Friday, November 13, 2015

Taking a Closer Look at Maley Drive, Part 4: Time to End the Subsidies

Growth and congestion go hand in hand.  The more roads we build, the more congested they become.   But for decades, traffic engineers have told elected officials and the public that we need bigger, wider and more abundant roads to ease congestion.  After decades of experimentation, it’s now become quite clear that the more roads we build to accommodate growth, the more congested our roads become (see: “California’s DOTadmits more roads means more traffic,” the Atlantic CityLab, November 11, 2015).

Building new roads doesn’t come cheap – but you might be able to justify the initial expense if there is a strong case that the benefit of having a new road will outweigh the costs.  As with any new infrastructure project, taxpayers will need to derive a good bang for the buck, usually in multiple ways. A new road can connect two or more previously unconnected areas to increase their economic interaction.  The presence of a new road could open up additional lands for development – important in areas of high growth.  And of course, a new road might help alleviate congestion, even if just for a little while.  New roads are also often touted as providing an additional level of safety for road users, although this last claim is almost always dubious, given that most new roads are built to standards which facilitate a higher level of speed – and that almost always leads to conditions which are less safe than other alternatives.

Here in Greater Sudbury, the talk of the town is the Maley Drive Extension.  This new road - running between Municipal Road 35 (Elm Street) in the west and Falconbridge Road in the east -  is to be developed in two phases, and will come with a price tag of about $130 million.  Right now, the City is seeking funding for Phase 1 of the project, and the Province has promised to chip in 1/3 of Phase 1’s $80.1 million in costs.  The federal government may very well follow suit with a 1/3 share under the Build Canada fund in the very near future.  That will leave the City to come up with about $16 million more to add to its $10+ million already in the bank to fund our 1/3 share for Phase 1.  Phase 2 is estimated to cost about another $50 million, and it remains unfunded.

For this $130 million, Greater Sudbury will get a road which will not connect currently unconnected areas to increase economic interaction (except perhaps for saving ore trucks a couple of minutes of time); will not open up any new areas to development (see: “Taking a Closer Look at MaleyDrive, Part 3: Expectations for Growth,” Sudbury Steve May, November 12, 2015); will not alleviate congestion in the long term; and will not increase safety in any measurable way.

Fighting Congestion

Regarding congestion, we might get lucky with Maley for a little while because it will essentially be a highway on the fringe of our City – similar to the under-utilized southeast and southwest by-passes are today.  But if you really want to fight congestion, there’s just one tried and true method for doing it: don’t grow.  Better yet, contract.  But that scenario doesn’t appear to be in the books for Greater Sudbury – we are expected to grow by 10,500 people over the next 20 years.

If growth is in you’re future, you’re going to have to take congestion along with it.  There are things you can do to alleviate that congestion, but studies have shown time and again that despite what the traffic engineers tell us about building bigger, wider, more numerous roads, that’s not the answer (see: “Building roads to curecongestion is an exercise in futility,” Tanya Snyder, Property and Environment Research Centre, undated).  If you want to mitigate against the impacts of congestion, especially while growing (but not only when growing), you’ve got to get people out of their cars and put them on buses, on bikes or on their own two feet.

Right now, transit, cycling and walking options are more akin to a sick joke in Greater Sudbury than they are a viable alternative to vehicular transportation for most of us.  And yet – the 2010 Sustainable Mobility Plan identified that up to 1/3 of Greater Sudburians do not have access to a car (see: “Sustainable MobilityPlan for the City of Greater Sudbury,” Rainbow Routes Association, June 2010).  Although the report’s economic analysis did not pinpoint who exactly, on an income scale, these car-less people were, I think it’s fair to suggest that largely these are people who are existing on lower incomes than the City’s median, and who may be living in poverty.

Who Benefits, Who Pays?

That’s important for a number of reason, but let me just point out one thing regarding Maley Drive here: the Cost-Benefit report which identified $11.1 million worth of benefit also says that people who don’t drive won’t receive more than a few cents of that benefit, period (see page 4 of this document, “Cost-Benefit Analysis of Maley Drive Extension,” AECOM, October 29, 2015).  The lion’s share of that benefits identified by AECOM come from a reduction in vehicular travel time – and if you don’t own a vehicle, you won’t get the benefit.  And yet people who don’t own car will see their tax money going to pay for the costs of the project.  This certainly raises some questions about the vertical equity of the Maley project in my mind – and I hope it does in yours.

