I spend a lot of time thinking about infrastructure spending. Whether it’s local projects in Gig Harbor or at one of the regional councils I sit on, there are constant reminders that we just don’t build enough in this country.
As Congressman-elect Kilmer often points out, we’re a community that has had growth literally brought to a halt by sewer and water moratoriums. Failing to have adequate infrastructure has had clear economic development consequences.
Unfortunately, federal spending on infrastructure is barely half what it was in the 50′s and 60′s. State governments have tried to pick up the slack, but it’s not nearly enough. The Ryan Budget, which passed in the House, would have slashed infrastructure investment even further.
Under Ryan’s plan, for instance, spending on transportation would be 26.1 percent lower in 2014 than it is today. If that size cut was applied to, say, air-traffic control programs, Kendall noted, “there would be 3,092 more flight cancellations and 68,683 delays annually. At the U.S. average of 49 passengers per flight, that’s enough to strand 151,503 more people at the gate and make 3,365,685 more people late every year.”
That said, we don’t just have an appropriation problem. We have a cost problem. By virtually every metric, the US gets much less for its infrastructure dollar than our competitors. The normal temptation would be to blame unions or environmentalists, but those groups are far stronger overseas where the cost to build a mile of rail can be a fifth what it is here.
It seems, ironically, that the drive to save money by privatizing core government functions is at the center of the issue. Stephen Smith at Bloomberg explains.
A huge part of the problem is that agencies can’t keep their private contractors in check. Starved of funds and expertise for in-house planning, officials contract out the project management and early design concepts to private companies that have little incentive to keep costs down and quality up. And even when they know better, agencies are often forced by legislation, courts and politicians to make decisions that they know aren’t in the public interest.
Comparing American transit-construction practices with those abroad yields a number of lessons. Spain has the most dynamic tunneling industry in the world and the lowest costs. In 2003, Metro de Madrid Chief Executive Officer Manuel Melis Maynar wrote a list describing the practices he used to design the system’s latest expansion. The don’t-do list, unfortunately, reads like a winning U.S. transit-construction bingo card.
Costs of materials and labor rise or fall with the rest of the economy, but I’ve noticed over the last 15 years that it’s the degree of involvement by in-house engineers that predicts whether a project will be on time and within budget. The ones that get out of control tend to be projects where we lack the man-hours or expertise to properly manage the project.
Just recently we had a fairly complicated road project in Gig Harbor that came in five months ahead of schedule and as a result, it’ll also be well under budget. I don’t know that consultants purposefully drag out projects or add unnecessary costs, but they do have some rather perverse incentives to do just that and there’s not much state or local governments can do to stop it.
I think there’s an additional layer to the problem in employee retention. While some reports have shown the private sector lagging behind public sector salaries, it’s quite obvious the opposite is true for engineers. The best and brightest are lured from cities and states to work for consultancies that charge many times more for their services.
So it seems a possible solution would be to make sure state and local governments have the appropriate resources to hire and retain quality engineers to do as much of the design and project management as possible. For more complicated projects, rather than forcing local governments to rely on private consultants, hire them at the state or regional level, keep them beholden to the public, and lend them out to the smaller jurisdictions.
The question is, how do we convince taxpayers to spend a little more on annual operating costs to save a lot more on distant, intermittent costs?
Sources of Pierce Transit operating revenues and declining sales tax.
While it came incredibly close, Pierce Transit’s Proposition 1 has failed. That’s despite being one of the most important and best run campaign I’ve been a part of. Hats off to all the hard working people that volunteered their time and money, and thanks to everyone who voted in favor.
I understand the reluctance a lot of people had. Sales tax in Washington is already extremely high. Our tax structure is crazy and unfair. This would have made it more unfair. Without some fundamental restructuring it’s hard to ask voters to add another layer to that mess. Hopefully the opposition that says it supports transit will go to Olympia with us to make the case for a more sensible solution this session. However, the chances that we’ll seek voter approval for a new tax are extremely low. I can’t imagine I’d vote “yes” to put it back on the ballot.
As a result, it’s time to make the cuts. On Monday the Executive/Finance committee reviewed a preliminary budget proposal for 2013. It will initially look a bit strange since it’s so similar to the 2012 amended budget. Think of it as a sort of placeholder year while we go through the lengthy service cuts process. As has been the practice the last couple years, expect amendments as the board’s direction becomes clear.
In December, the board will have a longer workstudy session to give some direction on our priorities. At the core of this debate is an eternal struggle for transit. Do we distribute service around the system equitably, or do we concentrate it on efficiency. Although almost everyone would naturally say they want government to be as efficient as possible, this means reducing service to more expensive outlying areas and increasing it in the more urban areas.
Obviously being from Gig Harbor, I’d like as much service as possible for our city. But the outlying areas are the most logical places for cuts since overcrowding is already a problem in the urban core. Our ridership’s destination is also most likely to be located in that area thanks to the concentration of schools, hospitals, social services, and jobs.
What would the cuts look like? The most likely scenario is that service will be cut on weekends and after 7pm on weekdays. Some areas may see their midday service cut. In most areas the frequency of the schedule will be reduced meaning that a route that has a bus come every half an hour, would now see it every hour.
