Airlines and their travelers complain about the taxes they pay to fly, even though a new labor union study shows the carriers get $1 billion a year in state and local tax breaks on their aviation fuel purchases. They also benefit from a growing array non-user financing schemes that keep public airports in operation.
The latest of these is the fracking rights sold off by Allegheny County in Pennsylvania to drill under the runways of Pittsburgh International Airport. There's enough natural gas down there to run the entire state for a year and a half, according to the New York Times. It's also enough to generate nearly $500 million in royalties over two decades for the airport, which found itself severely overbuilt and underfunded in the wake of 9/11, the loss of its U.S. Airways hub and the Great Recession.
While Pittsburgh International opened in 1992 with facilities for 30 million passengers a year, it now handles just 8 million and devotes 42 percent of its $90 million annual budget to debt service. Gas royalties are expected to run about $20 million a year, allowing the airport to cut rising fees charged the remaining airlines in hopes of luring back some of the 300 daily flights that have disappeared since its peak year of 600 in 1997.
PIT isn't the only airport making out like Jed Clampett with a fossil fuel windfall. Dallas-Fort Worth International gets $8 million a year from the 100 gas wells on its property and Denver International collects $6.2 million annually from 76 gas and oil wells, some of them operating before the airport was built. The payments are very small parts of those airports' revenues, however.
"San Francisco installed solar panels and generates energy," reports WESA, Pittsburgh's NPR station. "The largest blueberry producer in Georgia is at an airport. And some airports have explored water or grazing rights."
Airports and air travel consume mass quantities of resources; PIT alone covers 9,000 acres, more than 14 square miles. It's fine to put some of that vast capital to other productive uses, although no law says the public profit has to benefit airlines and air travelers. The airline industry also generates huge externalities in the forms of noise pollution and climate-unfriendly greenhouse gases, most of which it doesn't pay for.
Compare this now with the least resource- and externality-intensive of all our motorized means of mobility: public transit. No transit system has ever made a killing off fracking rights under the tracks. So the next time you hear anyone who flies or drives complain about subsidies for buses and light rail, take it with a giant grain of salt.
St. Cloud's Metro Bus is racking up firsts this year—first Minnesota transit system primarily fueled by compressed natural gas (CNG), first in the state with a mobility training center for riders and now the first in Minnesota to be named national urban transportation system of the year.
The award, presented by the Community Transportation Association of America at its national conference in St. Paul, honors Metro Bus innovation, creativity and responsiveness to its community. The system provides 2.4 million annual rides in St. Cloud and the surrounding cities of Sartell, Sauk Rapids and Waite Park.
In May, Metro Bus replaced 23 of its fleet of 67 regular route and dial-a-ride vehicles with new buses powered by CNG and built right at home by New Flyer in St. Cloud. The cutting-edge fuel isn't only cheaper—it's expected to shave $3 million off the cost of diesel over 10 years—it's clean-burning and quieter-running, too. The new buses replaced old ones due for retirement and the CNG fueling system was built along with other needed projects at the Metro Bus garage. As the rest of the fleet is retired, it will be replaced with CNG-fueled vehicles.
The training center opened in July in a remodeled former bank building in downtown St. Cloud. Its Travel Training program has partnered with dozens of community agencies to assess the travel needs and options of the elderly, the disabled and immigrants with limited English proficiency. In addition, "through this training agencies are able to maximize their transportation budgets by utilizing our fixed route services first, which is more economical than dial-a-ride, taxi service or other private transportation," Metro Bus staffers noted in the Minnesota Public Transit Association's In-Transit newsletter.
Many people think of public transit as only for big cities. That's not true at all, especially in Minnesota, which boasts a national model network of rural and small-city transit services. St. Cloud's Metro Bus shows us that such systems can match or outdo their metropolitan big brothers when it comes to innovation and community outreach.
James J. Hill, the 19th century St. Paul businessman who built the St. Paul Cathedral and a great railroad to the Pacific Northwest, must be spinning in his grave. The once-proud train that bears his sobriquet, the Empire Builder, has become a slow-motion blot on his legacy.
