Category Archives: Infrastructure

The Fiscal Benefits of Smart Growth

Posted on May 21, 2013 by James A. Bacon| 16 Comments

better_budgetsby James A. Bacon

Compared to conventional suburban development, smart growth development can save 38% in up-front infrastructure costs and 10% of the cost of supporting police, ambulance, fire and other public services, according to a new report by Smart Growth America (SGA). At the same time, concludes “Building Better Budgets,” smart growth generates 10 times more tax revenue per acre.

In 2010, state and local governments spent $1.6 trillion, including $525 billion on projects and activities heavily influenced by human settlement patterns and another $250 billion on capital projects. Apply the SGA findings to those numbers and the implication is that adopting smart-growth strategies could save state and local governments $100 billion or more per year while simultaneously bolstering revenues.

Smart growth advocates have long claimed that compact, walkable, mixed-use neighborhoods are more fiscally efficient for local government than conventional suburban development characterized by low-density and segregated land uses. While anecdotal evidence is abundant, it has been difficult to back up smart growth claims with comprehensive data. For this report, the SGA conducted a meta-analysis of 17 case studies comparing smart-growth to conventional surburban scenarios over the past 10 to 15 years.

“In case after case, localities determined that smart growth reduces costs,” the report concludes. “In some cases the savings were modest, in some cases the savings were significant.”

The reason for the savings in capital cost is straightforward, explained Bill Fulton, SGA vice president and director of policy, in a Tuesday conference call. Smart growth consumes less land. Because smart growth is more compact, it requires fewer lane-miles of roads and fewer linear-feet of water and sewer line.

The savings in operating costs are almost as direct. The cost of delivering services such as fire, police, rescue, snow plowing and school busing varies in proportion to how much driving is required. The fewer the number of miles that vehicles drive, the lower the cost of services, Fulton says. There is a second layer of savings as well. More compact development can reduce the number of cars, trucks and even the number of stations needed to serve a given population.

For instance, a Charlotte, N.C., study found that fire stations could maintain their five-minute response times for more households in areas with compact development and strong street connectivity than in low-density suburbs with cul de sacs. The initial cost of building a fire station is about $6.5 million and the annual cost to operate it is about $2.5 million. The number of households served by each of the city’s fire stations ranged from 6,000 to 27,000 and the annual operating cost varied from $159 to $750 per household. If Charlotte were built out according to smart growth standards, the city could eliminate the need for two fire stations at a savings of  $13 million per year and $8.4 million in annual operating expenses.

Chris Zimmerman, a member of the Arlington County board, credited the county’s steady pursuit of smart growth (even before it was called smart growth) over the past 40 years for the lowest property tax rate of any Northern Virginia county. Eleven percent of the land built around Metro stations contributes about half the county’s tax revenue. The resulting revenue gusher since the 1990s has allowed Arlington to spend more freely than its neighbors on public services.

“In tax terms,” said Zimmerman, “we’re eating their lunch. We’re known as the People’s Republic of Arlington — not shy about spending public dollars. We spend more on our schools than anyone in sight, pay more for teachers and principals, and yet we have the lowest tax rate in Northern Virginia.”

A Nashville, Tenn., study conducted for the “Building Better Budgets” report compared three developments in Davidson County: Lenox Village, a greenfield New Urbanist project; Bradford Hills, a conventional suburban development; and The Gulch, a downtown infill development. The New Urbanist development was the most cost efficient at $1,300 per year per unit to provide government services, followed closely by The Gulch at $1,400 per unit. Bradford Hills, the suburban project, cost $1,600 per year.

A fiscal analysis conducted by the Strategic Economics consulting firm determined that at full build-out, The Gulch would have a net positive impact on the Nashville-Davidson metropolitan general fund of $116,000 per acre. Lenox Village would have a positive impact of only $780 per acre, and Bradford Hills was essentially break-even at $100 per acre.

To facilitate walkable, mixed-use development, Nashville has implemented form-based zoning codes downtown and along major corridors, said Rick Bernhardt, executive director of the Metro Nashville Planning Department. “If you compare over the last eight years, the value of appraised property in Davidson County is up 30% — 115% in areas where we put new codes in place.”

