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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, September 30, 2007 Pricey Sound Transit ballot measure is a tough sell By James McCusker Every minute of watching O.J. news is 60 seconds of your life that you will never get back. This is an example of what economists call opportunity cost. If you use the time to watch the latest developments in the O.J. (or Britney or Lindsay) circus, you give up the opportunity to use that time in some other way, such as talking, working, sleeping, eating, reading, studying or even watching the replay footage of Vinny Testaverde's 1998 touchdown against the Seahawks. Most of us eventually realize that time is not an infinite resource, at least not for us personally. And most of us come to learn, as small children, that money is a limited resource, too. If we spend all of our allowance on ice cream we cannot spend it on, say, a comic book or a toy we want. (Kids who do not learn this lesson are called spoiled. Adults with the same problem are termed bankrupt.) In economics courses, then, the idea of opportunity cost usually is not very difficult for professors to get across. Because it is rooted in the idea of limited resources, most of the students are already familiar with the concept. In economics the opportunity cost of an asset is usually expressed in terms of the alternative asset that must be given up in order to obtain it. That is simple enough, but the idea of opportunity costs, if easy to learn, seems equally easy to forget, particularly when the limitations of a resource aren't so obvious. There is a big difference in the way we look at our own personal budgets and the budgets of, say, the federal government. With our personal budgets the limited resources, and therefore the opportunity costs, are obvious and very real, even when we view them through the lens of available credit. To an individual citizen, though, it seems that the money available to the federal government is virtually limitless, and this tends to erase any sense of opportunity cost. Generally speaking, the smaller the government entity, the greater the visibility of opportunity costs. In a small town, hiring another police officer may mean no replacement pumps for the water system. A city's decision to recycle its garbage may mean less money for street paving. County council members may have to choose between park maintenance and library computers. Size tends to blur our vision of opportunity cost, and the introduction of voter-free government entities -- regional authorities, mostly -- has essentially pushed it off the discussion agenda. This is unfortunate, for opportunity cost is really the most important economic tool that citizens have available to evaluate major expenditures of public money. If we spend our tax dollars on X, then we can't spend them on Y. This is especially true of the Sound Transit project, whose financing plan is on the November ballot. Its funding requirements are so huge -- and difficult to comprehend, really -- that its opportunity costs should be a major factor when voters make their decision on whether to pay for it or not. The actual costs for the transit project are is a matter of some dispute, and Sound Transit has not helped matters at all by its approach to cost estimates, which have been punctuated by an alarming number of "oops" corrections involving billions of dollars. Comprehending the cost is also made difficult by the structure of this funding package, which authorizes a flow of tax-generated dollars rather than, say, underwriting a fixed cost investment with a bond issue. And since the tax authorization would continue for decades after the project was completed, the question of what costs to include is a pocketbook issue for voters, not just an accounting question. So, as a practical matter, what we as voters know is that the total cost of the transportation project on the November ballot is somewhere between $18 billion and $157 billion. This level of imprecision gives a new dimension to the old number-cruncher's joke: when results didn't balance they could be deemed close enough for government work. At its upper level, of course, the projected costs are in the big-enough-to-block-out-the-sun league. But even at its lowest or mid-estimate budgets, the opportunity cost of the Sound Transit project is impressive. The money going into light rail would pay for a lot of new schools. Actually, it would pay for all new replacement schools, along with the teachers, books and computers to fill them or hospitals, or buses, or police and fire protection. That is the opportunity cost, the real cost, of this project; the things we have to give up in order for a few of us to ride on light rail. In November, the voters will have to decide whether it is worth it. James McCusker is a Bothell economist, educator and consultant. He also writes "Business 101" monthly for the Snohomish County Business Journal.

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