Author: john a. charles jr.

The Greatest Challenge to Traffic Safety? It’s Not Residential Speed Limits

By John A. Charles, Jr.

Earlier this week the Oregon House of Representatives passed HB 2682, which will allow Portland to lower traffic speeds on residential streets from 25 MPH to 20 MPH. This was hailed as an important step towards reaching the city’s goal of zero traffic fatalities by 2025, but in reality the bill is mostly symbolic.

First, HB 2682 only affects residential streets. Most traffic fatalities occur on higher-speed arterials.

Second, reducing travel speed is just one of many factors in traffic safety, and not always the most important. According to the 2015 Portland Traffic Safety Report, 54% of fatal crashes involve alcohol or drugs. When pedestrians are involved, 30% of fatalities involve either an intoxicated walker or driver.

Traffic speed is a factor, but 80% of Portland’s fatalities and serious injuries occur on the 19% of roadways that are posted at 30 MPH or higher. None of those roads will be affected by HB 2682.

The ubiquitous use of digital devices by motorists, cyclists, and pedestrians represents the greatest new challenge to traffic safety. Unfortunately, people who would rather text than watch the road are unlikely to be helped by a law that reduces speeds in quiet neighborhoods from slow to slower.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Testimony Regarding Senate Bills 432, 602, 608, 612 and 618

Testimony of John A. Charles, Jr.

President & CEO, Cascade Policy Institute

Regarding Senate Bills 432, 602, 608, 612 and 618

April 6, 2017

Advocates of land-use planning strongly believe that the benefits of planning always outweigh the costs.

But no regulatory system is perfect. Certainly the Oregon program can be improved, if we have the will.

The most obvious problem is that land-use regulation imposes a static vision on a dynamic economy. Oregon demands “urban containment” as the top priority, enforced through urban growth boundaries and rural exclusionary zoning. This has to result in an imbalance between housing supply and demand, leading to rapid price escalation. There is no other logical outcome unless planning advocates have invented a new economic theory that only they understand.

The bills under discussion today may not be the perfect responses to current problems, but surely at least one of them could be used by the Committee as a vehicle for modest reform.

I encourage the Committee to pick one flaw in the Oregon system and address it going forward.

You could focus on the dysfunctional urban growth boundary management process, the punitive “Transportation Planning Rule,” or perhaps farmland preservation requirements that are disconnected from economic reality.

It doesn’t matter which problem you address, but to say that no flaws exist and all reform bills must be killed year after year is not plausible.

Failure to address obvious problems will undermine public confidence in the legislative process. Please use the remaining time in this session to solve at least one problem related to zoning.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Testimony Before the Senate Business and Transportation Committee in Support of SB 656, SB 657, and SB 659

Testimony of John A. Charles, Jr.

President & CEO, Cascade Policy Institute

Before the Senate Business and Transportation Committee

In support of SB 656, SB 657, and SB 659

April 3, 2017

The Public Purpose Charge (PPC) was originally authorized by the legislature to run for 10 years: from March 2002-March 2012. It was anticipated that subsidies for conservation, renewables, and market transformation would no longer be necessary after that time.

The chart below shows that the original forecast was correct. PPC administrators are running out of things to do. The low-hanging fruit for retrofits has been picked, and newer homes have been built to stringent energy codes. The mission has largely been accomplished.

Therefore reducing the PPC from 3% to 2%, as called for in SB 657, is appropriate. In 2019 you should drop it by another percent, and then phase it out entirely in 2021.

Keep in mind that the Energy Trust receives additional ratepayer funding through the “increment” allowed under SB 838. During 2017, that increment will more than double the amount of money that ETO will receive from the basic PPC. Therefore, the Trust would continue to have significant funding regardless of what you do with these bills.

Ratio of Energy Benefits (kWh saved or generated) to Expenditures

All PPC Administrators

2003-2004 2005-2006 2007-2008 2009-2010 2011-2012 2013-2014 2015-6/2016 % change, 2003-6/2016
ETO Conservation 5.7 6.6 6.7 4.4 4.5 5.3 3.4 -40%
ETO Renewables 13.8 4.0 33.5 1.6 1.4 2.0 1.6 -88%
School   districts 0.8 0.6 1.0 0.5 0.5 0.3 0.4 -50%
OHCS low-income 1.3 0.9 0.7 0.5 0.8 0.4 0.6 -54%
Self-direct (conservation) 7.2 3.2 4.3 5.2 3.0 2.5 3.8 -47%

Source: Biennial reports to the Legislative Assembly on PPC expenditures, all years. 

Since the PPC was first authorized in 1999, it has escaped scrutiny by the legislature. The oversight called for in these bills is long overdue and I encourage your support.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Selling Bonds to Buy the Elliott State Forest Would Be a Breach of Fiduciary Trust

By John A. Charles, Jr.