If you’re a retailer, or a restaurant owner, you should now be panicking. Many of your workers no longer have reliable transportation.
Yes, we could make some changes here or there to that schedule, but it means cuts elsewhere. Add weekend service and we have to cut weekday service. If the buses run longer throughout the day, they’ll have to be less frequent.
Some of you are thinking that we could cut pay or get more efficient. It’s possible and I would certainly welcome those sorts of ideas. One thing I brought up was the prospect of hiring a consultant to conduct a performance audit of Pierce Transit and see where we could make changes in the way we do business. While peer reviews through the American Public Transportation Association (APTA) are relatively inexpensive, the cost to bring in private auditors took my breath away — that would cost around $400,000. The other problem is that transit is heavily regulated. A lot of the “inefficiencies” people think of are actually the result of some state or federal rule that we can’t shrug off.
On the subject of salaries/benefits, certainly as we proceed with layoffs the unions could respond with concessions. The problem is that they would have to be quite large to make up the sort of deficits we face. We cannot, however, unilaterally reopen contracts and make cuts. It’s not allowed by labor law nor would that sort of thing get past an arbitrator if we’d proposed it in the last contract.
After a few months of board and staff work, as well as a public process getting imput from the public, we anticipate 2013 budget revisions to take place in April. That won’t mean the service reductions are quite ready to implement. The federal government recently passed some rule changes to Title VI of the Civil Rights Act which means additional oversight for service cuts. It’s intended to prevent a disproportionate burden of cuts from falling on minority communities. Obviously that’s not our intent, but does add an additional level of oversight which will take some time.
The new service schedule should finally be implemented sometime in early 2014. As always, please feel free to ask questions or make suggestions below or to me directly by email or phone.
The President and Mitt Romney are busy making their “closing arguments” to voters. While I doubt there are many who will actually bother to cast a ballot that remain undecided, I thought I’d make my own closing argument for the President — with one graph.
A couple notes to make this clearer. The blue line represents private sector job growth, the red and green lines represent job growth in state and local governments respectively. All are indexed to 100 for an apples to apples comparison. They start, however, slightly off of 100 because each started midway through January so those changes are already reflected. The shaded area represents the duration of the recessions each President inherited.
The idea for the chart is stolen from @TBDInvictus, I’ve simple made a couple adjustments to make it easier to read and added the latest data.
You might be wondering why I left out the federal government. Growth in federal employees for both administrations was negligible except for the temporary hiring of of census employees in 2010 which greatly distorts the true picture of what’s going on in the job market. You can see what I mean here.
The purpose of the chart is to illustrate that at the same point in their terms, President Obama has net positive private sector job growth and negative public sector job growth while the inverse was true for President Bush. Cuts to state and local government have been a significant impediment to our recovery.
Without this public sector drag on our recovery, the economy would be doing much better. How do we know this? By looking at our response to past recessions. Even though this recession was deeper and longer than any since the Great Depression, rather than following long established precedent of blunting it’s impact with government stimulus, we engaged in a back door austerity program . While the private sector hunkered down to shed its debt gathered during the bubble, we increased the hole in demand with cuts to government.
If you pay much attention to politics, you know that the truth is often a casualty of campaigns. But until Proposition 1, I’d never been personally subject to this sort of dishonesty. I may have disagreed with opponents in City Council races in the past, but they are all good and honorable people who just wanted to serve.
Last week I posted a Prop 1 Q&A dealing with a number of half-truths and distortions spread by the “no” campaign. I touched on the issue of the boundary reduction in that post, but this deception deserves more detail. The block-quoted material in this post is from their Facebook page.
The author of this letter to the editor is Right On! Pierce Transit gerrymandered the transit district, cutting voters out of the process and rigging the system! None of the 106 precincts that were cut voted in favor of Prop 1 in the February 2011 attempt to raise the sales tax.
Here’s the reality. Pierce Transit had no say in the matter. The Public Transportation Improvement Conference (PTIC) was called by the Pierce Transit board but done on behalf of jurisdictions who were requesting to be removed from the taxing district. In fact, even after a preliminary boundary was drawn up mirroring the areas still being served, Sumner and Dupont decided they wanted out as well. It was not questioned as it was their right. Before the new boundary could become final each jurisdiction was given time to object to the new map.
Pierce Transit’s only role in the process was to pay for it and supply the facilities.
Voters demanded more responsibility and in return were cut out of the process so transit officials could rig the system to push their regressive agenda against the will of the voters. It’s a slap in the face to the democratic process.
Spanaway did NOT choose to be cut out of the district despite what the regressive tax campaign has to say about it. Pierce Transit is responsible for cutting those voters out of the process the same way they cut out voters in Gig Harbor, South Hill and Graham.
Actually they did choose to be cut out of the district, or at least their representatives on the County Council did.
It’s time for Pierce Transit to take responsibility for its actions.The district was drawn for this election, nothing else. When you look at the map it is very clear that PT worked hard to cut voters out of the district while leaving in their shopping centers so they would still have to pay the tax even though they can’t vote on it since their homes aren’t in the district.
Not true. In fact entire cities were removed. I’m actually sad that we won’t get the chance to restore service to Sumner, and Dupont was a natural location for future connections with Intercity Transit (Thurston County). What is true is that the more rural areas were drawn out. That’s because they were no longer getting any service after the last round of cuts.
