Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

Can We Count On Toll Revenue Forecasts?

with 4 comments

Clark Williams Derry on Sightline Daily (a really useful resource that I recommend you subscribe to if you don’t already)  has a very useful series on declining traffic. No 37 in that series picks up a story from the Orange County Register which he headlines “Southern California toll road debacle raises questions for the Northwest”.

The reason for this contribution to the discussion is that he apparently thinks that the states of Washington and Oregon are all that makes up the North West – and we in BC actually have a slightly different reason for caring. So read what he says first and then come back, because while what he says is all well and good for them, our very peculiar P3 system  – and the even weirder Port Mann set up – makes this a much more immediate concern. We have an election this spring and here is further reason to change our provincial government, if we didn’t have reason enough already.

Here’s the pictures

San-Joaquin-275x275 Foothills-275x262

The conclusion drawn from this data

The toll route is generally free-flowing, but drivers prefer parallel, toll-free alternatives, even if they’re clogged with traffic.

That is very important  but entirely consistent with what we have seen on the Golden Ears Bridge.

The traffic forecasts for the Southern California roads were made by the same consulting firm—CDM Smith, formerly Wilbur Smith—that performed the investment-grade bond study for Washington’s SR-520. And that firm was recently contracted for similar study on the Columbia River Crossing connecting Portland, OR with Vancouver, WA. CDM Smith has a good reputation—but that didn’t protect them from producing projections that went badly awry.

Now this is where we part company with “The North West”. Our projections are done by a different company, but while I have not looked in detail how either forecast was done it does not matter. As Jeff Tumlin pointed out, four step transportation models are no better than tarot cards at forecasting anyway. Or, as Clive Rock who looked after traffic forecasting at the GVRD and Translink liked to say, “You can’t steer the ship by staring at the wake”. They do this with personal finance too – past performance is no guarantee of future performance – is the caveat entered in every prospectus. But that is way all traffic forecasts are still done.

We do not fund transportation expansion by raising bonds the way they do in the States. Equally, we do not transfer risk to the private sector the way they have done in Australia. This got them some very large bits of infrastructure for free when the contractor operators (DBMO = design build maintain operate) went bust. The people who owned the companies’ shares and debts caught a cold, but the public sector was not on the hook. Here, if a DBMO gets the forecasts wrong, the risk is transferred to the tax payers. So we are now picking up the lost revenue on the Golden Ears. As we will on the Port Mann – which is no longer a P3 as no-one was daft enough to want to lend that turkey money, and the government was forced to admit that public sector borrowing was cheaper than private sector borrowing. As it always is, when the taxpayers can be expected to back the debt.

So we can now add the Port Mann “widest bridge in the world” to the long list of public sector projects that were supposedly safe in BC Liberal hands but have proved to be financially disastrous. BC Hydro was doing very well – until it had to subsidize run of the river private sector projects. BC Rail actually had been making money but was sold to CN (the “lease” idea is simply spin) for much less than it was worth. BC Ferries thought they could raise fares without worrying too much about price elasticity. PAVCO had to replace the roof – and never thought it needed a business case – which was just as well as there is no business model where that kind of investment makes any sense financially. Even well run stadia are subsidized – usually on the argument that it brings free spending punters to the area. Even casino operators now recognize that this mostly just cannibalizes other enterprises. The tv adverts currently running which talk about the economic models of unspecified other places assert that somehow BC has a different model. Actually, this is just another lie. Public sector spending and the running up of the debt of the public sector has been out of control CORRECTION A reference here to the Auditor General has been removed due to this tweet from the CBC “Christy Clark asks AG John Doyle to stay on 2 more years”

Please understand that I have no problem at all with using the public sector to stimulate the economy when that is required. Trying to balance the budget was what caused the Great Depression of the 1930s – and all of FDRs programs only mitigated that slightly. It was only the huge public spending of the second world war that got America working again. It was only the Marshall Program that resurrected Europe – and the reason the UK fell so far behind was that it was not covered by that plan and had to pay back all the dollars it had borrowed before trying to start repairing the damage. BUT that does not mean I support public sector spending on any and all projects. Indeed, as an economist working in or for the public sector for all of my career, reviewing forecasts and critically examining “business cases” (then called cost benefit analysis, which looked a bit further than just profits for banks) project selection was always the most important task to get right. What project – and where – and how its done, were all looked at carefully and objectively. Only when I came to BC did I come upon a system which said, in effect, the current political party has a bee in its bonnet about some idea or other, and your job is to make this idea look good. Actually that is not fair . As a consultant, I found that it was also the practice of at least two banana republics and one religious hegemony. Just substitute that words “current political party” with whatever they called their leaders at the time.

But what we have now – and what the US has had and to some extent still does – is a right wing party that says it will balance the budget, control spending and reduce the debt, but actually does exactly the opposite. And does that not because stimulating the economy and providing growth will make the population as a whole better off (“the rising tide floats all boats”) but simply to funnel ever larger sums from the public coffers to their friends and supporters – mostly corporations who owe no loyalty to any jurisdiction they operate in.

No we cannot count on toll revenue forecasts, but the corporations can indeed count on tax revenues collected for them by a compliant government.

Written by Stephen Rees

January 15, 2013 at 9:53 am

4 Responses

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  1. Actually, traffic forecasts these days are likely worse than tarot cards. Chances are random guesses are right some of the time while these traffic forecasts seem to be wrong all the time. The models seem to under predict transit usage while over predicting motor vehicle traffic.

    Richard

    January 15, 2013 at 4:44 pm

  2. Good point Richard. but to be sure the model is just as good as the people want it to be, we call it a GIGO (garbage In, Garbage Out -see wikipedia).

    The reason for that?
    http://voony.wordpress.com/2010/06/04/geb-or-how-translink-blames-the-lack-of-sprawl/

    Voony

    January 15, 2013 at 9:39 pm

  3. Makes me wonder about what is going to happen if we replace gas taxes with taxes based on KMs driven. What happens if people drive less than predicted or if they start driving less in response to the new tax? Who picks up the tab then?

    Dejan K

    January 16, 2013 at 5:49 pm


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