State Treasurer Tobias Read has announced that he is now prepared to support a plan being developed by Gov. Kate Brown to sell bonds that would “buy out” the Elliott State Forest from the Common School Trust Land portfolio and keep it in public ownership.

Unfortunately, this would saddle taxpayers with debt service on the bonds, thereby reducing or even eliminating the financial benefits of adding the bond proceeds to the corpus of the Common School Fund. This would be a breach of fiduciary trust on the part of the State Land Board.

Members of the public may not understand that bond sales don’t create “free” money; the face amount must be repaid over some designated period of time, with interest.

For example, if the legislature authorizes the sale of $100 million in general obligation bonds, total principal and interest will likely exceed $150 million over several decades.  All Oregon taxpayers will be legally obligated to pay off that debt.

Another option might be the sale of bonds backed by future earnings on the Oregon Lottery. But lottery revenues are essentially the same as General Fund revenues. Paying debt service on lottery-backed bonds will inevitably take money from public schools.

The Governor’s proposal to have the public buy a forest it already owns is akin to someone losing money in an IRA, then transferring funds into the account from a 401(k) to make up for the loss. If both accounts are owned by the same individual, there is no net gain; the loss is just disguised.

As the state’s elected Treasurer, Tobias Read should know better. The only way to decouple the Elliott State Forest from the Common School Fund is to sell it to private parties with no taxpayer financing involved.

Such an offer is sitting in front of the Board today. The Board should accept the offer of $220.8 million from the Lone Rock Timber consortium, place the net proceeds into the Common School Fund, and let the money begin immediately working for public school students.


John A. Charles, Jr. is President and CEO of the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization.

 

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Let’s Build Some Highways

By John A. Charles, Jr.

Oregon stopped building new highways in 1983 when I-205 was completed. Top planning officials began espousing a philosophy of spending money on rail transit rather than roads. The government also used the power of zoning to crowd more people into urban centers, in the belief that high density would lead to less reliance on cars.

The new strategy failed.

The Portland regional transit agency, TriMet, was given more than $3.6 billion to build a light rail system; yet between 1997 and 2016, TriMet’s market share of all commute trips in Portland fell from 12% to 10%. As a result, traffic congestion has become a major barrier to regional mobility.

Now a bipartisan group of legislators, led by Republican Rich Vial of Wilsonville and Democrat Brian Clem of Salem, has introduced a bill that would jump-start the highway-building process. HB 3231 would authorize cities and counties to jointly form special districts for the purpose of building and operating limited-access public highways.

If built, such highways would likely be financed through loans, with debt service paid off by tolls.

So far HB 3231 has not received a public hearing. It should. Motorists deserve all the highways they are willing to pay for. Let’s give them a chance to vote with their dollars for a better road system.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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It’s Finally Time to Sell the Elliott State Forest

By John A. Charles, Jr.

At the February 14 meeting of the State Land Board, the Board voted 2-1 to enter into negotiations with a private consortium to sell 82,450 acres of the Elliott State Forest. Gov. Kate Brown, who was on the losing end of the vote, has ordered the Department of State Lands to come back in April with an alternative plan that would allow for continued public ownership.

Not only is the Governor being petulant, but the alternative she favors has been studied repeatedly since 1995. That was the year that the Board released its first “Draft Asset Management Plan.” The Elliott was then valued at $850 million, but annual revenues were dropping due to rising management costs.

The Land Board was told by a consultant that “selling the Elliott State Forest would be the most effective way to maximize Common School Fund revenues.” The Board is required by the Oregon Constitution to make money on the Elliott because it is an endowment asset for public schools.

Sadly, that recommendation was rejected. Instead, state officials spent the next 20 years engaged in fruitless negotiations with federal regulators regarding compliance with the Endangered Species Act. Every time the Board thought an agreement to cut more timber had been reached, it turned out to be a false summit.

Meanwhile, advocacy groups used the Elliott as a legal piñata. They successfully sued the Land Board so many times that the forest stopped generating any revenue by 2013 and actually became a financial liability for Oregon schools.

The costs of this wait-and-see approach were not trivial. According to a report published by the Board in 2014, the Elliott had cost the Common School Fund $1.4 billion in lost earnings since 1995.

Things actually worsened after the report was published. In 2015 the Land Board decided to finally sell the Elliott; but instead of taking competitive bids, the Board established a fixed price. The Board also downzoned the land by imposing multiple limitations on future timber harvesting.

The result was that the Board received a single offer in 2016, for the state-mandated price of $220.8 million. The net result of 22 consecutive years of public ownership was a loss to the Common School Fund of at least $1.62 billion.

