Sound Transit Horror Stories: Letter from Seattle

Sound Transit's Rail Projects
Sounder Commuter Rail and Link light Rail as of 2008
12 years into its Sound Move Ten Year Plan (1996-2006)

By Emory Bundy
Sounder commuter rail

Sounder commuter rail

Although it absorbs the smaller portion of Sound Transit's funds--which mostly are allocated to Link light rail--Sounder commuter rail has the merit of having actually been put into operation. So there's a functioning entity to measure and evaluate. Its performance anticipates that of Link light rail.

Sound Transit's promises for Sounder commuter rail in the Sound Move Ten Year Plan tax package of 1996:

*82 miles in length, Everett to Lakewood
*Completed and fully operating in 2002, with 15 daily trains, 9 between Lakewood and Seattle, 6 Everett to Seattle
*Capital cost, $650 million
*Annual operating cost as of the benchmark year 2010, $10 million
*Ridership in 2010, 3.8 million boardings
*Farebox recovery, 27.5% of operating costs.

The record to date:

*75 miles of track completed
*10 of the15 daily trains are in operation , 7 from Tacoma to Seattle, 3 from Everett to Seattle
*Capital cost: $1.25 billion projected through 2010, with $1.1 billion more to follow via Phase 2 funds (second tax package, adopted 2008). The components to complete the Phase 1 $650 million capital development plan will cost approximately $1.8 billion, a $1.15 billion, 177% cost overrun.

*Completion of the 82 miles, promised by 2002, now is targeted for 2012-13.
*Operating costs exceed $30 million, triple the original projections--absorbed by only two-thirds of the promised daily trains.
*Annual ridership is 2.67 million, 70% that projected
.*Farebox recovery is 13% of operating costs, half the target

Most of the additional capital cost for Phase 2 is allocated to develop parking facilities added since the original Sound Move Ten Year Plan. Whereas much was made of "transit oriented development" at the outset--with images of people strolling, or perhaps biking to their handy train stop--virtually all Sounder's patronage is dependent on free, handy parking. People are enabled to live hither and yon, drive their SUVs and pickups to Sound Transit's far-flung parking lots and structures, and park free, in order to benefit from an enormously subsidized rail trip. Doug MacDonald, former Washington State Secretary of Transportation, and former Sound Transit board member, aptly dubbed Sounder, "Sprawl Rail."

"Transit-oriented development," doesn't mean live near your rail transit stop and get rid of your automobile. Were that the case, huge sums for parking facilities would be unnecessary. Rather, it means subsidies for commercial development near the stations, in addition to subsidies for the train system and its operations. E.g., there's a "transit-oriented development" in Kent, Kent Station. The municipality purchased the real estate for $15 million, spent $2 million for environmental remediation, and sold it to the developer for $5 million. Sound Transit then relocated its planned 800-stall parking garage to the opposite side of the tracks--where it brings traffic closer to downtown Kent--so the Kent Station developer could use the parking garage, free, for its customers.

The arrangement works because the clientele of Kent Station has virtually no relationship to that of Sounder. This is dramatized by the anchor tenant, a 13-screen cineplex. Since Sounder operates only during work day commuting hours, and people go to the movies evenings and weekends, Sounder patrons and movie-goers drive to and from the garage servicing Sounder's station and Kent Station without competing for parking spaces. Kent Station has almost nothing to do with transit, save the coming of Sounder provided a rationale for subsidizing the mall developer.

Central Link light rail

The vision of Link light rail was that of a 125-mile network linking all the major centers in the Central Puget Sound region (Snohomish, King, and Pierce counties). After several losses at the polls, a scaled-back 21-mile ten year "starter rail" plan was proposed, and the taxing authority was approved by public vote in 1996.

Central Link light rail was to run from the University District in north Seattle to South 200th, a short distance south of Seattle-Tacoma International Airport, at a cost of $2.3 billion. It was to be completed and operating in ten years, 2006, and demonstrate how well Sound Transit could build and operate a rail line. With this "test drive," the public could kick the tires and have confidence in approving additional, Phase 2 taxes for the rest of the 125-mile network, to completed and operating in 2020.

With great fanfare and bragging, a so-called Initial Segment of Central Link light rail (i.e. the "initial segment" of the "starter rail"), from downtown Seattle to Tukwila, will go into service in the summer of 2009, and be extended a short distance to the Sea-Tac Airport in 2010. Sound Transit then hurried to obtain its Phase 2 taxing authority, negating the public's opportunity to evaluate its Phase 1 performance. Initial Segment covers the cheapest, easiest portion of the promised Central Link segment, will cost as much as the proffered price of all Central Link, and is projected to have one-quarter the ridership promised in 2010. Also, four stations have been eliminated, and only 12 will be completed--four of them stations in the Downtown Seattle Transit Tunnel, originally built and financed nearly two decades ago.

