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Alert reader Jessie sent me this article about Houston ranking "very low" on a "resilience capacity index".  For real.  I was dumbfounded too. And now I'm going to post out-of-character and get a little snippy...

Let's skip right past the parade of articles and data showing Houston and Texas weathering the great recession better than just about everywhere else in the country.  It's so strong Rick Perry might win the Republican presidential nomination based on it.  That alone should make them question their entire methodology.  Go back to the dot-com and Enron crashes, and you'll find the same minimal impact.  Sounds like we're pretty resilient to me.

Then there's their explicit declaration that it represents the ability of a city to weather the shock of a major storm or flood.  I'll point to both Tropical Storm Allison and Hurricane Ike.  Both were devastating - yet we bounced back relatively quickly from each one.  You might note on their map that New Orleans ranks higher than Houston, yet Hurricane Katrina knocked New Orleans on its back for years.  Maybe they need to add a "levees upkeep" variable to the index?

Let's look at some of the problematic variables that make up the index:

My cynical side thinks that, since the University of Buffalo put this out, they intentionally chose variables that made Buffalo look good, even though it's one of the most stagnant metro economies in the country.

All in all one of the worst designed indexes I've ever seen - and there are some doozies out there.

OK, I feel better.  End venting (and snippyness).

Read more from Tory at HoustonStrategies.com.

A crazy owner and inept management are destroying a critically important  Southern California institution.  And I’m not talking about the Dodgers. 

Recent layoffs of veteran writers at the L.A. Times are not just symptoms of a declining newspaper business. The once-powerful daily has been run into the ground by Tribune Company’s Sam Zell, who acquired the property from the Chandlers.

The below-standard L.A. Times online version lets civic-minded residents keep track of regional affairs, while showcasing a few top-notch local journalists. But with the firing of 39-year reporter / editor / columnist Tim Rutten and other seasoned writers, the Times has plunged deeper into the abyss. 

When I got to town 30 years ago, the L.A. Times influence was extraordinary.  As a PR guy, I learned that getting coverage in that paper set up the whole news cycle. I watched as the Times singlehandedly tore down powerful local figures (remember former L.A. Coroner Thomas Noguchi)? 

Now L.A. Times investigations barely matter (did anyone read the recent five-part “expose´” on the Community College District construction program)? 

There’s talk about Tribune trying to unload the Times-Mirror Square building and of operational mergers with the Orange County Register.

But it looks as if this century-old powerhouse – which began as a virulent anti-union, jingoistic rag and was transformed into a nationally-recognized metropolitan daily – is now suffering its worst indignity:

Irrelevance.

This piece first appeared at LaborLou.com.

As the Los Angeles County Metropolitan Transportation Authority (Metro) prepared for its most recent round of major bus operations reductions, Metro CEO Art Leahy has been quoted:

"(T)oo many bus lines with excessive service has led to regular budget deficits¹."

"How full are Metro buses today? Overall, Metro buses are running at an average of 42 percent capacity. Of course, that doesn’t mean that all Metro buses are less than half full. Another measure to gauge bus usage is called ‘load ratio’ — the ratio of passengers to bus seats at the most crowded part of a bus route. By that count Metro’s average load factor is an average of 1.2. (For example, 48 passengers on a 40 seat bus). Many other large transit agencies are running load factors of 1.5 to 1.7² ."

The "42 percent" capacity is evidently the average passenger load (APL) divided by the number of seats – in other words, on average for the full year, each 40-seat MTA bus had about 17 passengers on board.

Forty-two percent might appear to be a low value, particularly in comparison to other modes of transportation like scheduled airlines, where it is common to have a 100% load factor on some flights.  However, Lufthansa doesn't stop at Wilshire/Vermont to pick up passengers between LAX and JFK – transit service is scheduled for peak load factor; that is, attempting to approach, but not exceed, a maximum load factor at the point on the line where the number of people on board is largest.

In the second quote, we have a mixture of load factors terms and data.  Almost all transit operators have load factor standards, which they set for each mode of service (bus, light rail), time of day, day of week, and type of service (main line arterial bus service, long-haul commuter, neighborhood circulator).  For Metro, the peak load factor criterion had been 1.20 – the 48 passengers on a 40-seat bus – since this was imposed by the Consent Decree that settled Labor/Community Strategy Center v MTA in late 1996 until very recently.

In that quote, Metro is comparing services standards to actual performance.  It is certainly true that, until the passage of the new policy a few months ago, Metro's 1.20 service standard was one of the lowest in the industry for larger city operators.  However, Metro routinely failed to meet this standard, which was a major source of complaints by the plaintiffs in L/CSC v MTA – and MTA's overall average passenger loads have among the highest in the industry for decades.

