My brilliant friend Allison Yoh is quoted in this article from the Los Angeles TImes:
From a budget surplus of $12 million in 2004, the OCTA is now facing a $300-million shortfall over the next five years. Fares rose in January, but that just drove riders away, resulting in even lower revenue. Cuts last year and those planned through March 2010 will reduce bus service by 30%, dropping back to 1998 levels. There were 42 layoffs in April, and additional layoff notices were sent out this month to 51 employees. Officials anticipate another 192 positions will be eliminated in March.
For years, the OCTA and other transit agencies have benefited from a strong economy, which provided sales-tax revenue and state funding. Economists had estimated the sales-tax revenue would continue to grow about 5% per year — one year it actually grew by 11%. That 5% annual increase was projected out into the agency’s comprehensive business plan from 2006 through to 2026.
Ok, I’m actually willing to make an argument for sales taxes specifically spent on public transit, even though sales taxes are in general a volatile tax instrument. Such a tax-and-revenue allocation scheme can, in fact, be progressive even though the out-of-pocket costs are regressive. However, they projected 5 percent annual increase through 2026. Let me repeat this: through 2026. Am I reading that right? That’s a 20 year forecast which suggests in 20 years receipts will approximately double in a built-out county.
There’s part of me that wants to write a paper on how the boom mentality affected policy analysis. Paul Knox and I recently wrote a grouchy piece for Housing Policy Debate about how the real estate boom deluded planners into assuming that metropolitan form was something that they could shape in their hands like clay on potter’s wheel simply because anything that got built got bought and occupied no matter what and developers couldn’t build fast enough. Now what do we do given that we’ve convinced ourselves that re-development is the key to urban and environmental reform if development has slowed to a near standstill? Rejoice when places like Flint decide to make their suburbs ghost-towns? That’s what we got?
This forecast of OCTA’s business folks strikes me as much of the same “business cycle what business cycle?” thinking–and from economists no less. How old are these economists and where were they trained? 2026 is a long time, and the first rule of public sector budgeting is that sales tax receipts are hella volatile. Places that emphasize sales taxes–like Arizona–always look like geniuses during up times (lookit our great services and our low property taxes! Aren’t we swell?) and then overnight they have no revenue cushion against lower consumer activity.
Even if nobody could predict that this particular downturn was going to happen, it was bad forecasting to assume that there would simply be no downtowns in a two-decade time period. I suppose, after the 11 percent increase in one year, that the 5 percent seemed like a reasonable average to use, but…not really. Given that interest rates on basic savings accounts were not much more than that, this was irresponsible forecasting. It’s kind of mean of me to be Monday-morning quarterbacking here, but…this was bad.
The consequences are steep, too, as the story shows. A $0.25 fare increase is a huge percentage increase in transit fares, concomitant with service quality decreases: ridership can’t do anything BUT fall under those circumstances (paired with an soaring unemployment rate, which causes ridership to fall because people don’t have jobs to go to). It’s a sad time for transit.