Higher tolls, more responsive pricing mechanism recommended for I-405 by national consultant

A draft report from University of Minnesota consultants recommends steps to improve “performance of Washington’s tolled I-405 corridor.“The Seattle Times reports on the what was bound to be the headline recommendation:

The top toll on Interstate 405 should be raised beyond the $10 limit, so the express toll lanes don’t break down into delays, says a report by out-of-state experts.

They also suggest the Washington State Department of Transportation (WSDOT) should write a much tighter toll algorithm, to make prices rise from the 75-cent minimum toward $10 or beyond much earlier — during those critical minutes when cars suddenly flock into the left-side toll lanes. Higher pricing would prevent sudden overloads, they say.

The Legislature asked for the analysis, described this way by the consultants:

Washington state statute RCW 47.56.880 lists several general performance measures for the I-405 ETL facility. Of these, three measures are of primary interest to this study:

  1. a)  Whether the express toll lanes generate sufficient revenue to pay for all I-405 express toll lane- related operating costs;

  2. b)  Whether the express toll lanes maintain speeds of 45 miles per hour (mph) at least 90 percent of the time during peak periods; and

  3. c)  Whether the average traffic speed changed in the general purpose lanes.

Overall, 

This study finds that the I-405 ETL facility is meeting the financial performance measure, but is missing the ETL speed performance measure.

The Seattle Times points out,

Two performance goals are required by law:

• That the lanes make money. Income has come in at triple the initial estimates. WSDOT is making close to $22 million a year after expenses. That’s lucrative enough that the state is considering bond sales next decade to widen the I-405 chokepoint north of Bothell where two toll lanes narrow to just one.

• That the toll lanes flow 45 mph or faster during at least 90 percent of peak commute times, in accordance with federal standards.

WSDOT acknowledged last winter that the toll lanes fell short, meeting speed goals only 88 percent of the time — but Wednesday’s report shows performance weaker than that for the first half of 2017.

Tolling has long been both controversial and inevitable. Wired Magazine reported recently on Virgia’s I-66 toll road, under the ominous headline “Virginia’s $40 toll road better be the future of driving.”

The express lanes on Interstate 66 near DC, previously reserved for vehicles carrying two or more people, opened up to solo travelers. Except those single-occupancy vehicles have to pay a toll, one that fluctuates according to demand. The world watched, aghast, as tolling prices hit $40 for folks headed into the capital on Tuesday morning…

Forty bucks is a lot for a toll, but it just might be the fair price for the right to drive by yourself down a majorly busy highway.

We’ll see how that works out for them. Clearly, there’s a lot of experimentation involved in getting the right pricing. The Seattle Times story adds,

A recent Seattle Times analysis found the toll lane averaged only 42 mph this spring across a four-hour morning period from Lynnwood to Bothell, and flowed only 23 mph at the worst time of 7:35 a.m. Toll lanes met the 45 mph standard in other segments.

Slowdowns there are related to the $10 maximum toll, which was designed to assuage political worries that Washington state was building “so-called Lexus lanes” for the rich.

“The $10 maximum toll was predicted to be rare,” the Minnesota report says.

But the top rate actually took effect 15 percent of peak hours, and in some months 20 percent of more — which consultants consider far too high. Once the toll lanes hit a price ceiling, it’s impossible to manage the volumes of cars by pricing.

WSDOT sees change coming.

Patty Rubstello, the state toll director, has previously said in public that higher rates eventually should be discussed. However, she and lawmakers chose not to make proposals in 2016 or 2017. Other tweaks to I-405 toll operations should be tried first, Rubstello said.

A moving target.

State economist reports strong economic and revenue growth in latest monthly update.

The Economic and Revenue Forecast Council’s latest monthly update continues the good news trend.