What happened in Gig harbor was a travesty of democracy. Pierce Transit’s footprint remains almost exactly the same as before, yet they cut most of the voters out leaving in only the HWY 16 corridor, where the businesses are. Businesses can’t vote, so citizens are essentially left with taxation without representation.
Now we’re getting into my neck of the woods so I take this personally. Again, the City of Gig Harbor wanted to stay in Pierce Transit. I was sent by our Council as our representative to make sure that was the case. Each jurisdiction had final say in whether they were in or out including Pierce County which clearly wanted the unincorporated areas out. If they have a problem with that, the “no” campaign should blame their own supporters on the County Council like Roger Bush, Dan Roach, and Dick Muri.
If Proposition 1 passes, everyone in Gig Harbor will have to pay the tax because the shopping centers are all within the district. They did the same thing at the end of meridian cutting out voters in South Hill, Spanaway and Graham.
It’s also true that people coming into Gig Harbor will pay their local sales tax to the City, rather than to Pierce County. That’s how sales tax works. On this side of the bridge, we’re not a part of Sound Transit but we have to pay for it when we shop in Tacoma, UP, Puyallup, etc. Pierce Transit didn’t pick the tax structure. This is what’s allowed under state law.
The Public Transportation Improvement Conference (PTIC) responsible for re-drawing the district was made up of 20 members, half (5) of the Pierce Transit Commissioners were on the conference, it was chaired by a Pierce Transit Commissioner and the Conference assistant was the campaign chairman from the “Save our Buses” campaign which sought to get Prop 1 passed last year in February. Hardly an independent conference!
I did chair the PTIC so kudos on getting at least that right. I was not, however, a Pierce Transit board member. In fact it was that process that got me interested in helping Pierce Transit. Glenn Hull of Fife was also on the PTIC but not a PT board member until afterward. It’s true that Pierce County Councilmember Rick Talbert was on both the PTIC and the Pierce Transit board, as was Tacoma Councilmember Jake Fey. Mayor Neil Johnson of Bonney Lake WAS on the board at the time, but he also opposed the previous ballot measure, campaigned against it, and asked that Bonney Lake be removed from the taxing district. After his wish was granted, I replaced him as a representative of small cities.
Maybe the “no” campaign should be blaming this “travesty of democracy” on their own supporters.
This is part III of a multi-post series addressing the taxation puzzle in Washington cities. Part I and II can be found here & here.
On Thursday we had the first of the Association of Washington Cities’ (AWC) Municipal Finance Ad Hoc committee meetings. The committee is made up of five electeds, including myself, and a dozen city staff. The initial meeting was designed to lay the groundwork, much of which I covered in the previous posts, so I’ll stick mostly to what was new information for me. As a result, this post will be heavy on charts from the presentations.
First off is top line revenue for all cities combined. The top is all funds, the second excludes utilities and other restricted funds. The bump in late 2009/2010 is due to the federal stimulus program (ARRA) and subsequent recovery which then reverted into a slump.
Total revenue for Washington state cities. Figure’s in billions.
Keep in mind most of those funds are not actually taxes, at least not directly. Quite a bit of a typical city’s budget comes from fees, grants, state revenue sharing, etc.
Total city revenue breakdown by type.
This is what the breakdown of tax revenue looks like. Keep in mind, this is an average from every city across the entire state. There is wide disparity between tax models for different kinds of cities. For example, Gig Harbor’s budget is dominated by sales tax — about 60% of general fund revenue — while it’s less than a 1/3 of total tax revenue for the average city.
Tax revenue by type
Want to see a total mess? Take a look at all the different ways property tax is distributed and limited. This graphic uses King County as an example.
The next chart looks at total tax collections for all cities over the last decade. As you can see, property tax chugged along fairly predictably rising at a slightly lower rate after imposition of the 1% cap first passed by Tim Eyman’s I-747 and subsequently by the Legislature. Sales tax, on the other hand, has taken a fairly dramatic hit failing to keep pace with normal inflation & population growth, and then dropping with the recession. It has yet to recover and under current rules, probably never will.
Tax revenue by type
Unfortunately we can’t look to the state for help because it’s in even worse shape. The next chart shows collection of Revenue Act funds… basically these are the taxes paid to the State of Washington rather than local government. It’s also why you shouldn’t listen to anyone who says the state doesn’t have a revenue problem. Notice the dramatic departure from the trend line during the recession (shaded area) and that it hasn’t come close to returning to its previous trajectory. The gap between those two points is the source of the state’s budget problems.
Effect of the recession on Revenue Act collections.
Isn’t this what happens in every recession? No. The 1990 recession didn’t see any reductions in revenue while 2001 saw just a quick dip before returning to historic growth rates. This recession saw a deep decline in revenue collections.
This recession’s impact to tax revenue is different.
I promise, this is the last post laying out the problems we face and the next one I’ll start suggesting some solutions. Thanks for hanging in there this long.
I’m getting a lot of questions from the public and local electeds around Pierce County about Pierce Transit’s Prop 1. Many of them inspired by the “No” campaign, but others just about the system itself. I thought it’d be best to round up the common themes as much as possible and answer them in one place. I’ll do my best to respond here as thoroughly as I can.
