Rail Disasters Mounting: Tales of Three Cities

COST Commentary: Below are three recent articles about 3 communities (Denver, Baltimore, and Las Vegas), regarding rail transit failures. Their common theme is: Costs are much higher and ridership is much lower than promised. Congestion and air quality are not improved. The rail systems are not cost-effective, placing major, unsustainable tax burdens on citizens; resulting in degradation of overall mobility and quality of life.

While this posting is about three rail debacles, it is also part of the continuing unfortunate story of the massive, wasteful spending of taxpayer dollars on ineffective rail systems which serve the self interest of many unelected transit management board members, transit agency executives, local government officials, and companies serving the transit industry, instead of the best interests of citizens.

This COST web site has postings regarding rail transit issues in many more cities/regions including: Portland, Salt Lake City, Dallas, Houston, Austin, San Antonio, Ft. Worth, Seattle, Washington D.C., Honolulu, Nashville, Detroit, Orlando, Chicago, California Bay Area, Phoenix, Las Vegas’ prior light rail bankruptcy and others. Selected, more recent postings to this site are referenced at the end of this posting.

The story for each region is the same: Rail COSTS TOO MUCH & DOES TOO LITTLE.

FasTracks to Nowhere: Denver’s Decade-Old Boondoggle

Daniel Bier, June 28, 2013, Reason Foundtion

Denver’s Regional Transportation District (RTD) has been forced to reschedule a telephone town hall meeting that was intended to discuss the future of its Northwest light rail line with local residents; RTD had given out an incorrect phone number to participants. This latest blunder is, unfortunately, all too representative of how the FasTracks project has proceeded thus far.

Mismanagement, unwarranted optimism and a consistent failure to plan for foreseeable contingencies have led FasTracks down the road towards insolvency and incompletion, leaving stakeholder communities with a choice between losing access to the system they paid for or ponying up even more in new taxes. This is not the transit system Denver had bargained for.

When approved by voters in 2004, RTD was expected to build 122 miles of light rail over the course of 12 years for $4.7 billion. To date, only 40 percent of the system, and only one complete line, has actually been constructed, about 75 percent of the way through the initial timeline. Its budget has ballooned 57% to $7.4 billion and because of massive cost overruns and revenue shortfalls, RTD does not expect the project to be completed until at least 2044, if ever.

In fact, it might never be finished, unless RTD gets new funding from… somewhere. It certainly won’t be from Denver taxpayers—they’ve steadfastly rejected proposals to double the sales tax increase they approved in 2004 to close the $2+ billion funding gap.

The project is a case study in how expensive transit mega-projects can go sideways. Many of FasTracks’ problems can be traced back to flaws in its original proposal: RTD didn’t secure rights of way for its corridors or obtain realistic cost estimates of acquiring them before submitting the budget to voters. When it pitched the plan the agency assumed that sales tax revenue would increase 6 percent annually, from 2004 to 2025—an unrealistic forecast that never materialized.

Before ground had even been broken in 2007, RTD announced that FasTracks was already a billion dollars over its original budget. Cost overruns would continue to grow to over $2.3 billion during the next few years Modifications to the plan approved by voters, including changes in project scope, new safety requirements and higher land costs, and from increases in the cost of construction materials led to these overruns. By 2009, the North Area Transportation Alliance had concluded that, “[FasTracks is] floundering with a financial plan that lacks credibility and a series of incremental decisions that are producing disjointed transit segments.”

The 41-mile Northwest Rail Line in particular (the subject of last week’s abortive town hall meeting) has been subject to skyrocketing costs, nearly doubling from an estimated total cost of $894 million to over $1.7 billion. Three of the northern counties that would be served by the line have already contributed $243 million in taxes to FasTracks, but they won’t see even a 6-mile segment of their line completed until 2016. At the moment the full track isn’t expected to be completed for another three decades.

Currently, FasTracks also includes funding for 17 miles of Bus Rapid Transit on two HOT lanes on U.S. 36 between Table Mesa Drive and the I-25 Express Lanes. One proposed solution to the continuing problems of the Northwest corridor is to replace most of that route, with BRT. This would dramatically reduce the cost of the line without forcing the community to give up its access to transit. The U.S. 36 BRT/HOT lanes project will cost only about $10.5 million per mile, while being subsidized by toll revenue from other vehicles using the lanes. By contrast, the Northwest Rail Line will cost over $40 million per mile and never recoup its capital costs.