Total nonfarm payroll employment rose 18,100 (seasonally adjusted) in September and Oc-tober, which represents a strong 3.3% annual rate of growth. This was even faster than the 3.0% average growth rate during the previous year. Manufacturing added 300 jobs in the two-month period in spite of the loss of 1,500 aerospace jobs. Construction employment increased 2,200 in September and October and government employment expanded by 1,700 jobs. As usual, the bulk of the net new jobs occurred in private, service-providing sectors, which added 14,000 jobs…

Major General Fund-State (GF-S) revenue collections for the November 11 – December 10, 2017 collection period came in $33.7 million (1.6%) above the November forecast. Revenue Act taxes came in $12.7 million (1.0%) above the forecast and non-Revenue Act taxes were $21.1 million (2.3%) above the forecast.

The national news also looks good.

This was another month of strong employment gains and low initial unemployment claims. Third quarter GDP growth was robust and, after several weak months, residential construc-tion and home sales improved. On a less positive note, light vehicle sales declined and wage gains remained tepid. 

The U.S. economy gained 228,000 net new jobs in November. Employment data for Sep-tember and October were revised up by 3,000 jobs. Sectors with notable employment gains in November included manufacturing (+31,000), health care (+30,000), construction (+24,000), professional and technical services (+24,000) accommodation and food ser-vices (+21,000) and employment services (+18,000)…

Average hourly earnings increased by five cents in November and are 2.5% above their year-ago level. The average workweek in November increased by 0.1 hours to 34.5 hours. The unemployment rate in November was unchanged at 4.1%. 

The second estimate of real GDP growth for the third quarter of 2017 was revised up from 3.0% to 3.3%. 

 We wrote of the November revenue forecast last month.

 

Seattle Times: Seattle should abandon costly and wrongheaded pursuit of illegal income tax

The Seattle Times editorial board offers clear, direct and blunt advice to Seattle officials.

Seattle should abandon its costly and wrongheaded pursuit of an illegal income tax.

A judge last month eviscerated the city’s legal justification of the high-earners income tax, affirming that cities in Washington have no authority to impose income taxes.

Seattle officials should not appeal. The city cannot afford such political vanity as long as it has broken sidewalks, underfunded social and police services, a backlog of park maintenance, and libraries that aren’t open regular hours.

The editorial continues in that vein for several paragraphs, identifying the flaws in the city’s argument for the tax – arguments “demolished” (the editorial’s word) by King County Superior Court Judge John Ruhl in November. It’s a good read and closes with another good suggestion for city officials.

Seattle should drop this dead-end case and find better ways to advance the worthy conversation about inequality and inequity.

An obvious place to start is by examining the economic burden of the city’s current taxes and the relationship between taxes, a lack of fiscal restraint and the cost of living.

Jason Mercier has compiled a good roundup of editorials from around the state, throwing in a bonus editorial from the Wall Street Journal. So far, Seattle stands alone.

Friday Update: Rent control, job growth, urban paychecks, and infrastructure

There are always a few items we’ve read during the week that deserve more attention but don’t make it into our regular posts. So we bundle them for the Friday roundup.

Here’s this week’s (and last week’s) bundle:

Seattle Times: Rent control in Seattle? Bill to repeal statewide ban in the works?

State Rep. Nicole Macri, D-Seattle, said Tuesday she will introduce a bill in the upcoming session to repeal Washington state’s ban on rent control, which dates to 1981. She has the support of officials in Seattle, where the City Council has been asking the state to repeal the ban for years.

Wenatchee Valley Business World (Johnson op-ed): Rewarding, good-paying careers await hands-on workers

I recently traveled to Switzerland with the governor and a group of business leaders and education experts from across the state to look at the country’s successful and robust apprenticeship programs, which are geared toward engaging 16-19-year-olds in meaningful work…

At our annual Manufacturing Summit in October, AWB held a panel discussion focused solely on the role apprenticeships play in attracting the next generation to the workplace. This is an incredible growth area for employers and can be a great tool to build a skilled workforce from the ground up.