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Posted in 2013, Budget, Infrastructure, Land use & development, Taxes, Transportation

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The Cooch’s Freak Show Dream Team

Posted on May 21, 2013 by Peter Galuszka| 6 Comments

cooch dream teamBy Peter Galuszka

Ken Cuccinelli just can’t keep away from the bizarre, but perhaps that’s what makes him what he is.

He stages a convention instead of a primary to neuter Bill Bolling. And since a convention is smaller, it draws more GOP hard-righters than  June bugs on a humid night and they succeed in getting Bishop E.W. Jackson and Mark Obenshain selected. They underline the social conservatism that turns millions off and makes Virginia the butt of jokes on late night talk shows.

The Bishop is an even bigger gay basher than Cuccinelli and says that Planned Parenthood is responsible for more fatalities among African-Americans than the Ku Klux Klan. This may be new to a Harvard Law graduate, but women of any color have a legal right to an abortion within limits. The U.S. Supreme Court said so. Look under Roe vs. Wade.

Then there is the attorney general candidate Mark Obenshain of the legacy Republican family. He proposed and withdrew legislation to require any woman in Virginia who miscarries a pregnancy to report it to the police. The idea is so repulsive it is beyond words. A woman may have miscarried to her great sorrow due to medical reasons and then would have to go through the added horror of having to report to the police? Yes, this comes from a cabal that otherwise wants to keep the government out of your lives. Even Josef Stalin wouldn’t think of this.

What does the dream team have to say on the many policy issues facing a troubled state? We have a bunch of lame and poorly thought out tax cuts and Cooch playing hardware store populist. Cuccinelli was against McDonnnell’s mammoth road building tax plan and has since backed away from his opposition.

Is this good news for Terry McAuliffe, who has plenty of issues of his own? Yes, I would think. Cuccinelli doesn’t need the fringe hard right voters. He’s already got them in his pocket. He needs the center and Mark and the Bishop aren’t going to be much help there.

It boggles the mind how Virginia is so schizo. It is attracting hundreds of thousands of newcomers who are running the state’s economy and are dragging it into the 21st century world. Yet the Republicans put up people like this who aren’t dragging us to Virginia’s recent dark past but to medieval times.

Global investors might think twice or three times before investing in this freak show.

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Role Reversal: Poverty Increasingly a Suburban Phenomenon

Posted on May 21, 2013 by James A. Bacon| 8 Comments
Houses with boarded-up windows in Henrico County

Houses with boarded-up windows in Henrico County

by James A. Bacon

Mirroring national trends, poverty in Richmond region suburbs has grown far more rapidly since 2000 in suburban counties than in the City of Richmond, according to the Richmond Times-Dispatch, reporting numbers published in a new book, “Confronting Suburban Poverty in America.”

Writes the T-D’s Graham Moomaw: “From 2000 to 2011, the number of poor people in Richmond-area cities grew by 30.5 percent, while the number of poor in the suburbs grew by 69.8 percent, according to the study.”

The poverty rate still remains roughly three times higher in the city compared to outlying counties (which the T-D did not identify, but presumably include Henrico, Chesterfield and Hanover). But the shift marks a dramatic change since the 1970s and 80s when poverty was a negligible problem in the Richmond region’s fast-growth counties.

Here’s the larger and more significant point, which the T-D did not make: There is no evidence that the shift in poverty from city to suburbs is slowing. Indeed, I would go so far as to suggest that there is a tipping point at which the shift will accelerate, and that it is possible that the poverty rate — and all the drawbacks associated with it, such as crime, social dysfunction, problems in schools, higher tax burdens — will be worse in the suburbs than the city 20 to 30 years from now.

Several factors are driving this reversal. First is continued gentrification in Richmond, similar to the trends we see in Washington, D.C., and other major cities, in which more affluent households move back into the city to be closer to job centers, cultural amenities and walkable neighborhoods. (Gaining proximity to mass transit is not, in my estimation, much of a motivator for affluent Richmonders.) The dramatic decline in the crime rate makes people far more comfortable living in the city than they once did. The poor quality of schools, especially middle schools,  and higher tax rate still remain deterrents — but that could change in time.

Meanwhile, poor people are leaking into the suburbs — typically into  unwalkable, lower-density neighborhoods that the middle and professional classes no longer find desirable. Unlike older city neighborhoods, with houses set on smaller lots within walking distance of retail, these older suburban tracts offer nothing to the affluent home buyer. Because their owners have been unwilling to reinvest in them, they have deteriorated and lost value. The poor are the only people willing to move into them now.

