Wednesday, January 04, 2006

The Impatient Electorate

Ten days to inauguration, just a week till the General Assembly session begins, and 'about two weeks' before Gov.-elect Tim Kaine presents his proposals for revamping the state's transportation program, says the Wash Post.

Kaine continues to push the land-use link at his 'town hall' meetings (yesterday's meeting in Falls Church was his 10th) but exactly what does he mean? At a November town hall in Manassas Kaine suggested that he wouldn't push for a true adequate public facilities ordinance, but just 'clarify' existing state law to let localities consider a new development's transportation impact as one factor in deciding whether to approve a rezoning.

One thing that is clear, though, from these mass meetings Kaine's been hosting: frustrated commuters want something done NOW, or sooner if possible. That's a wholly unreasonable expectation, so I hope Kaine et al have a strategy for dealing with the disappointment the electorate will feel in a year.

From a Wash Post article this morning:
'About the only thing the crowd of about 500 commuters, politicians, activists and others shared was a sentiment that something needs to be done -- and quickly -- to ease the daily frustration of getting around in Northern Virginia.
"We need to address this issue and address it early," Kaine told them. "We just can't wait, because it gets tougher and tougher."'
Some plain talk would be helpful now to cool off expectations. In this fast-growing state (with all the already-approved developments on the books) it's going to get 'tougher and tougher' for awhile.


At 10:55 AM, Blogger Ray Hyde said...

I'm glad someone besides me is asking what tying transportation to development means.

As McSweeney reports we are projected to have a shortage of 92,000 housing units by 2030, at current growth rates. If tying land use to transportation means less growth that situation will be worse, and the result will be that homes cost 7 to to 10 times annual salary rather than 3 or 4 times annual salary. Rents will climb in tandem.

He says, "Land development is necessary to accommodate anticipated economic and population expansion.", but it would be better to say land and road development are necessary. We have increased traffic by 70% and only increased road mileage by 30%, so it is no wonder we are so crowded and congested.

But it is wrong to blame the automobile or developers for scattered development and increased auto useage. The desire for gardens and privacy preceeded the automobile, and people are already making rational decisions about where to live and how to travel.

Bacon and Mcsweeney claim we ought to get the government out of land use and transportation. Segal suggests we use congestion pricing to reflect the true cost of driving, and he correctly notes that just a few percentage points difference in the number of vehicles using a congested area makes a dramatic decrease in the amount of congestion.

I agree. We should have a system that best allocates the cost decisions each of us has to make. That system is called the market.

As I put it previously:

“We need to be able to recognize and sum over all the benefits and all the costs of land use and transportation to be able to determine the least cost and most equitable solution. Calls for ameliorating one kind of cost externality (cars don't pay their full way, scattered housing doesn't pay its full way, etc.) or another can only aggravate inequity and imbalance and inefficiency, unless we consider all the externalities we can identify simultaneously.”

Economists at the Brookings Institute studied what would happen if you could adjust costs of transportation to achieve the maximum social beneft from the system as a whole. The authors added costs costs to autos through congeston pricing for externalities such as road construction, congestion, pollution, and accidents. After readjusting mass transit so that its subsidies and externalities were likewise accounted for, surprising results were obtained.

According to the study the optimally beneficial transportation network would increase user costs by $13 billion a year, across the US. This would be offset by a reduction of public expenditures of $24 billion. The cost of the tragedy of the commons would be reduced by over $10 billion (1990 figures).

Here is the kicker. As a result of privatizing these sytems and allowing them to simply meet cost effective demand, auto use would increase from 79 to 82%, carpooling would increase slightly, bus use would decrease by more than half, and trains would virtually disappear.

The authors found no net social value for trains as their benefits were exactly offset by the cost, and they questioned the rationale for increasing the extent of existing systems and the number of new systems. On the other hand they make a striking calculation that shows why cars are so popular: using calculations similar to that used for transit frequency and speed they showed that the convenience of autos was at least an order of magnitude higher than buses or trains.

But the study was limited to only maximizing the net social value of the transportation system. The authors "were unable" to include the effect of land use on transportation. But they concluded based on previous studies that changes in land use as a result of applied market forces in transportation will take place slowly, and they are likely to result in more dispersion to avoid costs and congestion, not less. "Changes in transportation based on land use are likely to be ineffective."

They give the example of a private road in Orange county where drivers have been paying steadily increasing tolls in order to avoid congestion on the state highway, "Apparently these drivers are unwilling or unable to change their place of residence."

So Segal thinks that congestion pricing will immediately relieve congestion, and McSweeney thinks that people will make better land use decisions, that people will choose to live in higher cost areas that are densly populated enough to economically support public transit. And that after choosing to live in areas that are more expensive they will choose to use public transit that is more expensive and slower than the other "option".

The economists think that neither of these things will happen. Congestion will still occur (at a lower level) with congestion pricing in place, otherwise you have no way of optimizing the price. One thing that will happen is that people will choose to travel to other places or at other times: this is not the same as reducing travel or congestion. It also implies that land use decisions will eventually be more disperse, not more compact.

Clearly there is plenty of confusion over what tying land use to transportation will mean, and even more confusion over what the results will be.

I believe the political power and patronage derived from our present system is sufficient that it is politically unlikely to change significantly.

Public transit, for example is designed to carry at a discount, mostly, people who could afford to pay the full cost of their trip. Probably this happens in the forlorn hope that it will reduce traffic congestion, but we have ample evidence that is not true.

Controlling land use also leads to political power. As McSweeney points out, "One contributing factor is tighter land use regulation by suburban counties. This has not only slowed housing development in those counties, but also driven up land costs." I would add that this does not protect farms, but makes them economically less viable. Unfortunately, the idea that free markets will lead to higher density also applies to open space.

