Wednesday, April 24, 2024

Here’s (NOT) the Real Reason Houston Is Going Broke

Strong Towns posted "Here’s the Real Reason Houston Is Going Broke" earlier this month, ironically on April 1st because a lot of what they said was absolutely foolish.  The core of their argument is the same argument Strong Towns always makes: that sprawl is somehow fiscally unsustainable, despite it being the default form of development since Ford made the Model T for the masses with incredibly few municipal bankruptcies over that century+. 

It includes this excerpt:

"That’s 37 feet of street per person, on average. I don’t know the going rate for a foot of street in Houston, but when utilities are included, it must be well into the thousands. That means that part of the wealth of each Houston resident, as collected through taxes and fees by the municipal corporation, is expected to maintain six figures worth of infrastructure. Every single person. A family of four has a generational liability of at least a half million dollars just to maintain essential infrastructure."

This is exactly the kind of hand-waving that makes me lose respect for Strong Towns: somehow 49 yards of asphalt plus a bit of water and sewer pipe is a "half-million dollar liability" for each homeowner instead of easily paid for by 30-50 years of normal property taxes for lifetime replacement?? Somehow it costs more than replacing their entire ~$300k house?? 🤔🙄

And if the suburbs packed full of homes are so uneconomic, then how is every rural county in the country not bankrupt?? They have *way* more infrastructure per person at much lower property values per acre!

The core fiscal problem is not sprawl - it's that it's too tempting for politicians to take money that should be going to infrastructure renewal and siphon it off for other programs, including police and fire raises. Kick the can to the next guy...

All I'm saying is that a bit of asphalt and pipe is a very small expense relative to the cost of building an entire house, and it is definitely affordable to replace it every 30-50 years. Whether politicians manage the taxes properly to do so is another issue...

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Wednesday, April 17, 2024

Houston tops affordability and innovation, big US homes, Houston's winning secret sauce, and more

 A few smaller items this week:

  • US vs European homes graphic below: "A good visual showing how huge US living spaces are compared to European. The average person below the poverty line in the US lives in more square feet of living space than the average European." (HT Michael). This is an often unsung advantage of Texas and especially Houston: not just lower home prices but how much home you get, plus the amenities of master-planned communities. But wow, those Mormons in Utah build some big homes for some big families! (click the graphic to enlarge it)

  • A great tweet from John Arnold: "Houston has bad weather, no natural beauty, and little history. But that’s a feature, not a bug. It means government has to be responsive to the people to create a place people and businesses want to locate. It must be efficient with taxpayer money and consider tradeoffs. It must create an ecosystem that leads to a high quality of life for its residents. Lose this focus and the city fails. There is no presumption that residents must acquiesce to the city; the city must work for the residents. Turns out there’s great demand for this concept: the city has gone from the from the 45th largest in the US to the 4th largest in 100 years. It's a simple concept but one I find wanting in many legacy cities with more natural advantages."
  • Houston needs this - more private operators covering suburb-to-work center routes that METRO doesn't.
  • Houston #6 on Top Metro Areas for University Innovation Impact, just barely behind the SF Bay Area and the only metro in the southern US in the Top Ten.  
  • High interest rates don't help, but Houston still requires the third-lowest income in the country among major metros to afford a mortgage (behind St. Louis and Detroit).  HT Oscar. (click the graphic to enlarge it)

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Monday, April 08, 2024

Metro 2023 Annual Report: stats improve, but $13.93 boarding subsidy remains excessively high

