A Word on Revenue Projections

Historic Revenues through January 2013

Historic Revenues through January 2013

An unfortunate consequence of the relentless simplification in campaigns is the reduction of revenue projections to a single number. Metro had to settle on a representative figure – 17% cuts – to produce a tangible example of what the cuts would look like, which left it open to some unseemly Times editorial board nitpicking and a trivial update from Metro.

In reality, the revenue projections which spawn these service estimates originate with King County’s Office of Economic and Financial Analysis, and like all projections they actually reflect a range of possibilities. According to County Budget Director Dwight Dively, any revenue projection from that office is “at the 65% confidence level. In other words, there is a 65% probability that actual revenue will be at least as much as is forecast.  This was a policy adopted by the Forecast Council.”

This isn’t a pro- or anti-Prop. 1 point.  Metro’s priority is to preserve current service level, so it’s entirely reasonable (and responsible) that King County would err on the side of caution. In any case, the chances are quite high that revenue will either exceed or fall short of projections, that’s the nature of projections. If Prop 1 fails, the cuts might be above or below 17%, with more weight on the low side. Similarly, if the measure passes Metro might come up a little bit short, but it’s twice as likely that there is some scope to build up a rainy day fund, make long-deferred capital investments to reduce operating costs, or add service on the most overcrowded routes. This is a good “problem” to have.

In any case, this isn’t about “lies” and “promises.” Any agency with highly variable revenues can’t make precise predictions about how much it will be able to spend. The only way to avoid this uncertainty is to join Metro’s lobbying for predictable revenue sources like Motor Vehicle Excise Tax and the Vehicle License Fee that is on the ballot next week.

Comments

  1. lazarus says

    “the chances are quite high that revenue will either exceed or fall short of projections.”

    Yes, in fact I would say that the above is a true statement with almost 100% certainty.

  2. Anandakos says

    IF Proposition 1 fails, I would hope that Metro takes a voter-oriented, democratic approach to the cuts. That can be accomplished at a precinct by precinct basis. Here’s how to do it:

    Identify the precincts through which each route passes or for precincts through which none does, attach that precinct to the route which passes closest to it. Then analyze each route to find the closest precinct to the largest trip attractor which that route serves which has a majority “No” vote and which has no precinct in the direction away from the primary attractor which has a majority “Yes” vote.

    As an example let’s say that Route 168 enters a precinct which votes “No” at 132nd SE and SE 260th and there is no precinct through which it passes toward Maple Valley which voted majority “Yes”. The route would be a candidate for truncation at the first nearest convenient turnback opportunity on its route.

    Once the exercise to identify truncation segments is complete, begin with the routes which have the lowest ridership per bus hour and truncate them at the identified point until the necessary savings have been made. If truncating all such tails does not meet the requirements — and it may not; many routes which pass through transit-hostile territory already are little used and therefore infrequently operated — shift the focus back to standard transit cutting analyses. Choose routes which serve the remaining transit-supportive core of the county with the poorest ridership per bus hour and cut mid-day and evening service frequency to double the headways provided.

    If doing that doesn’t garner enough hours, start trimming the span of service on those same routes where there are feasible mile-walk alternatives.

    Such a plan has the undeniable advantage that it removes “buses that run empty” from the view of those who resent it so much.

    • asdf says

      The problem with that approach is that people don’t live in a vacuum. Running a bus through neighborhood X is not just about people who live in neighborhood X, it’s about anyone visiting neighborhood X, regardless of where that person is coming from.

    • mic says

      Somebody’s a little cranky today.
      A punitive service guideline will backfire on you, as voters tend to think locally. In your world, an area with crappy service today, will not likely vote for higher taxes, therefore will get even less service.
      Several voting cycles, and you might as well let them quit paying taxes into Metro all together.
      Oh, that wasn’t part of the plan?

      • Anandakos says

        Maybe that should be part of the plan; seriously. I think John’s idea to separate King County into several local transit service areas with ST providing the intercity links is a good idea. I wouldn’t make it just a single city per agency. It seems to me that there are three “economic units” in the county: “Seattle”, which comprises the Municipality, Shoreline, Lake Forest Park, Tukwila, Sea-Tac and Burien.

        The Eastside is everything from Kenmore down to Renton, and South King County is the group of cities south of the two others.