New Geography: The Cities Where a Paycheck Stretches the Furthest

The widening divergence in housing costs — an issue which has occupied much of the recent tax reform debate — is becoming an increasingly determinative factor in the evolution of metropolitan economies. The largest cost difference in goods and services other than rents among the 107 metropolitan areas is 35%. The spread from lowest to highest in rents is 255%. The biggest gap, however, is in the cost differences for purchasing the average-priced house – a whopping 624%, nearly 2.5 times the differences in rents. This drives the overall cost of living difference up to 124% between the least and most expensive metropolitan areas.

As we have seen some areas — notably San Jose, Boston and Seattle — have been able to cope with higher costs because industries there are able to offer relatively fat paychecks. But even these storied areas may face challenges as the cost gaps rise. Already growth has slowed, and even gone into reverse in the Bay Area, a downturn at least somewhat tied to bloated housing costs.

National Association of Manufacturers: Infrastructure is Critical for Both Rural and Urban Shop Floors

Shop floors are commonly located in rural areas and rely on the same vital infrastructure needs as manufacturers in urban areas.  Manufacturers look forward to a 2018 infrastructure package that advances and invests in energy, water, broadband and transportation infrastructure projects.  Regardless of whether its a rural or urban area, if ports are clogged, trucks are delayed, power is down or the internet has a lapse, productivity and customer service are impacted.

That said, rural infrastructure faces different challenges in funding and delivering projects given low population levels. They are often not suited to public private partnerships.

New York Times: Job Growth Signals Robust Economy, With Gain of 228,000

The Labor Department released its official hiring and unemployment figures for November on Friday morning, providing the latest snapshot of the American economy.

• 228,000 jobs were added last month. Wall Street economists had expected an increase of about 200,000, according to Bloomberg.

• The unemployment rate was 4.1 percent, unchanged from October, when it was the lowest since 2000.

FiveThirtyEight: The Jobs Report is Overhyped, Here’s Why That’s a Problem

A little secret of the economics trade is that the jobs data is the statistical equivalent of a best guess. The 150,000 non-farm companies that are surveyed is an acceptable sample size from a statistical perspective, but it’s capable of providing only an approximation of reality. According to the BLS, the actual monthly change in the number of jobs likely falls somewhere in the range of 120,000 more or 120,000 less than its estimate. That means you can be confident that job numbers grew in a given month only if the change in monthly hiring is 120,000 or greater…To be extra clear: None of this is meant to suggest that the BLS is guilty of bad statistics, only that there are limits to a methodology designed to deliver monthly snapshots of a massive, diverse economy…

Rather, the point is that most journalists and many analysts are guilty of bad, or at least short-attention-span, reporting. And if you pay attention only to the initial hiring estimate that most mainstream media outlets blast out every month, you are operating with a skewed impression of what’s really going on in the economy.

Rural poverty “skyrocketing” as communities continue to shed jobs: It’s a national concern

 

The Hill reports:

The number of rural Americans living in poverty has skyrocketed in recent years amidst an economic evolution that has cost hundreds of thousands of manufacturing and mining jobs.

Urban poverty has also increased, but the story points out a significant difference.

The difference is that the increase in poverty in urban counties happened almost entirely during and after the recession. The increase in poverty in rural counties began around the turn of the century, and has been exacerbated by the recession.

After a decade of growth during the 1990s, the data show rural America has been effectively experiencing its own recession for far longer than the nation as a whole.

Rural economies have faced a unique challenge.

Rural areas with low populations are far more likely to be reliant on a single industry than their larger metropolitan cousins. The dominant industries in many of those rural regions — manufacturing in the Midwest, resource extraction in Appalachia — have been experiencing long-term declines as automation increases and as energy consumption evolves.

About 15 years ago, 17 percent of Americans living in rural areas were employed in the manufacturing sector, Thiede said. Today, just 10 percent of nonmetro workers are employed in manufacturing. Since 2000, the number of manufacturing jobs in rural counties has declined by 20 percent.

The decline in employment opportunities has led to a spiral as younger workers leave for metropolitan opportunities, exacerbating the problems of the small communities they’ve left behind. The generational implications are clear.

