How We Pay for Rail Expansion Matters


I’m looking forward to the Milwaukie Light Rail project opening around 2015. It’s an important expansion of our regional LRT network and will improve connectivity across the river dramatically for transit, bikes and pedestrians at the south end of the Central City.

But I’m disappointed by one element of the funding strategy. TriMet will issue bonds for about $39M as part of the $1.4B project – just over 2% of the overall budget.

The rub is that the only way TriMet has to pay off these bonds over the next twenty years is to use payroll tax and farebox revenue to do so – money that would otherwise be available for operations.

TriMet says that debt service on these bonds will be about $3.2 million each year. Currently, it costs about $100 to operate a bus for an hour. That means that we’re giving up the opportunity for 32,000 bus service hours (or a smaller number of more expensive light rail operating hours) in the first year. Over the 20 years the bonds will be paid off, allowing for some inflation in operating costs, we’re talking about half a million service hours.

An op-ed piece on Oregon Live this morning talks about the equity impacts of this choice.

Surely as a region we’re smarter than this? We should be able to find a way to complete our capital budget without robbing the precious funds that are available for operations.

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40 responses to “How We Pay for Rail Expansion Matters”

  1. Chris, what would you suggest that we do? Do you think there is any hope for federal allocations that go specifically to operations? Maybe there will be some allocations for operations in the next reauthorization?

  2. The point is that TRIMET should not have to pay the loans off. They could be taken out from someone else so that trimet doesn’t have to deal with this on the books

  3. Well, we could start by adopting a policy that says operating dollars are scarce and we don’t divert them to capital uses!

    I would love for the Feds to help with operations, but unless/until they do, we need to protect the operating dollars.

  4. Someone mentioned that TriMet does have the authority to issue bonds for N/S light rail–an authority previously approved by voters, but not yet exercised by TriMet–for an amount well in excess of $39 million.

    Why this isn’t being used I’m not sure–is it part of the funding package for CRC light rail? Or is the agency simply afraid of raising taxes (even if voters have previously given approval) and the political blowback that might ensue?

    Bonding operating dollars is dumb. Is there any chance that a different source of funding could be found to back and pay off the bonds once issued–assuming the alternate funding source is sufficiently creditworthy–or is TriMet pretty much stuck at this point?

  5. I’m not aware of any taxing authority (for bonds or anything else) that TriMet has that they are not already using.

    Unfortunately this practice (bonding operating dollars) has been used on a number of LRT projects. It has generally been pretty opaque. I hope highlighting some public discussion on this will help TriMet look in other places for future projects.

    I don’t know if there is any hope of changing the funding plan for this project. I’d like to think so, but we’re pretty far down the line on this one.

  6. While I’m commenting–the article you site discusses an issue beyond LRT funding, and one which lies at the very heart of all planning and funding decisions:

    What are the purposes of TriMet (I’m assuming more than one), and how do they stack up?

    The authors of the quoted piece assert that TriMet’s mission must be first and foremost social justice–providing transport for those who cannot afford alternatives–and thus favor inner-city bus service over LRT, which they view as primarily serving “choice” (i.e. not poor) suburban riders.

    Others think that the focus TriMet (and the rest of the region’s planning and infrastructure apparatus) ought to be any one of:

    * raw transit and mobility, independent of any social justice or environmental concerns
    * the environment–in particular, reducing pollutants and energy usage, particularly from SOVs
    * a source of high-paying jobs

    It’s an important question.

  7. I’ve always found it interesting that in the private sector, it’s the reverse: It’s easy to expense things, but many public corporations are loathe to have any assets on the books that aren’t in the bucket called “cash or cash equivalents”. Many “management effectiveness” criteria penalize companies for tying cash up in assets, especially things which aren’t fundamental to the business.

  8. When we make public investments independent of equity considerations, we wind up with an inequitable society. Measures of sustainability and cost-effectiveness must be balanced with measure of equity as well when guiding investment.

