What I’d fix about SB827, aka that white paper has sooooooo been written already

The “takes the cake” response to yesterday’s post is this one:

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This is “Shut up, bitch” politics 101. Lisa, you are speaking about the wrong things in the wrong way. Lemme splain how you best participate in policy, lil lady.

Holy crap, what’s it like to get up in the morning assuming you are entitled to tell a woman as accomplished and as intelligent as I am what I may say and how to say it?

Look, nobody is out to ruin SB827. I’m glad you think I’m that important, but um, no.

I had what I consider to be an important point to make about how difficult policy design is when it comes to really getting money and benefits to flow into the hands of impoverished renters. And how, if policymakers are not really, really careful, the policy process works to screw over poor people even that’s the last thing people crafting and advocating for a policy intend. These problems apply to SB827.

So let’s get this through some heads: I have more than earned the right to write about urban policy even if my every blog post isn’t a perfect roadmap that spoonfeeds people policy solutions. I’m not a free consultant.The material on this blog is offered without charge and without advertising; the public does not pay my salary even since I work at private university.

Here’s how you respond if you don’t agree with my point. “Hey, I don’t think you’re right on this one. I think Weiner & Co really has a handle on it.”

Ta-da! Disagreement that treats me like an equal instead of misguided girl speaking when she should be spoken to.

So I could write a white paper, but it would be a little redundant because Henry George already wrote the book in 1879: Progress and Poverty. You can read it all here.

If 18th century prose is not to your taste (understandably), some super-smart UCLA professors spelled it out in the LA Times Op-Ed page not that long ago (July 2017, actually). It was circulated widely and is generally approved of by all the very smart people who splain things to me. What to do is *right there* spelled out in 750 words.

We have been talking about value capture strategies around train stations in California since Christ was a carpenter. At least since I was in grad school, which was right after the Lincoln assassination.

You want loose supply? We can give you looser supply! It would just be nice if the regulatory change and transit investment combo weren’t just windfalls to landowners here, and we could split the nice land value bumps that SB827 will bring between developers and governments so that government could use its damn power to boost the purchasing power of poor people for housing instead of just lobbing softball economic gains to landowners who already have lots.

I have no heartburn when developers develop developments and make money. That’s their job!

But pointing out when public policy is doing dumb, unfair things is, in fact, my job.

Thus I do have heartburn when in Los Angeles alone we are spending billions and billions of dollars to make places extra-nice and extra-profitable to develop with public investments in transit (let alone HSR) with taxpayers recouping fractions of what we put in because of the way we deal with property taxation in this state.

Value capture as a strategy goes like this:

1. Governments build wonderful amenities like train stations that add value, often gobs, to land–value that landowners get even though they themselves have not done really anything to earn it, such as by actually improving the property themselves. We spent $900 mill on the Expo Line alone. It’s a lovely train! It has made land more valuable along Expo. Let’s get part of that $900 million back! When we upzone in high land value areas like Santa Monica, we can recoup some of our investment. Whee!

2. Value capture is just what it sounds like: governments capture either all or part of the value of the publicimprovement in the land value (but the not the property value) so that developers can still improve the property (and still gain on their investments), but the government recoups some revenue from the investment it has made that got capitalized in the value of the land.

When we do not do that, our public investments in things like transit—especially when combined with nice plans for allowing more intensive land development, like SB827, near transit—become nice, multi-billon dollar windfalls for landowners.

A great, big, fat hand-out of unearned land value windfall.

But, where, o where, could we ever find revenues to expand renter support programs, like vouchers, for California renters? There’s just no money anywhere!e

Yeah, there’s money there, it’s just going to private landowners. Again and again and again and again. We’ve done it with all our metro rail systems, and we will race to do another nice land value giveaway with high speed rail, too.

So the cycle goes something like this: California public policy makes owning land a cash machine for owners, and then we get mad at people for having entrenched interests in their property values, since our policies do not distinguish between land value and building value.

SOOOOOOoo is there any info on the value capture strategy of which you speak?

