The Extinction of Public Transit

By Emma Newman

Uber and Lyft have recently gained over 50 percent of the taxi market in Portland. This is especially notable as Portland was initially hostile to ridesharing companies, to the point of filing a lawsuit against Uber late last year. This industry takeover is just one example of how private market innovation has upended government-regulated transit.

At a recent Metro hearing on the SW Corridor project, one of the main arguments for pursuing a costly light rail tunnel requiring the destruction of several homes was that ten years of disruption is worth 100 years of use. But considering the speed at which the transportation industry is changing, is long-term use of public transit infrastructure likely?

Public transit is rarely anyone’s first choice due to inconvenience, time cost, and lack of reliability—problems that personal vehicles rarely face. Overcoming these factors has made ridesharing companies more popular than traditional taxicabs.

The fact that private market solutions will increasingly outcompete public transit is evident not only with companies like Uber and Lyft, but with future technologies as well. Google’s driverless car being used on a wide scale may seem to be far into the future; but if costly transit projects are being justified by decades of potential future use, transit planners need to consider what the future of transit may actually look like.

Emma Newman is a research associate at Cascade Policy Institute, Oregon’s free market think tank. She is a student at George Fox University, where she is studying Economics and Computer Science.

What They Say vs. What They Do: How PCC Students Really Get to School

By Anna Mae Kersey, Emma Newman, and Thomas Tullis

TriMet is considering the construction of a light rail line from Portland State University to Tualatin, at a cost of roughly $2 billion.

One routing option still on the table is to run the train down Barbur Boulevard, then build a tunnel to the Sylvania campus of Portland Community College. The tunnel would add $244 million in capital cost. It also would require moving several dozen homes and take at least two years to build.

To put this in perspective, for the price tag of the proposed tunnel, one could purchase approximately 23,094 Teslas, build 41 aerial trams like the one at OHSU, buy two brand-new cars per PCC-Sylvania student, or pay for 117,200,000 Uber rides from the PCC Sylvania campus to downtown Portland.

Such a hefty sum might be justified if there were a need for “high-capacity” transit at PCC-Sylvania, but such a need does not exist.

According to survey data released by PCC, 58 percent of Sylvania students drive to class, while 32 percent take shuttles or buses. However, travel surveys are notoriously unreliable, in large part because people tend to underreport their reliance on auto travel.

To correct for this, Cascade Policy Institute collected field data by going to PCC-Sylvania and counting every trip to and from the campus, at various times and on various days. The field observations tell a different story. Roughly 84 percent of students drove and only 15 percent took TriMet or the PCC shuttles during our observations, which covered nearly 7,000 trips.

During final exams week, when students really had to be in class, the split was even more skewed: 89% traveled via private automobile.

The difference between what students said in a survey and how they actually traveled is significant because it shows that college students are much less willing to forego cars and take transit than is commonly thought. For TriMet, this means the proposed light rail line likely will not have the increase in ridership that planners assume.

We can also learn from experience elsewhere, because one other PCC campus has been directly served by light rail for the past five years. The PCC Willow Creek campus is a single building located directly next to a light rail station on the west side. This is unlike the spread-out PCC Sylvania campus, where students would still have to walk a significant distance from the proposed light rail station to get to their classes.

Despite the convenience of light rail stopping right at the front door, at Willow Creek the field observations showed that 80 percent of students drove, 14 percent took light rail, and 5 percent took the bus. This is only a slight decrease in automobile use compared with Sylvania. Is it really worth spending $244 million to service a suburban college campus with light rail for this tiny difference?

Driving is the preferred method of travel for the majority of college commuters because it offers versatility that caters to their complicated schedules both in and out of the classroom. It seems that the complexities of student lives and lack of demand for transit are being overlooked in this decision.

PCC-Sylvania is already served by a rich mixture of college shuttles and TriMet buses. Those options are currently underutilized. Thus, there is no reason to spend $244 million and disrupt the serenity of this neighborhood to build a light rail tunnel.

