One Transportation Solution Fits All

Last: Centralized Planning at Community Expense

The centralization of public transportation policy and funding in federal agencies, guided by federal bureaucracies and administered by regional transportation authorities, has effectively removed local governmental and community control over the design and performance criteria for local and regional transportation system development and services. Funding for development of mass transportation facilities granted by federal sources to state and regional transportation agencies and authorities is increasingly supplemented by local tax revenues co-opted and channeled into regional transportation authorities to such an extent that non-transportation agencies and commissions, as well as, county and city governments, find themselves further and further removed from transportation system development decision making processes.

The Los Angeles City Council, which governs the city of 3.4 million, has little, if any authority or role in the planning of the city’s transportation systems, but must deal with the financial and environmental impacts of regional system development through its city agencies and departments. In a relatively minor, but significant illustration of this relationship, the decision of the Los Angeles County Metropolitan Transit Authority (LACMTA) to introduce articulated, over-sized buses onto city streets has rendered miles of streets and boulevards undriveable, even by the buses themselves, as the existing pavement has been crushed and potholed by the over-weight buses. Bus drivers on LA City’s Wilshire Boulevard routinely avoid the right hand lanes, which the over-sized buses have ruined, in order to reduce damage to the bus fleet. Street and pavement crews provided by MTA were at one time limited to the service of a single truck, leaving the City of Los Angeles to bear the burden of maintaining the perpetually broken down pavement and roadbed.

The most recent misguided scheme to address the neglected repair of LA City streets has the Mayor of Los Angeles promoting a proposal to borrow and advance $800 million of the City’s future share of a voter-approved Los Angeles County ½ cent sales tax to repair 1,500 miles of city streets. Repayment of the loan would be made over the next 27 years, requiring that roughly $55,000,000 of the City’s Proposition R, ½ cent sales tax revenue be committed to servicing the loan each fiscal year, while the repaired streets would have most likely fallen into disrepair well before the loan would be paid off. Within two weeks of his initial endorsement, the Mayor doubled down on the plan, proposing that the street repair campaign be expanded to $1.5 billion, by transferring city transportation funds currently allocated to street repair to the trimming of 75,000 trees, and replanting 3,750 existing trees in the project area.

Along with the growing loss of control and oversight of mass transportation system planning and finance, local governments and communities are increasingly saddled with the financial burdens of maintaining the grossly over priced, yet unsustainably inefficient transportation systems foisted upon them by their transportation planning agencies. The formation and consolidation of regional transportation agencies with pervasive monopoly authority that can shape state and local tax structures to funnel additional revenues into their control, while remaining separate, and unaccountable to the local communities and economies they are so dramatically impacting, has placed virtually all decision making power in the hands of elected officials and political appointees who serve on the boards of directors of regional transportation authorities. Current practices of regional transportation authorities flood local communities and jurisdictions with hundreds of millions, if not billions of dollars of short-term construction spending, while adding little to their long-term stability or economic structure. Indeed, the debt service, tax increases, surcharges and revenue diversions that accompany most large scale transportation developments add to the negative impacts of inefficient, underutilized and problematic transportation services imposed on local communities, governments and economies.

The LACMTA has adopted long range development and operational plans committed to spending $300 billion over 35 years (less $26.7 billion for debt service) of federal, state and local tax revenues, after successfully campaigning and convincing the voters of Los Angeles County to assess themselves an additional ½ cent sales tax that is expected to generate $30-40 billion over thirty years to fund a range of public safety and infrastructure improvements, as well as, MTA projects. After adopting their long-range development and spending plan, and securing an additional billion-dollar-per-year local revenue source, the MTA has begun to apply for accelerated federal funding, in order to shorten construction periods and permit numerous transportation projects to begin simultaneously.

As currently proposed, LACMTA would allocate and spend the proceeds of an $8.8 billion federal loan to accelerate ground breaking and completion of multiple transportation projects over the next 10 years, but has not identified the source of the $15-18 billion debt repayment service that the loan plan would impose on local taxpayers. Indeed, the “Proposed One-Half Cent Sales Tax for Transportation Outline of Expenditure Categories”, adopted by the LACMTA Board of Directors, July 24, 2008, allocates zero dollars to debt service of any kind. A crucial decision regarding the source of 30/10, high-speed rail or any federal “leveraged” loan debt repayment revenue should be publicly determined before the MTA or any local government authority enters into any future borrowing from federal sources. Combined with LACMTA’s 35-year long range plan debt service, repayment of the proposed 30/10 federal loan would send MTA’s debt service payments well beyond $1 billion per year, for the next 30 years.

