Cramping the Style of the Street Car

One of the fiascoes of Milwaukee City government in recent history is a plan to spend millions of dollars of taxpayer money to build a streetcar line that connects the trendy, affluent east side (where most people have cars, and where bus service is good) to the train station on St. Paul Street.

It will do no good for people who live on the suburbs. It will do no good for black people who live on the city’s North Side. It will do no good for people who live on the South Side. It will do no good for people who live in the Marquette area. It quite clearly reflects, not sober policy analysis, but rather the fetish of certain elites with mass, government planned and run transportation.

The costs of relocating utility lines to make way for the streetcar will be massive, and the City of Milwaukee has been demanding that ratepayers throughout the entire service areas of the affected utilities (the vast majority of whom will get no benefit at all from the project) should be forced to pay these costs.

Now enter the The Wisconsin Institute for Law & Liberty, which today urged at a public hearing of the Public Service Commission that utilities not be forced to foist on ratepayers the entire relocation costs. According to the Institute:

September 27, 2012, Milwaukee, WI - Brett Healy and his fellow utility ratepayers, represented by the Wisconsin Institute for Law & Liberty (“WILL”), scored a significant victory in today’s proceedings before the Wisconsin Public Service Commission. The City of Milwaukee had argued that the construction of its 2.1 mile downtown streetcar project is a proper exercise of its police power to promote the public safety and welfare, and therefore it has the legal right to force the utilities that will be affected by the project (and their ratepayers) to absorb all of the costs for the relocation or reconstruction of their facilities. Those costs have been estimated at more than $50 million. The City, which expects to essentially pay for the $65 million project with federal funds, has no room in its project budget to pay even one dollar of utility relocation costs.

The Commission declined to rule today that the construction of the streetcar project is a proper exercise of the City’s police power, setting that issue for a later hearing. More importantly, however, the Commission held that even if the streetcar project is a proper exercise of the City’s power, the City cannot impose all of the relocation costs on the utilities that will be affected. Only those costs that the Commission finds to be “reasonable” can be shifted to the utilities. The Chairman of the Commission particularly noted that the Commission’s duty is to protect Wisconsin’s utility ratepayers, and expressed serious reservations that it would be appropriate for the City to pass on millions of dollars in costs to Southeastern Wisconsin utility ratepayers who will receive no benefit from the City’s project. The Commission rejected the City’s contention that it had no jurisdiction to decide the cost issue, and said that it would hold a hearing to determine what costs it would permit the City to pass on to the utilities and their ratepayers.

Rick Esenberg, President and General Counsel of WILL, said “this is a clear victory for our clients and for the concept of government accountability. The Public Service Commission has done what we asked it to do, and will take a close look at the City’s decision to impose millions of dollars in costs on ratepayers who do not live in the City. We are confident that the Commission will decide that, if the City wants to move forward with the streetcar project, the City’s taxpayers should pay for it.”

Brett Healy, who originally brought the matter before the Commission, said “it’s clear that the City has no room in its budget for paying any of the utility costs and equally clear that the Commission will not let the City get away with shifting all, or even most, of those costs to utility customers. It’s time for the City to let its taxpayers know that the streetcar project cannot be financed with “free” federal dollars, and that it will likely cost them in substantially increased property taxes at the end of the day.”

This mania for mass transit among liberal elites, as we have noted before, reflects the resentment of these elites at the uppity nature of ordinary Americans. They want to live where they want to live. They want to drive their cars where they want to. They don’t want to have to conform their lifestyles to what urban planners think is best.

And the liberal elites hate that hugely.

Kenosha-Racine-Milwaukee Corridor Rail: Mass Transit Boondoggle

Yesterday we attended a presentation sponsored by Milwaukee County Supervisor Joe Rice on the proposed commuter rail line from Kenosha to Milwaukee.

Rice has a history of opposing tax increases, so it made sense that the free-market think tank, the Reason Foundation, would be doing the study.

In spite of the Reason Foundation’s pro-market bent, the presenter and chief researcher, Thomas Rubin, took a rather moderate tone. He clearly implied that the Milwaukee County Transit System was deserving of further taxpayer subsidies, and failed to outright condemn the rail line, simply urging the consideration of other, possibly more cost-effective, alternatives.

But the data he presented was damning.

The most obvious absurdity: each one-way trip on the rail line would cost $28. But the fare would be only $2.92. That means that every round-trip commuter, using the line to go from Kenosha to a job in Milwaukee would get a $50 daily subsidy from the taxpayers of southeastern Wisconsin.

That’s right. Fifty dollars per day. Assuming a 52 week work year, with two weeks vacation, that’s $12,500 per year. If we lived in Kenosha, we would gladly take that money and commute by car, or arrange a car pool, or telecommute or simply find a job in Kenosha. That would leave us better off, and the taxpayer no worse off.

