The shape of things to come at the north tunnel portal

Clark Williams-Derry, Sightline:

For far too long, “build now, pay later” has been the transportation budgeter’s mantra. In the 2000s, for example, Washington committed itself to massive road projects that it didn’t have the money to build. So the state floated bonds, assuming that revenue from gas taxes would show up to pay them off.

That hasn’t worked out so well. Traffic didn’t grow as expected, and gasoline and tolling revenue has gone AWOL as a result. Gradually, planners have come to realize that debt service will swallow up most of the state’s gas tax receipts, crowding out everything else. As the chart below shows, WSDOT predicts that within a few years three-quarters of the state’s gas tax receipts will pay for old projects.

There are plenty of sound reasons — from Marchetti’s Constant to congestion to gas price volatility to increasing environmental concerns — to assume that gas tax revenues might decline over time as people either drive less or more fuel efficiently.  Nonetheless, WSDOT has consistently projected gas tax revenue reaching for infinity.  For a few years now, Williams-Derry and Sightline have been hammering away at those overly-rosy WSDOT projections (and this one on USDOT projections is a classic).  Glad to see the agency take the note.

What’s interesting to me here is that it’s not the planners, but the bean counters who have finally seen the light.  The Office of Financial Management is stepping up and calling B.S.  It’s a refreshing acknowledgement that we simply won’t have the money to pay for all these road projects with current gas tax revenues.  In a sane world, that would mean fewer highway mega-projects.  After all, if people are driving less, you don’t need all those mega-projects anyway.  In an insane world, that might mean individual counties looking to get creative with new highway revenue sources while Olympia dithers.  I wouldn’t be surprised if, sadly, talk of a new RTID pops up sooner rather than later in an effort to squeeze more highway money out of a system that’s running out of it.

53 Replies to “Revenue Projections Meet Reality”

  1. I wonder if, politically, soon-to-be-ex-Senator Tom’s comments are coming true. Depending on how the Seattle TBD vote goes in a week, Seattle voters may demonstrate that they’re done funding regional projects, especially regional and statewide highway projects. It is interesting that there are campaigns charging that candidates are only going to pander to what “urban Seattleites” want, but what happens if we get what we’re after–frequent, reliable transit service and street maintenance and improvements paid for by local dollars–and then something like an RTID comes up? I suppose the state legislature has any number of ways to force the issue, I just wonder if they would.

    1. The opposition statement in the voters’ pamphet burns me up. Seattle is risking the loss of future county and state transit funding, and a deal is just around the corner if we wait a bit more, and its unfair to suburban cities if richer Seattle goes it alone? This is the same state that broke its promise to give Metro a long-term funding authority to replace the 2-year band-aid, and the same suburban cities that voted no on the countywide measure. So it’s time for a new direction, and maybe it will catalyze better transit in the suburbs and more transit prioritization at the state level.

      1. Here it is ($)

        “Seattle going it alone now might adversely affect future state and county efforts to develop a more comprehensive transportation package.Seattle might be shortchanged if it already approved its own funding, and Seattle voters might be unwilling to support higher taxes to pay for Metro service outside the city. Proposition 1 sets a precedent for other municipalities to purchase service from Metro, likely creating imbalances that would fracture the regional model.”

        How long should we wait? We’ve waited two years already. A regional (really county) model that can’t match either existing demand or mobility goals or our peer cities is not an effective model. The imbalance losers should’ve voted for county prop 1 — Seattle did.

      2. Mike,

        In response to the Crimes editorial, it seems to me that “the regional model” is handled. It has a dedicated funding and advocacy agency, SoundTransit, to ensure that regional mobility is maintained and enhanced.

        As to Metro, while there’s no doubt that the economies of scale offered by a large county-wide service provider should not be forgone, maybe it makes sense for municipalities to decide themselves what specific level of service they need and for which they are willing to pay, both locally and for Seattle CBD commuting.

      3. The good news is this is a guest column and not the opinion of the Seattle Times Editorial board.

        The bad news is this is an editorial from the Municipal League who is not without some influence. Furthermore given the reputation of the Muni League it really grids my gears that they haven’t bothered to better inform themselves on this issue.