Today, more than 20 percent of newborns in rural America are born into poverty — the numbers are far higher for African-American and Hispanic residents living in rural areas. And those who are born into poverty have a far more difficult time climbing out of it than those whose parents have more financial stability.

The Daily Yonder, from which the map at the top of this post is taken, further examines the issue.

Ten years after the beginning of the great economic depression in December 2007, rural America still hasn’t recovered. Rural counties count 770,000 fewer jobs in October 2017 than they had in 2007, according to the Bureau of Labor Statistics.

Falling unemployment rates in rural communities should also be taken with a caution.

Unemployment rates in rural and urban America were low in October of this year, averaging at or below four percent. Those rates are lower than in 2007, when unemployment rates were at or above 4.5 percent.

Rural unemployment rates have dropped, however, not because there are more jobs, but because the total workforce has shrunk. Since 2007, the total number of people working or looking for a job in rural counties has dropped by nearly 1.1 million people.

While the map shows that Washington’s rural communities are faring better than parts of the rural Midwest, Appalachia and the southeast, the economic divide remains real here. Efforts like the AWB Rural Jobs Summit are commendable responses to a challenge we cannot ignore.

Millennium Bulk Terminals files more suits against state over permits for proposed export terminal in Longview

Millennium Bulk Terminals continues efforts to gain essential state permits for its proposed export terminals in Longview. The Daily News reports,

The state Department of Ecology dismissed findings from its own consultants when it wrote the study used to deny permits for the proposed Longview coal dock, Millennium Bulk Terminals argued in a lawsuit filed Monday.

Among the claims is that Ecology’s estimate of cancer risks posed by diesel locomotive emissions are misleading…

In a separate filing Monday, Millennium asked the Shoreline Hearings Board to overturn a decision rejecting two shoreline permits needed for the project. Hearings examiner Mark Schiebmier acted outside his authority when he denied the permits last month, Millennium argues.

Of these two actions, the suit against Ecology is far more complex and intriguing, because it implies that the state manipulated study findings so it could reject the coal terminal.

The story reviews the regulatory challenges facing the project, which we’ve written about previously (see here and here.)  Keep Washington Competitive released a statement quoting former state Attorney General Rob McKenna.

McKenna, who recently penned an op-ed on a similar decision in The Olympian, says the Millennium case is a blatant example of the state’s regulatory process being hijacked by those seeking to block projects that run contrary to their own political agendas. McKenna is currently in private practice with Orrick, Herrington & Sutcliffe LLP in Seattle.

“Decisions like these eventually cast doubt on our regulatory process and give potential investors pause before considering operations here in Washington state,” added McKenna. “I support Millennium in their appeal of this decision and hope it shines a bright light on the abuses at work by regulators in our state agencies.”

We’ve pointed out previously, 

The export terminal has faced uncommon – even unprecedented – regulatory hurdles from the outset, as we noted here.

This continues to be a saga worth watching.

 

Washington’s high school graduation rate still below U.S. average; check out our Scorecard for more performance indicators

Last week we released the Opportunity Washington scorecard. (Watch our video, read the report.) Overall, we climbed three spots to rank No. 25. Our Achieve (education quality and outcomes) showed  significant improvement in postsecondary performance.

Washington’s Achieve ranking climbed four rungs, to No. 18. Our state made gains across the four postsecondary metrics tracked – associate’s, bachelor’s, STEM bachelor’s, and master’s degrees awarded per capita. 

One area in which we continue to lag is high school graduation rates. The Seattle Times today confirms:

According to data released Monday, the national rate climbed to 84 percent, the highest since the National Center for Education Statistics six years ago changed the way it required states to calculate graduation rates

Among all 50 states and Washington, D.C., Iowa’s graduation rate was the highest, at 91 percent, and Washington, D.C., was at the bottom, with 69 percent of all students graduating within four years. Washington’s rate was 79.7 percent.

