In light of today’s P-I article, I want to talk about the total cost of Proposition 1 and how the “No” campaign is being misleading on this subject. I agree with an earlier blog entry in that this total cost figure isn’t completely meaningful to voters, while the $69 cost per year figure is. I also agree that this is not the most important fact to voters, and the more time we spend arguing about the cost is less we spend boosting the plan.
However, most of us are pretty wonky – so let’s destroy this $107b number that the “No” campaign parades about with the help of the P-I.
Background: YOE vs. Constant Dollars
Last year, the Seattle P-I published an article discussing the “real” cost of Roads & Transit, the failed 2007’s measure to expand light rail and build new roads. It cost $18 billion in 2006 dollars and $47 billion when you factor in inflation and interest on loans. The $18b number would be “constant” dollars and the $47b would be “year-of-expenditure” (YOE) dollars. $18b in 2006 dollars is the effectively the same as $47b in YOE dollars (note: I am glossing over debt servicing and loan interest, both of which can be thought of conceptually as inflation).
YOE dollars have a lot of problems. For us in the here and now, it is simply not possible for us to comprehend the meaning of $10 in 2057 dollars. Whereas we all know that $10 today is a few boxes of cereal, or three gallons of milks/gas, or an entire day of parking at a downtown mall, or one hour of work at McDonald’s. Using some online calculators, we can see that $10 today will probably be somewhere around $39.50 in 2057 — nearly quadruple the number, but the same purchasing power.
So, the fault with YOE dollars is that at the starting point, they give the public a false conception of the price. They give managers at your company a false sense of the actual value of something. Most engineering projects do not use YOE dollars internally, because it is meaningless.
“Constant” dollars have their own problems, however. After a project is completed, “constant” dollars nearly always give the sense to the public that a project was over-budget. This is, in fact, why mass transit projects are — across the country — considered to be risky investments that always go over-budget. (Locally, Sound Transit and the monorail solidified this idea on their own — don’t get me wrong.)
(Read on to see how the media and Proposition 1 change things…)
The Media Uses YOE Dollars
So, the local media last year made a decision that Roads & Transit didn’t like. Instead of using “constant” dollars like the campaign, Sound Transit, and RTID did, the media used YOE dollars. Every news report about R&T pegged the cost at $47b — which isn’t inaccurate, or wrong, per se, but a number that is not very meaningful to most readers since inflation is responsible for the dramatic difference and inflation is something we deal with over the span of decades.
But it was an argument that ST lost — the media decided the number to use and arguing the price caused confusion. This year, it’s different. Sound Transit and the campaign both talk about YOE dollars to prevent voter confusion and giving the “no” any leverage.
The cost of Proposition 1 is $17.8b in YOE dollars. The Seattle Times uses this number (well, $17.9b for some reason). The Seattle P-I continues to factor in debt servicing, bringing the total to $22.8b (YOE) — which is still less than half of the YOE cost of Roads & Transit. $17.8b (YOE).
Today’s Article About Prop. 1’s Cost
I imagine that using YOE dollars was an effort to prevent bad press about the cost. Yet, here we are, almost a year to the day that the earlier Seattle P-I piece was published discussing a new article regarding the cost of Proposition 1. This article was obviously written because the “No” campaign is doing an excellent job in repeating ridiculous numbers and creating confusion. The “No” campaign’s tactics did the job last year, but I’m not sure it’ll work again.
The P-I article is the most in-depth look at the incredulous accounting methods the “No” campaign uses. While the P-I piece doesn’t draw any solid conclusions, it presents the reasoned arguments from ST staff as to why the “No” campaign’s math isn’t worthwhile. Unfortunately, the piece is very lengthy and wonky, so someone thumbing through the newspaper or website may be slightly overwhelmed.
To summarize for our readers, the biggest differences between ST’s numbers and the “No” campaign’s numbers center on:
The length of taxation: “[The ‘No’ campaign’s] figures assume the expansion tax will continue for 30 years after 2023 when construction is to end, while Sound Transit predicts it likely will stop 15 years earlier.”
Sound Transit is collecting taxes 15 years less than the “No” campaign is predicting. Indeed, 2038-2053 dollars are so vastly different than the value of today’s dollars this makes a large difference in cost. The “No” campaign is using these non-existent taxes combined with inflation blow up the price of Proposition 1.