        The precedent of private and governmental entities purchasing additional Metro service is already set. See Microsoft, several private schools, the UW UPASS program, and the City of Seattle’s Bridging the Gap levy.

        Furthermore there are protections against Metro playing cost-shifting games and there are clear priorities with both Metro service guidelines and Seattle’s transit master plan as to where funding would be spent to expand service. Indeed the City has already produced a list of routes and restructures it would like to fund.

        Frankly this editorial sounds much like the typical anti-transit concern troll. At best it is a case of the perfect being the enemy of the good enough.

  2. Raise the gas tax AND toll I-90. Do it now.

    And in the mean time vote “Yes” for Seattle Prop 1 to free the city from being held hostage by the state legislature.

      1. If gas tax revenues keep falling then at some point they are going to have to address the revenue side of the equation.

        And of course it doesn’t help that the State is in contempt of court for not funding education adequately. That, and the class size initiative, and the whole fish/culvert thing are going to put significant pressure on the general budget. Our lovely Legislators are not going to be able to cover a gas tax collapse by shifting funds from the general.

    1. You can not “toll I-90 now” or any time before possibly 2022. As long as the Republicans have control of the House of Representatives — and they will both because of geographical clustering and outright Gerrymandering — the proscription from tolling Interstate facilities except for capacity expansion or replacement will stand.

      1. So you are saying that the Republicans are getting in the way of reasonable transportation funding? Ya, that at least I agree with.you on.

        But I think you are ultimately wrong about the R’s blocking tolling on I-90. Even the R’s are beginning to realize that there is a place for increased tolling.

    1. If only we had done it during the 1950s-1970s prosperity and the early 00’s real-estate boom, we’d have better long-term infrastructure now.

  3. Build now, pay later also seems to be the City’s game plan when it comes to the increased transit that’s supposed to follow density.

    1. Do you have a better idea? We needed the transit twenty years ago and the city did almost nothing. We can’t sit in that hole another twenty years. We can’t afford not to build it, because the lack of fast/frequent/reliable transit is a drag on the city’s commerce and prosperity, and it makes people more car dependent and more insistent about parking spaces and highways. If all these neighborhoods had 10-minute buses all day and evening and widespread limited-stop service, the argument that every apartment and apodment must have a parking space would evaporate as being obviously silly.

      1. Payroll tax and/or developer fees to fund increased transit to match increased employment and/or density?

        Hell, I’d even support tying increases in development to increases in transit. You’d have developers fighting alongside us to get transit increased.

    2. *bites troll line*

      so Link, built. ridership rapidly increasing. whole corridor adding density AND property value.

  4. Williams-Derry writes: “In the 2000s, for example, Washington committed itself to massive road projects that it didn’t have the money to build. So the state floated bonds, assuming that revenue from gas taxes would show up to pay them off.”

    What concerns me is that this statement is pretty hostile towards borrowing at all for any reason. Just because WSDOT’s projections were faulty does not mean borrowing is bad. Sound Transit borrowed to build light rail. The Port of Seattle borrowed to expand Sea-Tac. King County borrowed to construct new sewers (unless you’d rather save up cash for a few more years while raw sewage pours into the water). None of these agencies “had the money” already; each had to assume how much it could generate in the future with the revenue streams available. Governments never have vast buckets of cash sitting around waiting to spend; our tax system doesn’t work like that.

    Projections are never going to be 100% accurate whether or not there are bonds to pay. Moreover, the principal payments on the debt would also be spent in a PAYG system. “Debt service” includes both principal and interest – it is really only the interest that is trading off with more transportation spending. Remember, the principal was already transportation spending, but thanks to borrowing, we don’t have to pay for it all immediately. The chart in the article doesn’t show the interest expense, only debt service. Interest is the cost of being able to use that infrastructure years earlier than would be possible with PAYG.

    Good projections are essential, but so is the ability to borrow money for the projects that need it.

    1. Ideally we’d go to a state infrastructure bank or cash-up-front model rather than using bonds. An infrastructure bank would recycle the interest back into infrastructure and local investors, and cash-up-front would eliminate interest costs completely. But we don’t have an infrastructure bank, and cash pools are liable to being diverted to other projects (highways) or dissolved and refunded (tax cuts). Plus we can’t wait twenty years to build up cash for large projects, especially when inflation would raise costs significantly in the meantime.

