Monthly Archives: October 2010

In Unprecedented Move, Gov Christie Cancels Under-Construction Over-Budget Tunnel

New Jersey governor Chris Christie reaffirmed his decision to cancel the "access to the regional core" tunnel across the Hudson River from New Jersey to New York. Christie had suspended his previous decision pending discussion of alternatives with the US Department of Transportation.

In the final analysis, according to Christie, none of the alternatives would have capped New Jersey’s liability at its present level, which assumed a project cost of $8.7 billion. Christie told the Moorestown Community House, "No more blank checks from the taxpayers of New Jersey, not on my watch."

More at…<construction-tunnel-unprecedented-move

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Portland’s Runaway Debt Train

Tri-Met’s more recent notoriety also reveals some serious concerns about financial management . Auditors recently finished their annual report, and it indicates that that Tri-Met has run up some rather large bills that it may be hard-pressed to pay.

Unfunded Pension Liabilities: Unfunded liabilities on Tri-met’s employee pension funds have grown to more than $260 million. This deficit has developed because Tri-Met can not meet its obligation to pay into the pension funds on a current basis. Indeed, at the rate Tri-Met paid the pension funds for fiscal year 2010 (ended June 30), they would be more than eight years delinquent. Overall, the pension funds are nearly 50 percent under funded.

Other Post-Employee Benefits: "Other Post-Employee Benefits" (OPEB), made up principally of retiree health care, pose a much bigger problem. As of the end of the fiscal year, the unfunded liability for these benefits was $817 million, up $185 million in just one year. Underfunding is an even greater problem. The retiree benefits are 100 percent under funded. Tri-Met has simply put no money aside for these benefits. Tri-Met has achieved world class status in underfunding its OPEB. The Los Angeles MTA, which carries nearly five times as much travel volume as Tri-Met had unfunded OPEB liabilities of only $730 million (still a huge figure) in 2009, which is the last data available.

When challenged on the huge unfunded liability and its growth, Tri-Met General Manager Neil McFarlane responded to KATU-TV: "That’s adding apples, oranges and grapefruits together to get a completely unreasonable number." One wonders what kind of complications the chief executive office of a publicly traded Fortune 500 company would face for similarly dismissing inconvenient data in its annual report (whether from the Securities and Exchange Commission, the board of directors or the stockholders).

Employees Ahead of Customers: Tri-Met implemented a fare increase in September and reduced bus service by 5.8 percent and light rail service by 3.5 percent. In the last 10 years, thebasic bus fare has risen 71 percent, well above the 27 percent inflation rate (Figure 2). The fare increases and service cuts are imposing substantial hardship on many Tri-Met riders, who have limited incomes and no access to cars. The above inflationary fare increases represent a financial management failure of fundamental proportions.

Yet while it was raising fares, Tri-Met also increased union employee compensation by three percent and covered increases of 7.5 percent to 22.5 percent on two employee health care programs. Tri-Met has admitted that these increases were not legal obligations (could this be a gift of public funds?). The cost of the non-obligatory wage increase was more than double the amount Tri-Met expects to raise from the September fare increase. Some discontinued service could have been financed with the rest of the wage increase money and the non-obligatory health care premium increases.

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New York Political Leadership Forces Another Fare Hike


The way the Post tells it, you might think that the Transport Workers Union (TWU) had engineered a coup and had forcibly taken control of the Metropolitan Transit Authority. It fact, it was all quite legal. Interests such as the TWU have used their political influence to obtain the expensive contracts that place the riders a distant second, after the employees and the taxpayers an even more distant third. The MTA was not compelled to sign overly expensive labor contracts. Albany was not compelled to insulate transit unions from the economic reality faced by everyone else, including private sector union members. Washington was not compelled to give transit labor unions job protections that would be the envy of European public sector unions. These protections are a considerable factor in driving expenditures up 100% (inflation adjusted) over the past 25 years, while ridership has risen only 40%. The appointed and elected representatives did so willingly, and to the detriment of the people, whom they were supposed to represent.

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Comment to the Wall Street Journal on the NJ-NY Tunnel

To say that the routine cost escalation of major infrastructure projects is a travesty is to understate the case. It is no defense that private sector project costs escalate. Such costs are paid by stockholders, not taxpayers. No one forces the taxpayers to pay for a building that costs twice as much as planned, unless the company happens to be too big to fail.

