Bacon's Rebellion

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Will Broad Street BRT Pay Its Own Way?

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by

James A. Bacon
in ,

Source: Broad Street Rapid Transit Project AA/EA Problem Statement
Source: Broad Street Rapid Transit Project AA/EA Problem Statement

by James A. Bacon

A  proposed rapid transit bus line between Willow Lawn and Rocketts Landing would serve as a catalyst for development along the Broad Street corridor and boost property values by 11%, according to an impact study just released by the GRTC Transit System, the Richmond regional transit enterprise.

The 7.6-mile route would have 14 stops. Buses would travel on a newly constructed bus-only lane along much of the route and use on-board technology to control traffic signals at intersections in order to travel with fewer interruptions. The service would decrease travel time by some 65 percent, making bus travel competitive time-wise with driving, and would increase ridership by more than a third to about 5,000 passengers per day.

The project will require an estimated $68 million in up-front capital costs, half of which would come from the federal government, and is expected to cost $4 million a year to operate “with some portion anticipated to be covered by fares.”

You can read summaries of the study in the Times-Dispatch and Style Weekly, or you can dig into the details in a Virginia Department of Rail and Public Transportation presentation.

Visualization of BRT station on Broad Street.
Visualization of BRT station on Broad Street. (Click for larger image.)

Here is one simple question you won’t find answered — or even asked — in any of those sources: What is the fiscal payback?

Of course, that’s the very question we live for, here at Bacon’s Rebellion. Let’s pretend for the moment that federal matching funds (50%) and state matching funds (25%) is “free money.” That leaves $17 million to be provided locally. Let us suspend the reality of depreciation and ignore the replacement costs for buses and, decades from now, the dedicated bus lane. Let us also assume optimistically that fare box revenues cover 50% of the operating costs.

Finally, let us assume that the GRTC will borrow the $17 million local share and will be reimbursed primarily by the City of Richmond, which will reap nearly all of the benefits. Here is a back-of-the-envelope summary of costs:

– $850,000 yearly in principle payments (20-year amortization)
– $425,000 yearly in interest payments (assuming 5% interest)
– $2,000,000 yearly in operating costs
==========================
$3,275,000 a year

Source: Broad Street Rapid Transit Study.
Source: Broad Street Rapid Transit Study.

Next question, how much economic value will the rapid bus service create? The DRPT addresses the question but provides no hard answers. Extrapolating from the experience of the Euclid Corridor bus rapid transit route in Cleveland, DRPT projects that the City of Richmond will see a significant increase in property values along the proposed route. The presentation does not provide exact numbers but the numbers can be guesstimated from the chart at right.

My eyeball guess indicates an increase in property values of about $600 million by 2020 and more than $1 billion by 2034.

The real estate tax rate in Richmond is $1.20 per $100 in assessed value. How much would property tax values have to increase in order for the city to recoup $3,275,000 a year? Simple algebra says an increase in property values of $273 million would cover the cost. (Full disclosure: I nearly flunked algebra.) If the DRPT projections are correct — and that’s a really big if — then the bus rapid transit project would seem to more than pay for itself.

But would it really? That’s a tricky question to answer. More people living along the corridor will require additional expenditures on public services, particularly schools and public safety. The DRPT analysis does not take that into account. On the other hand, population growth would occur in a corridor that is already provided with roads, utilities and public services, so the added cost would be far less than building infrastructure from scratch in a greenfield project. That, too, must be factored into the equation.

All things considered, accepting the DRPT’s projections of increased property values as valid and counting federal/state funds as free money, it looks like the project will more than pay back local expenditures. But there’s still one more question to ask: Are there alternative expenditures of the money? Could not Richmond achieve the same objective by fostering the development of a market-based jitney service that requires only a fraction of the infrastructure investment? No one appears interested in asking that question. Perhaps the next gubernatorial administration will deem such a topic worthy of study.

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16 responses to “Will Broad Street BRT Pay Its Own Way?”

  1. accurate Avatar
    accurate

    Simple answer – NO, it won’t pay its own way.

  2. larryg Avatar
    larryg

    so I’ll ask an really ugly question that Accurate did have the opportunity to ask.

    Is BRT the Solyndra of transportation?

  3. jft Avatar
    jft

    Good write-up.

    I think GRTC’s use of Cleveland as a case study is problematic. I also think an additional question should be asked: What do we know about the development plans of large Richmond institutions, such as VCU/MCV?