The only good news in all this rather bleak picture is that, if the economists are correct, we are surprisingly close to optimum conditions as it is. Maybe the interplay and competition between special interests works, after all.

The question we really need to answer is whether we are willing to take $13 billion out of our personal pockets in order to save $24 billion in our collective pockets.

At 4:03 PM, Blogger Toomanytaxes said...

Impressive and thoughtful analysis. I do, however, fall off the wagon once we begin discussing "collective pockets." I think that there probably is not a close relationship between payers of the dollars and those whose dollars are to be protected.

As I understand the facts, some of the biggest supporters of density in places such as Fairfax County live on large estates further west and south. Increasing the density of Fairfax County, which includes paying for the infrastructure to support that added density (remember we only have ten-pound sacks today), would likely provide considerable personal benefits to those who live on large tracts of rural property. Their neighborhoods stay rural a lot longer.

An alternative would be for Fairfax County to say "closed to further development." That would likely, at least over time, push development south and west (assuming continued growth) and, in turn, reduce the personal value of the rural life style.

In my first example, the payers are likely to live in Fairfax County and the beneficiaries are not. Indeed, I might be much better off financially if Fairfax County closes shop to any more building. Not only do I avoid paying for more ten- or 20-pound sacks, but my house is likely to become even more outrageously valuable.

The other obvious beneficiaries of adding dense development in Fairfax County are those who own the parcels to be developed and those who do the building and the like. Again, I'm not sure why I want to spend any of my money to finance the infrastructure to permit the added density.

It seems to me that we won't really solve any problems until we readjust the balance between the winners and losers in the development arena. The General Assembly can ignore the issue, but the members run a bigger risk in 2007 that they have a significant number of development losers in their districts.

At 8:22 AM, Blogger Ray Hyde said...


I think you are exactly right.

When it comes down to actually taking money out of our pocket to pay a toll that allegedly reduces our total tax burden, then we'll see where the chips fall.

Anyone know how large EMR's lot is?

On the one hand you have those that don't wish further development and on the other thee are people who would like to develop but can't - whether or not they are willing to pay for infrastructure. Those who are simply prohibited.

If we agree that people should pay for what they get, then developers ought to pay for the infrastructure they develop, and they ought to own it.

On the other side of the coin, land that is held aside from development provides a benefit to the government: it protects their immediate cash flow and allows for orderly planning. The people whose land is set aside for planning and budgetary purposes, or for drainage and water supply purposes, don't get paid for providing that benefit.

If you are right, and people with large estates west and south are pushing for increased density in fairfax as a means to protect their holdings, then I'm at a loss. I don't know how to bill them for that benefit.

At 9:26 AM, Blogger Toomanytaxes said...

There are many within the "government-business" complex that fear the market because they have grown so accustomed to the tight relationship between the two entities. For example, despite development having strained infrastructure, Fairfax County spends $6.8 M each year to fund the Economic Development Authority that advertises Fairfax as the place to live and work. The EDA argues that, by bringing in businesses, it keeps the residential tax rate lower than it would otherwise be.

Yet, the data show that business property taxes as a percentage of total property taxes has fallen from 27% in the late 1980s to 17% or so today. Meanwhile, more than 50% of the Metro Washington workforce has nothing to do with the local economy and probably benefits little, if at all, from new development; traffic is gridlocked; Fairfax is near to exhausting its sanitary sewer system; construction costs for the schools range between $150 & 175 per square foot; real estate taxes are up by about 80% over the last four years; etc.

The taxpayer subsidy gives a few bureaucrats fine jobs and helps the real estate industry reduce its advertising costs. It also keeps campaign contributions, which are much less than advertising costs, flowing to the Fairfax Supervisors.

This does not sound like a free market to me.

At 11:02 AM, Blogger Ray Hyde said...

"Yet, the data show that business property taxes as a percentage of total property taxes has fallen from 27% in the late 1980s to 17% or so today."

I love facts. It seems to me that EDA needs to come up with a new argument.

Suppose we actually closed Fairfax to more development. What then? Over time we could adjust the infrastructure and roads to meet the existing needs. At some point we could declare the job finished (right, just like your house is "finished"). Then we would be faced with deciding how to make the economy stable in a steady state, or what some people might call sustainable.

That would require exactly balancing the money coming in with the money going out, otherwise you'd have a local trade deficit.

The only way you could grow would be to eat someone else. Home prices would be locked at a fixed price because anyone coming in would be limited in what they could pay by the local business clmate, but at least real estate taxes would be stable. All of Fairfax would be limited by the extent of government pay raises coming in from the outside. If change comes to a halt, most of us could sit on the porch and enjoy the stagnation in peace.

I'm just thinking out loud, haven't given this any thought, but in the U.S. a zero growth economy is hard to imagine.

As to "free market" when you hear people advocating for it, they are usually only advocating for it in a narrow segment, as in scattered development exists only because it is subsidized, or auto use is only so high because it is subsidized. This is a thinly veiled way to promote a single special interest.

The nice thing about our method of using campaign contributions is that when one special interest or another absorbs too much damage, they get out their wallet and lobby for change. The competition among special interests for government attention is in itself a free market, so we get the best legislators money can buy. As such it acts as a fairly effective proxy for events in the free market.

The numbers I quoted about auto use under a free market where they (and transit) have to pay their full cost suggest that auto use would actually increase, but only a few percent. This suggests that the people who are lobbying against auto use are doing a good job, but it is unlikely they can do much better because those that are being damaged by the effects will start lobbying of their own.


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