Ballooning Transit Costs
Major transit projects such as light rail or bus rapid transit have become popular measures to place on the ballot in cities around the country. Such projects are thought to transform metropolitan areas into “world class cities,” and the benefits of a speedy alternative to driving in traffic seem to be a worthwhile investment for any community. But, when residents are asked to vote on a tax to fund these projects, do they have the necessary information to weigh the full costs against any benefits?
Chances are voters may have no idea what they are getting themselves into. More often than not, major transit initiatives end up costing far more than their original estimates. Three Danish university professors reviewed over 250 transportation projects in the United States and Europe to determine whether initial cost forecasts proved accurate. The results, published in The Journal of the American Planning Association, indicated that nine out of ten projects went over budget by an average of 28 percent. [1]
What is behind this phenomenon?
One of the major obstacles to obtaining an accurate estimate of costs is political. The more accurate the estimate, the greater the cost associated with performing it. Policymakers may choose to fund a less expensive estimate so as not to consume a large portion of their budget for a project before ground is even broken. This allows them to avoid political heat over the cost of a study. This applies to the study of other alternatives, as well. Accurate estimates of the costs to build both what agency heads want to build, as well as what they would prefer not to, would eat up a great deal of funds. [2]
This political force also weighs heavily on the forecasters themselves. According to Dr. Martin Wachs, Director of the Institute of Transportation Studies at the University of California, Berkeley, “forecasts are often expected to be advocacy which at the same time can be presented as to the public for political reasons as the result of unbiased analysis.” [3]
Another major difficulty with estimating costs has to do with how relatively rare large-scale transit projects are. Calculating the costs of building a ranch house in a particular area should be fairly straightforward, simply because there has likely been a great deal of similar construction to provide a comparison.
“Unlike houses, large projects aren’t built everyday, and so less data from ‘previous’ projects is available,” says Leroy Demery, a California-based transportation consultant. “As a practical matter, ‘unanticipated’ and ‘unknown’ factors will almost certainly turn ‘plus or minus’ into a ‘plus.’” [4]
Portland’s light rail system, for instance, cost nearly three times to build than originally projected. And by the end of construction, the Los Angeles to Long Beach light rail cost four times the original estimate. [5] In Miami, a new metro system was forecast to cost roughly $1.73 per passenger. At the time for which the forecast was made, cost per passenger had risen to $16.77 per passenger, an 877 percent jump. [6]
Based on these realities, can voters truly trust that the amount they vote to approve will be what they end up paying for?
According to Alan Altshuler, a professor of urban policy and planning at the John F. Kennedy School of Government at Harvard University, “The whole structure of incentives is extremely strong to underestimate costs. The temptation is very strong to take the most optimistic view because it's helpful in getting the project approved.” [7]
Regardless of whether accurate estimates for major transit projects are either cost-prohibitive or implausible due to the specifics of a project, the duty to fully represent the potential costs to voters falls on the shoulders of those who seek approval at the ballot box. If it is the case that cost overruns are simply an expected part of the construction process, it is only fair that this be explained to the public. Anything less should give voters reason to question the character of those backing transit proposals.
Notes
[1] Michael Wilson, “Study Finds Steady Overruns in Public Projects,” The New York Times, 11 July 2002. Available at: http://www.nytimes.com.
[2] Leroy W. Demery, Jr., “Construction Cost Overruns, ‘Strategic Oversimplification,’ and Wendell Cox,” available at: http://www.publictransit.us.
[3] Martin Wachs, “Ethics and Advocacy in Forecasting for Public Policy,” Business & Professional Ethics Journal, Vol. 9, No. 1 & 2 (Spring/Summer, 1990), pp. 141-157.
[4] Leroy W. Demery, Jr., “Construction Cost Overruns…”
[5] Wendell Cox, “Liar, Liar,” Europe Techcentralstation, 8 July 2002.
[6] Martin Wachs, “Ethics and Advocacy…”
[7] Michael Wilson, “Study Finds…”
Matthew Hisrich is a policy analyst and Jen Melby is a former research intern with The Buckeye Institute.