  9. “The authors of the quoted piece assert that TriMet’s mission must be first and foremost social justice–providing transport for those who cannot afford alternatives–and thus favor inner-city bus service over LRT, which they view as primarily serving “choice” (i.e. not poor) suburban riders.”

    I think the fundamental problem is that the authors of this article seem to be operating on a pre-conceived ideological belief from experience elsewhere rather than addressing the reality in Portland. There has certainly been a lot of displacement of poverty along Interstate. But that displacement has been to places like Rockwood and Lents that are well-served by light rail as I read this map from CLF’s Regional Equity Atlas:

    http://www.equityatlas.org/maps/map2-12.pdf

    The idea that buses better serve low income or other transit dependent riders is not really accurate. The issue of equity is a location question, not a mode issue.

    Rather than being concerned about operating expenses, the real problem is the use of urban renewal funds for light rail that should be available to ensure that low income neighborhoods aren’t displaced to begin with. That was the problem with Interstate MAX. Lots of promises were made about preventing displacement, but the money to fulfill them wasn’t there since it was needed to actually build the light rail line.

    Trimet may still have bonding authority approved for North/South light rail. Using that money was discussed when Interstate MAX was built. The decision was that project did not, by itself, meet the criteria voters approved for issuing the bonds. If you extend light rail to Vancouver and Milwaukie, that may no longer be true. The larger problem is whether anyone has the political will to raise taxes now based on a vote from 15 years ago.

    I think its important to remember that building light rail results in operational savings. If the alternative to bonding operating funds is no light rail, its perfectly possible using operating funds will actually result in more transit service, not less. There was certainly an improvement in bus service that resulted from the reassignment of the buses that Interstate MAX replaced.

  10. [Moderator: Comment interlaced with multiple speculative “outings” of Just Saying’s identity removed.

    People are allowed over the long-term to use a pseudonym here as long as they stick with one, as opposed to sockpuppets who, for example, crop up in the same thread as the original commenter or appear shortly after the original commenter has been sanctioned in some way.

    If you want to get into an “outing” war here, I’m open to hearing suggestions for how it could be done in a civil manner, but I’m guessing that more than a few people on all sides of the issues would be uncomfortable with that.

    (And those using pseudonyms who participate in activities such as (but not limited to) personal attacks, deception, sockpuppetry, should not feel entirely safe about not being outed.)

    Meanwhile, if you wish to repost the factual and policy theory portions of your comment without resorting to speculative outing, and without applying the blanket label of “fool” to anyone who disagrees with your economic theories, you’re more than welcome. – Bob R.]

  11. [Moderator: Just Saying’s reply, interlaced with snarky responses to JK’s speculative “outing” activity, removed. Please re-post sticking only to the factual/policy issues. Thanks. – Bob R.]

  12. As for the argument that improving a neighborhood drives up housing prices and rents, there is obviously truth to that. Its the reason Urban Renewal money needs to be used to stabilize the low income people who live there.

    Of course nothing will help the really unstable parts of a low income community. But urban renewal can allow many of the people who have worked to make the community better place to enjoy some of the fruits of their effort. Instead of finding themselves priced out by their success.

  13. Bob –

    At least he wasn’t accusing me of being you …

    Here are my responses to Jim’s post, minus the “snarky” pseudo-outing of Jim as ROT.

    JK: “Got any proof of that? The type of bus line that Trimet replaces with rail is the lowest cost bus lines which are a lot cheaper than light rail.”

    The cost of operating a bus is pretty much the same regardless of the line, empty or full, isn’t it? The gas costs he same amount, the driver costs the same amount. So when light rail carries several times as many people in less time it costs less than than the multiple buses it replaces.

    JK:“…why did Trimet delay the opening of the Interstate line due to money? If it really is cheaper why does C-Tran need more money to operate light rail?”

    Are either of those things true? C-Tran doesn’t even have a light rail line. Why are they worrying about operating costs?

    JK: “transferring from the bus to max (and back) in a bad neighborhood as opposed to the non-stop they had before max.”

    How many people is that true for? Not many, if any.