"Eighty-five years after its debut as the Great Northern Railway's premier passenger service to the west, the Empire Builder is broken," the Flathead Beacon of Kalispell, Mont., sadly reported. "Five years after the Empire Builder had some of Amtrak's best on-time performance rates, even outpacing Amtrak's high-speed Acela train between Boston and Washington, delays of three to five hours are now commonplace."
This is Minnesota's only intercity passenger train, once the most popular of Amtrak's long-distance routes but now bleeding ridership with each botched timetable performance. It's not a public-sector failure for the quasi-governmental rail agency, but one of the private-sector BNSF Railway whose tracks it leases the use of.
As passenger rail improvements—some publicly financed, some private enterprises—are blossoming across the rest of America, the Empire Builder's woes will only drive down support for such advances around here.
After delays of up to 12 hours on an already leisurely schedule plagued the train during the harsh winter, Amtrak modified its timetable in April. It didn't help much. "In June, the westbound Empire Builder, train No. 7, stayed on schedule 10 percent of the time," the Beacon noted. "The eastbound train, No. 8, has a zero percent on-time rate." By then, ridership was down 19 percent from June 2013, which was already off from the record 2012 year of 543,000 boardings.
Problems like this for Amtrak aren't confined to the Empire Builder as a surge in freight on share tracks, only partly caused by the U.S. crude oil boom, gums up the schedules. But the timing could hardly be worse as "Americans are getting more and more frustrated with air travel," according to Tanya Snyder at StreetsblogUSA.
Snyder cited a U.S. Travel Association survey that found significant percentages of respondents unhappy with the hassles of flying, some so much that they're traveling less than they used to or planned to. The Travel Association pegged the industry's losses from trips not taken at $27 billion. A 2011 Harris interactive poll found that a third of business travelers and two-thirds of leisure travelers would ride high-speed rail instead of jetliners, of the former existed.
In the face of such an opportunity, Amtrak has even taken a page from the airlines' playbook, getting rid of free amenities altogether or charging for them. "Amtrak is acting more like an airline every day," wrote Christopher Elliott in USA TODAY. "And not in a good way."
Since late May, Empire Builder passengers have had to fork over $8 for a blanket, pillow, earplugs and eye shade. No more free glasses of wine, either. It's the kind of cost-cutting and revenue enhancement that might please congressional funders, but not passengers, especially when the train pulls in hours late.
James J. Hill might have had a smart solution when he ran both the passenger and freight ends of his railroad, and air and car travel weren't competing with him. Today's fragmented transportation market complicates matters. But trains—at their best efficient, comfortable and internet-friendly—deserve more respect than they're getting from practically any quarter these days.
Photo credit: John Mueller, creative commons
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As a newly minted think tank fellow seven years ago, I heard Bob Poole, the libertarian Reason Foundation's thoughtful and nonpartisan transportation expert, argue in a local luncheon speech that private investment offered the only feasible way out of America's chronic shortfall in funding roads, bridges, transit and other ways of getting around.
But even conservatives such as Poole weren't unanimous about this. At about the same time, one of the Minnesota Legislature's farthest-right members proposed banning toll roads forever in the state, which would seem to eliminate any incentive for private stakes in transportation infrastructure. Not quite, it turns out.
Several Minnesota enterprises have put up money for highway improvements in recent years, according to interesting reporting by Erin Adler in the Star Tribune. The latest, according to her article, is the Shakopee Mdewankanton Sioux Community's commitment of $1.5 million to add a third lane to a milelong stretch of Hwy. 169 near its Mystic Lake Casino next year. The tribe also fronted $17.5 million for an interchange on 169 in 2005, with the state highway funds later repaying the loan.
Often, cash infusions from private interests or local governments speed up the delivery of highway improvements considered vital for customer access or economic development in the short term but buried deep in the state's decades-long expansion plans. UnitedHealth Group and the city of Minnetonka ponied up that way for an interchange on 169, and Woodbury did so to get exits serving developments beside Interstate Hwy. 494. On a smaller scale, Interstate Mills funded a left-turn lane on Hwy. 56 near its Dakota County facility.
Now, even President Obama, stymied by congressional conservatives in his repeated calls for more public funding of transportation projects with a proven record of return on investment, signaled his intention to lure nearly $2 trillion in U.S. corporate cash stashed overseas back home to work on roads, bridges and rails.