Yes! Yes there is! It has been bigily studied and described! It’s been implemented I places. It’s been evaluated.

There’s this big huge lineup of reports from researchers at the University of Minnesota.

There’s this discussion The Man Himself David Levinson writing for CityLab.

This friendly brief from APTA!

This friendly informer from the High Speed Rail Advocacy folks.

This nice summary paper from an open access journal.

This nifty book from the Transportation Research Board (a secret Illuminati organization if there ever was one)

This awesome report from Brookings.

This cool study on TOD Value Capture in Massachusetts.

This little blurb from Smart Growth California folks at SCAG who have a really helpful discussion of tools that may be used in California!

This fantastic report from the Lincoln Land Institute. That has a GREAT submission from Mr. Windfalls for Wipeouts Himself, Dean J. Misczynski, who fist published (brilliantly) about this particular topic in 1978.

From FHWA here.

We might, for example, just tweak this approach a bit.

Some private consultants have been working on this VERY IDEA in affordable housing!

OH BOY OH BOY IT’S GOT ITS OWN WIKIPEDIA PAGE!! (A little light; David L, go fix it. )

New York City is eyeballing it.

And of course, the very nice VTPI Report from Jeffery J. Smith and Thomas A. Gihring, which is a GIGANTICALLY LARGE annotated bibliography.

So may I skip the white paper, boss?

Here’s the specific fix, spelled out:

Since we are with BS827 setting up special districts around transit stations anyway, we should set up them up special assessment districts, use the transit-value and up-zone value in land appreciation to derive revenues to put into a fund for: a) rental vouchers; b) school districts with new student need from the new developments and c) transit operations and support. Stations are expensive. They should be far more self-financing than they are. This is one way to do it.

I assume that Senator Weiner has smart legislative staffers who know what value capture is. That it’s not in this legislation, explicitly right now instead of TBD, says something to me, and I don’t like what it says. It says to me our legislature is going to let the value capture ship sail away on us–again–and with it revenues the state or localities could have had to do nice things.

If you don’t like that I don’t like SB827 with these provisions, in the words of Steve Martin: Welll exchuuuuuuuuuuuse me.

Now THAT cat is out of the bag, let me repeat my point from yesterday, which is about the policy process, and NOT about Weiner, YIMBYs, or any specific policy, which I am going to repeat because if the value capture part of this wasn’t obvious to you before I spelled it out, then you are NOT enough of an expert on the policy process and injustice to tell me what I may and may not post in the name of appropriateness.

When you treat the concerns of impoverished people in the “TBD” category of legislation, like so:

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It is very likely that the sausage factory will leave their concerns on the curb, even if your nice, well-intended, progressive bill writer says that won’t happen. Individuals don’t control politics enough for their “I’ve got this” to be a bankable claim.

If you pass the supply components of this rule without value capture (to happen “later”) and without a commitment of those funds for specific people (not general funds), you lose leverage over development (that’s the point, fine, but don’t give away the store), and you set the stage for fighting over affordable units project by project (again, with less leverage, so it’s a both headache for citied and developers AND less effective), instead of a) capturing the value we are due and b) just letting market rates fall where they fall andthen c) using captured revenues to provide income support directly for renters who can’t pay market rates without subsidy. Yes, landlords are likely to capture that increment in rent, but the renter gets to be housed in the process, which I thought was the point here, so I’m in.

And you don’t have to futz with rent control.

And, btw, landowners near stations will have much less incentive to convert their properties if we don’t do value capture on land appreciation, so the policy also has a strong efficiency argument.

Nope, it’s not an easy fix. Landowners love the sugar they get. But they shouldn’t get as much as they do, and they shouldn’t get it at the expense of their neighbors who have contributed to the sale taxes and gas taxes that went into building the transit in the first place if those same neighbors are not making enough $$$$ to be able to stay near transit without income support.

And it would help if Americans didn’t purposefully suck at public housing.

That’s what I’d fix.