Comparing actual results to actual results is far more meaningful than comparing service standards to service standards.  Is 42 percent low, high, or what?  The standard methodology for determining this is peer group comparison.  The Federal Government makes transit data available though its National Transit Database – which we used for the 2009 reporting year³.

We then constructed our peer group, the twenty largest U.S. transit operators by annual unlinked passenger trips that operate both bus and rail service⁴ and developed the data for: 

APL:  Average Passenger Load
BHr:   Boardings/Hour
FRR:   Farebox Recovery Ratio
SP:       Subsidy/Passenger
SPM:   Subsidy/Passenger Mile

The results are:

1.         FRR: Higher is better - but, this statistic can often be misunderstood.  For example, a high cost operator with high fare can have a higher FRR than a low cost operator, but the low cost operator will be providing a better deal, financially, for both the riders and the taxpayers.

2.  APL/BHr: Appearing and to the right on the next graph indicates higher load factors.  Higher is better; however, at some point, overcrowding impacts service quality and reliability.

3.  SP/SPM: On this graph, lower is better, so down and the left is superior - except that, at some point, low cost can indicate concerns about quality of service and safety.

While Metro is not among the highest in FRR, it has more than twice as many ranked below it (13) than above it (six).  Considered with the subsidy metrics, Metro bus service is a fair deal to the riders and a great deal for the taxpayers.

On the service utilization graph, Metro is second highest in APL, beaten by NYC, and third on BHr, beaten by NYC and SF.  We added, "LA '96," for 1996, the year before the Consent Decree went into effect part-way through Metro's 1997 fiscal year.  BHr has decreased slightly (53.9 to 51.4, or ~4.6%), while APL has increased slightly (16.2 to 17.1, or ~5.6%).  The increase in APL is interesting because Metro's on-going replacement of primarily 43-seat "hi-floor" with 40-seat "low-floor" buses means that Metro is carrying more people in smaller buses.

Metro bus service again does well on cost-effectiveness.  San Diego beats Metro on both SP and SPM and Chicago beats Metro on SP.  Metro reduced both of these from 1996 to 2009 after adjusting for inflation⁵.

Finally, we decided to do a combined performance index, based on Metro's own "Route Performance Index" (RPI), which Metro utilizes to eliminate low performers⁶:

We have adapted METRO's RPI in three ways:

1.  We use it for bus system performance, rather than route performance.

2.  The "standard" is Metro's performance on each individual indicator.  The overall score is set at 1.00 for Metro, broken into four components, each of which Metro scores .25.  Operators scoring better on an indicator receives a score higher than .25; performing poorer, lower than .25, with the specific score a direct ratio against Metro's score (remember that, for subsidy, lower is better, while for route utilization, higher is better).

3.  Metro utilizes three metrics in its RPI, SP, BHr, and APL.  We added SPM.

What we see is Metro rated the highest overall among its peers.  Metro does not win on any single criterion, but its two seconds and two thirds put it ahead of the rest overall.

Metro's Transit Service Policy (page 32) states:

"Lines with an RPI lower than 0.6 are defined as performing poorly and targeted for corrective action.  Lines that been subjected to correction actions and do not meet the 0.60 productivity index after six additional months of operations may be cancelled  …"

If this .60 cut-off is applied to the 20 bus systems, several would be in major trouble.  Dallas (.38), San Jose (.46), Saint Louis (.56), and Washington, DC, (.57) are below the cut-off.  Boston and Pittsburgh (both at .60) are right on the line, and Miami (.61), Houston (.61), and Denver (.62) only slightly above.

If one takes the Metro RPI and applies it to the nation's Top 20, nine of the 20 are either below or very close to the cut-off point. This implies that a high portion of the individual lines, a majority in at several cases, are below the Metro route-by-route cutoff point.

Circling back to Metro routes, this could mean that many of the routes that Metro would cut, using its RFI procedure, would be average or even above-average routes for many of the nation's larger bus systems.  Failing to meet the Metro average is actually a very high cut-off point when compared to the national performance.

This is not to say that no Metro service should ever be cut or eliminated.  What we are saying is, don't make the cut-off point too high; there is a lot of well-utilized service, by national standards, that does not pass Metro's methodology.  More important, where there are bus lines with service reduced, put that back on the many, many Metro bus lines that are underserved – which is the usual condition.

