Category: John Charles

Road Policy Belongs to Those Who Show Up

By John A. Charles, Jr.

The Oregon Department of Transportation is hosting three Open Houses this month to discuss the possibility of changing how several local highways are managed.

Currently, we finance roads through gasoline taxes. However, a growing number of cars use little or no gasoline. Therefore, the legislature is requiring ODOT to study an alternative finance mechanism for I-205 and part of I-5 that would rely on user fees collected electronically.

In addition, those fees would vary in price depending on the time of day, direction of travel, and day of the week.

While this may sound punitive, the fact is that a single highway lane can move anywhere from 700 vehicles per lane, per hour, to more than 2,000 vehicles, depending on the density of traffic. At times of hyper-congestion, throughput drops dramatically as we sit in stop-and-go conditions.

An alternative would be to use variable toll rates to even out demand, thereby tripling the number of cars per lane while averaging about 45 miles per hour.

Is it a good idea to make our highways three times more productive through congestion pricing? That’s what the Open Houses will explore. Interested motorists should attend, because policy belongs to those who show up.

 

This is the schedule for ODOT’s community conversations, according to the department’s press release:

  • Tuesday, Jan. 23, 4:30 to 7:30 p.m., Clackamas Town Center Community Room (Level 1 near Buckle and across from Macy’s), 12000 S.E. 82nd Avenue, Happy Valley
  • Saturday, Jan. 27, 10 a.m. to 1 p.m., Lloyd Center (Level 1 between Ross and the ice rink), 2201 Lloyd Center, Portland
  • Tuesday, Jan. 30, 4:30 to 7:30 p.m., Vancouver Community Library, 901 C Street, Vancouver.
  • 17 to Feb. 5, the Online Open House will be active at odotvaluepricing.org. The public can see materials, view video recordings of the project Policy Advisory Committee meetings and leave comments for the project team.

 

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

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Poll Shows Voters Are Smarter Than Politicians Think

By John A. Charles, Jr.

In November the regional government, Metro, released the results of a new public opinion poll of 800 registered voters living in the tri-county region.

One of the questions was, “In a few words of your own, what is the most important change that could be made to improve the quality of life in the Portland region?”

The top three responses were: dealing with the homeless/poverty (25%); affordable housing (17%); and traffic congestion (14%).

Environmental issues tied for last place (2%), and global warming did not even make the list.

This is roughly the opposite of what we frequently hear from many of the political talking heads. Listening to them, one would think that environmental Armageddon is upon us, especially because Donald Trump is President.

For instance, the top legislative priority for Senator Michael Dembrow (D-Portland), who chairs the Senate Environment Committee, is a bill he hopes to pass in early 2018 that would create a $700 million/year tax on carbon dioxide by establishing a convoluted industrial regulatory program. The ambient environment would not be improved one bit by this tax, but all of our basic necessities—food, clothing, shelter, and energy—would become more expensive.

Sen. Dembrow’s biggest supporter on this issue is Governor Kate Brown, who recently flew to Bonn, Germany to hobnob with celebrities at a United Nations conference on global warming. The two of them are convinced that if they can make energy more expensive, we’ll all use less of it and the world will be saved from “global warming.”

Most voters intuitively know that this is a scam. The term “global warming” doesn’t even have a useful definition. Voters know that the pain-versus-gain equation of global warming taxes is heavily one-sided: the “benefits” of reducing fossil fuel use are highly speculative (and may not exist at all); long-term (potentially thousands of years away); and global in nature. Yet the costs will be known, immediate, and local.

As the Metro poll shows, there is very little grassroots support for this kind of punishment.

It’s not surprising that homelessness, housing, and traffic congestion rank as the top three issues in the Metro poll because these are problems most of us confront daily. They are also things we can take action on.

Unfortunately, government itself has caused much of the mess, so voters will need to think carefully before signing on to more tax-and-spend programs. Almost every time regulators intervene in real estate markets, the result is some combination of less housing production and higher housing prices.

Take the most obvious intervention: urban growth boundaries. Since 1980, the population of the Portland metro region has increased by about 78%, but the available land supply for housing has only gone up by 10%. Making buildable land artificially scarce and thus more expensive is not a winning strategy if you’re trying to provide more housing.

