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CATS’ Fuzzy Math Distorts Reality

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Wasting money is currently a government function. That, of course, is an opinion. There are too many who, being on the receiving end of the wasteful spending, do not consider it waste at all. They like getting money for nothing.

For generations now, the list of recipients has grown each year until we are at a tipping point where those who receive are able to out-vote those who give. Why else do you think the Obama administration is giving away $100 million here and $200 million there, except to buy the votes he needs to return to the White House? But his is not the only government entity that spends on its supporters through the funnel of wasteful and unneeded projects.

Mr. Jay Privette, by his own signature “An Advocate for South Mecklenburg Alliance of Responsible Taxpayers (SMART),” recently distributed an email about the Charlotte Area Transit System’s proposed North Corridor Rail Line, which included a report by Mr. Randall O’Toole of the Cato Institute concerning the same.

What an interesting read. For those curious about how government wastes money – excuse me – converts money to the pockets of special interests or, more exactly, practices Crony Capitalism, it would be difficult to find a more descriptive report.

Mr. O’Toole reveals that for the vaunted Lynx Blue Line, CATS reports one set of ridership numbers to the Federal Transit Authority (FTA), which gives away federal funds (borrowed of course), and another set of ridership figures  to the local media and supporters:

Public and FTA reports of bus ridership are nearly identical, but the Lynx ridership reports greatly differ … CATS publicly reported annual Lynx ridership numbers that were about 42 to 48 percent higher than it reported to the FTA in fiscal years 2009 and 2010 (CATS’ fiscal year ends on June 30).

The existence of two sets of books on Lynx ridership puts CATS in a difficult position. If the FTA numbers are correct, then CATS must explain why it has been deceiving the public with higher ridership claims. If the public numbers are correct, then CATS must explain why average fares are so low—as if a million-and-a-half riders per year are getting free rides.

Using either public or FTA numbers, Lynx ridership pales in comparison to ridership on other light-rail lines. According to CATS’ latest numbers, average weekday ridership on the 9.5-mile Lynx line averaged 14,800 in calendar year 2011, while FTA’s F.Y. 2010 average was less than 11,000. By comparison, 2010 average weekday ridership on the 7.4-mile Houston light-rail line is 35,000, while weekday ridership on Buffalo’s 6.2-mile line—which even most rail advocates admit was a failure—was 21,500. Most other light-rail systems are significantly longer than Charlotte’s, but even using CATS’ public numbers, Charlotte’s line carries less than 1,600 weekday riders per route mile, compared with a national average of 2,000 for true light-rail lines (again, excluding streetcars).

Interesting and enlightening information, to be sure, as is Mr. O’Toole’s analysis of Tax Increment Financing (TIF) that was used for the Blue Line and its quasi-cousin being pushed to sell the north corridor Red Line.

A short history is in order. In 2004, the voters of North Carolina approved what was referred to as Amendment One – authority for the state to use TIF, a method of Crony Capitalism that previously was illegal in North Carolina. According to the Cato Report, Charlotte claims $2 billion in growth along the South Line which, of course, Charlotte’s Crony Capitalists attribute to the investment of the line. Most likely, less than $250 million of that may actually be claimed because the growth would have occurred somewhere in Charlotte anyway. Additionally, hidden in that $2 billion is a $50,000,000 so-called synthetic TIF deal.

The report also states that “urban rail transit investments rarely ‘create’ new growth…..(it) redistribute(s) growth that would have taken place without the investment.” So the claims of growth for these type projects, always a large part of the selling point, are false. In the vernacular, they are lies.

But it is this “growth” that is the rationalization for such deals. TIF is a Crony Capitalist scheme where instead of the government taking the taxes produced by new development to help pay for the government services required by the new development, the businesses that develop in the correct areas get to keep a large portion of their property taxes to help pay for their buildings in that area.

What a deal. So the taxpayers who are already there, or businesses that don’t build in the prescribed area, have to pay their taxes in full to the government. And adding insult to injury, the final result is that their burden will increase because those who do pay taxes will shoulder the costs of services the government will still have to provide for the chosen developers.

The fallacy of increased benefits for those participating in the Red Line’s proposed Special Assessment Districts is also laid bare in the Cato report:

Unlike TIF, no one claims that funds collected through special assessment districts (SADs) are “free” money or are otherwise not a tax. But they do attempt to suggest that SAD charges are a voluntary fee paid by businesses that enjoy the benefits of proximity to the rail line. The rail line will lead to “increased business through a greater number of customers” for businesses along the route, says the Red Line Task Force. This should make those businesses willing to pay “an added tax that is self-imposed by the relevant property owners,” says the draft business plan (emphasis in original).

In fact, the planned commuter train will have a nearly inconsequential effect on businesses in the special assessment districts, mainly because ridership will be so low. Nearly all travelers will ride round trip, so the projected 4,200 trips per weekday the first year, rising to 5,600 trips in 2025, really represents just 2,100 to 2,800 people. Given the planned ten suburban stations, each station will have an average of just 210 to 280 people getting on the train in the morning and returning in the afternoon. Many of those people will be too eager to catch the train in the morning or get home from work in the evening to bother to shop, so few will add much to local businesses. Those businesses will hardly be eager to pay an additional 0.75 percent of the total value of their property in annual taxes because of a handful of new customers.

In any case, like TIF money, retail sales and other business generated by commuter-rail patrons are a zero-sum game: without the train, they would still be living in the region, buying food and other products from a variety of retailers and using other services. Businesses that would have to pay an additional 0.75 percent of the value of their property would be at a disadvantage to other businesses, so SADs, like some TIF, may actually be a negative sum game. The cost to local communities of using a special assessment to help pay for the rail line is that it will limit their ability to increase taxes for other, more necessary programs.

Would you like to know why CATS has given up asking the Feds for Red Line funding? Because this line is not expected to even come close to meeting the Fed’s efficiency requirement. Now if the Fed’s are concerned about it being a waste of money, what good can be said for it?

In all, the Red Line is more of the same as the Blue Line, except worse. The fact that bureaucrats, elected representatives, and their cronies are still trying to make it happen should tell the taxpayers and the voters that their money is being wasted by those who don’t care about the people.

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