Anna Mae Kersey, Emma Newman, and Thomas Tullis are research associates at Cascade Policy Institute, Oregon’s free market think tank.

Press Release: Cascade Policy Institute Urges TriMet to Cancel Proposed Tax Increase

July 23, 2015

FOR IMMEDIATE RELEASE

Media Contact:

John A. Charles, Jr.

503-242-0900

john@cascadepolicy.org

Cascade Policy Institute Urges TriMet to Cancel Proposed Tax Increase

PORTLAND, Ore. – At Wednesday’s TriMet board meeting, Cascade Policy Institute President John A. Charles, Jr. presented a detailed critique of TriMet’s proposed tax increase, and urged the Board to cancel public hearings on the tax proposal set for August and September.

Over the past several months, TriMet has been quietly meeting with business associations and large employers in efforts to gain political support to raise the rate of the regional payroll tax it imposes on most employers within the transit district. The current rate is 0.7237 percent. The proposal is to raise it by 1/10th of a percent, phased in over a ten-year period.

TriMet expects to have the first reading of the proposal on August 12, and a Board vote is scheduled for September 23. If approved, the rate increase will go into effect on January 1, 2016.

In his testimony, Charles pointed out that the last time TriMet increased the tax rate – the period of 2005-2014 – total operating revenues for TriMet increased by 80%, but actual service declined by nearly 14%. This was contrary to promises made by TriMet management in 2003 when the legislature authorized the tax rate increase.

Charles also reiterated that TriMet’s cost of employee benefits is unsustainable, with the cost of benefits equaling 149% of the cost of wages in 2014.

In addition to financial issues, the effectiveness of TriMet service is declining. According to TriMet records, ridership in 2014 was lower than it was in 2007, despite an increase in regional population. TriMet’s market share is also dropping. Portland commuters used transit for 12% of trips in 1997; in 2014, that number had dropped to 11%.

According to Charles, “TriMet thinks that the most recent labor agreement solves its employee compensation problem. It doesn’t. Until the cost of benefits drops below the cost of wages, TriMet has no moral authority to impose higher tax rates on local employers.”

The full critique of TriMet’s proposal can be viewed here.

Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity.

###

TriMet’s Great Disappearing Act

During the 2003 session of the Oregon State Legislature, TriMet sought an increase in the regional payroll tax rate. In public testimony, TriMet General Manager Fred Hansen said, “TriMet’s proposed payroll tax increase will be used exclusively to provide new or enhanced transit service.”

The legislature approved TriMet’s request, and the payroll tax rate went up every January for ten straight years. By the end of 2014, TriMet had received $34.4 million in new payroll tax revenues attributable to rate increases. Yet during that same decade, the miles of transit service offered to patrons actually dropped by 14%, while the hours of service declined by 5%.

Like a magic show, TriMet tried to distract the audience by pointing to grand celebrations for the opening of the WES commuter rail line and the Green MAX line, both of which opened in 2009. But overall service levels were reduced five times in six years, the opposite of what was promised in 2003.

TriMet’s proposed budget for 2015-16 was released last week. It calls for “expanding service through the opening of the Portland-Milwaukie light rail line.” Once again, all the attention will be on new trains, while total service levels will still be far below the levels we had in 2003.

State legislators should be asking TriMet where all the money went. But sadly, no one in Salem cares about results.

Report Shows Oregon Public Employment Contracts Are a Ticking Time Bomb

PORTLAND, Ore. – Cascade Policy Institute today announced the release of a new report showing that Oregon public employers have more than $2.6 billion in unfunded actuarially accrued liabilities associated with non-pension benefits promised to current and future retirees. These benefits, often referred to as “Other Post-Employment Benefits (OPEB),” typically include health care coverage for retirees, but may include other forms of deferred compensation such as life insurance.