Different accounting in how household costs are measured: “He said he divided […] sales taxes in the urban area by the estimated number of households, including those with very high incomes. ‘What’s wrong with including wealthy families in the average?’ he asked.
Well, the answer is that generally there are incredibly wealthy families that skew the average, which is why Sound Transit uses the median household income to predict the median expenedature on taxable items, which gives you impact of new sales taxes on the “average” family. In this case “average” means “typical,” not “sum divided by count” which unrealistically ties Bill Gates’ consumption to mine.
The “No” campaign adds Sound Move costs to the cost of Prop. 1: The Seattle P-I should have called out the “No” campaign for misleading voters. All over the “No” site you see one number: $107 billion. Over and over and over. Well, by their own admission in this very article their fuzzy math adds up to $55 billion for the expansion covered in Prop. 1.
While $55b already uses very debatable accounting and extends the tax for 15 years later than it will be — almost doubling that number by adding in Sound Move costs that will be paid regardless of Prop. 1 and calling that the total the cost is dishonest. Sound Move costs will be the same whether Prop. 1 passes or not. And that’s not even mention that the $52b cost for Sound Move is certainly just as misleading as their Prop. 1 costs.
Sound Transit doesn’t pass the sales tax on to consumers: “A Sound Transit memo said there’s been controversy over how much tax businesses pass through. Some assume they do ‘but local businesses must compete with outside businesses that have different or even no sales taxes,’ the memo says. ‘Every time China buys a Boeing 777, they help fund government services in our region, including mass transit expansions,’ [ST’s] Patrick said. ‘We have not tried to estimate this split — that would be a very difficult task — but it is very significant.'”
I personally find the Sound Transit argument convincing. The “No” campaign simply assumes that 92% of the sales tax increase is paid for by consumers.
Sound Transit includes households outside of its district: “One reason Sound Transit’s figures are lower is that it divided the tax bill by more households. The agency assumed a total of 1.3 million households throughout the three counties, including portions outside its urban-area district.”
Update: As The Stranger points out, this is actually an error in the article. Sound Transit’s figures aren’t divided by anything. Sound Transit uses the entire region’s household count to determine the median household income. In other words, this is likely more conservative than just using the ST district’s household statistics since those outside the district — the urban areas of Pierce, King, and Snohomish counties — likely have a lower income than those within the boundary. My previous reasoning, below, is irrelevant and inaccurate.
Why’s this? Doesn’t this seem questionable? No. A lot of folks who live outside of the boundaries of the ST district do shopping inside of the district where all the major stores are. Indeed, it’s likely that that population of the ST district swells during the day as people head to their jobs within the urban-growth area that the ST district aligns with.
The “No” campaign’s math is summarized as “divide the cost of the sales tax that ST is projected to make annually, by the amount of homes in the ST district” and that’s the cost per household.
Update: The reason this is wildly inaccurate is that very, very rich households are going to consume far more taxable items — so things other than food, rent, etc. Combined with the fact that they project ST to take in more revenue than reality or the measure allows, this created very misleading numbers especially in the future. The Stranger is responsible for this correction. My previous, below, logic is inaccurate.
But people who work in the ST district during the day or shop inside of it contribute to the tax base, and it is ridiculous to say that folks inside the district are paying a price for it. The “No” campaign uses a count of households which artificially increase tax costs by 15% annually.
Be sure to read the complex P-I article, which much like this blog entry attempts to summarize some very complex accounting weirdness. The P-I doesn’t call the “No” campaign out, so I will: The numbers are bull.
The $55 (YOE) billion number extends the Prop. 1 taxes 15 years longer than reality, lets high-income households skew the results (rather than normalizing for the typical family), assumes suppliers even from out of state will raise prices because of our sales tax, and uses other fuzzy math to distort reality. It’s bull.
The $107 (YOE/made up) billion number is simply a dishonest figure because it includes Sound Move costs that happen regardless of Prop. 1, and vastly inflates the cost of both Sound Move and Prop. 1. It’s worse than bull. They are saying that Prop. 1 costs $52 billion dollars even if it isn’t passed!