So, Henrico and Chesterfield now find themselves dealing with the problems associated with poverty — higher levels of crime (though down from the peak), social dysfunction and disruptive kids in school. Now, just like in the city, there are dicey districts in the counties where public safety is an issue. Now there are schools in the county to which  affluent households avoid sending their kids. Now counties have to share in the fiscal burden of dealing with poverty.

As I have argued elsewhere, human settlement patterns in the City of Richmond are inherently more fiscally efficient to maintain and replace than the scattered, disconnected, low-density settlement patterns of the outlying counties. That differential was masked while Richmond was coping with a 19th-century sewer-storm water system and the counties were basking in the newness of their infrastructure. But now, counties have aging infrastructure, too. At some point, a strengthening tax base in the city and an eroding tax base in the counties will be reflected in a shrinking tax differential between the two. When city taxes are no higher than county taxes, poof, there goes another reason to live in the counties.

When it comes to the distribution of poverty, the Richmond metropolitan area will be barely recognizable 20 to 30 years from now. The authors of “Confronting Suburban Poverty in America” fret that suburban counties are not prepared. They lack the soft infrastructure of governmental and not-for-profit social services, and poor households residing in the auto-dependent suburbs will be even more isolated than their counterparts in the city, who at least have access to mass transit.

To some people, the year 2043 might sound like the far-distant future. But the far-distant future has a way of arriving with frightening speed.

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Posted in 2013, Crime and corrections, Demographics, Infrastructure, Taxes

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Time to Get Real about Quality of Richmond’s Bicycle Infrastructure

Posted on May 10, 2013 by James A. Bacon| 5 Comments

bicycle_infrastructureThe Richmond region has a long way to go before it can truly be considered a bicycle-friendly town. The entire region has only 18.25 miles of paved bike lanes — “sharrow” lanes marked with bicycle icons don’t count — and those lanes are fragmented, unconnected to a broader network.

In 2015, hundreds of thousands of visitors are expected to descend upon the region for the World Road Cycling Championships, creating an “urgent need” for the region to upgrade its bicycle infrastructure.

That’s the appraisal of a new report by Sports Backers, the organization dedicated to transforming promoting an active lifestyle in the Richmond region. The report couched its findings in diplomatic language. I’m under no such obligation. Let me give it to you straight.

The region has 146 miles of dirt trails, but most are unpaved. A third of the total mileage is located in Pocahontas State Park on the region’s periphery, and none of the trails form a cohesive network. That’s not so bad if you’re a recreational mountain biker but the trails are pretty worthless if you’re relying upon bicycles to provide utilitarian transportation. The paved Virginia Capital Trail, which will link Richmond and Williamsburg, is another tremendous asset. But it, too, is free-standing, not part of a network.

The study details the fragmentation of the region’s bicycle assets: 164.2 total miles of bike trails split into 55 mostly unconnected segments.

Will Richmond be ready for the world bicycling championship?

Will Richmond be ready for the world bicycling championship?

“The lack of significant plans for more paved trails in the region will ultimately limit the use of bike infrastructure in the community,” the report states dryly. “Paved multi-purpose trails provide the ultimate level of safety and separation from motorized traffic that provides freedom to bikers as well as runners and walkers.”

The fragmentation might not be a long-term problem if there were a long-term, region-wide plan to tie the pieces into meaningful whole. But there is no plan. Not a single local government has a comprehensive plan for bicycling, the report notes. The City of Richmond is working on one — that’s about as good as it gets.

– JAB

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Posted in 2013, Infrastructure, Transportation

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Virginia: Pretty Darned Enterprising

Posted on May 3, 2013 by James A. Bacon| 6 Comments

enterprising_statesby James A. Bacon

For those who haven’t yet succumbed to state-ranking overload, here’s one more, this from the U.S. Chamber of Commerce. Its fourth annual Enterprising States report ranks states for the degree to which they are “best positioned to grow, create jobs and prosper in the coming five to ten years.”