A decade ago, the Governmental Accounting Standards Board (GASB) mandated that public employers begin clearly stating financial obligations for OPEB in their comprehensive annual financial reports. However, employers were not required to set up trust funds to pay for these promises. As a result, the Cascade review of 125 financial reports of state, regional, and local governments shows that most employers have no money set aside and are paying for OPEB obligations out of annual operating revenues. This cannibalizes funds needed for actual services.

The Portland transit agency TriMet has the biggest unfunded OPEB liability, estimated to be $950 million as of January 2014. Other employers with relatively large unfunded liabilities include Lebanon school district, Tillamook County, and the city of Corvallis.

Cascade President and CEO John A. Charles, Jr. said, “Over a period of decades, Oregon public employers have deliberately back-loaded employment contracts so that the cost of generous compensation packages would not become apparent until decades later, when the decision-makers themselves would be long gone. Those time bombs are now exploding, harming public school students, transit riders, and others who rely on public services.”

The Cascade paper is a call to action for the legislature to impose some form of fiscal discipline on public employers by requiring them to make annual contributions to OPEB trust funds. Legislation to accomplish this has been considered in past sessions but never approved.

In commenting on this failure, Charles noted, “Actuaries always state what it would take to amortize OPEB liabilities over a 25-year period; these are referred to as ‘annual required contributions (ARC).’ Unfortunately, most government managers treat the ARC as merely a suggestion. All the Oregon legislature has to do is pass a one-page bill reaffirming that ‘required’ means ‘required.’ How hard can that be?”

The Cascade report, Unfunded OPEB Liabilities for Oregon Public Employers: A $2.6 Billion Time Bomb, can be downloaded here.

Testimony to TriMet Board About WES Expansion

John A. Charles, Jr. presented this testimony to the TriMet Board of Directors on May 28, 2014 with regard to their proposed expansion of the Westside Express Service.

 

Board members:

Below are my comments on Resolution 14-05-27, Adopting the Fiscal Year 2014-15 Annual Budget and Appropriating Funds, for your May 28 meeting:

Assumed cost of fringe benefits: According to the introductory narrative, the proposed FY 15 budget “assumes management’s initial offer for active and retiree health benefits.” This is consistent with the budget statements from previous years, which have tended to “assume away” unpleasant aspects of labor negotiations. It does not seem prudent to continue making these assumptions, based on the history of TM labor negotiations over the past 22 years. As much as I like seeing the proposed expansion of service, perhaps it would be better to scale back service enhancements and set aside more funds for a worst-case outcome on the cost of health benefits.

Plans for WES expansion: The staff recommends purchasing two additional vehicles for WES, at a cost of $8.5 million, or $13.2 million over 20 years of debt service. All of those costs will cannibalize other general fund programs. I’d suggest that this proposal be pulled from the budget and possibly added back later, after further public vetting.

WES is TriMet’s most expensive fixed-route service, but I’m not aware of any justification that has ever been offered. Fewer than 1,000 TriMet riders benefit from these subsidies each weekday. Why are WES riders so privileged?

To put the issue in context, below are the costs of WES compared with those of similar bus service offered by SMART of Wilsonville. While WES is undoubtedly a nicer and quicker ride for users, the cost premium is difficult to justify to non-riding taxpayers who have to make up the difference.

Express Service from Wilsonville Station to Beaverton Transit Center

Operating cost/mile Operating cost/hour
TriMet Express Rail $43.74 $949.84
SMART Express Bus $   1.30 $   83.17

In addition, WES is an energy hog. According to a new report by the Federal Railroad Administration, the average energy consumed by all commuter rail systems in America during 2010 was 2,923 British Thermal Units (BTU) per passenger-mile. WES was close to the bottom: It consumed 5,961 BTU per passenger-mile, more than twice the national average (by comparison the top performer was Stockton, CA: 1,907 BTU/passenger-mile).

Not only is WES inefficient compared with its peer group, it is wasteful compared with other modes of travel. The national average for all transit buses in 2010 was 4,240 BTU per passenger-mile; for light-duty cars, the average was 3,364.

WES has always been a planning mistake. Before the Board decides to double-down on failure, there should be careful consideration of an alternative action: terminating service. None of the current board members had anything to do with the original decision, so no one should feel a personal need to defend it. Certainly terminating service would result in some short-term costs because of likely re-payment penalties to the federal government, but at some point the lower operations would provide net benefits to taxpayers (including those outside of TriMet’s district in Wilsonville, who pay TriMet more than $25,000/month to subsidize train operations).

In a typical year, there are very few opportunities for the Board to actually express a clear policy choice for TriMet’s future; most decisions are made by the staff. This is a rare chance for the Board to isolate two distinct policy options, consider the long-term effects, and express an independent preference for one of those options. I strongly encourage you to defer action on the proposed purchase of additional WES vehicles for at least another 60-90 days in order to have that public conversation.

Sincerely,

John A. Charles

Cascade Policy Institute

Time to Stop Throwing Money down the WES Sinkhole

In its proposed fiscal year 2015 budget, TriMet forecasts the purchase of two additional vehicles for the Wilsonville-to-Beaverton commuter rail line known as WES. The total cost will be $8.5 million in borrowed funds. None of those costs will be paid by WES riders; $600,000 annually in debt service will be paid by taxpayers for the next 20 years, for a total of $12 million.

This is a critical decision point for the TriMet board. Approving the proposed budget will expand the WES vehicle fleet from four to six and irrevocably commit the agency to commuter rail. But the five-year track record of WES suggests that another decision would be more defensible: shutting the train down completely.

There are at least three reasons to consider this option. First, WES is an energy hog. According to a new report by the Federal Railroad Administration, the average energy consumed by all commuter rail systems in America during 2010 was 2,923 British Thermal Units (BTU) per passenger-mile. WES was close to the bottom: It consumed 5,961 BTU per passenger-mile, more than twice the national average (by comparison the top performer was Stockton, CA: 1,907 BTU/passenger-mile).

Not only is WES inefficient compared with its peer group, it is wasteful compared with other modes of travel. The national average for all transit buses was 4,240 BTU per passenger-mile; for all light-duty cars, the average was 3,364.

In a state where most politicians are obsessed with energy conservation, it is difficult to justify expansion of a publicly subsidized line that is so wasteful.

Second, WES is TriMet’s most expensive fixed-route service, with an average per-ride cost of $12. Thus, even if ridership grows, it will not help TriMet, since the agency loses about $10 on every trip.

To see just how expensive WES is, we can compare it to an express bus route in the same corridor opened last year by the transit operator in Wilsonville, South Metro Area Rapid Transit (SMART). The costs of the bus are only 3% of WES: $1.30 per mile versus $43.74 for WES.

Transit Service from Wilsonville Station to Beaverton Transit Center

Operating cost/mile

Operating cost/hour

TriMet Express Rail

$43.74

$949.84

SMART Express Bus

$   1.30

$   83.17

Finally, WES ridership is tiny. WES now has about 940 daily riders who account for 1,880 average weekday “boardings.” This is still far below the forecast of 2,500 that was made for opening-year service (2009).

I’ve ridden WES at least 100 times in order to catch the express bus to Salem that picks up WES transfers in Wilsonville. For the privileged few on the train, it’s a nice trip. There are usually plenty of empty seats, free internet service, and lots of legroom. Plus, I feel like royalty as we shut down traffic temporarily on more than 20 east-west cross streets along the way. While this results in a net increase in regional congestion, it’s fun for the train riders.

But just because I personally enjoy WES, that doesn’t make it a good public investment. The bus alternative would move just as many riders at less cost and with lower fuel consumption.