    In a GAO report on BRT systems, dated July 2012, the GAO examined five BRT systems (including Cleveland’s, which GRTC used as its case study). The GAO looked at Cleveland, Eugene (OR), Kansas City (MO, Los Angeles, and Seattle. Taking into account the population of cities’ metropolitan areas, Cleveland and Kansas City are comparable in size to Richmond, Eugene is significantly smaller, and Seattle and LA are significantly larger. On pages 37-44 of the PDF (I will reference PDF page numbers, not the printed page numbers of the report itself), the report discusses the factors that affect economic development.

    The report identifies development efforts by large organizations as very important for the economic development of the area along a BRT route. On page 41 of the pdf, the report states that “local officials noted that major institutions and employment centers are playing an important role in supporting economic development in BRT corridors.” The report then provides examples from Kansas City and Eugene. In Kansas City, “most of the larger development projects” were sponsored by “universities and medical institutions.” In Eugene, the University of Oregon built a $250-million arena near one of the BRT stations. Cleveland’s Healthline runs through Cleveland State University and Case Western Reserve University, and also connects with large local hospitals. It seems clear that development support from local universities and hospitals (and other large employers) is very important for a BRT route to successfully stimulate economic development.

    Because the GRTC uses Cleveland as its case study, let’s compare Cleveland and Richmond a little closer on this point. Let’s look at student populations of local universities: CSU is home to approximately 17,000 students, while Case Western enrolls approximately 15,000. By comparison, VCU enrolls approximately 30,000 students, and Virginia Union University enrolls 1,700. So the total student populations between the two cities are about equal on that score.

    What about faculty and administrative staff? CSU has approximately 1,572 faculty and staff, whereas Case Western has approximately 6,374. VCU has approximately 13,300 faculty and staff (mostly staff). (I couldn’t find numbers for VUU, unfortunately). It appears that VCU employs approximately 5,000 more people than CSU and Case Western combined.

    (I acknowledge, but ignore, the fact that all of these colleges undoubtedly employ persons who work at satellite campuses or off-campus worksites, so these employment numbers are probably inflated for purposes of my discussion. I also acknowledge, but ignore, a similar point that can be made about students enrolled at these schools but studying at satellite campuses elsewhere. Finally, I acknowledge, but ignore, that these schools probably hire a number of vendors and independent contractors who are not captured in the faculty+staff estimates.)

    In terms of student population, it looks like Richmond and Cleveland are comparable. In terms of faculty/staff employment, it appears that Richmond has more jobs through VCU + VUU. However, a comparison of the schools’ endowments is also relevant. CSU’s endowment is approximately $43.7 million, but Case Western’s endowment is approximately $1.6 billion. By comparison, VUU’s endowment is approximately $29 million and VCU’s is approximately $438.1 million. As a public school, perhaps VCU has additional economic oomph beyond its endowment, but it seems reasonable to assume that VCU doesn’t touch the size of Case Western’s endowment.

    It seems reasonable to conclude that Case Western’s sizeable economic influence had a significant impact on positive economic development surrounding Cleveland’s BRT -and, in fact, we have some data supporting that conclusion. See page Figure 12 on page 40 of the PDF – two years after the BRT opened, land value in “University Circle” (the area surrounding Case Western) rose from 10% to 30% in the third year. By comparison, land values in other sections of the BRT either remained the same or declined. Why the 2 year lag? I have no data, but my bet is that Case Western (alone or in conjunction with others) built new facilities or improved existing ones, and the development took two years to finish.

    It appears to me that VCU’s development plans should be a significant consideration in planning a Richmond BRT line. We know that VCU is considering launching a new children’s hospital, but what about other plans – particularly new construction or renovations along the proposed BRT route?

    And what about other large employers and institutions along the proposed route? Are there such entities? If so, do they have plans for growth in the next few years? As the experiences from Eugene, Kansas City, and Cleveland tell us, it’s important to have buy in from the local “major institutions and employment centers”.

    I also note that Cleveland’s BRT route can put riders about half a mile from the baseball stadium for the Cleveland Indians, less than half a mile from the basketball stadium for the Cleveland Cavaliers, and just less than a mile from the football stadium for the Cleveland Browns – all of which are teams that compete in the major national sports franchises. By comparison, the proposed Richmond BRT would put riders within a mile of the Squirrels’ stadium, and less than half a mile from the Redskin’s training facility – no offense to either facility, but clearly not at the same level as Cleveland’s offerings.

    Should GRTC really be using Cleveland as its case study, given (1) the difference in endowment size between Case Western and VCU – especially in light of the fact that the economic benefits appear to concentrate in University Circle (aka Case Western’s turf) – and (2) the presence in Cleveland of three national sports teams compared to Richmond’s Squirrels and Redskins offerings?

    And I haven’t even mentioned the fact that Cleveland’s BRT has 59 stations and operates at 35 mph, whereas the Richmond plan calls for 14 stations and operations at 13.2 mph.