Interactive graphic of revenue sources for LA transit providers (and controls), flypaper effect, displacement effect

Here’s the pretty picture, or ugly picture, depending on how you feel about colors and cumulative bar charts.

Wednesday I posted some comparisons of transit revenue data from the NTD for big, regional agencies. I got some questions and comments, one being a comment from brilliant friend Shane Phillips, that LA Metro’s reliance on sales tax might not be as a bad as I suggested, granted that much of it is expended in capital improvements. I disputed this point, simply in that volatility can hurt your capital budgets, too, and I did raise the point that LA got much less from early Measure R implementation simply because it passed in the middle of the recession, and it took us awhile to climb out. During those months, we got much less take than forecasts suggested. It took us a good three years to get to forecast levels, and while Metro can use the funds, those early low months are painful–especially when R was set to sunset on us, and we got little out of the first two-three years.

Another concern came up about whose revenues I aggregated; I only did singleagencies. Brilliant friend Erik Griswald suggested that we should aggregate by geography rather than just agency. I don’t know about this. I see little evidence that different agencies within regions harmonize either service or budgets; agencies have separate budgets even if their service areas and spans overlap, and not all providers are full reporters for the NTD. Geography might be enlightening for things like comparing bases. You might compare total farebox take out of total travel base, for example for bus-only companies and rail-only companies in the same general area. But those are vastly different services with buses doing feeder work that rail services do for a smaller number of trips. Even then, though, agencies operate different service spans and coverage areas, which mean different revenue-mile and revenue-hour potential. Besides the conceptual problems, it’s also a mess given the way NTD reporting is done. You have to do the work to aggregate even by agency as they split by expenditure category and source. There is a lot of budget detail that agency aggregation hides; for instance, Miami Dade Transit gets general fund appropriations from both localities and the state. That’s really interesting information for budget nerds; it’s probably less interesting for people interested in transit just thinking where the money is coming from, which is what motivated me to start poking these data in the first place.

My own concern is a simple lack of confidence that I aggregated the categories properly. I think I did fine except for some chickenfeed categories, but nonetheless, I’d have to do a lot more checking work before I published these in a journal. I think I’d need a budget person to help sort it for sure.

Nonetheless, I figured I could do some with just LA providers, and it might be interesting. I know the providers a bit better here than anywhere else. I am still missing a bunch. I tried to get every agency that participates in TAP (I didn’t; some are under the “small operators” category, tho). It’s interesting but incomplete, with all the problems I figured I’d get once I tried to do this by geography. I’ve got the kitchen sink here institutionally and service wise, as well, including a paratransit provider for illustration (Access).

Sorry for the truncated names, but R has strong preferences about size, and for the locals who are most likely to be interested, the names should be obvious enough.

A better person would have completely consistent colors between yesterday and today, but I am a sad and sloppy coder and I didn’t save plot coding; I did the best I could. I did somewhat alter the small categories around “other” because with the tiny agencies, those become more important. Nobody here is reporting any toll revenue, so that category is gone, but I find that confusing. I checked the NTD stuff three times–I thought Metro got some revenue from HOT lanes. If they do, I don’t see it. Maybe it’s funneled through the state funds, and that’s where it shows up in the budget.

Also gone is the income tax category, we since don’t have any with these agencies, but oooooooo how I wish California would make that an opt-in option on income tax forms. It’s not the same as a big-base dedicated tax, but I think lots of people in California would be willing to chuck in $20 for transit voluntarily, and that could add up to a decent amount.

As to the “active capital investment program” suggestion Shane raised…that might be true with Metro, but many of these little, LA-area agencies do not strike me as having particularly active capital investment programs. I could be wrong, I suppose. They have to buy vehicles, and their real estate is as expensive as anybody else’s here. My suspicion, however, is that they rely on the sales tax because it’s there, and it essentially displaces other potential funding sources; you can, by comparison, see where other small providers in other states where sales taxes aren’t an option, they go with appropriations from general funds or some state fund. So my point doesn’t hold, either; appropriations can be even more of a white-knuckle ride in terms of stability than sales taxes, and you have the extra headache of dedicating lobbyist time to that in addition to policy measures.

