Uh, oh, McAuliffe Might Help Fund Light Rail for the Beach

Everybody loves the Tide... when someone else is paying for it.
Everybody loves the Tide… when someone else is paying for it.

by James A. Bacon

Governor Terry McAuliffe has committed to provide state support for a proposed $1.1 billion to $1.3 billion project to extend Norfolk’s light rail line, the Tide, to the Virginia Beach ocean front, according to Virginia Beach Mayor Will Sessoms. During his state of the city address, Sessoms claimed that the McAuliffe administration had made a “firm commitment” to help pay for the project. So reports the Virginian-Pilot.

McAuliffe’s staff told the newspaper that McAuliffe supports the concept of extending light rail but he needs to review a specific proposal, and has not committed any money. The governor, said a spokesman, “would need to make sure that the proposal is in line with his priorities of fostering economic development and had support from the local community.”

None of this is very reassuring. While I think it would be lovely to run light rail all the way from downtown Norfolk to Virginia Beach’s resort area, I’m not terribly impressed by the criteria enunciated by the spokesman. “Economic development” has been invoked for all manner of wasteful projects. As for “support from the local community,” any time locals see a transportation project being funded by “free” state or federal money, they tend to support it.

There is only one defensible criteria for endorsing a light rail project (or any billion-dollar transportation project, including bridges and highways): Can it pay its own way? If it can, it makes economic sense. If it can’t, it’s a boondoggle.

There are two legitimate ways to pay for light rail: through fare-box revenues and through value capture. Fare-box revenues speak for themselves. Value capture is a bit more complicated. Let’s assume the Virginia Beach leg of the Tide has 10 stops. Real estate values around each of those stops will increase, thus giving a windfall gift to property owners. Under the current practice of funding light rail, it’s all gain, no pain for property owners. Lucky them. I’ve got no problem with people making a profit — profit makes the world go round — but I do think some of that increased value should be captured to pay for the asset that creates that value.

Mayor Sessoms should draw a quarter-mile circle around every proposed rail stop (the distance most people will walk) and create a special district that will issue bonds to help pay the capital construction cost, with the bonds to be paid by a real estate tax surcharge on property owners. If property owners object, if they say the project doesn’t create enough value for them to justify the tax, Sessoms can sweeten the pot by increasing zoning densities to encourage higher-density, mixed-use development around the stations. If property owners still balk, or if bond holders don’t bite, then the project is not competitive in the capital marketplace. The money can be better invested elsewhere.

Unfortunately, there is every indication that Sesssons has decided that light rail is good for Virginia Beach…. as long as he can find someone else to help pay for it. Judging by the press accounts that I have seen, there has been no serious economic analysis of the project’s financial viability. There’s just a lot of vague, fuzzy talk about undefinable and intangible benefits.

Light rail advocates will counter that road construction projects don’t pay their own way — and they’ll be right. Virginia has abandoned the user-pays principle for funding new roads and highways. The entire system is corrupt — not in the sense that people are getting payoffs but in the sense that there is no intellectual integrity or financial discipline behind the decision-making. Sessoms can campaign as the mayor who got the light rail line built, but he won’t be around 40 years from now when the line is falling apart and needs a capital infusion of hundreds of millions of dollars, just like the Metro system in Washington, D.C., and there won’t be anyone to pay for it. Uncle Sam doesn’t fund rail maintenance. Neither does the state.

Virginians must insist that all transportation projects, or at a minimum, all mega-projects, pay for themselves. It is pure deranged craziness to expand transportation infrastructure while, thanks to the under-funding of maintenance of the transportation system we already have, that system is deteriorating. (See “America’s Road-Maintenance Deficit.”)

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8 responses to “Uh, oh, McAuliffe Might Help Fund Light Rail for the Beach”

  1. Breckinridge Avatar

    Light rail should indeed pay for itself, first and foremost with the farebox. If the ridership isn’t there at near the true price, don’t build it. But agreed, it could be supplemented with incremental tax districts that capture the value created by the project. That’s true of a number of transportation projects.

    But not all of them. Again, friend, you first wanted to starve the beast and now that the beast is being fed you want to direct all of the new money to maintenance. Sorry. We’re going to build some more capacity, too. Example: Widening I-64 between 295 and Jefferson Avenue in Newport News is long overdue and the kind of project that general user taxes should be paying for. Every Virginian should help pay for it just like every Virginian paid for the mixing bowl in Northern VA.

  2. re: ” The Tide is a 7.4 mi (12 km) light rail line in Norfolk, Virginia, connecting Eastern Virginia Medical School, Norfolk State University, and Newtown Road. Service began on August 19, 2011,[1] the first light rail system in Virginia.”

    would a better cut-line be …. “Uh, oh, McAuliffe Might CONTINUE TO Fund Light Rail for the Beach which began in the McDonnell administration?

    come-on Bacon – you’re better than this!