There are numerous questions about this project, not the least of which is why does New Jersey think it should be spending money to make it easier for its residents to leave the state to work? NJ is not that dependent upon New York and only a relatively small share of Northern NJ commuters travel to Manhattan… the vast majority stay in NJ. Finally, all job growth in the New York metropolitan area since 1956 has been outside Manhattan… so the consultants projections of a 500,000 increase by 2030 in Manhattan is about as believable as the original Big Dig cost estimates.

If Governor Christie musters the courage to stop this project now, it could be a shot across the bow of an international vendor and consulting engineering community that has routinely low-balled costs only to later jack them up, confident that no project would be canceled once started.

Wendell Cox
Former Member, Los Angeles County Transportation Commission
Former Member, Amtrak Reform Council

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Satellite Cities for Beijing? Yes, But….

China Daily ran an article on the continuing urbanization of Beijing. In Build upward or outward: City’s growth dilemma, Daniel Garst notes that Beijing is not as centralized as other urban areas, with its multiple business districts and comparatively low density in its inner areas. He indicates a preference for the urbanization of Shanghai, with its stronger center (both Pudong and Puxi), but suggests that it would be a mistake to replace the historic low density development with the high rises that would be necessary to change Beijing’s urban form.

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The Limited Potential for Transferring Twin Cities Travel Demand from Autos to Transit

Complete report at

The Minnesota Department of Transportation released a study entitled, Building Our Way Out of Congestion, which identified the freeway expansion that would be required to eliminate traffic congestion from Twin Cities area freeways. A report author put the price tag at $20 billion. The enormity of this amount led some to suggest that the area needs to invest more in transit, as an alternative for improving transportation. The assumption behind such views is that transit is a less costly option for dealing with traffic congestion than highway expansion. Indeed, this philosophy is behind much of transportation planning in U.S. urban areas.

But, beyond the rhetoric, there appears to be no studies or model runs that estimate what would be required to “ride our way out of congestion,” much less any plans that would begin to accomplish such a goal.

People from Minneapolis-St. Paul to Paris and Tokyo like transit. They will use it where it is the best alternative for travel. Americans will do so just as residents of urban areas in Western Europe and Asia do when it takes them where they want to go in the shortest possible time. Thus, approximately one-quarter of downtown Minneapolis workers use the local and express bus system that focuses on that core from all over the metropolitan area. But nowhere in the high-income world — whether to outside downtown destinations in Minneapolis-St. Paul or suburban locations in Paris or Tokyo, will be found a populace that “leaves their cars at home” in preference for transit service that is less convenient or materially slower than the automobile.

Any strategy that seeks to attract drivers from cars must provide transit service that is “automobile competitive.” And, to eliminate traffic congestion on Twin Cities freeways, as the $20 Billion highway program would do, would require providing automobile competitive transit as a viable option throughout the Twin Cities area, not just to the two downtown areas. This paper attempts to estimate the cost of providing such a transit system.

An automobile competitive transit system would provide service for virtually all trips in the area. Service would be frequent, virtually on demand. Transfers from one route to the other, where required, must take little more time than it takes to walk from the first transit vehicle to the second. Service must be available throughout the day. Service must be available from within walking distance (1/4 mile) of every potential origin in the service area to every potential destination. Finally, service must be time-competitive with the automobile. It doesn’t necessarily have to be as fast, but it must be nearly as fast. People will not abandon their cars that take 30 minutes for a particular trip for a transit ride that takes one to 1.5 hours.

An automobile competitive transit system for the Twin Cities would likely best be designed as a one-half mile grid of grade separated routes (all crossings by pedestrians or roads would be over or under the transit lines). Grade separation would be required to attain sufficient transit speeds, and so that the high level of transit service does not make the very traffic congestion it seeks to eliminate worse. Service would be provided by an automated rail system, operating with one, two or at most three cars at one-minute service frequencies. This would minimize transfer times and make it possible for most trips to be made in no more than 1.5 times what would be required by automobile. Vehicles would be similar to the Skytrain rapid transit system in Vancouver and the airport rail vehicles that operate between the Lindbergh and Humphrey terminals at Minneapolis-St. Paul International Airport (and at many other airports, such as Atlanta, London-Gatwick, Las Vegas and Osaka).

