Selling Oregon into Highway Bondage
Joe Cortright (Twitter: @CityObs) is a longtime Strong Towns contributor who runs the think tank City Observatory. This post first appeared in slightly different form on the City Observatory website, where you can find other articles, original research, and data-driven analysis of cities and the policies that shape them.
Image via Flickr.
Oregon Governor Kate Brown has just signed legislation that passed the Oregon Legislature, HB 3055, which authorizes the Oregon Department of Transportation to issue revenue bonds to finance potentially billions of dollars of highway widening projects in the Portland metropolitan area.
Oregon DOT is planning to widen freeways in Portland, including the Rose Quarter I-5 project, which we’ve now proven is designed to be wide enough to accommodate ten lanes. Its excessive width is the reason this project costs $800 million, and will cost even more if promised covers are constructed. The department is working on a multibillion-dollar list of other freeway expansion projections, including a revived Columbia River Crossing, widening I-205, a new Boone Bridge, and widening Highway 217. As we know from the fundamental law of road congestion, each additional lane mile of urban highways has the effect of generating more travel, more traffic, and more pollution; these projects will certainly and measurably increase greenhouse gas emissions.
HB 3055 allows ODOT to adopt a “borrow, spend, and build, then only later toll” approach to construction, which is guaranteed to produce oversized facilities that require increased traffic to avoid being a financial burden. ODOT’s own consultants on tolling have said that modest tolls could avoid the need to build any additional capacity on key Portland freeways, including the Rose Quarter.
ODOT is planning to embark upon a speculative financing scheme authorized by HB 3055 to issue potentially billions of dollars of bonds to widen highways throughout the Portland area. In theory, the bonds would be repaid by tolls, but ODOT has exactly zero experience in forecasting toll revenues. Forecasting toll revenue is a notoriously difficult business, and many toll roads and bridges have been forced into bankruptcy or bailouts because toll revenues didn’t match over-optimistic projections.
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That’s a problem, because HB 3055 allows ODOT to pledge, without limitation, all of its future revenues from state taxes and federal grants, to the repayment of bonds issued to pay the cost of toll funded highway expansion projects. If toll revenues are insufficient, ODOT would be required to take money from every other available source, including state and federal funds for road maintenance around the state, and use it to satisfy bond obligations.
Coupled with the fact that its major projects of the past two decades have all ended up costing double or more what they were projected, bond financing freeway widening exposes the state to financial risk. And when toll revenues aren’t enough to cover construction costs, ODOT is pledging every dollar available to it to bondholders, putting them in line ahead of every other project in the state, including maintaining our existing roads.
What’s worse: this Faustian bond bargain commits Oregon to filling newly widened roads with traffic in order to generate the money to pay bond holders. Borrowing creates the perverse financial incentive to maintain and increase traffic (and attendant climate pollution) in order to be able to pay off bonds and is directly contrary to the state’s adopted legal goal of reducing greenhouse gas emissions. This approach is doubly evil: it widens roads and generates traffic that will make climate change worse, and sticks future generations with the bill for paying for these roads, whether they’re used or not.
This plan to bond for huge highway expansions in the Portland area takes the state in exactly the wrong direction, in contradiction to our stated values: it would worsen our state’s carbon footprint, make us financially beholden to financial markets to generate traffic to repay bonds, and send the bill for this destructive and unneeded capacity to future generations of Oregonians, while undercutting the financial stability of the state transportation system.
Joe Cortright is President and principal economist of Impresa, a consulting firm specializing in regional economic analysis, innovation and industry clusters. Over the past two decades he has specialized in urban economies, developing the City Vitals framework with CEOs for Cities, and developing the city dividends concept.
Joe’s work casts a light on the role of knowledge-based industries in shaping regional economies. Prior to starting Impresa, Joe served for 12 years as the Executive Officer of the Oregon Legislature’s Trade and Economic Development Committee. When he’s not crunching data on cities, you’ll usually find him playing petanque, the French cousin of bocce.