DEPARTMENT OF VETERANS’ AFFAIRS

Agency Totals

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 9,678,902 13,007,966 11,066,613 8,380,599
Lottery Funds 14,856,025
Other Funds 45,304,442 85,405,620 86,784,284 113,266,941
Other Funds (NL) 186,154,228 373,333,710 387,546,159 387,546,159
Federal Funds 40,000 4,452,891 500,000
Total Funds $241,177,572 $476,200,187 $485,397,056 $524,549,724
Positions 84 88 88 96
FTE 82.63 87.76 88.00 95.84

Overview

The mission of the Oregon Department of Veteran’s Affairs (ODVA) is to serve and honor veterans through leadership, advocacy, and strong partnerships. ODVA has three primary program areas that are supported by the agency’s core operations:

  1. the Veterans’ Loan Program,
  2. the Veterans’ Services Program, and the
  3. Oregon Veterans’ Home Program.

The Veterans’ Loan Program, funded entirely with Other Funds, provides home loans to qualified veterans. Loan origination and servicing functions, as well as the agency’s administration costs, are included in the Loan Program budget.

The Veterans’ Services Program provides claims and appeals assistance, conservatorship services, and partnerships with counties and national veterans’ service organizations to assist veterans. The Veterans’ Services Program is primarily funded through a combination of General Fund and Lottery Funds.

The Oregon Veterans’ Home Program operates skilled nursing and memory care facilities in The Dalles and Lebanon. The operational costs of the facilities are funded with Other Funds from resident-related income.

Revenue Sources and Relationships

Other Funds revenues for the Veterans’ Loan Program are derived from the proceeds of general obligation bond sales ($240 million), veteran loan and contract-related repayments ($86 million), and interest earnings ($53 million).

The balance of revenue comes from service charges, rent, licenses, fees, and miscellaneous revenues totaling approximately $4.3 million. Available revenues and reserves are expected to be sufficient to cover operations and necessary debt service. The Home Loan Program’s administrative costs are limited in the budget, while the direct loan activity expenditures (i.e., loans made to veterans, pass-through payments made on behalf of borrowers, and debt service paid on general obligation bonds issued to finance the program) are nonlimited.

The Veterans’ Services Program has historically been funded with General Fund and Other Funds primarily generated from conservatorship fees. Beginning in the 2017-19 biennium, the Veterans’ Services Program funding includes Lottery Funds available through the passage of Measure 96, which dedicated 1.5% of state lottery net proceeds towards veterans’ services. Total lottery revenue dedicated to veterans’ services is projected to be $19.1 million for the 2017-19 biennium based on the Office of Economic Analysis’ May 2017 revenue forecast with adjustments for administrative actions. Lottery revenues will be allocated to the Department for the Lottery Funds expenditure limitation included in the Department’s budget, with the balance being retained in the constitutionally dedicated Veterans’ Services Fund.

Collectively, General Fund and Lottery Funds support ODVA’s statewide veteran services, including Veteran Service Officer positions, a small emergency assistance program, and service delivery partnership programs, where funding is passed through as special payments to counties and national service organizations. Lottery Funds directly support a veterans’ crisis support and suicide prevention telephone hotline, veteran volunteer program, veterans’ services grant fund, and grants to public universities and community colleges for campus veteran resource centers.

In addition to General Fund and Lottery Funds support, the Conservatorship program receives Other Funds revenue from fees charged to manage the finances of conservatorship clients (7% of the protected person’s income). Conservatorship fee income in the 2017-19 biennium is estimated to total approximately $920,000.

The Oregon Veterans’ Home Program operational costs are financed entirely with Other Funds. Revenues are primarily moneys received from the residents of the facilities, Medicare and Medicaid payments, and a per diem amount received directly from the U.S. Department of Veterans Affairs (VA).

Veterans who reside in the Homes receive benefits not available to them if they reside elsewhere. Many veterans receive aid and attendant benefits along with disability compensation or income-based VA pensions, which, combined with their social security benefits, provides the revenue with which to pay for their care in the Homes. Home Program charges for services are estimated to total $85.4 million in the 2017-19 biennium. The total amount of revenue is based, in part, on occupancy projections from the Homes’ contractor.

Other Funds revenue is also received from the sale of veterans’ license plates through the Department of Motor Vehicles and the Charitable Check Off program. ODVA projects a 2017-19 beginning balance of $11.5 million in the Veterans’ Home Program. Cash reserves will be used during the biennium for working capital, capital improvements, match for The Dalles Veterans’ Home federal renovation grant, and held for contingencies.

Budget Environment

An estimated 310,333 veterans live in Oregon who have served over the following five eras:

  • World War II (5.5%),
  • Korea (8.1%),
  • Vietnam (37.5%),
  • Gulf/Post 9-11 (25.6%), and
  • during times of peace (23.3%).

ODVA continues to focus on serving more veterans and reaching the seven out of ten veterans who are not accessing their federal benefits for education, health care, disability, or retirement. Additionally, over 50% of veterans are 65 or older, placing an emphasis on the need for aging veteran services.

The Veterans’ Home Loan program is funded through the issuance of tax-exempt Qualified Veteran Mortgage Bonds (QVMBs). Federal law limits the use of QVMBs, requiring that borrowers must apply for a loan within 25 years of discharge from military service and that proceeds may not be used to refinance homes. In 2010, Oregon voters passed Measure 70, making the Home Loan Program a state lifetime benefit for veterans. Loans for this eligible group must be funded from reserves or older bond proceeds. Oregon and the four other states with veterans’ home loan programs (California, Texas, Wisconsin, and Alaska) are seeking federal legislation to ease this restriction. While more veterans are eligible, and the product to serve them is restricted, reserves from the loan program have subsidized costs of the veterans’ services and administrative functions of the Department.

In response to a General Fund shortfall in the 1991-93 biennium, Veterans’ Home Loan Program revenues were used to supplement veterans’ services funding. This practice was a contributing factor to losses and a decrease in the overall net position of the Home Loan Program over the last six years. A portion of the subsidy was eliminated in the 2013-15 biennium when the cost of Veteran Service Officer positions performing non-loan program work was shifted back to General Fund. The remaining $4.1 million of veterans’ services and administration costs being supported by home loan revenues are shifted to Lottery Funds in the 2017-19 budget. Eliminating the subsidization of veterans’ services program activities will help to strengthen, stabilize, and sustain the Home Loan Program for future generations of veterans.

The recession and bursting of the real estate bubble, low conventional mortgage rates, and the inability to refinance significantly decreased ODVA’s home loan originations and outstanding portfolio. Over the past two biennia, as the economy has recovered, the demand for veteran home loans has continued to increase. However, this growth is limited by low housing inventory and rising prices. As of June 30, 2017, the loan portfolio was approximately 1,870 loans totaling $296 million.

Expenditures for the Oregon Veterans’ Homes relate to the cost of providing residential care. Operation of the facilities is contracted out to a health care service provider. Obtaining and maintaining a high occupancy rate is important to each facility’s financial condition. A second Veterans’ Home was opened in the City of Lebanon (Linn County) in the fall of 2014. Construction of a third home in Roseburg was reauthorized in 2017, with Article XI-Q general obligation bond proceeds set aside to fund a portion of the non-federal match obligation.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget for the Department of Veterans’ Affairs is $524.5 million total funds and 96 positions (95.84 FTE), which is a 10.2% increase over the 2015-17 legislatively approved budget.

Other Funds Nonlimited of $387.5 million for the Veterans’ Loan program bond-related activities, debt service, and loans to borrowers make up 74% of the total budget. Excluding Nonlimited funds, the 2017-19 legislatively adopted budget is a 33.2% increase over the 2015-17 legislatively approved budget.

Lottery Funds expenditure limitation of $14.9 million, available to the Department beginning in the 2017-19 biennium through the passage of Measure 96, is included in the budget. The budget also includes a $8.4 million of General Fund, which consists of $7.4 million for veterans’ services and $1 million for debt service on outstanding bonds.

Loan Program

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

Other Funds 11,214,580 15,899,349 17,131,485 16,417,830
Other Funds (NL) 186,154,228 373,333,710 387,546,159 387,546,159
Total Funds $197,368,808 $389,233,059 $404,677,644 $403,963,989
Positions 50 51 51 46
FTE 50.10 51.10 51.10 46.00

Program Description

The Veterans’ Home Loan Program was created in 1945 to provide a benefit to World War II veterans returning home. The Loan Program provides qualified veterans low-interest rate mortgages on single-family owner- occupied homes through the issuance of general obligation bonds authorized under Article XI-A of the Oregon Constitution. Since the Loan Program’s inception, the Department has made over 335,000 home and farm loans with a principal amount of over $7.9 billion. The program budget consists of:

  • Director’s Office – policy, public information, and communications

 

  • Veterans’ Home Loan Services – functions dealing with the loan program, including originating and servicing loans.

 

  • Financial Services – overall financial oversight of the Department, including budgeting, accounting, cashiering, and financial management.

 

  • Support Services – human resource services, information services, and facility services.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $404 million Other Funds is a 3.8% increase from the 2015-17 legislatively approved budget.

Other Funds Nonlimited of $387.5 million for loans to veterans ($155 million), expenditures related to making loans and issuing bonds ($13 million), and debt service ($219.5 million) make up 96% of the program budget. Limited Other Funds of $16.4 million for loan services and ODVA operations is a 3.3% increase from the 2015-17 legislatively approved budget.

This increase is net of a reduction of $1.7 million to shift funding for six veterans’ services positions (6.10 FTE) and associated services and supplies from Other Funds supported by home loan revenues to Lottery Funds in the Veterans’ Services Program.

Shifting the costs of veterans’ services activities to Lottery Funds is expected to strengthen and stabilize the Home Loan Program. The following Other Funds increases were also approved:

  • $933,333 on a one-time basis to refresh the Department of Veterans’ Affairs’ office building, including replacing the carpet, painting the walls, and updating exterior and interior signage.

 

  • $250,000 to purchase and install a home loan system that combines loan origination and servicing into one application, creating efficiencies and reducing errors. The new software system will also allow veterans to review home loan information online.

 

  • $201,359 to establish a quality assurance and compliance coordinator (QA/CC) position (1.00 FTE) and reclassify two existing Loan Specialist positions. The QA/CC position will maintain oversight and compliance with federal and state regulations, including new Consumer Financial Protection Bureau (CFPB) rules.

Reclassification of the Loan Specialists supports the increased responsibilities of these positions to comply with the new Dodd-Frank and CFPB regulations for loan origination.

Veterans’ Services Program

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 9,180,431 10,389,026 10,049,290 7,363,276
Lottery Funds 14,856,025
Other Funds 716,041 930,312 1,028,087 107,623
Federal Funds 40,000 1,150,000 500,000
Total Funds $9,936,472 $12,469,338 $11,077,377 $22,826,924
Positions 30 32 32 45
FTE 29.40 31.66 31.90 44.84

Program Description

The Veterans’ Services Program provides advocacy and benefits to veterans, their dependents, and survivors through the following activities:

  • Statewide Veteran Services – Assists veterans, their dependents, and survivors to obtain service-connected and non-service related benefits from the U.S. Department of Veterans Affairs. Federally accredited and state certified veteran service officers (VSOs) provide claims and appellate representation through ODVA’s power of attorney. In 2016, ODVA received 11,842 new powers of attorney, and currently holds power of attorney for nearly 101,000 veterans. Over 79,000 active claims were filed in fiscal years 2015 and 2016. This program also provides training, certification, and accreditation for county and state VSOs.

 

  • County Veteran Service Officers Program (CVSOs) – Pass-through funding to counties that supports a network of trained county veteran service officers. This partnership began in 1947 to aid counties in promoting veteran services at the local level. Prior to the 2017-19 biennium, CVSOs have existed in 34 of the 36 counties and ODVA provided services for Marion and Polk counties. However, a Polk County Veteran Service Office was established in January 2017 and ODVA expects Marion County to open a Veteran Service Office in 2018.

 

  • National Service Organizations (NSOs) – Pass-through funding supports national veteran service officers that provide benefit and claims representation. ODVA’s partnership with national veteran service organizations in Oregon was established in 1949. Currently, the Disabled American Veterans, Military Order of the Purple Heart, National Association of Black Veterans, American Legion, and Veterans of Foreign Wars participate in this funding.

 

  • Veterans’ Emergency Financial Assistance Program – Provides emergency aid to Oregon veterans and their immediate families through an emergency assistance program established by the Legislature in 2005. One- time grants are provided to help with health and welfare emergencies.

 

  • Partnerships – Leverage existing state programs and partner with federal, state, and non-profit organizations to expand services in the key areas of health, education, and economic opportunity. In the 2017 session, two new grant programs were established to expand ODVA’s partnerships. HB 2891 established a Veterans’ Services Grant fund to provide non-profits and other veterans’ organizations grants to expand services and programs that benefit veterans. SB 143 created a grant program to expand and enhance existing veteran programs on college campuses that help veterans successfully transition from military service to college life.

 

  • Aging Veteran Services – Provides conservatorship and representative payee services for veterans and their dependents who are determined to be “protected persons” and who are recipients of U.S. Department of Veterans Affairs’ benefits. Conservatorship services are provided when no other entity or person is willing or able to act as conservator and the agency is appointed as fiduciary. The staff serves as trust officers, files required legal reports, apply for all benefits due the veteran, and counsel with families, hospital personnel, social workers, and protected persons to ensure their needs are met within the resources available. Representative payee services are more limited in scope, with staff paying bills and advocating on behalf of veterans. As of June 30, 2017, ODVA had 136 Conservatorship clients and 144 Representative Payee clients.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $22.8 million total funds represents an 83.1% increase from the 2015- 17 legislatively approved budget. The increase is attributable to the addition of $14.9 million Lottery Funds, available through the passage of Measure 96. General Fund support for veterans’ services is a 29.1% decrease from the prior biennium, primarily due to the shift of $2.5 million of current service level expenditures from General Fund to Lottery Funds. Additionally, $850,000 General Fund was also phased-out during development of the 2017-19 budget to remove one-time funding provided in the 2015-17 budget for a crisis and suicide prevention hotline ($350,000) and an increase to support CVSOs ($500,000).

