Grand Rapids Pundit

Fiscal Armageddon – Time for Tough Choices

The October revenue report for the state of Michigan has been released, and there’s very little good news to be had. Revenues were again below the most recent projections. October saw tax collections that were $31 million below expectations. The best real-time indicators of economic activity, sales taxes and income tax withholding, are both down, again.

Due to the near-complete collapse of state revenues, the cuts have (finally) been forthcoming. Public schools received per-pupil cuts of approximately $300 for the current fiscal year. State agencies have been ordered by the governor to cut 10% of their budgets. The cycle of layoffs and reduced revenues continues.

The result? Governor Granholm and the MEA have begun hyperventilating. This week they staged a massive lobbying effort to get legislators to increase taxes. Apparently they don’t require Economics 101 in teacher colleges.

On the city level, Grand Rapids has seen a similar decline in income tax revenues and property tax revenues will probably see declines due to historic drops in resale values of homes and commercial property. Immediately upon announcing the layoffs of 125 city employees, Mayor Heartwell called for a ballot question to raise taxes in the city. He claims there hasn’t been a tax increase in 15 years. Apparently the constant reduction of the personal income tax exemption, the added property tax bill “service fee,” and the increase in trash collection property tax don’t count as tax increases in the mayor’s book.

Oh, and don’t forget that The Rapid is coming back, probably in early 2010 to ask, again, for a tax increase to build the redundant and wasteful “Silver Line” bus service, to clog up Division during rush hour.

But the fiscal problems are just beginning, and there is very little sign that anyone is proposing real solutions. The “easy” way out, increasing taxes, will only work so much. They will run in to the law of diminishing returns. The speaker of the state house, Democrat Andy Dillon, apparently grew some huevos and bucked his MEA masters by proposing the pooling of all public school health plans into one statewide health plan. The MEA, fearing the loss of their money-laundering cash cow health plan MESSA, promptly went ape-sh*t. This illustrates the difficulty of real, substantive change at the state level. So many special interests peddling their influence (in the form of money) makes it nearly impossible to propose an innovative solution to the state’s structural budget problems.

Of course, then there are the unsustainable defined-benefit Ponzi public pension plans. They will fail. It’s just a matter of time. Even politicians can’t repeal the laws of compounding numbers. But I’m sure they will try.

But we should turn to the local level, where real people can have the most chance of affecting change. We can, as a city, choose to continue down the ultimately disastrous path of “the easy way out,” or we can have real, substantive change in how city government does business.

A quick overview of what’s going on at the local level: As state revenue declines, so does the state subsidy to cities called revenue sharing. Revenue sharing has been on the decline for several years. City leaders keep pointing to how much has been “lost,” but their complaints fall on deaf ears – or at least ears that understand that cities fall further back in line from other special interest groups.

As revenue sharing declines, so have city income tax receipts. The city’s income tax revenue is down 14% (apparently year on year).

Not only has revenue been on the decline, the gigantic hydrogen bomb of the city’s pension system is preparing to detonate. The city’s 2010 fiscal plan (published before the layoffs were announced this week), is available here. One paragraph should stand out and set off all the alarm bells in the city:

In FY2007 our two pension retirement trusts were 110% and 120% funded.  Both employer and employee contribution levels were at or near the lowest possible levels.  This advantage was eliminated by the breathtaking decline of the financial markets over the past 18 months.  We now know that our retirement funds are significantly underfunded. This means that both employee and employer contributions must move dramatically higher.  Proposed changes to actuarial assumptions and plan provisions will freeze employee contributions at the bottom of the contribution range and provide additional time for the City to adjust to higher employer contributions.  Nonetheless, the employer share will go from 7.7% in to 9.29% in FY2010, and 13.62% in FY2011 for the General Pension and from an FY2010 rate of 0% to an estimated 23% in FY2011 for the Police/Fire Pension.  These percentages assume that we will be able to implement critical smoothing techniques that will mitigate the intense upward pressure on required contributions. The increase in employer funding requirements contributed to the FY2010 GOF operating deficit of $2.9 million.  Unless we see a significant increase in the market value of retirement plan assets over the next couple of years, the estimated pension contribution will continue to rise. (emphasis mine)

Translation: 2010 layoffs are just the beginning. Fiscal Year 2010 includes a pension contribution (as a percentage of salaries) for the police and fire employees of 0%. Yes, 0%. This will go from 0% to 23% (of salaries) in one year. A search of the fiscal plan shows that total personnel costs for police and fire are about $67 million. Let’s back out about 40% of that (just a wild guess) to come to actual base salary cost. We come up with about $40 million. Now,  re-read the above paragraph. The city is going from contributing $0 in the current fiscal year to the police and fire pension plan to (my estimate) of 23% of salaries in 2011 – or about $10 million. The increase in contributions for the other defined-benefit pension participants on the city’s payroll will increase from 9.29% this year to 13.62% next year. This is unsustainable.