It is estimated that an automated rail system of this description would cost 89 percent of projected personal income in the Twin Cities in 2020 if in subway and 59 percent if elevated. An elevated busway system meeting the same criteria is projected to cost 25 percent of personal income. Elevated alternatives, however, are not considered realistic because of their visual intrusiveness (a north-south and east-west overhead structure would be within one-quarter mile of virtually very home and business in the area) and noise.

However, mass transit projects routinely escalate in cost, and if the international experience holds, the subway automated rail system would cost 115 percent of personal income, the elevated automated rail system 72 percent of personal income and the elevated busway system would cost 30 percent of personal income. Further, it is not considered likely that the community would not generally accept the intrusive overhead transit alignments. Obviously, it is not feasible to implement transit options that would require such a large percentage of metropolitan income, either elevated or subway. Today, all transit spending in the Minneapolis-St. Paul area represents less than 0.3 percent of personal income. Even where transit market shares are 20 to 40 times that of Minneapolis-St. Paul, in Western Europe and Asia, total public and private spending on transit is less than 1.5 percent of personal income.

Urban areas are more economically efficient and tend to be more affluent where their citizens are able to access a larger share of the destinations, especially work locations. Mobility is an important determinant of metropolitan affluence. Portland, which has regulated land use more strictly than any other area and has seen both housing costs and traffic congestion rise much more than elsewhere is already facing difficulties in attracting new business development. Recently, Portland has substantially weakened its “smart growth” policies in response to these factors by expanding its urban growth boundary (analogous to the Twin Cities “municipal urban service area” by more than had been planned for the year 2040.

If traffic congestion continues to worsen, it will take a serious toll on the economy of the Twin Cities and the qualify of life of residents. It is thus suggested that future progress in the Minneapolis-St. Paul area requires solving the problem. While it is not inexpensive, expansion of the highway system is the only affordable approach. And expensive as it is, the cost is small compared to the projected increase in personal income, and is likely to be substantially less than the economic benefits.

Originally published: 2004

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New York Post Gets it Wrong on MTA Fare Hike

The New York Post editorializes against what it calls "Another TWU Fare Hike," blaming the union for the fares that will now rise to $2.50 for a ride. The editorial writer goes on to say of MTA chief Jay Walder, "It’s not his fault that straphangers get whacked while the MTA’s unionized workers — whose blue collars come with fur trim — don’t have to make a single sacrifice to meet the MTA’s shortfall."

In response, I posted the following comment to the New York Post site:

Not his fault? Well, perhaps not personally. But surely it is the responsibility of the MTA and those in Albany who have skewed law labor and regulation to create this untenable situation. It is about time that public officials, such as those who run the MTA, be held account for what they have given away to the unions. The unions could not have taken it without the agreement of the MTA and other local and state political officials.

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A Tunnel to Far? Issues for New Jersey

Excerpt: Complete article at

New Jersey Governor Chris Christie sent shockwaves through the transportation industry on last Thursday when he cancelled the under-construction ARC (Access to the Regional Core) rail tunnel under the Hudson River from New Jersey to New York (Manhattan).

The Governor accepted the Access the Regional Core (ARC) Executive Committee’s recommendation to "pull the plug" on the expensive project because of cost overruns. The project was to have cost $8.7 billion, but could escalate up to $14 billion according to the Governor’s office. All of any such cost overrun would have to be absorbed by the state of New Jersey, which like many other states is in dire financial straits.

Christie said:

"I have made a pledge to the people of New Jersey that on my watch I will not allow taxpayers to fund projects that run over budget with no clear way of how these costs will be paid for. Considering the unprecedented fiscal and economic climate our State is facing, it is completely unthinkable to borrow more money and leave taxpayers responsible for billions in cost overruns. The ARC project costs far more than New Jersey taxpayers can afford and the only prudent move is to end this project."

Governor Christie indicated that the project could become New Jersey’s "Big Dig," referring to the Boston highway project that he said escalated in cost by 10 times (that is not a typo). Yet supporters of the tunnel were unanimous in their condemnation of Christie’s move, fromPaul Krugman of The New York Times to the Regional Plan Association.