    1. James A. Bacon Avatar
      James A. Bacon

      JFT, excellent piece of analysis. You have zoomed in on the core assumption of the DRPT analysis — using Cleveland for the basis of comparison — and you have identified key local-level variables that need to be considered. That is precisely the kind of thinking we need to see before public officials proceed with a project like this.

    2. reed fawell III Avatar
      reed fawell III

      Bravo!

      Where are the anchors and ballast that puts a bottom under this thing? As TMT’s professor would say. And where are the torches to fire up its boiler?

      Public money spent on these projects do not justify bad risks. Otherwise every one is harmed. But the biggest loser is the public whose funds are wasted, destroying peoples wealth and their opportunity to create more.

      I know this sounds like a naive platitude. And that cynics with good justification will say “save your breath. This stuff can never be changed.”

      No, people can force the change of bad habits, if they undertake the task by effective means and draw a crowd of others who insist that far more business discipline, hard nosed analysis, execution, and accountability, be brought to bear on these sorts of projects. Why? Because only the public has skin in the game. Most everyone else at the table has their hands in the cash register, or is scrambling to jam theirs inside too.

      So Bravo, jft.

      Ps. Hopefully you’re the Major of Richmond. Otherwise, I hope somebody sends him a copy of your comment.

  4. larryg Avatar
    larryg

    I too thank jft for his(her?) analysis.. but it actually causes me to ask question about the fundamental purpose of BRT.

    what is BRT at it’s essence that is different from typical inter-city transit?

    what are thing things that are attributes of BRT that are not possible or mutually exclusive to improvements/upgrades to conventional mass transit? Certainly things like dedicated pickup spots, preemptive signal actuation, and “platooning” are all possible for conventional transit.

    Many of the things that we say BRT has as advantages could be just as easily provide to conventional transit.

    so what is it that is unique to BRT that is simply not possible, not an option for conventional transit?

    I see many of the claimed benefits of BRT to be things that could also be done for conventional transit.

    so then I would attempt to draw a parallel (that I could get smacked down on) between intercity rail and commuter rail.

    is BRT the wheeled bus equivalent of commuter rail and not really related to conventional bus/rail general purpose systems?

  5. larryg Avatar
    larryg

    I must admit – after reading the comments – I cannot tell if any of the commenters support public monies, taxes, for the development of BRT or if they believe it should be purely a private venture.

  6. larryg Avatar
    larryg

    For Toll roads, we have what we call “Investor grade studies”. They do these for private and public-private toll roads but not for 100% public roads – with the notable exception of the Chesapeake Bay Bridge Tunnel system which engages in that activity as it has to determine if it’s tolls can pay back the bonds.

    We don’t see to approach fixed rail and BRT in the same way.

    OTOH – to be fair – we don’t do investor grade analyses on schools, surface streets, libraries, or fire/ems.

    We DO do such analyses for water and sewer which are frequently financed from “enterprise funds”.

    In Virginia – they are defined thus: ” on an accrual basis similarly to most large business accounting. Unlike other governmental funds, depreciation is charged to capital assets in enterprise funds. The City [of Fredericksburg] currently has four major enterprise funds: Water, Sewer, Transit, and Parking.”

    The transit fund – does receive state and federal funds but it is operated on an enterprise basis… if funds are lost – routes are cut.

  7. Darrell Avatar
    Darrell

    How much money did Cleveland and the state put into developer pockets to make the BRT dream come true? I know on the West Side they sold housing lots for a buck and paid for demolition. I’m still trying to reconcile Rapid Transit with 13 mph.

  8. Hydra Avatar
    Hydra

    This is a good start. sounds like you have been reading my book.

    Reed and Larry are correct: this needs a better and more complete cost analysis.

  9. larryg Avatar
    larryg

    Actually Hydra, I’m trying to get some clarity here from those who say the govt is too incompetent to operate a cost-effective transit operation and the free market is a better choice.

    I pointed out that it’s allowed in Va Code to operate a transit on a public-private enterprise fund basis – which many water/sewer, parking and other smaller transit authorities operate on in the state.

    The bigger problem is that places like Richmond already operate transit and already barely are able to pay for it and even then with subsidies and now there is advocacy for what?

    are that advocating even more money for an additional service or are they talking about re-inventing the current service ?

    I see BRT as little better than some highway projects.

    in both cases, the justification is more like hand-waving than a real “investor grade’ study that takes a hard look at what the demand is and what the cost would be to provide that service – and LOS – level of service standards which nail down exactly what the service will do and not do at inception.

