Who should pay for mass-transit expansion? It's a dilemma in B.C., too
Provincial leaders have committed to expanding the SkyTrain, but they're wrangling with local mayors and the public over what type of tax to levy, and whether it should penalize people who drive the most.
'Atomic Taco' via Wikimedia Commons
In spite of a funding stalemate, work is already starting on a high-speed SkyTrain called the Evergreen Line, extending the existing Millennium Line through British Columia — beyond Burnaby east to Coquitlam. It's a firm promise from the provincial government.
But sometime in the next 90 days, the local mayors and the provincial government have to make up their minds how the region is going to pay for it.
Will it be with yet another property tax increase, or through a fee that aims to influence how we drive around the region? Is Metro Vancouver ready for so-called transportation demand management (TDM) funding? That method rewards people who drive less — some combination of vehicle levy, tolls, road pricing, high-occupancy lane tolls, congestion fees or fuel taxes?
Building the Evergreen Line has been the top regional transportation priority since the mayors along the route were pressured into supporting the Olympics-related Canada Line from Richmond and the airport into downtown in 2004. The success of that line has exceeded everyone’s expectations (except the cabbies whose airport-to-downtown business has all but disappeared). Ridership levels set for 2015 are already being achieved, partly because so many public transit first-timers discovered its ease of use during the Olympic traffic shutdowns.
The mayors of Vancouver's northeast suburbs agreed to the Canada Line because they were promised their route, the Evergreen line, would be built next. It is still the top priority, notwithstanding pressure from the City of Vancouver to put a rapid-transit line along Broadway, the major arterial leading to the University of British Columbia (UBC). Passengers on that line sometimes wait for up to three buses to go by to find one that isn't full.
There's only one catch: Residents of the region must raise $400 million to pay their share of the costs. The federal government is in for about a third of the $1.4 billion cost of the Evergreen Line; same for the province. But TransLink, the regional authority whose board reports to a council of local mayors, can’t get the mayors and the province to agree on which funding tool will be used.
The province wants the money to come from a property tax increase — a simple, familiar measure that typically directs taxpayer anger toward the municipalities that mail out property-tax notices. The mayors are adamantly opposed to any more property tax increases. Their residents are already staring down future regional property tax increases — on top of this year’s 5.8 percent boost — to pay for two new sewage treatment plants costing $1.2 billion, plus ongoing bills for an $800 million-plus water purification project on the North Shore mountains. And more big spending, for incinerators, is expected soon.
Nor will the mayors say they’re ready for the TDM-variation on the table: a sliding vehicle levy, with reduced fees for fuel-efficient cars. It was hard enough for them to approve this year’s mix of minimal increases in property taxes, fares, fuel taxes, and downtown parking taxes just to keep TransLink’s existing operations limping through to next year. With Surrey alone growing by 1,000 people every month, that didn’t include any money for more buses, new routes, or even putting the brand new third Seabus into operation between downtown and the North Shore. It’s still tied up at the dock.
The province has publicly committed to getting the Evergreen Line built, and RFPs (Requests for Proposals) are about to go out for construction bids. Fine, say the mayors, then you say how we should pay for it. You take the blame.
Unlike other TDM measures, the vehicle levy is already allowed in TransLink’s enabling legislation, but it has never been used for fear of political outrage from suburban drivers. They're still stuck in their cars for lack of transit options. TransLink says it has polling to prove that drivers will accept its proposed variable vehicle levy — officials are calling it a Transportation Improvement Fee — because it rewards fuel-efficient cars. It was tried once before, but rebuffed by the provincial government of the day.
The mayors would love to tap the province’s new carbon-tax revenues, set to increase dramatically in 2012. But the province has pledged that all carbon-tax money will be revenue neutral, offset by a tax reduction elsewhere, or by a check mailed back to low-income taxpayers.
New legislation allowing tolling on existing bridges, not just the new ones where tolling is now permitted, is another possibility. But the B.C. Liberals are in no mood to take on responsibility for a new tax. Their leader, Premier Gordon Campbell, recently resigned over backlash from a Harmonized Sales Tax, even though it didn't even add to the tax load.
So the two sides sit staring each other down, with property-tax increases favoring the suburban multi-car families, and the vehicle levy favoring car-less transit users in Vancouver. The province has given the region three months of breathing room to work out a deal.
"If you live in downtown Vancouver and you don't need a car, [with a vehicle levy] you're sitting there thinking, 'I'm OK, I don't have to pay,'" TransLink Mayors Council Chair Peter Fassbender, the mayor of Langley City, told B.C. Local News.
"If you live south of the Fraser — say Surrey or the Langleys — you say, 'My family needs two or three cars. We've got kids. We need to get around. But we get dinged three times because we have three cars.'"
"I have some mayors who are absolutely pulling their hair out if we're even thinking about property tax. And equally, there are mayors pulling their hair out if we go to vehicle levy."