Question: Do Pierce Transit workers really get paid $93k?
Answer: Transit workers make a decent living but it’s not quite that good. This misconception comes from the “No” campaign’s math, an official looking chart they put Pierce Transit’s logo on, and confusion between wages & total compensation.
Using a publicly available financial document known as a Comprehensive Annual Financial Report (CAFR), they started with total compensation — which includes all salary and benefits paid by the agency — and divided it by the number of employees. Simple right?
Wrong.
There are several problems with this. All the salaries and benefits accrued to the date of an employee’s layoff still shows up in that year’s total compensation. But the CAFR only reports the number of employees at the end of the fiscal year, December 31. During 2011 Pierce Transit eliminated 194 positions. Those employees have salary, health insurance, pension, and now unemployment compensation accruing without being counted as an employee. The same is true of a number of contract employees hired by Pierce Transit. Their contract appears under total compensation but they’re not counted as an employee.
Pierce Transit stripped out all the distorting factors to arrive at a real total compensation figure:
“The calculation presented by some of the opponents of Prop 1 have been using an employee average compensation of $93,545. This is based on 2011 wages and benefits of $82,413,780 and 881 employees. This number includes the costs of contract employees (such as off-duty police officers) and the cost of laid off employees. This is not appropriate because neither of the groups are included in the year end employee count. We recalculated average 2011 compensation taking out contract wages and benefits and adding laid off employees to the employee count up from 881 to 994. These are not all the factors in play but these are the ones we can quickly account for. The adjusted average 2011 compensation is then $80,553.”
During this same period Pierce Transit was struggling with the aftermath of an explosion at its compressed natural gas facility. Unable to fuel up at their base, bus drivers had to go all the way to Federal Way before returning to run their routes. All that resulted in a large amount of overtime because it’s cheaper and easier than hiring additional workers and then laying them off. Fortunately, the insurance company will cover these kind of expenses but it will still appear to boost their income for a while.
Another problem is related to the way layoffs are implemented. According to contract with the union, layoffs are done by seniority. This means the newest employees at the bottom of the pay scale were the ones let go while the long term employees at the top remain. This will have the effect of skewing average pay and benefits upward while undergoing layoffs but not actually giving anyone a raise. In fact, even the increase in average age of employee from 50 to 55 makes health benefits much more expensive. One critical component of bringing down employment costs was renegotiating the employee health benefits. Unfortunately the agency has had a large number of serious health problems all at once that have contributed to the problem resulting in a 25% premium increase.
The issue came up at a debate on KBTC that I had with the “no” campaign manager, Nick Sherwood. It was the first time I had seen the numbers so I was a bit confused and surprised when they were introduced.
As a result, KBTC issued a statement saying they’ll adopt new procedures in the future:
As a result of this discussion on Prop 1, and it has been a robust one, Northwest Now has now implemented a policy that requires one side of an issue to share its numbers with the other if those numbers are going to be brought into the discussion. The opponents of Prop 1 have published their figures widely, and they are supported in the agency’s CAFR. But not every board member or stakeholder who might be involved in the discussion on KBTC was necessarily aware of them. Because of that, Northwest Now will take the extra step of making sure that if a disputed issue is going to be discussed, numbers to be cited in the arguments will be shared.
Question: How does employee compensation compare to other systems.
This has been asked several different ways. Some have asked to see an actual independent compensation study. We don’t have one. Since competitors are public agencies and the information publicly accessible, a survey is simply done by Pierce Transit’s lawyer of top-step operators and adjusted from there. The non-union employees don’t have one that’s up-to-date because they’ve had their compensation frozen since 2009.
This is from a survey conducted for 2011/12 for top step operators.
You’ll notice that Metro (King County) is not included in this comparison. The reason is that it’s much higher cost of living and much larger resources would distort wages upward. Even this comparable group is spread over a wide geographic region with very different labor markets. Unlike cities which have lots of nearby neighbors to compare to, this is about as good as it gets for nearby comparably sized agencies.
Question: Is it true that Pierce Transit’s revenue is basically flat and you don’t really need the money?
Answer: This one comes from another chart used by the “no” campaign. To their credit, this one is a real number but used in an entirely dishonest way.
Total income includes millions of dollars that are prohibited for use in local operations by contract or law. For example, during this same period a contract with Sound Transit to provide regional transit service doubled in value from $16 million to $30 million or from 14% of total income, to 24%. In fact, much of the increase came last year and explains the difference between the number of service cuts and layoffs. They are not, however, available for local service.
It also includes reserve transfers and sale of assets. If a business was selling off equipment, dipping into savings, and laying off employees, would you say it was in good shape?
Since sales tax is the largest unrestricted source of revenue, it’s actually the best gauge as to how a transit agency is doing financially. Here’s what it looks like.
You can clearly seem what has happened to our main funding source for local service. To make matters worse, this December Pierce Transit will stop receiving funds from the areas cut from the district. That’s an additional loss of $8 million.
Question: Will sales tax really be 10.1%?
Answer: Short answer, not unless you’re buying a car in Tacoma. Regular sales will peak in Tacoma at 9.8% and are lower elsewhere. For example, in Gig Harbor this would increase our sales tax rate from 8.5% to 8.8%. We’re not a part of Sound Transit so our sales tax is considerably less.
