Wednesday, May 09, 2007

Funding KRM

KRM (Kenosha-Racine-Milwaukee) train advocates will tell you that the projects initial investment and the projected annual operating losses are nonetheless worth it because Racine will be a more wonderful place to live and therefore property values will rise and we will all be richer and happier as a result. Perhaps there is a way to allow KRM supporters to bet on their assumptions.

Suppose we allowed KRM supporters to agree to fund the project with an initial increase in THEIR property taxes. Once the project is paid off with their taxes, they could recoup their investment with their increased property values. To sweeten the pot, their property could be taxed at their pre-KRM value until their initial tax investment is paid off. Heck, we could even allow them to profit even further, as it is they who would be taking the risk.

Meanwhile, those who opt out of the voluntary KRM tax would not get a free ride. They would pay the full amount of taxes on their increasing housing values. They would have to pay the full fair for KRM usage (as opposed to the self-subsidized price for KRM investors), and they would be denied the additional profits that might accrue through tax breaks on increasing property values.

What I am proposing, absent the details, is a quasi-privatized train system, or to use a favorite local term, a public-private partnership. I understand that the notion of allowing individuals the option of selecting or rejecting government programs is both unusual (if not unheard of) and potentially troublesome. Our local peaceniks would love the option of not paying for military protection, for example.

The idea is perhaps a bit nutty. But is it any nuttier than thinking that one small industry, car rental companies, can foot the bill for this enormously expensive undertaking?


Anonymous said...

Most refreshing idea.
Wouldn't it be nice if our system allowed for an experiment like that.
I think it would be very telling if we took a survey to see how many "supporters" would agree to such a plan.

gopfolk said...

“Once the project is paid off with their taxes…” But therein lies the rub this project does not go away…ever! There will be year over year costs to maintain the line and based on the projections the rental car tax fails to cover them.

Then there is the issue of those supporters that move…do we move the tax with them? What if they leave the city/state? Who then picks up the cost?

Nice try Dennis but I still wouldn’t support KRM.

Caledonia Unplugged said...

Denis, I feel like you're baiting me...and also wondering if you've been hanging too much with our Mayor recently! :)

OK, first the "opting" out of government programs correlation - Our U.S. Constitution provides for "common defense" and gives that funding power to the President and Congress - elected and accountable to the people. RTA, the organization responsible for the KRM funding, on the other hand, is neither elected nor accountable - HUGE difference.

Let me provide some details...As far as the property tax - I understand the concept, it is a little "nutty" and in another initiative, it might be viable, but in the case of KRM, it would be insanity. The annual subsidy at $4-5 million alone would negate any profits these individuals would see from increased property values.

Let's assume you have 2,000 Racinians willing to take you up on this offer, I believe an overly high estimate. (There may be more riders, but only ocassional users that won't buy into this proposal, and many users won't be Racine residents, so you'd need other counties to buy into this plan as well.) They would each increase property taxes by $2,000 - $2,500 each year...JUST TO COVER THE "ANTICIPATED" ANNUAL SUBSIDY, NOT TO MENTION ANY BUDGET OVERRUNS ON THE PROJECT, OR SHORTFALLS FROM LOW RIDERSHIP. I'm guessing it would be closer to $3-4,000/year...again IF there are 2,000 takers.

Realistically, you might have 500 people take you up on this - they'd be looking at a $10,000/ year property tax increase! With today's faltering real estate market, they won't recoup that...but I understand that's where the gamble comes in.

Let's assume that the average fare on KRM is $10.00/day (5.00 each way) and the business commuter uses this train everyday for a total of $2400/annually! And again, there are business fares that could substantially reduce that cost.

So, if I'm one of the 500, I'm paying $10,000+ additional in property taxes, and still paying possibly $1,000 for my commute, when, I could be paying $2,400/year or less.

And as gopfolk stated: this tax never ends - there will be an annual subsidy for as long as KRM exists, so they will never realize any gains, therefore no incentive to be part of this program.

IF KRM anticipated 50,000 Racinians a day, this might be a good deal, however, you would have created a bureaucratic disaster in the county/local municipality treasurers' offices!

The numbers with KRM don't add up for this type of proposal. Remember, this is going to be used almost exclusively by commuters closer to the lakeshore, and by J-Wax.

BUT, you did hit on one absolutely BRILLIANT IDEA: "They would have to pay the full fare for KRM usage" - this is the one that works. Charge users of the train what it costs to run this train. PERIOD!

Denis Navratil said...

Gopfolk, I would likely be one of those choosing NOT to risk my own money on KRM.

Calunp, I think that if we actually allowed people to invest their own money in the manner that I proposed, the project would die before it ever started. Many people in the area want the train, to be sure, but they want everyone else to foot the bill. If they actually started to assess the likelyhood that their soaring property tax theory would come to fruition, then I suspect they would be considerably more conservative with their own money.

eric said...

Denis, I will opt in for KRM via my taxes, but would like to offset somewhat by opting out of our share of the I-94 freeway destruction/reconstruction costs. Also, I never fly since retiring, so I'll be looking for my infrequent flyer discount there too. Why should I be funding these transportation methods I don't use? Additionally, I need the savings so I can afford to buy $3 gas for our lawn mower as the grass is growing like crazy.