The legislatively adopted budget makes key investments with the lottery dollars dedicated by Measure 96 to expand services to veterans, while retaining a projected $2.8 million in the constitutionally dedicated Veterans’ Services Fund to allow for fluctuations in revenue projections and provide a working capital balance. Specific investments include:

  • $4.5 million to double the current service level pass-through funding to County Veteran Service Officers and National Service 2017-19 combined General Fund and Lottery funds support for CVSOs totals $8.7 million and support for NSOs totals $236,312. Increased funding is intended to enhance exiting state and county funding, helping to serve more veterans, increase the number of claims filed, and bring more federal dollars to the state.

 

  • $4.1 million to shift the funding for veterans’ services from Other Funds supported by home loan revenues to Lottery Funds. Veterans’ services activities ($2.9 million) and the program’s share of support service costs ($1.2 million) previously funded with Loan Program revenues will be supported through Lottery Funds. Corresponding Other Funds decreases are reflected in the Veterans’ Services Program ($920,464), Loan Program ($1.7 million), and Veterans’ Home Program ($319,794).

 

  • $1.2 million to develop and implement one or more grant programs to expand and enhance existing veteran programs on college campuses that help veterans successfully transition from military service to college life, succeed in college and complete educational goals, and transition from college to the workforce (SB 143, 2017). Funding of $187,194 is provided for a Student Veterans’ Coordinator position (0.92 FTE) to administer the program and $1 million is provided on a one-biennium basis for grants to public universities and community colleges.

 

  • $600,000 to replace the conservatorship system, which will enable the Department to effectively and efficiently deliver conservatorship and representative payee services. Funding is provided for one-time development, implementation, and training costs ($400,000) and ongoing software licensing and maintenance costs ($200,000).

 

  • $555,000 to establish a grant fund for purposes that benefit veterans, including expanding outreach and services, promoting mental and physical health care, housing security, employment opportunities, education, and transportation accessibility (HB 2891, 2017).

 

  • $390,256 to establish two positions (2.00 FTE) to accommodate the increased statewide support services workload anticipated with the additional funding to CVSOs. A trainer position in the Salem Office is established to provide essential training and certification for county veteran service officers. An administrative position is established to process the increased number of claims and appeals that will be filed through the Portland ODVA office.

 

  • $380,548 to establish two positions (2.00 FTE) within the Aging Services Program. A Representative Payee position is added to accommodate the representative payee caseload and an Aging Veterans’ Outreach Specialist position is added to serve as a veteran service officer with expertise in veterans’ benefits and complex aging health care issues.

 

  • $350,000 to support a veterans’ crisis and suicide prevention hotline that offers free, anonymous assistance, 24-hours a day, to active-duty service members, veterans, and their families.

 

  • $245,509 to establish a Veteran Volunteer Coordinator position (0.92 FTE) responsible for developing and establishing a statewide veterans volunteer program that will expand outreach to veterans in their communities (HB 2908, 2017).

The 2017-19 veterans’ services budget also includes $500,000 Federal Funds in anticipation of the Transportation of Veterans in Highly Rural Areas 2017 renewal grant. ODVA has applied for and received the annual grant since the grant program was established in 2014. Grant funding is available to highly rural counties, as defined by the

U.S. Department of Veterans Affairs, for transportation of veterans to medical appointments. Expenditure imitation for federal grants received during the 2015-17 biennium was phased-out during development of the 2017-19 budget and ODVA will request limitation during the 2017-19 biennium for any additional grants received.

In summary, the 2017-19 legislatively adopted budget funds ongoing veterans’ services programs at the following levels:

  • Statewide Veteran Services: $4,610,421 General Fund, $3,188,534 Lottery Funds, 31.55 FTE

 

  • Aging Veteran Services: $725,428 General Fund, $2,552,990 Lottery Funds, $107,623 Other Funds, 12.37 FTE

 

  • County Veterans’ Service Officers: $1,805,571 General Fund, $6,904,151 Lottery Funds

 

  • National Service Organizations: $118,156 General Fund, $118,156 Lottery Funds

 

  • Emergency Assistance funding: $103,700 General Fund

 

  • Partnerships:
    • Campus Veteran Resource Centers grant program: $1,187,194 Lottery Funds, 0.92 FTE
    • Veterans’ Services Grant Fund: $555,000 Lottery Funds
    • Suicide Prevention Hotline: $350,000 Lottery Funds
    • Highly Rural Transportation Grant: $500,000 Federal Funds

A lottery allocation of $1.5 million was also approved to address veterans’ homelessness and housing issues. Expenditure limitation of $350,000 was provided to the Housing and Community Services Department (HCSD) for emergency housing assistance to veterans through the Emergency Housing Account program. The remaining $1.15 million is reserved pursuant to a budget note that requires ODVA and HCSD to report back to the Joint Committee on Ways and Means in February 2018 with a proposal that includes strategic investments that will result in long-term housing stability for veterans.

Oregon Veterans’ Home Program

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 498,471 2,618,940 1,017,323 1,017,323
Other Funds 33,373,821 66,099,983 68,624,712 83,791,488
Total Funds $33,872,292 $68,718,923 $69,642,035 $84,808,811
Positions 4 5 5 5
FTE 3.13 5.00 5.00 5.00

Program Description

The Oregon Veterans’ Home Program provides skilled nursing, Alzheimer’s and memory-related, and rehabilitative care to Oregon veterans and their spouses, and to parents who have lost a child to war-time service, through two Veterans’ Homes in Oregon.

The Dalles Veterans’ Home opened in November 1997 and has a bed capacity of 151 residents. Funding for construction and equipping of the facility was from a 65% federal grant matched with a 35% state obligation contributed by Wasco County. As of June 30, 2016, The Dalles Veterans’ Home had an occupancy rate of 90%. As The Dalles Veterans’ Home enters its 20th year of operation, repairs, maintenance, and capital renewal are needed to keep the facility in good operating condition. Health and safety improvements were completed in 2011-13, and the home will undergo a renovation in the 2017-19 biennium through a federal grant approved in 2015-17.

A second Veteran’s Home in Lebanon (Linn County) opened in the autumn of 2014. The Edward C. Allworth Veterans’ Home has capacity for 154 residents who need long-term care. Skilled nursing, including inpatient rehabilitative care, is provided using a small house model, providing a home-like setting with “neighborhoods” that include landscaped courtyards and a community center. While census levels were lower as the facility began operations, as of June 30, 2016, the Lebanon Veterans’ Home was at 94% capacity.

The facilities provide care at lower-than-market rates to veterans and their families because veterans’ benefits can be utilized toward the cost of care. Home operations are funded entirely by Other Funds, consisting primarily of resident-related income, including federal VA payments, Medicare, Medicaid, insurance, and private payments. The program also receives monies from the sale of veterans’ license plates through the Department of Motor Vehicles and donations from the charitable checkoff income tax program. ODVA contracts with Veterans Care Centers of Oregon (VCCO), a non-profit organization, for the day-to-day operation of the facilities, utilizing the state’s competitive procurement process.

Legislatively Adopted Budget

The legislatively adopted budget of $84.8 million is a 23.4% increase over the 2015-17 legislatively approved budget. General Fund of $1 million is appropriated for debt service on Article XI-Q bonds issued in 2013 to fund a shortfall in the state/local share of Lebanon home construction costs that were driven by federal design requirements. Increases in Other Funds expenditure limitation for the Veterans’ Home Program include:

  • $14.9 million to address the Lebanon Veterans’ Home operating at a higher census and occupancy level sooner than originally anticipated, in addition to a higher census at The Dalles Veterans’ Home. The increase also includes updated projections for minimum wage costs.

 

  • $310,000 for costs of issuance on Article XI-Q general obligation bonds approved for capital construction projects.

 

  • $249,080 to establish an Aging Services Assistant Director (1.00 FTE) within the Veterans’ Home Program to help direct and manage the day-to-day operations of the division, including the two Oregon Veterans’ Home program directors and contractors who manage the homes.

Other Funds expenditure limitation was also decreased by $319,794 to reflect the transfer of the Aging Services Director position (1.00 FTE) to the Veterans’ Services Program. A corresponding Lottery Funds increase and position is included in the Veterans’ Services Program. The Aging Services Director is responsible for coordinating the statewide effort related to aging veterans’ services.

Capital Construction

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

Other Funds 2,475,976 12,950,000
Federal Funds 3,302,891
Total Funds $5,778,867 $12,950,000

Legislatively Adopted Budget

Capital construction expenditure limitation of $13 million was approved for the following three projects funded with the proceeds of Article XI-Q general obligation bonds:

  • $10.5 million to build a new veterans’ home in Roseburg.

 

  • $1.3 million to build a new parking lot at the Lebanon Veterans’ Home.

 

  • $1.2 million for capital improvements to The Dalles Veterans’ Home, including construction of new educational and daycare buildings, upgrades to wireless and security infrastructure, and phone system replacement.

Bonds are scheduled to be sold in spring 2019, with debt service of $2.2 million General Fund beginning in the 2019-21 biennium. Capital construction expenditure limitation for the approved projects will expire on June 30, 2023.

The 2015-17 legislatively approved budget included $3.3 million Federal Funds capital construction limitation for a U.S. Department of Veterans Affairs construction grant for major renovations to The Dalles Veterans’ Home.

The federal construction grant requires a 35% state and local match ($2.5 million Other Funds approved in 2015-17), which will come from the Veterans’ Home Program cash reserves. The funds will allow for new flooring, paint, wallpaper, and ceiling tile throughout the facility; furniture replacement; remodel of the nurse stations; upgrades of all resident rooms; remodeling of the production kitchen and nutrition centers; and remodel of the rehabilitation and therapy area, including replacement of equipment. A storage building will also be added. Capital construction expenditure limitation for this project is authorized through June 30, 2021.

$10.5 million of lottery bonds were authorized in the 2011-13 biennium and reauthorized in each subsequent biennium for a third veterans’ home in Roseburg. A U.S. Department of Veterans Affairs construction grant was not received in prior biennia to provide the remaining funding for the home. Additionally, analysis by the Department has not supported the facility maintaining necessary occupancy levels to operate at a sustainable level. Capital construction limitation established in 2011-13 for the Roseburg Veterans’ Home (HB 5006, 2011) expired on June 30, 2017. Limitation was re-established for a new six-year period in the 2017-19 budget and general obligation bonds were authorized to support funding for the home.

ODVA continues to evaluate the need for skilled nursing care in the Roseburg area, as well as explore a new veterans’ home model that would include assisted living and secure memory care.

Additionally, due to the shortage of nurses and medical technicians in the City of Roseburg and Douglas County that would be required to staff the Roseburg Veterans’ Home, ODVA was directed though a budget note to convene a rural medical training facilities workgroup.

The workgroup will investigate issues related to alleviating the shortage and include representatives from the City of Roseburg, Douglas County, local hospital or medical facilities, including the Roseburg VA Medical Center, and local medical practitioners with experience in training nursing and medical technician students. ODVA will report the results of the workgroup and recommendations to the Legislature by September 18, 2018.

MILITARY DEPARTMENT

Agency Totals

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 21,821,936 25,558,014 26,930,695 25,608,114
Other Funds 102,454,814 125,943,093 101,022,153 120,386,657
Other Funds (NL) 75,953 60,624
Federal Funds 151,411,508 284,615,518 261,708,475 271,814,624
Total Funds $275,764,211 $436,177,249 $389,661,323 $417,809,395
Positions 530 451 429 477
FTE 478.55 408.01 386.88 426.82

Overview

The Oregon Military Department (OMD) is responsible for administration of the Oregon Army National Guard, the Oregon Air National Guard, the Oregon State Defense Force, and the Office of Emergency Management (OEM).

The National Guard is a federal-state partnership with a dual mission:

  • Provide combat-ready units and equipment in support of national defense;

 

  • Provide units and equipment to protect life and property during natural disasters and civil unrest, as well as to provide backup support to law enforcement.

The National Guard serves on a day-to-day basis under the command of the Governor, and is available to the federal government upon order of the President of the United States. The Department is overseen by an Adjutant General, appointed by the Governor to a four-year term. The Adjutant General also serves as the Governor’s homeland security advisor and chief of staff of the Military Council.

 

The federal government directly funds federal employees, guard member salaries and wages, and all equipment and equipment maintenance. For the state, federal responsibility primarily centers on providing facilities and facility maintenance for the Oregon Guard. The federal government also is a major source of funds for new construction of facilities, and for Homeland Security.

 

The Department operates two National Guard Bureau-funded educational programs: the Youth Challenge program and the Science and Technology Academy Reinforcing Basic Aviation and Space Exploration (STARBASE) program.

Youth Challenge provides students at risk of dropping out of high school an opportunity to complete educational credits for graduation or to take the General Education Development (GED) examination.

The STARBASE program increases third through eighth grade students’ awareness of the importance of math and science through learning about flight operations, weather reporting and forecasting, and electronics maintenance at Oregon’s two military air bases.

Revenue Sources and Relationships

The Department’s state budget receives nearly two-thirds of its funding ($271.8 million in 2017-19) from the federal government. These funds are used to finance each of the Department’s four major program areas and are based on federal/state cooperative agreements and federal grants. Also included are Federal Funds for major construction projects.

Outside of the state budget, the Department receives direct federal support ($677.2 million in 2017-19) through the National Guard Bureau for funding federal employees (2,011 FTE), guard member salaries and wages, and equipment.

The level of federal support in the state budget varies by program, type of facility, and type of construction project. For example, troop training sites are entirely supported by Federal Funds, as are base security and the STARBASE program. Approximately 75% of the costs associated with logistical sites and between 75% and 85% of utility, maintenance, and supply expenditures of the Air National Guard are federally funded. Oregon Youth Challenge Program costs are covered by federal funding at the 75% level. Federal Funds converted to Other Funds provide most of the support for the Department’s administrative costs. OEM receives Federal Funds for emergency management, disaster recovery, and homeland security.

The federal and state expenditures for the National Guard in Oregon total over   $1 billion over the course of a biennium. General Fund supports wages and salaries of state employees, debt service, and state matching funds for various federal/state agreements.

Other Funds revenue received by the Department totals $111 million. Approximately $84.1 million is related to 9- 1-1 emergency telecommunications surcharge revenues. The Department also generates facility rental fees and miscellaneous sales revenue. Rental revenues earned from federally supported facilities are required by the federal government to be used in support of the facility that earned it. The Department’s facility rental revenue is estimated to be approximately $3 million in 2017-19. Miscellaneous sales revenues are derived from vending machine profit, coin operated telephones, and recycling programs.

Other Funds revenue includes approximately $27,000 in Oregon individual income tax check-off deduction revenue, which began with the 2006 tax year and is associated with the Emergency Financial Assistance Program.