However, in Washington there is a special sales tax on cars of .3% so you need to add that on top of the local rate. I don’t have a table just for Pierce, but this table shows whatever everyone in the state is currently paying and you can basically add .3% to that to figure out what your local rate would be if Prop 1 passes.
The “no” campaign notes that this would give us the highest tax rates on the West Coast. That’s already true. The reason is that Oregon and California are income tax states and we aren’t.
Question: Does Pierce Transit have too many managers.
Answer: There are 866 budgeted position and 42 staff that are considered management making the ratio 1:20 or 4.8%. Since management was reduced more than employees (30% vs. 18% respectively), this ratio actually dropped some as a result of the layoffs.
I’ve been asked if there are performance audits making recommendations as to the size necessary for management. No such audit exists (I’ll have a different performance audit below). At the request of Pierce Transit, a peer review was conducted specifically for the Communications Center by the American Public Transportation Association (APTA). Their recommendations were implemented. One of them was a reduction in the number of supervisors which was implemented in the last round of layoffs.
Question: Why are the cuts so much greater than percentage drop in revenue? Why would the election result in 53% cuts in the case of failure but 23% increased service in the case of success?
Answer: I lumped these together because they’re somewhat related and they were the first questions that popped into my head when I got my first briefing from finance staff.
In response to the first, the problem is fixed costs. Just like any business, there is a non-scalable cost associated with operations. If a business starts losing money, they can cut employees and certain services, but they likely still have to pay rent, turn on the lights, have equipment, etc. At this point, there’s not much else to cut other than service.
In fact, this is the scary part about the cuts we’re looking at. You have to start wondering at that level if the cost is worth it or not.
The uneven cut/restoration is due to the upcoming $8 million sales tax reduction as a result of the reduced boundaries. No matter what, that will be missing. Since service was already cut to these areas prior to them requesting removal, there is no operational savings to go with the reduction in revenue.
Question: What will the restoration of service/cuts look like if Prop 1 passes/fails?
Provide service during morning and evening hours on weekends
Buses more often to connect to work, school, appointments and shopping
Service begins earlier in the mornings and continues later at night
More direct connections between Pierce County urban centers
Restored service to community events like the Puyallup Fair and the Fourth of July Freedom Fair
If Proposition 1 FAILS on Nov 6th:
Elimination of Saturday and Sunday service for buses and paratransit service for people with disabilities
No service on holidays
No service past 7pm
Longer wait times – buses arrive less often
No restoration of special express service to events like the Puyallup Fair and the Fourth of July Freedom Fair
Question: Did Pierce Transit gerrymander its boundaries?
Answer: An emphatic no. As some of you recall, I actually chairedthe process. I was not on the Pierce Transit board at the time. In fact Pierce Transit didn’t have any say in the process at all other than supplying resources like noticing and an attorney.
The request for withdrawal from the taxing district’s boundaries came from the cities whose service was eliminated and the process formally started by the Pierce County Council. It wasn’t exactly unexpected. I’d demand the same thing for my city were we in a similar situation. Each jurisdiction got a chance to say whether they wanted in or out. The County represented unincorporated areas.
The final boundary very much resembles what was left of the service map. If there’s a fixed route near you, you’re in the taxing district. If there isn’t, you’re not.
Some people are complaining that they’ll have to pay the tax because that’s where the shopping is. Welcome to Washington, that’s how sales tax works. The same is true for the rest of the sales tax supporting local government. Support an income tax if you want your taxes going to the place you live.
Question: Why aren’t similar transit agencies in as much financial trouble?
Answer: This one is fairly simple. Other transit agencies have already enacted the extra .3% sales tax. One of the ironies of all the accusations lobbed at Pierce Transit is that it didn’t ask for the increase until it was unavoidable while Metro (King County), Community (Snohomish), and Intercity (Thurston) — Intercity levies .8% total rather than .9% — all passed their’s years ago. In fact Metro also recently levied a special $40 license tab fee $20 license tab fee it collects from the whole county to avoid cuts to outlying areas.
There were actually two fare increases after the last proposition failed with the rates now at $2.25. You may have noticed in the chart of operating revenues above that fares are a small portion of the budget. Even a large increase in fares would have a tough time making up the gap in revenue.
The problem is that it would be an enormous burden for the typical rider who makes $20k or less a year. When comparing fare box returns across the region and nationally, you have to keep in mind that population density, development patterns, and local income all figure heavily in how much can be charged.
APTA produces a periodic survey of fares across the country and Pierce Transit is actually on the high side (see below).
Some argue that there should be no subsidy. There is no public transit without subsidy. In fact, there are no roads without subsidy. Contrary to popular belief, the gas tax and license tab fees you pay don’t come even remotely close to paying for all the roads you drive on. Local governments all use sales tax to build and maintain them.
Question: Have any performance audits been conducted?
Answer: Other than the peer review posted above, the Federal Transit Administration began conducting performance audits in 2006 every three years. This audit, from 2011, was for Pierce Transit’s procurement process. It gave Pierce Transit a clean bill of health.