Governor Kate Brown now wants to renege on the sale entirely (despite voting for it in 2015) and use state bonding capacity to “buy out” a portion of the Elliott. This is probably the worst idea yet. The public already owns the forest; why would we want to go into debt buying ourselves out?

While the $220.8 million offer now on the table is a far cry from the $850 million we could have received in 1996, it’s better than hanging on to a dead asset. Secretary of State Dennis Richardson and State Treasurer Tobias Read voted to sell the forest, and that was the appropriate decision. Adding $220 million in new revenue to the Common School Fund endowment will generate many billions of dollars for schools over the next century.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in the Portland Tribune on March 16, 2017.

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Oregon Taxpayers, Not Riders, Pay Most Costs of Public Transit Operations

By John A. Charles, Jr.

In a recent interview with the Portland Business Journal, Chris Rall of Transportation for America argues for increased state support of public transit service. He says that Oregon only covers three percent of the operating costs of transit, while other (unnamed) states pay for 24 percent.

I don’t know the source of Mr. Rall’s claim, but the audited financial statements for the largest transportation districts in Oregon show a very different picture.

In FY 2016 TriMet had total operations revenue of $542,200,000 but only $118,069,000 came from passenger fares. That means TriMet riders received a 78% subsidy from other sources.

At Lane Transit District in Eugene, passenger fares in 2015 were only $7.2 million, while total operating revenue was $60.9 million. Non-riders paid for 88% of operations.

For Cherriots Salem-Keizer transit, public support totaled 94% of all operating revenue in 2015.

Undoubtedly the largest subsidy goes to the Portland-Eugene passenger rail line operated by ODOT. For every one-way ticket sold in 2015, the public paid $120.

Before state legislators approve any more subsidies to transit, they should require that transit operators recover at least 50% of costs from customers. If riders are only willing to pay 10 percent, why should taxpayers have to pick up the rest of the tab?


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Land Board Votes to Sell Elliott State Forest

By John A. Charles, Jr. 

On February 14 the Oregon State Land Board – comprised of Governor Kate Brown, Treasurer Tobias Read, and Secretary of State Dennis Richardson – voted 2-1 to sell 82,450 acres of the Elliott State Forest to a consortium of private parties led by Lone Rock Timber Management Company. The agreed-upon sale price is $220.8 million; and the net proceeds will be placed in the Oregon Common School Fund (CSF), an endowment for public schools.

This parcel is a small part of the Oregon Common School Trust Land portfolio of 1.5 million acres of lands that must be managed by the Land Board to maximize revenue over the long term for the benefit of public schools.

For many years the Elliott was a money-maker, but environmental litigation steadily reduced timber harvesting to a trickle. For the last three years the Elliott has actually lost money, which prompted the Board in August 2015 to vote unanimously to sell the Elliott and put the proceeds into alternative investments.

As a long-time Board member, Gov. Kate Brown repeatedly voted to sell the forest, but in December 2016 she changed her mind and announced her intent to use state bonding capacity to buy a portion of the Elliott and keep it in public ownership. Treasurer Ted Wheeler and Secretary of State Jeanne Atkins agreed with her conceptually, but no formal vote was taken and both of them have since left the Board.

At the meeting earlier this week, Gov. Brown made a motion to terminate any further negotiations to sell the forest, despite the fact that Lone Rock and its partners had spent at least $500,000 putting together a good-faith offer in response to the Land Board’s sale protocol. Her motion never received a second.

New Treasurer Tobias Read indicated that he was uncomfortable walking away from the offer at the last minute, and that the legal doctrine of “undivided loyalty” to Common School Fund beneficiaries – public schools – compelled him to sell the money-losing forest. Secretary of State Dennis Richardson concurred and the Governor was out-voted.

Cascade Policy Institute has been urging the Land Board to sell the Elliott since 1996, when the forest was valued at roughly $800 million. It was evident to us that over the next several decades, environmental lawyers would treat the Elliott like a legal piñata and file continuous lawsuits to prevent timber harvesting. That is exactly what happened, turning this vibrant forest into a net liability by 2013.

Cascade published a number of technical papers demonstrating that over virtually any time period and under any reasonable set of assumptions, Oregon schools would be better off if the Board simply sold the forest and put the net proceeds into stocks, bonds, and other financial instruments. These papers were ignored by multiple generations of Land Board members, including John Kitzhaber, Ted Kulongoski, Jim Hill, Phil Keisling, Randall Edwards, and Kate Brown.

Many editorial writers are urging the Land Board to “hit the pause button” on this sale, but the fact is the Board has been “pausing” since at least 1995. As timber harvest receipts steadily declined over the next several decades, Oregon wasted more than $3 million trying to negotiate a so-called “Habitat Conservation Plan” with the federal government that would shield Oregon from further litigation. Such an agreement was never reached.

