let the cream rise to the top – thus promoting the cancellation of $4 dollar rides to an airport for $17 dollar rides. The only thing that hasn’t risen through this FTA debacle is the farebox recovery, which is still south of a buck a ride.
FTA’s next venture is a $2 bil. – 3 mile tunnel with two more stops in just 5 more years of digging.
Woo Hoo. (This is what the FTA considers ‘highly rated’)
The FTA’s ratings were always wonky, but the well-reviewed route in Seattle was always, always, always University to Downtown. It’s going to do a lot better than you expect. Hell, there are famous routes which only HAVE two stops which are among the most successful routes in the world.
@Mike, there’s no such thing as free FTA money.
For starters, FTA doesn’t throw out bags of money from a sack as if it were Santa Claus during a parade. It always receives more applications than it can possibly fund, and it must turn away or partially fund many projects.
The applicant also has to have skin in the game. Major investment studies are not free. Agencies have to spend time and money — routinely in the millions of dollars — just to think about what to do and how to get it. You’re spending money on deciding what to do next, and it’s money that can’t be recovered.
This hurdle alone eliminates most of the unworthy contenders. A cash-starved transit system doesn’t need to spend 7 figures or more to know that no-build is as good as it gets for them.
For those agencies that can afford the studies and put in for a funding grant agreement, that documentation is a very expensive application fee. It then has to be evaluated by the FTA according to the FTA’s prerogatives at the time. There’s still a chance that there are projects with better cost and ridership metrics, there’s a chance your project won’t meet the threshold, or there’s even the probability that the evaluation process gets rearranged and a sure-fire project is suddenly now fallen out of favor.
Oh, and let’s not forget where some of that FTA money comes from: you and me.
Any new large-scale spending program is pretty much dead on arrival, regardless of its merits, and Obama’s speeches telling Republicans to “put country before party” are only making matters worse. Didn’t Democrats rightfully get livid when W said that those who disagreed with him were unpatriotic?
With corporations holding, but not spending, plenty of cash, why not work on ways to get this money put to use investing in infrastructure and creating jobs?
You mean like prosecuting the bankers?
Corporations are holding cash for two reasons:
(1) because final demand is going nowhere, so they don’t see a good reason to expand. This calls for Keynesian deficit spending by the “spender of last resort”, the government; or for transfers from the rich and corporations (who don’t spend) to the poor and bankrupt (who spend every dollar they get immediately)
(2) because they don’t trust that they can get loans if they need them, so they need cash to cover any trouble. This is because the banking system is broken. Broken broken broken. It can’t be fixed without removing from power the *criminals* running it. For more on this, see Naked Capitalism.
Oddly, only a few Democrats seem interested in prosecuting the criminal bankers — and NO Republicans are interested. And the Democrats don’t include Obama. And they don’t include more than a couple of Senators. (They do include NY AG Eric Schneiderman, thank God.)
We’re kind of screwed. We need someone like FDR at the top, instead we have Obama and various “bipartisanship” obsessed “Democrats”, and a bunch of ready-to-destroy-the-country Republicans. (I’m not saying all Republicans are ready to destroy the country, I’m saying *the ones running Congress are*. I wish there were more like Ray LaHood.)
The USA would have more money to spend on internal infrastructure such as transport, if it didn’t spend billions of dollars each year bankrolling criminal states/entities overseas, e.g. in the Middle East.
Since spending by the USG is not finance constrained at the present point in time, the spending on the reckless foreign adventures ~ as counter-productive as they may ~ does not limit how much we can spend on infrastructure … at least, not up to several multiples of any amounts that might conceivably be proposed by this White House, never mind getting through the current House of Representatives (though with more incumbents in swing districts, the Republican House majority is certain to be trimmed and could be lost in the same anti-incumbent sentiment that puts the current administration at risk of losing in 2012).