The Oregon Youth Challenge Program receives Average Daily Membership (ADM) revenue from the Bend-LaPine School District totaling $2.1 million, as well as approximately $414,000 National School Breakfast and Lunch transfers from the Oregon Department of Education. Lastly, the budget includes Other Funds for bond proceeds for Capital Construction projects.

The following display shows total funds, by fund type, from 2009-11 through the 2017-19 legislatively adopted budget.

Source: State of Oregon

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $417.8 million is 4.2% less than the 2015-17 legislatively approved budget and includes 477 positions (426.82 FTE).

The General Fund portion of the budget totals $25.6 million and is 0.1% less than the 2015-17 legislatively approved budget. Other Funds expenditure limitation is 4.3% less than the 2015-17 legislatively approved budget, and Federal Funds limitation is 4.5% lower. The following display shows the 2017-19 adopted budget by agency division.

Source: State of Oregon

Significant changes to this budget include:

  • A revenue reduction package of $500,000, to bring Other Funds expenditure limitation for armory operations and maintenance in line with estimated armory rental revenues. Armory rental revenues have fallen since early 2015, when twelve of the Military Department’s 38 armories were closed to rentals following the discovery of lead contamination in and around indoor firing ranges used by National Guard soldiers. Remediation activities are expected to continue through 2017-19.

 

  • $7.4 million Federal Funds and 21 permanent full-time positions (21.00 FTE) to operate a 7,500-acre National Guard training site on the former Umatilla Chemical Depot. Transfer of the property from the U.S. Army to the Oregon Military Department will be finalized in the second quarter of the 2017-19

 

  • $224,000 General Fund and $896,000 Federal Funds expenditure limitation to pay an annual storm water fee assessed by the City of Portland at the Portland Air National Guard

 

  • A reduction of $1.5 million General Fund from the fire protection programs operated at the two Air National Guard bases in Oregon. The National Guard Bureau has determined that fire protection programs at such bases are 100% federally

 

  • $181,178 General Fund, $181,178 Federal Funds, $5.1 million Other Funds, and two positions (2.00 FTE) for the Resiliency Grant Program created in HB The Resiliency grant fund will be capitalized with $5 million of Article XI-Q bond funds, authorized in SB 5505.

 

  • An increase of $256,000 Other Funds and $518,000 Federal Funds for the Youth Challenge program, following updated revenue estimates from the National Guard

 

  • An additional increase of $477,113 Other Funds, $600,322 Federal Funds, and 13 positions (4.94 FTE) for the Youth Challenge program to accommodate additional cadets expected in January, 2019.

 

  • An increase of $726,331 Federal Funds and the conversion of twelve limited duration positions to permanent full-time positions in the STARBASE program

 

  • Bond funding for the following projects:
    • Grants Pass Armory Service Life Extension: $3,270,356 Other Funds (Article XI-Q Bonds) was approved for a service life extension project to renovate the facility
    • Regional Armory Emergency Enhancement Project: $8,534,400 Other Funds (Article XI-Q Bonds) was approved for making structural improvements to bring the following three facilities to essential facility standards for seismic events: Coos Bay Armory, Newport Armory, and the Anderson Readiness Center in Salem.
    • Future Readiness Center Sites: $1,730,000 Other Funds (Capital Construction Account) was approved for the purchase of two parcels of land necessary to construct two new Readiness Centers as replacements for the Hillsboro and Redmond Armories.
  • The Legislature provided $1 million General Fund for construction or repair of the military museum at Camp Withycombe in Clackamas.

 

  • A net agency-wide reduction of $2.3 million total funds for statewide adjustments to personnel and services and supplies expenditures, and to state government service charges and Attorney General rates.

These and other budget changes are described further in the individual divisions’ sections.

The Department’s budget is composed of

$77.5 million personal services,

$58.7 million services and supplies,

$25.6 million capital outlay,

$245.9 million special payments, and

$10.1 million debt service.

Special Payments, the largest sector, are primarily in Emergency Management and are provided to local governments and state government to prevent, mitigate, prepare for, respond to, and recover from natural and man-made disasters. Additionally, 9-1-1 tax revenue is distributed to public safety answering points for operations and equipment maintenance.

The following display depicts the 2017-19 legislatively adopted budget by expenditure type.

Source: State of Oregon

Administration

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 4,328,682 4,068,297 5,277,981 5,354,977
Other Funds 1,857,884 2,181,614 2,410,428 2,364,950
Total Funds $6,186,566 $6,249,911 $7,688,409 $7,719,927
Positions 26 24 25 25
FTE 24.88 22.88 23.88 23.88

 

Program Description

The Administration program consists of the office of the Adjutant General, the Command Group, Financial Administration, Personnel, and Public Affairs.

The program supports almost 2,500 state and federal Oregon Military Department and Oregon National Guard employees, commands over 8,100 soldiers and air personnel, and provides oversight for more than $4 billion worth of facilities and equipment.

Additionally, this program administers the Emergency Financial Assistance Program, which provides hardship grants and loans to National Guard members and their families. This program is funded with charitable check-off revenues from Oregon person income tax returns and occasional General Fund appropriations from the Legislature. Since its inception in the 2005-07 biennium, the fund has provided financial assistance to more than 1,000 individuals.

Revenue Sources and Relationships

The program is funded with a combination of General Fund and Federal as Other Funds. Other Funds revenue includes approximately $27,000 in Oregon individual tax check-off deduction revenue associated with the Emergency Financial Assistance Program.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $7.7 million is 23.5% greater than the 2015-17 legislatively approved budget and includes 25 positions (23.88 FTE). The considerable increase is due to price list adjustments of $1.2 million, which cover State Government Service Charge and Attorney General charge increases agency-wide.

Operations

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 7,163,378 9,416,881 8,613,376 6,901,560
Other Funds 4,302,460 4,892,841 4,985,935 4,413,963
Federal Funds 78,228,668 83,998,181 79,532,712 86,560,079
Total Funds $89,694,506 $98,307,903 $93,132,023 $97,875,602
Positions 407 339 316 337
FTE 363.80 296.51 274.38 295.38

Program Description

The Operations program supports Oregon National Guard facilities operations and maintenance. There are fourteen programs within Operations, including the Army National Guard Facilities Operations and Maintenance, Construction Operations, Environmental, Electronic Security, and Wildland Fire Management programs; and the Air National Guard Administration, Civil Engineering, Security, Fire Protection, Environmental, Distributed Learning, and Counterdrug programs. These programs and their component sub-programs are almost entirely federally funded, some with state matching requirements from 10-25%, depending on the program.

Revenue Sources and Relationships

The program is funded primarily with Federal Funds. General Fund provides state matching payments for those programs with cooperative agreements requiring matching funds. The source of the Other Funds is primarily facility rental fees (approximately $3 million), but includes some Federal as Other Funds. Federal Funds are received through Federal/State Cooperative agreements to support the programs for which they are received.

Budget Environment

The Oregon National Guard currently has 559 buildings totaling 4.55 million square feet spread across the state in 27 counties. The largest of these facilities are fifteen training/logistical sites, two air bases, and 38 armories.

Major Oregon National Guard facilities include:

  • Air National Guard Installations – Portland Airbase and Kingsley Field
  • Army National Guard Installations – Armories, Readiness Centers, Armed Forces Reserve Centers, and two aviation
  • Unit Training Areas – Camp Rilea Armed Forces Training Center, Camp Adair, Central Oregon Training and Education Facility, Biak Training Center, Oregon Military Academy, Boardman Training Range, and the former Umatilla Chemical Weapons Army
  • Other – Oregon Youth Challenge educational facility and Christmas Valley energy

The age of some National Guard facilities makes them inefficient and expensive to operate and maintain. The Department reports that 28.9% of its facilities are in compliance with National Guard Bureau/ Department of Army standards and are in the best condition, 5.3% do not fully meet standards, and the remaining 65.8% are substandard and/or in very poor condition. Facility compliance with these standards has declined in recent biennia as resources have not been available for repairs, maintenance, and improvements. Twelve of the Department’s 38 armories were closed in 2015 to remediate lead contamination from indoor firing ranges. Two armories have been remediated, remodeled, and reopened for public and National Guard use, and ten remain to be completed in 2017-19.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $97.9 million is 0.4% less than the 2015-17 legislatively approved budget and includes 337 positions (295.38 FTE).

The legislatively adopted budget includes the following changes:

  • A revenue reduction package of $500,000, to bring Other Funds expenditure limitation for armory operations and maintenance in line with estimated armory rental revenues. Armory rental revenues have fallen since early 2015, when twelve of the Military Department’s 38 armories were closed to rentals following the discovery of lead contamination in and around indoor firing ranges used by National Guard soldiers. Remediation activities are expected to continue throughout 2017-19.

 

  • $7.4 million Federal Funds and 21 permanent full-time positions (21.00 FTE) to operate a 7,500-acre National Guard training site on the former Umatilla Chemical Depot.

 

  • $224,000 General Fund and $896,000 Federal Funds to pay an annual storm water fee assessed by the City of Portland at the Portland Air National Guard Base.

 

  • A reduction of $1.5 million General Fund from the fire protection programs operated at the two Air National Guard bases in Oregon. The National Guard Bureau has determined that fire protection programs at air national guard bases are 100% federally funded.

 

  • A reduction of $1.8 million total funds for statewide adjustments to personnel and services and supplies expenditures, and to state government service charges and Attorney General rates.

Oregon Emergency Management

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 1,848,191 2,013,808 2,033,450 2,156,544
Other Funds 82,370,859 89,295,918 91,226,589 96,511,997
Federal Funds 56,358,897 162,077,091 168,157,586 169,347,449
Total Funds $140,577,947 $253,386,817 $261,417,625 $268,015,990
Positions 45 42 42 44
FTE 43.41 42.62 42.62 44.62

Program Description

The 2007 Legislature (HB 2370) expanded the Department’s statutory mission to include the responsibility for state emergency management. The Office of Emergency Management (OEM) coordinates statewide emergency services and maintains emergency communications systems used for public warnings, emergency notifications, and emergency support. OEM also provides cities, counties, and tribes throughout Oregon with planning, training, exercise and technical assistance for disaster preparedness, emergency response, recovery services, and hazard mitigation.

In addition to OEM Administration, the program has three primary responsibilities:

  • Executing planning, training, and exercise programs to raise awareness and preparedness for all hazard incidents. This section is responsible for Homeland Security grant programs, Emergency Operations Plans, the Geological Hazard Program, the National Incident Management System, and the State Emergency Coordination Center.

 

  • Operating the statewide Enhanced 9-1-1 system, including managing the network that delivers 9-1-1 emergency calls to Oregon’s 43 Public Safety Answering Points throughout the state. This section also oversees the state Search and Rescue program and the Oregon Emergency Response System.

 

  • Coordinating the development, planning, and adoption of local community hazard mitigation plans.

Revenue Sources and Relationships

The major funding source is Federal Funds received for state homeland security, Federal Emergency Management Agency (FEMA) disaster recovery, and Non-Disaster Emergency Management Performance grants. These funding sources are used for general OEM operations, development and administration of the emergency response infrastructure, training, and grants passed through to local governments for emergency management programs. Some of the funds require a 50% state or local match.

Oregon’s 9-1-1 toll-free emergency number to access safety services is a state and local partnership. The state’s portion is funded through an Emergency Communications Tax, a per-month $0.75 tax for any phone line capable of accessing 9-1-1 services, excepting federal, state, and local governments. During the 2013 legislative session, the 9-1-1 program’s statutory sunset was extended from January 1, 2014 to January 1, 2022 (HB 3317).

Additionally, prepaid cellphones were taxed at $0.75 per month, per customer until October 1, 2015, when the tax changed to $0.75 per retail transaction.

The Emergency Communications Account is distributed quarterly according to statute for the following purposes:

(1) up to 4% of the balance may be used by OEM for program administration costs;

(2) 35% is transferred into the Enhanced 911 subaccount; and

(3) the remaining balance is distributed to cities and counties. Local governments use the revenue to partially fund the expense of 43 Public Safety Answering Points (PSAPs) across city and county governments in Oregon. Revenue in the Enhanced 9-1-1 subaccount is primarily used by the Department to make direct payments to vendors for PSAP circuit charges and software upgrades. The subaccount may reimburse cities and counties on an actual cost basis for some costs.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $268 million is 5.8% higher than the 2015-17 legislatively approved budget and includes 44 positions (44.62 FTE). This budget includes the following changes:

  • $200,000 Other Funds expenditure limitation for a special payment to the Department of Public Safety Standards and Training for two additional telecommunicators training classes in 2017-19.

 

  • $1 million Federal Funds expenditure limitation to pass FEMA Pre-Disaster Mitigation and Hazard Mitigation grant funds through to the Department of Land Conservation and Development.

 

  • $181,178 General Fund, $181,178 Federal Funds, $5.1 million Other Funds expenditure limitation, and two positions (2.00 FTE) for the Resiliency Grant Program created in HB 2687. The Resiliency grant fund will be capitalized with $5 million of Article XI-Q bond funds, authorized in SB 5505.

 

  • A net reduction of $118,000 total funds for statewide adjustments to personnel and services and supplies expenditures, and to state government service charges and Attorney General rates.

 

Community Support

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 206,062 197,383 205,448 197,358
Other Funds 4,328,920 4,893,349 2,296,660 3,010,201
Federal Funds 8,085,920 9,480,396 9,071,605 10,960,535
Total Funds $12,620,902 $14,571,128 $11,573,713 $14,168,094
Positions 52 46 46 71
FTE 46.46 46.00 46.00 62.94

 

Program Description

The Community Support program coordinates support for local education programs and emergencies that require assistance of the National Guard. The unit includes:

  • Oregon Youth Challenge Program (OYCP) – Since 1994, the Oregon National Guard has operated the OYCP through a federal/state agreement with the National Guard Bureau. OYCP is Oregon’s only accredited statewide alternative high school and its only public military school for at-risk students. It offers high school- aged youth, at risk of dropping out of school, an opportunity to complete educational credits with a goal of reintegrating into high school to earn a diploma or prepare for the General Education Development (GED) examination. The program is a 22-week residential training program followed by a 12-month nonresident mentored program. OYCP graduates approximately 250 students per year.

 

  • Science and Technology Academy Reinforcing Basic Aviation and Space Exploration (STARBASE) – STARBASE is designed to increase third through eighth grade students’ awareness of the importance of math and science. National Guard members demonstrate the applicability of math and science to flight operations, weather reporting and forecasting, electronics maintenance, and firefighting facilities. The STARBASE program operates at the Portland Air National Guard air base and at Kingsley Field air base in Klamath Falls.