There are inconsistencies in measurement, but the pattern holds.

The rankings aren’t definitive, as each state has different requirements for students to graduate from high school. And some states offer alternative, sometimes less-stringent options for students to earn a diploma.

The numbers from the national center also differ slightly — 1 percentage point or less — from the state rates released in February by Washington’s Office of the Superintendent of Public Instruction. For example, the state reported the graduation rate for the class of 2016 was slightly slower — at 79.1 percent.

The state superintendent’s office is reviewing the center’s statistics and methodology, said spokesman Nate Olson. The state also measures how many students graduate within five years; that rate for the class of 2016 was 82 percent.

We reported on the the state’s earlier report here and looked at national patterns here

Washington is poised for substantial growth in great job opportunities; most of them will be filled by workers with a postsecondary credential or some college. The obvious prerequisite: graduating from high school with a meaningful diploma. We have a ways to go to make sure our high school students are prepared to seize the opportunities awaiting them.

Report finds Washington state budgeting enhanced by stable revenue streams, reserves and balanced budget requirement

Some good news about Washington’s tax system, as reported in The Lens.

Washington benefits from one of the more stable revenue streams in the nation, and the best among the West Coast states. That’s according to a new study by the Tax Policy Center that examined all 50 state budgets and revenue over an 11-year period.

The absence of progressive income taxes and capital gains taxes helps mitigate volatility.

Between 2005-2016, Washington and nine other states’ revenue streams had a 4.4-5.5 standard deviation in percent change. That’s less than Oregon, which had a 5.5-6.5 standard deviation change, and half of California’s 8.5+ standard deviation.

Both those states have income taxes and a capital gains income tax, which Washington Research Council (WRC) Research Director and Senior Economist Dr. Kriss Sjoblom says provokes greater revenue volatility. “Most of them (capital gains) apply to the top slice of the taxpayers, and they’re taxed at a higher rate than everyone. The progressivity accentuates the volatility of an income tax. It’s very hard to forecast capital gains, because you have to forecast the stock market, and you know how poorly people are at forecasting the stock market.”

Another positive feature of Washington fiscal policy is the balanced budget requirement. Again, from The Lens:

…stability is critical not only for accurate [revenue forecasts], but also for state lawmakers whose purse strings are tightened or loosened based on those estimates as part of the Balanced Budget Requirement (BBR). That fiscal stipulation was first implemented during the 2013-15 biennium, by restricting budgeted state spending to four-year revenue forecasts.

The state’s budgeting practices have helped Washington maintain high credit ratings. According to the latest reports, Fitch gave Washington a rating of AA+ with a stable outlook, Moody’s rated Washington an Aa1 with a stable outlook and Standard & Poor rated the state an AA+ with a stable outlook.

As The Lens reports, the BBR has legislative critics.

…some lawmakers say the continued surplus revenue causes the BBR to artificially restrict state spending. With a power transition in the Senate, its future role could be up in the air.

Sjoblom says the BBR helps prevent the state from spending based on assumed growth that doesn’t materialize.

It’s good fiscal policy, which works well in tandem with a budget stabilization fund (BSF). Among the Tax Policy Center’s recommendations

  1. Focus on sustainable systems

    • »  Pair strict BBRs with robust BSFs, which can soften volatility without undermining the beneficial effects of strict antideficit rules.

    • »  Reform or eliminate TELs that prevent either saving during good times or raising revenues during economic downturns.

    • »  Be transparent about pension liabilities and tax expenditures, redesign debt limits to discourage shifting to nonguaranteed forms of debt, and practice current service budgeting.

  2. Focus on design

    • »  Adopt stricter automatic contribution requirements for BSFs, based on the volatility of each state’s unique revenue streams.

    • »  Partner with the research community to invest in additional research on best design practices.

Washington has benefitted from sound budgeting in recent years, a practice enhanced by the four-year balanced budget requirement and the rainy day BSF. It would be a mistake to weaken either of them now.