The Chamber examines each state for 33 measures, which it organizes in six broad categories. Virginia snags a No. 5 spot for overall performance. Here is the breakdown by category:

Economic performance — 5th
Exports — 46th
Innovation and entrepreneurship — 3rd
Business climate — 16th
Talent pipeline — 5th
Infrastructure — 24th

Three of the top five performing states — North Dakota, Texas and Wyoming — are all enjoying natural resource booms. Of course, it could be said that Virginia has benefited from a federal spending boom. Here’s what the report says about the Old Dominion:

Virginia takes 1st place in our measure of general standard of living: median family income adjusted for cost of living. The state’s steady performance—ranking between 14th and 23rd in the other six performance measures—lands it 5th overall in growth and performance. Partly owing to its proximity to the nation’s capital, Virginia is a national leader in professional, scientific, and technical services. Virginia grew that sector 37% over the past decade — impressive growth for an already large sector.

And here is what Governor Bob McDonnell had to say:

Creating the best environment for private-sector job creation and innovation has been the top focus of our administration. Since we took office, our unemployment rate has fallen from 7.3 percent to 5.3 percent, the lowest rate in the Southeast and the second lowest east of the Mississippi. This report confirms that when it comes to supporting startups and new jobs, Virginia is a national leader and continuing to make substantive progress. But there is more to do. We have continued last year’s “Year of the Entrepreneur” campaign in Virginia with the ongoing “innoVAte” initiative, including an undergraduate business plan competition that brought some of the most promising startup ideas from 21 of Virginia’s colleges and universities to Richmond yesterday. Innovators like the young people who pitched their business plans to investors yesterday will form the backbone of a culture of entrepreneurship in Virginia that will continue to make the Commonwealth one of the best places to live, raise a family, and find a good job.

Bacon’s bottom line: To what extent can McDonnell, or any other governor, take credit for Virginia’s strong performance? That’s a really sticky question. Clearly, the national economy is a major factor in Virginia’s performance, and so is proximity to the federal spending machine in Washington, D.C. The boom in major industries, especially the energy and agricultural sectors, also has driven state performance recently — in Virginia’s case, an energy-importing state, acting as a drag on performance. It’s difficult to disentangle the effect of state or regional policy, and any claims must be taken with a grain of salt.

My first rule of economic development is, “Do no harm.” And other than raising taxes to crank up spending on transportation, McDonnell has done no harm. The initiatives he highlights in the prepared statement above have little more than symbolic value. What he has not done — he hasn’t passed a lot of expensive regulations or spending programs — is more important that what he has. And his record on that score is fairy good.

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Posted in 2013, Economic development, Economy, Infrastructure, Labor & workforce, Taxes

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Congestion Tolls Coming to Hampton Roads?

Posted on April 17, 2013 by James A. Bacon| 30 Comments

Congestion on the Hampton Roads Bridge Tunnel

by James A. Bacon

Hampton Roads transportation planning officials are giving serious thought to putting tolls on the Hampton Roads Bridge-Tunnel and the Monitor-Merrimac Memorial Bridge Tunnel as a tool to reduce congestion during periods of peak demand.

Under the conceptual plan presented Wednesday to the Commonwealth Transportation Board (CTB), the toll would be set at whatever rate it took to create free-flowing traffic conditions at the two crossings, which are frequently subject to backups many miles long.

The purpose of the tolls would not be to pay for new construction nor to raise money for other purposes, Dwight L. Farmer, executive director of the Hampton Roads Transportation Planning Organization (HRTPO), told the CTB. “The concept is simply to change behavior.”

Farmer suggested that modest tolls from $.50 to $1.50 per trip would be sufficient to induce travelers to shift their trips to less-congested times of day, although the tolls could run higher if that’s what it took to ameliorate congestion. “The idea is to utilize the capacity more effectively.”

Hampton Mayor Molly Ward

Farmer and Molly Ward, chairman of the HRTPO and mayor of the city of Hampton, brought up the idea as part of a broader presentation about the region’s top transportation priorities. The region is expected to generate roughly $200 million a year in new revenue under new transportation-funding legislation. That revenue over the next 50 years can be converted into roughly $3 billion in bonding capacity.

That may sound like a lot but it is not nearly sufficient to cover the region’s top transportation priorities, which include widening Interstate 64 on the Peninsula, expanding capacity of the two bridge-tunnels, widening I-64 south of the James River and improving the I-64/I-264 interchange, not to mention implementing high-speed, intercity passenger rail. The mega-projects are so expensive that a single one of them could gobble up the entire $3 billion.