 

  • Emergency Operations – In the event of a state emergency, the Governor can call upon the National Guard to provide personnel and equipment to help with the state’s response. For example, in August 2017, the Governor ordered 946 soldiers and air personnel to assist the Oregon Department of Forestry and the State Fire Marshal’s Office with wildland fire suppression efforts. The Office of Emergency Management is the coordinating entity for Department resources used for statewide emergencies.

The Emergency Operations budget structure is a “placeholder,” used only in the event of reimbursable emergency operations having taken place. The Department’s legislatively adopted budget does not include funding for Emergency Operation expenses, as they are difficult to predict. Therefore, the Department has, historically, requested expenditure limitation increases for amounts it is unable to absorb within its normal operating budget, as well as General Fund reimbursement of expenditures. Revenues for Emergency Operations come as Other Funds from state agencies the National Guard is supporting, most commonly the Department of Forestry.

Revenue Sources and Relationships

The program is funded almost entirely with Other Funds and Federal Funds. The STARBASE program is 100% federally funded through the National Guard Bureau. The Oregon Youth Challenge program is federally funded, with the required 25% state match funded through Average Daily Membership (ADM) revenues through the Bend- La Pine School District. A small amount of General Fund is available for budgeted expenditures not covered by Federal or Other Funds.

Budget Environment

In 2015, the Legislature approved $5 million of Article XI-Q bond funding to enlarge the OYCP facility to house 24 additional female cadets and 60 additional male cadets per 22-week residential class. Construction and program expansion is occurring in phases, with the additional female cadets first expected in the class starting in January, 2019, and the additional male cadets in the class starting in January, 2020.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $14.2 million is 2.8% less than the 2015-17 legislatively approved budget and includes 71 positions (62.94 FTE). The reduction is due to phasing out one-time Emergency Operations Other Funds expenditure limitation approved in February, 2016, for the cost of National Guard troops and flight crews deployed to fight wildfires in 2015.

The legislatively adopted budget incorporates the following changes:

  • An increase of $256,000 Other Funds and $518,000 Federal Funds for the Youth Challenge program, following updated revenue estimates from the National Guard Bureau.

 

  • An increase of $477,113 Other Funds, $600,322 Federal Funds, and 13 positions (4.94 FTE) for the Youth Challenge program, to accommodate additional cadets expected in January 2019,

 

  • An increase of $726,331 Federal Funds and the conversion of twelve limited duration positions to permanent full-time positions in the STARBASE program.

 

  • A net increase of $16,615 total funds for statewide adjustments to personnel and services and supplies expenditures, and to state government service charges and Attorney General rates.

Debt Service

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 8,275,623 9,611,645 10,800,440 9,997,675
Other Funds 114,591 445,750 102,541 550,790
Other Funds (NL) 75,953 60,624
Total Funds $8,466,167 $10,118,019 $10,902,981 $10,548,465

 

Program Description

The Debt Service Program provides funding for principal, interest, and financing costs associated with the issuance of Article XI-Q bonds and previously issued certificates of participation (COPs), which are tax exempt government securities.

Budget Environment

The Department relies on bond proceeds to match National Guard Bureau Federal Funds when constructing, altering, or repairing National Guard installations. The percentage of state matching funds required varies by the type of installation. Bonds provide financing for federally non-allowable project costs, which, for example, include the cost of real property. Bonds also fund certain armory additions/alterations that are a 100% state responsibility. The Department’s debt service is funded primarily with General Fund.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $10.5 million is 4.5% more than the 2015-17 legislatively approved budget. General Fund for debt service is reduced by $802,765 as a result of both revised debt service estimates for new debt and reduced debt service requirements after refunding existing bonds. Other Funds expenditure limitation in the amount of $448,249 is added for the cost of issuance required for bonds to be issued in 2017-19.

Capital Improvements

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

General Fund 250,000 1,000,000
Other Funds 385,000 194,377
Federal Funds 1,866,025 4,770,599 4,946,572 4,946,561
Total Funds $2,251,025 $5,214,976 $4,946,572 $5,946,561

 

Program Description

This program provides for capital improvements to existing facilities. Capital improvement projects are those with a total cost of $1 million or less. The Department’s capital improvement projects are overseen and coordinated by agency construction staff budgeted in the Operations Program.

The Capital Improvement Program’s primary purpose is to address the Department’s backlog of deferred maintenance projects, currently estimated at approximately $134 million on 3.4 million square feet of facility space. Capital improvement expenditures delay, where possible, facility replacement. This is important for certain installations, especially armories, where the replacement schedule is dependent upon the National Guard Bureau’s Long-Range Construction Plan and Congressional funding of that plan.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $5.9 million is 14% higher than the 2015-17 legislatively approved budget. Changes to the budget include an additional $1 million General Fund (one-time only) for construction or repair of the military museum at Camp Withycombe in Clackamas.

Capital Construction

2013-15

Actual

2015-17

Legislatively Approved

2017-19

Current Service Level

2017-19

Legislatively Adopted

Other Funds 9,095,100 24,039,244 13,534,756
Federal Funds 6,871,998 24,289,251
Total Funds $15,967,098 $48,328,495 $13,534,756

 

Program Description

The Capital Construction program plans, designs, and constructs facilities projects with a cost of more than $1 million. Since 1986, the Department has undertaken 47 major construction projects totaling over $318 million with a federal/state funding ratio of 7:1. The Department currently has 18 projects identified in the National Guard Bureau’s Long-Range Construction Plan, which will bring additional federal construction dollars into the state through 2040.

Revenue Sources and Relationships

Typically, Federal Funds provide the majority of construction funding. In general, Other Funds and General Fund are used only for required matching funds for projects. State funds also pay for certain costs ineligible for federal match (e.g., real property, local permitting, etc.). The sources of Other Funds are either bonds or the Department’s Capital Construction Account, which is discussed below.

Depending on the type of facility constructed, the federal government pays between 67% and 100% of the approved construction cost. By emphasizing construction of Armed Forces Reserve Centers (AFRC) wherever possible, the Department can access Federal Funds for approximately 97% of the design and construction costs. Site improvements and multi-purpose accommodations outside the federal guidelines are 100% state obligations. Where possible, the Department partners with other federal, state, or county agencies to co-locate functions. This reduces the Department’s design and construction cost obligations, and reduces the long-term operations and maintenance burden of each agency.

The Military Department Capital Construction Account (CCA) is a statutory, interest-bearing account into which proceeds from the sale of Military Department real property are deposited. The Department requires legislative approval to dispose of surplus property. Moneys in the CCA can only be used for Capital Construction expenditures on legislatively approved projects, which include: (a) paying for construction costs that are a state obligation outside federal guidelines; (b) state matching requirements on federal Capital Construction funding; and (c) miscellaneous land acquisitions. The Capital Construction Account generally has an insufficient balance to meet matching fund requirements on major construction projects.

Other revenue sources are project management fees charged to the federal government and bond revenues transferred into the account. Some of the Department’s real property originally donated by counties is on a reversion clause, which requires that the land returns to the county if the Department determines it is no longer needed for military purposes.

Of all the Department’s programs, the Capital Construction program is the one most likely to be affected by shifting federal priorities. The Legislature is frequently requested to add projects or transfer limitation between existing projects; such changes may require additional state matching funds. The fluidity of the Department’s capital projects as compared to other state agencies’ capital projects underscores the uniqueness of this agency and the influence federal funding has over its budget. It also underscores the need for OMD to frequently communicate short- and long-term Capital Construction priorities to the Legislature.

Legislatively Adopted Budget

The 2017-19 legislatively adopted budget of $13.5 million is 72% less than the 2015-17 legislatively approved budget. While the period-to-period change can be significant, the legislatively approved expenditure limitation for any Capital Construction project has a six-year duration.

Funding for the following projects is included in the budget:

  • Grants Pass Armory Service Life Extension: $3,270,356 Other Funds (Article XI-Q Bonds) was approved for a service life extension project to renovate the facility. The project is for design and construction of additions and alterations to the Grants Pass Armory to bring the building into conformance with current building code. The project will upgrade mechanical, electrical, and plumbing systems; remodel the existing classrooms, administrative space, latrines and showers, equipment storage areas, kitchen, and assembly hall areas; replace failed paving areas; and replace existing site lighting, landscaping, and fencing.

 

  • Regional Armory Emergency Enhancement Project: $8,534,400 Other Funds (Article XI-Q Bonds) was approved for making structural improvements to bring the following three facilities to essential facility standards for seismic events: Coos Bay Armory, Newport Armory, and the Anderson Readiness Center in Salem. The project includes seismic structural upgrades, backup power and water systems, and emergency equipment and fuel storage for the three facilities.

 

  • Future Readiness Center Sites: $1,730,000 Other Funds (Capital Construction Account) was approved for the purchase of two parcels of land necessary to construct two new Readiness Centers as replacements for the Hillsboro and Redmond Armories. One property is located in Washington County and the other is located in Deschutes County.

The Legislature approved the extension of the project expiration date and expenditure limitation for The Dalles Readiness Center (Other Funds) to June 30, 2018 and The Dalles Readiness Center (Federal Funds) to June 30, 2018; and approved the proposal from the Oregon Military Department, as required by ORS 396.515 (4), for the sale of the Burns Armory and 40 acres of land in La Grande.

by Andrew Price, Strong Towns

The majority of American towns and cities are built around the automobile. From multi-lane highways to vast paved parking lots, our communities have been shaped around a single mode of transportation over the last seventy years. While this may feel like progress, it has also harmed ourselves and our towns in ways that will be felt for generations.

Today I’m going talk about some of the negative consequences of car dependency and how a more walk-friendly, human-scaled development pattern would make us all better off. Specifically, I’m going to talk about them from the perspective of a town or suburb that has gone all-in on the auto-oriented pattern of development, where car travel and storage is prioritized over any other mode of transportation, and where the entire community is designed around car use. Some of these negative consequences are:

  1. Social isolation
  2. Discrimination
  3. Expense
  4. Decline of small businesses
  5. Effect on public health
highways on highways.jpg

I’ve lived in both cities (taking transit and walking everywhere) and suburbs (working in a suburban office campus and driving everywhere). When I lived in the city, I used to have random encounters with strangers, often daily. These were usually nothing more than simple interruptions. The elderly lady that asks for help at the train station. Overhearing the couple’s conversation behind me on a bus. The homeless man asking for my spare change… These people were rich and poor, old and young. Even though the idea of being forced to interact with strangers sounds undesirable, there’s something very human about feeling that you are part of a living world. I was not the most sociable child, so these random encounters played an important part in developing my social skills and feeling comfortable around strangers.

When I lived in the suburbs, I eliminated most of these random encounters. When I got into my car to drive to work, I felt like I was traveling through town in my own isolated box. When I got out of my car at work, the only people that I interacted with were co-workers, and when I returned home, the only people that I interacted with were my family. The possibility of random encounters with strangers was still there (when I visited the supermarket, for example) but I reduced the window for this to occur from an everyday experience to a couple of hours on the weekend. I had to go out of my way and place myself in public to interact with my neighbors and others that lived in my town, rather than it being a natural part of my day. The places where I shopped and spent time targeted my demographic, so I was constantly surrounded by people that were similar to me.

I often wonder if not having those small everyday interactions with strangers has a greater psychological effect on us than we realize.

people1.jpg

Getting around in a car dependent environment is fine if you’re old enough to drive (but not too old) have no major mental or physical disabilities, passed the test, and can afford a car and all of its associated costs. Everyone else is treated like a second class citizen; they are either a burden to their friends and family to escort them around, isolated at home and get out very little, have to rely on mobility services, or they tough it out and walk, cycle, or take transit in environments not suited to those forms of transportation.

It’s discriminatory. By going all-in on the auto-oriented development pattern and creating a car-dependent environment, we’re discriminating against those that cannot drive: the poor, the young, the elderly, the disabled. We place so much emphasis on buildings that are ADA complaint, so that people with disabilities can conveniently navigate through doors and between floors, yet we keep building car dependent environments where an even greater demographic cannot conveniently get around on their own.

There is a gross inequity behind this model; those that can drive are entitled to a fast and easy day, while those who cannot are not.

17stroad.jpg

Going all in on the car is very expensive for everyone. This includes our cities, our business owners, and individuals.

For Cities

We are endlessly “upgrading” roads by widening them and adding extra lanes. We install countless numbers of traffic lights and stop signs. We build vast networks of freeways and interchanges. We spread out across the landscape, promising sewage, water, power, police and fire protection, schools, and perfectly paved roads to a tax base spread too thin to support them (this is at the heart of the Strong Towns message). We issue bonds, take on debt, cut services, and increase taxes so we can keep on doing more of them same.

Improvements to walk and bike infrastructure cost far less and save our communities millions over the long run. These are some of the most high returning investments we can make in our towns.

Businesses built under the auto-oriented pattern require landscaping (greenspace) and extensive maintenance to prevent this style of development from appearing blighted. (Source: Google Maps)

Businesses built under the auto-oriented pattern require landscaping (greenspace) and extensive maintenance to prevent this style of development from appearing blighted. (Source: Google Maps)

For Property Owners

The appeal of locating a business in the suburbs is based on the availability of cheap land, usually fueled by a city’s desire to attract more easy horizontal growth. In auto-oriented places, there are usually regulations that require a minimum lot size (perhaps 1/4 of an acre), parking, and perhaps landscaping. Sometimes the business needs to pay for things that are technically part of the street, such as installing and maintaining the sidewalk.

In the walk-friendly traditional development pattern, businesses need only enough space for their building. Parking in the traditional development pattern doesn’t need to be required or banned, because it’s within a business’s best interest to make their business as accessible to as many customers as possible. If the surrounding businesses and streets have an ample supply of parking or if the majority of the customers live close enough that they don’t have to drive, then the property owner may not decide to supply their own parking. Without the need to landscape or supply parking, businesses are only required to purchase, develop, and maintain enough space for their building. The end result of the traditional development pattern is a very fine-grained mix of properties that is highly walkable and takes up minimal space.

For Individuals

Living in a car dependent environment places a financial burden on the individuals that live, work, and go about their daily lives there. These financial burdens are both direct (owning a car) and indirect (taxes).

