Category Archives: Media

Lars and John talk bonding TOLLS

The Insanity of bonding future TOLL revenues gets more exposure

Radio host Lars Larson read my column in Clark County Today (here) and invited me on his show to talk about the craziness of the legislature bonding future TOLL revenues.

We chatted for just over 12 minutes. Click HERE and take a listen!

The entire May 14th radio show is below.

John Carlson and John Ley talk TOLLS and bonding

John Carlson talks TOLLS in Seattle

In his Monday morning show, in the 8 – 9 a.m. hour, KVI’s John Carlson discusses the outrageous decision by the democrat led state legislature to BOND (borrow) up to $1.5 billion and pay it back from future TOLL revenues.

He first interviewed Mariya Frost from the Washington Policy Center. Their conversation begins at 3:47 into the show, as John tees up the issue. Their great conversation goes through 11:06.

He later took my call, which begins at 15:40 and goes thru 17:54.

You can listen by clicking here.

Washington Legislature moves transportation toward a costly future

Seattle Times editorial board laments Legislature’s 2019 bonding of TOLLS

They also mention the resurrection of the CRC — “reviving a project scuttled in 2013 by resistance to linking the bridge to the Portland light-rail system.” They fail to mention that both Gov. Inslee and Gov. Brown (OR) are demanding light rail on the replacement bridge.

May 9, 2019

The nearly $10 billion transportation budget the Legislature approved by sweeping margins in April was labeled “bare-bones” by both parties’ Senate transportation leaders. However, taken with other transportation legislation now awaiting Gov. Jay Inslee’s signature, it sets in motion several transformative changes, including a worrisome financing plan, for how Washingtonians get around. For good and ill, the consequences will reverberate well into the future.

The spending measure, a slight increase over recent biennial transportation budgets, draws on fee increases but did not require adding to the gas tax. It includes a significant step toward the long-needed replacement of the Interstate 5 bridge over the Columbia River, reviving a project scuttled in 2013 by resistance to linking the bridge to the Portland light-rail system.

Leaders in Washington and Oregon should move ahead with getting a new bridge in place, which will inevitably require years of planning and negotiation. The budget bill’s appropriations for a management office to revive the Columbia River bridge project and preliminary design work signal lawmakers are again taking seriously the need to fix this regional choke point.

Closer to home, the Legislature wisely addressed Eastside commuters’ daily I-405 logjam through a widening project but used a problematic mechanism to cover the cost. That the project is paid for in part by extending tolled sections of the road may have been inevitable.

In a departure from past practice, the financing plan to accelerate this construction and the Puget Sound Gateway between the Port of Tacoma and highways in King and Pierce counties will involve selling up to $1.5 billion in bonds on the tolling. This maneuver will encumber the state.

To bond out a public project is roughly similar to obtaining a mortgage, in that you obtain up-front money in exchange for making interest-augmented payments for years. Bipartisan backers of bonding the I-405 tolls say that the interest costs will be amply offset by economic benefits on two levels: opening the roads’ capacities for commercial use sooner, and avoiding the inflation-boosted cost of doing the work years down the road.

These may indeed carry some benefit, but bonding against toll revenue is a policy choice fraught with peril, and a bad habit for government to take up. It creates a justification to maximize toll revenues in perpetuity, which has been correctly labeled as a policy conflict for a Department of Transportation charged with cutting gridlock. It also increases the state’s debt-service obligations, which inhibits future construction capacity.

With leaders already working to build momentum to pass Washington’s next sweeping transportation package of new projects in a coming legislative session, sustainable financial planning has become an emergent and growing concern.

The Insanity of Bonding TOLLS

The outrageous cost of bonding TOLL revenue

In the 2019 democrat controlled legislature, HB 2132 and SB 5825 were passed. The legislation will allow the state to “bond” and borrow up to $1.5 Billion in future TOLL revenue from Wall Street banks. Voting in favor of this legislation locally, were Senator Annette Cleveland and Representatives Sharon Wylie and Monica Stonier, all representing the 49th Legislative District.