Proposition 1 costs $17.8 billion dollars (YOE). If you’re the Seattle P-I, you factor in debt servicing bringing up the cost to $22.8b (YOE). If you’re the Seattle Times, you round the number to $17.9b somehow (YOE). However you slice it, much cheaper than the opposition is making it out to be. What’s easy to digest is that Proposition 1 will cost $69 dollar per year for the average adult.
(I am far from unbiased on this matter. Besides being a blogger here and supporting mass transit growth in general, I am a volunteer for the Mass Transit Now campaign regarding Prop. 1.)
35 Replies to “What does Prop. 1 cost?”
The main thing here is that supporters and wonks alike should be able to back up their numbers, which you’ve done wonderfully.
Great article. I’ll save this link for next time the “no” side starts telling people it will cost every taxpayer their first child.
To make it even easier to understand:
More transit for 19 cents a day.
Can we afford not to?
I think both sides are playing ‘loose’ with the facts.
$69 per adult is a feel good number, that has nothing to do with the actual cost per adult.
If I give you 69 from my front pocket, and say 100 from my other, then you got 169 total.
To be fair, compare the benefit of this project (new riders) to the total cost (all the taxes). Then cast your vote.
Prop 1 INCREASES current taxes, plus extends Sound Move taxes for decades, plus takes in state and federal taxes.
Meanwhile, I only have so many different pockets to draw from.
$169 is still 46 cents a day.
I live on a shoestring on purpose, and my day-to-day costs and weighted monthly costs are the following, excluding necessary purchases and bills I couldn’t recall (water and transit, for example):
Electricity ($21 a month/30: 0.71)
Rent ($710 divided by 30: 23.66)
That’s $31.37 a day.
Now, given that I am on the low end of spending and earning, I don’t see how 46 cents a day is hard to swallow. Per rider, you’re paying .00000131 cents a day. If this goes on for 40 years, that’s still less than 2 cents paid per daily rider, total, for the entire duration of taxation. This “$100,000 per rider!” is scaremongering, making it sound like you’re going to face pocketbook collapse with little ROI.
Want to be fair? How much do you pay for highways every year? Do you even have any idea? I don’t think your opposition has anything to do with ‘comparing’ anything – just with trying to drum up big numbers.
And no, there are no state taxes involved.
Come on Ben, we both know how “partnership” funding works. WSDOT and ST have been dickering for the last 12 years over who pays for this ramp or that bridge with a transit benefit.
Funding individual projects is the fine art of assembling as many pots of money in one place.
No, WSDOT isn’t funding ST projects. On the contrary, ST has been funding projects that WSDOT wanted to do for years before!
It seems to me that you have a little information, but probably not a very complete picture – or perhaps you just want to believe particular things, so once you have just enough to support your beliefs, you stop there.
The concept of cost/benefit between ST and WSDOT is a constant tug of war, often decided by political or other needs either now or in the future. Both sides can claim gains and losses, as it should be, and not all projects get an equal flow of dollars from one or the other, depending on who the lead agency is.
The point I was making is this — just rat-a-tat-tat, gushing that $69 bucks is the only cost is mis-leading at best, and down right lying at its worst.
It’s the very thing that unravels public trust in government. Just give us the truth, the whole truth, and nothing but the truth. That’s how you earn continued funding.
As for WSDOT and ST – find me an example of a project in either Sound Move or ST2 where the state added funding to an ST project. ST helped pay for some transit projects the state wanted – WSDOT never paid for ST costs, as you’re tiptoeing around asserting.
$69 is all we’re voting on. You don’t have an argument, you’re just trying to mislead.
While I have no doubt you’re right about this particular point Ben, the essence of lrt’s comment remains sound. You have pointed out repeatedly that the federal government is paying for a portion of Link. Lrt’s point is that federal money still comes out of our pockets. Of course if we don’t get it, it will go somewhere else and we still have to pay the same amount in federal taxes. Ah, the pork barrel.
Far more significantly though is the fact that the $69 figure refers to the increase over sound move and assumes that sound move will continue even if ST2 fails, but you yourself have argued that if ST2 fails, that Sound move could very well be dismantled, and even if it is not purely dismantled, the intent is for those taxes to retire once the bonds are paid down.
So if ST2 passes we pay $69 more than we are paying now, but ~$125 less than we would pay if ST2 were to fail (and sound move were to expire).
That additional $56 is coming out of our other pocket.