The mayors are counting on a more conciliatory approach from the province to deliver them either a vehicle levy, or maybe carbon-tax revenues. One thing is certain: Improving transit will cost more than we're paying now, and any solution will be politically painful.
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Comments:
Posted Thu, Dec 2, 7:03 a.m. Inappropriate
So the people in Vancouver want more train transit, and they are debating how to pay for it? Well they DEFINITELY should look at how the government managers here pay for it and contrast that with how TriMet in Portland pays for transit. We are doing a super-lousy job of it – TriMet’s model is vastly superior.
People here and in Portland wanted trains and buses, and two different financing schemes were used. The leaders in Vancouver shouldn’t make the mistakes the government managers in Olympia and Seattle are making. There is no good reason for the discrepancies between how it’s done here vs. how TriMet pays for buses and trains.
Below is a "fact sheet" document that lays it all out re: how TriMet pays for its light rail. The light rail in Portland has come on line gradually, and federal funds covered a lot of the costs. A public/private partnership was used recently for an extension. Here though they pile on regressive sales taxes, and do not use much grant money. Apparently less than 10% of the $100 billion financing plan for the $18 billion in capital spending ST is launching into would be grant money - a FAR lower percentage than its peers.
The following describes how TriMet finances its top-quality bus system (along with better light rail construction and operations than what we have):
http://www.trimet.org/pdfs/publications/factsheet.pdf .
TriMet never has imposed regressive taxes targeting people and individuals. Metro and ST sure do. Here are three differences between here and what goes on around Portland that the folks in Vancouver should consider:
- Progressive taxing of businesses there vs. heavy regressive taxing targeting families and individuals here.
- A couple of billion dollars of a reasonable mix of federal grant money and progressive tax revenues used to build out a 50-some mile light rail system there vs. a $100 billion mostly-regressive local tax revenue package to pay for the same number of miles of track, and fewer stations here.
- $0 direct regressive taxing targeting individuals and families for bus and train service there vs. $455 per year direct regressive taxing on the average family for bus and train service here, and that amount will grow every year for decades.
Hey, our government managers blow! They like harming people financially in the name of transit. Metro, Sound Transit, and the transit governments in Pierce and Snohomish counties expect to haul in something on the order of $1.3 billion in local tax revenue this year, the vast majority of which will be sales tax revenue. All their peers do a great job providing good bus service and expanding train systems for their people and businesses with far less annual local tax revenue:
- TriMet (Portland) - $233 million;
- DART (Dallas/Fort Worth) - $385 million;
- San Diego Metropolitan Transit System - $100 million; and
- RTID (Denver) - $241 million.
There is no good reason for financing transit the way government managers in Olympia and Seattle do it. The grossly excessive transit taxing and spending programs here in comparison to all peer regions are a big problem. They cause financial harm to people and the local economy. The policy-makers in Vancouver should take lessons from how everyplace EXCEPT Western Washington provides transit to its people.
Posted Thu, Dec 2, 9:08 a.m. Inappropriate
Hey Crossrip,
You missed one more big thing that a state could do to reduce the cost of these systems to the taxpayers... Open a state bank. Then borrow money from the federal reserve at 1%, using tax revenue as "assests", and then loan the transit agency the money at 1.00001% with the additional bit to cover the handling of the money. Instead they all issue municipal bonds at 4%+ which makes money for the bond issuers and the bond holders and scr*ws the tax payers.
Only North Dakota has a state bank, Washington and Oregon should open one too.
Posted Thu, Dec 2, 9:32 a.m. Inappropriate
Interesting idea Gary!
Leave aside for the moment that the capital spending plans are many times too high in light of the benefits the ST rail could deliver to the region. The financing plan selected to impose on people here is what truly is brutal.
The state bank idea could well work. Here's another approach that would be better: if the state guaranteed the Sound Transit bonds it would reduce ST's tax confiscation needs by 80%. Instead, Dow Constantine and his pals pushed a financing plan that punishes people and requires many times the taxing that anyplace else needs for transit, just because they decided to secure the bonds with pledges to collect far more tax than is required to pay for capital costs and operations subsidies.
I've never heard Constantine (or Phillips, or Ed Murray, or Frank Chopp) explain the thinking behind the approach used here. It's bad management of public resources, and it unnecessarily punishes the least well-off in our community. It appears the financing practices here are driven by a group-think in the taxing class that either is sadistic or sociopathic.
Now we'll get the pro-government screen names posting here saying "it's the voters' fault" . . .. Their argument is the government managers gave voters an abusive financing plan, and if it had been rejected the public would have received trains at a fair cost, as it is done by all the peers. Great argument, isn't it?
Posted Thu, Dec 2, 10:02 a.m. Inappropriate
Hi Crossrip!
Bonds! smonds! Show me a bond that isn't a US Treasury bond that pays 1%. We are talking nearly free money and since the agency issues 30 year bonds, we are not talking pocket change.
And a State Bank Loan is like getting the state to guarantee the funding. Yes state issued bonds would have had a higher rating and lower cost to the tax payers but the state is near it's debt limit. That's why we need a bank. A bank only has to hold 10 to 15% of the asset to debt ratio. A year of tax collection and you get 10x the loan capability.
