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The Incentives of School Bonds

Regular readers know I put a lot of emphasis on incentives as a way to understand events and a key consideration when crafting policies.  The $250 million school bond proposed for the November ballot is a good example.

On the front end, the incentive is very strong for school districts and municipalities to let facilities deteriorate.  First, the law is structured to give advantages to labor unions organized at the state and even federal level, creating incentive for them to manipulate the political structure.  Then, elected officials have incentive to tilt budgets toward organized labor, drawing money to compensation.  Next, having learned from that experience over time, taxpayers have incentive to squeeze money out of budgets so that even higher taxes aren’t paying again for things like maintenance that they thought were already included and that might be diverted again if available.

On top of it all, the near certitude of passing bonds for dire repairs creates disincentive for regular maintenance from the start.  This mechanism creates incentives for financial interests and investors, and the bias toward big projects brings in the incentive that got me thinking of these things.  As Dan McGowan reports for WPRI:

Fix Our Schools R.I., a 501(c)4 nonprofit formed last week, will spend the coming months “educating communities across the state about what this plan is and how it would affect them,” Haslehurst told Eyewitness News. …

The organization lists its address as 410 South Main St., the same building as the Laborer’s International Union of North America. Haslehurst said it will share space with the Occupational and Environmental Health Center of Rhode Island, a nonprofit that has an office inside the building.

A quick look at the health center’s IRS filing shows that it’s a labor union organization, with AFL-CIO poobah George Nee as the treasurer.

‘Round and ’round the incentives go, to the point that running things efficiently — in the way people run their households, planning ahead and all that — seems almost to be an impossible task.  Be skeptical of anybody who tells you that this is a “once in a generation” investment that fixes a problem.  After all, when the debt payments subside, the incentive will be to find more projects in need of debt or to build the payment amount into regular budgets.

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A Telling Juxtaposition of Priorities in Newport

Let’s stipulate that public safety is paramount and that lives and bodily injury beat road repair on the priority list every time.  That said, Newport Mayor Harry Winthrop could have picked any government activity to highlight in this exclamation, made in the context of a conversation about school shootings:

“Our number one priority is public safety,” Mayor Harry Winthrop said. “Who gives a damn about a pothole on Bellevue Avenue if we are not safe?”

He didn’t go with his government’s charitable grants, beautification projects, open space, community planning or any of the countless other things that municipal government does that ought to come after both public safety and maintenance of infrastructure.  That tells us a lot about the priorities of our government officials, and we see it in our roads.

Which, by the way, don’t take long to become public safety matters themselves.  When one drives around the state and sees bridges with regularly decreasing weight limits or propped up on wooden blocks and has to swerve onto the shoulder or into another lane to avoid potholes, the specter of harm and even death isn’t difficult to sense.

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An Elusive Train That Might (Might) Make Sense

When I first began trying to figure out how to actually find a job without dragging my wife out of stop-by-her-parents-to-pick-up-dinner range nearly two decades ago, I didn’t understand why no direct train was available from Fall River to Boston.  As laptops, tablets, and smartphones advanced, the prospect seemed even more obvious.  In the meantime, government (broadly considered) found money for a sparsely used train station in Wickford; go figure.

However, now that the excitement of possibility is ramping up in Fall River, as Kevin O’Connor reports for the Fall River Herald, what jumps out at me are the numbers:

Commuter rail to Boston was first proposed 30 years ago. Gov. Bill Weld and Gov. Deval Patrick both promised it would happen. Patrick promised trains would carry commuters by 2016. Plans called for a $1.4 billion project to improve rail lines through Stoughton. That price has since risen to an estimated $3.4 billion

Baker instead proposed running the rail lines through Middleboro, which would cost an estimated $935 million. It could also be completed in less time, state officials say. …

Plans now call for a train that would stop at a station on Davol Street at Pearce Street next to the Boardwalk Crossings Plaza. Studies show the train would carry an estimated 1,600 passengers a day for the 90 minute ride to Boston, Fiola said.

I’ll stipulate that these are back-of-the-envelope calculations, because I’m not sure what specifically is included in that number of passengers or how neatly the expected cost matches up with serving just those passengers, as opposed to other customers elsewhere up the line.  But these costs are huge.

Even going with the lower estimate (and assuming it doesn’t grow), $935 million amounts to a $160 subsidy per ride over the course of 10 years.  For a single two-way commuter working five days a week in Boston, that’s over $80,000.  Would anybody actually pay that amount for themselves?  And sure, opening up such possibilities in the Southeast of Massachusetts would have an economic effect (although some of it will just be a shift in wealth away from closer suburbs), but that’s a tricky thing to estimate.

It’s important to remember that this subsidy has to come from somewhere else in the economy that, by virtue of the fact that it wouldn’t need a government subsidy, is likely to be more economically productive.

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The Wrong Mindset on School Repairs

Somehow, I don’t expect Democrat Governor Gina Raimondo’s “bold plan” increased school construction funding to emphasize a change in priorities that leads to spending reductions elsewhere.  The quote in Shiina LoSciuto and Sarah Doiron’s WPRI article is better seen as a cause for alarm:

Raimondo said she plans to unveil a proposal next week for funding the rebuilding of schools across the state.“I plan to present a bold plan to the legislature, to make a once in a generation investment in rebuilding our schools,” Raimondo said.

This is entirely the wrong mentality.  We don’t want to repair schools once a generation.  We don’t need “an investment” as much as we need reform.

Maintenance and repair should be ongoing.  The problem is that the incentive in state and local government is to spend as much money as taxpayers will tolerate on ongoing operations and then hit us with a crisis in order to ratchet up the revenue.  One photograph of a flooded classroom suddenly makes disappear the consequences for three decades of letting maintenance slide while spending on other priorities.