In a report paid for by the Department of State Lands in 2015, experts found that the failure to sell the Elliott in 1995 – as recommended by a Department of Forestry consultant – had cost public schools $1.4 billion in lost earnings over a 20-year period.

Gov. Brown’s last-minute effort to buy back timberland the public already owns was poorly thought out. Most of the media observers – who tend to favor public ownership – have apparently overlooked the fact that any revenue bonds sold by Oregon would have to be paid off by profits generated on-site. Since the Elliott has been steadily losing money under public management, it’s unlikely that anyone would even buy such bonds.

Although selling the Elliott was the right thing to do, we will never know if the public received fair market value because the Land Board refused to take competitive bids. In 2016 the Board established a price of $220.8 million based on multiple appraisals, and no one was allowed to offer a higher amount. Clearly, this was a bizarre way to sell a valuable asset and demonstrates how Kate Brown, Ted Wheeler, and Jeanne Atkins consistently abdicated their fiduciary responsibilities in favor of a political agenda to retain public ownership.

Treasurer Read and Secretary Richardson deserve credit for moving forward with the sale. Neither of them wanted to do it, but they understand that they have an obligation to current and future public school students to add value to the Common School Fund.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Car Ownership Is Not a Crime

By John A. Charles, Jr.

A bill has been introduced in the state legislature that would impose a $1,000 ownership tax every five years on automobiles more than 20 years old.

Fortunately, leaders of the Republican Party quickly denounced it; and without bipartisan support the bill has no chance of passage. The chair of the House Revenue Committee, Rep. Phil Barnhart of Eugene, has announced that the bill is dead.

The fact that this legislation was even introduced points to a conceptual problem shared by many lawmakers: They think that owning a vehicle is undesirable and should be taxed.

But owning a car imposes no cost on the public; it’s the use of the vehicle that we should be concerned with.

As one legislator told me many years ago, “I own four cars—but I only drive one at a time!”

Since we do need money for improved roads, any transportation tax should focus on road use. One option would be to lower the cost of vehicle registration in exchange for a small increase in the gas tax.

Motorists deserve all the roads they are willing to pay for. Raising the gas tax would give drivers a chance to vote with their tires for a better road system.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Surprise! Renewable Energy Mandates Are Actually Fossil Fuel Mandates

By John A. Charles, Jr. and Lydia White

The Sierra Club and other environmental groups are objecting to PGE’s plan for new, natural gas-powered generation to help replace the electrical output that will be lost when PGE shuts down the Boardman coal plant in 2020. What these groups should admit is that they are the ones responsible for that decision.

Last March, the Oregon legislature adopted the Oregon “Renewable Portfolio Standard” (RPS), which requires PGE to procure 50% of its retail load from designated renewable energy sources by 2040. This requirement, enacted with few public hearings in the rush of the one-month session, was demanded by environmental groups as a way to burnish the state’s mythical green power credentials.

The RPS is essentially a mandate for more utility-scale wind and solar power. These are known as “intermittent resources” because wind farms don’t generate any power about 68% of the time, while solar goes dead about 71% of the time. Being forced to rely on randomly-failing generators means that utilities must have back-up sources (known as “spinning reserve”) in order to preserve grid reliability.

Electricity cannot be stored like other commodities. As soon as electricity is fed into the grid, it travels at the speed of light through many pathways until it is consumed almost instantaneously by a household, factory, or some other end-user. Supply and demand have to be matched at all times in order to avoid grid failure, or “blackout.”

Right now, wind and solar only account for about 5.69% of Oregon’s electricity supply. As lawmakers keep ratcheting up RPS mandates towards 50%, the need for spinning reserve will go up as well. The only practical fuel is natural gas.

These new gas-fueled plants will be running even when not used, in order to be ready when the windmill blades stop turning or the sun goes down. This will result in wasted fuel and increased air pollution.

If utilities must have spinning reserve, can we predict the need for it? This question was the subject of a paper recently published by the National Bureau of Economic Research (NBER). The researchers found that a 1.0 percentage point increase in the share of fast-reacting fossil generation capacity in a country is associated, on average, with a 0.88 percentage point increase in the long-run share of renewable energy.

In other words: more wind and solar = more fossil fuel use. Oregon legislators rushed through the RPS law so quickly that they forgot about the law of unintended consequences.

PGE and PacifiCorp will both be turning to increased natural gas generation over the next 20 years because they don’t have a choice. Customers want their electricity 100% of the time, not 30% of the time. If environmental groups are offended by the use of more natural gas, they should admit that the 50% RPS requirement was a mistake and ask legislators to repeal it.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. Lydia White is a Research Associate at Cascade. This article originally appeared in the Portland Business Journal on January 12, 2017.

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