The "benefit" of reduced travel time and maintenance costs for vehicle owners/operators described by AECOM can also be called a "subsidy". 

Alternative Transportation the Key to Reducing Congestion

Getting back to transit, cycling and walking – what we’re calling “alternative transportation” (which is funny if you think about it, because the very first form of transportation was walking – shouldn’t driving a motorized vehicle be the alternative?  But I digress).  We know that if we’re going to reduce congestion, the best way to do it is to get people engaged in “alternative transportation”.  And yet we have consistently failed to invest much in the way of time or treasure in facilitating these forms of transport. 

Since we don’t see people in our communities walking, we presume that there’s no need for sidewalks.  Ditto for bike lanes.  And buses, for that matter.  And it’s true: we have fairly low incidences of alternative transport use in our City.  So the perception becomes the reality. Especially when you factor in the fact that building and maintaining pedestrian and cycling infrastructure costs money – as does running buses. 

Truth is, as recently  as the 1970s, are streets were filled with people walking, especially in the
vibrant downtown part of the City.  What happened?  Well, suburbia happened – and decision-makers made driving a government-subsidized activity.  Yes, our governments actually paid people to drive their cars, and gave hand-outs to rich land developers to build subdivisions which provided people with a disincentive to walk, ride their bikes or take transit.  Folly, you say?  Well, we’re still doing it today.

Subsidized Roads

Who pays for roads like Maley Drive?  For the most part, taxpayers do.  At the municipal level of government, the revenues which pay for our roads come largely from property taxes and provincial revenue transfers.  Yes, it’s true – user fees also make up some of those revenues, including taxes collected on gasoline.  But when it comes to roads, road users are nowhere near paying the full costs of use.  Throw free parking into the mix, and it quite quickly it becomes apparent that society subsidizes road use.

We like to think that government subsidies are going towards things which make society better for most people.  Good roads make life better for everybody, no?  For the drivers who use the roads, for people who take the bus, for anyone who shops at a grocery store where goods are trucked in.  Clearly, there’s a public good inherent in roads.

But at the same time, the proliferation of roads has led to a more sedentary society with contingent higher health-related costs.  More roads has led to congestion in our communities which takes time away from our families, leading to unhappiness.  Roads have led to building cost-ineffective low density suburban communities where the provision of services by governments isn’t sustainable. And of course roads have led to a transportation system comprised almost entirely of fossil-fuel burning motorized vehicles that contribute more to Canada’s greenhouse gas emissions than any other sector.  With this in mind, it’s difficult to make the case that roads are actually a net good to the public.

Net Public Good

That’s not to suggest that we shouldn’t build roads.  It is, however, to suggest that perhaps its time we, as a society, began evaluating whether it’s in our public interests to continue to subsidize the users of our roads to the extent that we’ve been doing for quite some time now.  If a net public good can’t be demonstrated, why are we continuing to throw tax dollars at the project?  Maybe it’s time for users to pay more for what they’re using, and to give the rest of us a break.

As taxpayers will be on the hook for the capital and operating costs of Maley (in other words, all of the costs), whether those costs are just the $80 million identified in AECOM’s Cost Benefit Report, or whether they are the approximately $130 million needed to actually complete Maley from MR 35 to Falconbridge Road, the fact is that all of the beneficiaries that AECOM has identified will be receiving their benefits in the form of a subsidy from the government – except those who will benefit from lower greenhouse gas emissions (which, frankly, is a complete joke.  See what Laurentian University Professor of Economics, Dr. David Robinson, has to say about Maley’s benefits on emissions: “Maley Drive: How Not to do a Cost / Benefit Analysis,” Economics for Northern Ontario, November 6, 2015).

Cost Sharing

With Maley Drive, AECOM’s biggest beneficiaries are going to be the trucking industry.  While motorists will receive a slightly larger share of those costed benefits ($8,464,000 in travel time and vehicle operating cost savings – about 51%), that share will be distributed among a much larger pool of participants.  Truckers will receive about $4,168,000 in savings, or 49% of the benefit, - but those savings will be split among a much smaller group – only about 1,000 to 1,500 users a day (and likely much fewer at peak times – maybe only 100 or so during rush hour).  Those are individual trucks, of course.  Many of these trucks are owned by just a small number of operators – so that’s where the benefit will accrue.

Given that the local trucking industry will be receiving about half of the monetized benefit of the public’s subsidy of Maley Drive, and given that the remaining benefits are of questionable utility to the public, perhaps it’s time that the public turned to the beneficiaries to help pay for some of these costs.