The alleged purpose was to accelerate the construction of three “much needed” transportation projects in the Puget Sound area.  Senate Bill 5825 primarily authorizes the expansion of tolling on I-405 and SR 167. It was the need for “immediate gratification” driving the legislature’s decision to live on the taxpayers credit card and allow bonding of future toll revenues.

Current TOLLING revenues will not cover a $1.5 Billion debt. Picking the pockets of vehicle drivers will have to TRIPLE current TOLL revenues to cover borrowing $1.5 Billion from Wall Street.

The Tacoma News Tribune reported it this way. (Click here for the complete column by Sen. Phil Fortunato).

“WSDOT is heading down this path and there is no turning back. The Senate approved the enabling legislation, Senate Bill 5825, by just one vote.

Under this plan, only about half of your toll (tax) dollars will be available to fund the promised projects once you deduct the 30 percent for collection and 12 to 16 percent financing costs of the bonding. That is not the most responsible use of your tax dollars.

Also, once tolls are bonded, there’s no incentive to reduce congestion – because that could reduce the revenue stream and affect the bond payoff.”

There are a host of reasons to be concerned, and Senator Fortunato nails it.

The Washington Policy Center also highlighted the issue (here), saying bonding would insure “gridlock and debt for decades”.

“The House bill would take the tolls that drivers pay and use them to borrow more money and send our state further into debt. Specifically, the bill would let WSDOT officials issue a whopping $1.5 billion in bonds backed primarily by the toll revenue drivers would be forced to pay on I-405 and SR 167.”

Currently, Washington DOT tolls I-405 on the east side of Seattle, on the northern half of I-405 from Bellevue north to Lynnwood, as well as parts of SR 167. The legislature hopes to expand TOLLING to the rest of I-405 by 2025 and more of SR 167 in 2026.  See graphic below.

The 43% “Cost of Collection”

The Washington State Tolling Division in its 2018 Annual Report indicated that I-405 TOLLING took in $27.8 million last year. Of those gross “revenues”, they spent $11.9 million in tolling facility and operations maintenance costs, leaving a “net” of $15.9 million to buy new traffic lanes and fund other transportation improvements. The important thing to realize is that 43% of driver’s TOLLING dollars go towards the “cost of collection” & maintaining the tolling facilities. What a huge waste of your money!

(Graphic courtesy of WSDOT Tolling Division Annual Report).

The Washington State Transportation Commission answered a public records request in early 2018. They indicated that 35% of I-405 TOLL revenues were going to the “cost of collection” of tolling facilities and the private firms that install and operate them on behalf of WSDOT. That 35% number mirrors the 3-year record of I-405 TOLL revenue being $75 million, and $25 million going to the cost of operating the tolling facilities, as reported by the WSDOT Tolling Division.

SR-167 improvements were added to the SB 5825 bonding measure. In 2018, WSDOT took in $3.4 million in SR-167 TOLL revenue (click here). Expenses were $1.5 million, for a 44% cost of collection on SR 167.

Borrowing $1,500,000,000 vs collecting $25 million per year

With “income” of TOLL dollars taken from the pockets and budgets of thousands of Puget Sound drivers providing $25 to $30 million a year in funds, how long will it take to raise $1.5 Billion? Because the legislature voted to EXPAND the miles of freeway that can be tolled, toll dollars will increase by some unknown amount. Here are some numbers indicating that it will take a significant increase in annual tolling dollars (higher rates and more cars paying) plus a very long time, to collect the $1.5 Billion the legislature is allowing WSDOT to borrow on behalf of taxpayers.

It will take 30 years to collect $1.5 Billion in gross TOLL revenue IF tolling revenues DOUBLE to $50 million per year. It will take 20 years to collect $1.5 Billion in gross TOLL revenue IF tolling revenues TRIPLE to $75 million per year.

What about INTEREST on the $1.5 B debt?

