For years now, Oregon's leaders have assured taxpayers that plans for a new interstate bridge across the Columbia River were financially solid. The bridge would in large part pay for itself, they said, by charging tolls to cover the debt necessary to build the $3.6 billion project.
State officials have known for a long time, however, those statements weren't true: Their projections of how many people cross the Columbia on I-5 have been way off.
As a result, official claims about how much money Oregon and Washington can collect from tolls have been wrong. And the number is important: The states desperately need the money to pay off the $1.3 billion loan they want to take out to build the project (see "A Bridge Too False," WW, June 1, 2011).
Last week, State Treasurer Ted Wheeler issued a devastating report that for the first time made an official admission of how flimsy financial plans for the project, called the Columbia River Crossing, or CRC, really are.
Wheeler's report, based on analysis by two independent consulting firms, found that the CRC overstated projected tolling revenues by as much as $600 million. Last week, Wheeler and Gov. John Kitzhaber talked around the problem (see "Garbage In, Garbage Out," below).
The fine print of Wheeler's report, however, has potentially bigger news: The whole project could collapse at the hands of voters in Clark County, Wash.
Voters there must agree to increase sales taxes to help pay for the operating costs of the light-rail line that would extend from North Portland to Vancouver. That's about $3 million a year.
Without the locals' show of support, the feds would likely turn down the project's request for light-rail money, $850 million in so-called "New Starts" transportation cash.
"Vote on tax to generate $3M in annual transit operating funds by Clark County residents is critical to getting the New Starts money," the report states. "Failure to win Federal funding for the transit portion of the project may require rethinking of the overall project scope, time line and financing plan."
C-Tran will hold two key elections. The first, in November, will ask voters to raise about $8 million annually through a sales tax increase to keep buses running at their current levels. In the second, sometime in 2012, C-Tran will ask voters for a second sales tax increase to pay the $3 million annual cost of running and maintaining the light-rail line.
Clark County voters rejected light rail 2-to-1 in a 1995 vote whether to extend MAX across the Columbia. There's also plenty of opposition to the tolls the new bridge would charge. Vancouver Mayor Tim Leavitt won his 2009 campaign by opposing bridge tolls—only to flip-flop once elected. US Digital owner David Madore, a well-heeled and vocal opponent of the CRC, and his allies have established a strong presence at public meetings and online with the website, notolls.com.
Nancy Boyd, the CRC project director, acknowledges that delivering her project got tougher last week after Wheeler's report and will again be challenged by the 2012 C-Tran election. Boyd adds that a "no" vote, however, would not necessarily kill light rail or the project.
"There could be other ways of coming up with that money," she says. "[C-Tran] could set aside a portion of their operating budget."
And that's exactly what many Clark County residents fear: that regardless of the vote, C-Tran will find ways to cover light-rail expenses.
"We think they'll use the money from this year's vote as a backstop so they don't have to worry about next year,â says Josephine Wentzel, who works for Madore.
Heather Stuart, the political consultant running the "yes" campaign for this year's C-Tran measure, says the transit agency could shift bus funds to light rail. But she says C-Tran wouldn't do that.
"The critics are conflating the two [C-Tran measures], and that's not fair," Stuart says.
C-Tran's board of commissioners has debated whether to put the light-rail vote to a narrow portion of area voters. U.S. Rep. Jaime Herrera Beutler, who represents Washington's 3rd Congressional District, has told The Columbian she wants all voters in C-Tran's service area to have a say. Without their support, she says, the project would have to be redesigned.
Bob Stacey, the former director of 1000 Friends of Oregon, has been skeptical of the project, even though he supports extending light rail to Vancouver. He says Clark County voters pose a huge risk.
"I think it could be fatal to the entire project," says Stacey. "If you don't have $600 million from tolling and you don't get the [light-rail] money from the feds, you have to completely start over."
Garbage In, Garbage Out
Last week, state officials finally admitted that the most basic assumptions underlying the $3.6 billion Columbia River Crossing are wrong.
State Treasurer Ted Wheeler's July 21 report showed the project would fall $600 million short. This whopper of a mistake—which experts have been pointing out for a long time—boils down to this: Not enough people will cross the bridge and pay tolls.
Those tolls are supposed to pay back the $1.3 billion Oregon and Washington must borrow to build the project. The lack of traffic means the states wouldn't be able to make their debt payments.
Here are the big lessons for Oregon taxpayers in Wheeler's report:
The model for predicting traffic on the bridge was wrong. It's been painfully apparent for some time the traffic projections for the CRC didn't match reality. As WW has reported, the number of cars now crossing the I-5 bridge is well below the numbers predicted by the CRC.
The CRC assumed that traffic would steadily increase, but the number of cars crossing the current bridge each day has fallen since a peak in 2005. A consultant who provided an analysis to Wheeler, C&M Associates of Dallas, found that the CRC had relied on an old model using 1994 data (even though Oregon and Washington have spent $130 million planning the project).
Second, the consultants noted, the model didn't consider soaring gas-price increases since 2005, part of the reason traffic is down in the I-5 corridor and nationwide.
The CRC hoped to stick drivers with increasing tolls. The traffic-modeling mistakes accounted for half the $600 million error. The other half came from assuming Oregon and Washington would automatically increase tolls every year.
Long before Wheeler's report, Washington's state treasurer, Jim McIntire, had the courage to say raising tolls every year was unrealistic. Without regular toll hikes, the project would come up another $300 million short.
Officials still aren't being straight with Oregonians about why the numbers were so wrong. After Wheeler briefed him last week, Gov. John Kitzhaber blamed the $600 million miscalculation in the CRC plan on the bad economy.
"The Treasurer's updated work reflects a slower rate of employment; clearly, this recession has been deeper and longer than expected," Kitzhaber said in a statement.
Not so, Wheeler's experts say: Evidence shows the traffic estimates missed a drop in use of the I-5 bridge that started long before the economy went sour.
"Traffic volumes using the I-5 Bridge have flattened-off over the last 15-20 years; well before the current recessionary period," wrote consultant Robert Bain. "The clear inference is that the flattening-off is a long-term traffic trend; not simply a manifestation of current circumstances."
Kitzhaber now proposes stretching out construction of the project to make it affordable. "It is time to start planning for a project that adapts to the available resources and fits into today's economic reality," Kitzhaber said last week.
Oregon could have done that years ago. Virtually everything Wheeler's consultants found—bad data, a failure to reconcile rosy projections to measurable traffic declines, and the wild overstatement of future traffic tolling revenues—confirms what Portland economist Joe Cortright has contended for the past three years.
Cortright says the CRC's leaders never really sought accurate assessments of the project's financial viability.
"My dad was a banker," Cortright says. "He told me you never check to see if a bill is counterfeit after you've accepted it. [CRC staff] got the answer they wanted from their model—so they never checked it."