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Letter: Transit plan only as good as business model


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Note: The statements, views, and opinions contained in this letter to the editor are those of the author and are not endorsed by, nor do they necessarily reflect, the opinions of The Republic.

An Indianapolis newspaper recently offered some careful rethinking on why the state legislature hesitated this past session to authorize Indianapolis Mayor Greg Ballard — and mayors from neighboring suburban cities — to place a ballot before voters for a $1.3 billion mass transit plan for Marion and Hamilton counties.

While conceding the particular transit system is underfunded and its skeletal transit service must be improved to enable more people to access employment opportunities throughout its city, the newspaper wondered whether achieving that objective requires lavishing large sums of new taxpayer money building one or more gleaming new billion-dollar mass transit lines coming in from the suburbs.

 

Most important, the newspaper ventured into previously forbidden territory, raising questions about the wisdom and potential effect of the proposal’s various components.

It wondered about the financing source (a higher local income tax); it wondered if gleaming new mass-transit lines are the highest priority for its city; and it wondered if such lines might simply hasten a population shift to outlying suburban areas.

These are essential questions deserving a full public discussion in other cities throughout the state. Few such voices of conscience were raised last year as the mass-transit bandwagon rolled into the Statehouse.

So finally we have begun the process of understanding and illuminating the mechanism underlying mass-transit proposals, the fundamentals of their system design and function.

And we are posing questions against the backdrop of pressing fiscal realities. For example (though unstated so far), the most basic of municipal services (public safety and law enforcement) will consume upward of 90 percent of the typical city-county budget. It would seem there is not money for much else.

To be sure, inadequate transit service is in large part the result of a lack of dedicated transit funding sources; it generally relies heavily upon annual appropriations by a city-county council.

And there can be no argument that a reliable local tax source could provide a solid foundation on which to expand transit coverage and improve service frequency.

At the same time, revenue from any new transit tax could quickly be drained away by cost overruns and “scope creep” in constructing other projects in an upgrade package, leaving the original transit system high and dry. This scenario has happened in other places.

As an independent transportation analyst, I would ask a few questions beyond the current discussion: What is the problem the experts and system proponents seek to solve? Are they properly framing the issue? With a billion dollars and more in play, how objective can we expect the government’s experts to be? How have similar projects fared elsewhere (no cherry-picking examples, please)? Is there any reason things would work out any differently here?

Finally, if mass transit rises to one of our highest priorities, there remain a host of tough, practical questions a banker would ask of a prospective borrower:

How solid are the numbers in the business plan? What are the details of the revenue projections and their sensitivity to changing conditions? How realistic are the ridership numbers? The construction cost estimates? What contingency plans are there for problems you will encounter? How likely would a slip in the schedule — or added project scope — lead to a need for more money? How would you adjust your plans? Would the expansion of a transit system be sacrificed to fund overruns on the mass-transit lines?

Indiana taxpayers must demand answers to these questions. For in the end, they are that banker.

Thomas Heller, a resident of Columbus, earned his bachelors degree in economics at the Wharton School and a master’s degree in regional science from the University of Pennsylvania. Prior to his move to Indiana, he was principal and founder of Regional Analytic Sciences in Seattle, specializing in transportation, public finance and land economics. Previously he held related positions with the Washington State Department of Transportation and the Washington State Senate. Contact him at regional.analytic@gmail.com.

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