      I do worry about a backlash against all borrowing, as we’ve already seen at the federal level and in Europe. But hopefully enough people will see that ST is very responsible and conservative with debt. And let’s get going with that infrastructure bank.

      1. Local and state borrowing for infrastructure doesn’t seem to get quite the yelling and screaming that borrowing for operations does.

        Past that in addition to requiring balanced budgets I believe there are either statutory or constitutional limits on the total amount of borrowing allowed by government entities in Washington State.

      2. Furthermore, the “backlash against borrowing” is really stupid. You know that, right? You know that every idiot that suggests we “tighten our belts” during a recession is simply suggesting that we repeat the mistakes of the great depression? That is obvious to every mainstream economist, so I assume you are aware of it, despite what idiots on the right might say.

        Look, when inflation is a real problem in this country it is time to tighten our belts. But with deflation being the biggest worry right now here and in Europe, it should be obvious that we need to borrow, borrow, borrow. Our debt isn’t nearly big enough, and that is a big problem.

        But back to the concerns of the state, there is nothing at all wrong with borrowing money. What this article says, though, is that investing in a failed system is foolish. Companies, even really big, old companies borrow money all the time. Hell, IBM — big, crotchety IBM — sells bonds. But it would be really stupid if a company like Kodak decided to issue billions in new long term bonds and then did nothing to change their business model while people were replacing their film cameras with digital ones. That is, to a certain extent, what is happening here. There is nothing wrong with the state issuing bonds. These will be paid back. The problem is that the state is spending it on the wrong things. Spend it education and you will probably get back the money ten fold. Spend it on public transit and you could really improve things as well. But spend it on a tunnel (that now sits idle) and you have a really stupid policy on your hands. People will never use the tunnel in numbers that justify its construction. This doesn’t mean that the state won’t be able to pay back the bonds — they will. It is just that it isn’t a very good investment, so that will mean that paying it back will cost each individual taxpayer (you and me) a bit more.

      3. Chris,

        Well, you really shouldn’t “borrow for operations”, at least not habitually. That’s because there’s no “payback” from future expenditures. There may indeed be a reasonable counter-cyclical arguments for borrowing to pay for operations in a severe downturn, but be damn sure it’s paid back fully in the following upswing. That’s the hard part.

      4. Actually I see nothing wrong with counter-cyclical spending when it is by the national government. Especially since unlike many state and local governments the US Government does not have separate capital and operating budgets. There is also the small matter that debt is a whole different kettle of fish when you can borrow in a currency you control.

        I’m a little skeptical of borrowing for operations at the state and local level as too often it leads to trouble when it is allowed.

        Most of the counter cyclical stimulus can be provided by infrastructure spending at the state and local level. Capital borrowing is generally less limited by law and often the projects themselves increase future economic growth.

        I agree that if managed properly (borrow in lean times, raise taxes and pay off debt in times of expansion) but all to often governments don’t show this discipline. Again I see this as less of a problem when the entity borrowing also controls the currency.

  5. Maybe the number of car sales has been falling off. But did this morning’s traffic reports leave anybody but me feeling that this metric is beside the issue?

    The issue is how we build a transit system that will keep everybody aboard rolling top speed- as LINK did the night I rode it in from the airport when everything below might just as well have been left in the icebox.

    Or when multiple weather related crashes take down the entire region from Everett to Tacoma, maybe Olympia. A few years ago, BART got me from Downtown SF to Richmond in time to catch my ride north- after a fire a station back up Market Street.

    The freeway below looked very much like our whole I- and SR- system must have this morning. But however many cars sold that year, it was enough that through a major metropolitan are none of them could move.

    While a whole trainload of people- one of many dozen trains that night- went by them at seventy or eighty- regionwide, which is an important thing to stress right now.

    Everybody trapped at the wheel along on the miserable ride south- subareally, were they Everett passengers? Mukilteo? Lynnwood? Shoreline passengers? They were the passenger load of an entire region.

    We don’t live our lives in subareas. One of the main reasons that cars have been kicking the crap out of transit starting in 1915 is that that year likely marks the last time it took less than a whole day to go twelve miles from home to anywhere.