We all understand that buying a $30,000 car on credit means the total cost of the car will be more than $30,000.  A 5 year loan at 5% means the owner will pay $33,968 for the car. Similarly, someone borrowing $300,000 to buy a home will pay $515,609 over 30 years with a 4% mortgage.

What will be the cost of borrowing $1.5 Billion?

The legislatures “choice” to live on the citizens credit card means the new roads and lanes built, the new bridges built or repaired, will cost a great deal more. How much? It will require a two step analysis.

We know it will take at least 30 years to raise $1.5 Billion IF annual tolling revenues DOUBLE to $50 million per year, or at least 20 years IF annual tolling revenues TRIPLE to $75 million per year.

Buying $1.5 Billion transportation projects on the taxpayer’s credit card means “if” the state has to pay 4% interest, it will require $85.9 million PER YEAR to pay off the loan. Furthermore, the total cost of the transportation projects WSDOT “buys” will rise by over $1 billion in interest to $2.57 Billion.

As demonstrated earlier, TOLLING revenues would have to rise by roughly TRIPLE current amounts to generate the $86 million a year required to pay the loan.

The TOLLING nightmare as a source of funding

Tolling as a source of taxpayer “revenue” has a huge cost to collect that revenue. As shown, WSDOT loses 43% of TOLLING dollars collected on I-405, as the “cost of collection”. Therefore the “net” to pay off loans is only 57% of TOLLS collected.

One would expect politicians and bureaucrats to argue collection costs will go down, due to “economies of scale” when they expand the miles of roads being TOLLED. Here are the final TOLLING dollars that need to be collected from taxpayers to pay back the $1.5 Billion in borrowed funds, with both a 43% “cost” of collection, and a 35% “cost of collection”.

Because of the huge inefficiency in the TOLLING “cost of collection”, the $1.5 Billion in borrowing results in those transportation projects costing $4.5 Billion over a 30 year period. That is “if” TOLLS collected more than TRIPLE so annual revenues go to $86 million per year, assuming the “cost of collection” remain 43% with a 4% interest rate.

IF those costs of collection drop to 35%, then the total cost of those transportation projects rises to $3.96 Billion over 30 years, assuming the TOLL revenues more than TRIPLE.

With current I-405 TOLL revenues and SR-167 revenues totaling just over $30 million a year, that would limit borrowing to around $500 million, much less than the authorized $1.5 Billion.

Bottom line to this discussion, is the legislation authorizes the bonding of TOLL dollars of $1.5 Billion. That means whatever WSDOT “buys” with the borrowed money, taxpayers will be paying between $4 Billion and $4.5 Billion.

By comparison, our traditional means of funding transportation improvements is via the gas tax. The cost of collection is just under 1%. Under a “pay as you go” scenario, using gas tax dollars would mean drivers would pay only about $1.52 Billion.

Doesn’t it make sense to pay a 1% “cost of collection” rather than a 43% “cost of collection? Doesn’t it make sense to pay $1.52 Billion for these transportation projects rather than $4.5 Billion?

Why would anybody borrow money when your revenue source has a 43% percent “cost of collection”? No private business would ever make such a choice. Certainly no private citizen would do this with their own money. Only government bureaucrats and politicians would make this deal, knowing it’s “other people’s money”.

Senator Fortunato mentioned one more cost I have NOT included in this analysis. He indicates there is a “12-16% cost to borrow the money”. When you go to Wall Street to issue the $1.5 Billion in bonds, you have to pay Wall Street roughly 10% “up front” to handle and sell the bonds. I have asked the State Treasurers office for information on this and await a response. But at 10%, this Wall Street “up front fee” would reduce the “net” on $1.5 Billion in bonds by $150 million. At 16% the cost would be $240 million. That’s $150 – $240 million LESS in transportation projects WSDOT could buy with your money.

As Senator Fortunato said: “there’s no incentive to reduce congestion – because that could reduce the revenue stream and affect the bond payoff.” Isn’t reducing congestion what transportation spending is supposed to be all about?

