Friday, February 24th, 2012

Transport Devolution Won’t Stop Boondoggles

Harvard economist Ed Glaeser wrote a Bloomberg column with his prescription for US transportation. Among his recommendations is to de-federalize transportation spending, saying:

Most forms of transport infrastructure overwhelmingly serve the residents of a single state. Yet the federal government has played an outsized role in funding transportation for 50 years. Whenever the person paying isn’t the person who benefits, there will always be a push for more largesse and little check on spending efficiency. Would Detroit’s People Mover have ever been built if the people of Detroit had to pay for it? We should move toward a system in which states and localities take more responsibility for the infrastructure that serves their citizens.

Yonah Freemark responded to this and others commentators voicing similar views on his blog. He has a contrary take:

The argument goes something like this: The federal government, because of its national power and ability to collect revenues from the fuel taxes it administers, is a wasteful spender and it chooses to invest in projects that are inappropriate enough that they wouldn’t be financed by local governments if they were in charge.
….
Here’s the thing: The large majority of decisions on transportation spending with federal dollars is already made at the state and local levels. And state and local governments already contribute huge sums to the operation, maintenance, and expansion of their transportation programs.

I’d like to examine one aspect of this, namely the idea of whether or not devolving transportation spending to the state level would reduce wasteful spending on boondoggles. I see no reason to believe that it would.

We see one example of this in Indiana. Indiana leased its Toll Road for $3.9 billion to financing a highway construction program called Major Moves. While this has made use of federal dollars, a huge pot of locally raised funds in the form of this lease was put to work.

So how did the state spend the money? When Gov. Daniels took office, he blew the whistle on the past practice of the state transport department to promise projects that had no chance of being delivered because the state didn’t have the money. The result was the toll road lease that would actually pay for most of the projects the state had on the books.

Here’s the interesting thing, though: despite an extensive project prioritization process, INDOT and Daniels didn’t cancel any major project that was sitting in INDOT’s list. I-69? Check. US 231? Check. Ohio River Bridges? Check. Hoosier Heartland Corridor? Check. US 31 upgrades? Check. I-465 widenings? Check.

I’m not going to claim these are all boondoggles or pick on any particular project. But I do find it interesting that not one big project was judged not worth doing. (There was an outer beltway proposal for Indianapolis that Daniels withdrew, but this wasn’t a pre-existing project. It was effectively a trial balloon Daniels proposed and then withdrew after some local opposition). Is there really nothing on INDOT’s list that should have just plain bitten the dust? I find this particularly remarkable in light of Daniels fiscal conservatism bona fides. He’s a genuine lean government guy, not just a talker.

This leads me to my general view on proposed highway projects: There is no highway boondoggle big enough that even the most fiscally conservative governor is willing to kill it on cost efficiency grounds.

I’m not aware of any highway example analogous to Gov. Chris Christie’s ARC transit tunnel cancellation. I’ve heard of projects collapsing because of public opposition. But never because a governor simply judged it was too financially imprudent, as Christie did with the ARC tunnel.

Given that most states seems to suffer from the same problem as the federal government – namely that they are collections of disparate regions that have a huge incentive to try to maximize their take from the overall spending pie – it seems unlikely that by devolving to the state level we would make any material dent in boondoggle spending. Maybe the worst of the worst – say the notorious “Bridge to Nowhere” in Alaska – may die, but those would be exceptions.

If we devolved to the local/regional level, things might be better. But unfortunately localities do not have the legal powers necessary to take are of their own business in most cases, and states seem very unlikely to give it to them. Also, localities do pay for things like stadiums and convention centers mostly out of their own pocket. We all knows these type of investments have been judged poor by virtually every independent academic study. Glaeser himself has criticized them. So even devolving to the local level probably wouldn’t solve anything.

There may be good reasons for devolving transport funding from the federal to the state or local level, but eliminating boondoggles isn’t one of them.