    One of the main things cars freed people from, in addition to the company store in the song, was lines- like city, county, and state. And certainly “subareas”.

    This is certainly not to say that Seattle shouldn’t hold its present course. A colllapsed transit system in a major city is a poor pro-transit argument county, region, statewide and national. But as with any diplomatic exchange that can either destroy or save a continent- you don’t break off negotiations ’til you’re in a very strong position.

    I’d be surprised if this morning’s stuffed-in regional population doesn’t change a few minds about something that runs fully reserved right of way.

    Mark Dublin- just home in Olympia from five hour drive that should have taken one and a half. But was already gonna vote for transit any election.

    1. And that’s FIRST day trip time started to take less time by Model T than by either interurban or horse.Cataract gone New glasses next week.

      MD

    2. All I could think about while sitting on the bus for 3 hours and 15 minutes last Monday morning was how anyone else in that traffic could ever vote against transit. It always amazes me how the people who will drive until they die refuse to see how transit would still benefit them by taking more vehicles off the freeway.

  6. We may not need more transportation taxes to expand the highway system, but we damn sure need them to maintain the system we have. From here on, the focus should be on catching up on all the deferred maintenance.

    1. Deferred maintenance is always the unsexy thing that gets cut first. It’s like all the pipe dreams about how if we hadn’t gone into Iraq we could have rebuilt schools, rebuilt bridges and roads, increased teacher pay, etc., etc., etc. No we wouldn’t have. We’d have just had more tax cuts and more sexy little boondoggle bridges to nowhere.

      1. Well said, Breadbaker. Bush II “gave the taxpayers’ money back” as quickly as he could and then decided to have his splendid little war on the national credit card.

    2. I agree. We also need to fund the things that we have started (like 520). I think it also makes sense to do a handful of small projects, that provide very big bang for the buck. But the big projects (like the Columbia Crossing project or 167/509 project) make no sense to me. Those two projects alone cost more than every other project put together and provide a lot less benefit. Given all that, I think you could easily come up with a sensible, moderate plan that would be supported by both sides of the aisle, if not for the completely dysfunctional nature of the legislature.

      1. Ironically the effort to get funding for ST3 may serve to break some of the logjam on transportation in the legislature.

        The downside is the 167/509 project is likely to be a part of it due to how important that project is considered by leaders in Pierce County.

        The CRC is likely dead as a doorstop unless and until the leadership in Oregon, Washington, Portland, and Clark County can all get on the same page regarding project requirements and budget. Unfortunately the current bridge needs maintenance and rehabilitation if it is to serve longer rather than being replaced. Maintenance and rehabilitation funding is hostage to the same politics that killed the CRC. Hopefully things don’t drag out to the point we face an emergency closure like with 14th Avenue South or a bridge collapse like the Skagit River bridge or I-35W.

      2. I’m a very pro-transit person, but 167-509 is legitimately a good project. It’s absolutely key for freight from the Port of Tacoma and exactly the kind of thing we need to be doing if we want our ports to complete with LA, Price Rupert, and an expanded Panama Canal. Expanded 405 is the kind of thing that should be replaced with transit instead. That’s the bad guy in WSDOT planning.

        Really, the problem with state transpo funding isn’t the big projects. 167-509 is good. Completing 520 is necessary. At least some progress on North Spokane Corridor is probably good. We’ll need a new CRC someday. The problem is that to buy enough votes to pass a 5-12 cent gas tax increase (which you need to pay for the big projects), you need to pack in a bunch of worthless pork into key districts just to buy votes from legislators. That is where the real waste is. A highway package limited to just a few really necessary things would not be a bad deal but it’d never pass.

  7. I’ve heard futurists say fairly bluntly that a VMT assessment is ultimately the only way to continue to fund even roadway maintenance. The problem is that the fee (note that I refuse to call it a “tax”) isn’t normally paid gradually. Until there is a link between mileage and credit card or debit card deductions, it’s not going to be popular. Auto manufacturers are already anticipating having all new cars in the next few years be “connected” and when that happens, a seamless system will be easier to create. Meanwhile, we’ll have to figure out what to do for older model years – like attach transponders under the hood.