The average yearly cost of owning a car is between $6,957 and $11,039 (a number that often varies, but it’s usually within the higher half of four digits.) A family of two working adults who live in an auto-oriented place will likely want two cars for commuting and other daily tasks, thus doubling the yearly cost of car ownership for the household. In a family with grown children of driving age, there may even be a need for three or more cars.

In a walkable, people oriented city, many households still own a car as it’s often convenient to have a car around for the few times you need it (to visit family out of town or to help transport large purchases). But in these cases, a car becomes a luxury, not a necessity, and most families could get by with only one or none.

The indirect costs, such as maintaining roads and traffic signals (as mentioned above), is eventually handed down to the tax payer through tax increases and service cuts as the bonds mature and the debt and maintenance of the auto-oriented pattern remains.

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4. Decline of Small Businesses

Car-dependent environments are unfavorable for small specialty businesses. The auto-oriented development pattern creates a high cost of entry for small businesses, as discusses above. I am concerned that this high cost of entry will lead to a polarized economy where the rich get richer while the rest of the population is prohibited from participating. (Read more about this issue.)

The auto-oriented development pattern where everyone drives from store to store isn’t favorable to specialty businesses. There is a considerable overhead in time and effort to make a stop; you need to turn off the street, park your car, then get out of your car. Once you are done shopping at each store, you need to get back in your car,  slowly back out of your parking spot, wait for the traffic to clear so you can exit back out onto the street, and drive to your next destination.

The thought of shopping for a week’s worth of groceries from small specialty businesses — going from a grocery store, to a butcher shop, to a bakery, to a pharmacy — seems overwhelming, especially if these businesses are located in different areas of town that could take up to 15 minutes to drive between. In this kind of environment, the convenience of visiting a large store where you can park once and have everything under the same roof is often the winning factor for the consumer. Contrast this to a walkable town where it takes no more than half a minute to detour into a store while you are walking down the street.

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5. Effect on Public Health

At Strong Towns, we often talk about how the design of our streets and roads can be dangerous for all users, including drivers, cyclists, and pedestrians. According to the Centers for Disease Control and Prevention, motor vehicles crashes are the leading cause of death for Americans between the age of 5 and 34. There’s also a heavy correlation between car usage and obesity. This shouldn’t be too surprising as we’ve replaced the primary form of exercise throughout human history — the act of getting from A to B — with mostly sitting in a seat. Add to that the health effects of local air pollution caused by vehicle exhaust. The latter may be solved by the adoption of cleaner fuels and electric vehicles, but not the preventable deaths, injuries, and health risks associated with obesity and a sedentary lifestyle.

Car-centric towns are isolating, discriminatory, expensive, harmful to small businesses, and bad for public health. In contrast, walkable, human-oriented communities tend to be the happiest and healthiest and the most financially productive types of places to build and retain.

Let’s focus on building places that cater to the needs of humans, not the needs of cars.

(Republished from StrongTowns.org; All photos by Johnny Sanphillippo)

Andrew Price has been a regular contributor to Strong Towns since 2013 and is a founding member of the organization. Andrew is a software developer by day and an urbanist by night. He is passionate about traditional urbanism – he believes in fine-grained, highly walkable places that are built for people. He grew up in Australia and now lives in the United States with his wife. Andrew is a regular contributor on Strong Towns and runs his own blog, andrewalexanderprice.com. You can find many of his photographs throughout the Strong Towns website. Andrew’s motivation to be involved in Strong Towns and urbanism is to create a great place that he and his wife, and one day their children and their future generations will want to call home.

Autos — The Next Subprime Crash

(Chuck Marohn of Strong Towns speaks with Tony Dutzik, Senior Policy Analyst for Frontier Group and Strong Towns member about his recent article, “What Comes After the Auto Bubble?”)

Tony Dutzik of The Frontier Group

Strong Towns: I want to start with the kind of remarkable statistic, and it was not maybe remarkable to you, but to me it was, this idea that ADT [average daily travel] the amount that people drive is really tied not only to unemployment, the growth of the economy, but also tied loosely to credit conditions. Can you talk a little bit about that relationship?

Dutzik: I can talk a very little bit about it, which is to say that it’s that it’s rather unclear. What I can say is that there’s been there’s been growing attention in to the link between the availability of auto credit and access to vehicles, the ability to purchase vehicles on the market.

You know, when we think about the factors that go into whether someone purchases a car or many people purchase cars the things that we tend to think about relate to state of the economy: so do people have jobs, do people have income, are they able to afford vehicles. And all of that is true and very important. But there’s also this additional factor which I think, certainly, if you think about the housing bubble and the conditions that led to, that plays out in the car world as access to credit. We’re starting to look into this question a few years ago.

I found a very interesting working paper that was done by researchers at the Federal Reserve that essentially looked at this question of what is it that triggered the downfall of a car market in and around the recession. And what they had found was that, in addition to all of the sort of bread and butter economic factors that were playing into people’s decision making at that point in time, that credit availability — so simply the inability to get a loan to buy a car — was a major factor and in fact was as big a factor, credit market conditions were as big a factor as employment and income. How that plays into trends and how much people are driving, I think is a point that is still very unclear.

One of the reasons that we started looking into this, in addition to coming across this research, was the very sharp spike in vehicle travel that started in late 2014 but accelerated in 2015. Which a lot of folks, including ourselves, have chalked up, in large degree, to gas prices and the economy. But it was also at roughly the same time that this concern about subprime auto lending really started to get rolling. So I think we don’t really know very much at all about the connection between credit conditions and people’s ability to buy vehicles and how much that’s affecting overall trends and driving. But we definitely — I think there’s reason to ask the question of how those things relate. And it’s worth talking about and thinking about.

Strong Towns: At the beginning of this paper you had a number, 1.2, 1.2 vehicles for each licensed driver. I have to say, if you would have asked me, for every licensed driver in the US how many vehicles are there, and this may point to my worldview, but I would have said 0.8, 0.85, something below 1.0. In other words there’s going to be families where you’re going to have two people sharing a car, or are you going to have kids that have licenses that don’t have cars. There’s 20 percent more cars than licensed drivers in this country. And that number is actually then started to go up in the last few years again after reaching a high over a decade ago. Do I have that right?

Dutzik: You do have that right. I think that statistic can — and we flagged this in in the blog post that I think is the jumping off point for this conversation. We flagged that that statistic. I think it can be easily misinterpreted. So when we talk about 1.2 vehicles per licensed driver, that includes commercial vehicles and includes taxis and includes Ubers and includes all manner of vehicles that are out there that are not necessarily personal household vehicles. That being said, it’s still a pretty striking number.

Strong Towns: It’s astounding. That’s astounding. Yeah, it’s incredible. The number peaked in 2001 and then kind of hovered and then and then dipped during the recession. But now, in the last few years, it started to spike up again. Is this kind of tied into this notion of now we’ve made credit more available, we’re doing more subprime lending, and so it’s simply easier to get into a car?

Dutzik: Well, I think that that is very much true. We had done a blog post a few a couple of years ago when we first started exploring this topic. I can’t remember if it was the title of the blog post or just a line that we used within it, that “it’s never been cheaper to get into an expensive car.” What we meant by that was that the credit market conditions that have prevailed in the last few years have enabled a very large number of people to “afford,” quote unquote, vehicles that otherwise would have been out of their financial reach if we had — if we were dealing with lending conditions that were similar to what they would have been 10 or 15 years ago. So there’s a few factors that play into that. So one factor that plays into it is just that interest rates have been very low, which is obviously a huge factor.

The second thing that plays into it is that lenders have become increasingly willing to lend people money for cars over longer periods of time. So, when I was growing up, your traditional car loan, it was about a four year loan, four or five years. Now many more people are taking out loans that are five, six, seven years long on new cars.

Strong Towns: I saw a seven year loan the other day and it just floored me. Seven years!

Dutzik: Yeah. No it’s true. And there are some who I think, perhaps legitimately, will note the fact that that cars last longer than they used to. So one of the things that I think is a factor that will be interesting to see how it plays out over the next couple of years is the fact that cars are increasingly higher quality. They’re more durable, they last longer. So you might think, well if I’m going to be in this car for for 10, 11 years, that a seven year auto loan makes some amount of sense. That challenge is that it lengthens, intentially lengthens, the amount of time that someone has a car that they owe more in loans on than the car is actually worth at trade in. So my concern is that that’s going to play out in some fairly wacky ways in in terms of how people deal with those decisions over the next few years.

But the bottom line is that, if you have low interest rates, if you’re paying off over a longer period of time, and if used car prices are high, which they have been over the last number of years, then it’s possible for lenders to offer a much lower — all of those things combined, when you’re leasing a car, enables you to offer a really attractive lease payment. And if you’re buying a car, enables you to have a lower payment. You’re still paying more over time, because you’re paying more in interest with a longer loan period. But the actual monthly payment is lower. And, for many consumers, when they’re thinking about, “Do I get into a car” and “Do I buy this car, do I not buy this car, ” the monthly payment is the thing that they’re thinking about. They’re not necessarily thinking about the cumulative payments over time.

Strong Towns: Exactly. I remember my wife bought a car, five, six years ago, and it was all about the interest rate and the payments. This would have been 2011, 2012, so we’re after we plumb the depths of the recession. But kind of in the early phase of this, and yeah, the hook . . . We went in, she knew what car she wanted, she knew that type, all that. But the hook was the, yeah, here’s like — I think we even got zero interest for a while, but they wanted to make a six year loan. And I think we actually wound up doing something like that, just because the interest rate was ridiculously low. You know, like, why not. And I figured, how does this make any sense? Because I felt like the car was fairly priced and all that. Is this all part of the national . . . . I don’t sound conspiratorial, but the Federal Reserve pushed to loosen credit, and kind of loosen up things and can keep the economy going as a response to the recession?

Dutzik: You’re getting a little bit beyond my field of expertise or field of concern. I would say that certainly, coming out of the recession, the Federal Reserve did, through interest rate policy, tried to find a variety of ways in which to spark the economy. And clearly, if you are lowering interest rates, that makes all sorts of durable goods purchases that you might borrow for look a heck of a lot more attractive. And so I think one of the one of the concerns, when you look at the auto market, is that to the extent that those policies have incentivized people to buy vehicles now that they might otherwise have waited two or three years to buy, and to have taken out a fair amount of debt on that is not something necessarily that the collateral of the vehicle supports their ability to take out that debt. You might have repercussions in the next few years of people not being able to make vehicle purchases that otherwise they would have made. So essentially there’s a concern I think that the consumption has been pulled forward by those policies a little bit, and might result in what I think the auto industry anticipates as being a slackening of sales in the next few years.

Strong Towns: A hangover in a sense. I remember with the Cash for Clunkers thing, we had this debate too. The idea was “hey, we’re we’re in a really bad fix, the auto companies are imploding. Let’s do this thing and essentially pull the demand forward and keep things from bottoming out now” with the understanding that if people are buying more durable cars that last longer and they’re purchasing it earlier than they otherwise would, that means at some point in the future you’re going to have less demand, but the urgency is there now. So let’s deal with now and we’ll worry about that later. There’s a part of me that sees the whole subprime thing essentially as a way to entice people to bring forward even more purchases that they otherwise wouldn’t make. Is that kind of what you’re sensing too?

Dutzik: Well, it’s interesting that you bring up Cash for Clunkers because I think there’s there’s a couple of things that are going on here. So one of them is that Cash for Clunkers took all the cars off the road. So it spurred the demand for new vehicles but it also wiped a bunch of older vehicles off the road at the same time.

Strong Towns: Those were crushed, like, they didn’t go back on the market as used cars. I don’t think they did.

Dutzik: I’m not 100 percent certain of that, but I believe that that’s true. One of the really curious things of the last couple of years at least 2015, we haven’t seen final 2016 data, is that there’s been this huge net flood of vehicles in the market. So we had looked at some statistics, and I’ve been working on a blog post on this, I hope I can find them while we’re actually talking.

Last year light duty vehicle sales were north of 17 million, so it was an all-time good year. In 2015, scrappage, the removal of old vehicles off the road, was running at around 11 million. So what had happened was this very strange circumstance in which new vehicle sales are at an all-time high, and yet the average vehicle on the road got older, which suggests to me that we have been — that number that you talked about at the very beginning of the 1.2 — that we have been — we know — we’ve just been putting a lot of cars into a lot of people’s hands over the last couple of years. And a lot of those folks who have those vehicles now are folks who were not going to be in a position to buy them during the course of the recession, either because they didn’t have income or they didn’t have access to credit.

And so you have this really difficult and challenging situation where — you and I have talked about this before — that we’ve created a situation and create a transportation-land-use system in this country where many folks feel the need to own a vehicle, where in order to participate in, to be able to participate in daily economic life and to take their kids to school and do the things that they need to do every day. And you know when those people are people who are not of economic means, if they are folks who really legitimately can’t afford to own a car, then you have this sort of ping pong effect where you get the subprime market going to provide access to something that people very desperately need.

You have a subprime — tools that are being used in that market to recover vehicles that people may not be able to make payments on. You have all sorts of very shady dealers who show up on the scene to provide access to this product. What ends up happening at the end of the day is that it does challenge the financial viability of those households and it also raises some challenges for the financial system too. So I think that my answer might have kind of taken off on a little bit of a different tangent than what you were asking but . . . .

Strong Towns: I feel like we’re getting, and I know John Oliver did the piece that was really very good, that kind of talked about how we’re preying on people, really, through the system.

And you have, like you say, you have a captive audience. I mean people in most of America need a car to get to work and to function. I mean it’s kind of the ante to participate today in most places. I remember back in 2000, I went to graduate school and my wife and I were looking for an apartment. At that time we we still do but we had two big white snow dogs. They’re Samoyeds. They’re not exactly like household pets. And every place we were looking for, nobody — I mean they were going to charge us obscene amounts for these dogs. And it just was a bad deal.

And this realtor we were talking to said “What you guys should actually look to buy. Buying is not bad right now.” Well. I was quitting my job, right, to go to graduate school. I had a half-time assistantship at graduate school, was going to pay me like $12 an hour. And we had a mortgage already on our existing house, which we were thinking we were going to rent, but we weren’t exactly sure. We go into “OK, we’ll entertain this.” We went and looked at a townhouse and I thought, there’s no way we’re going to be able to afford this thing. And when we got in they asked us some questions and they said “Well, let me let’s go show you some houses in your price range.”

