by James A. Bacon
A proposed rapid transit bus line between Willow Lawn and Rocketts Landing would serve as a catalyst for development along the Broad Street corridor and boost property values by 11%, according to an impact study just released by the GRTC Transit System, the Richmond regional transit enterprise.
The 7.6-mile route would have 14 stops. Buses would travel on a newly constructed bus-only lane along much of the route and use on-board technology to control traffic signals at intersections in order to travel with fewer interruptions. The service would decrease travel time by some 65 percent, making bus travel competitive time-wise with driving, and would increase ridership by more than a third to about 5,000 passengers per day.
The project will require an estimated $68 million in up-front capital costs, half of which would come from the federal government, and is expected to cost $4 million a year to operate “with some portion anticipated to be covered by fares.”
Here is one simple question you won’t find answered — or even asked — in any of those sources: What is the fiscal payback?
Of course, that’s the very question we live for, here at Bacon’s Rebellion. Let’s pretend for the moment that federal matching funds (50%) and state matching funds (25%) is “free money.” That leaves $17 million to be provided locally. Let us suspend the reality of depreciation and ignore the replacement costs for buses and, decades from now, the dedicated bus lane. Let us also assume optimistically that fare box revenues cover 50% of the operating costs.
Finally, let us assume that the GRTC will borrow the $17 million local share and will be reimbursed primarily by the City of Richmond, which will reap nearly all of the benefits. Here is a back-of-the-envelope summary of costs:
- $850,000 yearly in principle payments (20-year amortization)
- $425,000 yearly in interest payments (assuming 5% interest)
- $2,000,000 yearly in operating costs
$3,275,000 a year
Next question, how much economic value will the rapid bus service create? The DRPT addresses the question but provides no hard answers. Extrapolating from the experience of the Euclid Corridor bus rapid transit route in Cleveland, DRPT projects that the City of Richmond will see a significant increase in property values along the proposed route. The presentation does not provide exact numbers but the numbers can be guesstimated from the chart at right.
My eyeball guess indicates an increase in property values of about $600 million by 2020 and more than $1 billion by 2034.
The real estate tax rate in Richmond is $1.20 per $100 in assessed value. How much would property tax values have to increase in order for the city to recoup $3,275,000 a year? Simple algebra says an increase in property values of $273 million would cover the cost. (Full disclosure: I nearly flunked algebra.) If the DRPT projections are correct — and that’s a really big if — then the bus rapid transit project would seem to more than pay for itself.
But would it really? That’s a tricky question to answer. More people living along the corridor will require additional expenditures on public services, particularly schools and public safety. The DRPT analysis does not take that into account. On the other hand, population growth would occur in a corridor that is already provided with roads, utilities and public services, so the added cost would be far less than building infrastructure from scratch in a greenfield project. That, too, must be factored into the equation.
All things considered, accepting the DRPT’s projections of increased property values as valid and counting federal/state funds as free money, it looks like the project will more than pay back local expenditures. But there’s still one more question to ask: Are there alternative expenditures of the money? Could not Richmond achieve the same objective by fostering the development of a market-based jitney service that requires only a fraction of the infrastructure investment? No one appears interested in asking that question. Perhaps the next gubernatorial administration will deem such a topic worthy of study.