This Wednesday the 17th, 6:30pm at the University of Washington Tacoma – Philip Hall, the League of Women Voters and Associated Students of UWT are sponsoring a ballot measure forum. I’ll be representing the “Pro” side for Proposition 1, the Pierce Transit sales tax.
There are some other big issues on the program like marriage equality and marijuana legalization, so it should be an interesting night and would love to see some friendly faces there, even if we disagree.
Here’s the agenda:
Ballot Issues-2012 An Interdisciplinary Arts and Sciences Community Engagement Forum October 17th, 2012 6:30-8:30pm
Moderated by Cynthia Howson PhD, UW Tacoma
Opening Remarks and Introductions
Ann Williams, League of Women Voters Board
Gabriel Bowman, ASUWT Liaison
Pierce County Charter Amendment 40- Concerns a Two-Thirds Majority for Tax Increases
Pro- Matt Hamilton
Con- Rick Talbert, Pierce County Council
Pierce County Proposition 1- Concerns a Sales Tax Increase to Support Transit
Pro- Derek Young, Gig Harbor City Council
Con- Nick Sherwood, Campaign Manager, No on Prop 1
Initiative 1185- Concerns Tax and Fee Increases by State Government
Pro- Amber Carter, Association of Washington Business
Con- To be announced
Initiative 1240-Concerns Creation of a Charter School System
Pro- to be announced
Con-Rosa Franklin, former Washington State Senator
Referendum 74- Concerns Marriage for Same Sex Couples
Pro- Ryan Mello, Tacoma City Council
Con- DiAnna Brannan
SJR 8221- Concerns Washington State’s Debt Limit
Pro- Wolf Opitz, Assistant State Treasurer
Con- to be announced
SJR8223- Concerns Investments by UW and WSU
Pro- to be announced
Con- to be announced
State Advisory Vote 1- Concerns B and O Tax Deduction for Certain Financial Institutions
A Brief Explanation- to be announced (UW-T student)
State Advisory Vote 2- Concerns Expiration of Taxes on Possession of Petroleum Products
A Brief Explanation- to be announced (UW-T student)
Sponsored by Tacoma Pierce County League of Women Voters And Associated Students of University of Washington, Tacoma
These are the instructions I received to the hall:
There is an entrance to Philip Hall at 1918 Pacific Avenue. From that entrance go up one flight of stairs to the entrance of the hall. Street parking on Pacific Avenue is free after 6pm, although there could a lot of competition for this. The main entrance is accessed by “C” Street and Dolly Roberson Lane, with a parking lot nearby.
By transit it’s just a few steps from the bus and light rail stops. Parking along Pacific usually isn’t bad, but here’s a map of UWT lots just in case.
UPDATE and apologies for the error: Thursday the 17th Friday the 19th, also at 6:30pm, this time at Peninsula High School, the Gig Harbor Chamber of Commerce is hosting a debate for our Congressional seat between Sen. Derek Kilmer (hold your applause) and Bill Driscoll. The last time we replaced this district’s Congressmember was the year I was born, so this is a pretty big deal. That’s without even going into the enormous challenges our nation faces.
Also that morning will be the regular 7:30 Chamber Public Affairs forum at Cottesmore, this week featuring Rep. Jan Angel and challenger Karen Ashabraner. If you haven’t been to one of these yet, I highly recommend it. The forums are really well done, non-partisan but certainly informative and thoughtful. The crowd that attends them is a good mix of folks and their questions reflect it. Thursday mornings tend to be tough for me as I often have meetings, but they’re well worth it if you can make it.
This morning at the Gig Harbor Chamber of Commerce’s Thursday morning Public Affairs forum, Rep. Larry Seaquist and Doug Richards had their debate. It was a great crowd and both candidates did a fairly good job giving concrete policy responses to questions. Before I move on, it’s fair to say I’m a fan of Rep. Seaquist and endorse him without hesitation, so please don’t mistake this as a non-partisan recap.
1) Education. Both candidates repeatedly stated in various ways that K12 education is their highest priority and cited the Constitution’s “paramount duty” doctrine as well as the recent McCleary decision by the Supreme Court ordering the Legislature to fully fund K-12.
However, Richards’ seems to given inherently contradictory statements on K-12 funding. On the one hand he repeats a common Olympia cliche about funding education first and then moving on to the next of the budget. That’s fine, I see prioritization not timing as the issue, but whatever gets it done is ok by me. You’d think that rhetoric, combined with criticism for K-12 cuts that have occurred under the Democrats watch, would imply he wants to increase funding education closer to what’s demanded by the McCleary decision. But that’s not the case, he also says (paraphrasing) “throwing more money at the problem won’t solve it.”
So somehow the Legislature was wrong to give this level of support, and education comes first before everything else, but he doesn’t want to give them any more. It’s a really strange thing to say and I’m not sure what to make of it other than these are just attacks and not intended to be a coherent platform.
2) Transportation. Both candidates expressed a desire to make safety improvements on Highway 302 as well as investing in Pierce County’s top economic development priority, Highway 167. Seaquist seemed to indicate a package including these projects would likely require a new nickle gas tax and possible increase in motor vehicle excise tax. This is apparently the beginnings of a package that transportation leaders in Olympia are starting to rally around.
