Bacon's Rebellion

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Beast of Burden: The Fairfax Commuter

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by

James A. Bacon
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Yesterday, I published a column, “Rail Rip-off,” that decried the funding mechanism for the $4 billion Rail to Dulles extension of the Washington METRO. It was unconscionable, I argued, that commuters on the Dulles Toll Road will be required to pay 25 percent, or $1 billion, of the capital costs of the project, while most of the economic value created would accrue to the owners of property near the METRO stations.

If only I’d known the whole truth, an anonymous phone caller informed me late yesterday. In fact, Dulles Toll Road commuters may well end up closer to half of the METRO project costs, or nearly $1.8 billion, and their fares will ratchet higher for years to do it.

That, of course, is not the official party line. The Dulles Corridor Metrorail Project forwarded the graphic pictured above (cropped and shrunk to fit this blog). The state, which extracts its share from Dulles Toll Road commuters, will contribute 25 percent of the project costs, the localities (including the Metropolitan Washington Airports Authority) will contribute 25 percent, and Uncle Sam will generously provide the rest.

By way of background: In February 2005, the Commonwealth Transportation Board enacted a $0.25 toll increase at the main entrance and exit ramps to the Dulles Toll Road. As the CBT explained in a February 2005 press release (my highlights added):

The quarter toll increase will complete Virginia’s share to fund Phase 1, which will extend Metrorail for 11 miles from near East Falls Church station through Tysons Corner to Wiehle Avenue in Reston. The toll increase will also help to fund part of Phase 2, which will further extend the line for 12 more miles from Wiehle Avenue through Dulles International Airport to Route 772 in Loudoun County.

Since that CBT announcement, the Kaine administration has proposed turning over responsibility for the Rail-to-Dulles project to the MWAA (the airports authority). The MWAA outlined its plans for the disposition of the Dulles Toll Road revenues in a December 2005 document entitled, “Proposal to Operate the Dulles Toll Road and Build Rail to Loudoun County.”

On pages 14 and 15 of the proposal, MWAA “assumes” the following contributions to Phase 1 and Phase 2 of the METRO construction from toll revenues:

  • Phase 1: $361 million
  • Phase 2: $1,409 million

That totals $1,770 million, or $770 million more than acknowledged by the state.

Why is the Phase 2 contribution so huge? Because, my source explains, MWAA assumes that, while the federal government will contribute $900 million to Phase 1, it will not contribute one thin dime to Phase 2. MWAA, in his estimation, plans to accelerate development of METRO by substituting known and predictable Toll Road revenue for not-yet-committed federal revenue.

What does that mean for toll payers? MWAA says that it will “keep average real toll rates flat on an inflation-adjusted basis.” MWAA’s preliminary analysis assumes that tolls will be increased every three years starting 2010 at a 3 percent compounded annual rate for 50 years. Translation: Dulles Toll Road commuters can expect toll increases of about 10 percent every three years (assuming inflation stays at the current rate).

That sounds very reasonable if the sole purpose of the toll is to provide for operating expenses and capital improvements to the Toll Road and related corridor improvements. But roughly half of the tolls will be going to pay off METRO bonds — and bond payments are fixed. They don’t increase with the rate of inflation! In other words, increasing tolls at the rate of inflation over the next 50 years is, in fact, a very aggressive increase. Contrast that to the rate history of the Dulles Toll Road before 2005: From the day it opened in 1984 — 21 years — it did not increase tolls once.

Bottom line: Dulles Toll Road commuters are the beasts of burden upon whose backs Rail to Dulles will be built. When all is said and done, they will wind up paying about 44 percent of the cost of the METRO extension even though, by definition, they will not be using it. By contrast, as explained in yesterday’s column, the contribution of Fairfax County commercial property owners will be capped at $400 million for Phase 1, even though they will be the most direct beneficiaries.

Tax revolt, anyone?

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14 responses to “Beast of Burden: The Fairfax Commuter”

  1. James Atticus Bowden Avatar
    James Atticus Bowden

    Jim: Can you figure out a ratio of who should pay what share for metro extensions? Like rail commuters/road warriors/trucks/business/home owners/whatever = x/y/z/a/b/n?

  2. Anonymous Avatar
    Anonymous

    When the state decided to increase tolls by $.25 as a mechanism to fund the Dulles Metro project, didn’t it decide at that point it was acceptable to fund rail with tolls?