The availability of sale tax revenue probably has enabled smaller cities to stabilize funding for transit and use their other local funds for other purposes. On balance, I’m guessing that is probably to the good. Probably. Sales taxes are easy for consumers to pay (the retailer has the cost of the compliance), have a nice big base, and tax foreigners living abroad (but visiting us) and resident noncitizens.

One counter, which I suspect Metro would make: because Los Angeles raises local funds with the sales tax, these agencies attract more Federal dollars–the flypaper effect. That can be true, too, but the Feds do not necessarily care what public finance tool you are using, as long as the money is there. So LA could go with market-rate parking charges and dedicate that to a fund, and as long as it went to a dedicated fund, that would work the same way for flypaper effects.

I’d need to do more work to be able to show anything solid about flypaper or displacement. This is only one year of funding, too, and it may just be that agencies that are seeing bigger lumps of money from the Feds had holdover ARRA funds or got lucky during one grant cycle.

Fun note: What do Metrolink and MARTA have in common? They would miss parking charges if those go away.

I’m reaaaaaaalllly sick of these data; I’ve scratched this particular itch, which is a passive aggressive way of noting that anybody who wants to see more should go play with the data themselves. 😊😊😊

Interactive transit revenue data, visualized in different ways via Plotly

This week I wanted to challenge myself to learn how to use Plotly, as those always look so nice. The other thing I wanted was to clear up some questions I had with WMTA’s budget numbers. They do a very nice job telling a visual story, but I was a little flummoxed by the absence of a full revenue chart. I also wanted to learn more about ImageMagick colors, so there’s that, too.

It’s very difficult to compare transit agency budgets; not all use zero-based budgeting and they are quite different in terms of their scope and service spans. NY Metro is so much bigger than everybody else; very few agencies cross state and county lines. But I picked five relatively large, inter-jurisdictional direct service providers. These data are all from the NTD.

This first chart is a bit weird, but stick with me. I wanted to see who was getting what from where, and how much. I was rather interested in looking at the raw budget numbers by revenue category as whole. I do like it, as it helps us see how important in the big transit picture each type of funding source is. We do tend to point out that fares do not cover costs, and yet this shows that fares are important, overall. They may be much less important in Los Angeles than sales taxes, but in other systems, fares are important. We can also see who is getting what from the Feds, at least this year, 2015.

This next one gets us to the proportions that I suspect most people care about, and the scratchy, uncomfortable feeling I have with the dependence that so many of our big transit agencies have on sales taxes. I get into a lot of trouble saying that I don’t love our transit sales tax measures. I get why LA people support them, but it’s hard for me to tolerate the whinging about small ridership gains when we don’t act more aggressively with gasoline taxes and tolls. There is really no reason why we shouldn’t be doing both tolls and a local option gasoline tax instead of sales tax after sales tax, other than the political difficulties of expecting drivers in LA to pay. If we can’t raise the costs of driving relative to taking transit, I think we are going to be frustrated by underperforming investments for a very long time.

And sales tax revenue is hella volatile and follows the business cycle, so that agencies relying on them for half their budget on sales taxes, like the LA Metro, get to have the floor fall out from under them every time there is a recession.

These are both public and in Plotly, so you can diddle with them, too. For those interested, these data went from Excel to R to Plotly with direct stream through R to the Plotly API.

Eric Jaffe shows the yearly financials on transit, and it’s ugly

So people like Gen Giuliano and I have been saying this for years, but Jaffe is a man, and ostensibly a transit ally (unlike people like me, who wish to destroy it all by noting it costs money and suggesting we should plan for that problem), and since men are the only people who could ever ever understand transit, maybe the transit fanboys will listen this time out.

In either case, Jaffe from Atlantic Cities combs through this report and boils it down for his readers. I’m sort of excited about this entry into the discussion because 1) the DOT seems actually to have taken President Obama’s evidence-based decision-making to heart with things like this report, which is very good and 2) Jaffe does a terrific job of hitting the high points, so I can, in turn, be a fangirl in his general direction.