The mayor’s solution? Raise taxes.

Lest I be declared someone who only points out problems and no solutions, here are a few suggestions:

1. Lay off all non-essential employees. This includes the “equal opportunity” department of five people.
2. Outsource information technology (IT) services.
3. Eliminate the Office of Children, Youth, and Families.
4. Convert all employees, now, to a defined-contribution retirement plan. NOW.
5. Eliminate the Downtown Development Authority. This entity sucks up about $17 million of local property tax revenue that would normally go to the city’s general operating fund. The DDA also currently owns the Van Andel Arena. Sell the arena, pay off the outstanding bonds, and use the excess to pay off some of the DeVos Place bonds. The DDA currently operates as a taxpayer-funded subsidy to developers, giving away free money to those who ask.
6. Implement a fire department response fee. Most (if not all) homeowners insurance plans offer coverage if you’re charged for fire department response.
7. Eliminate the city’s trash collection services. There is a special property tax levied for this. There are plenty of private trash haulers. Once the trash collection services are eliminated, go to voters and ask them if it’s ok to convert the current trash levy on property tax to a general fund levy so that it can be spent on other city services (including police).
8. Contact every citizen and ask them what their priorities are. Do you prefer Police and smooth roads, or do you prefer an equal opportunity department and subsidies for developers?

If serious, dramatic changes are not implemented, the city will go bankrupt. This has started to happen in other states. There is no chance in h*ll that the economy is going to return to anywhere near where it was at the peak of the last cycle in 2007 – at least not any time soon.

Tough choices need to be made now – if our politicians can stomach it.

Posted by: GRPundit on Friday, 13th Nov, 2009

Rapid Silver Line: They Almost Got to Take Credit

An important article appeared in the Grand Rapids Press last week that highlights several issues regarding the failed Silver Line bus system and the false claims of economic development that are touted by the Silver Line’s supporters.

The Grand Valley Metro Council (very much pro-Silver Line) won $400,000 in federal grants to clean up several abandoned sites along Division avenue, in the hopes that this will attract more development. You can almost hear how this would have been announced if the Silver Line had passed. It would have been touted as the first in a series of positive developments because of the Silver Line. Of course, the Silver Line had nothing to do with this grant award, but it underlines the claims that these sorts of transportation projects somehow spur development. However, as this news item shows, the development is largely spurred by government subsidy, not the appearance of a fancy silver-colored bus line. The Rapid supporters confuse correlation with causation. It goes against logic that replacing the current buses with buses that are painted silver will someone convince people and business to move to Division Avenue.

As we have previously pointed out, the development in Portland around mass transit, as the pro-Rapid supporters love to point to, only occurred after government subsidies were enacted. The development did not occur due to the mass transit system. This is the heart of the pro-Silver Line argument; that the Silver Line “would have” spurred several dollars’ worth of development for each dollar spent. This is simply not the case. The only evidence the Rapid points to in support of their argument is a thinly-documented three page article, as we pointed out here.

However, this Press article also points out that they haven’t given up on the Silver Line boondoggle. The article states, “Although [The Rapid] expects the Silver Line route eventually to win the voters’ blessing, plenty of other properties could be helped in the meantime . . .” Clearly they aren’t done with trying to sell this mess to the voters. Based on the negative Silver Line feedback both in the Press and on other online sources, it seems unlikely that they can salvage this project without significant changes. Even the pro-transit people weren’t convinced about the need for the Silver Line.

Posted by: GRPundit on Wednesday, 13th May, 2009

Rapid Silver Line Goes Down

Rapid Silver Line: FAIL

It’s fantastic news for taxpayers and for fiscal sanity in the Grand Rapids area. Last night the expensive and redundant Rapid “Silver Line” tax increase request went down in flames. The overall vote total was 52% against and 48% in favor, but when looking at the six cities in the Rapid service district, we see that a majority of the cities rejected the request:

Grand Rapids – 53% yes, 47% no

East Grand Rapids – 64% yes, 36% no

Grandville – 36% yes, 64% no

Kentwood – 46% yes, 54% no

Walker – 32% yes, 68% no

Wyoming – 36% yes, 64% no

As you can see, Walker, Wyoming, Kentwood, and Grandville all soundly rejected the tax increase request and even Grand Rapids was closer than expected.

The pro-Silver Line people are predictably dour. The comments of Peter Varga, executive director of the ITP (Rapid), sum up their attitude perfectly. He said it was rejected simply because voters didn’t understand the request. Right. Voters heard from this blog as well as other groups (including our friends at KCFFR) who exposed the bad plan of the Silver Line. The Rapid folks tried their hardest to limit the information available on this request, but active citizens exposed the Rapid and let voters know the facts. This web site alone received thousands of visits from people searching for more information.