This week we're lucky to have another one of Oscar's excellent analytical posts.
Metro's 2023 annual report, covering the 12 months ending September 2023, was recently posted online. This is the third annual report fully affected by the Covid transit downturn. While ridership and financial statistics continue to improve, operating cost and boarding subsidy continue to remain excessively high.
We can see in this plot that ridership was down 50% in 2021, 36.3% in 2022 and 23.8% in 2023. So there is steady progress toward pre-Covid ridership. At 68.6 million, ridership remains 33.3% below the 2002 peak of 102.8 million.
Metro's operating budget exceeded $1 billion for the first time in actual dollars in 2023, coming in at $1.006 billion, although inflation-adjusted values exceeded $1 billion in 2017, 2019, and 2020.
The following plot shows Metro ridership on a monthly basis through February 2023, which had the best ridership performance in the post-Covid era. Overall ridership in February was down 14.7% versus the 12 months prior to Covid, which is better than the national average of down 24.2%. We can see in this plot that ridership gains are being powered by traditional bus service, which is only 4.8% below the pre-Covid average.
The next plot shows the operating cost per boarding and taxpayer subsidy per boarding, which benefited from improved ridership. For the 68.576 million boardings, the operating loss was $955.3 million. Subsidy per boarding was $13.93, down from $15.10 (inflation adjusted) in 2022. Operating cost per boarding was $14.59, down from $16.36 (inflation adjusted) in 2022.
Even with improvement, the 2023 values are far higher than historical values, and the operating cost is much higher than the national average. Looking at data in APTA national statistics (see spreadsheet tab 73), in 2019 the national average operating expense per boarding was $5.20, and Metro was $9.50. In 2021, the most recent data available at APTA, the national average was $11.25 and Metro was $17.57.
Last year I reported that a regular weekday Metro rider making two boardings (with no transfers) for 250 days per year received an annual subsidy of $7,550 dollars, which was equal to the annual operating cost of a new small sedan for 12,000 miles per year driving. With the subsidy reduced and the cost of car ownership going up, I could find only two new cars using the AAA calculator with an annual ownership cost less than the 2023 Metro ridership subsidy of $6,965. As shown in the plot, they are the bare-basic Kio Rio and Nissan Versa. For 5-year-old cars, it still takes a small economy car to be below the subsidy. Even with the improved performance, the $6,965 annual taxpayer subsidy per regular rider remains shockingly high.
The next plot shows major Metro budget items. Metro received yet another huge influx of federal funds in 2023, a $221 million operating grant and $252 million total grants including capital grants, lifting total revenue to $1.37 billion. Metro received mind-boggling Covid operating grants totaling $714 million in 2020 and 2021, while fare collections in those two years was down only $81 million compared to 2019 fare revenue. The annual report states the following:
"Operating grants (includes capital grants authorized by the FTA for use in maintaining capital assets) are primarily used to maintain transit vehicles and operating specific transit programs such as METROLift and METRO STAR Vanpool. ... The significant increase of $216.7 million in FY2023 primarily related to the funds from the ARP Additional Assistance, Urbanized Area Formula Program and preventative maintenance program." [sic]
The problem with these huge grants which have no correlation to ridership is that all cities receive them, and of course all the expense gets piled onto the $34.6 trillion national debt.
Sales tax revenue exceeded $1 billion for the first time in 2023, coming in at $1.028 billion. Infrastructure assistance, generally used for road maintenance and improvement, was $193 million, down 4.3% from the 2022 inflation-adjusted value of $202 million ($196 million actual).
The next plot shows Metro fare revenue and average fare collected per boarding. Average fare per boarding plummeted after Covid and continues to worsen, dropping to $0.66 cents in 2023, which is the lowest value in the plot (which starts at 2001), and probably the lowest ever in the history of Metro on an inflation-adjusted basis.
The next plot shows the average fare collected as a percent of the cost of providing the service for a boarding. With an average fare of $0.66 and a cost per boarding of $14.59, the fare covers 4.5% of the cost, which is a slight improvement from 4.3% in 2022.
In April 2023 I posted an article called "Does Metro's Advertising Budget Influence Local Reporting". The local media seems to treat Metro very nicely. For example, I never saw any media outlet report that the per-boarding taxpayer subsidy was $17.57 in 2021 and $15.78 in 2022. Could the favorable media treatment be due to Metro's large marketing budget, with millions of dollars being spent on advertising? Metro's marketing budget spiked upward to $18.2 million in 2023, the second-highest value in the plot which goes back to 2010.
Metro's New Leadership
Mayor Whitmire recently appointed a new board chair and new board member. A good goal for the new Metro leadership is to lower the $13.93 taxpayer subsidy per boarding back to pre-Covid levels of around $10 per boarding. Ten dollars is still a very high subsidy, but a reasonable goal to achieve. Reaching this goal will require continued ridership recovery and, most importantly, curtailing excessing spending and working to improve the efficiency of operations.
I would also be interested in knowing more about the low average fare collection per boarding. The official Metro fare is $1.25, and rates for Park & Ride service are much higher. Yet Metro's average fare collected is only $0.66, the lowest since 2001 and probably the lowest in Metro's history (on an inflation-adjusted basis). What's the reason for this? Is Metro not collecting fares? Is Metro giving more and more riders discounts or free rides?

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Monday, April 01, 2024

Mayor Whitmire balances city budget without new taxes or a garbage fee

In a surprising turn of events, Mayor Whitmire of Houston has unveiled a groundbreaking plan to balance the city's budget without resorting to new taxes or fees. How, you ask? By turning the volume up on noise ordinance fines, especially for those booming car sound systems that seem to think the entire city is their personal concert hall!

It's no secret that Houstonians love their music, but sometimes that love can get a little too loud for comfort. Mayor Whitmire has decided to tackle this issue head-on. Starting today, fines for noise ordinance violations will skyrocket.

Imagine a world where your favorite jam could cost you a pretty penny if played at a volume so loud your entire car is rattling. Mayor Whitmire's plan is simple yet effective: the louder you blast your tunes in public spaces, the heavier the fine. Beyond that, fines will triple from 10pm to 7am as well, and after a third violation vehicles or venues will be confiscated and auctioned off! It's a surefire way to encourage everyone to enjoy their music responsibly, without disturbing the peace for others.

Projections indicate the fines in Midtown alone will be able to cover the new firefighter pay deal.

Critics may say it's a bit extreme, but supporters argue that it's a small price to pay for a harmonious city. Plus, think of the revenue boost for Houston's coffers! Who knew that turning down the decibels could turn up the dollars?

So, if you're cruising through Houston with your bass booming, beware! Mayor Whitmire's ears are tuned in, and your wallet might just feel the beat in more ways than one. Cheers to a quieter (and financially sound) Houston!


Hope you enjoyed this year's April Fools post ;-D 
Here are previous years if you missed 'em and would like a chuckle: