Last: Formation of Private Operational and Development Entities
Local and regional transportation authorities are repeatedly drawn into long term commitments of local tax revenues by the structure and terms of federal transportation funding and incentives. Mistakenly convinced that virtually all of the funding for local transportation system development will be provided by federal transportation agencies, local transportation authorities tend to leverage initial federal funding into creation of transportation systems and services that are not financially sustainable, and require extensive local tax revenues to continue operation. Under prevailing transportation planning practices and funding regimes, the ability of regional transportation entities to secure federal funds for mass transportation system development has become the primary objective, while traditional planning criteria and cost effectiveness have assumed secondary influence. This repeatedly leads to the building of transportation systems that fall short of their projected ridership and fare income levels, while achieving little or none of the traffic congestion relief their promoters promise. The September 2010 preliminary environmental impact report on a portion of the planned 12-mile extension of the Los Angeles subway to Santa Monica indicates a negligible reduction in vehicle trips and traffic congestion as a result of constructing the subway. This complete disconnect from any significant benefit or improvement of traffic, or any other condition, typifies virtually all mass transportation developments currently under construction or recently put into service, yet regional transportation authorities pursue ever-expanding transportation development, financed by ever-increasing levels of local taxpayer expense and indebtedness.
In perhaps the most extreme shift of transportation development funding and debt obligation, the Los Angeles County Metropolitan Transportation Authority (LACMTA) has adopted a $300 billion, 35-year development, service and financing plan that completely inverts decades-old funding practices that provided an 85%-15% federal-local share of funds, to a 20%-80% federal-local funding regime that threatens to bankrupt the massive transportation system. Commitment of ever-increasing amounts and percentages of local tax revenues to transportation system development, operations and debt service has created an unsustainable financial burden on the taxpayers, local governments and the economic structure of Los Angeles County. The LACMTA’s development, funding, revenue and debt conditions are moving toward, and in most cases, dwarfing those of California’s local government entities; while having grown well beyond the effective fiscal and credit capabilities of the State of California. Moody’s rating service cut its’ rating of California’s crucial Infrastructure and Economic Development Bank securities from Aa2 to Aa3 in April, 2011. With California’s bond ratings progressively downgraded, the Los Angeles County Metropolitan Transportation Authority appears to be moving toward going it alone in the foreseeable future, or borrowing from state and federal governments at ever-increasing costs to LA County taxpayers.
In a convoluted “joint-venture” proposal, the California High-Speed Rail Authority has announced intentions to invest $30 million toward land acquisition in the Los Angeles area, the majority of which will be committed to purchasing the beautifully restored architectural jewel of Union Station, in a $75,000,000 joint-investment with the Los Angeles County Metropolitan Transit Authority. The stated purpose for the purchase of 38 acres of land including Union Station is to facilitate improvements to the station area required to expand the capacity of the transportation center to serve the expected increases in rail passengers that the LA subway extension, high-speed rail connection and several other new rail services would bring to Union Station. Notwithstanding the fact that Union Station’s state and national architectural and historic registry status would prohibit most of the improvements needed to accommodate expanded or high-speed rail services, the likelihood of high-speed rail ever reaching Los Angeles is becoming increasingly remote; raising serious questions regarding the necessity for purchase of land that can not be developed as a high-speed rail station or related facilities under any circumstances. Furthermore, a scenario may develop that leaves a defunct, or non-connected LA high-speed rail service in possession of key real estate for which the California High-Speed Rail Authority has no use or purpose; leaving control of the station and its transferable development rights to the LACMTA. As of February 2011, the Los Angeles County Metropolitan Transportation Authority plans to purchase Union Station, and development rights to its 38-acre site, for $75,000,000.
Once funded and built, operation and maintenance of new transportation facilities and systems becomes the fiscal responsibility of local and regional transportation authorities, and the local governments they represent. Failure to plan and design self-sustaining public transportation systems inevitably leads to operating deficits and reduction of service, which can only be offset by subsidies derived from funding reallocation or tax increases. Deficit operational performance only adds to short falls in servicing the ever-increasing debt that local and regional governments are assuming as they leverage bonds, taxes and other transportation authority commitments of public funds in efforts to fast track or expand the scope of transportation developments under their jurisdiction.
Monorail systems can be developed and placed in service in approximately three years, while light rail generally takes twice as long to fully complete, and subways may require ten to twenty years from environmental study to public operation. Combined with maintenance and operational costs at 5-10% of all types of passenger rail systems, the distinct economic advantages of monorail system development, technology and operational efficiency present transportation authorities with alternatives that should be addressed and considered in every mass transportation situation and development campaign.
Monorail system development can leverage federal funds by strategically applying a fraction of the typical amounts of federal transportation dollars to defraying limited local government expenditures incurred in the assembly of right of way, environmental impact study, planning, permit issuance, inspection, utility and infrastructure relocation, project oversight and other governmental functions required for successful implementation of new monorail systems and services. Built and put into service by private monorail development companies, new monorail systems could be operated and maintained by private monorail operators; or turned over to local transportation authorities under BOOT, Build-Own-Operate-Transfer agreements, or similar processes that would employ the efficiencies and cost effective advantages of the private sector to implement public transportation infrastructure and services. Local governments and public transportation agencies should be aware that transfer of system operations to public entities may change the property tax status, and possibly curtail several sources of tax revenue from the system’s guide ways, facilities and service operations.
The need for comprehensive, long-term planning of debt service and operating revenue sufficient to maintain transportation services at optimal levels is critical to the future of public mass transportation. Under current planning and funding regimes, the long-term viability and sustainability of new transportation services appears to be systematically stunted, and dependent on ever-increasing subsidy, revenue diversion and tax increases. The self-limiting, self-defeating nature of such planning is illustrated by the proposed commitment of thirty years of future sales tax revenues to servicing an $8.8 billion federal loan to fund a ten-year accelerated Los Angeles County MTA development program, that would only serve to compound the long-term indebtedness of LACMTA and the taxpayers of Los Angeles County. Shifting of long-term debt obligations increasingly onto local taxpayers has in large part paralleled the change in the federal-local shares of transportation funding, as well as, the diminishing solvency of local government. In view of the perpetual deficit condition of virtually every MTA service and program, the shifting of current development expenditures into long-term debt service will inevitably exacerbate future budget shortfalls, while forfeiting all opportunities to change plans or reallocate tax revenues to more productive or appropriate uses.
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