But lack of land is just the start. After you add in ubiquitous farm and forestland zoning, extortionist system development charges, tree protection ordinances, inclusionary zoning requirements, prevailing wage rules on public housing projects, and numerous other interventions, the result is that we have a serious shortage of housing.

Even the government is trapped in government regulation. Last spring the Portland City Council approved spending $3.7 million to purchase a strip club on SE Powell Boulevard near Cleveland High School. The City plans to tear down the building and build 200 to 300 units of low-income public housing on the 50,000-square-foot property. City officials have admitted that it will take two years just to obtain the necessary permits for the redevelopment.

If it takes this long to get the permits for one of Mayor Ted Wheeler’s top priorities, imagine the delays facing a private sector developer.

The housing woes in such cities as Portland, San Francisco, New York, and Seattle are mostly self-inflicted. Housing supply is lagging demand because we’ve created so many barriers to housing construction. Removing those barriers should be a top priority for the state legislature when it convenes in February.

Global warming legislation does not even deserve a hearing.

John A. Charles, Jr. is President and CEO of the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was published by the Pamplin Media Group and appeared in The Portland Tribune.

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Winning Is Not the Only Thing That Matters

By John A. Charles, Jr.

Last Friday the Republican-controlled Senate passed a 479-page tax reform bill in the dark of night without holding any public hearings.

Moreover, the bill itself was not in final form during the floor debate. The legislation was amended on the fly with handwritten changes. The only way to know what the Senate did was to read the bill after it had been voted on.

The same tactic was used by Democrats in 2016, when the Oregon Legislature passed a complex energy bill that was drafted behind closed doors and passed with almost no public input, in the space of three weeks. Not a single legislator understood what the bill actually would do because many sections, including those dealing with billions of dollars of utility assets, were never discussed.

This kind of behavior is a disgrace. The process is more important than any particular bill. If we tolerate mob rule just because “our team” is in charge, it guarantees that we will be treated the same way when the “other team” has power.

Federal tax reform has been needed for decades. There is no crisis. Congress should slow down, invite public input, and make sure the legislation is actually worth passing.

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

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Tolling People on to Portland’s Highways

Tolling People on to Portland’s Highways

By John A. Charles, Jr.

Earlier this year the state legislature passed a bill requiring the Oregon Transportation Commission (OTC) to apply for federal authorization to implement “value pricing” on two regional highways: I-205, and I-5 from the Washington border to the intersection with I-205. The OTC must apply by December 31, 2018.

Although value pricing may sound vague or somewhat ominous, motorists should be happy with this new policy. It has the potential to eliminate traffic congestion and create a revenue stream that will allow us to build the new highways and bridges that we need.

First, some background. “Value pricing” is a bureaucratic term for electronic tolling of highways where the toll rates vary based on the density of traffic. Usually, the rates change based on time of day, direction of travel, and day of the week. The rates are set to ensure 45 MPH driving conditions at all times of the day, hence the “value” offered to motorists.

There are many possible variations on this theme. In most cases, value pricing is used on new highway lanes, allowing drivers the option of staying in the unpriced, general purpose lanes. That probably will not be feasible in the Portland region because there is no room for an entire new network of priced lanes on I-5.

In some ways this is a blessing, because variable tolling will make our current lanes more productive. If priced properly, it’s possible that new lanes will not even be needed, saving us the expense of construction.

Value pricing is necessary because our current system cannot address congestion. Our highway network is an open access system, where each trip appears to be “free.” Of course, it’s not free—it’s being paid for by various back-door mechanisms such as motor fuel taxes, vehicle registration fees, and random federal grants. But we think it’s free, so during peak hours we see a “stampede” effect.

When too many people try to get on at the same time, per-lane throughput drops substantially. The carrying capacity for most highways is roughly 1,800 vehicles per-hour in each lane. At times of hyper-congestion, this can drop to 900 vehicles or fewer.

By using variable pricing, we can clear up the stampede and get per-lane travel back to 1,600 or 1,800 vehicles per-hour. In essence, value pricing allows us to “toll on” more people than we “toll off.”

The effect of this was seen recently when tolls on the Port Mann Bridge in Canada were removed on September 1. The Port Mann is a 10-lane bridge over the Fraser River near Vancouver. After tolls were removed, the result was a huge increase in congestion. One driver saw her daily commute increase by 25 minutes each way. She told a news reporter, “Absolutely, it’s terrible. It’s selfish but I want those tolls back on.”

