The ‘Innovation Express’ – even less efficient, more costly, and more unjustified as crony capitalism than anyone might have thought!

There are two stories at the Janesville Gazette that do their damnedest to justify federal, state, and local subsidies ($83,005) for a bus that benefits principally a few workers from multi-billion-dollar Generac, but even cheerleading can’t conceal the serial errors behind this project.

(Online, the Gazette combines the stories into a single one, “Riding bus to Whitewater a ‘no-brainer.'” In the print edition, there are two stories, one below the fold on the front page, and other inside on page 9.)

Quick summary: Multi-billion-dollar Generac Power Systems lobbied for federal, state, and local taxpayer money for a bus route that would take its employees to and from their homes in Milton and Janesville to work in Whitewater. Although most of the riders have been Generac employees, most of the money has come from taxpayers, not from cash-flush Generac. The cost of the bus per rider is over $40 per passenger trip, considerably more than the costs for a group of Generac carpoolers.

For more on this topic, see A Local Flavor of Crony Capitalism, A little consistency would be in order, A Generac bus by any other name, and The Generac Bus and Bottom-Shelf Messaging.

Months ago, Generac proudly announced – with Gov. Walker in attendance — that it would create hundred of new jobs at the Whitewater plant. Shortly afterward, when it was clear that Generac wouldn’t be hiring those workers in Whitewater, the corporation started looking for taxpayer money to support a flimsy (but much touted!) business plan that, in fact, didn’t even consider how Generac would meet a professed need for hundreds of new workers.

(Whitewater has many unemployed residents, and an educated population with a university, but somehow Generac’s supposed needs simply cannot be met in Whitewater.)

A ‘No-Brainer.’  Never mind the use of a hackneyed and condescending expression – calling the bus a no-brainer doesn’t insulate the Generac-subsidizing bus from legitimate scrutiny and criticism.  If boosters of this plan think that a headline settles the question of corporate cronyism, they’re mistaken (and they simultaneously think too little of the Gazette‘s readers).

Free Riders and Subsidized Rides.  The story is about a free promotion, where riders don’t even have to pay a fare to ride — of course riders would like an offer like that.  They ride the bus, and get to ‘sleep on the way to work,’ at the expense of others.  It’s almost too funny that this comes close to the economic concept of the free ridership problem (getting something like this for nothing), and yet the Gazette somehow presents this idea as a good one (as proof of how lucky these riders are).  (A further discussion of  public goods is available online.)

These are, after all, not indigent people — they’re riders going to their jobs, who could afford to drive or car-pool.  This isn’t a service for the poor – it’s a subsidy to Generac, to fill the gaps in its publicized but shoddy business plan.  Government doesn’t owe Generac or its employees special treatment.

‘Public Transit Is Not Expected to Make Money.’  The total cost of this bus is $128,310, but Generac pays only a minority share of about 20% – most comes from taxpayers who have no connection to Generac.

Astonishingly, Janesville’s Transportation Director, Dave Mumma, is quoted as saying that public transit is not expected to make money.

What he’s really saying is that he’s not required to show a cost-benefit to anything he does – that it’s okay to be inefficient, wasteful, and ever-needier, because he should not be held accountable to the consequences of his spending.  Consider the arrogance of that claim – that ordinary concepts to evaluate a service don’t apply to his work – that he may take from others, to benefit Generac and its particular workers – without regard to the needs of the community.

Why not?   He is, by his own criterion, free from evaluation – he doesn’t have to make money, break even, etc. – he happily dwells in the world of perpetual loss, unchecked inefficiency, and taxpayer subsidies.

What’s that about bus size, again?  When asked whether a smaller bus might be most efficient for a small number of riders, Mumma objects, replying that “Seventy percent of the cost is sitting in the driver’s seat. That cost would be the same whether the driver is driving a bus or a van.”

It’s hard to tell whether Mumma is being disingenuous or is simply ignorant.  First, the cost that matters is the total cost, not a part of it, and so if a smaller vehicle would save fuel, emissions etc., it would be the better alternative.

Second, and this is critical, Mumma is wrong to think that the actual cost of using a large bus is the price tag of $128,310.  It’s not – the cost of using a larger bus when a smaller one would do is the money spent plus the opportunities forgone by using the wrong-sized bus.  Every time Mumma chooses the wrong-sized bus, society loses out, as a larger bus is taken from a better use, and a smaller one denied a more fitting use.  There’s a price to choosing poorly that exceeds Mumma’s narrow explanation of expenses.

If that’s too hard for officials in Janesville to understand, they might want to get on the bus – on a free fare day, of course – and travel to Whitewater, for an introductory course in economics at our university.

Don’t Worry, Whitewater Will Pick Up the Tab.  What happens if fares don’t even pay for a small portion of the total cost?

Here’s the answer:

Any shortfall in the amount raised from fares would be made up by Generac and Whitewater, meaning the city of Janesville would not be left with any cost, Mumma said.

Janesville residents get a subsidized ride, but City of Whitewater taxpayers will be paying more if fares don’t meet expectations.  (As for Generac, it should be paying for all of this now, not just a minority portion.)

This program should never have been publicly funded, to boost one cash-flush business.

There’s a selfish corporate and bureaucratic disregard for anyone other than a few behind a plan like this – in which a big corporation and a larger city’s officials take money from ordinary people and a smaller city for their own benefit.