Letter: Appreciation for Loudoun Due Diligence & Critique of RCL Analysis, Terry Maynard, April 22, 2012

 April 22, 2012

Dear Honorable Members of the Loudoun County Board of Supervisors,

As a person active in trying to address the huge financing issues surrounding the planned construction of Phase 2 of the Silver Line on behalf of Restonians, I want to take a moment to commend you for your serious examination of the benefits and costs of extending Metrorail to Loudoun County.  All the more so in light of the unanimous, uninformed, knee-jerk re-affirmation of the current financial arrangements for Phase 2 by the Fairfax County Board of Supervisors. 

I have no idea whether, in the end, you will approve or disapprove rail to Loudoun; certainly the debate has been robust.  More than the debate, however, I commend you for carrying out serious due diligence on rail’s pros and cons as well as its options, listening to the concerns of your constituents (which is far different than staging public meetings and hearings that are ignored), and examining your vision of an optimal future for Loudoun County.  Thank you for taking your job seriously.  You and your constituents ought to be proud of your efforts even if some will disagree with your final decision.

As part of your due diligence effort, you commissioned a follow-up study by Robert Charles Lesser & Co. (RCL) to carry out a fiscal impact analysis of the planned rail line to Loudoun.  I have read it, including the appendices, and have to say that it is a dis-service to your efforts to at understanding the true costs and benefits of the proposed rail line.  I do not intend to go into a detailed critique here, but I must identify one outrageous omission:  The study admits that it does NOT include the public infrastructure investment costs associated with bringing rail to Loudoun.  The result, as you are well aware, is that the study says there will be substantial economic benefits for Loudoun County—close to $400 million over the next three decades. 

Your County Administrator Tim Hemstreet has already pointed out this shortcoming in the analysis, but let me add:  A cost-benefit analysis that does not include capital costs and the associated debt servicing costs is like eating a chocolate cake that is nothing but frosting.  It creates a stupendous sugar high, but ends with a huge headache when the spike crashes and leaves you empty; in this case, fiscally, not physically.   Nonetheless, the RCL report has had the desired sugar-high effect:  Area media picked up the RCL’s headline $386 million benefit and broadcast that number all over their reporting, creating an inaccurate, positive image of the economic benefits of Metrorail for Loudoun.  

I believe that an economic assessment that comes closer to the mark is one prepared by Tom Cranmer, Fairfax County Taxpayers Alliance, and displayed graphically on the LoudounOptOut website; although I do not agree that “opt out” is necessarily the right answer for Loudoun.  (Fairfax does need the Silver Line to be completed at least to Dulles, but not under the current unacceptable financial arrangements for Dulles Toll Road users.)  I cannot vouch for the specific outcomes Mr. Cranmer identifies—a more than $700 million shortfall over the same three decade timeframe—but I know that he is highly competent at this kind of analysis, his one-page report is transparent, and I don’t see any glaring errors in his assumptions or calculations.  I am quite confident that he is directionally correct.   I would recommend that your staff take a close look at Mr. Cranmer’s spreadsheet analysis, discuss it with him, and come up with its own assessment, even if it causes a sugar crash headache. 

More broadly, Mr. Cranmer’s analysis highlights the critical issue of public infrastructure investment requirements that accompany the construction of commuter rail.  Only now, nearly two years after the Fairfax County Board approved a plan for Metrorail-driven development in the Tysons Corner area, is the Planning Commission Tysons Committee (PCTC) wrestling with what needs to be done to accommodate that growth and pay for it.  The most recent estimates put the 20-year costs for the area around the four Metro stations at well over $2 billion (excluding debt service).  The partners in the PCTC effort have reached an impasse in deciding who and how those identified needs should be paid for.  

• The landowners and developers say those costs should be covered by taxpayers (Tysons- or county-wide, plus any outside aid that may be available).  

• Citizens groups say they are not going to make millions in profits from the resulting development there and that the developers should shoulder the bulk of the infrastructure investment costs since they will make the profits.  I believe they are right.

If nothing else, the Tysons deadlock highlights the need to include financing and implementation plans as part of any Loudoun rail-related development planning going forward.  Not to do so would be a serious failure like the one that is ongoing in Tysons and will probably occur in Reston where County staff has refused to consider implementation issues as part of the planning process. 

The key point is that Metrorail to Loudoun will bring major infrastructure investment and financing costs with it that will outweigh—probably by far—the economic benefits that may accrue to the county over the next several decades.   

A second point I will make more briefly about the RCL study is that it is based on overly optimistic assumptions about the future growth of the county and the region.  While I have not studied Loudoun’s prospective growth specifically—clearly its growth rate is the strongest in the Washington area albeit from a relatively small base—virtually all the employment and population forecasts I have seen overstate the likely growth of the region and its counties.  For the most part, this over-optimism is based in a failure to recognize the continuing impact of the last recession and the near-certain prospect of reduced federal spending in the Washington area over at least a decade.

The “go to” independent research entity in northern Virginia for years has been GMU’s Center for Regional Analysis (CRA) has begun to address the issue.   While I have not kept track of its forecasts for Loudoun County, its growth forecasts for Fairfax County have dropped precipitously in recent years.  I have attached a graphic that shows three population and employment growth forecasts for Fairfax County ranging from their 2010 forecast for the Reston Task Force (RTF, of which I am a member, and their two forecasts associated with their excellent “workforce housing” study of October 2011 and an update for the RTF in January 2012 in which we were told that they were cutting their October employment forecast by a third.  In short, GMU CRA has cut its Fairfax County economic forecast for the 2010-2030 period for employment and base population growth (no changes in workforce housing policies) by more than 60% in less than two years.  There is still significant growth, but hardly robust, and certainly something Dr. Fuller should address in his forthcoming presentations in Loudoun County as they may apply in Loudoun.

My broader caveat:  Never ask a real estate company for advice on development matters, especially where they have a vested interest.  If you want an objective assessment, you may want to turn to bond rating agencies for their insight since, in the end, rail to Loudoun will require substantial public financing.  There are also independent consulting firms that specialize in transportation-related economic impact analyses, including the Economic Research & Development Group, Boston, for example.  Although I can’t vouch for the accuracy of analyses by these groups, at least they don’t have a dog in the hunt. 

Closing on a more positive note, I again commend you for the efforts you are pursuing to understand the implications of rail to Loudoun County.  I appreciate that it is a difficult decision that is worth your considerable effort and one that may be decided by only a small margin one way or the other when you finally vote.  Whatever the outcome, Loudoun County can be proud of its work in coming to grips with probably the most important decision this Board will make during its tenure.

Sincerely,

Terry Maynard

Reston Citizens Association Board of Directors

RCA Reston 2020 Committee

cc:

Governor Robert McDonnell

Transportation Secretary Sean Connaughton

Selected Congressional Legislators

Selected Virginia General Assembly Legislators

Fairfax County Board of Supervisors

Reston Citizens Association Board

RCA Reston 2020 Committee

McLean Citizens Association

Loudoun Times-Mirror (Editor)

Leesburg Today (Editor)

Reston Patch (Karen Goff, Editor)

The Connection Newspapers (Mary Kimm, Editor)

The Washington Post (Editorial Board; Dana Hedgpeth, Transportation)

Fairfax Times (Steve Cahill, Editor)

Mr.  Andy Rountree, CFO, MWAA

Mr. Tom Cranmer, FCTA

Dr. Stephen Fuller, Director, GMU CRA