In addition to the benefits of free-flow driving conditions, variable tolling will also create the dedicated revenue stream we need for future highway expansion. There is no doubt that we need several new bridges over the Columbia River, plus additional highway lanes elsewhere. Value pricing will tell us where to build, when to build, and who is willing to pay.

Fortunately, the Oregon Constitution does not allow toll revenues to be siphoned off for non-highway uses such as light rail construction. Therefore, money paid by motorists will benefit them directly.

The new law mandates value pricing on two specific highways but also authorizes the OTC to implement pricing anywhere else. Since the Portland highway network is an integrated system including I-84, I-5, I-405, HW 26, HW 217, and I-205, it would be better to implement value pricing region-wide to ensure that motorists get what they want: free-flow driving conditions, at all times of the day.

Most new highways being built around the world are using electronic tolling with variable rates. The new Oregon law is an opportunity for us to learn from that experience and to implement a Portland highway pricing system that truly delivers “value” for motorists.

John A. Charles, Jr. is President and CEO of the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was originally published by the Pamplin Media Group and appeared in the Wilsonville Spokesman and The Portland Tribune.

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Kate brown attention deficit disorder

Kate Brown’s Attention Deficit Disorder

By John A. Charles, Jr.

The most serious problem facing Oregon right now is the exploding costs of the Public Employee Retirement System (PERS). The PERS crisis is so severe that the Oregon Legislature should make it the only issue addressed in the February 2018 legislative session.

But Governor Brown isn’t interested in reducing the PERS liability. That would take too much work and might offend her public employee union campaign contributors. So instead she has signed two Executive Orders purporting to address “climate change,” ahead of her jaunt to Bonn, Germany next week to attend a United Nations conference on global warming.

Her Executive Orders impose a blizzard of costly requirements on new buildings, including requirements for new homes to meet energy efficiency guidelines by 2023, and mandates for new homes to be solar-panel-ready by 2020. New buildings will also have to accommodate electric vehicles, regardless of whether the owners ever intend to own such vehicles.

The Governor is also setting a fantasy policy goal that Oregonians own 50,000 electric vehicles by 2020, more than three times the current ownership level.

Oregon desperately needs political leadership to avoid a PERS-induced death spiral. Unfortunately, all we’re getting is a Governor flying halfway around the world to escape reality.

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

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Transportation Finance Isn’t as Complicated as Legislators Make It

By John A. Charles, Jr.

Some members of the Oregon Legislature think you don’t pay enough to travel. Therefore, they are considering a 298-page bill that would create multiple new transportation taxes.

The draft legislation, HB 2017, includes dramatic increases to vehicle registration fees, higher gas tax rates, a new sales tax on the purchase of motor vehicles and bicycles, and a statewide tax on all employees to subsidize transit.

In addition, a percentage of money currently paid by customers of investor-owned electric and gas utilities would be diverted to subsidize electric vehicle owners.

Billions of dollars would flow to various bureaucratic entities, with little accountability. Those of us paying the taxes would hardly know we’re paying them, and we would have no idea how the money was being spent.

The legislative strategy of simply “throwing money” at transportation is not going to work, because it’s already been tried. For example, TriMet riders only account for about 10% of all revenue in the FY 18 budget; the rest of TriMet’s income is derived from various backdoor taxes.

The agency’s most lucrative income source is the regional payroll tax, authorized by the legislature decades ago. TriMet has been raising its payroll tax rate almost every year since 2005 and will continue to do so through 2024. As a result, the agency now collects over $366 million annually from employers to subsidize transit operations. Yet, in the first decade after tax rates began rising, TriMet service actually declined.

Much of the new money went to pay for generous union contracts rather than the promised service improvements. The result: In 2016, employee benefits equaled 123% of wages. In other years the ratio has been as high as 149%. This is not a finance model that we should emulate.

The best way to improve any kind of service is to have a tight fit between what we pay as consumers and what we get in return. If we don’t know the real price, we can’t evaluate the purchase. And if taxpayers are being forced to subsidize unrelated services, there can be no fiscal discipline.