Most recently, Obama discussed this strategy as a way to head off corporate tax-dodging "inversion" mergers with foreign entities such as Minnesota's Medronic Inc. plan to move its headquarters to Ireland. He also has launched a separate push for private investment in infrastructure, especially in rural America.
"Institutional investors ... tend to look for longer-term investments to match up with their long-term debt obligations, while taking relatively low risk," Douglas L. Peterson, CEO of McGraw Hill Financial and a public-private partnership advocate, wrote on cnbc.com. "Infrastructure projects tend to fit that profile: regulated markets, long-lived assets with stable demand and little, if any, competition."
U.S. private investment in surface transportation infrastructure has had a long and checkered history, from the flowering and faltering of streetcar systems in the 20th century to the financial travails of an 85 miles per hour toll road in Texas. Just this week, Nevada officials scrapped plans for privately financing an interstate highway project, which had been championed by the conservative governor. Projected costs had risen too high compared with traditional public bonding, no surprise considering factors such as tax breaks and the profit motive.
Meanwhile, however, there's a surge in private financing of high-speed rail projects, which I examined more closely in today's feature article.
I'm not totally sold on any of this, partly because most private money will cherry-pick just a few projects with the greatest profit potential, leaving the vast majority of the nation fighting over government scraps to stay mobile. Besides, nearly every important U.S. transportation advancement—from the Erie Canal to the Transcontinental Railroad to the Interstate Highway System—has been heavily backed with some kind of public subsidy. On the other hand, much of our transportation system, especially congested urban roads, could benefit from more market pricing discipline.
I'm confusing even myself here. What seems both certain and prudent is that our multimodal means of access and mobility will continue to be paid for with a mix of public and private money, and finding the right combination will be a never-ending challenge.
Under pressure from the City Council last week, St. Paul Mayor Chris Coleman outlined a $54 million street-improvement program—more than 10 percent of his proposed $515 million operating budget for 2015. Hizzoner thus significantly raised a group of rebellious council members' bid of $22 million for streets after they likened his earlier plan to "putting a Band-Aid on a broken hip."
There's a lesson here. Despite all the buzz about Americans' flagging interest in driving, despite Congress's serial brinksmanship over highway funding, despite all of St. Paul's recent transit improvements connected with the Green Line light rail launch, it's where the rubber meets the road that still counts in transportation policymaking.
And despite all the conservative grumbling about subsidies for transit, it's motorists who do most of the feeding at the public trough. Little of Coleman's $54 million for rebuilding and repaving streets, and not a penny of the $34.4 million in new money he's earmarking, will come from user fees for driving such as fuel taxes and registration fees. Instead, it comes from taxes and special assessments on property, whether the owners drive or not.
Now, it's been argued that city streets are a "public good" that benefit drivers and non-drivers alike by providing access for buses, bicycles and emergency services while boosting property values and commercial activity. True enough, but who comprises the overwhelming predominance of traffic on those streets? The folks behind the wheel who pay nothing directly for the privilege.
Coleman's plan focuses on rebuilding bumpy arterial streets, some of which may qualify for Minnesota's 9 percent share of highway user funding that goes to Municipal Street Aid. More money may actually come from diverting $10 million of a $14.5 million residential street repair fund to the arterials. That's not a bad idea. I've often thought that city streets where people live should be left in lousy shape to discourage drivers from speeding. I've even dreamed of turning them into greenways, limiting everyday motor access to the alleys.
The mayor's budget calls for 2.4 percent increase in the property tax levy, a sure target for criticism from some quarters. But if spending trims begin, don't look for any in street repairs. A more likely candidate for the axe is Coleman's proposed introduction of paid parental leave for city workers. The projected cost there is $200,000—or 0.37 percent of his streets budget.
The way this plays out will tell us once again what we value most in our autocentric society.
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In a representative democracy such as ours, policymakers are elected with a mandate to do the bidding of their constituencies. That's why our politicians are sometimes derided as "poll-iticians," their legislative behavior slavishly directed by public opinion surveys. The alternative, the much-praised virtue of "leadership," is generally hazardous to life in office.