20 Comments
Topics: Public Policy, Transportation

20 Responses to “Transport Devolution Won’t Stop Boondoggles”

  1. Eric says:

    As a local, it’s quicker to get through/around/out of Indy by taking the highways that criss-cross the city, rather than going around the I-465 loop. It’s a shame the City built it in the first place when there was the Federal money to build these loops and now has leased an asset to rebuild it. That money could have gone to commuter rail or fixing roads IN the City rather than fixing a highway people use to bypass it.

  2. John Morris says:

    Even so called local projects are not really local.

    I mean, up until now-how many cities haver been allowed to go banrkrupt? I mean, we know a lot really have liabilities they can’y possibly pay for.

    There’s a huge implied daisy chain of guarantees that you will be bailed out for screwups.

    Then we have the “regional authority” scam. It’s all a scam-and that’s why everyone thinks they can pass the buck along and always get someone else to pay for their mistakes.

  3. Jason says:

    The Detroit People Mover is lame because the federal program that was funding it was discontinued and the city used the small amount of money they were left with and built what they could.

    Yonah Freemark has it right, nowadays almost all transportation projects are done at the state level or lower. The federal money is matching grants and stuff like that.

    John Morris: So how do you think transportation should be funded? Should each municipality have its own DOT which manages its own tiny little system? And who benefits from a good transportation system, just the people who living within a few blocks of the stops, or everyone because of the overall economic benefit?

  4. Nick Hufford says:

    In terms of building highways and interstates I have oft considered the prospect of making it more regional, because it simply makes sense that regional and local governance is more practical in those situations. But in the case of the Interstate, its not just the individual state that is involved. Take for example the large states just on the West side of the Mississippi such as Kansas, Nebraska, Wyoming, Oklahoma, and Montana, and even to an extent Colorado, Utah and Nevada. These states don’t have the population to make the payments on improvements or maintenance to the Interstate system that they need to sustain their economy and population, as well as the trans continental movement to the ever popular and populated state of California. In the eastern states where population is more urbanized and has a higher density the move away from the Fed makes practical sense, but in some states, Federal subsidization is still a necessity.

  5. John Morris says:

    @Jason

    No time to go into all the detail but Glaeser’s basic ideas about tying spending to users as much as possible is correct. That could mean tolling systems, congestion pricing or links between development and infrastructure.

    Yes, in many cases, this will not provide everything everyone’s little heart desires, but it is the only real sustainable concept.

  6. Tory says:

    You may have a point within just highways, but I do think it would make a big difference when considering all transportation, including transit. Right now highways and transit are separate buckets of money and localities do everything they can to get their “fair share” (or more) of each bucket, including some boondoggle transit projects. If they had a single block grant and were told “prioritize your own transportation needs” they would be more likely to do whatever combination their locality truly needs – highways, local roads, buses, trains, bike paths, etc. Like maybe subways in NYC, train infrastructure refresh in Chicago, or freeway widenings in newer Sun Belt cities.

    Ultimately, the feds should maintain the basic 4-lane Interstate network and leave everything else to the states/counties/cities (including mega-freeways in urban areas).

  7. John Morris says:

    “Who benefits from a good transportation system.”

    How do we define a “good system”? Glaeser and me certainly feel like a whole lot of the existing spending is not creating much of value.

    NY State is talking about a 15 billion dollar replacement (or so) for the Tappan Zee bridge, a cost that is more than almost all the subway capital budgets which server a vastly larger number of people.

    Now, some goofballs are saying they should pay to maintain the old structure as a pedestrian bridge!!? How much would something like that cost? They just don’t care.

    Stuff like this isn’t creating a good transpotation system my any rational criteria like return on investment. It’s a political game.