        The people in most of South King County really don’t want a lot of local service. Yes, they want Sounder and some RapidRides to get to and from work, but there are no urban places down there where people want to collect during the day. It’s office parks and SFH.

        The Eastside is similar, but it does have a “real” urban core in Bellevue; it’s transit should be focused on downtown Bellevue and let Link and ST Expresses deliver people to the Seattle CBD, UW and Boeing.

        By dividing things up this way (which is essentially what ST does, though the boundaries are a little different, recognizing the much closer integration of the first southern tier of suburbs with Seattle. Each of those transit areas could choose how much to tax itself for transit, and the Eastside and SKC would not be constantly angry about all the service in Seattle.

        Of course the legistlature would have to give each of the areas freedom to set its own tax rates, and ideally allow them whatever means of taxation they wish to impose on themselves. That’s democracy; what is happening now is that people with fundamentally different economic interests are smooshed together in one very large county and are moving rapidly toward mutual hatred.

        Heck, it might even be best to just break up King County along the lines mentioned above.

      • mic says

        Interesting discussion: Just for grins, I may take a stab at trying to cost out S.King County, using your funding scenerio.
        A couple of givens:
        ST remains divided, funded and planned as is, with maybe some additions to STEX service.(like rerouting FW to KTC then Seattle or BTC)
        SKC (S.King sub area) – Core – bi-directional routes still get split 50/50 between sub areas.
        Peak Express routes may charge a premium and be fully funded by the sub area they begin in.
        Local routes and sub contracted services would not be subject to current union rules of X hours of sub contracted services allowed. (limits on DART, Shuttles to Link etc)
        I don’t have a clue how this thought exercise will come out, but it interests the heck out of me to do it, throw it out there, and have all the darts thrown at it.
        Maybe someone wants to do the EKC sub area to see how they fare tax wise.
        If someone else does NKC sub, then the 3 should add up to the current 2014 budget – otherwise were just kidding ourselves.

      • Anandakos says

        mic,

        What I suggested can’t work with the current tax restrictions, unless the Seattle’s and other cities’ councils of the “Seattle” transit zone vote to use property tax revenues to fund operation of their system. If the new system is limited by the legislature to the current taxing authority (basically, sales tax and the $60 MVET) and the councils don’t divert monies from the general fund the “Seattle” system would have to reduce operations dramatically. There is no denying that the Municipality gets much more in service hours than it pays for in the current Metro system. The suburbs aren’t being stupid when they say it’s not equal.

        Of course, if it were equal there would lots more “buses running around empty”. Trying to make a county-wide system with which balances efficient service patterns with equitable tax collections is impossible when the service area has such disparate layouts. It’s a Catch-22: either the city is starved for service or enormous waste occurs in the ‘burbs. It sort of works for ST because long distance express service is really expensive to provide, but also attracts a decent all-day ridership. “Coverage” service in low-density areas is a formula for inefficient transit, but it has to happen to achieve equity in expenditure.

        So, the legislature would have to allow the “Seattle” system to tax itself in new ways. Even though the sales taxes within its boundaries are huge, the ridership is even more so; that’s why Seattle gets nearly twice the service hours that it pays for.

        I get that what I’m proposing is very blue-sky; but transit, like public assistance, seems to be a topic on which “Good fences make good neighbors.” Everything government does isn’t like that, but they are.

      • mic says

        I understand you point, and agree with it. The legislative shackles would have to be freed, to allow Seattle voters to tax themselves (SDOT) in which ever ways the Seattle City Council deems most appropriate.
        At first blush, I ‘m somewhat surprised that Seattle really pays a lot more than they are given credit for. I took ST’s 2014 financial plan through 2023 as a good estimate of future revenue projections per their boundaries of King Co..
        When I deducted fare revenue from local taxes, I got West Sub Area (Seattle) generating 43% of the revenue and using 50% of the Ops Budget (not too far apart)
        East Sub Area generated 35% of the tax revenue, but only got 21% of the Ops budget (after $16m in fares). South Sub generated 22% of taxes ($116 local on a $439 total metro Op budget), offset by $24m in fares for a net of 29% of the Ops budget consumed – so South is getting a really good deal, Seattle too, and East could have a legitimate complaint against both of them.
        Of course all this is back of the envelope, knowing ST and MT district boundaries aren’t exactly the same, but it’s an interesting way to look at things.
        Splitting Metro accomplishes a couple of key things.
        1. Seattle can carry the day in progressive transit votes without catering to the burbs.
        2. If South, for example had to eat all of the costs on a route to Seattle, they may decide to truncate it at RBS or Angle lake to save operating cost. Right now, who cares.
        3. Local service would be better coordinated with local jurisdictions having much more ‘skin in the game’ as to outcome, and probably fare just as well on grant and FTA funding. They (SKC & EKC) would each be as large an MBTA as PT and CT, so the clout would be there.

