Monday, August 12, 2013

First Rule of Holes

Today's WSJ featured a snippet from a column by former San Francisco Mayor Willie Brown that originally appeared in the San Francisco Chronicle. It was a short but sweet glimpse into the way that public spending on projects really works:

News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone.

We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project. So get off it.

In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved.

The idea is to get going. Start digging a hole and make it so big, there's no alternative to coming up with the money to fill it in.

You gotta give Brown credit for his honesty. He makes no bones about that fact that the original estimates for public spending projects are illusions not tethered to reality that are all about getting public buy in rather than factual estimates of the true costs that will be incurred. He’s also right that once the digging starts there’s no going back.

We've seen this pattern of public projects knowingly going over budget again and again. Locally, we just when through something somewhat similar with the new Vikings stadium. At this point, the project hasn't gone over budget (although it surely will), but we have discovered that the proposed method for paying for the stadium was a work of fiction. Again, this was used to sell the stadium to the public. While costs are undersold, in this case the revenue was grossly oversold. By the time this shortfall was made public (I believe no one ever really believed it was real) it was too late. The legislation had been passed, the purple clad rubes had celebrated, and the stadium design was revealed. Whoops, guess we’ll have to find another pot of money to pay for it.

So now that we know that the politicians know that they’ll spend much more (and take in much less) than they pretend on these projects the question is when we will come to our collective senses and stop digging new holes?