Taxpayers aren’t getting the bang-for-buck promised in transportation projects

Voters in the nation’s most populous county have shown a willingness to tax themselves to improve crumbling transportation infrastructure. But Los Angeles County voters aren’t getting anywhere near their money’s worth, a new study shows.

Voters in the California county of more than 9.5 million people, home to Hollywood, Pacific Ocean beaches familiar in movies and television, and scores more iconic sites, backed a sweeping November 2016 transportation funding ballot measure. It was meant to “ease traffic, repair local streets and sidewalks, expand public transportation, earthquake retrofit bridges and subsidize transit fares for students, seniors and persons with disabilities,” according to LA Metro, the Southern California county’s public transit agency.

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Measure M was overwhelmingly approved by Los Angeles County voters the same day the nation elected Donald Trump as president, raising the local sales taxes by half a penny on the dollar. Elected officials said it would generate $120 billion in benefits over 40 years.

If only that were true.

A new report by the San Jose State University-based Mineta Transportation Institute details the transportation funding scheme’s shortcomings. The report’s authors, Mineta research associate Joshua Schank and former LA Metro Manager Emma Huang, offer as Exhibit A the West Santa Ana Branch Transit Corridor project, a light rail transit line that would connect southeast LA County with downtown Los Angeles, which is fast turning into a boondoggle.

“Preliminary cost estimates based on 5% design indicated an alignment from downtown Los Angeles to City of Artesia to cost over $4 billion in 2015 dollars,” the Mineta report states, with local voters on the hook for less than half of that. As of today: “The WSAB Project has not yet made it through the environmental process, but the cost is now estimated to be at least $9.1 billion.”

Facing mounting costs, LA Metro effectively downsized the project in 2021. But maybe the project ought to be scrapped altogether, the report’s authors suggest.

Overregulation is a Problem
The Mineta Transportation Institute was founded by the late Norman Mineta, the Democratic San Jose mayor and congressman who went on to be a Cabinet member for both Democratic President Bill Clinton and Republican President George W. Bush, the latter as transportation secretary. The institute has a thoroughly bipartisan reputation.

Taken together with another recent report from New York University’s Marron Institute of Urban Management, a transportation policy community consensus emerges over transit funding — that the process is broken and badly in need of repair. As the NYU paper puts it: “the United States has among the highest transit-infrastructure costs in the world.”

This matters nationally because the stakes have been raised by President Joe Biden’s administration, and could end up shortchanging businesses and taxpayers.

“After some small starts in the Obama administration and the Trump Administration’s constant attempts at Infrastructure Week, the Biden Administration’s Bipartisan Infrastructure Law converted this enthusiasm for infrastructure into law,” the NYU report states. “BIL calls for nearly one trillion dollars in spending between fiscal year 2022 and fiscal year 2026, more than $500 billion will go to transportation, including $66 billion to mainline rail and $39 billion to other public transit.”

Report authors Eric Goldwyn, Alon Levy, Elif Ensari, and Marco Chitti argue that “With such large sums at stake, it is critical to spend money productively.”

Numbers suggest that is currently not happening.

“[T]he United States is the sixth most expensive country in the world to build rapid-rail transit infrastructure,” the NYU study found.

However, that likely understates the problem, “Because construction costs scale with the percentage of tunneled track, which is more expensive than building rail at grade. The five countries with greater average costs than the United States are building projects that are more than 65% tunneled. In the United States, on the other hand, only 37% of the total track length is tunneled.”

Cost overruns on projects in California such as high-speed rail are now widely known, but many other municipalities are seeing jaw-dropping costs to build out new transit infrastructure as well. On a per capita basis, some measures have Hawaii’s current light rail projects as the most expensive in the nation. Or take New York City’s subway expansion. The NYU researchers found that “Phase 1 of New York’s Second Avenue Subway is 8 to 12 times more expensive than our composite baseline case.”

Inflation is one factor driving construction costs higher. Yet other aspects of infrastructure planning, from high labor costs to planning costs, make it structurally more expensive to build out transit projects in the United States than in most other nations.

So what’s to be done about these spiraling prices? There is no firm consensus, though there are a lot of suggestions.

The Mineta report says that the problem is the way projects are planned. Specifically, it argues that “projects” are the wrong way of thinking about transit, and that these should be replaced by goals to be met.

One suggested way to meet those goals is through public-private partnerships, which typically come with both private financing and more stringent cost controls. Reason Foundation transportation policy analyst Marc Scribner praised this suggestion to the Washington Examiner.

“The Mineta report’s explicit recommendation to consider public-private partnerships (P3s) is wise,” he said. “P3s can combine the design and build phases with financing, leading to streamlined construction and enhanced cost control. But just as important, they can include long-term operations and maintenance (O&M) contract provisions.”

Scribner explained that those contract provisions are “important because O&M costs have surged in recent years, with growing transit system maintenance backlogs and declining ridership that spreads those rising costs over fewer customers.”

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The NYU report suggests that federal, state, and local regulations and best practices are badly in need of updates.

“We believe the most important development should be to empower entities that build transit projects to realign regulations and practices with what is found across as wide a net as possible of low-cost cities,” the NYU report states. “Moreover, the entire procurement process must be reformed.”