A sweetheart deal in the making

Houston TX - At taxpayer expense, the Houston Metropolitan Transit Authority (Metro) is spending $7.2 million of taxpayer dollars to buy 2 blocks of land along it's light rail line according to the Houston Chronicle. This land was bought from a developer and will be sold back to the same developer at the same price at a later date.

In short what is happening is that the Metro is holding land, tax free, for a developer that just isn't ready to start building anything yet. The purchase of the property back by the developer will be for the same price and literally amounts to a tax break of millions of dollars to the developer as well as a free loan of taxpayer dollars. The developer will also earn interest on the $7.2 million received from the Metro. Metro will make absolutely no profit from this transaction and millions in lost real estate tax revenue will have to be made up for by the taxpayer.

These types of shady transactions are all too commonplace when it comes to development associated with a transit project. They are never mentioned by the pro-rail crowd either since it makes one question the true cost of having rail. Usually the city does these shady deals but now we're seeing the transit systems themselves getting involved directly.

Transit systems should not be involved in this type of activity. This is not what they were set up to do. It is a waste of taxpayer money that should be stopped immediately. Cities should not be involved in these deals either but I'll save that rant for another day.

This story shows well how public transit systems have lost their focus on what they should be doing, moving people from point A to point B. Millions of tax dollars are spent each year by Metro just to have a real estate department. And guess what, the money to staff and run the office comes out of operating funds.

As I have said many times before, the management in the public transit industry is on a mission to find new ways to spend the taxpayer's money on anything and everything except providing good service and Houston's Metro is proving my theory is factual. As a reward for proving my theory as a fact, the Houston Metropolitan Transit Authority earns itself a well deserved Lance.

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.

Did you ever notice...

One thing I've been noticing over the years of collecting the Transit News for the AMCAP web site's discussion board is the number of transit systems that are screaming for money.

What is interesting in this fact is that just about every one of the transit systems that are screaming the loudest for money and threatening massive route cuts and fare hikes all have some form of rail operation. This is not to say the bus only operations aren't in a cash crunch too but they don't seem to be in as critical of a cash flow crunch as those systems that have rail or are hopping on board the rail bandwagon.

This observation tells more than you may think. It shows that rail is draining the treasuries of these public transit operations at a much faster rate. It also shows that systems with bus operations only generally tend to be more resilient to cash flow issues.

Not every system that has rail is on the verge of a complete financial collapse but the vast majority of them are. On the flip side, not every system that is a bus only operation is safe from a financial collapse but it sure seems that those operations that don't have rail aren't in that bad of shape.

While rail has its place, not every city needs it and even fewer can support it. The pro-rail crowd never mentions this little fact in their quest to get every Podunk town, population 2, set up with a rail line.

Rail is inherently expensive to build, operate and maintain. Residents need to start asking the hard questions when politicians and pro-rail activists start pushing rail as the saviour of the city. The main questions need to do with long term costs as well as how many millions of dollars extra will be spent in unrelated costs such as sweetheart deals with developers and other non-direct costs to the project. Most important, don't back down and demand proof of their numbers.

Public transit is at a critical point. The cost to provide service continues to climb and transit systems need to provide the most efficient type of service available if public transit is to survive. Buses provide that efficient service and they have the added benefit of being able to be quickly adjusted to meet demand.

Minnesota is setting an unwise precedent

St Paul MN - The most recent report out of St. Paul indicates that the politicians are about to set an unwise precedent in the transit industry. The Minnesota House of Representatives approved an amendment that would force the Metro Council to reverse the awarding of a bid to Gillig Corporation and award it to New Flyer Industries (NFI) who, by the way, couldn't bother itself to follow the bidding procedure and are whining about it.

By politically forcing the reversal, it will set a precedent that in Minnesota, all buses will be NFI since NFI can now low ball every bid in the state, not meet the bidding criteria and then invoke the new state law to get awarded the contract. As I mentioned in an earlier Laurels and Lances article, "Warranty? What warranty? There's no stinkin' warranty".