As communities along the corridor debate making changes to the project, they should consider that proven, affordable rapid transit is available in the form of BRT for a fraction of the cost of light rail. Best of all, because its capital costs can be partially offset by automobile user fees, it could actually be built now, without raising taxes or waiting decades for funding to appear.

A public-private partnership to build and operate the line would be an effective way to shield justifiably skeptical taxpayers from the risks inherent in these kinds of transit projects. It would also reduce automobile congestion on the route with HOT lanes and maintain RTD’s commitment to provide fast, reliable transit service to the northern Denver metro region.

A Red Line That Shouldn’t Be Crossed

by Daniel Bier, Reason Foundation, July 14, 2013

When the Maryland Transit Administration first proposed a new light rail system for Baltimore, the plan was to add 66 miles of track on six lines at a cost of $12 billion. More than ten years later, as a result of skyrocketing costs and collapsing revenues, that plan has dwindled to one east-west line. Chronically underfunded and over budget, this project has been ill-fated from the beginning.

The Red Line, the lone survivor of the original plan, has been cut down from 21 miles to 14, from 27 stations to 19, and has had its start date pushed back from 2013 to 2016. It’s not expected to open until 2021, if not later. Unfortunately, even after numerous modifications, the city still can’t afford it.

In 2009, the line was expected to cost $1.6 billion. By 2011, mounting costs and persistent delays had pushed the total over $2.2 billion. Undeterred by its $2.3 billion revenue constraint, the Baltimore Regional Transportation Board called for spending 93% of the area’s entire revenue between 2016 and 2021 on this single corridor. As a result only 7% of the funding is available for all the other highway and transit needs.

That was two years ago. As of last month, the governor’s office reported the line will cost $2.6 billion—over $185 million per mile. There is not yet a clear explanation of where all this money will come from, nor what other projects will get axed to make way for light rail, but proponents of the plan remain hopeful that federal grants will cover an unspecified portion of the construction costs.

Boundless optimism is no match for fiscal realities, however. Over the next ten years the city government is facing a $745 million deficit which grows to $2 billion when infrastructure needs and pension liabilities are included. With already exorbitantly high property and income tax burdens, raising taxes is simply not politically feasible. Baltimore must find a realistic and fiscally responsible way to meet its transit needs; the Red Line is not it.

A Better Way

Fortunately Baltimore has options. Bus Rapid Transit, an innovative bus system that provides rail-like service at a fraction of the cost, is an increasingly popular option with cities looking to expand transit without breaking their budgets. Traveling on dedicated lanes with queue jumps and traffic signal priority, BRT uses larger vehicles than regular local buses, combining frequent service with frequent stops. Because the lines are built on existing infrastructure, BRT is both faster to implement and less expensive than light rail.

In 2008, before settling on the $1.6 billion plan for the Red Line, MTA did a comparative analysis of various BRT and rail alternatives. Simply by replacing light rail with BRT, the cost of the project fell by a third to $1.1 billion. Skipping the hugely expensive tunnel portions of the line and building on the surface would bring the total down to $545 million—only around $40 million per mile.

Best of all, if the city implements a “Managed Arterials” strategy, the capital costs of building BRT on the Red Line can be subsidized by drivers who pay a toll to use the excess capacity of the busway. By varying the toll rate based on demand, the city can keep the lanes flowing freely, even during rush hour, to guarantee fast and reliable transit service, as well as reduce traffic congestion along the corridor.

Baltimore doesn’t have to wait another decade for expanded transit, nor pay through the nose for an expensive light rail line. Bus Rapid Transit offers a cost-effective solution that can be implemented today to meet the region’s needs and not worsen the government’s financial situation. It’s hard to stop a train in motion, but the city shouldn’t let inertia carry it towards bankruptcy.

