THE GREAT RECESSION started in December 2007 as a modest decline. Following the failure of Lehman Brothers in September 2008, the downturn turned virulent, becoming the deepest and longest economic recession since the Great Depression of the 1930s.
Effects were widespread, including on local governments dependent on sales tax revenues.  An often-stated claim, recently repeated by IJ columnist Dick Spotswood, is that the Great Recession and its effects on sales tax revenues is one the reasons the Sonoma-Marin Area Rail Transit train had to shorten its rail line by half. The problem with this claim, like many of those emanating from SMART and its supporters, is that it is wrong.  SMART's financial problems began long ago with invented claims that a quarter-cent sales tax could finance both construction and operation of a 70-mile rail line. As many participants in this ongoing controversy know, SMART was told by its consultants in 2005 that a quarter-cent tax would not raise sufficient revenues to finance rail construction and subsidize the promised rail operations.

But polls indicated that SMART couldn't pass a half-cent tax, so SMART opted, as many transit agencies do when seeking taxpayer support, to understate costs and overstate revenues. In 2008, SMART and its backers successfully conned the voters that it could buy the promised rail service at half the price.  Unfortunately, SMART's efforts to mislead the public regarding its financial position didn't stop after passing Measure Q. In May 2009, it issued a revised financial plan that continued to radically understate construction costs and included a revised sales tax forecast that was higher in economic terms than the one the board adopted in 2008.  Even when this bogus revenue forecast was pointed out in emails, op-eds and memos documenting the foolhardy forecast, the board and staff dug in, refusing to listen to anyone who raised questions about the financial viability of the proposed project.

In October 2010, the board's ability to deny SMART's financial problems came to screeching halt when Lillian Hames, SMART's former general manager, announced $150 million of "newly discovered" costs associated with the reconstruction of tunnels and bridges along the line.
It was a tipping point. Ms. Hames left and the board recognized it could only build half the line promised in 2008.
The $150 million cost overrun had nothing to do with the recession. In fact, had there not been a recession, reconstruction of the bridges and tunnels would have cost even more than estimated in late 2010. But this isn't the only reason that SMART's financial woes aren't tied to the recession. In two other ways, the recession significantly lowered the costs of constructing the rail line.

First, the recession reduced construction costs everywhere. This is a real savings compared to prior estimates and the project is a beneficiary of these lower costs.

Second, interest rates are now at historical lows. Since debt service is a significant burden on SMART's future finances, this too represents a real benefit to SMART's finances.

SMART backers constantly point to lower sales tax revenues, but SMART's planning horizon is through 2029, when Measure Q expires. Three years of reduced revenues were not the reason the sales tax revenue forecast for 18 years had to be revised downward. The revision was made to align the sales tax revenue forecast with long-term historical trends.  And it was done at the insistence of the Metropolitan Transportation Commission, not the SMART board. Neither SMART nor the public knows whether a quarter-cent sales tax will be enough to operate the promised train service on a 35-mile rail line.  As a result, the public will learn the hard way. Once the trains start running, SMART will have to balance its budgets.  Like other transit agencies, it is likely to do so by cutting service and raising fares.

Mike Arnold of Novato is an economist and a leading critic of the SMART train. He is a former public member of the IJ editorial board.