And they started showing us these $400,000 homes, which is like double the house I had, and I thought “this is insane. Something’s wrong here.” When we sold it a few years later, the couple that bought it, in order to purchase the house, had a first mortgage, a second mortgage, and third mortgage, and they paid like $2,000 more than what we were asking for. And we found out when we got to the closing that the $2,000 extra was a bonus to their realtor, and their realtor actually turned around and cut them a check so they can make the first two payments. This is 2004. And in my mind, there’s just warning bells going off, like “This makes no sense.” I know people today, I know two people today who actually have leased cars that are sitting in their driveway because they’re over the mileage amount and they still have time left before their lease is done. So they’ve actually gone out and purchased another car and are essentially making two car payments. To me it feels frothy in the same way that 2004 felt frothy to me.

Dutzik: You can definitely start to see signs of that. You know, if you’re if you’re looking for signs of froth, basically right about now, what seems to be happening in the new car market — and again, I would preface for your listeners that my interest in this is more in the line of a hobby as a than as a full time vocation to me — but I pay attention to it because I think that it does. To the extent that the work that I do looks at trends in transportation, to the extent that we look a lot at potential transitions in how we do mobility, whether it’s moving toward shared mobility and shared vehicles or walking or biking or land use or any of these things, this stuff is important, and it intersects with all of that. So with a little bit of preface that this is not something that I’ve spent my entire life focusing on, what you’re seeing, I think right now in the new car market is that a few things are kicking into gear that are reversing many of the trends that we just talked about

So the thing that enables the leased vehicle to be sitting in your friend’s driveway, one of them, is that because we have put so many more vehicles on the road, and because so many people have leased vehicles — and because the deal has been so good over the last few years to lease a vehicle — that you have this surge of relatively inexpensive, but fairly high-priced used cars that are coming on the market that is causing used car prices to fall. When used car prices fall, the trade-in value that you get on your new vehicle becomes less attractive, and it becomes harder for dealers and lenders to finance leases in a way that is attractive to folks.

So you’re starting to see, from the automakers, a few things that are happening at the same time. One of them is that sales are going down of new vehicles. The second thing that’s happening is that incentives are going up, so they’re actually giving away more money to encourage people to take vehicles on their lots than they have since the recession, and at the same time inventory for some of the automakers of new cars is growing. So I think you have — the evidence of the froth in the market is that you start to have something that looks like a glut of cars, cars that are sitting in dealer lots, cars that are still being manufactured by the manufacturers, and also on used car lots.

To tell you a little bit of an anecdote, and I almost hesitate to share this because I don’t really know that it’s proof of anything, but I bike to work a lot, and I’ve been biking by our local Toyota dealer, and I’ve noticed over the last couple of months that it used to be that they stored all of their cars on their lot at their facility. But now I’m noticing that there’s a vacant lot across the street where there are a bunch of cars and there’s a former restaurant lot down the street that has even more cars, so there’s you know it’s almost like they’re pouring out of their lot into adjacent properties wherever they can store cars. And none of that is particularly sustainable I don’t think going forward.

Strong Towns: I noted the same exact thing here in central Minnesota. We have the same thing. We have an auto dealership that I go by when I take the girls to dance, and their overflow lot across the street was always empty. The last few months, the last six months, really it’s overflowing now. It’s packed full of cars, and it’s not the time of year to be packed full of cars you know.

Dutzik: Exactly, because pretty soon they’re going to be trying to get rid of those vehicles in order to turn over the stock for the next model year.

Strong Towns: I want to ask a little bit about the implications of this because I’ve seen this kind of rumbling around for months, maybe a year now. The people that push back back on it say “Hey, this isn’t as big a deal, don’t worry about it.” You know, subprime housing was a big deal, but when people defaulted on their home mortgages it took a year to get them out of the house. You default on your car and the repo man shows up and it gets taken care of in an afternoon. And we can make the banks whole pretty quick. So there’s there’s not a big deal here. Don’t worry about it.” That changes though when there’s a glut of cars right?

Dutzik: Yeah, it changes quite a lot, and I think it’s already beginning to change. You’re starting to see some indications from some prime lenders that they’re not recovering the value on those vehicles that they’re repossessing that they had in years past or that they’re anticipating. This whole system, in the subprime world, of offering a relatively high interest loan to a relatively high credit risk and being able to repossess it quickly and resell it to the next person is — which I think that John Oliver piece that you described and which we linked to in our blog post on this — and which I definitely encourage folks to watch for entertainment value if nothing else.

Strong Towns: So it was hilarious, but it was ridiculously eye opening too.

Dutzik: You read some of these stories and you watch that piece and kind of — you sit back in bemused horror a lot of the time. But, at any rate, this whole system actually works decently well for lenders and dealers so long as vehicles are holding their value.

If it comes to the point where a dealer is repossessing — in a lot of cases the industry segment of the industry that John Oliver talked about is the the Buy Here Pay Here dealer, essentially folks who sell and finance vehicles right on the same lot. But, essentially, if you get to the point where those vehicles are being repossessed and they’re being resold at a lower value, then you begin to get into issues. Certainly for the lenders, which I think is already starting to happen to some degree.

You know, for consumers, I think the implications for the folks who are in the subprime market, I don’t really have a clear idea of because — on one hand you might say that folks are going to be lacking access to credit and therefore not able to borrow for vehicles, which I think will be . . .

As banks and other lenders are beginning to tighten their credit standards, which is already happening , but could continue to happen even more in the months and years ahead, that will obviously shut off credit.

But there’s also going to be a flood of — a lot of really cheap, pretty good used cars out there. So I suspect that for some folks, who would be in the used car market and would be in the subprime market, that there will be opportunities to have access to vehicles that perhaps they might not have previously.

So how all of that shakes out, I think it’s still very much unclear to me. I haven’t really seen much in the way of analysis that documents or suggests what’s likely to happen there, and I think it’s important not to jump to too broad of conclusions about what that’s likely to look like.

Strong Towns: You had one other statistic in that paper that struck me. And I don’t have any context for this one except for my own. It’s the 137 percent loan-to-value ratio.

I’ve been fortunate enough that the only two cars I’ve owned as an adult have been brand new cars. I grew up on a farm in a poor family, we always had junky cars and they always broke when you needed them, right? And I said, “Look I’m not going to have a junkie car, I’m going to have a car that works.” I bought a brand new car out of college and then, in 2004, nine years later, I bought another brand new car. I still have that one. So I’ve driven it almost 13 years now. It’s been mine, I’ve taking care of it and all that.

I know when I drove that thing off the lot it dropped $2,000 in value right there. And so my loan to value ratio was something over 100 percent, but 137% being the average? And that’s not even the subprime average — that’s the average average for used, not for new. That astounded me. Because that just tells me right there that you have, if you buy a used car, and you even get like a three year or four year loan, for half of that loan or a third of that loan, at least, you’re going to be underwater for sure. Even if you don’t drive it. That doesn’t seem to work in any world to me.

Dutzik: Right, well and it doesn’t. It doesn’t make intuitive sense really.

There was another paper that I had seen when we were doing our investigation into this that was dated from the early 2000s. I was going to talk about it a little bit in our blog post and it wound up on the cutting room floor. But it’s an interesting piece of work. When they were doing their analysis, one of the things that they specified was that the amount of the loan could not exceed the value of the car. And this was back in the early 2000s. And what I gleaned from that was that the researchers had sort of not thought that that was something that was possible — for there to be a loan to value ratio that vastly exceeded 100 percent and yet it’s something that happens all the time.

I’ve got personal experience with this, because my stepfather passed away a number of years ago. This was back in 2009, and he had to be the opposite experience, I think of you growing up, which was that he was a car guy. He raced stock cars in the 60s, and always very much wanted to have a new car. You know, he had to have a new car every three or four years, and he continued this well beyond his ability to sustain it financially. And so his last vehicle, which was the vehicle that he had when he passed away, was in this very same situation of the loan to value ratio. He had rolled over the outstanding balance of a previous car loan into the loan for this car and it was, by that time, he passed away and that we had to sell it. The car was worth dramatically less, I think it was worth it was worth about $7,000 and he still owed about $13,000.

So for me, as the executor of the will, I could just say “Here you go, here are the keys, have at it,” without my credit rating being at risk. But he would not have been in that same situation. And I think for folks . . . . At some point, this has been called, and I’m forgetting exactly who labeled it this way but I think it was a Morgan Stanley analysis that labeled it “The Trade-In Treadmill.” But at a certain point you do wonder if there is some sort of upper limit on what that loan to value ratio can be.

So how much how much phantom car are lenders willing to finance going forward? And if you do have that situation where you have folks who are in relatively long-term, five years, six years, seven-year financial commitments on their cars, if those vehicles turn out not to be worth at Year Two or Year Three or Year Four what people have anticipated that they would be, how does that affect the financial decisions that they make if they’re under financial stress? How does that affect their willingness to purchase new vehicles three or four or five years down the line? There are a whole set of implications that I think tumble atop of one another that I certainly haven’t had the time to dig into and I don’t know have really been fully explored by people who pay attention to this stuff.

Strong Towns: I want to ask you one last question, and I don’t know how you are going to know the answer. But with the subprime market for housing, I know a lot of it originated at the local level. There were everything from the appraisers, to the real estate agents, to the originators in local banks, all kind of part of this chain of people, none of whom was really responsible for anything. And there was a moral hazard created by the fact that the paper got shoved off onto the secondary market where it was securitized and sold off. And basically the people who were taking the risk were so far divorced from the people who were, in a sense, vetting the risk, that we wound up in this really crazy situation.

With auto loans, it does seem like you’ve got the vendor financed ones, and they’re charging really high interest rates and there’s some predatory things there. But are most auto loans still held by local banks? Or is this something that too is getting securitized and we have that kind of hazard with the people taking on the risk being very different from the people who are vetting it?

Dutzik: Yeah, I think there’s there’s a lot of very similar dynamics at play.

So certainly auto-loan backed securities exist. They are increasingly important, and I think one of the dynamics that some observers of the situation have been concerned about is that you have a very similar set of incentives that are put in place. Essentially you have folks who are investors who are seeking yield. So they’re seeking good returns at a time when interest rates are relatively low, who are seeking investments that can deliver that. And auto backed securities have tended to — they did pretty decently well during the recession and afterwards. And so you have this bidding up of the market of people who want to invest in this kind of lending when the cupboard may be getting to be fairly bare in terms of the people who are actually willing to do the borrowing and capable of paying it back.

In some ways it is similar to the housing market. I think that one of the slight differences is that, certainly banks and others are beginning to pull back from this market a little bit. I think that they understand, or are coming to understand what some of the issues are. I was reading a story in Bloomberg today that was talking about a number of lenders who had retained a firm to identify essentially what percentage of new car loan applications are beset by fraud. And that’s something that I think was not really part of the conversation until well after the housing bubble began to burst.

Now you could argue that the auto bubble has already started to burst over the last few months. But there’s, I think, some greater awareness among the more reputable and sane aspects of the financial industry as to what’s going on here. One of the issues I think going forward will be to what extent — it’s one of the things that I think has been challenging about this particular situation is that you’ve had new entrants to the market who are not necessarily . . . . who were a little bit more fly by night, a little bit more willing to take on risk, who then are entering into the subprime market in a big way. And the extent to which I think they’ll continue to be able to do so is something that’s up for question. But I think you’re right about this question of the divorcing of of risk from investment. And I think there are a lot of things that we don’t know about how that has happened. But there are definitely some, if not similarities, at least echoes of the housing crash that are starting to play out in this market.

Strong Towns: I just remember buying my first car in in high school and sitting down with the banker. And, you know, knowing that this guy knew my dad, knew my grandpa, if I didn’t make good on this loan, not only did this guy know where I live and was going to kick my butt, but I was never going to get a loan for anything ever again. And you contrast that with when I the story I told about going to purchase the second home when I was in grad school with no income. It’s a very strange world to me that I have trouble grasping. I’m 43, I’m too young to be the Curmudgeon, you know? This feels like a little bit “Boy, back in the day, it made sense” and this doesn’t make sense to me.

Dutzik: It is unsettling, and I think part of the reason that we wrote that blog post and have written before on this issue is less about the kinds of things that we pay a lot of attention to all the time. But the fact that I think many people who look at trends in transportation and land use, one of the themes over the last couple of years has been that we’re going back to whatever was the case in the 2000s or previous to that. You know, we’re going to see a resurgence of sprawl, we’re going to see everybody’s driving again, and so on and so forth. And to some degree that is happening, but what we don’t tend to look at are the underlying forces that drive what’s happening. And, I think, over the last couple of years, it’s certainly the case that the economy and gas prices and all of these things are helping to drive consumers’ decisions.

Dutzik: But consumers can make this question of what people are being incentivized to do with their money through this system something that — it plays into all of these decisions. And we saw how that happened in the housing bubble. I mean, you can say that people had demand for all of those really big mansions that were very expensive, but it was it demand that was never going to be satisfied if it weren’t for the fact that there was someone who was willing to throw money at people to go out and do this thing. And I think it pops up in the housing market, I think it pops up in the auto market. It certainly pops up among those of us who pay attention to the innovative mobility world where you have services like Lyft and Uber that are coasting on huge amounts of venture capital investment. But we don’t know, for many of these services, whether they actually are fundamentally sound or viable as businesses over the long run.

And yet we have to figure out how we react to them and how we understand how they play into people’s decisions today. So I share your sense of being very unsettled by it.

But I think for all of us who care about and want to pay attention to the decisions that people are making, the decisions that communities are making, decisions that individuals are making in this set of issues, we at least have to acknowledge and surface the fact that those decisions are not necessarily being driven entirely by market fundamentals or entirely by individual supply and demand, but that there are these other other factors and other decision makers that are coming into play. Until we can understand and surface that and begin to talk about it, we’re going to continue to misinterpret what’s happening in the world in ways that I think could be quite dangerous. So that’s kind of how we got into it in the set of questions that we really wanted to start asking. And I think you’re right that we to do a lot of work to think through, to understand how all of that works and to get to the point where we go beyond being unsettled by it and can begin to react to it.

Strong Towns: On a related note, I’m going to send you a picture. My girls play softball and one of the practice fields that we play in, next to the outfield is an old industrial site used to be the paper mill. My dad worked there, my grandpa worked there, the paper mill is closed now, but they’ve taken the grounds and they’re using it to store the recalled Volkswagens. So there’s this sea of cars, and they’re all brand new. They all look beautiful, they’re gorgeous, but they’re just sitting there waiting for people to figure out what to do. And nobody knows how long they’re going to be there and it’s eerie. It’s really weird. So I’m going to take a photo and send it to you so you can see it. I go by this all the time with my kids.