Preposterous, right?  We can’t ask the trucking companies to pay for the Maley Drive Extension.  We can’t ask users of our roads to pay for their use.  Who would ever think of such a thing?  They may do that in Europe or the United States, or maybe even in Southern Ontario with the 407, but this is Sudbury – we’re different.

Well, actually, we’re not that different after all.  As for who would ever think about asking users to pay for new infrastructure from which they will primarily benefit – guess what?  Greater Sudbury contemplates doing just that with specific regard to Maley Drive.  Or at least we did at one time.  The September 2005 City of Greater Sudbury Transportation Study Report, item #12 on page 112, indicated that funding will be provided through negotiated cost-sharing agreements with major industries when those industries benefit from the transportation improvement being proposed.  Right now, it’s the 2005 Transportation Study which is in effect in our City, as the more recent Transportation Master Plan has yet to be accepted by Council.

Maley - Those Who Benefit Should Pay

So, AECOM produced a Cost-Benefit report which showed that the trucking industry will receive a significant monetized benefit from the construction of the Maley Drive Extension.  Given that the City has since 2005 contemplated entering into cost sharing agreements with major industries where those industries receive a benefit from a transportation improvement, one can’t help but wonder what the status of those negotiations might be.  How much are the beneficiaries of Maley chipping in for the costs? They’re going to receive a benefit – what are they going to pay for that benefit?

Or, despite what’s written in the 2005 Transportation Study Report, does our City expect that taxpayers alone will be on the hook for this major infrastructure project which will provide limited benefit to taxpayers, and a more significant benefit to a narrow set of business users, namely the trucking industry?  Why should taxpayers subsidize this road when the identified benefits to the community will be marginal compared to costs - and probably non-existent when you factor in opportunity costs (what we'll be missing out on doing because we're paying for the Maley folly).

Greater Sudbury - Future Development

Some believe that Maley Drive may be the lynchpin for other new roads, such as widening MR 35 to Chelmsford and building the Barrydowne Expressway from New Sudbury to Hanmer.  In these grand visions, a multitude of new lane kilometers will open up the Valley (East and West) to new residential, commercial and industrial development.

Unfortunately, that development just isn’t going to come.  With enough lands already set aside to
meet our development needs for half a century, we don’t need to build more roads to facilitate new development.  Yes, the outlying areas of the City will grow – in fact, the Hemson Consulting report forecasts that those areas will continue to grow through to 2036 at the same rate that they’ve been growing, and approximately two thirds of new residents will reside outside of the former City of Sudbury.  But in terms of real numbers, we are talking about just 10,500 people – and only several thousand new households.  These aren’t big numbers, and they can easily be accommodated on lands already set aside for development in both the former City of Sudbury and in the outlying areas.  The presence or lack of presence of Maley Drive will not change a thing.

However, should we really expect two thirds of new residential growth to 2036 to occur outside of the former City of Sudbury? This assumption may need to be tested, although I understand why Hemson has included it in their report.  If the future was going to be like the past, then the trend seems a logical one.  But the future isn’t going to be like the past – we know that.   As we become even more concerned about the costs of development, are we going to continue to subsidize a suburban built form? 

Prosperity: Getting Prices Right

We would be wise to take a closer look at where the lion’s share of anticipated growth in our City should be occurring – with an eye to making our City more livable while simultaneously keeping our collective costs down.  Right now, there’s a prevalent misunderstand at large in our community in which citizens believe that property taxes from the outlying areas are subsidizing the former City.  This misunderstanding, arising from an extremely limited discussion around area rating back at the time of amalgamation, has led to considerable resentment from those living in the outlying areas.
At the time of amalgamation, it was decided that property taxes would be area rated depending upon the level of service that parts of the new City would be receiving for fire protection and transit.  At the time, it was recognized that it would be prohibitively expensive to extend the level of service enjoyed by the former City of Sudbury to the outlying areas for these two services, and as a result, a formula was developed whereby outlying area property taxes were – and remain to this day – lower than those of inner city taxpayers.