    1. There is nothing wrong with a gas tax. The problem is, in the U. S., it is just way too low (http://en.wikipedia.org/wiki/Fuel_tax#mediaviewer/File:Fuel_tax_in_OECD_countries,_2010..png). As cars transition (if they ever do) to electricity, you can simply tax that a little more. Some of the electricity is benign — it doesn’t hurt the environment or the economy in the least. But some of it isn’t. Meanwhile, we know that every drop of gasoline that is consumed screws up the environment and the economy, so taxing it heavily makes sense.

      1. There is nothing wrong with a gas tax …
        if the revenue is used only for maintaining the current infrastructure to a level of good repair.

        Any funding for capacity increases should be able to pass in a public vote, via the same communication and justifications that any public transportation projects currently go through.

        There also should be no reason mega-expansion projects couldn’t rely on other funding mechanisms besides tolls, either.

        Property tax increases for the beneficiaries?

      2. I’m not saying that we should give up on a tax on gasoline next year. What I’m saying is that technology is moving to reduce overall gasoline consumption, and our vehicle fleet by 2030 or 2040 may have all-electric vehicles predominate. All vehicle owners should have a responsibility to pay for the wear and tear on roads, and not only those who use gasoline. There are proposals out there for a “carbon tax” as well, but that one will be trickier to calculate.

      3. @Al — Right, and everyone will stop smoking in thirty years, so we should phase out the tobacco tax.

        If this really happens, then we can easily phase in other taxes. We can easily tax coal or natural gas. We can easily tax nuclear power, if we want to. If we get to the point where we aren’t consuming much in the way of carbon or nuclear based fuels, then we can start taxing other things. If we get to that point, we could just tax energy in general, and not worry about how people consume it. With a tax on energy, it works itself out anyway. If there is a tax on electricity, then driving a heavy battery powered truck hundreds of miles will cost a lot, and some of that money will go to the state. It will discourage people from driving, and they will find other ways (like using a train) to get their goods (or selves) to where they want to go. If there are expensive choke points, then congestion pricing (AKA tolls) makes sense.

        We could also just pay for it with an income tax or property tax. A good public infrastructure benefits everyone, so we shouldn’t worry that much whether some folks take advantage of a public good more than others. There are exceptions, of course, such as heavily congested areas. In that case, tolling makes sense. But why should some small farmer in Yakima, who drives a hundred miles a day on a lonely road pay more than the rich guy in Medina who drives his hummer everywhere in town (but only half the distance)? That makes no sense to me.

        I dislike the VMT tax for two reasons. First it implies that the gas tax is a user fee It’s not. It’s a sin tax, and it is way too low. Second, it implies that there is no general public good when it comes to our roads. Again, this is like a user fee (similar to a fishing license). But unlike a fishing license, we would be in deep trouble if our roads shut down. We could simply cancel sport fishing next year and even though a lot of people would be disappointed, society in general would be OK. But close off the roads and you would have food riots in a week. Think about it. Think about someone living in Fremont, one of the few places in Seattle where you can live fairly well without a car. You can walk to work and walk to grocery store. But if the roads shut down, the trucks can’t get the food to the store. So, sure, the truckers can pay a fee to use the roads, and then pass that fee onto the consumer. That is how a gas tax works right now, and it is less than ideal. It is a regressive tax, but one that is balanced by the desire to reduce the consumption of fuel. A VMT tax would be regressive, but it wouldn’t discourage anything that we want to discourage. Quite the opposite, as it would take away one of the few benefits there are to driving a low emissions vehicle.

      4. So far as taxing EV’s instead of having a mileage transponder, which philanderers and gun nuts hate with a passion, instead just have a charging meter built into every EV and tax the “fuel” like with cars. That keeps the focus on reducing resources, from whatever source, instead of specific behaviors.

        That doesn’t mean that there are no behaviors that should be taxed: entering downtown in a private vehicle during business hours is one, for sure. But people who use EV’s to go to the woods for a hike aren’t contributing to congestion; they are consuming resources directly or indirectly though.