Dough Richards
What was less clear is whether or not either candidate endorsed it specifically as a mechanism for new transportation investment. Seaquist seemed to indicate he was open to supporting it while I didn’t hear Richards indicate either way. His general opposition to newtaxes and fees would seem to get in the way, but it would be interesting to see if someone could pin down either candidate with a response. With the gas tax’s purchasing power eroding to inflation, and fuel efficient cars becoming more standard, we absolutely must have new revenue to make new transportation investments.
3) Tax reform. Someone from the audience asked a good question about tax reform in Washington. Citing studies that put Washington as one of, if not the most regressive states in the nation, he asked what the candidates would be willing to do about it.
Seaquist echoed his concern on the regressive nature of our tax system and the sheer stupidity of the B&O tax saying the “B” should stand for “Bizarre.” But he also said that citizens weren’t ready for reform and seems to believe that the Legislature couldn’t do anything until the public was ready. Importantly, he noted the income tax as basically off-limits due to multiple Supreme Court rulings.
Still, I’m worried it will never happen if we don’t get some leadership from the Legislature. How can citizens know if they like something if they have no idea what it would look like?
Richards, on the other hand, dismissed the question out of hand making a lame joke about how you can get an economists opinion to say anything. In fact regressive taxation isn’t some economic theory, it’s math. It’s just a fact that our structure burdens lower income people more than the rich. There’s no debating it. But Richards dismissed it with a laugh the way Republicans ignore virtually all math and scientific data these days. It’s sad what a flat-earth society the GOP has become. There was a time when it was grounded in hard realities while the Democrats were more prone to silly Utopian ideology. Now it just ignores inconvenient facts that counter their beliefs.
Update: Here’s some more from Gateway reporter Brett Davis on some of the give and take. They usually post an initial reaction and then add more later.
The lede from an article in yesterday’s New York Timeshighlights a core problem in dealing with the deficit. Everyone says they want solutions, but their policies actually make it worse.
Senator Charles E. Schumer of New York, the Senate’s third-ranking Democrat, threw cold water on Tuesday on one emerging approach for striking a bipartisan deficit-reduction deal — an overhaul of the tax code that lowers top income tax rates but raises more revenue. Mr. Schumer’s position complicates efforts to seal a deal before January, when the “fiscal cliff” of tax increases and automatic spending cuts goes into effect.
An even dumber way of getting rid of the deficit.
Got that? The bi-partisan plan to shrink the deficit is based on cutting tax rates for rich people but raises more revenue. Seems to me Congress should stop worrying about Washington State legalizing weed when it’s clear Washington DC has the good stuff. Sen. Schumer throwing water on the idea seems to have provoked some serious reaction from those who would prefer to protect their addition by subtraction charade from too much scrutiny.
There isn’t much difference between this plan and what Romney/Ryan are trying to push — a 20% across the board rate cut. They regularly claim that these rate cuts won’t cost anything, but the simple fact is, they’re lying. There are not enough tax expenditures (deductions, credits, loopholes) to pay for that large of a tax cut without increasing taxes on the poor and middle class or increasing the size of the deficit. Josh Barro explains why:
The tax preferences that exist today overwhelmingly benefit people with lower and middle incomes, not the wealthy. While tax rate cuts reduce income tax burdens proportionally, as TPC notes, there aren’t enough tax preferences for wealthy people to offset Romney’s cuts at the top.
To understand this, we can look at the IRS Statistics of Income report for 2009, the most recent year available. Tax returns reporting less than $200,000 of adjusted gross income (AGI) accounted for a total AGI of $5.86 trillion, and taxable income of $3.24 trillion. That is, deductions and exemptions amounted to 45 percent of adjusted gross income for people making under $200,000.
Keep in mind, the biggest deductions are enormously popular like housing interest and non-profit donations. Eliminate those and you could send an already fragile housing market into another death spiral and take a huge bite out of charitable donations. Romney has said at times they’re off the table but is purposefully vague knowing that it’s impossible to make his plan work without them. He does rule out the special treatment that capital gains and dividends get which makes things even more difficult since that’s how rich people tend to make their income.
At this point you have to assume one of three things:
They aren’t serious about their huge tax cut plan. - Given what we know of their history over the last decade, I think we can safely rule this out. In fact, the single largest policy responsible for the deficit is Bush’s tax cut that they steadfastly defend.
They’re going to raise taxes on the poor and middle class. - Raising taxes on the poor is possible as there’s a growing number of Republicans who seem to think these lucky duckies shouldn’t get out of income taxes. Romney himself expressed significant contempt for this 47% of the population. However, the poor paying more would raise almost nothing in terms of new revenue so the budget would have to be balanced on the backs of the middle class, just as the Tax Foundation’s analysis showed. Politically this is tougher.
They aren’t serious about the deficit. The bulk of our deficit is the result of the Bush tax cuts, wars, and the economic downturn. They took a “balanced” budget (note the sarcastic air quotes) from the Clinton administration and quickly adopted policies to wreck that. As Dick Cheney said, “Reagan proved deficits don’t matter.” It wasn’t until the economy went into a freefall and a Democrat took over that the deficit hawks quickly appeared. At the absolute dumbest time to balance the budget, these white knights suddenly got religion and became deficit Crusaders.