  3. Jim Bacon Avatar
    Jim Bacon

    JAB: I don’t think you can come up with a pre-determined ratio. As Ed Risse says, the starting point is doing the land use planning around the METRO station. Once you determine the highest and best use of the land, you can figure out how many extra square feet of residential, hotel, commercial space can go there, and place a monetary on that. Then you figure out the monetary value of proximity to the METRO station. From those two numbers, you can calculate a rough estimate of the value to be created by the presence of any given METRO station — $50 million, $100 million, $250 million, whatever. Once you know what the value is, you are in a position to negotiate a fair and reasonable amount of money that the property owners can afford to contribute to the project through incrementally higher taxes.

    Once you’ve gone through that exercise for all 11 stations, add up all the numbers, and that’s how much the property owners should pay. Only then do you go to other sources like federal grants and toll road revenues.

    Anonymous 9:32: Yes, when the Commonwealth Transportation Board raised the toll fare back in February 2005, it explicitly stated that the added money would fund Rail to Dulles. I believe that the CTB’s action was the basis for the widely held belief, still in circulation today, that Toll Road revenues will contribute 25 percent of the Rail to Metro project, or about $1 billion.

    But handing over the project to the MWAA scrambles all the old assumptions. MWAA wants to siphon off nearly $1.8 billion in toll revenues, and it wants to raise tolls at the rate of inflation over the next 50 years rather than keep them flat, as had been done for 21 years before 2005.

  4. Ray Hyde Avatar
    Ray Hyde

    OK. I did some very crude back of the envelope calculations and I figure that to cover the capital costs, not the operating costs, that it breaks down like this for the next fifty years:

    Metro riders, $4.87 per day;

    Home and business owners in the immediate area affected, $1.51 per day, based on $300000 of valuation;

    Other road users $0.015 per day.

    That last one is being generous, since we already know there will be no congestion benefit for those drivers, but I figure the general increas in business is worth something. Although that figure is small on a per driver per day basis, the number of other drivers is huge. Overall they would pay about 1.5%, affected landowners 35%, and riders 63.5%

    This only covers the $1.77 billion which is the Fairfax contribution.

    Under this plan the bill would be paid by those that directly benefit, and not by Fairfax residents at large, except for the mall contribution by all other drivers.

  5. Ray Hyde Avatar
    Ray Hyde

    My line of thinking was close to what Jim suggested, except that I did not use some hypothetical optimum land use around the stations. I made crude approximations of existing land use in the area and incremented it by 15% (the value MCOG uses) then added the appreciation due to rail. Under Jim’s assumptions or if you could really achieve optimum land use the landowners would pay more and riders less.

    But if you really did that, then you might have to consider the negative effects on other landowners farther from the stations. If you actively promoted the construction and the value of many units near the stations it would negatively affect the market of other places.

    I only considered that new wealth was created, not that wealth was transferred from one location to another. If that is the case the net land benefit might be small and riders would have to bear more of the cost.

  6. E M Risse Avatar
    E M Risse

    There is an interesting and confounding factor that has not been addressed:

    If the creation of a shared-vehicle system in the Dulles Airport corridor is “successful” then Balanced Communities will evolve at Greater Tysons Corner, Greater Reston / Herndon, Greater Cascades / Sterling and Greater Ashburn.

    That means a balance of J / H / S / R / A in each of these Alpha Communties in the Virginia Subregion and far, far fewer “commuters.”

    There will be riders to and from the Airport — a New Urban Region – wide serving facility — but the classic commuter will be extinct on road or rail. Do not count on lost of travel demand for revenue on road or rail.

    (This is a variation on the axiom that the only “help” that should be provided to “commuters” is to help them become non-commuters.)

    Extinct populations are not a good basis for a revolution much less a rebellion.

    EMR

  7. Ray Hyde Avatar
    Ray Hyde

    “far, far fewer “commuters.”

    This is where we part company.

    I believe there will be “some” fewer commuters, but there is not a single example anywhere of there being none. I believe that even far, far fewer commuters is hoplessly optimistic and plans on that basis are doomed to fail. (at least for quite some time.)

    You assume that the communities that develop will be balanced. I assume that they will be constantly imbalanced and constantly seeking balance, and that travel is part of the result.

    You assume that all travel will vanish (and with it fares and tolls income) if commuters vanish, but I assume that such communities will still generate substantial auto travel, and that because of the way they are situated, there will be considerable congestion costs associated, transit notwithstanding.

    You appear to assume that anything we do for commuters is help, but I assume that if they are paying their own way, then it is a service, but it is not help. (Providing that service may still be environmentally unsound and ultimately unsustainable.)

    Since the Dulles line affects primarily that area none of your argument (or very little) applies to the rest of the county. If it does apply to the rest of the county, then the associated costs (for other rail extensions) would be much higher.