For an additional $1.9 billion, Sound Transit plans to add two more of the Central Link stations by 2016, and reach the University of Washington's football stadium. At that point the $2.3 billion project, to be completed in 2006, will have reached neither end of the Central Link line (NE 45th in the U District and South 200th, south of Sea-Tac), it will have cost $4.4 billion, and be missing 7 promised stations. That will have exhausted the Sound Move Phase 1 taxes, even though extended for 10 years in addition to the original 10 years. Reaching the NE 45th and South 200th termini, now targeted for 2020, will add well over $1 billion, supplemented by Phase 2 taxes. As of 2020, for roughly $6 billion, Sound Transit's Central Link light rail is now scheduled for completion, 14 years late, absent 5 of the promised 21 stations, with a $3.7 billion cost overrun.

The Central Link ridership promised in 2010, 32 million boardings, won't be approached by 2020, with a system that will cost at least 2.6 times as much. Operating costs will be multiples of those projected, and the share covered by the farebox--forecast at 53%--will be but a small fraction.

As for the Phase 2 additions, which was supposed to complete the 125-mile light rail network by 2020, if all goes according to the current plan, only 50 miles will be completed by 2030. The cost per-station for that Phase 2 is projected at $650 million. For Phase 1, Central Link, the cost-per-station will be roughly $300 million, versus an original estimate a tad higher than $100 million.

In sum, the introduction of the two rail systems in the Central Puget Sound counties, is a slow, disruptive process, costing huge sums to build and operate. The bottom-line effect will be to degrade the already inadequate productivity of the public transit system. The time, money, effort, and distraction will add so little to transit ridership that the effect on the region's mobility will be indiscernible--save for the immense "opportunity costs," the resulting inability to make productive use the financial resources.

The attached graphs illustrate the trajectory of transit ridership, and the share of the region's entire transportation funding allocated to transit from local, state, and federal sources. Forty years ago transit received 29% of the funding, and delivered 6% of the transportation market share. If Sound Transit performs as well as it hopes to, and if the idealized smart growth land uses are fully adopted, by 2030 transit will serve 4% of the transportation market share, and absorb more than two-thirds of the region's transportation dollars.

Seattle Three County Transportation Tax Revenues
Seattle Transit Market Share: 1965-2040


Las Vegas Monorail Bonds: Default Imminent or Inevitable?

Bloomberg News reports today (20090622) that $450 million of municipal bonds that provided most of the funding for Las Vegas Monorail had their credit rating further reduced today by Fitch Ratings. Bloomberg indicated that this action implies “default of some kind appears imminent or inevitable.”

This apparently impending financial embarrassment was predicted in our 2000 Public Purpose report on the Las Vegas Monorailbefore the bonds were issued. The problem, as we predicted, is that ridership has fallen far short of projections, which is a fairly standard occurance with respect to large transit infrastructure projects.

Las Vegas Review Journal Article

Las Vegas Monorail: Bond Default Imminent?
Las Vegas Monorail: Bond Default Inevitable?


Slumdog Millionaire: The Movie and the Book

I had the pleasure of watching the movie on a flight from Dhaka to Bahrain. I had just been inside three separate slums in Dhaka and have seen slums or shantytowns in many places, such as Kolkata, Sao Paulo, Rio de Janeiro, Manila, Jakarta, Soweto and Cape Town. I have also been to Mumbai’s Dharavi, where much of the movie takes place.

I don’t watch many movies, but Slumdog Millionaire was well worth the time. When I got home I ordered the book. It was written by Vikas Swarup and was originally published under the name Q and A. The book was as different from the movie as the difference in titles.

Only the broadest outline of movie’s story resembles the book. Jamel is not Jamel, he is Ram and he has no brother. His love, Latika appears in the book but is not his love. She appears for the first time in the 11th of 12 chapters. The program is not Who Wants to be a Millionaire, but is rather Who Will win a Billion?. The top prize is not 20 million rupees, it is rather 1 billion rupees ($20 million).

There are the murders, but none of them resemble those in the book. Finally, there is some consistency in geography. Mumbai is the scene of most action in both, Agra appears, but Delhi, which is important in the book does not appear in the movie.

Finally, in the greatest inconsistency of all, Jamel/Ram is not a lifelong slum dweller. He actually lives in lower middle class housing, above that of the shantytowns. He does spend part of his time, however, in Dharavi.

However, there is much to be gained from reading the book. It provides another, almost completely different perspective on urban living in India. Both the movie and the book are highly recommended.


Note: Dharavi is often called the world's largest slum, with 1,000,000 people in approximately one square mile (2.5 square kilometers). However, I believe that another area, to the north of Dharavi, bordering on the east side of Mumbai International Airport is larger. This “airport east slum” covers about twice as much land area as Dharavi and may have 2,000,000 residents. For more information see Rental Car Tour of Mumbai.