Given the findings of a new national opinion poll on transportation funding then, the highway trust fund patch passed by Congress and signed by President Obama last week makes great sense. It adds nearly $11 billion in nonuser subsidies for driving to $53 billion already forked over, and the new crutch will last just 10 months but be "paid for" over 10 years of fiscal gimmickry.
Well, that's just the way We the People like it. The Associated Press-GfK poll of more than 1,000 U.S. adults showed strong support for highways and other transportation modes, but extremely low interest in any way at all of paying for them. Respondents overwhelming panned not only raising federal fuel taxes, but also establishing mileage fees and even letting private investors build toll roads and bridges. Sending more of the bills down to state and local governments got little backing, either.
"Congress is actually reflecting what people want," national transportation think tank chief Joshua Schank told the AP's Joan Lowy. "People want to have a federal [transportation] program and they don't want to pay for it."
Businessman Brian P. McGuire, interviewed by a Washington Post blogger, was even more pointed. "No one should be surprised by a poll finding people aren't will to pay more for something they're already getting at a big discount," he said. "Americans understand the benefits of infrastructure but don't understand how it's paid for. We can either do that the responsible way— raising the gas tax or creating other user-free revenues— or we can continue to pass the buck to our kids and grandkids."
According to U of M Prof. David Levinson's blog, "We don't pay enough for transportation," which I cited while voicing similar complaints last week, state and federal fuel taxes would need to triple to nearly $1.50 a gallon to defray the real cost of roads and bridges.
Most Europeans shell out much more than that already, but it won't happen here anytime soon. Conservatives are especially opposed to paying more at the pump. But it was one of their icons, Margaret Thatcher, who observed that in a fiscal system like ours for highways, eventually you "run out of other people's money."
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It may seem strange to work up much sympathy for a booming industry that killed 47 people while virtually leveling their Quebec town last year and later touched off a giant fireball over Casselton, N.D., on the Minnesota border, but that's what I'm feeling these days for the railroads.
Since those derailment conflagrations involving North Dakota crude oil, it's been open season on the once largely neglected workhorses of commercial transport. Everyone, it seems, has a complaint against what I'd now call "the engine that dissects us."
Upper Midwest farmers are upset over delayed shipments of grain overflowing their bins and railhead elevators. Amtrak passengers are getting Soviet-style on-time service because of a glut of freight on shared tracks. A federal analysis found most railroads grossly underinsured for the likely damages of an oil train accident.
National Farmers Union President Roger Johnson noted last week that more than 95 percent of all BNSF Railway's past due cars are in Minnesota, Montana and the Dakotas. Meanwhile, he said, "farmers are now dumping wheat on the ground."
This concern is understandable. University of Minnesota researchers reported last month that higher storage and rail shipping expenses cost Minnesota farmers nearly $100 million in just March, April and May this year.
The NFU's Johnson also protested shipping delays plaguing corn-based ethanol fuel, nearly two-thirds of which is delivered by rail. "Failure to bring ethanol to market will hurt consumers because of higher gasoline prices and will work against our efforts to offset imports of foreign oil," he wrote to the U.S. Surface Transportation Board.
Now there's a conundrum for you. What do farmers blame for their transport troubles? Of course, all the oil trains clogging the tracks, which also reduce the need for imports of black gold.
In their own interests as well as everyone else's, the railroads are working mightily to get more efficient. Warren Buffett's BNSF alone is investing half its annual profit—$5 billion—this year in beefed-up infrastructure, rolling stock and staff. In addition, BNSF is negotiating a labor contract provision to allow most of its trains to be operated by a single engineer instead of the standard two-person crews. This has sparked blogosphere outrage, raising the specter of even more dangerous oil shipments. The company insists it wouldn't trim crews minding any hazardous cargo, but critics doubt the pledge and call for federal regulators to step in.
And then there's the insurance issue. The small railroad whose runaway oil train devastated Lac-Magantic, Quebec, carried only $25 million worth. Cleanup alone, not to mention payments for death, injury and property damage, is expected to cost $200 million. So the Montreal, Maine and Atlantic Railway has declared bankruptcy and its assets have already been auctioned off.