    If we convert to a totally pedestrian society, then your argument would hold, but if that happens we would have built roads, cars, and rail for naught and they would be of no value whatsoever.

    That seems unlikely to me. I’m not so sure that extinct populations are not a possibility, however, and I’m pretty sure that eliminating transportation would lead to quite a bit of that.

    The analysis I submitted above was based on the idea that metro would move only a percentage of people who move and metro housing would house only a percentage of those who live. I based it only on the Upper Potomac planning district which includes the half of the line closest to the Airport. Consequently the property value increas I have is far lower than the $400 million cap Bacon mentions. Surprisingly, sensitivity analysis shows you can make major changes in the assumptions without changing the end results very much.

    If you are willing to posit an extreme case such as transit development is so successful we don’t need to live anyplace else or travel anyplace else, then my model blows up, just as Ed suggests.

    This reminds me of the astronomy class where the professor says the sun will burn out in two billion years.

    “What??” exclaims a sleepy and astonished voice from the back of the auditorium.

    After the professor repeats himself the voice says “Whew, for a minute I thought you said two MILLION years.”

    Here we are talking about fifty years, and we will probably have to change the plan after 20 anyway.

  8. Anonymous Avatar
    Anonymous

    Remind me to buy som Metro bonds.

  9. Toomanytaxes Avatar
    Toomanytaxes

    EMR – I’m unable to reach your conclusion that we will see balanced communities in Fairfax County for two reasons. One is: it is very expensive to build high rise condos at places such as Tysons because of the high costs for land and because of greater construction costs associated with high rise buildings. From everything we’ve seen, the vast majority of new housing will be upper bracket. But, of course, not everyone who works in or around Tysons can afford the likely price tags. In fact, there’s pretty strong evidence that a portion of Fairfax County’s more affordable housing stock will ultimately be replaced by more expensive housing. So much for balance.

    Second, recent data from the Bureau of the Census strongly suggests that a large number of people want a single family home and will drive to and from places where they can find such housing. If they wanted to live in New York City, they would move there. The “American Dream” of a home in the “suburbs” or now perhaps, “exurbs” still lives on!

    No one is arguing that it’s wrong to build condos at Tysons. But it seems almost silly to me to believe that those condos would make a difference in traffic, etc. More people mean more strain on the infrastructure.

    Ray Hyde’s mantra — we need more places (i.e., we need to move more jobs to lower-cost, outlying areas) makes more and more sense.

  10. Anonymous Avatar
    Anonymous

    Why are only a few saying that the rail to Dulles will be a crummy 2-track system where every train will stop at every station? DUH, do we need another Orange line from Rosslyn to Vienna?

  11. Ray Hyde Avatar
    Ray Hyde

    TMT: Good point. when I think of balance ai usually fall into the trap of limiting myself to jobs/housing balance. Of course there is a need for balance of economic strata, as well. Having lived on Martha’s Vineyard, you’d think I’d know that.

    We can’t build any housing that is not upper bracket because of the (false, in my opinion) idea that homes less than $700,000 don’t pay their own way, and because no on wants to see less expensive home built in their neighborhood.

    I think we can get more balance, but not 100%. We need to plan for what is likely achievable and stop worrying about the rest.

    Anonymous: Good point. The PRT systems EMR proposes have sidings at the stations so that you can have express and local traffic. As it is, we can’t justify or afford two tracks, anyone want to guess what four tracks or sidings at the stations would cost?

  12. E M Risse Avatar
    E M Risse

    TooManyTaxes:

    You will find that getting a grip on functional human settlement patterns including the evolution of Balanced Communites inside the Clear Edge will be facilitated by reviewing the facts in “Five Critical Realities That Shape the Future” a backgrounder at db4.dev.baconsrebellion.com.

    The issue you are having trouble with is the metrics of spacial distribution and functional densities at the Alpha Communtiy scale. This is a root cause of Geographic Illiteracy.

    EMR

  13. Anonymous Avatar
    Anonymous

    Uh, anybody here speak English, rather than PO’d wonk?

  14. E M Risse Avatar
    E M Risse

    Anonymous 1:12

    If you lood closely you will find this post and comments are in English.

    There may be some words that you do not recognize. It is just as counter productive to discuss human settlement pattern issues relying on simple, confusing and misunderstood Vocabulary as it is to describle ailments of the digestive system as tummy ouchies.

    Should you seek further insight into is issue of Vocabulary you will find the four our of our last six columns at the Bacon’s Rebellion site address the issue of Vocabulary. These columns examine the futility of using “simple” language to explore human settlement pattern issues.

    EMR

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