A better option would be to euthanize this 298-page monstrosity and work to implement highly-targeted user fees. The social costs of travel such as congestion, road wear, and noise pollution vary considerably by time of day, direction of travel, weight of the vehicle, and other factors. The user fees that we pay should account for these differences.

Gasoline taxes and vehicle registration fees are poor user fees because they are fixed, mostly invisible, and not time-sensitive. But new technologies now allow us to collect the full cost of each trip in real time by all modes of travel.

Some auto insurance companies already collect detailed driving data because they sell mileage-based policies. Millions of American drivers also own toll tags for use in modern tollways. And many transit operators use digital technology to collect variable fees based on distance traveled, type of service, and time of day.

User fees should be precisely calculated, and revenues should be dedicated to maintaining and improving the services paid for by consumers, with no cross-subsidization of other modes.

Transportation finance doesn’t have to be complicated. Legislators only make it that way when they don’t want you to know where the money is going.

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 SB 324-A, Low-Carbon Fuels Standards

The top legislative priority for most Democrats in Salem has passed the Senate and will be up for its first public hearing in the House on Tuesday, February 24th.

SB 324-A, the “low-carbon fuel standard” bill pushed so hard by Cylvia Hayes and former Gov. Kitzhaber, will be reviewed in the House Environment and Energy Committee at 3:00 p.m. on Tuesday. In prepared testimony sent to the committee today, Cascade President John A. Charles, Jr. points out that the “carbon intensity” of driving has dropped by 47% since 1975, making SB 324 redundant. Moreover, carbon dioxide is not a real “pollutant” anyway, so there would be no public health benefits to reducing emissions.

If SB 324 passes, it would raise the price of motor fuel by at least 19 cents/gallon, but none of the increase would benefit roads. Only an actual “motor fuel tax” raises money for roads, and Oregon already has a state gas tax of 30 cents/gallon. Legislative leaders hope to also increase that tax, meaning motorists would face two new taxes but receive less than half the benefits.

Cascade supporters are encouraged to contact their state Representative in opposition to this poorly-conceived bill.

Read full testimony here

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Report Shows Oregon Public Employment Contracts Are a Ticking Time Bomb

PORTLAND, Ore. – Cascade Policy Institute today announced the release of a new report showing that Oregon public employers have more than $2.6 billion in unfunded actuarially accrued liabilities associated with non-pension benefits promised to current and future retirees. These benefits, often referred to as “Other Post-Employment Benefits (OPEB),” typically include health care coverage for retirees, but may include other forms of deferred compensation such as life insurance.

A decade ago, the Governmental Accounting Standards Board (GASB) mandated that public employers begin clearly stating financial obligations for OPEB in their comprehensive annual financial reports. However, employers were not required to set up trust funds to pay for these promises. As a result, the Cascade review of 125 financial reports of state, regional, and local governments shows that most employers have no money set aside and are paying for OPEB obligations out of annual operating revenues. This cannibalizes funds needed for actual services.

The Portland transit agency TriMet has the biggest unfunded OPEB liability, estimated to be $950 million as of January 2014. Other employers with relatively large unfunded liabilities include Lebanon school district, Tillamook County, and the city of Corvallis.

Cascade President and CEO John A. Charles, Jr. said, “Over a period of decades, Oregon public employers have deliberately back-loaded employment contracts so that the cost of generous compensation packages would not become apparent until decades later, when the decision-makers themselves would be long gone. Those time bombs are now exploding, harming public school students, transit riders, and others who rely on public services.”

The Cascade paper is a call to action for the legislature to impose some form of fiscal discipline on public employers by requiring them to make annual contributions to OPEB trust funds. Legislation to accomplish this has been considered in past sessions but never approved.

In commenting on this failure, Charles noted, “Actuaries always state what it would take to amortize OPEB liabilities over a 25-year period; these are referred to as ‘annual required contributions (ARC).’ Unfortunately, most government managers treat the ARC as merely a suggestion. All the Oregon legislature has to do is pass a one-page bill reaffirming that ‘required’ means ‘required.’ How hard can that be?”

The Cascade report, Unfunded OPEB Liabilities for Oregon Public Employers: A $2.6 Billion Time Bomb, can be downloaded here.