      • mic says

        meant to say ‘added fare revenue’, based on just percentages,
        A more accurate way would be route by route, but only have 2010 data for that. I’d hope ORCA data could be available if this little exercise every gets legs.

      • Anandakos says

        @mic,

        Thanks for the specific amounts you provided in the ratio of tax revenues to service hours. I was wrong to say twice; it’s more like a sixth more, which is not that bad at all. It makes it somewhat more feasible to imagine a “north sub-area” agency standing alone.

        I very much like your list of three “accomplishments” (good word). They’re what I was trying to get at by saying “good fences make good neighbors”. Thank you for specifying them so well.

        Our society is fragmenting at a sobering rate; people will vote for local improvements about as frequently as ever. But region-wide improvements are getting harder and harder to pass; “that guy over there” might be benefited more than I am” seems to be the wide-scale thought.

        The folks in Bellevue might agree to tax themselves for better local service if they don’t think the money will “leak away” into Seattle.

      • mic says

        If Prop 1 passes, then this is a mute discussion for the time being. Otherwise, when King Co Council starts scratching their heads (being nice today), for a plausible Plan B, it would be good to do some refinement of your ideas, and put some ‘giggle proof’ numbers on them.
        Hopefully, none of this is needed, but finding better funding, more efficiencies, better accountability, better integration with Link, and a host of other goodness will and should be on the table for discussion.
        I’ve mostly burned all my bridges at STB with the leadership, but Martin knows I’ve held this opinion since the recession hit. Metro did audits, blue ribbon panels, focus groups, and raided every capital account before slowing Rapid Ride rollout, or reducing more unproductive service patterns. Most other agencies believed the forecasts and cut service to sustainable levels in ’09 or ’10. We’re likely just starting down that road in ’14 and ’15 – a full five years late.
        Let’s chat after the election and some dust settles.

      • Anandakos says

        @mic,

        Totally agree with your hope for passage of P1. Only an hour and a half now.

  3. Sam says

    Maybe I don’t understand this post. Is Martin arguing that government agencies should receive the exact same level of revenue during a depression as they do during prosperity?

    • Roanoke Rogue says

      He’s saying for a set amount of routes and runs therein, their costs are fairly constant, but non-farebox income (but probably there, too) varies a lot: when property values drop as they have in The Great Recession, so does the tax-base.

    • Chazzer says

      No. It is about understanding and accepting that variability between projections and actual revenues recieved is a natural consequence of having a highly variable funding source.

      If you want more predictability, then Metro needs a more predictable funding source. If you want Metro’s funding to be as varialbe as the economy, then accept that Metro’s forecasts will be about as accurate as the weatherman’s, and don’t go looking for malfeasance that does not exist.

      • says

        Motor vehicle motor excise taxes (MVET) are not rock-solid either. Remember that a big portion of the Seattle Monorail Project’s shortfall was due to the MVET not bringing in the revenues projected.

        Every region of the US has transit agencies with funding gaps, which relied on a wide variety of funding sources that all dropped back during the recession of 2009. Portland’s TriMet is funded primarily through payroll taxes; they also had bus service cuts during the recession.

        The point: No tax source is 100% protected from drops during recessions, but a diversified basket of revenue sources will be more reliable than a single source. Therefore Prop 1 is a move in the right direction as Metro would have access to sales tax & car tab fees. Adding MVET, property tax & payroll tax streams would be even better.

    • Sam says

      I’m still confused. What’s wrong with the government making do with a less when taxpayers have to make do with less?

      • David Lawson says

        Unfortunately, the time when taxpayers have to make do with less (times of high unemployment) is often the time when they have the greatest need for government services. This is somewhat less true for transit because ridership is tied to employment to a degree, but it’s not helpful to either the unemployed or the economy as a whole to impose severe reductions in mobility every time there is a GDP hiccup. Unfortunately truly wise fiscal management rarely happens anywhere, whether in the private or public sectors. But a truly well-legislated and well-managed agency would have the following mechanisms to iron out economic volatility:

        1) A diversified revenue stream. Lots of small dissimilar taxes will produce better results than one massive one like Metro’s sales tax. Unfortunately the state legislature has no interest in allowing Metro to assemble a more logical set of revenue sources.