    There are some disadvantages to MAX. The stops are often further apart (part of the reason it is faster) and the service may be less frequent since replacing it requires multiple buses. But light rail is far more popular to use than the bus for good reason. Its more comfortable, smoother, faster and more reliable. And the stops are better lighted and safer.

  14. Just Saying Lots of promises were made about preventing displacement, but the money to fulfill them wasn’t there since it was needed to actually build the light rail line.
    JK: Displacement was a goal of any UR project. It is simply not possible to build all those new high density condos without raising land costs and therefore driving out existing renters as rents rise. It takes a bit longer for rising property taxes to drive out the home owners. Even economically illiterate planners (econ is not required for a planning degree), should know this. They simply didn’t care. All they wanted was the $30 million that should have gone to fixing up the streets for the toy train.

    Just Saying I think its important to remember that building light rail results in operational savings.
    JK: Got any proof of that? The type of bus line that Trimet replaces with rail is the lowest cost bus lines which are a lot cheaper than light rail.

    Just Saying If the alternative to bonding operating funds is no light rail, its perfectly possible using operating funds will actually result in more transit service, not less.
    JK: Only if light rail is actually cheaper. If it is actually cheaper, why did Trimet delay the opening of the Interstate line due to money? If it really is cheaper why does C-Tran need more money to operate light rail?

    Just Saying There was certainly an improvement in bus service that resulted from the reassignment of the buses that Interstate MAX replaced.
    JK: Yeah, I keep hearing about all the people who love transferring from the bus to max (and back) in a bad neighborhood as opposed to the non-stop they had before max.

    Thanks
    JK

  15. I’m not aware of any taxing authority (for bonds or anything else) that TriMet has that they are not already using.

    Back in 1994, voters approved $475 million in bonding authority to Tri-Met to build a light rail line from Clackamas County to Clark County. That was one component of a larger funding package (involving contributions from Clark County, the states of Oregon and Washington, and the federal government) that ultimately fell apart — Clark County voters didn’t want the project, and the state of Oregon’s contribution was referred to the ballot and failed in a state-wide vote.

    Tri-Met, acting in good faith, has chosen not to touch the money, and taken the position that it isn’t available. But I think it is LEGALLY an open question as to whether they could still use the 1994 bond authorization to construct a light rail line from Clackamas County to Clark County. As I recall, the bond measure approved by voters did not SPECIFY a particular Clackamas-to-Clark county project with exact beginning and end points or a specific route. I also think (and I could be wrong) that there was no expiration date as to when the bonds could be issued.

    Conceivably, if C-Tran and/or the City of Vancouver and/or the State of Washington came up with Clark County part of it — enough to pay for one light rail station downtown and maybe a mile of track, plus part of a bridge — then Tri-Met could issue up to $475 million in bonds to pay for (1) the bridge over the Columbia and a station on Jantzen Beach to connect to the MAX line; and (2) a big chunk of the proposed Milwaukie Line.

    I expect Tri-Met isn’t even looking at it because it WOULD be seen as bad faith — taking money approved sixteen years ago for a failed project, and turning it to a similar (but much shorter) project today. It would create significant political backlash. Since this isn’t the last rail project Tri-Met plans to build, they need to worry about stuff like that.

    Personally, I’d rather see them ask the voters to approve bond funding for the local share. It’s been twelve years since the last light rail vote (which was defeated NARROWLY on a crowded ballot). It might pass this time around.

  16. JK wrote: “If it is actually cheaper, why did Trimet delay the opening of the Interstate line due to money?”

    JK, I’d be delighted to review your source for that assertion.

    It was rather widely reported back at the time that the line was opening on-time and on-budget.

    I rode the line on the opening weekend, and my camera files are distinctly dated “May” and not “September” (the original planned opening), but someone could have gotten into my files.

    A Google search for: “interstate max” opens early
    turns up over 1,000 results.

    JK also wrote, regarding Interstate Max, “Yeah, I keep hearing about all the people who love transferring from the bus to max (and back) in a bad neighborhood as opposed to the non-stop they had before max.”