The message was clear:

• This new Silver Line was a duplicate of already-existing bus services
• The Silver Line would cost tens of millions of dollars (just for buses)
• The Silver Line would have cut off traffic on Division by shutting down lanes and dramatically increasing congestion
• The Silver Line was slower than existing bus services (see our previous posts on the issue)
• The claims of spurred development and “new jobs” were based on speculation and conjecture

In summary, bravo for the voters of the four cities who rejected this request. Make no mistake, they will be back, asking for more. Their next request will be for more than $100 million for an even more inefficient light rail line.

Posted by: GRPundit on Wednesday, 6th May, 2009

Rapid Silver Line – Bus “Slow” Transit

The supporters of the proposed $110 million Silver Line bus system in Grand Rapids tout it as a “Bus Rapid Transit” line. The proposed route of the Silver Line is up Division from 60th Street, a jog around the hospitals around Michigan street, and back to the Rapid station. The total route, according to Rapid, is 9.8 miles. It will take 35 minutes for the new “Silver Line” to travel this route. An important note here is that, as we’ve previously pointed out, Division will be turned into an effective two lane road (one lane each way) so that these Silver Line buses can have their own dedicated lanes. This supposedly will speed these buses up because they won’t have to share these lanes with regular cars. 

But wait, the Rapid already has a bus, route #1, that travels from the Clyde Park Meijer, down to 68th Street, up Division, and around to the Rapid station. The total distance for the current buses on this route is 12 miles, according to Google Maps. In addition, according to the Rapid’s web site, the buses on this route take about 33 minutes.

Let’s do the math. The Silver Line is supposed to take 35 minutes to travel 9.8 miles, with dedicated lanes on Division. The current #1 bus, traveling 12 miles, takes 33 minutes, sharing the lanes like every other vehicle on the road. The Silver Line factors out to be traveling at around 16.8 miles per hour. The current bus factors out to 20.57 miles per hour.

Huh? How do they call this Bus Rapid Transit? It’s Bus Slow Transit. It’s slower than the regular buses that take the same route now!

Don’t forget that these dedicated Silver Line lanes on Division will squeeze all current traffic on Division down to one lane in each direction. Traffic jam, anyone?

Be sure to cast your vote on this idea on Tuesday, May 5th, if you live in Grand Rapids, East Grand Rapids, Wyoming, Walker, Kentwood, or Grandville.

See our prior posts on this subject:

• Rapid Silver Line – More Concealment and Deceit
• Rapid Silver Line – Another Waste of Money

Posted by: GRPundit on Tuesday, 21st Apr, 2009

The Rapid Silver Line – More Concealment and Deceit

Grand Rapids Pundit has received one of the pro-Silver Line post cards in the mail, as I’m sure many residents of the ITP service district have (Grand Rapids, East Grand Rapids, Walker, Wyoming, Kentwood, and Grandville). This post card, which you can view here, exemplifies the continued contempt that the ITP/Rapid has for the taxpayers. The post card says virtually nothing about the reason for the tax increase. In fact, they bank on voters knowing as little as possible about this tax increase. The more voters know, the more likely it is that they will vote no.

The only detail the post card has on the Silver Line is as follows:

Silver Line is more like a light rail system than a traditional bus. A proven solution in other communities, it will maximize ridership opportunities, economic development, and travel-time savings. Silver Line vehicles will use:

• Dedicated lanes during peak times
• In-station fare collection to speed boarding
• Intelligent transportation system applications such as signal priority, allowing quick travel between stations

That’s it? Yes, that’s it. As previously stated, they don’t want you to understand all the details.

What is the Silver Line really? As we’ve previously reported, it is a Bus Rapid Transit line that will dedicate one lane each way on Division Avenue from 60th street to the Rapid Station for use only by these new buses. This means that Division will be limited to one lane each way for regular vehicular traffic during peak traffic hours (rush hour). You heard that right. Division will turn into a traffic nightmare, likely pushing traffic to side streets to find better ways to get where they are going.

They say that this new “traffic priority” system will allow for these buses to travel much faster than current buses (which already travel the same exact route as the proposed Silver Line). How much faster? Well, we don’t really see any improvement. The Silver Line’s route would be 9.8 miles long and would take the new buses 36 minutes to travel. Huh? Yes, that’s right, 16 miles per hour. We don’t honestly understand how they can call this a Bus Rapid Transit line.

But wait, it gets better! This whole project is a $70 million tax increase – all so that they can duplicate the bus route they already have. No kidding: they already have a bus that travels this route. There’s no reason to raise taxes by $70 million just to duplicate what’s already there.