But even $1 billion in coverage, the most available in the insurance market, might not be enough in a worst-case train wreck. Addressing this problem, BNSF has proposed an indemnity system modeled on that of the nuclear power industry. Nuke companies pay into a federal disaster fund and get some liability protection in return. At least one critic says the railroads don't deserve that kind of treatment.
As Politico pointed out, common carrier rules bar railroads from refusing any cargo or shipper-owned tank car that meets (generally loose) federal standards, but gives them all the responsibility for accident damages. Despite the fistfuls of money they're making these days, that's a tough situation. Considering that the alternatives to freight by rail are nonexistent, unappealing or economically unsustainable, let's keep pushing the railroads to safer and more prompt service, but also muster a little sympathy for these iron horse devils.
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As Finnishfest USA comes this weekend to Minneapolis—home to the largest U.S. metropolitan population of Finns outside the homeland—the Star Tribune advises us to learn from the Nordic wellspring of Nokia and Angry Birds.
The Strib editorial focused on Finland's excellent education system and business climate, but another Finnish initiative deserves our consideration, too. That's the effort of the capital city, Helsinki, to rationalize its transportation system in a way that, according to our colleague Jeff Spross at the Center for American Progress, "might make car ownership a thing of the past."
Whoa, wait a gol-darn minute, you might be thinking. You'll pry the car keys from my cold, dead hands, buster! Unlike conservative caricatures of smart alternatives to our autocentric ways, this is not a push to get everyone out of cars. Rather, the goal is get as many folks as want to out of their own cars.
How? With mobile connectivity that can link all of Helsinki's transportation options—subways, buses, taxies, ferries, car and bike sharing—into a single, custom-tailored trip with just one payment. This comprehensive "mobility on demand" app could "essentially render private cars obsolete" within 10 years, the Guardian says.
That's probably overstating the potential, and not in a helpful way for widespread acceptance. For the foreseeable future, there will be auto enthusiasts everywhere whose identities are wedded to their wheels and those who won't give up the convenience of immediately available transportation.
These benefits come at a steep price, however, for both individuals and the broad society. Car ownership is expensive, especially considering that the average private car sits parked 95 percent of the time. Economists would call this inefficient use of costly capital resources.
On top of that, the multitrillion-dollar U.S. system of roads and bridges promotes massive inefficiencies, too, because it is so propped up by nonuser revenues and "free" economic externalities that distort our transportation choices in favor of driving anywhere, anytime we feel like it. More market discipline—not only in the fiscal underpinnings of roadway infrastructure but also in pricing tailpipe greenhouse gas emissions via a carbon tax or cap and trade—could encourage smarter transportation decisions.
"There's no inherent reason all the people living in a dense urban area should need to own a car," Spross writes. Helsinki's plan "would allow a far smaller fleet of cars to serve that same population. That would mean less resource use, less space taken up by ... parking, and most importantly it would require burning far fewer fossil fuels."
Recent transportation innovations such as car and bicycle sharing are making piecemeal impacts on Minnesotans' mobility habits. App-based disrupters such as Uber and Lyft are edging into broad-based travel services, including car-pool matchmaking.
If the private sector can achieve Helsinki's vision of mobility on demand encompassing all the modes, great! If not, it's a worthwhile project for governments already so deeply involved in the transportation business.
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Creating a full-service Metro Go-To Card would benefit transit users and those without access to traditional banking services. It would also benefit the Met Council. There are examples of public institutions acting as lending agencies that provide great benefit to a range of people. The largest example of a public institution bank is the Bank of North Dakota (BND).
In 1919, North Dakotans, in a wave of populist progressivism and angry at the financial control wielded by Twin Cities’ banks, created a publicly operated bank that could provide loans and hold savings. Created by and for the people, BND was designed to provide more affordable loans to struggling farmers and families out on the prairie. Over the last 80 years it has provided a tremendous service to the state of North Dakota and continues to receive large support for citizens.
Banks make money by charging a higher interest rate on loans than needed to pay the smaller interest rate of depositors. As a private institution they seek to maximize these profits. Banks can make small loans to farmers that need new equipment or to governments that need new infrastructure, making money on each of them. North Dakota found that a public bank worked better for them.