ST has been scr*wing tax payers for years. Just look at the Eastside taxes that were then used to finance bonds that the revenue from those bonds was put in the general fund with the Eastside paying interest for no actual capital expenses! It was all a big shift of tax money that was legal under the sub-equity rules. I've given up complaining about that. It falls on deaf ears. So I'm going for the state banks. It will save us all millions!
Posted Thu, Dec 2, 11:10 a.m. Inappropriate
I'm not sure I would blame local leaders in Seattle for utilizing the only tax options that Olympia will give them or that the public supports.
Sales tax is simply the main tool available for transit agencies to use here. You don't think Metro or Sound Transit would love to tap other "less regressive" sources?
And the public doesn't get away without blame. Amongst the few options transit agencies have are motor vehicle excise tax and license fees. However, the public's reaction to the monorail MVET in Seattle and passage of Eyman initiatives which devastated transit budgets by cutting MVET made it clear that they don't like those options either.
Despite Rossi's attacks about earmarks, Sen. Murray won re-election for her success in doing things like bringing federal dollars to Sound Transit and Amtrak projects here in Washington.
The blame needs to be placed strongly on Olympia lawmakers to provide new options for transit funding in Washington.
Posted Thu, Dec 2, 1:05 p.m. Inappropriate
Mickey Mouse writes:
“I'm not sure I would blame local leaders in Seattle for utilizing the only tax options that Olympia will give them or that the public supports.
“Sales tax is simply the main tool available for transit agencies to use here. You don't think Metro or Sound Transit would love to tap other "less regressive" sources?”
I disagree completely with the positions you are taking.
The local government managers here deserve a heaping pile of blame.
Read this story about what's going on in BC. The greater Vancouver BC area has twice the population of the RTA area, and the local tax hit for this 7-mile rail extension will be $400 million. Let’s assume it’ll be paid by property owners – that’d be a progressive tax. $400 million is a bit more than one-half of what ST alone hauls in every year, from a region half as large. Add in Metro's comparable taxing and the per-capita transit taxing here is many, many times greater than anywhere else. Local government managers are responsible for that.
Now think about the ST plan for the financing of the sky-high $18 billion in capital costs. The financing costs will be about $100 billion, and about 85% of that will be from local tax confiscations (primarily sales taxes). Only $8 billion or so of the $100 billion is expected to come from federal grants – a tiny percentage compared to how it is done everywhere else.
No way should an abusive financing plan like that have been put before voters. That is far too heavy a tax burden for a region of 2.7 million people, especially here where the economic benefits of a train system will be negligible.
The ST boardmembers did not conduct any “tax cost vs. benefit” analysis. One of those would have shown the costs FAR outweigh benefits.
The ST boardmembers also did not examine how peer regions build their light rail systems and develop a financing plan of the type used everywhere else, where regressive tax costs either don’t exist or are minimal. They deliberately kept themselves ignorant of better ways of paying for trains.
Contrary to what you suggest they DID want to impose heavy sales taxes. We know that because their state legislative agendas each year between 1996 and 2008 never called for obtaining progressive revenue sources or getting the state to guarantee the bonds, which would have reduced the tax cost of the ST financing plan by a huge amount.
Another glaring flaw with what the ST boardmembers did is fail to provide any legal safeguards to protect taxpayers from abusive or unwise spending decisions. People are on the hook for all the bad decisions ST makes when it comes to lavishing out massive contracts and payments to other governments.
The local government managers never should have put a proposed ordinance like the one they did on the ballot. People want trains? Fine. Provide them with a reasonable financing plan of they type every other region uses. What they did instead though is they pimped a grossly abusive financing plan that shows contempt toward the people living here.
I’ll say it again because I believe it is true: ST and Metro are engaged in bad management of public resources, and they unnecessarily punish the least well-off in our community. It appears the transit financing practices here are driven by a group-think in the state and local taxing class that either is sadistic or sociopathic.
Posted Thu, Dec 2, 1:09 p.m. Inappropriate
Mickymse, you know as well as I do, that it wasn't just the MVET on the monorail that killed that project. It was the lack of expertise in building the dang thing and a Mayor who wanted it gone due to his political contributions from large building owners downtown who wanted no competition from outlying areas and no people looking into their 2nd story windows.
People hated the old MVET because it was based on car value fantasy. The current one uses the Kelly Blue book. You may not like to pay the tax but you can no longer claim unfair valuation.
Posted Fri, Dec 3, 1:42 a.m. Inappropriate
Mass transit = Mass slavery.
People have been fleeing the taxation of the city and shackle holds of buses and subways for a century now.
Personal Transit is an evolutionary process -- given the person high efficiency, direct access to goods, and shortest path travel.
Mass transit is yet another scheme by politicians to steal our land, reduce us to slaves who must pay fees and taxes to the centralizing bureacracy.
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