Mitsubishi 60 Gram Car

Mitsubishi has announced development of a lithium battery driven car, to be sold within two years. The car, the "MIEV Plug-In Electric First Drive" would travel as much as 100 miles (160 kilometers) between charges.

United States Data and Comparisons: GHG Emissions per Passenger Mile/Passenger KM are indicated below (From power plants - variation is due to mix of fuel sources used in producing electricity)

Average United States: 61 grams/37 grams
Lowest (Vermont): 1.4 grams/0,7 grams
Highest (North Dakota): 102 grams/62 grams

The average GHG reduction compared to the current US automobile and sport utility vehicle fleet average would be 83 percent.

European Union Comparison The MIEV would be 40 percent less GHG intensive that is required by the newly adopted European Union fuel economy requirements for 2020 (the equivalent of 101 grams per passenger mile or 62 grams per passenger kilometer).

The above calculations assume the US national vehicle occupancy rate of 1.6. The comparison to the present fleet includes upstream production and transport activities.

Mitsubishi MIEV Site

Edmunds Review


Regulation breeds seizure in the two-speed housing market


Originally Posted March 7, 2007 (On the Heartland)


Much has been written about the housing industry slowdown in the United States and the “housing bubble” evident in overvalued house prices. In fact, only part of the US market is experiencing overvalued housing prices, with the rest of the nation enjoying historic housing affordability ratios in what has become a two-speed housing market. National Association of Realtors data indicates substantial reductions in existing house sales year-to-year in a number of states, most of which are characterized by highly regulated land markets (principally so-called “smart growth” policies). These policies ration the land available for residential development and, not surprisingly inflate land and housing prices. The costs are substantial, with many years of housing expense (including mortgage interest) being added to the budgets of households now purchasing homes. In the longer run, it seems likely the “bubble” will deflate or even “burst” in the highly regulated markets. This could occur in various ways. Until the necessary correction occurs, the highly regulated markets can be expected to experience laggard population and economic growth (as is already occurring).

The Housing Slowdown

Perhaps the most covered economic story in the nation in recent months has been the housing slowdown. National Association of Realtors data indicates that in 2006, existing house sales fell 8.5 percent in the United States compared to 2005.

The Two-Speed Housing Economy

Much has been written in recent years about the “housing bubble.” However, national data mask some very significant differences. Others are doing just fine. New York Times economic columnist Paul Krugman noted more than a year ago, that the “bubble” is concentrated --- in what he called the “zoned-zone” The “zoned-zone” is the highly regulated states in what has developed as a two-speed housing market. There is not a national housing slowdown, so much as there is a slowdown in some areas.

Sales volumes have generally plummeted in markets where land use regulation is strongest, where zoning and restrictions are the most severe. Conversely, where land use regulation is less stringent, sales volumes are steady or even increasing.

Market Seizure in Highly Regulated Markets

Housing market seizure --- akin to heart seizure --- has hit the most regulated markets in the United States according to an analysis the state data by Demographia. The strong land use regulations include land rationing policies, such as so-called smart growth, large-lot zoning and insufficiently rapid government land sales where there is insufficient privately owned land left for development. All 19 states with strong land use regulations experienced sales declines, with a minimum loss of 4.5 percent between 2005 and 2006. The largest losses were in Nevada (minus 28.9 percent), Arizona (minus 28.2 percent), Florida (minus 27.6 percent) California (minus 23.5 percent and Virginia (minus 22.9 percent), all states where government policies have stood in the way of sufficient land supply. Overall, the highly regulated states experienced a housing sales decline of more than 17 percent from 2005 to 2006.

At the same time, median house prices in the metropolitan markets of the highly regulated states held steady. This is to be expected, given the artificial shortage of supply that land use policies have created in these states.

Market Strength in Liberally Regulated Markets

Conversely, in the states without excessive land use regulation, annual existing house sales rose nearly one percent. Gains of more than six percent were posted in Alaska, Arkansas, North Carolina, Texas, and Indiana. Existing house sales rose three percent in fast growing Georgia, home of the high-income world’s fastest growing large metropolitan area, Atlanta.

It is the Law of Supply and Demand

Some analysts have blamed low interest rates and high demand for the bloated housing prices in some markets. This view is disproven, however, by the fact that the same interest rates have been available in markets that have experienced housing cost escalation and those that have not. Moreover, the unaffordable markets do not have the greatest demand. The fastest growing metropolitan areas with more than 4,000,000 in the high-income world are Atlanta, Dallas-Fort Worth and Houston, and each of these has remained affordable --- with Median Multiple (median house price relative to median household income) below 3.0. Economics is governed by the “law of supply and demand,” not the “law of demand.”