Dutzik: So that’s a monument to a really bad decision. Yeah, we’ve done work in the auto emissions field for a while and just the ability to think that you can get away with something that’s fundamentally unsustainable and wrong and and that’s the result: you get a bunch of unused Volkswagens sitting in an old paper mill in Minnesota.

Chuck Marohn, Strong Towns: Our guest today is the author of a book, Human Transit. He runs the website and blog with the same name. He’s a consultant. He’s a speaker and he is an innovator. Jarrett Walker, welcome back to the Strong Towns podcast. You were on a couple of years ago at CNU (Congress for a New Urbanism).

I’m going to say, right now, just to get started [that] I am one of those people who is an outsider looking in. I’m not a transit rider. I live in a very small town. We have dial-a-ride, which in many ways is worse than having no transit system at all, at least in terms of our dialogue. So I’ve always been hesitant to have you on because I felt I would be wasting your time, not asking intelligent thoughtful questions. I’ve done enough homework now [to] where I hope I don’t waste your time but I want you to feel free to start at a 101 level.

I want you to start with geometry. You talk a lot about how geometry, essentially, doesn’t lie and is not subject to focus groups. Can you talk a little bit about transit and the geometry of cities and why the two are a match for each other.

Jarrett Walker: Sure. I think it’s helpful to start not so much with transit as a product as “what is the problem for which transit is a solution, [and] the problem for which trains is the best solution? — and in many cases the only solution [to] the problem of providing mobility and access to lots of people at fairly high densities or generally in cases where there is a strong disincentive to driving.”

So, right there, you can see that transit has a somewhat — in the U.S. the way it’s constructed, Canada too to a degree — has a somewhat contradictory mission, because there isn’t a contrary expectation that we run some transit service everywhere regardless of density because certainly there are, everywhere, there are people who can’t drive, [or do] without some sort of mobility assistance, transit, in the sense that we value with ridership.

And transit, in the sense that it achieves goals of substantially reduced car traffic, substantially reduces card dependence. Which is, of course, connected to the ability to use street space for something other than cars. All that really arises in places where there is sufficient demand for big vehicles running in regular patterns to be the right answer.

Strong Towns: There’s a lot of chatter right now about small scale transit of one kind or another.

Jarrett Walker: The word “transit” is being used to mean lots of different things. But fundamentally, really, really successful transit is transit that’s carrying a lot of people on relatively few vehicles. That’s the essence of what makes it highly effective.

There’s some geometry about where that’s likely to happen, and that’s the geometry that is primarily about density: How many people are around every possible stop.

Walkability, which is can the people around the stop, actually, are things close enough together that we don’t have to cross big wire or gas to get to them. You know that’s really what determines whether you’ve got a place where transit can succeed.

Strong Towns: And I want you to notice that with those things you’re thinking about your own town and it’s going to sound like him passing judgments about your own town whether it’s a good place or not. I’m not doing that.

Jarrett Walker: I’m simply describing some basic math about why transit works as it does. By the way if you Google an article of mine called “The Transit Ridership Recipe,” you’ll find an explanation of all this with some statistics.

Strong Towns: One of the things that I found very approachable about your work is that you go down the path that we don’t have to have transit everywhere to be successful. I know a lot of people who advocate for transit, advocate for transit at all times in all places. Can you talk a little bit about why that is maybe not the right approach and why you have a more nuanced understanding of where transit works well and maybe where transit doesn’t work as well and why there’s a important difference between those two?

Jarrett Walker: That comes right down to what you mean by working well. A lot of people believe that some measure of transit working well is that it has lots of riders that are relatively low cost. You read the newspaper, you look at the way average journalists writes about this stuff. and they just assume that the ridership is the measure of success.

Well, if we were designing a public transit network for high ridership, we wouldn’t go everywhere. We would think like a business, which is to say we would concentrate our service in the places where we are most likely to succeed. We’d concentrate on places where we have a concentration of potential customers and also where our competitor or the private car is at the greatest disadvantage, which tends to be in bigger denser cities and in denser parts. And so that’s what we would do if we were pursuing ridership in any community.

[One of the things] I’ve worked in there is an obvious, high-ridership thing to do, and that involves not going to a lot of the town, because those parts of the town are just not conducive they are giving me the density, walkability, linearity that I need to say that we’re going to have a good transit market. [Which means] that lots of people will drive.

I’m not saying you shouldn’t serve those places. What we always say is [that] if you serve those other places, you need to have a reason other than ridership, and you should be keeping track of or making clear about the fact that you’re doing this for a reason other than ridership.

I generally call that other reason coverage. Coverage is the contrasting justification of services where we run services to places where we know we’re not going to get high ridership, for teen ridership for this non-private purpose, maybe lifeline access to people with severe needs.

It may be perceptions of the quality. It can just be purely political. You know if we’re going to have some council members supporting the measure, we need to hit that and council districts, that kind of thing. Those are all, you know, perfectly good reasons why people demand coverage services, low ridership coverage services, and our role is basically to help communities think about this straight and reach an intelligent decision about what mix of ridership and coverage services they want.
It’s not that coverage services are bad, it’s just that, if you are being evaluated on ridership, you wouldn’t run them. So you have to be smarter about how you talk about what your goals are and what’s going to count as success if you’re going to run coverage.

Strong Towns: The tradeoff between ridership and coverage area it seems, a lot of time, like our transit systems today maybe were originally envisioned based on coverage area. And I’ll even go so far as to say they [were] originally envisioned for that person [who] has no other option, to serve the disadvantaged. Has that affected our cultural mindset regarding transit? Has that affected how we have tended to look at transit systems, and reforming them — some of the work that you’ve done to increase ridership.

Jarrett Walker: Right. Yes, there’s that history. There’s also a history of evaluating the ridership. The real problem that we have is that transit agencies are being given contradictory direction: they’re being evaluated on contradictory measures, and then we yell at them because they’re not satisfying our contradictory expectations.

You might as well tell your taxi driver to turn right and left at the same time. You know, it’s that stark. It’s that ridiculous.

If we’re going to measure transit agency outcomes on ridership, [then] you need to let them run service designed for ridership, and you need to not yell at them when they say “Well, that means we can’t go by Mrs. Jones house, even though she’s here standing in front of you with all of her Facebook friends telling you how much she needs [service].

And so, if we are going to go by Mrs. Jones’s house, I mean if we are going to satisfy everyone who has — everyone who has a severe need or a feeling of an entitlement to a bus that has two people — that were not doing that for a better reason, than let’s be clear about what we’re doing and why we’re doing that. There’s nothing wrong with doing that, as long as we’re being clear. So that, for example, the fact that you’re running that empty bus doesn’t get read as . . .

Strong Towns: Right — it isn’t failing when it runs an empty box of a low ridership area. It’s doing something that it is being demanded to do for inbound ridership. That’s the key distinction.

If we were going to, and I’m going to say this in a harsh way, if we’re going to just apply rote dollars and cents, are there a lot of parts of our transit system that we just wouldn’t cover then? If you are talking about a dollars and cents measure that comes down to ridership.

Jarrett Walker: You’ll hear “What percentage of our costs are we covered with fares?” That’s another way of saying ridership. “What’s the subsidy per passenger?” That’s based on ridership. So if any of those kinds of metrics, [which] ultimately vary with ridership, are going to push the transit agency toward running less, running more ridership service which means less coverage service.

You have to make sure, when you go to a transit agency with those metrics that that is really what you need. You know, the classic example is the relatively conservative elected official from a low-density outer suburban area who gets on the transit [board] or starts banging on about you know we need less subsidy per passenger. And the transit manager, quite accurately, says the best way to do that is to cut all the service to you or to your district; the best way to do that is to not go into those outer suburban, you know, unwalkable, low-density kinds of places that he may feel entitled to have the bus go to.

So there’s just no getting around. And, again, I will never say what we should do. What I do is convene communities and help them figure out what they want out.

Strong Towns: How does this concept of a total Transportation Investment fit into that? Clearly, if we’re talking about the suburban city council member, they’re not lacking for Transportation Investment are they?

Jarrett Walker: Right. In fact, this will seem much fairer. You know when I’m talking [about] this to the city council member who isn’t really sure he likes transit, but his attitude is usually “Well, as long as where I’ve paid for that . . .” And that often becomes a reason for why transit agencies are forced to run low-ridership services. You can think about that, which is to think about the fairness of the totality of the Transportation Investment. People who live in dense parts of cities people, who live in high density, who tend to be at the greatest need for transit stability, [have the] ability to generate ridership.

Strong Towns: Those people need a lot less asphalt per capita than someone who works in an outer suburbs.

Jarrett Walker: And if you thought in terms of that sort of, you know, square feet of asphalt per capita, you realize right away that in the inner city we get by with very little of that [compared to] in a very low density area, [where] you need a lot, because you need to cover long distances and there are [not too] many people.

If we could think about the totality of transportation, that’s what it would look [like] — fairer than what we usually do, which is to try to have a conversation about the fairness of transit in isolation because, however much you spend on coverage, it’s impossible to achieve something that everyone will experience [as] fair.

In fact, I argued in my book [that] one of the reasons I’m reluctant to use the word fairness is because people come with completely different definitions. There is no single, agreed definition of what a fair transit system is, really, at the end of the day. A cultural conversation that needs to happen. One of the reasons we struggle with transit [is] because we really haven’t defined what we are trying to do with our transportation investments.

Strong Towns: I think that’s absolutely right.

Jarrett Walker: Transit agencies — and this has been, you know, my life’s work for the last 20 years really — transit agencies have not demanded clear direction from their communities. But what the community wants [is for] them to actually prioritize.

This is really where my role has been if you will: to put elected officials to work. This is what elected officials are for, to make those hard, reality-based choices about which is more important. But elected officials all know, it’s basically the same experience you have when you’re drawing up a municipal budget. You have to decide what’s more important, and what you have to have painful conversations with them.

And that’s, essentially, what we’re trying to do in the transit space with encouraging communities to think about these unavoidable tradeoffs. Because in the absence of doing that, they’ll just keep yelling at their transit agency because they’re not getting something that they feel they’re entitled to.

Strong Towns: But if they don’t understand the math. You know a lot of the major transit investments that I see happening seem to spawn out of, like, a 1970s commuter mentality. The idea that we’ll have a central city and then we’ll commute people in. And if we can move people out of their cars and into a train that will just make it easier for people to drive.

There’s another mentality that I see starting, to have more primacy in places, and that has to do with, essentially, creating a high frequency transit network, the ability to get around in a place. Do those two mindsets compete with each other in a practical sense? And is there kind of one that you would prefer over another?

Jarrett Walker: Everybody’s mindset pretty much arises from their own daily experience, right? If you live in a suburb and your problem is getting into the central city, then you know that’s going to seem to you like the most important thing in transit too.

If you live in an inner city where you’re trying to get to many different places and getting around in the city, that’s really where the high frequency grid saves. That’s really where that pattern is most effective.

And so we’re really just talking about the right solutions with different places, different parts of our region. I’ll emphasize to you that there is a larger problem there, which is that the standard commuter express service is very very expensive per passenger to operate, particularly if it is the service that is flowing into the single big downtown at 8:00 in the morning while back at 5:00 in the afternoon.

That’s because all the trains and buses, and drivers who piled up in the city at A.M. as a result of all their trips, they all had to go back out, because you have all of these very short shifts and it’s difficult to get people to go to work to work for just three hours.

So and you have to own a fleet that you don’t use very much, and the distances are very long. If you ride a half-full to two-thirds full commuter express bus or commuter express train, your travel is probably being subsidized much more than if you ride a quarter whole municipal bus running a frequent network. The problem’s not just of the peaking, but a single directional nature.

And there are cities that do much better at this. Los Angeles comes to mind, because Los Angeles is so multi-directional because people are going all directions at once. There isn’t that huge single hotel in the morning, going back the afternoon.

So those are some of the issues [that make] suburban commute services very expensive. There are many possible ways in which you just cross subsidize by service. But you know it is part of the larger political consensus that makes regional transit agencies awesome.

Strong Towns: Can you elaborate on that a little bit? I’d like to contrast the L.A. experience, which I have been told by people, who have kind of pushed back against L.A. being a car city, [people] who said L.A. has some of the best transit in the country. Can you contrast that with Washington D.C. or a place that has maybe a more well-developed but, more high-end kind of transit system?

Jarrett Walker: Right. So I would say that Los Angeles has a lot of work to do on its transit system, and that it is doing that work. It is inevitably constrained by a legacy. You know, we are all forced to live in a world laid out for us by our parents and grandparents and great aunts.

And L.A. has the problem of the particular legacy that, you know, people’s grandparents and great grandparents wanted it for them, which was lots of roads and everybody driving.

L.A. has now grown to a point — it’s an extraordinary city because I don’t know any other place where there is such a massive consensus that the basic ways the city was laid out is not working.

I mean there’s a sort of complete existential rejection of how the city was built, and I find that very unusual. Most people allow their views to be conditioned by how their city is – [they] don’t really question it.

But the urgency about transit is so extreme. You know, we’re getting seventy percent, yes, on very expensive transit. No new taxes for transit. Seventy percent, yes. There’s just an overwhelming sense of urgency about that transit in L.A. is not everything it could be because they’re still scrambling to essentially compensate for all those decades of non-investment.

But, on the other hand, Los Angeles just has superb geography for trains — it’s hard to imagine a better city geographically. Precisely because, if you look out over it, and there are clusters of towers far apart, settled here and there, and those create those great markets where people are commuting both way at the same time, using the capacity very efficiently. And then you have a street network that’s ideally suited to that high frequency grid.

It’s mostly a grid in a city like Chicago. That gives you those very easy north-south east-west paths, where if you just run a service, running a frequency, and get the service running fast enough, you get these multiplier effect where it just becomes very easy to change from one ramp to another get to wherever you’re going.

The geography grid would be better. It’s just a matter of you know Los Angeles still obviously having to catch up after many decades of neglect.
Strong Towns: I want to ask you a question about building incrementally. We talk at Strong Towns a lot about our cities needing to kind of grow in this broader, more incremental way, as opposed to the large transformative investments. Many small investments over a broad area.

But when we get to transit, I get a lot of pushback. I get people saying “Well, Chuck, you can’t do transit incrementally, it doesn’t work that way, it’s an all or nothing kind of thing.” Can you talk about that? Is it possible to do transit incrementally? Can we scale transit over time? Or is that is that a crazy notion? Do we have to either be all in or not in at all.

