Thursday, April 5, 2007

RTD could be $1 billion or more in the hole

Denver CO - The Rocky Mountain News reports that Denver's Fast Trax program could be $1 billion in the hole due to overestimating the revenues from a 0.4 percent tax hike approved in 2004. This is hardly a surprise to me as transit systems, as well as any government entity, always wildly inflate projected revenues and underestimate costs.

The $1 billion number is the projected deficit over 25 years but still accounts for 11 percent of the total. This 11% reduction in the tax hike isn't the only loss either, the dedicated sales tax that pays to operate the system is also taking a $1.63 billion dollar hit over the next 25 years.

This reduced revenue not only effects transit projects, it effects the operation of the transit system. In other words, Denver overestimated the revenues so they could justify building various transit projects and now they'll be screaming soon for more money or they'll cut service and raise fares.

This is a big problem throughout the transit industry. Too many operations rely on wildly inflated revenue projections to justify building rail lines and other costly transit projects. When the economy takes a hit, the hit to the transit system is greatly amplified due to using heavily tweaked revenue and cost projections.

The RTD is on an ambitious building campaign to extend its rail system and they may end up with major problems running what they have in place already. With the projections based on the current as well as planned operation over the next 25 years, this negative change in revenue predictions will have one of two effects as the projections may come down even further.

First is that the Fast Trax program, which millions have been spent on already, may be shelved which would be just tossing tax money away. Second is that they'll continue on building the entire plan, cutting corners where they can, and then do a major hack and slash of service on the bus side of the operation.

The taxpayers need to understand this important point when they hear about their transit system going on a building spree. Projected revenues are always greatly inflated as is projected ridership and project costs are always vastly underestimated. When the public remembers this simple fact, they begin to ask the tough questions about expensive transit projects. By blindly following the politicians and transit officials, you'll end up with a transit system that has a bunch of pretty and expensive transit projects but no money to operate them.

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