Transit tax going to voters in Los Angeles

1/2-cent tax for 30 more years

Matt Dietrichson, Sep 04, 12.

In hopes of funding numerous comprehensive transportation projects, Los Angeles’ leadership is asking voters to approve a lengthy tax extension this November, according to The Transport Politic:

Residents of Los Angeles may already pay more in sales taxes for the upkeep and expansion of their transportation system than people in any other county in the U.S. Referenda have been approved by voters in 1980, 1990, and 2008, each of which distributes a half-cent tax on every dollar in sales to the county’s transportation system, Metro. Of the total $1.8 billion per year in revenues,* about 40% are spent on expansions to the transit system, with the rest distributed to maintenance and operations of the county’s roads and transit systems.

This very public endorsement of the need to invest in transportation (Measure R, passed in 2008, required a 2/3-vote to be approved, pursuant to California law) has allowed for the planning of the nation’s most extensive rail and fixed-guideway bus expansion program. Earlier this year, the first segment of the Expo Line opened to Culver City; two other light rail expansions are under construction, and several other bus and rail lines are funded. Most importantly, a subway rail extension running under Wilshire Boulevard through West the Westside of L.A., to Westwood and U.C.L.A., is practically ready to begin construction.

But Mayor Antonio Villaraigosa, who has been the staunchest political advocate of improved transit in L.A., has been clear that the program is not advancing quickly enough. Because of the lack of strong federal support, the full extent of the Westside Subway will not be completed until 2036; important improvements for other parts of the county will not be done until later. That’s more than thirty more years with little significant alternative to the traffic-clogged arteries so infamous in the city. Thus the county approved, the state legislature accepted, and the governor signed late last month the bill offering to the public in the form of a referendum Measure J, which will extend the Measure R tax 30 years past its original expiration date, which was supposed to be 2039.

What is to be voted on is not a new tax. Rather, if approved on November 6, it will continue assessing the 1/2-cent sales tax between 2039 and 2069. The outcome may well determine the degree to which L.A. is able to produce a truly appealing alternative to automobile travel within a reasonable amount of time.

Why pass a tax extension now, when the revenues will not begin to be collected for another 27 years? To build more quickly.

Effectively, the mayor wants to be able to “bond against” future revenues — in other words, to take out loans from the investment market that will not be paid back until beginning in 2039, in order to pay for transportation projects now. The tax extension does not appear likely to add to the list of transit projects that will be completed — it will just allow them to be completed more quickly.

Though the measure is practically sure to win a simple majority of voters, whether it will win a two-thirds majority remains to be seen. Measure R passed with only 67.2% of the vote, just enough to succeed, and that proposal actually provided funds for new projects. This referendum, on the other hand, states that it will “accelerat[e] construction of light rail/subway/airport connections within five years not twenty,” as well as improve safety on roads and keep senior, student, and disabled fares low. Will that be enough to convince voters on this matter, especially when certain local officials make the reasonable point that the proposal would “bind our hands until 2069“?

By 2040, will the county’s citizens be content with the transit system they have constructed? If so, perhaps they will be happy to continue paying taxes. If not, will they assent to essentially continue to pay off the debt on an unwanted infrastructure for another thirty years?

The referendum would extend the tax “for another 30 years or until voters decide to end it.” What if disenchanted voters decide to cut off the tax midway through its life? The county will have to find other funds to pay back the loans that were supposed to be financed through the tax revenues (and which have the county’s credit behind them), cutting down on the county’s ability to fund other priorities or requiring a separate tax increase. These uncertainties may limit investor interest in buying the county’s revenue bonds or increase the interest the county is forced to pay to take out those loans.

Moreover, the measure does not specifically guarantee that the projects promised back in 2008 will actually be delivered. Though L.A. has moved forward on a number of its recent expansion projects relatively on time and on budget, several American cities have promised far too much. Miami’s transportation referendum, passed in 2002 and supposed to fund dozens of miles of rail expansions, has produced just 2.4 miles, a major embarrassment and an affront to the voters’ original intent. The referenda results will say a lot about the public perception of Metro’s ability to produce what it has promised.

In other words, it is hardly obvious that a large majority of L.A. voters will agree to Measure J’s passage. Significant public information campaigns will be required if it is to be approved.

Yet the truth is that if L.A. wants an expanded transportation network now, rather than 30 years in the future, it has few options. It can adopt this approach, which has several demerits, as shown above. It could increase its taxes once again, but the sales tax burden is already quite high. Or it could rely on low-interest federal loans to advance projects more quickly. The latter was the solution Mayor Villaraigosa initially proposed in 2010 as “30/10″ — 30 years of projects in 10 years. His proposal, which he renamed “America Fast Forward,” was politically popular enough to make it in a certain form (through an expansion of TIFIA to $1 billion) into the federal transportation bill earlier this summer, but that aid will not be adequate to fund all the projects L.A. wants — even if the U.S. DOT prioritizes the county over the rest of the country.

L.A.’s voters, then, have a choice: Take a risk by assuming that people of the future will want the investments being made today and therefore be happy to pay for them, or slow down the rate of transit expansion tremendously.