Transit funding: The Bateman’s plan and Charles Marohn

January 19, 2015

Jordan Bateman, from The canadian tax payer federation has released an alternative funding plan to fund the Mayor’s plan, let’s have a look at it:

The CTF funding plan

The CTF notes that the aggregated local revenues (all municipalities and the regional district) growth at an average rate of 5.7% annually. It is well above the ~2.5% combined inflation and population growth rate in Metro Vancouver, and also significantly above the GDP growth rate (~3%). So, the CTF suggests that future local spending could be certainly restrained, to earnmark 0.5% of them toward Translink.

Below is the projected local revenues according different hypothesis.

historical and projected aggregated GVRD revenues. The CTF’s plan suggests to earnmark 0.5% of the revenues growth to Translink. if the growth is 4.7%, it could be enough to fund the 10 years Mayors’ plan.

The CTF report [5] assumes an aggregate regional revenues growth of 4.7% which seems reasonable and below the 5.7% historical trend. Given this assumption, earnmarking 0.5% of these revenues growth to Translink could generate $2Billion on the next 10 years. That is enough to finance the mayors’ plan [7].

What is kind of baffling, is that the mayors, especially the tax addicted ones, have not only implicitly endorsed the out of control taxation growth, but becomes apoplectic at the mere suggestion to put rein on it. The narrative is worded by Bill Tieleman like it:

    “To suggest that you can make savings out of growth when you need more schools, when you need more roads, when you need more sewer lines, when you need more garbage trucks — that doesn’t make any sense”

It is time to introduce Charles Marohn:

“No More Road”
“no more sewer line, and no more garbage truck…keep the school thought!”

A rarity in the field, Charles Marohn believes in fiscally responsible urban planning. The main theory developed in his blog is that municipalities are generally engaged in a Ponzi scheme:

  • Cities invest in new infrastructure disregarding of the return on investment, which generally tend to be bad: Capital cost can be paid by Development charge, but the generated property taxes are not enough to cover the maintenance cost of it.
  • Cities then invest in more new infrastructure, to increase their tax base. The new constituents’ taxes pay to maintain the older infrastructure in the city, but then again there is no revenue to maintain the newly built infrastructure…

Thought things here could not be as bad as in US, we still have a financially unsustainable development model as illustrates the graph above.

Charles Marohn solutions

  • A full accounting of all short and long-term financial obligations local governments have assumed for maintaining infrastructure.
  • A stop to infrastructure projects that expand a community’s long-term maintenance obligations.
  • The adoption of strategies to improve the public’s return on investment and improve the use of existing infrastructure.

Charles Marohn often reminds us: More ≠ Better :
Bus 430 lining up at Knight Bridge: more buses will not make the bus any faster than the bike

How much room we have to make better use of our existing infrastructures?

Most city’s “liabilities” can be correlated to its street network length:

  • basic road maintenance, including snow plowing and cleaning
  • lampposts and other urban furnitures
  • police presence, number of fire stations,…
  • sewer and water mains underneath
  • garbage truck running on it

The list obviously includes transit. The shorter the road network is, the more efficiently a city can be ran. The meters of road per capita is a good proxy to estimate how efficiently a city can be ran or not. Below some comparisons

meters of road per capita
transit rich cities are not road rich

As suggests the graph above: We have already more than enough roads! Growth without no new roads, and all the service liabilities they implies, is not only a very reasonnable proposition, but should even be a requirement.

How make that happens?

As witnessed by the cold reception of the CTF plan, many municipalities show no intention to take a more fiscally responsible route for future development. However, using the municipal revenue sources to finance Transit creates an impetuous to control spending (“there is so much water a faucet can deliver”).

Notice that financing transit by municipal revenue sources is also of nature to encourage municipalities to adopt development pattern enabling efficient transit, to effectively maximize revenue sources room for other municipal services [6].

For those reasons, the CTF plan has significant merits.

How good is the CTF plan?

Some have criticized the form of the message, Many other have critized the messenger [4]. some are eventually trying to spin misinformation, but we still have to see an argumented rebuttal of the plan content. It is that good!

However, it is not what we are asked to plebiscite or not. What we are asked to vote for is a tax, which contours are still not specified. This to finance a plan which so far has not been audited, and has still to allocate $700M of tax revenue [7]. Without Bill of law insight to clarify all that, it effectively sounds like we are asked a blank check. Strangely enough the proponents of the plan don’t seem much concerned about that… That is concerning.

What come somewhat as a surprise: The CTF plan doesn’t question the mayors’ plan, and accept all of it, so they are not framing the debate as a “yes or no to Transit” as “yes” advocate try to do. Do they will be succesfull ? time will tell.