I still think it’s a good deal and I’ll probably be voting for Prop 1, but I continue to find it frustrating how harshly dissenters are treated on this blog.
There’s a huge problem with lrt?’s argument. The first is that the calculation of the actual, total burden is massively complex – the same 777 purchase that causes local sales tax revenue also increases local income. We are not in a vacuum here.
The fact is, if you wanted to take the discussion that far, you’d also have to consider exactly what transportation does for our income levels. In less than the 25 years before Sound Move taxes could be rolled back in the event of a loss, ST2 *would produce more economic benefit than it cost*. For users of the system, it’s almost immediate – a few months of commuting by Link and you save more than your entire contribution to the cost. And every time someone’s money doesn’t go to oil from somewhere else, they’re more likely to spend locally, meaning dollars for local pockets.
So, no, lrt?’s comment isn’t sound. He isn’t interested in cost-benefit analysis. If he was, he’d have gone here a long time ago, instead of trolling with simplistic arguments:
With $700 Billion in the news every minute, I think most taxpayers look at a $20 billion project as chump change.
The playing field has changed significantly. It’s not a matter of ‘how much’ anymore. It comes down to ‘what’ and ‘why’.
The No camp can scream about the cost all they want, but the voters won’t hear them.
Only the wonks care about cost at this point.
It’s true, though I think most people who are for transit are already going to vote yes by default. The arguments about $69 / year and the tax rollback are simply the campaign trying to define the message before the “No” campaign runs radio or TV ads that say something negative about the cost.
I do think that the more exciting part of the plan is where it goes, how it’s quicker & cheaper than last year’s proposal, and has awesome short-term bus service improvement — not the price.
If we wanna win, we gotta say it loud, say it proud, and most of all, say it over and over again:
“$69 a year….$69 a year…$69 a year…”
I would just hate to see this Prop get “monorailed.”
lrt?, I’m unthreading that conversation.
$69 dollars per year is not a lie. $69 dollars per year is the cost of Proposition’s 1 0.5% sales tax increase.
If you want to talk about the over-all cost of the system (Sound Move, FTA grants, WADOT partnerships, Metro partnerships, CT partnerships, Pierce parnerships) and then how that affects the average person, then you’re talking about something different. Sound Move is a done deal. It’s not relevant to Prop. 1 until 25+ years from now when it won’t rollback as planned. The rest of the items you’re talking about? Listen, the FTA, WSDOT, Metro, CT, and Pierce funding would probably be the exact same if ST was never created. It’s better that the money go to something that benefits our region than transit projects in Atlanta or highway projects in Spokane or bus systems that are no wear near as integrated as they are today.
So, the “yes” campaign and Sound Transit aren’t being misleading at all. Prop. 1 costs $69 / year to the average person. Income taxes will be the same, the gas tax will be the same, local bus taxes will be the same, and Sound Move taxes will be the same (for 25+ years) whether or not Prop. 1 passes.
Thanks for the info John. Could you give us more details on what really will happen if Prop 1 fails?
I’ve always been told that Sound Move taxes would be rolled back, after all the bonds were paid back, to only pay for continued operations.
But this won’t happen for 25+ years from now, making Sound Move’s 10 year plan at least a 38+ year plan until the taxes can be scaled back. That’s a long time to collect 4/10 sales and 3/10 MVET for 13 miles of track to the airport, Sounder, and 20 bus routes.
If Prop 1 fails, ST will build U Link, Lakewood, and a few other projects still on the board, and then accelerate bond repayments once construction is complete.
Could you give us more details on where you came up with your 25 year number? U Link construction will be complete in 2016, and bond repayment would go more quickly after that. I think you made up the 25 year number (actually, I’m an idiot, it’s in the comment you replied to… sorry)
UW to Airport is more than 18.5 miles – even Westlake to Tukwila is longer than 13 miles. But you already know that. Stop lying.
Actually, John Jensen threw that 25+ year number out first. I was asking for more info.
Do you know when the Sound Move taxes could be rolled back to pay for operating the system only.
Ah, I missed the 25 years.
It’s probably more than that. The initial Sound Move bonds will start being paid off a little sooner than that, but that money should go to repaying the later bonds (like U Link) sooner.
Of course it’s impossible to ‘know’ when. We’re going to vote on more transit before then anyway.