    It appears to me – and I’ll say here again – I could be ignorant (and Reed, we ALL are ignorant, some just are honest about it) – I see BRT as taking a regular transit service and peeling off existing routes and ridership to concentrate on selected routes and ridership.

    I equate BRT to Commuter Rail – which is not only subsidized but it caters to people who are not on the lower tiers and need transit as a last resort service since they often lack other transportation options.

    I’m just not sure exactly why we’d need to create another layer of transit service for higher income folks – and still subsidize it.

    The concept sounds inviting… but I’m not yet convinced that much of the claimed benefits of BRT could not just be implemented on regular transit to improve that service and BRT could ultimately cannibalize the heart of regular transit rendering it even less used and less relevant.

    so I have asked – what are the things that are specific and unique to BRT that could not be done with regular transit?

    My buddy Darrell who does something connected to the military with SOPs knows that in the military – the very first document that is generated for a new thing is called a CONOPS. VDOT has a similar approach called Purpose and Need. These are the docs that get into what the operation will be, what needs it will serve – and why existing facilities and operations cannot meet that need.

    We need that for BRT and we need an investor grade analysis that details just how much the negative ROI will actually be taking into account the accrual accounting that addresses expensing and depreciation and gives a more accurate view of the actual likely costs – not fan dancing and hand waving.

  10. RossPatterson Avatar
    RossPatterson

    I don’t have an opinion on Bus Rapid Transit as a viable system – I’ve lived in and around places that had a variety of bus and train systems, but never BRT. But the headline here – Will Broad Street BRT Pay Its Own Way? – got my attention.

    I understand that it is common to discuss public transit systems as if covering their costs was an important aspect of them. But I drive, alone, in my car on VA Route 7, in a county that has poor bus service and no rail service, every workday. And it occurs to me that it is actually the private transport systems (cars, trucks, etc.) that do not “pay their way”. Consider that Route 7 has been built and maintained for over 80 years without a driver ever paying a fee that a non-driver does not. And that the Dulles Greenway, a private road constructed before public-private partnerships existed in the Commonwealth, and which could divert much of Route 7’s traffic, is largely empty because of the toll it charges – a toll that is about the same as the fare to ride the Washington Metro the same distance.

    But for some reason, we never discuss the road network as the subsidized, unable to pay its own way, transportation system that it is. If we consider that perspective, we should ask why we never discuss what ought then to be obvious questions. If the bus and rail transportation systems were as free of end-user cost as the road system, how much more would they be used? Would we finally see a serious reduction in the number of vehicles on the roads? Would the Commonwealth’s metropolitan areas be better off with a public transit system that encouraged ridership as much as its roads encourage drivership?

    1. James A. Bacon Avatar
      James A. Bacon

      Ross, you make a good point that roads and highways don’t “pay their own way” any more than transit does. For the record, I have been hollering for years that the state needs to move to a “user pays” system for roads, and I harangued against Gov. McDonnell’s transportation funding fix for moving in the wrong direction — making our road network even less of a user pays system than it was before.

      The fact is, roads, rail, trolleys, buses and other expensive forms of transportation all need to pay their own way. They all need to compete on a level playing field. Until that happens, we dole out money on the basis of politics, ideology and perception, an arrangement that guarantees wasteful investment.

      1. larryg Avatar
        larryg

        I think when we assert that roads are subsidized and don’t pay their own way, we need to make a prima fascia case as many people believe that most roads, like Route 7 are paid for with gasoline taxes.

        I’m of the view that transit should probably be viewed more like schools or libraries than user-fee transport or at least like schools that are tax-supported with some-user fees hybrid.

        so.. in the interests of being clear – what do we think the source of funds are for roads like Route 7?

        Not disagreeing with Mr. Patterson.. just wanted to make sure we understand where we think the funding comes from.

    2. reed fawell III Avatar
      reed fawell III

      Its doubly important for mass transit pay its own way for the simple reason that the driving rationale behind the huge expense of mass transit is that only mass transit can carry massive amounts of people efficiently.

      One of the great tragedies of Washington DC’s Metro was driven by the hypocrisy of many of its most vocal proponents when their zeal for mass transit evaporated when it came to allowing sufficient parking and residential around Metro Stops in their neighborhoods. Thus Mass transit proponents forced others to pay for their own selfish benefits while refusing their neighbors the benefit they enjoyed at other people’s expense. All of while beating their chests in celebration of their own moral superiority.

      This should NEVER again be allowed to happen.

  11. larryg Avatar
    larryg

    re: ” when their zeal for mass transit evaporated when it came to allowing sufficient parking and residential around Metro Stops in their neighborhoods. ”

    is that something that WAS done in other Metro-type systems in other cities?

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