If you are a resident of East Grand Rapids, Grandville, or Walker, you will see no benefit from this line at all. If you are in Kentwood or Wyoming and happen to live near Division street, you might be able to use this new line conveniently, but as said before, there already is a bus line on this route. Basically, very few residents of any of the six ITP cities will see any benefit, yet will be expected to pay for it.

In the same vein as the near-informationless post card, the Rapid’s pro-Silver Line web site lists one source for their claim that the “investment” in the Silver Line will create jobs and produce a return on investment through new development. They reference an article named “Bus Rapid Transit: A Powerful Real Estate Development Tool” by William Kaplowitz. They don’t provide a link to this article, nor the text of it. So we did a simple Google search and came up with the text of the article. Read it for yourself here. The article makes a couple of simple, poorly-documented claims about development, and that’s it. That’s what they use to try and get residents to raise their own taxes by $70 million.

What they don’t discuss is that most of the time this “new” development was already happening or happened only because government created tax incentives to do so. In other words, they confuse correlation with causation. Just because development occurred around same time as the bus system’s implementation, it doesn’t mean that the buses caused the development. For example: there already is a lot of development going on along Division. It is likely that the Silver Line people would say that the Silver Line caused that development if they try and tout the “benefits.” But once again, since there already is a bus line along Division, it’s hard to understand how new buses would suddenly spring up more development.

But this is how the ITP/Rapid works. They don’t release their budgets. They don’t make true ridership numbers (by route, etc.) easily available. They don’t release the true operational statistics of their system. They don’t release the minutes of their board meetings, as the City of Grand Rapids does. They operate as though they don’t need to be accountable. But they’re a publicly-funded body and they need to operate transparently. The Rapid operates secretively so that you don’t understand how they operate. It’s all part of their contempt for taxpayers and efficient operations.

Don’t forget for vote on Tuesday, May 5th if you live in Grand Rapids, East Grand Rapids, Wyoming, Kentwood, Walker, or Grandville.

Read more on this issue:

• Rapid Silver Line: Another Waste of Money
• Rapid Silver Line – Bus “Slow” Transit
• ITP Watch
• ITP Watch: Rapid Silver Line Blog

Posted by: GRPundit on Sunday, 19th Apr, 2009

Rapid Silver Line – Another Waste of Money

The ITP/Rapid transit agency is again asking taxpayers for a tax increase on Tuesday, May 5th. Once again, they are using an off-election date to try and get as few voters as possible. If you live in Grand Rapids, East Grand Rapids, Walker, Wyoming, Grandville, or Kentwood, you should vote no on May 5th. 

The new “silver line” that is proposed is what’s called a Bus Rapid Transit (BRT) line. What’s that? Basically, they will cut off two of the four lanes on Division and squeeze regular traffic into one lane each way so that these new “rapid” buses get their own lanes. Did you think rush hour was bad before? If this passes, Division will be a traffic nightmare.

Some common-sense reasons to vote no:

1. This is a $70 million tax increase in the middle of the worst recession since the Great Depression – plus another $40 million in taxes that will be spent from the Federal and State governments – bringing the cost to over $110 million for buses
2. There is already a bus line that has the exact same route
3. The residents of Grandville, Walker, and East Grand Rapids will see absolutely no benefit for their increase in taxes
4. How many people do you think live and work right along Division Avenue? This is another waste of money on a ineffecient and inconvenient fixed-line bus system
5. As previously mentioned, the “Silver Line” will absolutely choke up traffic on Division during rush hours

UPDATE: (4/16/09)

Since this original post, I’ve had several people contact me with more information:

• The Rapid Silver Line will travel 9.8 miles from 60th Street to the Rapid Station near downtown. The total travel time is 36 minutes, which factors out to a whopping 16 miles per hour! Wow, Bus Rapid Transit, indeed!
• The Silver Line will eliminate crucial parking along Division that small businesses depend on.
• The pro-Silver Line web site names one source for their claim that this spending will result in a 400% return on investment. However, a quick search on the Internet reveals that this “source” is just a three page article with no data to back up the claim.
• The Rapid has supposedly done years of studying of this issue. Why don’t they publish any of that information on their web site? What do they have to hide? The Rapid has a history of not publishing data – they still refuse to publish their budget online.
• The Rapid claims that this project will create up to 189 direct and indirect jobs. This project is costing $110 million (assuming it comes in on-budget). This means that there is a cost of $582,000 per job! Where do I apply?

See our other posts on this subjet:

• Rapid Silver Line – More Concealment and Deceit
• Rapid Silver Line – Bus “Slow” Transit

For more info, visit the new ITP Watch web site: http://www.itpwatch.org

Posted by: GRPundit on Monday, 13th Apr, 2009