Moreover, it could take 10 to 12 years of deliberations, studies, approvals and construction before any of those projects could be built. The beauty of the congestion toll, says Ward, is that it would require no longer than a year to get the regulatory green light and a year to install the tolling system. Thus, tolls could be a fast fix for congestion at two of the region’s worst bottlenecks.

The HRTPO has entertained the idea of congestion tolls since 2005, says Farmer, but Ward is the first political leader willing to take the flack for going public with it.

The toll could virtually eliminate congestion by changing the behavior of just 10% of drivers, Farmer says. He gave the example of a retired U.S. Navy officer who books a medical appointment at 8:00 a.m. when he could easily wait until later in the morning. There probably wouldn’t be a toll for 18 hours out of the day, and many days out of the year probably would be toll-free, he says.

Another advantage of the tolls, says Ward, is that they would collect real-world data on how price-sensitive traffic is in the region. Before dropping a couple billion dollars building a new tunnel, which would be financed through tolls, a congestion-tolling experiment would gather hard data on whether the market would support tolls needed to build a mega-project like a new tunnel. It is not unheard-of for toll revenues to fall short of projections, as investors in the Dulles Greenway and the Pocahontas Parkway discovered to their misfortune.

“You’re talking about spending an enormous amount of money,” says Ward. “Let’s generate some data and let that guide our decision.”

If this idea gets implemented, says Farmer, Virginia would be the first state outside of California to institute pure congestion tolls. The congestion tolls in Northern Virginia are being used to pay for adding lanes to the Capital Beltway and Interstate 95. “If it’s successful,” he adds, “it will change the way we do business.”

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Posted in 2013, Finance, Infrastructure, Transportation

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McAuliffe: Can a Schmoozer Transform?

Posted on April 17, 2013 by Peter Galuszka| 3 Comments

By Peter Galuszka

On Easter Sunday, I was driving in a cold rain to Charlottesville for a family event. My cell phone started beeping with messages from Democratic gubernatorial hopeful Terry McAuliffe.

He said he was on his way to his own family brunch but wanted to tap me for $5. I got similar messages from two other staffers.

Why bother me at Easter? Political analyst Larry Sabato wondered the same thing. In a tweet that day he complained about finding “11 obnoxious messages for $$$. Now I know the answer to the age old Q; Is nothing sacred?”

And that may be McAuliffe’s biggest problem as he faces arch-conservative Ken Cuccinelli in the off-year governor’s race. In my profile of him in Style Weekly, I note that McAuliffe is trying to rein in an expansive personality that has made him a top political schmoozer and fundraiser for Democrats from Jimmy Carter to Bill and Hillary Clinton.

A decades’ long political operative who has never been in elected office, he can be bombastic and smooth, as his recent dealings with GreenTech Automotive shows. He flirted with Virginia for a hybrid  car plant before going to Mississippi. He has been accused of somehow using the car plant to win special visas for foreign workers and maybe misleading the Virginia Economic Development Partnership about his intentions in the Old Dominion.

Meanwhile, he must overcome some of his misunderstandings of traditional Virginia thinking. However, it’s probably a good thing that he’s going to skip the Shad Planking in Wakefield tonight with its Confederate flags where Cuccinelli will be keynote speaker.

While polls are about 50-50 in the race, McAuliffe’s fundraising prowess has shown brightly. In the first quarter, he raised more than $5 million — more than double the take of Cuccinelli, who has hamstrung by not being allowed raise money during the General Assembly session because of his position as Attorney General. Read on…

(Also, here as a Q&A with McAuliffe)

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Sunnier Skies for Virginia Solar

Posted on April 17, 2013 by James A. Bacon| 8 Comments

Photo credit: Secure Futures

Thanks to a new law making it easier for non-utilities to sell solar electricity, backers of solar power are viewing the future with cautious optimism.

By Andrew Jenner

Virginia gets enough sunshine, relative to other states, to give it better-than-average potential for solar energy development. A 2012 study by the National Renewable Energy Laboratory estimated its potential solar energy generation capacity at 1.9 million gigawatt hours – about 17 times the state’s total annual electricity consumption.

This potential is far from reality, however. With just 10 MW of installed solar photovoltaic generation capacity, the largest being a new 2.1-MW array at the Norfolk Naval Station, Virginia ranks far behind other eastern states with more progressive solar energy policy. (New Jersey alone had 955 MW installed by the end of 2012.)