Back in the 1990s, Westside politicians and rail boosters fell in love with the concept of a commuter train to Wilsonville. As with all such pork-barrel campaigns, the promises vastly exceeded eventual performance. But current TriMet board members can claim plausible deniability; none of them were on the Board back then, so it wasn’t their fault.

Now they have a chance to clean up the mess. It won’t be fun having to admit that mistakes were made; but if the Board is serious about re-setting TriMet on a path of financial sustainability, there will be many such decisions to be made. A long journey begins with the first step.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

As TriMet Sinks, Should Portland Suburbs Go Down With the Ship?

Last week Cascade released a report encouraging cities and counties to consider leaving TriMet due to its financial mismanagement.

TriMet has long admitted that its labor costs are unsustainable. In addition, the agency’s addiction to costly rail construction has cannibalized bus service, which has been cut by 14% in the past five years.

Comparison with other local transit districts paints a stark picture. The cost per mile of operation for the TriMet commuter rail line is $43.74. TriMet’s flagship service, light rail, costs $11.96 per mile. Yet, the small city of Sandy runs its own bus service for $2.57 per mile.

TriMet predicts that additional service cuts will be required by 2017 and every year thereafter to balance the budget, which essentially would shut down the agency by 2025. TriMet’s only strategy has been to seek contract concessions from the bargaining unit representing most workers, but this is unlikely to succeed. The ongoing PERS crisis shows that once management agrees to expensive fringe benefits for unionized workers, it’s almost impossible to reduce them later.

TriMet is in a death spiral of its own making. Local jurisdictions might be hoping for the best, but they should plan for the worst. Leaving TriMet is an option that needs to be on the table.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. 

TriMet Violates Clean Air Act While “Regulators” Stay Silent

In previous decades the Portland region failed to meet national air quality standards for carbon monoxide pollution and was designated a “non-attainment” area under the federal Clean Air Act. As a result, the region was required to develop and implement strategies to reduce carbon monoxide.

One of the strategies is that TriMet must increase transit service by 1% annually for the period 2006-2017, on the premise that more transit service will reduce auto-related carbon monoxide emissions. TriMet’s compliance must be measured on the basis of a 5-year “rolling average” of actual hours of service. The “baseline year” for compliance is 2004 and includes the opening of the Yellow MAX line, which began operating that year. This strategy was specifically devised by TriMet to grandfather in the Yellow line, thus giving the agency the best chance for compliance.

However, even with this advantage, TriMet has not met the obligation to increase service. In fact, TriMet service has been steadily decreasing. This is a potential problem not only for TriMet, but for other local governments. If the Portland region were to be found out of compliance with the Clean Air Act, the federal government could delay or cancel federal dollars for such projects as Milwaukie light rail and the Columbia River Crossing. For regional politicians, this would be a disaster.

In January, the crisis was taken up by one of the obscure committees run by Metro―the Transportation Policy Advisory Committee (TPAC), comprised mostly of local government bureaucrats. TPAC agreed to recommend that compliance be measured on the basis of cumulative average of service hours for the 10-year period 2007-2017. The new “baseline year” would become 2008.

After TPAC, the plan had to be approved by the Oregon Environmental Quality Commission (EQC), the governing board for the state DEQ. The EQC took testimony in August and rubber-stamped the TPAC recommendation in early December.

Last week the issue moved to JPACT, another obscure Metro committee that approves all regional transportation spending. The free pass for TriMet was quickly approved.

The final stop will be the Metro Council, which will approve the change on December 19.

Sadly, none of the four entities approving the recommendation ever seriously considered enforcing the Clean Air Act. The top priority at every level has been to craft an escape hatch so that business as usual can continue. However, even a cursory look at the evidence would have shown that TriMet had no excuses for non-compliance.

For example, Metro/TriMet/DEQ have all claimed that the “abrupt drop” in TriMet service was “caused by the recent deep recession.” However, as shown in Table 1, the drop in TriMet fixed-route service has not been abrupt; both hours of service and miles of service were lower in 2012 than they were in 2004, so this has been a problem for years.

