John Locke Update / Research Newsletter

Billion Dollar Buses

posted on in City & County Government, Spending & Taxes, Transportation
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On June 6, the Wake County Board of Commissioners approved a transit plan.  This is not good news.

The plan calls for spending $2.3 billion (that’s right, billion, with a b) over ten years to build commuter rail lines and Bus Rapid Transit, as well as increase the number and frequency of regular bus lines.  The goal is to connect every corner of the county – Garner, Zebulon, Wake Forest, Rolesville, Holly Springs, Apex, Fuquay-Varina, RTP – through transit.

The first, and most obvious, problem is the money.  $2.3 billion is a lot of tax dollars.  And make no mistake, the plan is absolutely to pay for this, overwhelmingly, through local taxes.  How?  Well, the biggie is an additional half-cent sales tax, which is expected to raise $78.5 million in it’s first full year and increase annually from then on.  The majority of the funding for the entire project comes from this half-cent sales tax increase.

Think about that for a minute.  $78.5 million dollars in the first year, and more each year after that.  To put that in perspective, over the last couple of years, new elementary schools in Wake County have cost about $20 million each.  The latest middle school in Wake County cost almost $33 million.  The newest high school, the really expensive school building project, came in at $66 million.  We’re talking about a lot of money here, enough to build four elementary schools.

But it’s not even that we’re taking money away from school building.  No, this is new, additional taxation, and a lot of it.  It’s $78.5 million taken from every single person who buys anything in Wake County.  It’s $78.5 million taken away from every other conceivable use within the economy and pumped into trains and buses.  Are we sure that’s a great idea?

And the hits don’t stop there.  If you have a vehicle registered in Wake County, you’ll pay for the trains and buses there, too, in the form of an additional $10 per vehicle in registration fees.  Add this up.  Half a percent on everything you buy, plus $10 per vehicle.

There will also be some existing sources of revenue that will be used to fund the project, including rental car taxes and federal and state funds.  And then there’s the debt, because even with all that revenue, the capital costs will still have a significant amount of debt funding – 40% for commuter rail, 15.5% for Bus Rapid Transit, and 31% for regular bus infrastructure.

So we have additional taxes and fees, plus some debt.  Isn’t there some other source of revenue, something obvious that’s missing from this mix?  Oh, yes, that’s right.  How about fares?  After all, people will pay to ride these buses and trains, right?  Well, it turns out fare revenue is factored into the transit plan.  And the estimate is that 20% of operating expenses (that’s just operating, not capital) will be funded through fares.

And this raises another important point.  Wake County is choosing to enter into a transit plan that will cost more than $2.3 billion dollars over ten years, and they’re not expecting that ridership will actually ever cover even a substantial portion of the cost.  It’s perpetual subsidy.  It’s not a quick infusion of cash to get this going until it can be self-sustaining.  No, this is a commitment to tens of millions of dollars every year for the foreseeable future.

But maybe it’s necessary, you say.  Maybe people really need more trains and buses.  Maybe there’s huge demand for the service.

According to Wake County’s Recommended Transit Plan, “Transit is currently used by just 1.1% of commuters across the County.”  Transit does exist already.  There are actually quite a number of buses in Wake County.  But few people use them.  And one of the most glaring omissions from the Transit Plan is any hard data that would suggest there’s significant demand for all the buses and trains they’re proposing.  Instead, there’s a certain “Field of Dreams” quality to the report.

People will come, Ray. They’ll come … for reasons they can’t even fathom. They’ll turn up … not knowing for sure why they’re doing it. … They’ll pass over the money without even thinking about it: for it is money they have and peace they lack. … and it’ll be as if they dipped themselves in magic waters. … People will come Ray.

I bought it from James Earl Jones talking about a magical baseball field in the middle of an Iowa corn farm.  From the Wake County Transit Plan, I don’t.

There is, however, one piece of this puzzle that gives me hope.  The increase in the sales tax has to be approved by voters, and it will be on the ballot in November.  Because it is such a huge chunk of the funding, the whole plan is subject to approval of that sales tax increase.  I’m hopeful that the voters of Wake County will demonstrate more fiscal responsibility than its commissioners and vote it down later this year.

Julie Tisdale is City and County Policy Analyst at the John Locke Foundation. She studies the effectiveness of local spending and tax policy. Before coming to the Locke Foundation, she worked at the Centre for Civil Society in New Delhi,… ...

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