The legislature should have said NO to bonding TOLL revenues.

We need to find a way to reverse this horrible decision to live on the taxpayer’s credit card.

Letters: Rose Quarter ‘fix’ won’t improve safety

Spending half a billion dollars doesn’t fix the problem

Safety is supposedly the overwhelming first priority of transportation officials

The Portland Tribune printed my letter here.

Thursday, April 04, 2019

Safety is supposedly the overwhelming first priority of transportation officials and politicians. We’re discussing the most unsafe site to drive in Oregon. The 2-mile, two-lane section of Interstate 5 at the Rose Quarter has three times the accident rate of the Terwilliger Curves.

ODOT says it’s also the region’s No. 1 bottleneck.

Yet half the transportation money proposed for the I-5 Rose Quarter project has absolutely nothing to do with improving safety. It has nothing to do with adding new through lanes to reduce traffic congestion; nothing to do with adding shoulders for safety.

After spending a half-billion taxpayer transportation dollars, the Rose Quarter will still have the highest accident rate in Oregon. That’s an outrage.

Let’s do some math. Rose Quarter accidents are 300 percent of the Terwilliger Curves. ODOT “experts” hope the improvements will provide a 30 percent to 50 percent reduction in crashes.

Even if they achieve the 50 percent reduction, the Rose Quarter will still have 150 percent of the crashes and accidents of the Terwilliger Curves.

Why spend scarce taxpayer dollars if you’re not going to fix the safety problem? Clearly, safety isn’t ODOT’s top priority here.

Dan Saltzman bragged about this project being “community redevelopment.” It’s creating real estate by building two concrete lids over I-5. The lids and a bike-pedestrian bridge will consume half the money.

Out of the 10 items listed on ODOT’s website describing the Rose Quarter project, only three relate to improvements on I-5 for traffic and vehicle safety. That demonstrates this is not about improving traffic safety and reducing vehicle congestion. It makes Saltzman’s point — it’s “community redevelopment.”

Transportation dollars are supposed to be “protected,” not for community redevelopment. Taxpayers should demand a more appropriate fix. It’s a safety issue.

ODOT also reports this is the No. 1 bottleneck in Oregon. Why aren’t new through lanes being added to Interstate 5?

While the auxiliary lane extensions will reduce accidents and slightly improve traffic speeds, it won’t be as effective as adding new through lanes to I-5. ODOT reports: “the auxiliary lanes will not provide long-term capacity relief to congestion problems.”

Furthermore, ODOT says: “In the NB direction, between the Marquam Bridge and the Interstate Bridge, there are four recurring bottlenecks … from 6:30 a.m. to 7:30 p.m.” Will any of those four northbound bottlenecks be eliminated after spending a half-billion dollars?

In the southbound direction, ODOT reports: “the most significant recurring bottleneck is at the Rose Quarter (Broadway) with congestion extending back to Rosa Parks Way.” There are nine hours of congestion, which poses significant problems for freight.

Question: After spending $500 million on the proposed improvements, will the Rose Quarter section of I-5 no longer be the “No. 1 bottleneck in Oregon”? Unless the answer is “yes,” this project is a huge waste of taxpayer transportation dollars.

Stop this wasteful spending of scarce transportation dollars until a proper expansion of through lanes on I-5 at the Rose Quarter can be agreed upon and the safety problems truly fixed.

John Ley

Camas, Washington

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REFERENCES

The 2012 City of Portland report shows the I-5 Rose Quarter has the highest accident rate in Oregon.

HALF the $450 million (now $500 million) allocated for the Rose Quarter will pay for “community redevelopment” according to Dan Salzman. It will create real estate by building two concrete lids over I-5, and spending $30-$50 million on a bike/pedestrian only bridge. Here’s the graphic from ODOT. The two “lids” and the bike/pedestrian only bridge are in yellow.

The congestion at the Rose Quarter and bottlenecks in the region.