I’m sure ST has projections as to when they’re schedule to finish paying of the bond debt. I don’t recall the exact number, 25+ years might be too much, but the point is that it’s not going to happen within a few years of U Link being completed. It’s a far out thing.
It’s pretty much dependent on how much sales tax revenue there is, and what inflation is. There is a range, and I don’t know it, but mister lrt isn’t interested in it anyway.
Ben, ST has rough projections for when the debt would be paid off for Prop. 1 — there might be something similar for Sound Move.
Longest post ever!
Great post, John.
One thing to keep in mind: pretend economists like Jim MacIsaac and John Niles purposefully create their own proprietary methodologies for achieving the largest possible figure.
I started noticing how dishonest and disingenuous both of these men are when I began noticing how they like to pump up eachother’s academic medals.
I learned a long time ago that truly smart people don’t spend a lot of time trying to impress others with their resumes. When you actually read through the piles of theoretical garbage Kemper’s guys crank out on a daily basis, you can see they are more like junk scientist paid assassins, as opposed to scientists seeking truth. Indeed, the right wing think tanks which pay Mr. Niles don’t exactly expect him to come up with unbiased data and conclusions. They pay him to twist the truth as much as possible.
And the local media never calls them out on it. Ever.
John and Ben. You both seem like honest reasonable people, trying to solve a nightmarish problem of traffic in our region, for which I aplaud you.
The thing that drives me nuts, and that really hurts getting things done around here are the pumped up claims — on both sides of this issue, which was the point of my initial comment.
The $69 claim that everyone falls on their sword for is just wrong.
Go to ST financial reports for 2nd Qtr of 2008. Sales tax revenue was $134.1M, or about $268M per year generated by a 4/10th sales tax. Scale that up to 5/10th gives $335M/yr.
With 1.1M households in the ST taxing area, or about 2M adults, gives a Prop 1 sales tax of $167 per adult, not $69.
How can voters trust an agency that can’t seem to do math.
How can an agency claim transparancy and honesty, when crap like this keep going on?
I understand what you’re saying, and sometimes it isn’t perfectly crystal clear that this is $69 in *new* taxes.
However, what we’re telling you about what Sound Transit will do is different than what’s authorized. Sound Transit is authorized to collect Sound Move taxes until the end of time with or without this vote. It’s just improbable – they’d have no public opinion leg to stand on.
When we vote for ST2, that will be $69 a year more than people are already paying. Yes, in 25 years, when the ST2 tax is rolled back, the Sound Move tax will still be there. But to call the agency dishonest…? We’ve covered this. Sound Transit has covered this. The campaign generally says $69 a year in new taxes. That’s what happens right now if we vote yes.
But you don’t have a leg to stand on. You use bad numbers yourself, for things like the mileage built, and then you complain that Sound Transit isn’t… advertising what you want it to? The fact that you KNOW Sound Move taxes would be extended by ST2 means they’re informing you quite well. You’re the only one who’s actually using bad numbers.
You know, there is a lot of complicated math involved in huge projects, whether they are public or private. So if you aren’t in cost control yourself, what do you do? Well, you might get an independent outsider with the necessary skills to do it for you, and then take the experts’ word for it. You know, like the WA State Auditor’s Office Audit of SoundTransit (PDF) which says that they’ve done a good job since 2002? Note that’s not a SoundTransit report.
lrt, do you forget that people from out of state pay sales tax, too? Do you forget that there are thousands of people who live outside of the boundaries of the ST district but travel inside to make taxable purchases?
There is no way to pump up the tax numbers in the way you are since taxes are not static, they’re dynamic. They are dependent upon actual sales and not a flat fee divided equally amongst people. Sound Transit did an actual check to see exactly how much people spent on average and determined that the average adult in this area spends $13,000 on taxable goods (33% of one’s income) and they pared that down to an actual taxed amount of $69.
http://www.visitseattle.org/resources/pubs/CICreport.pdf shows that in King County alone, taxable sales amounted to over 50 billion dollars. That’s 200 million in tax dollars for 2007 for Sound Transit coming from King County alone. 64% of the population of the district lives in King County. Assuming a rough equity based on population, the overall maximum taxation would be 292,000,000$ for 2007 at .4% taxation, which it was not. This fits in well with the common knowledge that King County taxes slightly higher (but not much higher) than Pierce and Snohomish Counties, giving us the spot on assumption that this was a round taxation and within Sound Transit’s declarations. 200 million is 74% of the tax receipts listed for this year. A maximum of 52 million is Pierce County’s 2007 contribution (data extrapolated from here: http://www.lifeinpiercecounty.com/illegal-signs/DEPT%20OF%20REVENUE%20RESPONSE%20TO%20EXCISE%20TAX%20INQUIRY.pdf). The remainder comes from the small portion of Pierce County in the boundary, easily giving us the above stated $268m.