One major reason is that the state has no mandatory Renewable Portfolio Standard (RPS), due both to the considerable lobbying efforts of the state’s powerful electric utilities and a political climate generally unfavorable to new regulatory mandates. Since Virginia adopted a voluntary RPS program in 2007, the utility lobby snuffed out legislative attempts to set mandatory RPS goals and to allow renewable energy companies to sell power directly to individual customers from behind-the-meter wind or solar installations.

Over the past two years, Dominion, the state’s largest investor-owned utility, also has blocked several solar projects financed with power purchase agreements, or PPAs, arguing that the arrangement infringes on its exclusive right to sell power in its franchise territory. The PPA model, which allows nonprofit entities to capture important federal tax benefits through a for-profit energy company, has been key to development of the solar industry in other states.

In January, however, renewable energy advocates were pleasantly surprised when Dominion reversed course and put its considerable weight behind legislation that allows for limited use of PPAs in the state. In March Governor Bob McDonnell signed the bills, which creates a pilot program for solar and wind energy projects in Dominion’s franchise territory that are financed through third-party PPAs,

Solar energy advocates in Virginia are hopeful that the industry soon will make up lost ground. “[This program] is a great opportunity for Virginia customers to be able to finally take advantage of the financing model that is driving most new solar installations nationwide,” said Ivy Main, the vice-chair of the Sierra Club’s Virginia Chapter.

Solar developers within the state also are excited about the future. Mike Healy, a national board member of the Solar Energy Industry Association, called PPAs “critically important” mechanisms for stimulating private investment into the solar market, and applauded the pending change in Virginia as precedent-setting within the state.

“The outlook for this year is a really good one,” said Tony Smith, president and CEO of Secure Futures, a Virginia company that designs, finances and installs solar arrays for universities and other tax-exempt institutions and organizations.

Dominion’s support for the PPA model came as both a surprise and a relief to Smith and other solar supporters, given the utility’s recent actions to block these very same PPAs. Over the past two years, Secure Futures has been at the forefront of this conflict in Virginia, and has played an unexpected role of energy policy activist as it has struggled to find ways to bring projects online without using PPA financing. Read more.

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Posted in 2013, Energy, Environment, Infrastructure, Money in politics, Regulation

Under-Funding Street Repair in Richmond

Posted on April 15, 2013 by James A. Bacon| 7 Comments

Photo credit: WRIR

I’ve been ragging recently about how Virginia state and local governments are doing a poor job of taking full life-cycle costs into account when making infrastructure-investment decisions, and how some are doing an equally poor job of setting side money to replace their assets when they wear out.

A perfect example of such blinkered thinking appeared in the Sunday pages of the Richmond Times-Dispatch. If potholes seem to be bad and getting worse on city streets of the state capital, there’s a reason for it. The city is not dedicating enough of its capital budget to road repair, and the streets are deteriorating.

A November 2011 city auditor’s report identified a $277 million backlog in road work, with 66% of the city’s 1,860 road-miles of streets requiring “major rehabilitation or reconstruction.” Stated the report:

Currently, the city does not adequately fund the maintenance of good roads, which could result in the deterioration of the entire roadway system, including the 33 percent of roadways in good condition. Once the roads are completely deteriorated, the funding required to cure the situation will be significantly higher than the current estimate of $277 million.

The city has allocated $5 million, plus $5 million from the state, to pave 175 road-miles in proposed FY 2013-2014 budget. Over five years the city plans to pave 465 line-miles, or one quarter of the street network. That puts the city on pace to re-pave every street, on average, once every 20 years.

According to the auditor’s report, funding is insufficient to follow industry practices on preventive maintenance that would extend the life-span of the city’s streets. City officials plead significant competing priorities such as heavy spending on water, waste water and storm water (much of it federally mandated, I believe) as well as a new city jail and new school buildings.

(It would be interesting to know to what extent the need for new schools is dictated by the failure of previous administrations to allocate sufficient funds to properly maintain the old ones.)

A few thoughts….

First, the Virginia Department of Transportation allocates funds to Virginia cities that, in theory, should be sufficient to cover street maintenance costs. How adequate are those payments? If the city has to supplement the $5 million VDOT contribution with $5 million of its own, is the state short-changing the city?