Caledonia Unplugged said...

Denis, thanks for your clarification - my faith has been restored that Denis has not been kidnapped by KRM aliens! lol

eric - one word: COMMERCE. Think about it.

Anonymous said...

Yeah Eric,
Your plan works as long as you do not use anything that has been freighted by truck on I-94, or transported on an airplane.

eric said...

You're right! Commerce is important. Perhaps that's why the Chamber of Commerce supports KRM.

sandy said...

I would volunteer to choose to pay KRM with my taxes, count me in. Although, if we are going down that route I want the ability to choose other areas my taxes do or do not go towards. There are many things, many programs, that I do not want a single penny being spent on yet I have no choice. For starters, I do not want my tax dollars going to expand I-94 to 8 lanes, I do not want to pay for the jail expansion, I would like to see my tax dollars stop going towards certain low-income programs, like the day-care program that is being widely abused in Racine. There are so many more things I feel are less worthy of tax dollars, yet I have no choice.

Eric, not sure how large your yard is but if it's fairly small, try out an electric mower. We purchased an electric mower last year and it works great for our small city lot. When I lived in Germany, we were not allowed a gas mower, it had to be electric so I got accustomed to them over there and actually like them better than gas mowers, it is less of a hassle with a small lot.

Denis Navratil said...

To Eric and Sandy, don't think of this as a government program, like police and jails etc... think of it as a privitized train where the government is merely helping to facilitate your project through the use of voluntary tax hikes. You take the risk, you get the reward of higher property values. Of course, the down side would be that your investment might fail and that the increase in property values might not materialize.

eric said...

Denis, you could privatize the freeways too. They do that in some other countries. Just my opinion, but the Chicago tollway runs better since the private contractor from overseas took over. Age old question of where to draw the public/private line.

I'm willing to take the risk on KRM. A commuter rail service in a corridor between two large cities strikes me as a good investment. My in-laws made a similar investment and it paid off well. Maybe it will, maybe it won't. I'll bet on it, one way or another.

sandy said...

Denis, if you are suggesting the train be privately funded then other public transportation should also be included in this experiment as well, like the Belle Urban System - City Bus. I don't have the numbers but I suspect it is not profitable. Why single out only one form of public transportation? Out of curiosity, what exactly do we fund with tax dollars that makes a profit? I can't think of anything offhand. Most things just end up costing more every year.

Denis Navratil said...

You are correct Sandy. I can't think of any government projects that are profitable. But I hardly think this is a good reason to add more government projects like KRM. Rather, we should recognize the innefficiency and corruption inherent in governments of all kinds, and work to return the wealth and power to individuals where it belongs. This is not to say that there should be no role for government (I am not an anarchist), but that role should be for essential services like police protection, courts, military and the like.

B said...

That is a novel idea, a sort of KRM bond program, and worth consideration...
I have to wonder, however, about the other major infra-structure projects and how they are funded, and whether or not they reap a profit. How much money do automobiles, associated infrastructure, negative externalities (health, injury, stress,time,insurance)cost the average user? How has the automobile affected the designs of our cities/neighborhoods.. what are the social implications?

The argument follows that there exists alternatives in public transportation, but do they trulyexist? I suggest an experiment, ride the bus from one side of town to the other. Bring a stop watch, and maybe do it in the rain so when you transfer you get soaked, standing unsheltered along the road side. Now try to get out of town...impossible.. Well, if you haven't got a car, you must be poor, and if your poor you must have all the time int he world, right? It is a broken system, and designed as such since its inception back in the 50's. Let's start by fixing that, following the model of streetcars used during Racine's flourishing past. Buses dedicated to simple parallel routes, that follow the logical routes that would you take if you were driving. East/West..transfer.North/South.
no zig zagging, no stops every twenty feet, and right of way.

Increased accessibility to the enormous markets of Urban and peri-urban Milwaukee/Chicago will undoubtably help Racine Co.s workforce, especially with the ongoing loss of the manufacturing/agricultural base. I have many friends now that commute daily. What will that commute look like in 25 years as congestion increases and oil prices continue to climb? Gopfolk is correct in the assessment that this project will last, and it will also relieve/prepare us for the inevitability that lies ahead (congestion, energy crisis, health crisis) all the while boosting quality of life. Now how about that $ 1.9 billion for kenosha and racine Co.s' I-94, not to mention the Billions going into Milwaukee Co's Interstates? How many lanes will it take? Let us consider Los Angeles.. 8-10 lanes going each direction, completely stopped for 4 hours a day... add two more lanes? Is that the answer? Where is the proof?
I don't suggest that there is no need for automobiles, however I do suggest that we consider mass transit for metropolitan areas... and Racine Co. is fast becoming a part of Metropolitan Milwaukee and Chicago... for better or worse, that's reality.. so why not benefit from it as much as possible?
So the dilema is how to pay for these major infrastructure projects that for some reason or another are not included in the Federal Transportation Monies.... maybe that's the place to start.