Listen to an audio podcast of this presentation here:
Joe Cortright, president and principal economist for Impresa, a Portland consulting firm specializing in regional economic analysis, speaks at the “Bridging the Gaps” event in Vancouver on June 4. An overview of his remarks follow his bio.
Here is Cortright’s bio as found on the Impresa Consulting website:
Joe Cortright is president and principal economist for Impresa, a Portland consulting firm specializing in regional economic analysis, innovation and industry clusters. He is also a non-resident senior fellow at the Brookings Institution and senior policy advisor for CEOs for Cities, a national organization of urban leaders. He has served as an advisor to state and local governments, private businesses, foundations and advocacy groups in more than a dozen states, Canada and Europe.
Cortright’s work casts a light on the role of knowledge-based industries in shaping regional economies. His work is quoted in publications ranging from the Wall Street Journal and The New York Times to The Economist, Business Week and USA Today.
He is currently chair of the Oregon Governor’s Council of Economic Advisors, has served on the editorial board of Economic Development Quarterly, and is co-founder and editor of EconData.Net, a guide to regional economic data.
Prior to starting Impresa, Cortright served for 12 years as executive officer of the Oregon Legislature’s Trade and Economic Development Committee. He is a graduate of Lewis and Clark College and holds a master’s degree in public policy from the University of California at Berkeley.
Overview of the remarks by Joe Cortright at Bridging the Gaps
01:07 Cortright talks about the true cost of the CRC project, how it will be financed and the implications for the region. He starts by showing an overview slide that lists three financial challenges.
02:28 Cortright explains the first challenge: The project cost is really $10 billion* and not the $3.5 billion that has been widely quoted. He shows a slide itemizing costs over a 30-year period and explains each one in detail.
- $3.875 billion construction costs
- $2.700 billion interest payments
- $1.700 billion toll collection costs
- $1.300 billion supplemental project costs
- $275 million credit card, sales tax and bond issuance costs
- $175 million incremental transit operating costs
04:33 Cortright compares the “novel” financing plan to pick-a-pay loans. He says this “creative” form of financing almost doubles the total amount of interest. Cortright shows a slide titled “The cost of creative finance.” It shows interest on a 30-year “conventional” repayment equaling $1.5 billion. Interest for back-loading repayment would be an additional $1.2 billion.
06:00 Cortright talks about the demand for travel. Because the bridge depends on tolls to pay for it, it’s critical to know how many people will use the bridge each year for the next 30 years, to know how much money will be generated to repay the loans. Cortright shows a slide titled “Significant Deviation From Forecast” and points out that the projection doesn’t depict the drop-off rate since 2005 of cars traveling the bridge. Cortright says the actual number of cars crossing the bridge per day is about 17,000 fewer than what CRC has forecast just for the year 2010. He says that shortfall puts a giant hole in the CRC.
08:35 Cortright shows a slide titled “No ‘Investment Grade’ Analysis.” He says if that type of analysis were done it would show that the tolls revenues aren’t adequate.
09:14 Cortright talks about the financial risks the CRC project poses to taxpayers and citizens. He says the track record of Oregon and Washington DOTs for delivering projects on time and under budget does not help create confidence. He shows a slide showing two examples of cost overruns and mentions another. He says careful studies have been done of “mega-projects” and they routinely run over budget by about 28 percent. He adds that a 25 percent cost overrun for a project like CRC ends up being about one billion extra dollars.
11:06 Cortright shows more slides and mentions a range of risks like bond risks, back-loaded revenue, construction risks and makes the point that it all falls in the lap of taxpayers.
13:04 Cortright concludes with three points:
- Cost of CRC is $10 billion, not $3 billion or $4 billion
- The financial forecasting that justifies this project is outdated
- The way this project is structured exposes taxpayers and state treasuries to enormous amounts of risk in comparison to the project’s benefits
The complete CRC analysis can be found here.
* The well-documented cost to taxpayers, if the CRC stays on budget, is $10 billion. This was established by the Cortright Report (PDF) which used data from an independent review panel hired by the governors of Washington and Oregon. (View the panel’s final report.)
See our continuing coverage of the Columbia River Crossing Light Rail project.
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