  8. John Morris says:

    For context, please read about the real liabilities of the federal state and local governement and the way they do not use normal, standard accounting practices.

    http://www.truthinaccounting.org/

    “If we were a company, we would be out of business.
    David Walker, Comptroller General of the United States”

  9. AIM says:

    The Strong Towns blog has been pillorying such a project on the Minnesota/Wisconsin border. It’s ridiculously expensive, serves a very small number of commuters, and yet no one is willing to kill it despite the fact that it uses up more money than is required to fix all the deficient bridges in Minnesota. That’s a striking comment when one considers that of any state, the people in Minnesota should be most aware of the dangers of failing to maintain bridges after the I-35 bridge collapse.

    http://www.strongtowns.org/journal/2011/10/25/follow-up-on-stillwater-bridge.html

  10. John Morris says:

    I think the whole stimulus program made people focus on the reality here that transportation funding, has really never been about creating good investments as much as just spreading jobs, power and cash around.

  11. Danny says:

    Of the INDOT projects you mentioned, are there any that were 100% funded by the state?

  12. John Morris says:

    It gets worse. I mean, the biggest hole in The Port Authority budget. building the “Freedom Tower” isn’t even transportion related.

    BTW. Why don’t we have a Museum of Science and Trucking?

  13. Danny, I don’t know. The state had $3 billion to play with. But as Yonah noted, even with federal funding, the state picked the projects. None of them were earmark recipients (certainly no major earmarks in any case).

  14. James says:

    Ed’s argument is, as usual, problematic. He often tries to cherry pick examples to make a point, the sort of arguments that fool the rabble. I thought Harvard professors were supposed to be smart?

    “Would Detroit’s People Mover have ever been built if the people of Detroit had to pay for it?”

    But you see the problem with the people mover isn’t that it was expensive to build, but that it is costly to maintain. A cost borne by the city and not the Feds. It represents a failure of execution. So the answer is yes. But worse is the assumption that all federal spending on cities is a boondoggle. Based on one anecdote? How foolish! After all Chicago’s subways were built with federal money. Does Ed think the State Street subway was a boondoggle? And the implicit assumption Ed makes is that Detroit did not pay its fair share for the DOT money for the People Mover. But is there any evidence of this at all? Most cities pay more into the DOT than they get back. It is rural places like Alaska or Kansas that tend to be boondoggles.

    I’m not surprised that Ed makes a disingenuous argument. It is his speciality.

  15. Eric says:

    “Most cities pay more into the DOT than they get back.”

    Irrelevant. What you have paid is a sunk cost. What you get back depends on lobbying, and cities will lobby for a low value project in their city, rather than any project in another city.

  16. Walbikus (walk-bike-bus) says:

    I believe that countries that don’t have such a federal-aid program don’t have the car dependence at the local level. For example, Canada, which I understand does not have a federal highway program, the cities have less sprawl and more transit. Their cores are less abandoned, more vibrant and intact.

  17. Joe says:

    Danny & Aaron,

    You could argue some financial jogging for I-69. Gov. Daniels and INDOT have lowered the quality of materials for the extension to “bring down” short-term costs and make the project appear financially sound. It is a sick display of resource allocation, but Daniels has made it clear that he is a road guy and nothing else can stand in the way.

    Sell a road to build a road……..how long can this pattern continue?

  18. James says:

    I don’t understand what you mean Eric.

  19. Eric says:

    I-465 was and will be a legacy of wasted of money, but like Obama’s stimulus, Daniels pitched transportation improvements as economic development. The toll road lease money should’ve gone to more innovative projects supporting locals, rather than a city bypass that is usually grid locked at rush hour. Take a look at the pushback against a similar freeway that is occuring in Denver and has spawned commuter rail and a vibrant downtown, as well as the numerous cities now dismantling freeways.

  20. Nathanael says:

    “There is no highway boondoggle big enough that even the most fiscally conservative governor is willing to kill it on cost efficiency grounds. ”

    That’s because *there are no fiscally conservative governors*. Try to rebut my thesis, seriously, try. I think it’s clear that there are no genuine fiscally conservative governors in the present day, though there might be some obscure Democrat I’ve forgotten. The Republican governors are all spendthrifts who like to borrow, and most of the Democrats aren’t fiscally conservative either.

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