[1] CTF unveils alternative to Metro Vancouver transit sales tax, Jen St. Denis, Business in Vancouver, Jan 15th 2014.

[2] Cities, TransLink should scrimp to avoid new transit tax: No campaigner, Jeff Nagel , Surrey North Delta Leader, Jan 15th 2014.

[3] Number for Hong Kong from “Hong Kong: The facts”, for Vancouver, from 2014 Capital and operating budget, from “Transportation Inventory” for surrey, from Bureau of street service for LA, Greater London authority for London and from wikipedia for Paris

[4] Jordan Bateman could have many defaults, but it is not an election to put Mr Bateman in an office. In a referendum, at the difference of an office election, the message trumps the messenger whoever he can be. We will have opportunity to explain more about that point in another post

[5] No Translink Tax: A better plan, January 15th 2015.

[6] In that regard the current translink levy on property is a good thing, but because it is not directly correlated to the cost to serve a city, it is not good enough to encourage policies optimizing Transit efficiency: A more direct contribution from the city coffers tied to the Transit subsidies in it, could be an improvment.

[7] The mayor plan is originally based on $2B revenues of a “new tax” over 10 years, while the “Congestion Improvement tax” will bring ~$2.7B in the Translink coffers. See our December 22nd post for more detail. The hereby discussed CTF plan conclude basically the same.

2 Responses to “Transit funding: The Bateman’s plan and Charles Marohn”

  1. Rico Says:

    I have to disagree with this post. It is not a good idea to forecast future growth based on past growth as owners of privately financed toll roads will tell you…..I also don’t see that substituting one tax for another increases the municipal incentive to prevent waste.
    Also my brief read of the ‘Bateman’ plan was that it would raise the money for unspecified ‘transportation improvements’… basically being deliberately vague to convince the ‘responsible spending’ transit advocates to vote no then advocating new freeways…I just view this as a Trojan horse against the ‘referendum.’
    While I agree with a lot of Charles Mahons work I have no problems with building new infrastructure that has a proper business case (I know neither does he, but reading his blog implies a very high bar).

  2. Voony Says:

    Rico: Fair enough.

    I am aware that Mr Bateman could have an hidden agenda, but in this post I discuss the proposed funding mechanism on its own merits. (I didn’t read the “ranting preamble”, and just jumped to the accountant report)

    Last december I have sent a letter to Translink voicing concern about the bus integration at Metrotown

    -I have just received a Translink answer confirming that the new layout will increase the bus operating cost (~$300,000/year my number), this to please Burnaby city hall.

    -Translink want to improve the bus 49, and save $500,000/year. The Vancouver council has put a motion against it.

    notice that above “waste” numbers are order of magnitude greater that an one time poodle expense 😉 .

    More generally, bus lanes (improving transit while reducing operating cost) are in competition with parking lanes (bringing money in the city coffers). Vancouver has no good financial incentive to convert a parking lane into a bus lane (so we have basically none..)

    If Translink was also funded more directly from the cities’ coffers, no doubt that the above examples could be seen under a different light by the concerned city hall.

    Ona related note y a comment on ssp from Kisai pretty much sum my view point:

    As for electing people directly to Translink… I think this is foolish. The Mayors are already elected, and they’re the ones screwing around and not raising property taxes. Translink is essentially a private company that keeps being meddled with by politicians instead of being left alone to do what is best for the region. If there is no political will from the mayors to raise taxes, nor the province or feds for capital projects, then Translink should just raise all the fares or cut service to each region that isn’t paying for the amount of services required. Translink has a government mandated monopoly on transit, and then some. I’m sure the South of Fraser feels they aren’t getting their moneys worth, but that is because of the geography. It costs more money to run buses in less dense areas, because more buses are needed to get comparable service to North of Fraser. 

    Nothing is going to change that in the short term as long as communities South of the Fraser keep on urban sprawling. Any form of rapid transit is completely wasted without the transit oriented development. And picking the wrong kind of “rapid” transit, will not bring the right kind of development.

    Also, worth to note that the Mayors’ plan also integrates future growth.
    e.g: In 2024, $275 Million of the “Congestion Improvement tax” will be required to foot the bill of the operating cost only of the Mayors’ plan (extension over the translink base plan)…and it will still a lot of capital cost to repay by that time. (I have entered all financial sheet into google doc here)

    But, you are right future growth is just a prediction: that is one reason I prefer to see Transit projects to hit ground only once they become cheaper to operate than buses. (if growth happen we are ready for, if not it still make sense to operate it)…

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