    Like Douglas K., I’d like to know just what people you’re talking about. I made an attempt to quantify this a few years ago. The Interstate Line essentially duplicates the #5’s service as far out as the Expo Center, but not Hayden Island, which I think was an unfortunate omission from the initial line.

    But as you can see from the linked article, 75% of the original #5 riders saw a trip time improvement, while 21% saw trip times lengthen.

    So, should we avoid doing something that improves trip conditions for 75% of existing riders if 21% see worse service? (I guess part of the answer depends on just how better “better” is and just how worse “worse” is.)

  17. Like Douglas K., I’d like to know just what people you’re talking about.

    I think that was Just Saying asking the question.

    [Moderator: I stand corrected. 2nd part, inferentially personal, removed. – Bob R.]

  18. What is equitable, anyways?

    I often hear of the inequities of there not being any sidewalks on some streets in far East Portland. Is that the city’s fault that there’s no sidewalks and that these homes were built during a time when walking was taken over by autos? The auto-only crowd always brings this up as a talking point, but hypocritically by “them”, when people argue that the built environment should foster better pedestrianism as an option; you’re met by “them” with absolute criticism that you’re magically forcing “them” to walk everywhere and that walking is not practical when the car is so much superior!

    Ohh the contradictions they use regarding equity as an argument.

    Relating to the topic:

    Should someone complain if there’s no timely bus service in their low density neighborhood, where they chose to live there because it saved them a whopping 20 dollars a month on rent?

    I’m generalizing greatly as it does not fit everyone’s position. I agree the bus service is in need of an overhaul, for sure. I think Tri-Met will reap rewards in terms of greater transit ridership when they realize that if they provide the “last mile” of service (to relate it to broadband lingo), that their rail investment and total transit ridership will greatly increase too (A lot of people in the burbs drive to park n ride stations instead of taking the bus).

    And what I mean by “last mile” is make the bus experience more understandable and a bit more timely (if possible). I’d bet most people don’t even know how to board a bus properly with fare or how to transfer buses properly or how long a transfer is good for.

    Rail is easy. You buy a ticket, board, and present the ticket when questioned. (Or don’t buy a ticket and run from the transit officers when confronted!).

  19. I’ve heard people from Tri-Met say that one of the biggest obstacles to new riders is uncertainty about how to pay the fare.

    I disagree that paying fare on rail is easy. A fare on a bus is easy; buy a ticket at the door when you get on. LIke going to a movie or a museum. (Unless you’re on a “pay when you leave” system like Seattle.) Rail is confusing — you need to figure out that you have to buy a ticket from a vending machine that may or may not be working, and then there’s no turnstile to take your ticket and nobody to give it to at the platform or on the train.

    The zone system adds a daunting level of complexity to people trying to use the system for the first time. So does the free rail zone — the rail is free here, but not over there.

    I admit that buses can be a bit confusing when it comes to working out zone and transfer systems. You might get a transfer in one system that’s only good for specific buses at certain stops. Another provides a transfer that’s good for one bus, and yet another for two buses, and here your ticket is good for two hours. Down in Los Angeles, there are no transfers; you pay $1.25 for EVERY boarding (even transferring from one subway train to another) unless you have a pass.

  20. I boarded a TriMet bus the first time a couple years ago, and I had no idea how to pay. I had put off bothering with the busses for a while because of it. There was nothing at the stop telling me what to do, there was no indication if cash could be accepted, if they could make change, credit cards, whatever. It was daunting. I was afraid to even bother because I figured I’d probably hold up the line or not be able to board.

    The Max is easy. There’s a big vending machine you can deal with before the train even arrives, there’s instructions. I’ve met plenty of people with the exact same apprehension.

    And I’m a 20-something transit user.

  21. Back to the original topic which I think raised two issues:

    1) Will the savings in operating costs from the new facilities be greater than the cost from operating funds? If it does, then the actual impact will be to make more opeerating funds available, not less.

    Of course that assumes there is no other way to pay for the facilities. I agree with Chris that it would better to find funds elsewhere.