Mass transit proponents continually claim to particularly care about the poor, and always puff the need that poor people have for mass transit. Where city bus systems are concerned, this argument may have some traction. But try finding somebody on a commuter rail line anywhere in the country who is taking the train in to a janitor’s job, or a hotel maid’s job, or to work on the counter in a McDonald’s in the city. In short, the vast majority of the riders would be affluent professionals enjoying a massive subsidy financed by the sales tax.

But if the $50 per day subsidy is the most obviously outrageous part of the plan, it’s hardly the only one.

In the first place, estimates of costs and ridership for mass transit projects have a nasty history of being badly off. And not off randomly. The costs are systematically underestimated, and the ridership is systematically overestimated. If that has happened here, the taxpayer subsidy would have to be larger -- probably much larger.

Further, it’s virtually impossible to dismantle a project like this if it proves a failure, since you have to give back the money you got from the Federal government! Thus taxpayers have to throw good money after bad with a costly white elephant that can’t be gotten rid of.

A lot of the costs of the project aren’t taken into account, and Rubin gave an enlightening account of the complexity of projects like this. A train line along the KRM route would impede traffic at many grade crossings, and kill at least a few people. (Admittedly, the people killed would be idiots who drive around a lowered gate to try to beat a train.)

(U.S. railroads reported 237 deaths in “highway/rail incidents” in the first ten months of 2008.)

Noise would be substantial. In fact, Federal regulation requires that train whistles be loud.

Economic Benefits?

One of the standard excuses for spending massive amounts of taxpayer money is that the spending has large spillover benefits. And indeed a study from the University of Wisconsin-Milwaukee claimed that the rail line would indeed produce such benefits, both in terms of stimulating the local economy and raising property values.

The Reason study thoroughly debunks that.

The University of Wisconsin-Milwaukee analysis of the local economic benefits of the construction of the rail line wrongly assumes all expenditures, and jobs created, would be local, even though there is no local capacity to produce many of the components, such as the $48 million rail cars. And the $2.1 billion increase in property values the rail project alleges would mean that each of the 3,696 projected 2035 round-trip riders would be “worth” $568,000, a claim that “cannot be taken seriously” the Reason Foundation concludes.

Of course, any economist knows that you can create jobs and development in some highly visible place if you just throw enough money at a particular developer, or provide a large enough subsidy (explicit or implicit) to this or that locality or industry.

The Reason study, however, concludes that while the KRM line could certainly move development around (taking it from the I-94 corridor to the lakefront, for example) it wouldn’t actually create any new development.

This, of course, reflects a truism about subsidy-driven economic development. With enough taxpayer money you can create showpiece development that politicians can brag about, while leaving everybody else, including businesses who pay their own way, worse off.

Most economists know this, but there are always a few hacks around (often, it seems, in the UW system) who will try to justify this or that expensive project.

The policy brief of the study is here, and the full study is here.

Ken Yunker Responds

The people who staged this press conference graciously allowed Ken Yunker, a strong supporter of the KRM line, to respond. Supervisor Rice kindly sent us two slide shows that Yunker prepared, and they are available here and here. Due to limitations on time, Yunker only dealt with a few of the issues covered in his slide shows.

We found his responses unconvincing, and indeed rather silly.

In response to the absurdly high subsidy that would be required for each rider on the KRM line, he said that the Marquette interchange upgrade cost millions, and does not accommodate a single new rider.

We confronted him after the presentation on this, and told him that even if no additional autos use the interchange, the reduction in waiting time might well justify the expenditure.

He then responded: “so you want to subsidize drivers and not transit users?”

Too shocked at this absurd response to explain that (1.) we don’t like to subsidize anybody, and (2.) drivers pay a Federal gas tax to provide funds for such interchanges, we responded “subsidize what is cost effective.” We added “you are assuming that people are exogenously assigned to driver versus mass transit status, but in fact people choose.”

He said he understood. We are rather confident he did not.

Conclusion

What we have, with the KRM line, is the typical mass transit boondoggle. Those proliferate all over the country, driven by a variety of forces. There is, first, the pork barrel imperative. Big projects create big profits for various suppliers and contractors, and political profit for politicians who can point to some “achievement” confident that the average voter will have no idea what the project cost, either in terms of other lower-visibility public programs, or in terms of private consumption.

Then there is the “other people’s money” factor. Given that “free” Federal money, siphoned off from funds that should go to highways (since they come from gas taxes) are available, why not have something for “free.” But of course it isn’t free. And it especially isn’t free when it saddles local taxpayers with an expensive white elephant.

Finally, there is the liberal dislike of roads, cars and suburbs. To elitist liberals, all those things are symptoms of ordinary Americans getting uppity. They think they have the right to live where they want, to commute if they want, and to drive their cars where they want -- all without permission of bureaucratic planners.

(It’s true, of course, that planners plan highways, but their typical task is to simply accommodate traffic by making it easier for people to travel as they want.)

Those ordinary Americans have the gall to live under suburban governments that are may be responsive to their own interests and values, and not inclined to massive social engineering.

So ultimately, the animus against autos -- which translates into a lust after “public” transportation -- is cultural. But the culture follows from the class interests of elite liberals.