 

Table 1

Annual Fixed Route Service Trends for TriMet

2004-2012

 

FY 04

FY 06

FY 08

FY 10

FY 12

Change

Veh. revenue hours

1,698,492

1,653,180

1,712,724

1,682,180

1,561,242

-8.1%

Veh. revenue miles

27,548,927

26,830,124

26,448,873

25,781,480

23,625,960

-14.2

Moreover, the recession had little to do with the cuts because TriMet’s operating budget has grown by 62% since 2004 (Table 2).

Table 2

TriMet Financial Resources

2004-2013 (000s)

 

 

2004

2006

2008

2011

2012

2013

% change

 

 

 

 

 

 

 

 

Passenger fares

$ 59,487

$ 68,464

$ 80,818

$ 96,889

$ 102,240

$ 112,500

+89%

Payroll tax revenue

$ 168,378

$ 192,450

$ 215,133

$ 226,456

$ 248,384

$ 259,233

+54%

Total operations revenue

$ 315,130

$ 342,274

$ 404,481

$ 410,388

$ 488,360

$ 508,971

+62%

It’s interesting that the pollutant in question here―carbon monoxide―is a serious one that can permanently injure or kill people, and has been explicitly regulated under the Clean Air Act for over 40 years. Yet, local air quality regulators don’t care about TriMet’s non-compliance. Meanwhile, Metro is squandering a vast amount of public money on its co-called “Climate Smart Communities” plan, aimed at decreasing carbon dioxide―a harmless trace element that has never been explicitly regulated by the Clean Air Act.

In fact, the most notable consequence of increased CO2 levels in lab experiments is the faster growth of plants, which is generally thought to be a good thing. But CO2 has been demonized by environmental activists as a cause of “global warming,” so it must be regulated.

The new compliance plan for TriMet subtly changes the goal posts. By moving from a five-year rolling average to a 10-year average, and shifting the baseline year to 2008, TriMet picks a better year to begin measuring (service levels had already dropped by 2008), and gives itself more future years to “forecast” increased service, even if there is no reason to think such service will materialize. TriMet has publicly stated that the cost of employee fringe benefits must be reduced by 50% in order to restore lost service, and everyone who has watched public employee union negotiations knows that such concessions will never be made.

TriMet is a federal clean air scofflaw, but the local “regulators” are all in on the scam. For a region that prides itself as an environmental leader, this is a disgrace.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

TriMet Finally Admits Rail Problems

Last week I wrote about the problems TriMet is having with its constantly failing rail system. On Wednesday, TriMet General Manager Neil McFarlane announced that the agency is hiring an outside firm to review light rail maintenance needs. The contract will cost a maximum of $245,000.

This is an important acknowledgment by TriMet that the vaunted regional rail system is suffering from chronic breakdowns that will require ever-increasing levels of maintenance.

The ownership problems associated with rail transit are well known within the industry. Indeed, four years ago the head of the Federal Transit Administration (FTA), Peter Rogoff, gave a speech on this topic to a room full of transit executives. Mr. Rogoff reminded people that rail systems have significant long-term costs. FTA had recently concluded that there were more than $78 billion in deferred maintenance costs for public transit agencies in the U.S., and three-fourths of those costs were associated with rail systems.

TriMet management is having to face up to this reality. The supposed “operating advantages” of hauling rail cars disappear when the lifecycle costs of rail system ownership are taken into account. Bus transit doesn’t face these problems. The cost of a bus is only one-tenth the cost of a rail car; it can be sent to many locations rather than a few dozen; and the ubiquitous road system is paid for by millions of motorists, not the transit agency. This keeps the maintenance costs of bus transit to a manageable level.

Unfortunately, TriMet is in a financial free-fall, and absorbing substantial costs for depreciation and maintenance of light rail will worsen the fall for a long time to come.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. 

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