        2) An automatic formula for accumulating and then spending a rainy-day fund based on a combination of economic conditions and actual receipts.

        3) A capital budget that spreads out major capital expenditures evenly to the extent possible. (Unfortunately this is sometimes in tension with reducing cost — it’s more expensive, for example, to run 12 small subfleets of buses with one replaced each year than 2 bigger subfleets each replaced every 6 years).

      • William Aitken says

        point 3 can be addressed somewhat by taking delivery on large orders (and spreading their costs) across multiple years

        BTW, I’m confused by your example it sounds like you are saying that having a more homogeneous fleet makes it possible to replace buses twice as frequently. Did you really mean something like “2 bigger subfleets one of which is replaced every 6 years”?

      • Martin H. Duke says

        It’s a coherent position, if a wrong one, to think government should make do with less in that circumstance. But that requires acknowledging that they’re making do with less, rather than conflating tax rates with tax receipts and then blaming Metro or ST for lying to the public.

        The No on Prop 1 rhetoric is like that, saying Metro is coming back for “more taxes” when in fact it’s seeking to recover revenue it never received. It’s using ambiguity in the language to assign a moral failing where none exists.

      • RossB says

        Doing so can also cripple an economy (cut government spending during a recession and you will get a depression).

      • David Lawson says

        William, sorry, bad wording on my part. What you said. 2 subfleets, each replaced every 12 years, so you are replacing one every 6 years.

      • William Aitken says

        @RossB: But in environment where you have to balance the budget, not cutting spending when revenues are down eventually means you have to increased revenues, i.e. taxes, which is also a good way to tank the economy To a first order approximation, for an entity like King County, or even the State of Washington, which is legally required to balance its budget no matter what, there’s a zero sum game being played.

  4. John Bailo says

    I am more convinced that the problem is the over extension of Metro as an agency.

    There is no way they can make good decisions within budget with so many factors.

    Seattle needs to form it’s own MTA — and budget.

    Other municipalities as well.

    These mini-agencies will focus only on local travel — circular routes and shuttles that serve the trunk lines.

    SoundTransit takes over all long haul and rail based transit.

    • William C. says

      If you want Sound Transit to take over the 271, 255, 101, and 150, I’m not going to argue with you.

      But, there will always continue to be a need for routes like the 240 (primary service to Newcastle), 245 (a frequent intra-Eastside trunk), RR-E (long-haul North King trunk), and 248 (main Redmond-Kirkland service). Yes, you can distinguish this class of routes from local circulators like the 236, 226, and 11; but it’s also very different from the existing Sound Transit freeway expresses. Why dp you think Sound Transit would be the better agency to handle them?

      • John Bailo says

        What Sound Transit needs to do is run BRT lines that are the equivalent of future LINK lines until the rail network is all built out.

        Then, all the mini-Metros should have as their charter primarily to ferry people back and forth to eather the real LINK stations of Park n’ Rides and that’s it. All other routes are circulators within a narrowly defined area.

      • asdf says

        By your approach, any short trip that happens to cross a jurisdictional boundary is going to be awful. For instance, with your system, a trip from Redmond to Kirkland would involve something akin to riding the B-line to Overlake Transit Center, Link to Bellevue Transit Center, and the 234 north to Kirkland. All together, a trip that is a straight shot today on the 248 would take at least an hour.

      • asdf says

        It should also be noted that the Washington D.C. area does, by and large, use the John Bailo approach. The result is a system that is pretty good for getting downtown (if you have car to sit at the Metro station all day) and terrible for everything else.

      • Anandakos says

        John,

        Having every municipality have its own system is way too much overhead. As I mentioned above, I think there are three distinct economic zones in the county. Either split the county at those economic boundaries or have three local transit providers and leave the interagency trips to ST.

        Obviously, to do that ST would also have to have increased taxing authority in order meet both its responsibilities.

      • Anandakos says

        @asdf,

        What’s to stop ST from having Redmond-Kirkland-UW service? It would probably go via 85th but make few stops: BRT-lite. Besides, it makes no sense for Redmond and Kirkland to have separate agencies; John is wrong about that.