The approved bill, submitted by Representative Loren Solberg (D) must be reconciled to a similar bill in the State Senate that was introduced by Senator Tarryl Clark (D) before being signed into law by the governor.

The main issue is the warranty. A warranty on a transit bus is no trivial matter as they all have problems when new. I have not seen a bus order since the days of the GM New look that didn't have tons of warranty related problems and even they weren't immune to problems.

Gillig, who followed the bidding procedure, will provide a 2 year warranty as per the bid terms. NFI's grand plan is to offer a 1 year warranty and then only if a problem effects 30% or more of the order based on their assessment of the problem. That's like buying a car that is known to have problems and having the warranty only going into effect if 30% of the cars sold at that particular dealership have the same problem. No sane person would take a car they know will have problems with that type of warranty.

The cost to the transit system under NFI's offer will ultimately cost the transit system millions of dollars more over the 2 year period that the bid required since the transit system will be left to pick up the tab. Even though the initial outlay is more if the contract went to Gillig, the long term costs are less.

In my personal opinion, NFI's warranty offer is done in such a way that they won't have to provide warranty service. What a way to do business. It's the proverbial non-warranty warranty. You get a piece of paper saying your covered but when there's a problem, don't bother them with it.

Both Representative Loren Solberg and Senator Tarryl Clark earn the Lance for failing to understand what they are about to do but then, Democrat politicians only understand knee jerk reactions while never understanding the long term implications of their actions. Transit in Minnesota will suffer in the long term over the politician's desire hand NFI a free pass to get the business without meeting the bidding criteria.

This is a rarity...

St Cloud MN - An article in the St. Cloud Times which was penned by the executive director, David Trip, for the St. Cloud Metropolitan Transit Commission (MTC) is a rarity. Not so much for it's content but for actually being published as it goes against popular opinion and newspapers tend to ignore such stories as this one.

Basically the article tells why the MTC doesn't run smaller cutaway style buses and actually goes into a few details to explain it.

Too often, reporters are busy echoing the public misconception of smaller is better when it comes to motor vehicles. This misconception comes directly from the environmental movement who has, for decades, tried to persuade the public that bigger vehicles are bad for the environment while smaller vehicles are better and will save the environment. *cough* Toyota Prius *cough*

While Mr. Tripp is right on the money, I wish he would have made a bit clearer the information on operating cost. As I have also tried explaining this to many brain dead Liberals that were screaming for smaller buses on various routes where I live, I am well aware that they have no concept of what operating costs mean.

Operating costs means fuel, maintenance, insurance, operator and mechanic wages as well as a few other obscure costs all rolled into one convenient term. What needs to be brought to the forefront however is fuel use. Just saying the operating cost is no different between a large and small bus doesn't really break down the idea properly.

For example, the general public truly believes that a smaller bus uses less fuel than a larger bus but they do understand that the costs of wages remain the same.

The truth of the matter is that there is virtually no difference in fuel use between a small cutaway van and a heavy duty 40 foot bus. The only real difference is if the transit system went from 60 foot articulated coached to a 25 foot cutaway. Then and only then would you notice an overall fuel savings. That's hardly a practical solution to public transit however as if your running articulated coaches, you more than likely have the ridership for it and cutaways couldn't handle the load.

Also, too many people don't quite understand the concept that transit systems need to be set up for peak hour service and can't have an off-peak fleet and a peak fleet. That would drive the cost of providing service out of the range of most everyone that depends on the service.

One thing mentioned in the article is something even I never gave much though to and that is safety. Going with the smaller cutaway vans that many people call for because they think larger buses are a waste of money and use more fuel, your putting the riders at greater risk during an accident.

The article is a great read and chock full of useful facts to help better understand why transit systems run big buses on low ridership routes. While focusing on the St. Cloud MTC, it is easily adaptable to any transit system. I encourage you to read David Tripp's column.