    2) The second issue is whether light rail versus max is an equity issue. Do investments in light rail have the tendency to improve service in wealthier parts of the community at the expense of transit service in low income neighborhoods? Does light rail serve areas with higher paying jobs at the expense of service to areas with a lot of low income workers?

    As I said above, I don’t see the evidence for either one. In fact, adding MAX to the central eastside industrial area seems to do the opposite. As did adding MAX to the I205 corridor from Clackamas County.

    If anything, one can argue it is buses the are inequitable. Trimet is spending money operating bus routes with low usage that extend service to wealthy suburban areas at the expense of light rail operations that serve low income communities.

    Of course that is line specific. If you are looking at the Barbur Boulevard corridor, it may well be the case that you are serving upscale neighborhoods and employment. But the symbolic claim that light rail is for the rich and buses for the poor is simply not true.

  22. At the recent Coalition for a Livable Future Regional Equity Summit, a TriMet representative indicated that they had an analysis of how service hours were distributed by census block. That would presumably provide a number of ways to analyze equity considerations.

    But a follow-up request for the data generated an answer that “it is not up-to-date”.

  23. Great post over there Scotty. But I’m not sure if you should really be bringing Martin Luther into this. :-)

  24. Come on, Bob. It’s only been 500 years, surely some of the hurt feelings have healed by now. :)

  25. Bob R. Says: JK wrote: “If it is actually cheaper, why did Trimet delay the opening of the Interstate line due to money?”

    JK, I’d be delighted to review your source for that assertion.

    It was rather widely reported back at the time that the line was opening on-time and on-budget.

    I rode the line on the opening weekend, and my camera files are distinctly dated “May” and not “September” (the original planned opening), but someone could have gotten into my files.
    JK: There was a news media report at the time that the line was finished early, but trimet could not operate it because of lack of funds. After several attempts, I was unable to locate that statement, but I did find that he line was operational in February to point of taking politicians, artists fans & construction reps, but didn’t start regular service until May:

    —————- Oregonian quote ————–
    NEW MAX LINE TAKES CROWD ON RUN TO EXPO CENTER, Oregonian, February 20, 2004
    Summary: The $327 million Yellow Line is finishing below budget and ahead of schedule
    The phoenix rode not wings but steel wheels and rails.

    A light-rail line once seemingly killed by voters took its first 5.8-mile run through North Portland on Thursday, filled with politicians, neighborhood activists, transit fans and construction representatives.

    TriMet will open the $327 million Interstate Avenue MAX line on May 1, carrying passengers between the Rose Quarter and the Expo Center.
    From: http://docs.newsbank.com/s/InfoWeb/aggdocs/NewsBank/100DDB885A4BBAE4/0D10F2CADB4B24C0?p_multi=ORGB&s_lang=en-US

    Thanks
    JK

  26. JK: There was a news media report at the time that the line was finished early, but trimet could not operate it because of lack of funds. After several attempts, I was unable to locate that statement, but I did find that he line was operational in February to point of taking politicians, artists fans & construction reps, but didn’t start regular service until May:

    Light rail lines go through a significant burn-in phase prior to revenue service, and it’s quite common to use this time for tours for community members, employees and politicians, JK.

    The Yellow Line was originally scheduled to open in September 2004, but instead opened in May.

  27. Just Saying Says: The cost of operating a bus is pretty much the same regardless of the line, empty or full, isn’t it? The gas costs he same amount, the driver costs the same amount. So when light rail carries several times as many people in less time it costs less than than the multiple buses it replaces.
    JK: Several conceptual errors here:
    1. The operating cost of both LRT & bus are mainly fixed per hour or per mile. The bus averages $112 per vehicle hour compared to LRT’s $328.
    2. The cost per boarding is mainly dependent on the number of boardings per hour.
    3. LRT at 2.9 times the cost of bus has to have 2.9 times the riders to cost the same. Conversely a bus only has to have 34% as many riders to cost the same.
    4. MAX averages 138 boarding/hr so a bus only has to average 47 to match the cost.
    5. The average bus has 33 boarding, a line 42% above average would match MAX.

    Just Saying Says: JK:”..If it really is cheaper why does C-Tran need more money to operate light rail?”

