Tom Jankowski, all around fabulous guy, and one of the leading lights at Wayne State’s Institute of Gerontology  passes along this story from the Detroit Free Press about the cancellation of Detroit’s Light Rail construction program.

There’s a lot to discuss in this story, and in some ways it epitomizes the contemporary debates we are having over high speed rail and a second stimulus.

1. I’m going to risk getting criticized for indulging in “Ruin Porn” because we have a lot to learn from this particular policy, and if there is another city more mischaracterized among snobby urbanists than my beloved Los Angeles, I’ve yet to see it. Before we go too far in, we can start by saying there’s a lot to Detroit besides population and employment decline.

But there is still population and employment decline, and that’s what gets us to the first fundamental question: what is the marginal productivity of relatively expensive capital investments in mobility in places where you are facing long-term population decline?

The optimistic side says that it’s exactly these types of investments that create transit miracles and rejuvenate places like Detroit. We can’t afford not to do it.

The pessimistic side says that every dollar we spend in declining places is a dollar chasing riders who will never materialize. Better to help them with some level of transit service, with buses, than throwing good money after bad. Target intense, expensive investment dollars in growing places, like San Diego and Portland.

I’m of camp 2, but that doesn’t mean I’m not sympathetic to camp 1. It’s just that I’d rather see investments in human capital, which is mobile, in places like Detroit at this point, so that if the gamble fails and decline continues, we haven’t created a very expensive ghost system. (i.e., places like Detroit strike me as exemplars of where people-based rather than place-based economic development interventions make more sense.)

2. The reason the Feds backed away here concerns the operating deficit that nobody local seems willing to fill. And Detroit, like any number of US cities, is trundling towards outright default–in four months. What I don’t understand is why there is money to operate buses, supposedly, but not the light rail. Drivers are drivers; they cost money. Management and maintenance cost money. While I think that the operating cost savings that light rail advocates have always claimed for light rail are overstated, it’s not like buses are free. I’m having trouble understanding where the money for bus operations comes from if it wasn’t there for light rail operations.

3. Howver, assuming the Feds are right, the operating deficit problem here is one of the dangers of letting cities become so fiscally fragile that they can not run basic services like transit even with with a large capital subsidy from Federal sources. And the problem captures one of the whipsaws for making land and property taxes so utterly verboten in urban politics. As the story suggests, there were businesses and philanthropists lined up to put money in the plan. Businesses and nonprofits (like museums) are willing to do so because rail can bring customers, giving them a nice boost–both in terms of customers and in terms of the relative value of their landholdings proximate to the facility.

Our allergy to land taxation means that although some businesses are willing to pony up to cover capital investment, few want to be on the hook forever for operations. For systems that run on a deficit, like most transit services, that means you need other funding sources. You have fares for part of operations, but if you can’t go to the city’s general fund, where do you go? Voters are not fond of approving taxes for operating funds; they like project lists in exchange for new local taxes. So the major value added of service accrues to real estate, but our ability to recapture that value back into the system is extremely limited by voter preferences.

What’s a place like Detroit supposed to do?