Policies that caused the deficit.
What’s interesting about this is that the GOP has trained a huge number of people that deficits are caused by a massive growth in government under Obama. In fact I’ll bet even some of the most ardent Obama supporters believe deficits have exploded under Obama.
The federal government’s fiscal year 2012 has come to a close, and CBO estimates that the federal budget deficit for the year was about $1.1 trillion, approximately $200 billion lower than the shortfall recorded in 2011.
So the annual deficit was $1.1 trillion, down from $1.3 trillion. Guess how much it was in 2009, the budget Obama inherited from Bush…. $1.2 trillion.
Mind blown right?
Well surely these tax cuts have given us lots of growth and employment from the Job Creator gods. Nope. In fact somehow the economy tends to grow after tax increases, though I’d never try to draw a causal relationship between the two.
The main problem with politics today seems to be that the Republicans and their media allies are happy to lie nonstop about this, and the Democrats are too spineless and weak to debunk it or propose deficit measures that make any sense. Sen. Schumer now being the notable exception.
From the founding of the Washington territory in 1853 until the depth of the Great Depression, the primary revenue source for the state was the property tax, a tax that became increasing ill-suited to our industrializing economy, and that rose ever higher as government services expanded to meet Depression-era needs. By 1930 the average property tax was 2.8 percent of property value annually (compared to less than 1 percent today). Faced with plummeting tax revenues and skyrocketing delinquencies, a tax overhaul was sorely needed.
In 1932 voters took things into their own hands by running and passing two statewide initiatives. The first capped the state property tax levy at 0.4 percent annually, a cap that remains today. The second implemented progressive personal and corporate income taxes, a measure that passed by a 70-30 margin.
Odd as it may seem, the income tax was once extremely popular in Washington with the exception of wealthier business interests who filed suit to challenge it in court. As a result, the law was overturned on a split Supreme Court decision making Washington the only state in the union with a Constitutional precedent against the income tax. Since then, several efforts to pass one under both Republicans and Democratic governors have been struck down by the Supreme Court, or rejected by voters.
The trouble for these Depression era legislators is that they were now unable to raise property taxes back to their original level due to the new cap. Without the replacement income tax, they faced a significant revenue crisis. To fill the hole they they created a new sales tax. In fact, they authorized it at the same time as the income tax as a sort of backup plan. Warren Magneson, then a young state representative, called it an emergency measure that wouldn’t “become a permanent part of our tax system.”
He was wrong.
I mention all this not as an argument in favor the income tax or against sales tax. There’s pros and cons to all forms of taxation. Some are worse for certain people or businesses, while others have really negative economic side effects. But people need to know that the way we fund government is largely an accident of history. In fact the bulk of Washington’s taxes are an odd assemblage of patches and fixes related to one crisis or another rather than a well-thought through comprehensive plan.
Starting in the 90′s voters began something of a tax revolt led by initiative entrepreneur Tim Eyman. I-695 eliminated nearly all of Washington’s Motor Vehicle Excise Tax, an annual license tab fee based on the value of a car. This not only unwound the road bond package voters had approved just a year before, but also eliminated the state’s share of local transit funding.
I-747 was next putting a cap on property tax increases for existing buildings at 1% without voter approval. State and local governments now had their most stable source of revenue limited to less than the typical rate of inflation. For what it’s worth, I thought it was absurd that government was regularly taking its previously allowed 6% increase each year regardless of the effects of inflation. We in government brought the backlash on ourselves. As was the case this time, tax revolts often have righteousness on their side, but free from the normal give and take of the legislative process, prone to overreaction.
With the other major sources of revenue now constrained by voters or courts, sales tax remains the only means to raise a significant amount of revenue for general government operations. Several times the Legislature has increased the state’s share from 2% in 1932 to where it’s been since 1983 at 6.5%. Cities and counties are limited to an additional 1% while a number of overlapping special taxing districts can pile on a few more points. All told, our largest cities are at or approaching 10% in retail sales tax.
Though rates may have increased, taxable retail sales have shrunk drastically as a percentage of the economy during that same time.
Some of the drop is due to the rise of internet sales which are mostly out of the reach of state sales tax until Congress takes action. But this is a long term trend preceding the advent of the internet by decades. The real cause is the shift towards a service economy.
Some of you might be thinking that it seems like you’re actually paying more. Well this is where our system gets really sinister — there’s a good chance you are. Washington’s reliance on a huge sales tax makes it one of, if not the most regressive tax structures in the nation and it’s getting worse almost every year. We’re a great place to be wealthy, but it’s very expensive for everyone else.
According to the Institute of Taxation and Economic Policy, the poorest 20% of us (less than $20,000 per year income) pay 17.3% of their income in combined state and local taxes while the richest 1% (over $547,000 annual income) pay just 2.6%. Median income households are paying a full point more than the national average.
Obviously gaining consensus on how to fix our tax code will be difficult and maybe even impossible. But I challenge anyone to say with a straight face that if given a clean sheet, they’d purposefully re-implement this system. Surely there is room for improvement.
I spend a lot of time thinking about infrastructure spending. Whether it’s local projects in Gig Harbor or at one of the regional councils I sit on, there are constant reminders that we just don’t build enough in this country.