    Are either of those things true? C-Tran doesn’t even have a light rail line. Why are they worrying about operating costs?
    JK: Here are the data (note the conflict):
    1. C-Tran claims LRT is cheaper to operate than the bus and that is why they support LRT on the CRC.
    2. C-Tran will continue current bus service across the CRC.
    3.C-Tran will go to the voters to get a sales tax increase to operate the LRT.

    Thanks
    JK

  28. “(note the conflict)”

    I don’t see any conflict. If they aren’t replacing any existing bus service, of course they have to have more money to operate an additional light rail service. It has nothing to do with which is more expensive.

    You left out a modifier: “5. The average bus has 33 boarding, a line 42% above average would match (the average) MAX.”

    The capacity of a light rail is about 320 per train. To match that with similar costs buses would have to carry about 110 passengers. They don’t. That is why light rail is cheaper on heavily used routes, but not on lighter used ones.

    If you have ever taken a bus from Gresham into Portland you will also appreciate how much faster MAX is. It saves its passengers a lot of time. And “time is money” as the saying goes.

  29. This thread at humantransit has become relevant to the present discussion. The thread discusses various schemes where private entities get involved in the financing of public infrastructure projects–an arrangement which is often made for the same reason that TriMet bonds its operating revenue:

    To be able to build new stuff without raising taxes up-front.

    Either way, it’s dumb and shortsighted. Either you pay nor or pay later, and paying later costs more.

  30. Jeff F is correct … for example, the Green Line started running test trains several months ahead of time, and in late June held a “First Ride” event, which PortlandTransport covered on video.

    Nothing in the article JK provided, which I saw as well, supports the unfounded assertion that the opening of Interstate MAX suffered a “delay” because of funding. Quite the opposite, in fact. This is another case where words mean things. “Delay” is quite the opposite from “opens early”. You can’t get around that.

  31. “Either you pay nor or pay later, and paying later costs more.”

    But the “you” doing the paying are not the same people. If you bond a capital investment that is going to last 40 years, there is something to be said for letting the folks who are using it in 40 years pay part of the cost. In fact, limiting public investment to what people can afford to pay right now in taxes for up-front costs is going to cost more in the long run in lost opportunity.

  32. Most bonding measures are sufficiently long-term that the pain is spread out over a sufficiently long period of time–but not too long.

    When you finance something over too long of a period, the interest starts to dwarf the principle–even considering that inflated dollars are being used, you’re paying a premium for the financing.

    In the specific case of the Milwaukie line, the people can certainly afford a $39 million bond measure–we’re not talking about taking on billions of additional debt.

  33. Bob, to clarify,
    I did not mean a delay in opening relative to the original plan data. I meant that it could have opened earlier than it did except for insufficient money to operate it earlier.

    Thanks
    JK

  34. Although, a little off of my original clam, here is a pretty clear statement that Trimet choose to fund rail at the expense of bus service:

    TriMet cannot substantially increase bus service for at least another five years because of commitments to help fund new rail lines and increases in senior and disabled citizen services. The Portland Tribune, Jun 1, 2007,
    localdailynews.com/news/story.php?story_id=118065302018049900

    Thanks
    JK

  35. Following that statement and the source of that quote, guess who was named to the TriMet Board of Directors, effective yesterday:

    trimet.org/news/releases/june2-boardnew.htm

    None other than Steve Clark, Portland Tribune President.

    So much for what little objectivity and impartiality that was still left in the local media.

  36. “Although, a little off of my original clam, here is a pretty clear statement that Trimet choose to fund rail at the expense of bus service:”

    No, not really, since that is describing commitments to expansion of service and makes no mention of cutbacks to bus service.

    Analogy: If I state that I cannot add another bedroom to my house at the present time due to commitments to kitchen expansion, that does not mean that kitchen expansion comes “at the expense” of bedrooms.

    Now, if I took away a bedroom to make room for a bigger kitchen, you could make that argument.

  37. There is the good old concept of “opportunity cost”, although I generally consider the notion to be overused.

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