Except…the “blame labor” question is a big one because I thought the reason we were running around pouring money into trains was to take advantage of economies of scale and save on labor costs. The commenters are circling around the issue, which is higher management salaries do not translate to lower operating costs on the ground. So all those contract managers we have floating around transit agencies are probably expensive relative to what they are producing in terms of revenue.

It’s a lot more than a salary story. First, energy costs are problem for transit agencies as well as motorists (as energy costs are an issue for every industry) so the prices for fuel creeping upwards hits transit agencies right along with everybody else, even if they are using “alternative” fuels, which also probably have a petroleum base. Energy prices tend to move together.

During the time period Jaffe is talking about (00 to 10), there has been a lot of capital investment. Capital budgeting is done separately, but that’s a bad idea. Capital expenditures become debt service, and expanding the system means an increase in both operating costs and revenues in different proportions. In private management decisions, it would be clear: with operating deficits of this magnitude, you shut down. Immediately. You’re losing money every time you send a bus out of the barn. On the rail side, you don’t invest billions of dollars to lose 40 cents on every dollar you spend to operate. Public management requires a more subjective nexus. Is a 50 percent subsidy adequate? Unacceptably high? We have to think about transit a lot like we think about public schools. It’s the same debate, really.

I haven’t gone through and looked at anything rigorously yet, but it’s entirely possible that new expansions are pulling down cost recovery ratios even more because the investment decisions are poor upfront–that is, without the expansion, the existing system gets about 40 percent, but the new service gets 25 percent. And that might be common enough to pull down those numbers as well. The response is always “Those new lines take awhile to build ridership” but then…Metrolink.

There are a couple of key graphics in Jaffe’s discussion that should worry us. The one that really really worries me is this puppy:

Dot chart 3

Wuuuuuuuuuuuut? Yeah, nothing really surprises me here, except the bus and light rail entries. WUUUUUUUUUUUUUUUUUUUT? And people wonder why I am always in such a bad mood. One of the reasons we are supposedly pouring all this money in light rail is that, while it’s more costly upfront to build, it has lower operating costs. This graphic does not suggest that, at all. Now, there are other arguments for light rail (it’s jolly! It’s sweet and wonderful and provides a better ride! Woohoo!) But damn it. The fact that there are no apparent scale economies here suggest that all that public investment in trolleys could be kicking some agencies straight in the financial groin. You spend more to get the same return, and to the degree that there are amenity benefits to the investment, those go to land owners who may or (in California’s case) may not be paying in via local land taxes.

(PS I’m sorry, Atlantic Cities, for lifting your graphic but if you label your figures with numbers I could just refer it rather than lifting it.)

Finally, inevitably, somebody in the comments started in about subsidies to drivers, to which I responded:

I have never understood the transit advocates’ belief that, somehow, operating subsidies to private vehicles are germane to how much operating subsidy transit requires. Is it a fairness or public interest argument? I agree that motorists should pay their full marginal costs, but they already pay via gas taxes, they provide a good deal of their own labor and capital costs privately (owning the car (horrendously expensive), operating it, fueling it, insuring it, etc etc). Buses, bikes, streetcars, and trucks use roads, too, so acting like those are all on car owners is also a bit off. But it’s not like places that charge very high petrol taxes, which for all practical purposes serve as a green tax*, don’t also have to grapple with how much operating subsidy to provide. At some point, there is a basic public management problem here: How much of the operating deficit is a “subsidy” that goes to benefitting patrons, and how much of it is just poor public management, where we really ought to start saying “no” to various add-ons (like new buildings with marble floors, etc, ala the LA Metro building) and expansions that simply put agencies on the hook for operating service they can’t afford to operate.

*I know it’s probably third-best, but see the work of Ken Small and Ian Parry.

Can a bankrupt city like Detroit (not) afford light rail?

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?