      5. It’s not just a question of roads vs no roads. A certain amount of road space is a necessity for a modern civilized society: for transit, emergency vehicles, deliveries, workmen taking their tools to their jobs, people with walking disabilities, etc. You can add a fraction for Sunday drives and other discretionary uses. But all that only requires a quarter of the road capacity we have. The rest of it is all for SOV drivers. It wouldn’t have been built and wouldn’t require maintenance costs if we didn’t coddle SOVs more than any other industrialized country. All road lanes are not equal, and some of them are more deserving of non-drivers’ maintenance taxes than others.

  8. Agree completely with rebuilding decrepit freeways. A Sacramento light rail driver pointed out that the stretch of elevated track we were crossing had been built as a freeway but repurposed. His opinion was that anything built for freeway is more than strong enough to handle rail.

    So my thinking is that at least through urban areas- like I-5 through Downtown Seattle, where lane setup is like combination of Destruction Derby and the carnival “Wild Mouse”-can have motor traffic relocated like through Moses Lake, and replaced with electric rail.

    As I’ve repeated a million times- reason people over 65 get their own seats separated from other passengers- the Interstate Highway system was created to move arms and supplies.

    Not to leave thousands of civilians burning world oil reserves while being sitting ducks for enemy close-air support. Would be howl of a scene for a movie, though.

    Also, careful with calculation about how avoiding wars doesn’t cure deferred maintenance. Avoiding wars has a few advantages, as easy Route 36 trip to the VA hospital can show you.

    Also, Google “Detroit”. Get pics from before the Viet Nam war, and compare present day Detroit with contemporary Hanoi. Note which city is in ruins and which has thriving industries. Some of its labels are on stuff we now buy. Perhaps formerly made in Detroit.

    Maybe good compromise is to confine the wars we get into to ones where we know what we’re doing. And the ones for which any Congressman will propose to reinstate the draft in an election year.

    Of go get shot himself. Oldest and fattest of them can still find an IED before first wave of younger troops get there. Give ex-reps a sure posthumous Medal of Honor. Will also save huge amount that said representatives will get for pensions if they retire or lose an election for voting for the draft this year.

    Mark

  9. Isn’t it ironic how SR-520 has become a luxury highway. Mostly paid for by everyone’s taxes where the elite can pay a few dollars to avoid congestion. Of course they still have it on I-5, but soon they can pay to avoid congestion in HOT lanes too (probably also only paying a small fraction of the cost to build those lanes.)

    1. Who is this elite? I thought it was college professors and the liberal media and latte drinkers. Now you’re saying everybody who pays a $3 bridge toll is a member of the elite? That’s a large part of the population.

      1. Someone who uses the bridge as an SOV driver to and from work is paying around $35/week or $1750/year just in tolls, on top of all other costs of car ownership. It’s fair to say that this is not a worker at the median income in our county.

        I’m pointing out that we’re building a $4 billion facility that mostly remains congestion free while I-5, I-405, 520 east of 405 and I-90 are all congested. Yes it can currently still be congested at Montlake and it will get congested at the I-5 end. But it’s kind of ironic that the impact of tolling just this one road means it will be underutilized and really a kind of luxury purchase while the rest of the roads are congested.

        It seems like the politics aren’t going to give us tolling on I-90 or I-405 or I-5 anytime soon, and the impact is that the 520 crossing is kind of a luxury premium crossing. I’m not really sure that makes so much populist sense since the tolls pay at best a small fraction of the cost, but the populist would rather keep the other roads toll-free than put in place a more rational toll regime which will spread the traffic out differently.

    2. Also, why are you focusing on the individual’s congestion-free experience rather than on the voluntary revenue that can be used for road maintenance? The person is not paying “only a fraction” of their share because they already paid their full share in their taxes. That voluntary revenue would not be available without giving something in return; i.e., the congestion-free trip. It doesn’t bother me as long as the lane remains clear enoug for buses to run at full speed.

    3. Bridge tolls and even toll highways are pretty common around the US. You don’t see these generally referred to as “luxury highways”. While some are entirely funded by tolls this is not always the case.

      I don’t really have a problem with bridge or highway tolls, nor HOT lanes and congestion charges.

  10. I’ve been criticizing WSDOT for years on their ludicrous traffic projections. So it’s good to see something more sensible. Except that there’s a very good chance that traffic will start dropping more later this decade, especially in the 2020s, as peak oil begins to hit hard.

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