        It DOES make sense for Kenmore, Bothell, Kirkland, Redmond, Bellevue, Issaquah, and Renton to have a transit agency; they’re quite closely linked economically. Each of the suburbs, except Bellevue, of course, probably sends as many people to Seattle for employment as it does to Bellevue, but the mid-day local rides that occur there are mostly not going to Seattle; they’re going to Kirland, Redmond or most likely Bellevue.

        So there’d probably be local eastside service between Redmond and Kirkland along 85th and 70th as there is today. It just wouldn’t be run by Metro.

        And you know what? Though initially the local service would probably suffer, eventually people would invest more in transit if they knew it wasn’t going to carry all those slackers in Seattle around. Yes, that’s how their Fox News minds work.

      • Oran says

        Anandakos: ST did have a Redmond-Kirkland-UW limited stop route via 85th. It was the 540 before they cut and cut it due to low productivity and let Metro run the corridor instead.

      • Anandakos says

        Oran,

        Nice to have you post. I wasn’t proposing that ST start BRT-lite on 85th now. Redmond and Kirkland aren’t far enough apart, and the stops are far enough apart that the ride on a local service bus is unacceptably long. But asdf assumed that adopting John’s proposal would mean that a rider making the trip would have to go through Bellevue, and I was just pointing out that, if ST became responsible for inter-agency trips and Redmond and Kirkland created separated agencies, ST would probably provide some sort of semi-express surface street transit between them. There is bound to be enough ridership for a bus or two an hour between the downtowns,

      • asdf says

        Kirkland is too far out of the way for anyone to want to ride from Redmond to the UW via Kirkland. It superficially looks on-the-way looking at a map, but when Redmond to UW is a straight shot down a freeway and Redmond to Kirkland requires meandering through back roads, Kirkland is most certainly NOT on the way. I don’t see ST ever creating a route like this.

        There is also the broader issue that people make short trips that cross city boundaries all the time, and any decent transit agency has to be handle such trips. Which means a 3-mile straight shot down a major road should not require transfers and/or backtracking just because the halfway point of the trip transitions from one city to another.

      • Anandakos says

        @asdf,

        Are you arguing with John, me or both of us? If me, where did II say that there should not be direct Redmond-UW service on 520? It already exists, so why would it be removed? You are correct that direct service from the Rose Hill area to UW no longer is offered by ST or Metro, so I guess there’s not enough demand for it. So no Redmond-Kirkland-UW BRT.

        Still, I was clear that I disagreed with John’s proposal to have one agency per municipality; Redmond to Kirkland service would be provided by the “East Side” district. Your objection about the three-mile local bus trip with a transfer in the middle is exactly the reason why.

  5. William Aitken says

    Yeah, but the weatherman provides timely revised forecasts when his data changes.

    The serious claim made in the Times editorial wasn’t that Metro’s forecast was inexact but that they had been nsitting on the data. Martin’s correctly and articulately points out that projections are by their nature inprecise. This is a valuable reminder in an era of fact denial, but doesn’t address the Times’ main point. As such, it is largely attacking a straw man.

    By the way, going from 600,000 hours cut to 550,000 hours cut is not “heading off 1.4% of the previously estimated 17%” it’s heading off 8.3%. That’s the sort of mathematical error that, if made by the “No” forces, would have been called, at kindest, a distortion. I’m happy to concede that a 15.5% cut in hours would still be a disaster, so the change is arguably still trivial, but it’s more than just a rounding error.

  6. Glenn in Portland says

    If you want to see some really freaky stuff caused by inaccurate tax revenue estimates, do a search for Oregon Income Tax Kicker.

  7. says

    It is so frustrating to read John Carlson on a major news magazine parrot that Seattle gets more transit service than surrounding areas… when if Johnny could just read a transit map, he’d see all the OVERLAPPING lines of transit FEEDING Seattle w/ service from the suburbs. PLUS all the ADDITIONAL service for MANY MORE Seattle residents.

    DAAAAAAAAAAAAAAAAAAH. That’s why Seattle has more service!!!!!!!!!!

    • mic says

      All those overlapping lines you refer to are not counted when critics talk about Seattle getting more service than what they pay for.
      All those routes are paid for 100% by the suburbs, even though they terminate into Seattle.
      Seattle only pays for routes that remaining in the city limits, or spits the cost of a two way, non express type route with those suburban cities running core routes both directions.

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