The main thing to take away from this is that the budget is sound. Taxes function as a dynamic number and depend entirely on how much you spend. However, you need to also take into account things like tourism revenue, extra-regional purchasing (i.e. someone crossing over for purchases at the mall in Bellevue) and the simple fact that some people spend more than others.
$13,000 is close to 1/3rd of the Per Capita income here and is reasonable as a projected amount of taxable spending. Remember that unprepared foods aren’t taxed in any regular way (variable, often 0%) and as such, they do not figure heavily into one’s taxable income. Nor do a majority of utilities or one’s rent.
If you make more than $40k a year and spend 33% of your gross income on taxable items, then you are average and will pay, yes, $69 a year. If you spend less than 33% of your gross income on taxable items, that $69 shrinks. If you spend more, it grows.
lrt? I applaud your composure and tone during this disagreement. You are not launching personal attacks, and are listening to what we say. I appreciate the honest you’re throwing my way.
First of all, the number you calculate — $167 — is even higher than the “No” campaign’s number of $157 ($284 per household / 1.8 people per household). You can see that this type of “common sense” math is just plain wrong, but it’s easily how the “No” campaign manipulates people into believing this stuff.
Obviously I assert that $167 isn’t the real cost. There are two factors that make your math not accurate:
1) Businesses who purchase products from other businesses within this district (and foreign countries, and out-of-state tourists, and people who live outside of the ST district who do the same) contribute to the sales tax but do not have a household here. A ton of local businesses buy locally, of course, again feeding into the taxing mechanism.
2) “Average” is not the same as “typical” — especially in a consumption tax. Wealthy people “consume” and pay sales taxes on a disproportionate amount of money since they have far more disposable income.
Your $167 figure (times 200, or 1/0.05) assumes the “average” adult — not family, just one adult — spends $33.4k on taxable items a year (and rent, groceries, and other necessities aren’t covered by sales taxes). That’s a ton of a disposable cash — about 14 iPhones a month. People in Seattle are not well-off.
If you think the $69 is misleading, well I think we just disagree. I think the numbers can be backed up, as we’ve tried to do dozens of times in this thread — but if you’re not buying it, let’s call the whole thing off.
How about this: 5 cents for ever $10 you spend. That’s what 0.5% sales tax is. You can decide how much disposable income you spyend a month and put your own math in. Me? I’d pay about $78 a year. Whoop-de-doo.
With 1.1M households in the ST taxing area, or about 2M adults, gives a Prop 1 sales tax of $167 per adult, not $69.
I think the issue here is “median” vs. “mean”. Of course, you’re computing the mean, but there’s a large amount of taxes paid by business, some of which may be picked by consumers.
Also, because of a large number of very rich people, and because incomes seldom fall below zero, the mean personal income in most societies is a lot larger than the median. If you have 5 people making $50K a year and a CEO making $30M, the mean income is about $5M but the median is still only $50K. The same goes for taxable expenditure.
Tony, an earlier comment you made: “So if ST2 passes we pay $69 more than we are paying now, but ~$125 less than we would pay if ST2 were to fail (and sound move were to expire). That additional $56 is coming out of our other pocket.”
It’s a very complex argument to make. If we’re saying that Prop. 1 is a $125 increase in taxes per person, we’re not being accurate. If we’re saying it’s a $69 increase in taxes per person, we’re not being accurate (in 15-25 years from now).
Personally, given the complexity of the argument, I’d rather be inaccurate in 20 years than tomorrow. It also helps that this decision helps my political cause, but you get my point.
As for dissenters being treated harshly… I praise lrt? for putting up with some pretty tough accusations in the context of this thread. He didn’t deserve them.
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