As a public institution, BND has a different objective, to provide a quality service to its citizens. Instead of profits being placed in the hands of bankers, they are returned, in various ways, to the people of North Dakota. Mostly profits are returned through lower interest rates. Farmers and students can better escape the stress of high levels of debt that plague them both. It can also provide low interest rate loans to the cities and state of North Dakota. Studies have shown that interest from private loans composes 30-50 percent of public loans. Without needing to pay back expensive interest to private banks, cities can build better schools and the state can build sewers more affordably. This makes North Dakota a better place to live.
The Met Council can learn from the success of the Bank of North Dakota by creating a bank that could provide loans for infrastructure improvements. The Met Council has recently invested in the water and sewer system so these will need little large investments in the coming decades (Thrive 2040). The Met Council and the region do recognize that we need to significantly invest in transportation infrastructure for the next couple of decades. These projects would benefit from the assistance of a public bank. I want a bank that begets better buses. Don’t you?
As predicted here, Congress has found enough fiscal gimmicks to prop up the federal Highway Trust Fund with $10.9 billion in non-user subsidies before its predicted default on its obligations to states late this month. This comes on top of $53 billion in previous bailouts for the fund, which once was fully supported by federal fuel taxes. These handouts to drivers and the trucking industry dwarf federal spending on transit and nonmotorized travel, despite the complaints you'll hear from autocentric conservatives.
While allowing the fund to start trimming promised reimbursements for road and bridge projects would have been terrible policy, there's much to dislike in the means of avoiding such government irresponsibility in the proverbial "richest nation on earth."
First, as U.S. Transportation Secretary Anthony Foxx noted: "The bad news is that there is still no long-term certainty, and this latest band-aid expires right as the next construction season begins" in May 2015. "While Congress may be able to wait until May, the country cannot."
Federal transportation bills used to run for five or six years, giving state and local authorities ample time to plan and stage multiyear projects with assurance of a long-term partner in Washington. But since bipartisan refusal to adjust per-gallon fuel taxes set in 1993 for decades of inflation took hold, the funding windows have shrunk— to two years in the expiring bill, to 10 months in the new one.
This one was 100 percent crafted by U.S. House conservatives, who rebuffed bipartisan Senate attempts to drop a particularly odious accounting trick and shorten the bill's life in hopes of passing a long-term measure during December's lame-duck session. The House majority would have none of that, preferring to set up another inevitable crisis next spring.
That smelly legislative legerdemain is called "pension smoothing," described by the New York Times's Josh Barro as "a budgetary gimmick worthy of Rube Goldberg."
The bill lets employers put less in their pension funds—for a while—thereby boosting their bottom lines and "funding" extra highway subsidies with greater business tax collections. Later on, of course, those forgone pension contributions must be made up, reducing future tax liabilities. But meanwhile, some of those businesses will go bankrupt, and "pensioners will take some losses, but mostly the unfunded benefits will be insured by a federal government entity [resulting in] higher fees on companies that don't go bankrupt," Barro explains.
It's a charade only elected representatives could love: spending money "while being able to say they are not increasing the deficit [and apparently generating tax revenue] without imposing a real tax increase," he adds. Barro notes that congressional progressives also employed this ruse to extend emergency jobless benefits over the objections of conservatives. At least the former could claim it was for a temporary program unlike the highway fund, which also got a pension smoothing infusion two years ago.
Barro pooh-poohs that argument on grounds that "fake pay-fors" are stupid and costly whatever the purpose, and that relying on them "has made our policymaking process sclerotic." Besides, when it comes to appropriations for either transportation infrastructure or unemployment assistance, economists note that there's no reason in the first place to offset them in the budget. Unlike most tax cuts and direct business subsidies, they pay for themselves in overall economic growth, also called return on investment.
While that's true no matter where the money comes from, boosting non-user subsidies for highways distorts consumer choices in favor of driving, unnecessarily promoting evils such as congestion, pollution and accident mayhem. For a full-wonk discussion of this problem, check U of M Prof. David Levinson's new blog. The beneficiaries are mostly people who could easily afford to pay a few more pennies at the pump for the roads and bridges they take for granted.
It's time now, and has been for a long while, to move road user fees gradually somewhere nearer all of driving's real costs. This common-sense solution also would put an end to "fake pay-fors" and gridlock in at least one important policy area.