Fiscal Tactics and the Columbia Pike Trolley

by Eileen Norcross on April 20, 2012

in City Life, Federalism, Public Choice, Public Finance, Tax and Budget, Transit and Transportation

The Columbia Pike Trolley does not have a reputation for popularity among some local residents of Arlington County, VA. In a previous post, I noted the concerns voiced on local blogs and community boards that the $261 million trolley is several times more expensive than the alternatives. In addition, it is feared the trolley will not relieve congestion but will interrupt spontaneous economic development. The Green Party calls it, “the urban renewal trolley for the rich.” Part of the economic development plan involves demolishing older apartment buildings, raising rents.

How will officials try to finance the streetcar?  The plan requires the majority of funds come from local sources (seed money is being provided by a federal program). One possibility is they will dodge voter approval by raising revenue bonds instead of general obligation bonds (GO bonds). The reason is that in order to issue GO debt (which is backed by the full faith and credit of the government), the County would need to put the bond issue on the ballot. But they are worried about voters rejecting it. Revenue bonds don’t require voter approval since they are backed by an independent revenue stream; in this case, future revenues from the government’s surcharge on commercial real estate.

Locals may not have their chance to approve or reject the project, however. The Arlington Sun Gazettte reports that according to Virginia law Arlington as a county – not a city – government, “does not have the power to have a referendum on a topic or subject matter, like cities [do].” The decision to move forward or stop the project thus rests with the County Board.

Map of proposed Columbia Pike streetcar system

The plan is an example of what I define as “fiscal evasion.” These are maneuvers governments employ to defer or obscure the full costs of spending by evading rules or constructing loopholes. Not to be confused with venal gimmicks, fiscal evasion is often built into the rules. It is undertaken by, “circumventing statutory or constitutional budget rules, or through the weak design of such rules.”  In other words this approach is perfectly legal. Since revenue bonds don’t need voter approval revenue bonds present the “funding path of least resistance,” from the viewpoint of trolley advocates.



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