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Report Shows No Return on Public Investment for Oregon Wave Energy Trust

PORTLAND, Ore. – A new report released by Cascade Policy Institute concludes that the public-private partnership Oregon Wave Energy Trust has failed to achieve a return on public investment.

The Oregon Wave Energy Trust (OWET) is a nonprofit, public-private partnership established by the Oregon State Legislature that works to “responsibly develop ocean energy by connecting stakeholders, supporting research and development, and engaging in public outreach and policy work.” Since its inception in 2007, OWET has received nearly $12 million dollars in public funding from the Oregon Innovation Council (Oregon InC), another government-sponsored entity. OregonInC claims its initiatives must earn a profit, but that is clearly not the case with OWET. None of the money spent to date by OWET has led to any profitability.

Cascade President and CEO John A. Charles, Jr. commented, “Electric utilities in Oregon, both public and private, are quite capable of generating and delivering power to their customers. If wave power is a good idea, utilities themselves will bring it to commercial scale. If it’s a bad idea, taxpayers should not be forced to bear all the risks of early-stage experiments.”

The Cascade paper recommends that Oregon legislative leaders “should closely examine all state-sponsored venture capital funds to determine if grant recipients will ever become financially self-sufficient, as originally envisioned. OWET would be an excellent place to start.”

Cascade Policy Institute is Oregon’s free market public policy research organization. Cascade promotes public policy solutions that foster individual liberty, personal responsibility, and economic opportunity. The full report, entitled Waiving Profitability: The Oregon Wave Energy Trust’s Failure to Achieve a Return on Public Investment, may be viewed here.

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Press Release: New Report Proposes Better Outcomes, Lower Costs for State and Local Governments Through User Fees

PORTLAND, Ore. – A new report released by Cascade Policy Institute suggests numerous ways state and local governments can lower the costs of public services through judicious, targeted use of “user fees,” rather than relying on general taxation. Resurrecting User Fees in Public Finance: A Prescription for Lowering the Cost and Improving the Fairness of Public Services was authored by Randall Pozdena, Ph.D. Pozdena is president of QuantEcon, Inc., an Oregon-based consultancy.

The share of personal income collected as revenue by state and local governments has doubled since 1945. Oregon and other U.S. state governments obtain approximately 75 percent of this revenue through broad-based taxation and 25 percent from fees levied on the beneficiary of the service.

This report details the theoretical and practical advantages of reducing reliance on broad-based taxation in favor of user charges. It reviews the economic philosophy of reliance on user charges versus broad-based finance and the findings of the public finance literature. These key findings are:

  • The total cost of public services would decline. By making users of services and facilities aware of the costs associated with their use, spending would be limited only to those services for which consumers get benefits commensurate with their user costs.
  • Because user fees, unlike broad-based taxes, are only paid if one uses a service, the public or private providers of the services are incentivized to provide a service of value and at the minimum cost. This effect is particularly pronounced if users also enjoy choice of the provider of the service.
  • User fees link the generation of revenue intimately to the specific service or facility used. This avoids the “trust fund” or “trough” financing model that allows political lobbies to direct the allocation of revenues and provision of services to those with political power, rather than what is beneficial to consumers overall.
  • The result is more efficient and equitable provision of services because of the closer nexus of financing burden and receipt of benefits from the services.

The report also examines historical and current patterns of state and local spending and revenue collection. The review of these practices reveals that increased reliance on user charges is both practical and desirable in K-12 education, higher education, health services, public safety, and transportation infrastructure (especially highway and transit services). Together, these services constitute approximately 50 percent of state and local public spending in Oregon and other states in the aggregate, but in total have less than 5 percent reliance on properly designed user fees at present.

Cascade President and CEO John A. Charles, Jr. commented, “Switching from general taxation to user fees would be a more progressive way to pay for infrastructure because those who consumed the most would pay the most. This is how we pay for electricity, gasoline, and thousands of other commodities.”

User fees can completely, or near-completely, replace broad-based taxation in key areas of public spending, and consistently yield better outcomes and lower costs. This would be a benefit to state and local government budgets and, ultimately, to the taxpayers who finance them.

Cascade Policy Institute is Oregon’s free market public policy research organization. Cascade promotes public policy solutions that foster individual liberty, personal responsibility, and economic opportunity. The full report by Cascade Policy Institute may be viewed here.

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