  3. Darrell Avatar

    Ridership has been going down. Typical bureaucrat response? Rider fares are going up. They just can’t figure out this whole supply and demand thing.

    Regular route buses should never be feeder buses for one thing. They should be express connectors from dedicated parking, like they have at Green-briar Mall or the HOV lot. Make them free if it improves LRT ridership (and fare recovery).

    Here is the most recent report.


  4. If I’m not mistaken, transit and light rail are a little like the MedicAid Expansion in that the Fed Govt offers funding and the states have to sign up to get it and if they choose to not sign up – they don’t get it.

    Now, I’m assuming that both Kaine and Warner signed up for the funding and I’ll not be surprised if McAuliffe signs up for the funding but as far as I know McDonnell also signed up for the funding.. when McDonnell did have the option of saying – …NOPE.. we don’t want that funding…. we’re afraid the Feds are going to go broke and then we’ll have to pay it.

    In other words – … we don’t want it even if the Feds fund it.

    as far as I can recall – no such words with respect to transit and light rail came from Gov. McDonnells mouth..

    but .. I could certainly be corrected… if the facts are otherwise.

    Here’s what I am for:

    1. – non-partisan truth telling

    Here’s what I’m opposed to

    1. hypocrisy, double standards .. especially those of a partisan nature.

    If we’re going to call transit or light rail a bad deal – let’s do it on a non-partisan basis unless the facts truly show that is is a partisan issue.

  5. wesghent Avatar

    Writers are quite right about partisan issues, and it’s too bad that now-citizen-again McDonnell is technically from Tidewater; but didn’t he steal most of his perquisites from central and northern Virginia? We in Tidewater know that you Richmond savants will oppose anything good or reliable that might come from our area–hey, you remember that we were weak on supporting massive resistance and swallowing the Byrds’ doctrine, right? What we need is a return of Chuck Robb–now there’s a guy who loved to play at Virginia Beach and had a heart for our transportation needs. If Mayor Sessoms is sly enough to sneak into Gov. McAuliffe’s tent and work a deal that might benefit all our people, let him do it. We can always put a transponder in you nay-sayers, hook you to E-Z Pass, and charge you for the time you spend down here–enjoying our ocean and sand, benefiting from our shipping and eating our seafood. “Light rail should indeed pay for itself,” indeed; as Charlie McDowell said, “When you hear a gratuitous ‘indeed,’ be forewarned that you are in the thick of thin things.” Or words to that effect.

    1. the thing is… the money that funds these things is discretionary Federal grant money and matching local and state money.

      when the argument is made that these things are not cost effective – the metrics for judging their cost/benefit are few other public expenditures for infrastructure and services.

      schools, fire, rescue, police, libraries parks, etc do not “pay for themselves” in the strict sense that user fees pay fully for them.

      and yet we keep circling back to that canard with transit and rail.

      I’m quite sure there is a point where it’s not cost-effective but I do wonder if farebox is the proper ROI …

      A substantial chuck of road funding these days – comes not from the fuel tax but from general sales taxes and yes one can make the case that since virtually everything we buy from food to furniture gets delivered by roads.

      the other hidden subsidy for roads is eminent domain where we get the right-of-way for cheap because we do not compensate for the economic potential of land – owned by others – and entitled to that potential and we also take off the tax rolls land acquired for roads.

      if one would total up all the taxes on land taken for roads and not not generating tax revenue how much would it be?

      then you have the cost of law enforcement that is not paid for with fuel taxes…

      I don’t think I have an answer … just blather.. but there is something just fundamental wrong with the way we compare roads to transit/rail in terms of cost effectiveness – AND – unfortunately – the whole dang thing has become a political/partisan issue with one side said to be in favor of subsidies and the other side claiming free(er) market virtuosity.

  6. accurate Avatar

    “There is only one defensible criteria for endorsing a light rail project (or any billion-dollar transportation project, including bridges and highways): Can it pay its own way?”

    And light rail has YET to do that. In Texas there is another proposal on the board to put together high-speed rail between (I believe) San Antonio, Dallas and Houston. The difference is that (supposedly) it’s all private money. Personally, I don’t really like rail, so I’m not inclined to think much of the project (haven’t looked into it extensively). However, if someone wants to put their OWN money into the project – go for it. If the project fails, at least (hopefully) the taxpayer isn’t on the hook for the loss.

    1. there’s another view or at least a different perspective.

      public roads do not pay their own way either – because:

      1. – the land for them is acquired on the cheap by essentially forcing property owners to sell whether they want to or not – for a lot less than many value their land.

      2. – the state does not compensate them for future opportunities lost

      3. – the state does not compensate those whose properties are damaged indirectly by the road

      4. the land taken for roads if forever off the tax rolls

      5. roads create winners and losers and winners get essentially windfall gains even as those displaced get shorted on compensation for their properties.

      6. roads receive law enforcement and ambulance services that is paid for by taxpayers rather than road users.

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