Cavalierly brandishing LA County MTA’s ½ cent sales tax increase-supported “30/10-America Fast Forward” transportation financing proposals, the Mayor of Los Angeles has publicly stated, “This is a program that puts people to work now, at little cost, since 98% of the federal dollars would be repaid from local sources”. Grandstanding from the same playbook, the MTA’s deputy executive officer has described voter passage of LA County Measure R ½ cent sales tax increase as a “mandate from the voters” in support of a 6.3% increase in the MTA 2011-2012 budget, and its unprecedented simultaneous ground breaking on three rail projects. Passage of the 2008 County tax measure is repeatedly touted by California politicians and transportation officials as unqualified taxpayer support for everything including the $540,000,000 per mile LA subway extension, $100,000,000 per mile rail projects, multi-billion dollar borrowing schemes and inter-city high-speed rail, while failing to connect mass transit to Los Angeles International Airport.

The most prominent and expensive of the dozen 30/10 projects is a 12-mile extension of the LA Red Line Subway from Mid-Wilshire LA to the City of Santa Monica. At an estimated cost of $540,000,000 per mile, the subway’s $7+ billion construction failed to receive LA County MTA Board of Directors approval for inclusion in their 2040 comprehensive plan. It is fairly obvious that full implementation of the subway extension would monopolize most of the proposed $8.8 billion federal loan, should MTA manage to break ground and complete the subway in the next ten years, raising uncertainty regarding priorities and funding of the other transportation projects promoted under the 30/10 Plan. A likely outcome of this competition for funding would be the curtailment of several of the proposed transportation projects, or application for billions of additional federal dollars. Repayment of the $8.8 billion federal loan would require roughly $18 billion in debt service over a thirty-year repayment period, or the equivalent of $600,000,000 of Measure R, ½ cent sales tax’ anticipated $1 billion annual revenue. Even repaying the proposed federal loan at 0% interest, with no administrative or service expenses, debt service on the $8.8 billion loan would cost taxpayers $300,000,000 per year. Commitment of 30-60% of anticipated annual sales tax revenue to servicing debt would greatly diminish the dynamic long-term potential of the Measure R sales tax, or any other LA County revenue source. Addition of multiple new rail projects, leveraged multi-billion dollar borrowing and expanded state and local mass transportation initiatives to the list of Measure R 1/2 cent tax-supported spending programs appears to have committed its anticipated sales tax revenues several times over.

The unrestrained pursuit of funds by LACMTA, local, state and federal elected and appointed representatives, to break ground on a dozen “accelerated” or currently unfunded transportation projects, including the subway extension, places LA County taxpayers in a double-bind of debt, should any of the federally supported projects fail to be completed. Under the terms of most federal transportation grants and financial aid, federal funds spent on unfinished projects, or on anything other than the specific transportation projects to which federal funds are allocated, including servicing of debt, would require that the federal funds be repaid in full, with interest. The consequences of such misspending or misallocation of transportation funds would inevitably fall onto local taxpayers and local governments, who would be burdened with long-term indebtedness, without receiving any significant benefits from the failed transportation development schemes.

It is unclear whether the proposed “30/10 Plan” would allocate any of the federal loan to public safety or infrastructure programs other than accelerated transportation projects, or how the commitment of future sales tax revenue to debt service would affect the allocation of annual sales tax revenues to purposes other than targeted MTA projects. The “160,000 New Jobs” that promoters of the 30/10 Plan claim will be created by the spending initiative would, at best, be temporary construction jobs, often awarded to out-of-state contractors, building track, tunnels and facilities for operation of imported rolling stock. (It cost Solyndra approximately $450,000 to create each of the 1,100 full time jobs at its now-closed solar panel manufacturing plant in Fremont, California). Virtually none of the 30/10 “new jobs” are likely to become integral or long-term components of the local economy. Depictions of the $8.8 billion federal loan as “leveraged financing” deflects attention form the fact that the money will have to be repaid from future County tax revenues; thus extending the long-term indebtedness of the LACMTA, and further “leveraging” the taxpayers of Los Angeles County. Having discovered yet another means of transferring short-term transportation project development ambitions onto the backs of local taxpayers, MTA, local and federal government elected officials have undertaken a re-branding of “30/10” as “America Fast Forward”, and are planning to “apply it nationwide.”

In a similar end-run around state taxpayers, both of California’s Senators hailed the May 2011 federal grant of $3.5 billion supporting high-speed rail development without mention of the nearly $3 billion in matching funds the state would be required to contribute in support of the San Joaquin Valley first phase, known as “The Train to Nowhere”. Whether the matching funds are secured through issuance of California High-Speed Rail Initiative bonds, special taxes or other financial instruments, they will add to the state’s debt at a time when California is burdened with historic debt, and tax revenues have fallen several billion dollars short of balancing a highly speculative state budget.