From the above, we see Metro working very hard to cut to reduce the service operated by the most cost-effective and productive major city bus system in the nation – why?  Unlike most other U.S. transit operators, it is not due to lack of funding – but the explanation will have to wait for my next blog entry.

The Pew Center on the States has released a new report examining the impact a potential federal default would have on state and municipal governments. The picture isn't pretty.

According to Pew, "A federal default could have a serious impact on states and cities by constricting their borrowing and budgets while they are still feeling the aftershocks of the Great Recession." Loss of faith in federal debt securities could have a knock-on effect on government debt at all levels, causing jittery ratings agencies to downgrade state and local credit ratings in turn. One ratings agency, Moody's, has already warned that up to 7000 municipalities could see their bond ratings lowered in the wake of a federal default, and has placed five currently AAA rated states on a downgrade watch list. Ratings downgrades would lead to increased borrowing costs for state and local governments, restricting their long-term ability to finance desperately needed infrastructure upgrades.

In addition to raising borrowing costs, a federal default could also directly impact federal program dollars currently allocated to state and local governments. According to Pew, such transfers amounted to "$478 billion in 2010 alone." States and municipalities, already stressed by years of budget challenges, might suddenly find themselves even more cash strapped. In addition, the report points out that the suspension of federal payments to individuals, such as social security recipients and government contractors, could cause a drop in state and local tax receipts as individual incomes drop and commerce slows. While Pew feels states and local governments are "highly unlikely" to face a shutdown as a result of a federal default, they could be left scrambling to find alternative funding sources to cover already budgeted expenses they were expecting to meet with federal support.

The Martin Prosperity Institute recently released the map below, which compares the GDP of several US metropolitan areas to the size of national economies. For instance, the Boston-Cambridge-Quincy metropolitan statistical area (MSA) has a GDP of $311.3 billion dollars. If it were a country, it would be the 40th biggest national economy on earth, ahead of countries such as Denmark ($310.1) and Greece ($303.4). The Houston-Sugar Land-Baytown MSA has a GDP of $378.9 billion, which would make it the 31st biggest national economy, bigger than Austria ($375.5) and Argentina ($368.9). New York-Long Island-Northern New Jersey ($1.28 trillion) isn’t all that far behind Canada ($1.57 trillion).

While trotting out such comparisons is an interesting exercise, the comparison also gives us some important perspective.  Despite the fact that these cities, as well as many others, produce as much as large countries, they have nowhere near the same fiscal levers at their disposal. Further, they are subservient to higher levels of government. The same problem exists in Canada. The Greater Toronto Area’s economic output ($233.9) is nearly equivalent to Finland’s total GDP ($270.6). Note that this definition is far less expansive than the US metro areas listed above. If the definition were expanded to include the entire Golden Horseshoe, it would be closer to the Size of Norway ($414.3 billion).  Yet the City of Toronto can’t finance a public transit expansion without the two senior levels of government. Calgary ($62.5 billion), roughly the size of Lithuania, couldn’t decide to create a municipal sales tax. Vancouver ($85.5 billion), slightly bigger than Serbia, can’t even decide how to allocate gas tax dollars without a special deal with the federal government.

The problem isn’t that we have too little government spending, but that revenue collection and spending decisions often happen at the wrong level. Revenue generation and spending should take place as close as possible to the point of delivery. There is no reason why someone in Moose Jaw should pay federal income taxes so that the Federal Government could partner with the province of New Brunswick to build a highway near Moncton. Similarly, there’s no reason why someone in Edmonton should send property tax dollars to the province so that it can pay for a transit expansion in Calgary. Not only is filtering money through multiple layers of bureaucracy inefficient, but it leads to bad decision making. Decisions both on the revenue, and expenditure side need to be made at the lowest level of government possible.

In order to ensure that cities can meet their infrastructure requirements, provincial governments should gradually devolve spending responsibilities and revenue generating capacities to the municipalities, and the federal government should end the practice of intervening in infrastructure issues altogether. Some municipalities may choose to raise property taxes, others may increase user fees, and still others may experiment with municipal sales taxes. But regardless of how municipalities decide to raise revenue, they are better placed to determine how much revenue is required, and which projects are really essential. More importantly, devolution gives more direct control over decision making to the people that are actually impacted by the decisions. Devolution means more accountability, and more local input. And if tiny Iceland can fund it’s own infrastructure, there’s no reason why Winnipeg or Edmonton couldn’t do the same.

This piece originally appeared at the Frontier Centre for Public Policy Blog.

Steve Lafleur is a public policy analyst with the Frontier Center for Public Policy.