New Jersey Senator Frank Lautenberg announced that Christie had backed down, noting his "reversal of yesterday’s decision to kill" the tunnel project. Referring to a meeting between US Secretary of Transportation Ray LaHood and Governor Christie, Lautenberg said “The Secretary was clear with Governor Christie: if this tunnel doesn’t get built, the three billion dollars will go to other states. We can’t allow that to happen.” Lautenberg listed a litany of benefits such as a reduction of greenhouse gas emissions by 70,000 tons annually. He also noted that New Jersey would have to reimburse the federal government the $300 million it had received for the tunnel. Senator Robert Menendez added that "New Jersey taxpayers don’t want to own a $600 million hole to nowhere."

However, under examination, it is unclear whether Christie had "reversed" his position.

2. Exporting New Jersey Jobs to New York Why should New Jersey pay to build more capacity so that its people can work across the state line? Why should they not work in New Jersey? New Jersey is often thought of an economic afterthought in Manhattan centric media and business interests (such as by The New York Times). In fact only a small share of New Jersey commuters travel to Manhattan for work. Even in the New Jersey counties that border New York, only 12% of commuters work in Manhattan. In the other New York metropolitan area counties in the metropolitan area, the figure drops to 5%.

The trends here are also important. Since 1956, every new job in the New York metropolitan area has been created outside Manhattan (Manhattan’s employment is 400,000 lower now than back then). New Jersey depends on New Jersey far more than it does New York. New Jersey has developed successful new office complexes in Jersey City, New Brunswick, along the I-287 Belt Route and elsewhere. Perhaps New Jersey should seek to minimize work trip lengths and encourage the next 500,000 jobs to be created in the state rather than in New York. Downtown Newark, for example, has excellent transit access and could use substantial new employment investment. This might prove more beneficial for New Jersey and its taxpayers.

The Decision Much rides on Governor Christie’s decision. It may be better for the state to have a $600 million tunnel to nowhere than a $14, $20 or $25 billion tunnel that may not really be needed. Moreover, frustration is building with Washington’s “plunder" philosophy that encourages wasting money at home, so that another state doesn’t get the chance. Digging the nation out of its present (and future) malaise seems likely to require fresher thinking than this.

If Governor Christie musters the courage to stop this project now, it could be a shot across the bow of an international vendor and consulting engineering community that has routinely low-balled costs only to later jack them up, confident that no project would be canceled once started.

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Soccer Moms Against Rail Transit in Tampa
On election day, the voters of Hillsborough County, Florida (Tampa) will vote on a one-cent sales tax that would fund transit (75%) and roads (25%). Part of the funding would be used to build a new light rail line, which is the focus of campaigns on both sides.

The proponents are the usual well financed coalition of business, rail construction companies and consulting engineers, who could well profit from the program going forward.

The opposition, however, is unusual. It is a direct outgrowth of the growing citizen involvement from the TEA Party and 912 Project. These groups have broken new ground in raising general issues of government waste and public expenditure policy. This could be an important step toward balancing the spending proclivities of special interest groups with taxpayer interests in spending no more than is necessary to provide essential public services.

In Tampa, the rail opposition goes by multiple names, including "No Tax for Tracks" and Smartmoms. The more interesting of the terms is Smartmoms, or "Suburban Moms Against the Rail Tax." They might have just as accurately called themselves "Soccer Moms Against the Rail Tax," reflecting the demographic that has been so important in recent elections.

tampa.JPGI recall being told by a disappointed former federal official that one of his greatest disappointments was to learn that there was no constituency for economic efficiency. This may be changing, if the developments in Tampa are any indicator.

I had the privilege of speaking at one of their rallies recently and wonder whether Tampa might represent a new birth of citizen questioning of large spending projects. Their revulsion at the "if we don’t take the federal money, Baltimore will" line of thinking was refreshing. One key to restoring a more prosperous America will be to minimize this mutual plunder, by which Washington seduces local areas to buy things they never would with their own money. A new day could be dawning.

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Beijing: Satellite Cities Not the Answer

Re: China Daily

Build upward or outward? City’s growth dilemma
By Daniel Garst (China Daily)
Updated: 2010-09-27 08:08

Comment by
Wendell Cox 2010-10-10 07:31
Satellite cities are not a reasonable answer unless they are so far from the Beijing urban area that commuting to Beijing is not possible. The idea of self-contained satellite cities, where people live and work in them has not worked anywhere. There are good examples of failure in London, Cairo, Stockholm, etc. So long as the large urban area can be reached, people will commute there.
Wendell Cox, Demographia (St. Louis, USA)

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