Allocation of Los Angeles County sales tax revenue is being subjected to further attempts at preemptive commitment or steering by several competing LACMTA projects and sub-authorities, in a relentless effort at securing funds adequate to complete projects on accelerated schedules, while simultaneously extending financing and repayment into future decades. Finding that ½ cent sales tax revenues, even when supplemented by the proposed $8.8 billion 30/10 federal loan, will not support ground breaking and accelerated construction schedules for projects other than the multi-billion dollar subway extension and several at grade rail projects, interests including The Gold Line Foothill Extension Construction Authority are proposing to front-load their construction financing to close what is termed a “funding gap” by means of design-build agreements under which construction contractors would design, build and finance portions of the project, and be paid from sales tax or operating revenues over an extended period of years. The “gap funding” agreements sought by the Extension Construction Authority and depicted as “public-private partnerships” appear to be little more than deferred payment plans, dependent upon access to future sales tax revenues.

As representatives of the various included, as well as, excluded 30/10 accelerated transportation projects submit their respective claims on the $8.8 billion federal loan and ½ cent sales tax revenues, it is becoming increasingly clear that additional funding and funding sources will be required in order that all designated “accelerated projects” can be started and completed ahead of MTA’s 30-year schedule. Competition for early funding among the designated accelerated projects could create a hierarchy of commitments and payments of annual sales tax revenues in servicing the various types of debt, which could, in turn, lead to delayed payments to holders of secondary, or lower priority instruments, should sales tax revenues fall short of projected levels. With government bonds and federal loan payments assuming top priority, other loans and deferred design-build contract payments may be delayed or deferred into later fiscal years. In the event that sales tax revenues fall below projected levels, the lower priority debt service may be deferred until revenue returns to levels sufficient to pay all debt. Should the newly built systems operate at nearly inevitable deficits, requiring subsidies to maintain service and maintenance at optimum levels, the only flexible and accessible source of supplemental revenues would be the steady stream of sales tax dollars that may have to be diverted from servicing of other debt, and the possible postponement of some debt payment for years into the future.

In contrast to the growing advocacy and political maneuvering over allocation of funds for the Measure R 1/2 cent sales tax, and hoped-for multi-billion dollar federal loan revenues, little in the way of a clear plan to complete the three-mile connection between the Los Angeles Green Rail Line and terminal area of Los Angeles International Airport has been publicly presented or discussed. As of April 2011, the LACMTA-adopted plan to build a Measure R-funded, $1.7 billion surface light rail line between the soon-to-open Expo light rail line and the existing 105 Freeway-Green Rail Line passes 1.5 miles short of the airport, with no specific plans to link a proposed new Century Boulevard Crenshaw Line station to any part of LAX. Metropolitan Transportation Authority approval of such ill-conceived, expensive, yet ineffectual rail projects should cause a serious re-assessment of the professional competence, practicality and cost-effectiveness of MTA planning and implementation processes, as well as, the pervasive powers the Los Angeles MTA Board of Directors holds over every aspect of transportation development and financing in Los Angeles County and Southern California. In perhaps the greatest evidence of convoluted, “below the radar” incompetence yet exhibited by LACMTA, a barely noticed, and unpublicized May 2011 MTA staff report indentifying $2 billion of “low-priority maintenance and system enhancement projects” that could be “redirected” to the proposed $1.7 billion, 8.5-mile Crenshaw rail line has been touted by local politicians as the potential solution to the inclusion of an additional $400,000,000 station and undergrounding project on the poorly designed at grade rail service. Notwithstanding the report’s questionable conclusions, the May 2011 MTA board’s decision to exclude a community-supported Lamert Park station from its final adopted Crenshaw Plan does not appear to be based on a claim of insufficient funds, but rather on MTA’s unwillingness to change its flawed station location criteria, or its community input and representation processes.

Recent congressional proposals to create a federally organized National Infrastructure Bank would further expand local governments’ access to financing and debt in pursuit funds needed to maintain decaying infrastructure, including transportation systems. Presented as an apparent alternative or replacement for 2010 federal stimulus grants for “Shovel Ready Infrastructure Projects”, the National Infrastructure Bank would launch its funding with an initial $10-50 billion federal contribution, also described as a “leveraged investment”, then turn day to day financial operations over to its majority private, Wall Street investors in the “American Infrastructure Financing Authority”, to underwrite, structure and provide loans to local governments that would require repayment under conventional long-term debt servicing agreements. The Authority’s profits would be divided commensurate with the percentages of investments to the fund by federal and private lending institutions. This National Infrastructure Bank concept would not enhance or grow local financial institutions or stimulate local economic conditions as effectively or prudently as would American Monorail’s proposals to form community based, infrastructure-supporting financial institutions; and is likely to deepen the indebtedness of local governments and taxpayers.

Next: Size and Scope of Mass Transportation Development

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