Uncharted Unaffordability Territory

Finally, virtually all of the unaffordable markets were nearly as affordable as the liberally regulated markets just a decade ago. In recent years, government policies have driven housing prices to unprecedented unaffordability in many highly regulated markets. In a number of highly regulated metropolitan areas, such as San Diego, Los Angeles and San Francisco, housing costs have escalated so rapidly in recent years that the Median Multiple is more than three times the historic standard of 3.0.

In highly regulated San Diego, the escalation in the median house price housing and financing (at today’s low rates of interest) relative to incomes in just 10 years has been the equivalent of 14 years of median household income. This has imposed $800,000 more in costs for each household buying a median priced house and is making San Diego extraordinarily uncompetitive. The same is true, to a greater or lesser degree in other highly regulated markets.

These unnecessarily higher prices are likely to translate into lower rates of home ownership. This will disproportionately affect lower income households, which are minority to a larger degree. Today, African-American and Hispanic home ownership rates hover at or below 50 percent compared to the half-again higher 75 percent among White-Non-Hispanic households. The gap has been narrowing in recent years, but smart growth is likely to reverse that.

Irrelevant Solutions

There is no point in proposing the conventional housing affordability programs to solve the problem. “Inclusionary zoning” and home buyer give politicians the appearance of doing something, but their impact reaches little beyond headlines. Such programs are simply irrelevant to housing affordability. The depth of the housing affordability crisis in California, the Northeast and other highly regulated markets is far beyond the ability of any conventional housing affordability program to correct. The problem is that smart growth, urban planning and regional planning have manipulated the price of land so high that nothing short of a structural correction will solve the problem.

Regulation Associated with Less Economic Growth

However, the price of regulation is being paid in a housing market seizure that has seen sales volumes plummet. This is not surprising. United States Federal Reserve Board research indicates that metropolitan areas with more stringent land use regulation can expect to grow less quickly than would otherwise be expected.

Demographic Reversals

This research is validated by US Bureau of the Census migration data. The excessive over valuation of residential property appears to be a major factor in driving more than 2,500,000 residents from the high cost coastal markets to more affordable inland markets since 2000. This represents virtually a complete reversal from the demographic trends from World War II to the early 1990s. There is no reason for it to have occurred other than that housing affordability has been destroyed in the formerly strong but now highly regulated markets. Shockingly, previously fast growing San Diego is now losing domestic migrants at twice the rate of Pittsburgh.

Deflating the Housing Bubble in the Highly Regulated Markets

Housing prices have reached uncharted territory relative to incomes. Some analysts have suggested that housing affordability was nearly as bad when interest rates were high, especially in the late 1980s. But those interest rates passed and nearly all high-interest rate mortgages were replaced with lower-rate loans. Thus, the affordability crisis was “transitional.” This housing affordability crisis is “structural.” Buyers are stuck with the high prices they paid and the costly mortgages. It seems likely that, in the longer run, the bloated prices in highly regulated markets will be subject to correction. This could occur in various ways. For example:

    (1) Slower Economic Growth: Overvalued markets could experience stagnant population and economic growth (already evident in the domestic migration data, especially in California and the Northeast) as household incomes rise over a period of many years or decades in relation to housing prices. For example, San Francisco-San Jose, which had been one of the nation’s fastest growing metropolitan areas from World War II to the early 1990s, is now growing at one-third the rate of rust belt St. Louis.

    (2) Inflating Away Windfall Profits from Bloated House Prices: The overvalued prices could fuel higher inflation, which would in the longer run negate the higher house prices as the rise in overall prices in the economy discounts the bloated house prices. This may be unlikely in the United States, because liberal regulation remains in so much of the nation, including some of the fastest growing markets. However, inflation may well be the easiest way out for economies that have nearly lost the housing affordability battle, such as Australia and New Zealand (where smart growth is called “urban consolidation”). They do not have the outlet of affordable markets that allow US households to find reasonable prices outside of smart growth areas. In Australia and New Zealand, political pressure could build on central banks to allow higher inflation both to minimize foreclosures on households overburdened by high debt, principally in excessively large mortgages. (Already, major political parties in Australia are treating central bank interest rate decisions as a political matter.)

    (3) The Bubble Bursts: The current housing market seizure in over-regulated markets could turn into a “bust” as the already weakening demand could be converted into a massive decline in demand, precipitating huge losses in the overvalued markets.

A correction could occur by other means as well and the future is always impossible to foresee. However, the overvalued prices in over-regulated markets are not likely to be sustainable. The price of smart growth and excessive regulation is already being paid by some households. The next question is the extent of damage that the increasingly expensive mortgages created by smart growth will inflict upon regional economies, if not the national economy.

US Existing House Sales: 2005-2006.