Las Vegas High Speed Rail Federal Loan Application on Indefinite Suspension

By Wendell Cox, July 12, 2013, National Center for Policy Ananysis (NCPA)

The application for a federal taxpayer loan required to start construction on the proposed Victorville California to Las Vegas high-speed rail line has been suspended indefinitely, according to Rep. Paul Ryan, chairman of the U.S. House of Rep.’s budget committee and Sen. Jeff sessions, ranking member of the US Senate budget committee. In a July 11 letter (here), Former US Secretary of Transportation Ray LaHood informed the operator, Xpress West, of the decision in a June 28 letter, which has not been made public.

Ryan and Sessions related their briefing on Secretary LaHood’s letter, which “explains that ‘serious issues persist’ with the XpressW est loan application; that there are ‘significant uncertainties still surrounding the project’; and that, as a result, USDOT has “decided to suspend further consideration” of the XpressWest loan request.”

The nature of the cited “serious issues” and “significant uncertainties” are not known, but they are manifest. They were detailed in our August 2012 policy report for the Reason Foundation (The XpressWest High-Speed Rail Line from Victorville to Las Vegas: A Taxpayer Risk Analysis).

Congressman Ryan and Sen. Sessions, had written a joint letter dated March 7 to Secretary LaHood characterizing the taxpayer risks as untenable. They asked for a Government Accounting Office investigation of the project and asked Secretary LaHood to suspend final determination on the taxpayer loan until the GAO investigation is completed.

The Reason Foundation report had expressed concern that there might not even be a market for the service, since no place in the world do people drive 50 to 100 miles to get to a train to take them the last 175 miles.

Even it were assumed that such an unconventional market existed, we judged the ridership, and thus the revenue projections to be grossly exaggerated. Unlike the project ridership projection consultants, we applied a “reference class” ridership analysis, which used actual ridership from other similar routes around the world. That yielded a forecast from 53 percent to 76 percent below promoter p rojections. This could have led to losses of from $4.3 billion to $10.4 billion over 24 years. The report predicted a default on the federal taxpayer loan by the ninth year of operation (In 2000, we made a similar default projection, due to the similarly bloated ridership estimates by promoters of the Las Vegas Monorail. That project subsequently defaulted on its bonds).

The Victorville to Las Vegas train depended on a long-term (35 year), $5.5 billion to $6.5 billion low interest loan from the Federal Railroad Administration’s Railroad Rehabilitation and Improvement Financing Program (RRIF). No payments would have been required for the first six years. Our concern was that, if ridership was not sufficient to cover the operations and loan payments, taxpayers could lose the entire amount — approximately 10 times the loss in the w ell publicized taxpayer loss in the Solyndra loan guarantee. This does not include the inevitable subsidies from taxpayers of California and Nevada that would have likely been necessary to keep the line running.

Xpress West was just another of a number of high speed rail projects around the world marketed as commercial ventures. Yet, the International Union of Railways indicates that only two routes, Tokyo to Osaka and Paris to Lyon have recovered their capital and operating costs from commercial revenues. In the end (or the beginning), the taxpayers virtually always pay. They have been spared that fate by the Department of Transportation decision in the Xpress West case.

There has been no statement from Xpress West.
More on the California to Las Vegas rail can be found at:

The Washington Post Opinion

XpressWest Las Vegas Train: Where are the Venture Capitalists? By Wendell Cox in newgeography.com

A selection of additional rail article postings on this COST web site:

Washington State stalls Oregon’s Rail Folly: Travelers, Taxpayers & Social Equity are Winners

Austin’s ‘Urban Rail’ is Another Name for ‘Outdated Streetcars’

Massive, Wasteful Spending on Rail Transit Degrades Overall Transportation

Transit and Train Truths for Austin

“The Streetcar Fantasy”

The Great Streetcar Conspiracy

Can Streetcars Save America’s Cities

24 Key “Guiding Principles” for Austin Area Transportation and Mobility

12 Reasons Austin’s Urban Rail is Off-Track

Austin’s Urban Rail has Many Unanswered Questions

Has Denver’s Rail Transit System (FasTracks) been worth it?

Commuter rail costs too much, does too little

The Streetcar Fantasy

Portland Transit Agency in “Death Spiral”

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