Jarrett Walker: Let me be very clear. Yes, you can do transit incrementally.

Yes, you can get almost anywhere by starting with incremental improvement.

It doesn’t mean you don’t need the infrastructure. What it means is that the need for big infrastructure arises out of the fact that you’ve built a corridor that buses can’t serve anymore. And some of the best transit projects in the country, they’re incredibly expensive. But they are — they are the thing you have to do, once you’ve done everything you can with busses. [They] can be justified in those terms.

I’m thinking about the Wilshire Subway in Los Angeles. The Second Avenue subway in New York with Broadway Subway — the most obvious examples where buses are doing everything they can. And now we have built a manned transit demand to a point where we just have to do something higher order.

Strong Towns: That is I think a logical relationship between service and infrastructure. You use bus service to grow incrementally toward where you’re ready to do that big infrastructure.

There’s another theory of infrastructure though, which is that the reason we need the big bang is to attract more elite riders than those who are attracted to buses. You know, sometimes you have cases where there really is no transit value being added.

Like when you introduce a street car that’s going to be stuck in traffic instead of a bus. It doesn’t do anything the bus can’t. But even where we are building services that are going to be faster than buses, we as planners will certainly notice that there’s a subliminal message of the reason this has to be so expensive is that we’re trying to appeal to a higher class of people.

Jarrett Walker: So the big warning I have to always give is “If you are a very fortunate person who tends to sit in powerful rooms making propositions, you know, if you are a millionaire, if you are an executive, you have to start by remembering that most people are not like you.

You represent a small minority, and therefore your personal tastes, in what you would like in transportation, [you are a] very poor guy to [know] what will make a good investment for the entire city. So when someone comes up to me and says “Hey, I drive my BMW and what are you going to do to get out of me out of my BMW?”

My answer is there’s no there’s no public interest in getting you out of your BMW because there aren’t that many of you for it to matter. What matters is the way we incrementally expand people’s liberty, opportunity to transit, so that people who are in a financial or personal position where transit makes sense for them, they don’t have the BMW, maybe they own you know 1989 Chevy, those people can make the switch.

Strong Towns: What about this notion that “We have to build something big and permanent looking. We’ve got to have tracks in the ground and overhead wire. Otherwise we won’t get developers to build. We will get people to commit to it.”

Jarrett Walker: Well, that’s called infrastructure hostage taking. You know you basically give hostages, you lock up a certain amount of money from the ground, and therefore the real estate industry thinks that’s permanent. That’s actually a really bad guide to permanancy.

Let’s take one of the most obvious examples. At the same time that people were going around saying we have to have streetcar tracks in the streets, the service will be permanent, we were going around and ripping up whole freight tracks in the same neighborhoods.

In fact, you have the whole part of the martyrdom of the original streetcars, which were torn up by evil people. That’s not really the total story, that’s the story here. And of course that story proves that those rail tracks in the street didn’t make it permanent.

What is actually permanent is high ridership. So if you want service to be permanent, you want service to succeed in ridership terms. Because if it doesn’t succeed in ridership terms, the infrastructure isn’t going to stay, that’s the reality. Over and over, you’ve got to remember that transit operating costs are the — transit costs are primarily operating costs and that’s got to make sense in terms of ridership.

So that’s why it’s so important to recognize permanence. To say that a transit corridor is going to be permanent is to say that it has permanent high ridership.

And to say that it has permanent high ridership means that the land use conditions, that physical conditions are favorable, comes back to what I mentioned at the beginning: Get a walkability here, that’s where you got a permanent high ridership. So, ultimately, the permanence that realtors should be looking for is actually the permanence that they are creating with dense development the permanence of a land use pattern is what matters, not whether they’re attractive.

Strong Towns: I was on the outskirts of Portland with some of the transit planners there, and one of the things that was pointed out to me as being a huge win for them was this art installation at the station. The station itself had very little built around it. They were planning some big investment, hopefully, in the future, but it was pretty barren. The planners seem very, very happy, about this art installation essentially. You talk about the dependent writer, or derogatorily people call them captive writers, taking them for granted and kind of making a system based around getting that guy out of their BMW.

Jarrett Walker: Let me say my parents were public art experts. I grew up in the arts. I have a degree in an arts field, so I’m all for public art. I think that public art has an incredibly positive role, if it is bottom up, if it has arisen out of the community, it’s therefore an expression of a community’s particular value.

I think that top-down public art is probably less effective, but no one has a problem with there being an aesthetic dimension to service. The larger issue though is how much? When the question becomes “How much less service are we going to have so that we can pay for this?” That’s really the frame in which you need to think about that question.

So I’ll switch that to a common example, [people] calling me when their book came out about 10 years ago, they used the word transit has become dull and “utilitarian,” utilitarian of course is a derogatory word meaning useful. No indication that there’s something wrong with the fact that transit is just useful as opposed to beautiful and the way we think it should be.

And they use the example of you know whimsical bus shelters that create delight. They included a photograph of a famous Japanese bus shelter that’s shaped like a strawberry.

And my response to that was, “OK, how much service, less service are we going to [have] so that we can have those? How many people we going to tell that they can’t get where they’re going when they need to? Because we chose instead to invest in cute bus shelters.”

Strong Towns: Yes.

Jarrett Walker: And when they use the train. My job is to make that tradeoff visible and not let it get concealed behind vague romantic notions.

I’m fine with public art — I’m fine, you know I’m GREAT. I love art. I want that to be part of the experience, but part of the beauty to me is the beauty of people that have great lives and being liberated to do what they want to do because the transit system works for them.

And that requires sheer quantity. So I point out, for example, to the San Francisco bus shelters that were introduced a few years ago which have a very simple kind of waveform to them they are nice they’re distinct and they say something about San Francisco. And yet they’re designed to be just stamped out of a kit of parts very cost-effectively because the crucial thing about transit is that transit is big scale, and if your idea doesn’t scale it doesn’t matter.

That’s what you’ve got to be careful, too, about the demonstration project. The idea that “We’ll just do this little thing over here, and that we’ll see if it works,” and then it will take off. Very few things in transit — that works fine for a lot of product development kinds of ways, but it just doesn’t work in transit because if it doesn’t work at the scale of the network it probably doesn’t work.

Strong Towns: As a final question I want to pose to you the whole autonomous car conundrum and maybe we don’t have time to get into it too deeply but I’ll set it up this way.
I was in Omaha last week and we were having a conversation about transit. A nice little lady in the front row raises her hand. She is well into retirement age and she referred to this, you know, burgeoning technology of autonomous vehicles and how it basically is going to make transit systems obsolete and make the entire conversation we were we were having kind of silly. I had an answer for her, but I’d like to give you an opportunity to give your answer to her.

Jarrett Walker: There are three big kinds of problems in transportation, especially urban transportation. And they have three different kinds of solutions. And although it’s fashionable to want to mix them all up and create some sort of romantic or sexy vision of the future, you’ve got to keep one foot on the floor to do that. You’ve got to think about these three questions separately.

But first of all there is the problem of emissions and energy efficiency, for which the solution is electrification.

Then there is a problem of safety and use of time for which the solution is automation.

And then there is a problem of the efficient use of space in dense cities. Which the solution is big vehicles that use space efficiently.

Those are three different problems, and we can certainly imagine a future in which those three things get combined in the electric automated bus. Those are the solutions to all three problems combined as they apply to the city.

Now there are plenty of places where autonomous cars are going to be great, but they’re going to be the places that have room for [them] like outer suburbs, [not] in dense cities, [not] in places where space is precious.

They’re going to be a disaster if they if they are allowed to just go everywhere in a free market way, they’re going to create their own congestion, their own problems and that’s why, by the way, I want to give Uber and some of those companies credit. They are looking ahead to road pricing, the prospect that they will have to, in some way, pay some sort of pricing that that gives them a reason to use that road space official.

The notion that autonomous vehicles can replace public transit is probably true in some places. It’s true in the coverage places. It’s true in our suburbs. Places where transit doesn’t work well anyway. But it’s a disastrous vision.

Strong Towns: Do you think autonomous vehicles are going to make transit cheaper?

Jarrett Walker: I think yes. If we had an autonomous bus. Many many subway systems are autonomous now. You know, most people have ridden one of these things. But when it comes to autonomous buses, which are rapidly under development in places like Europe and China, where they where the value is “if we had that, bus service would suddenly become vastly more abundant” because the primary the cost on the quantity of bus service right now is labor.

So, you know, I look at typical bus systems, and I imagine how utterly transformative it would be if the bus was every five minutes, where we can’t afford that now. The cost is high that way. But that becomes possible with automation. What that would do is it would transform the useful mass of buses.

Strong Towns: It would also then transform people’s attitudes toward buses. And you know we’d be in a much better course the next time we chat.

Modal Data

Tables 29 through 41 provide statistics about the characteristics of the various modes of public transportation operations. Data are presented on two summary tables of national information, with roadway modes in Table 29 and rail modes and ferryboat in Table 36, followed by tables listing agency-specific information on unlinked passenger trips. Given the large number of bus, demand response, and transit vanpool agencies, only the largest 50 agencies of each mode are listed for bus and demand response, and 30 for transit vanpool. Tables 30 through 35 and 37 through 41 list agencies operating each mode in urbanized areas and Tables 42 and 43 list agencies by mode of operating service in rural areas.

Transit service is provided by a variety of modes, defined both by the type of vehicle they use, operating characteristics of the service they provide, and the travel needs of the riding public for which they are designed.

A mode is a system for carrying passengers, described by a specific right-of-way, technology, and operational features. The mode of service in most cities is buses.

BUS SERVICE:

 2016-APTA-Fact-Book

The Greater Lafayette Public Transportation Corporation provides fixed-route scheduled bus service in the Lafayette, IN area. Bus data are reported in Tables 29 and 30.

Fixed-route bus service, called “bus” service in the Fact Book, is the basic public transportation service in most American communities. Nearly one-half of all public transportation trips are taken by bus. Modern buses have automated stop announcements, security cameras, bicycle racks, and are accessible to persons in wheelchairs. This Foothill Transit bus provides express service from Diamond Bar, CA, into downtown Los Angeles. Bus data are reported in Tables 29 and 30.

Bus service is provided by rubber-tired vehicles powered by engines using fuel carried on the vehicle. Most buses operate in fixed-route service on regular schedules, and passengers pay a fare or present a pass or transfer when boarding their bus. Nearly all buses are accessible for wheelchairs by lifts or ramps, and most can carry bicycles on racks in front of the bus. 

BUS RAPID TRANSIT SERVICE:

Bus Rapid Transit systems operate vehicles on separate rights-of-way with high-frequency service, low-floor vehicles, stations, traffic signal priority, and other operating improvements which increase their speed and passenger capacity. BRT is the newest operational type of bus service and offers increased capacity and higher speeds when buses are taken off of congested streets and arterials in central areas.

The Greater Cleveland Regional Transit Authority Health Line provides bus rapid transit service in bus-only lanes that are prohibited to other vehicles. This BRT bus is headed east on Euclid Avenue toward University Circle from downtown Cleveland, OH. Bus rapid transit data are reported in Tables 29 and 31.

COMMUTER BUS SERVICE:

 

Commuter buses provide high-speed longer distance service to commuters for their daily journey to work. The average passenger trip length on a commuter bus is over 26 miles while the average trip on a regular bus is less than 4 miles.

Community Transit Double Tall buses in Everett, WA, provide commuter bus service to downtown Seattle. Commuter bus data are reported in Tables 29 and 32.

DEMAND RESPONSE SERVICE:

Demand response service vehicles travel on roads and streets but take passengers directly from their origins to their destinations. Demand response service is provided primarily by vans. By law, accessible demand response service must be provided in all areas served by regular route transit service to persons with disabilities or those otherwise unable to use fixed-route service.

The Central Florida Regional Transportation Authority provides Access LYNX demand response service in the Orlando, FL region. Passengers who are not able to use fixed-route services are taken directly from their origins to their destinations. Demand response data are reported in Tables 29 and 33.

General demand response service is not required by law and is often open to larger segments of the public or all riders. Some general demand response services are operated during late-night and weekend hours in place of fixed-route services.

TROLLEYBUS SERVICE:

Another type of roadway transit service is the trolleybus. Trolleybuses are standard rubber-tired buses except they are powered by electric motors and receive electricity from two overhead wires through trolley poles on top of the vehicle. Able to negotiate congested city traffic, trolleybuses provide environmentally friendly transit service.

This TransLink trolleybus operates in the central area of Vancouver, BC. Trolleybus data for U.S. are reported in Tables 29 and 35. Data for Canadian transit operations are reported in Table 44.

RAIL SERVICE MODES:

Five rail modes provide most of the rail transit service operated in the U.S.: light rail and streetcar, heavy rail, and commuter rail and hybrid rail. Each of these modes operates on rail rights-of-way, but they differ in many other characteristics. Most operate on private right-of-way exclusive of motor vehicles but some operate in streets. Passengers board some only in stations but others pick up riders at stops in streets. Some are designed for fast, long distance trips and others for shorter trips in congested areas. The following sections describe those and other differences among modes of rail service.

LIGHT RAIL SERVICE:

Light rail is a mode of service provided by single vehicles or short trains on either private rights-of-way or in roads and streets. Passengers board in stations or from track side stops in streets. Light rail vehicles and infrastructure are designed to carry a “light” load of passenger traffic when compared to heavy rail which carries a “heavy” load of passenger traffic. A primary difference between light rail and streetcar is the longer distances between stops and higher operating speeds of light rail trains. Streetcars often function as distributor systems in congested central areas.

Los Angeles County Metropolitan Transportation Authority light rail vehicles provide transit service in the Los Angeles, CA region. Light rail vehicles operate on private rights-of-way and city streets in many American urban areas. This train is passing the Los Angeles Trade Technical College on the Exposition Transportation Corridor (Expo Line) from Culver City to downtown Los Angeles. The Expo Line is being extended to Santa Monica with passenger service scheduled to begin in 2016. Light rail data are reported in Tables 36 and 40.

STREETCAR SERVICE:

 Streetcar service is a type of light rail service with frequent stops with nearly the entire route operated in streets. It is usually in denser, high-traffic areas, and the vehicles are designed for lower speeds and to allow quick boarding and alighting by passengers.

Streetcars provide a type of light rail service characterized by more frequent stops and shorter trips in higher density areas. This streetcar is owned and operated by the City of Portland in partnership with the Tri-County Metropolitan Transportation District of Oregon. Streetcar data are reported in Tables 36 and 40.