Second, preventive maintenance is the very first thing that should be funded in every city budget. If the city neglects maintenance, the deterioration of its streets (school buildings, fire stations, office buildings, etc.) accelerates and becomes more expensive in the future. As an aside, poor maintenance shifts costs to motorists, who incur higher maintenance costs as the result of driving over potholes.

Third, the short-changing of maintenance should not be the type of thing that one discovers from an auditor’s report. Private corporations must report depreciation, which is counted against their earnings. Cities don’t have earnings, so depreciation is rarely an issue in budget deliberations. But it should be. Every political jurisdiction in Virginia should report the value of its assets and the depreciation of those assets, and should be required to set aside money in a reserve to replace those assets when they have outlived their useful lives.

To do anything less is to shatter the pretense of running a “balanced budget” and to shift the burden of paying for today’s government services to the next generation.

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Life Cycle Blues

Posted on April 10, 2013 by James A. Bacon| 22 Comments

The Capital Beltway — dark clouds overhead

by James A. Bacon

Beneath the surface, the Washington Post informs us, the Capital Beltway is crumbling. Writes Ashley Halsey III:

Under the surface of all but some recently restored segments, fissures are spreading, cracks are widening and the once-solid road bed that carries about a quarter-million cars a day is turning to mush. …

“With the older base layers under the asphalt, the surface is not able to absorb the pounding the way it used to,” said Doug Simmons, deputy highway administrator in Maryland, home to almost two-thirds of the 64-mile Beltway and to the more serious of the highway’s problems. “It is at that 50-year age point, which is too close to [the end of its life]. It’s a good example of the challenges we’re going to be facing not only in Maryland but other places in the country.”

Virginia, it seems, is not as badly off as Maryland. First, it has significantly fewer miles of Beltway to maintain. And secondly, large swaths of highway have been redone as part of the Woodrow Wilson Bridge project, the I-95/Beltway “mixing bowl” interchange and the Beltway express lanes. But Simmons’ warning does apply to the rest of Virginia’s Interstate system, very little of which has received such makeovers.

Bacon’s bottom line: Yes, it’s going to cost a lot of money to fix Virginia’s interstate highways as they approach the end of their useful lives. But there’s another point to me made here: The fiscal predicament posed by the decaying Beltway is a perfect illustration of Charles Marohn’s thesis of what has gone so disastrously wrong with infrastructure policy in this country: The federal government built the Beltway but Virginia and Maryland inherited the responsibility for maintaining it. That wasn’t so bad early on, but the problem mounts as the Beltway reaches the end of its design life some six decades later. Now the states are stuck with the tab.

Depreciation is the way businesses account for the fact that stuff wears out and must be replaced eventually. Businesses pay attention because depreciation is deducted from their earnings. But governments don’t have earnings — they operate on a cash-in, cash-out basis — and elected officials don’t pay no heed to depreciation at all. As a consequence, neither Virginia nor Maryland, nor any other state to my knowledge, has set aside funds to pay for massive structural repairs that their interstates will require. Aggravating the problem, as the Post points out, it’s one thing to build an interstate highway when there’s no traffic on it, and quite another to rebuild it is when it traversed by thousands of drivers per hour.

Governor Bob McDonnell’s transportation-financing plan will raise some $800 million a year for new construction. Virginia’s politicians will spend as much of it as they can on new projects that yield highly visible, short-term gains, caring little about the life-cycle costs. The flaw in thinking applies to mass transit just as much as it does to the interstates — just look at the condition of the Washington Metro!

Virginia needs to do at least two things:

First, state agencies need to conduct life-cycle analysis for all new infrastructure projects. It’s not enough to know how much a project will cost up-front. We need to know how much it will cost to maintain the assets and to replace them. Then we need to set aside funds, a little bit each year, to carry the project through its full life cycle.

Second, state agencies need to get a handle on what kind of liabilities we face for old infrastructure projects. When will critical assets wear out, and how much money will we need to replace them? If the money isn’t there — trust me, it isn’t — then we need to ask where it will come from. Before the McDonnell administration runs off with its new-found tax revenue to indulge its transportation wish list, let’s make sure we have the money to repair what we have when the bill comes due.

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Posted in 2013, Infrastructure, Transportation