Brookings Scholar and Berkeley Economist on Rail Transit in AmericaContinuing "Rail Week" at Houston Strategies, today I want to pass along a piece from Bob Poole's Surface Transportation Innovations at Reason.
Rail transit projects in most
Brookings Institution’s transportation scholar Cliff Winston has taken a quantitative look at this issue. His new paper is titled “On the Social Desirability of Urban Rail Systems,” co-authored with Vikram Maheshri, an economist at the
The purpose of the paper is to estimate the contribution of
On average, rail transit systems cover about 40% of their operating costs from farebox revenues and none of their capital costs, according to figures in the National Transit Database. That means their net taxpayer subsidy is large, given the high capital costs of rail.
Winston and Maheshri construct an elaborate econometric model to estimate the “consumer surplus” of 25 rail transit systems. This is economists’ term for the benefits to users, over and above the fares they pay. The large systems (
Next, the authors compare the consumer surplus of each system with its net taxpayer cost. On this measure, every single one of the 25 systems has negative net benefits—i.e., the annual value of the benefits to users is less (usually much less) than the annual cost to taxpayers. Surprisingly, this is true even for the massive
But what about larger benefits to the metro area? Rail systems are advocated not just to benefit their riders, but because they are expected to reduce traffic congestion, reduce air pollution, save energy, etc. So the final step in Winston and Maheshri’s analysis was to estimate the value of these “externality” benefits. They first conclude that the only one of these purported benefits large enough to make any difference is congestion relief. Given rail transit’s low load factor (less than 20% during all the hours of the day these systems operate, generating costs), neither the energy savings nor the emission reductions are significant.
They do quantify the congestion reductions, which are significant because the rail systems attract riders during rush hours, when marginal reductions in cars on the road can make a meaningful difference in the level of congestion. Adding the congestion savings to road users to the consumer surplus gives the total benefits of rail transit. When this total is compared with the net taxpayer costs, only
All 23 other
Miami-Dade Transit: $141 million/year
Dallas DART light rail: $457 million/year (ouch!)
(I checked the whole paper - no Houston)
This means each of those urban areas is poorer by that amount each year.
Winston and Maheshri anticipate that some rail advocates will protest that these systems offer other benefits that are not accounted for in their calculations. For example, rail stimulates some development around rail stations. “But case studies have yet to show that after their construction transit systems have had a significant effect on employment or land use close to stations and that such benefits greatly exceed the benefits from commercial development that would have occurred elsewhere in the absence of rail construction.”
And there is also the claim that rail systems increase the mobility of low-income residents. But the authors point out that the median annual income of rail users in 2001 exceeded $50,000, which was greater than the median income of the general population in that year. So rail’s primary market is not the poor (unlike bus transit).
Overall, then, the authors conclude that rail transit is erroneously believed by the public to be socially desirable, because “supporters have sold [rail systems] as an antidote to the social costs associated with automobile travel, in spite of strong evidence to the contrary.” [emphasis added] They conclude that, in fact, rail transit is “an increasing drain on social welfare.”
Whole paper (pdf)