And then moving forward, this “once in a generation investment” will be built into our state and local tax bills, which won’t go down when all the work is done and all debt is paid off.  Instead, as the cost of the emergency subsides, the government will find ways to spend the money elsewhere and let the schools deteriorate again.  Meanwhile, whatever mental space Rhode Islanders allocate toward thinking about education will be distracted by the excuse that children can’t learn in crumbling schools and then palliated by the fancy new buildings, even as the level of education continues to be substandard.

We have to stop falling for this ploy.

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The Post Office’s Delivery Neutrality

One suspects that Wall Street Journal reporters Cara Lombardo and Paul Ziobro saw their recent article on the United States Post Office’s imbalance with Amazon as residing in the “Trump tweets versus the world” category.  On the social media platform, the president expressed frustration that the money-losing government agency is basically subsidizing Amazon’s business by keeping shipping costs artificially low.

The ins and outs of that conflict — woven through consumer interests, the destruction of local brick-and-mortar retailers, and so on — are interesting, but for my narrow purpose, here, it occurred to me that the matter offers a serviceable analogy to net neutrality:

… some critics suggest that the USPS is underpricing such services and that the e-commerce deliveries are being subsidized by the universal service obligation that the USPS must maintain under congressional edict. The universal service obligation is a collection of requirements that ensures all users receive a certain level of service at a reasonable price.

Like Internet service providers, the post office has a limited amount of bandwidth, and it wants to keep prices down to maximize the number of individuals and organizations that can use the service.  That low price, however, creates a framework on which major players can lean their business models for greater profits than would be possible if the providers were able to absorb some of them to provide their mission-critical link in the chain.

Both issues present a need for balance, and people can obviously apply different priorities; the distinction between government and private corporations also has an effect.  Both seem to me, however, to show quite readily the complex nature of balancing society’s interests and the folly of attempting to channel them through blunt government instruments.

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Jobs That Appear When the Taxpayer Money Starts to Flow

Here’s a doozy of an example of government waste:

Workers in the East Side Access tunnel, which will connect Grand Central Terminal in Manhattan with the Long Island Rail Road. The project’s costs have ballooned to nearly $3.5 billion for each new mile of track. …

The budget showed that 900 workers were being paid to dig caverns for the platforms as part of a 3.5-mile tunnel connecting the historic station to the Long Island Rail Road. But the accountant could only identify about 700 jobs that needed to be done, according to three project supervisors. Officials could not find any reason for the other 200 people to be there.

Sadly, one suspects that this is just an extreme version of a typical activity, and that’s before one points out the reality of jobs that are happily claimed on the books, but that could easily be discarded, such as the proverbial three union workers on every project whose apparent job is to watch the one who’s actually doing something.

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PawSox: Suddenly a Legislative Hot Potato?

Kathy Gregg is reporting in today’s Providence Journal that

[Senate President Dominick] Ruggerio said the Senate Finance Committee will unveil a revised version of the PawSox financing bill next week, and then vote to “hold it for further study,” so the public can see it, discuss it and debate it before the General Assembly convenes for its 2018 session on Jan. 2.

Yesterday on the WPRO airwaves, Dan Yorke, an open supporter of the state’s financial participation in a new stadium for the PawSox, noted that he had been aware since last week that this would happen. More interestingly, he reported that members of the House have been urging their colleagues in the Senate “do not send us this bill”.

Interesting. Are some in the House seeing the folly, financial or political or both, of the state getting involved in a sport when far more important matters have been budgetarily neglected or outright cut? For example – and feel free to add to this list of unwise legislative priorities – of course, excessively generous state pensions had to be cut, though bringing the fund from 49% funded to only 56% funded was in no way worthy of the fawning national media coverage showered on the governor for this “feat”. But bigger picture, should public pensions take a secondary position to a very seasonal “economic development” (please, no snickers) sports project?

And as was demonstrated by both the Rhode Island Center for Freedom and Prosperity and the Republican Policy Group, headed by Minority Leader Patricia Morgan, the money to repair Rhode Island’s as roads and bridges could easily have been found in the budget. But Governor Raimondo pretended otherwise and the legislature unwisely followed her lead in passing a highly destructive and inefficient toll plan (the implementation of which is not going swimmingly). Really? Our roads and bridges are less important than the state participating in the frivolity of a sport?

What does it say about Rhode Island’s priorities if the state participates in the PawSox stadium? That needs to be the point that House members and leaders mull over as they consider the PawSox request and the Senate’s bill. Possibly, it is the basis of the quiet push-back, referenced by Yorke, that the Senate is getting from the House and that has hopefully turned the PawSox stadium into a political hot potato.

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Chris Maxwell: RIDOT’s Inadequate Environmental Assessment Intended to Accelerate Toll Bait Lawsuit

[Below are the prepared comments of Chris Maxwell, President of the Rhode Island Trucking Association, for the RIDOT toll gantry workshop Tuesday evening. The video of Chris’ actual comments, abbreviated due to time constraints, can be viewed here. For the sake of the news outlet that erroneously reported that public comment Tuesday night was mostly a re-hash of old objections and omitted all on-topic comments from their story, Ocean State Current has bolded all of Chris’ comments that pertain to the Environmental Assessment that was the subject of Tuesday’s workshop.]

Good evening. My name is Chris Maxwell and I represent the Rhode Island Trucking Association and all local trucking companies adversely affected by truck-only tolls.

Our opposition to this plan from its introduction in the spring of 2015 is well-documented. And despite the justified rancour that still exists, our industry’s willingness to contribute to infrastructure improvement remains steadfast – even beyond our existing contributions which are considerable.

In 2016, the trucking industry in Rhode Island paid roughly $70 million in federal and state roadway taxes.

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