Unexpectedly Intriguing!
July 16, 2007

Once upon a time, we said:

Economically speaking, of all the ways to transport people between cities, rail is perhaps the stupidest. Nowhere else do we see the confluence of extraordinarily high infrastructure costs (land, construction, equipment, facilities, etc.) and extraordinarily high operating costs (labor, maintenance, fuel, utilities, overhead, etc.) combine with extraordinarily low demand by commuters to produce such little tangible benefit.

And that was just for moving people between cities. When it comes to moving people within cities, as light rail is intended to do, it becomes perhaps even more stupid. The only way to make it work, in fact, is to redesign cities themselves, which costs magnitudes of money even more than what putting a light rail system in place costs.

Speaking of the costs of putting a light rail system in place, we're reminded of a bet proposed by the Coyote Blog's Warren Meyer:

The system [in Phoenix, Arizona] is not up and running yet, so I have not seen ridership numbers, but I will make a bet: If we take the entire cost of the system's construction, plus its annual operating losses/subsides, I will bet that we could have bought every regular rider of the rail system a nice car instead and gas for life cheaper than the cost of the rail system.

Well, let's find out! Fortunately, the St. Louis Federal Reserve's Molly D. Castelazo and Thomas A. Garrett considered this question, specifically looking at St. Louis' MetroLink light rail service, and worked out the basic math for us! We took that math, enhanced it a bit, and built the tool below so you can run numbers for whatever light rail system you might want to consider:

Light Rail Subsidy and Ridership Data
Input Data Values
Annual Government Subsidy for Light Rail
Average Number of Daily Light Rail Riders
Percentage of Daily Riders Who Are Poor and Don't Own Cars
New Car Cost Data
New Automobile Purchase Price
Annualized Interest Rate (%)
Term of Automobile Loan (Years)
Total Operating Costs Over Term of Loan

What If We Bought the Poorest Light Rail Riders New Cars?
Calculated Results Values
Number of Poor Light Rail Riders Without Cars
Annual Loan Payment Amount to Supply One Poor Rider with a New Car
New Car Average Annual Operating Costs
Total Cost of Supplying All Non-Car Owning Poor Riders with New Cars
Number of Poor Riders Without Cars Who Would Receive New Cars
What Can Be Done With Any Remaining Money?
Annual Government Subsidy Remaining After Buying New Cars for Poor Riders
Annual Amount Available for Vouchers for Other Mass Transit Options for Every Other Rider

Having run the default numbers, some of which were provided by Castelazo and Garrett, we confirmed that instead of pouring money into low return light rail, the government could simply purchase cars for the light rail riders without them and still have enough money left over to provide all the other riders with substantial credits to use for bus service or other subsidized mass transportation options.

The Coyote Blog's Warren Meyer did follow up his original post with some figures from Los Angeles. And before we leave off, let's also remember that the costs of putting in a light rail system and the subsidies to operate them are not one-time only events.

Light rail. The gift to politicians and the local developers who support them that taxpayers keep giving, and giving, and giving....

Where to Get Numbers

How much a local light rail system is receiving from the government is best found in the appropriate transit authority's annual financial statements of their operating costs (or as is often the case, their annual operating losses.) These agencies should also be able to provide daily average ridership data. The percentage of light rail riders who do not own cars is difficult to estimate, but will most likely range between 10 and 20 percent. To divide the entire annual government subsidy for light rail equally among all individual riders, set this percentage to 0.

The best resource we found for finding the purchase price and annual operating expenses for a car is the Auto Channel's New Car Buying Guide's Total Operating Costs database. The default numbers we entered are those for a base model 2007 Toyota Prius 4-door hatchback for five years, which matches the term of the car loan. The tool assumes this is the term for which the car will be owned and operated.

The tool also assumes that loan payments are made monthly (12 per year.) Current car loan interest rates may be found through Bankrate.com.

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