Some – mainly those in the outlying areas – have always believed that this area rating didn’t go far enough, given the perceived lower level of services that they continue to receive from the City. 
Others recognize that the chances are the opposite is happening: that inner city ratepayers are subsidizing those living in the outlying areas.  This observation is not based on any specific study of the City of Greater Sudbury, but rather based on studies from a multitude of areas which compare the costs of suburban and exurban living to those of urban areas, and which show on per capita basis, the servicing costs of suburban and exurban living are much higher for municipalities.  So unless Greater Sudbury is different from just about everywhere else, our reality is that our municipality experiences higher costs servicing the outlying areas than the inner city – but taxpayers in the inner city are paying a higher share of taxes than those in the outlying areas!

This is an example of perverse pricing.  And it is examples like this which we can expect to see turned on their heads going forward into the 21st Century.  Getting the price right is going to become extremely important to decision-makers.

For Whom The Road is Tolled

For Greater Sudbury, that means that we will likely see a shift away from the desirability of developing in the outlying areas in preference to areas within the former City.  With new policies promoting second suites, and smaller, denser and (in theory) more affordable built form in locations which are transit supportive and include cycling and pedestrian infrastructure, we can expect the former City’s predicted share of development will be more than the 1/3 forecast by Hemson.  And this will especially be true if we end the subsidies for suburbia and move to a user-pay system for servicing – particularly for roads.

While municipalities in Ontario do not currently have the authority to institute road tolls (only the province can do this), you can bet at some point in the not-too-distant future, as part of a larger suite of municipal revenue-generating powers, cities will get these powers.  We often think of tolls as being collected in person or electronically at a booth or gate of a highway, but there are many ways in which users of road infrastructure can be made to pay for the actual costs of their use (see: "We Can't Get There From Here: Why Pricing Congestion is Critical to Beating it," Canada's Ecofiscal Commission, November 2015).  New technologies finding their way into vehicles right now will be able to facilitate the collection of fees for each lane kilometre driven, and raise and lower those fees depending on the time of use.

We’re already smart-metering our energy use – one day soon it may very well be that we’ll have smart meters in our cars as well.

Turning the Future on Its Head

Let’s be clear: this approach to paying for our roads will turn the current situation on its head, because it will end the subsidy which road users have enjoyed.  By having users pay for their use, we’ll actually likely decrease congestion, as our roads are currently experiencing excess demand thanks to the subsidy.

When you pay people to drive, that’s what they’re going to do.  And that’s what we’ve been doing. We can’t afford to keep doing this – not only is it not equitable, but the “net public good” which we derive from subsidization is questionable at best, and likely non-existent (see: “The True Costs of Driving,” the Atlantic, October 25, 2015).

Those looking at Maley being the first in a series of new roads in our City, ostensibly to fuel suburban growth in the outlying areas, need to consider what the future is going to be like.  The pursuit of a 1950s-style dream of high-speed roads that open up vast tracts of new land for low-density single-family homes isn’t in the cards for the future we’re going to have.  That’s not to say it couldn’t happen – if our decision-makers want to make foolish and fiscally ruinous decisions to build more roads and maintain them over time when none are demonstrably needed, than it very well could happen.

But if we really want to get our financial house in order, and maximize our opportunities for prosperity going forward, we have to change the way that we spend public money.  If we choose to subsidize a project, program or activity, we have to be certain that we receive a net public benefit from our subsidy.  Making the case for new roads, particularly in a low-growth environment, is one which will fail time and again the test of net public benefit.

Getting Our House in Order

We here in Greater Sudbury are already going to be facing numerous, difficult challenges going forward, many as a result of past land use decisions which created our sprawling City.  As much as we might like, we can’t go back and change time – or wipe the map clean like you can in Sim City.  We’ve got to live with what we’ve got, and retrofit suburbia as best as we can.  But there are a number of things which we know we must not do – and perpetuating an unsustainable, fiscally unsound built form has to be at the top of that list.  One of the ways of accomplishing this is to stop new roads that we don’t need.

Maley Drive, like many of the road projects City engineers have talked about for decades, has no future – or rather, our future should not have Maley Drive in it.  If there actually is a benefit to be derived from Maley, it’s one which will accrue almost entirely to as specific industry.  Taxpayers should not be asked to foot the bill – upwards of $130 million – for a road that we don’t need and can’t afford, and is in the wrong place for development which isn’t going to happen anyway.  If the beneficiaries of the road believe that there is value in its construction, let’s figure out a way to make sure that they are the ones on the hook for the lion’s share of the costs – either through cost-sharing agreements as contemplated by the City through the 2005 Transportation Study Report – or through user fees.

(Opinions expressed in this blog are my own and should not be considered consistent with the views and policies of the Green Parties of Ontario and Canada)

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