So the other day, I found myself watching the local municipal channel and saw the hearings on the Metro board decision to railroad Richmond and Wheeler Avenues. This is part of the proposed 30.1 mile expansion of the current Main Street rail line, which itself cost $520 million and not the advertised $324 million (and of which Frank Wilson immediately asked for another $104 million to upgrade). The advertised price of the expansion is $2.2 billion, but other documentation I have in my possession (and of which I will write about below) states that another cost estimate will be $2.6 billion (including the estimated 300 million for the Northside Intermodal temple). Either way, for further purposes, I will go with the $3 billion for the 37.5 miles of rail since nearly all transportation infrastructure projects have cost overruns.
So what to make of all of this? The point of this article is to make some rough back of a napkin comparisons of what the opportunity costs of spending $3 billion on 37 miles of rail verses what could be done with that amount of money with alternative forms of public transportation. It is also to air my thoughts on this whole mess.
Addendum edit - December 8, 2007: Please read my updated entry on Metro's $3 billion $4.7 billion limousine.
On August 8, 2007, the Examiner News, one of the Houston Community Newspapers, carried a story about a transportation solution that was implemented for the needy (one day access can be purchased to access the story) which are served by the Spring Branch Family Development Center of Houston and interviewed its director, a man by the name of Richardo Barnes. As it is, the SBFDC services immigrants studying English to improve themselves, single mothers and those who are otherwise struggling financially.
Mr. Barnes tells of how he has been on a crusade to get Harris County Metro to implement a series of bus routes to better serve the Spring Branch area. He correctly notes that the agency - scandalously in my view - does not run a regular bus route along Hillcroft, which turns into Voss road as it goes through Memorial, and into Spring Branch. Hence the agency does not even have a way to connect would be patrons from the heart of the Galleria to Spring Branch. It also does not have a direct route running along Chimney Rock, which turns into Wirt Road as it reaches Spring Branch. More to the point, Mr. Barnes believes that the Spring Branch area would better be served by a circulator route. I grew up in Spring Branch and cannot agree with him more. Instead, the agency makes sure that the routes in the area make it to the nearby transit center.
So what has Mr. Barnes done instead? Well, the Examiner article goes on to say that his Center received an anonymous donation of $60,000 to purchase a bus from Texas Bus Sales. Said Barnes,
The bus goes where people need to go and the schedule is made up based on their needs. "Sometimes they have to compromise a bit," he said. "If several people need to go grocery shopping, we ask that they go at the same time."
Barnes illustrates what some of his clients are up against by pointing out that a woman who lives in an apartment near Interstate 10 and Gessner must take three Metro buses in order to bring her baby to the WIC clinic.
"The trip takes about three hours," he said. "Our bus can pick them up and have them here in 20 minutes."
Barnes went on to say that there are more than 250 people who have signed up for the bus service and that they pay $10 per month. Their monthly fee barely pays for gas, however one might ask how much does it cost per month to maintain the bus?
The question of what to do here could use some reasonable framing. In Metro's National Transit Database profile for both 2004 and 2005, the agency states that the 7.5 mile MetroRail line costs $14 million per year to operate. This is more or less in line with the annual operating costs of other rail lines, which often take about 2-5 percent per annum of original capital costs to operate. Or, I should say that they do in their early years, until it comes time to do major maintenance of switchgear, signaling, wear out on rail cars, and so on. Still, a reasonable estimate will be that in its early years of operation, the 37.5 miles of trains will cost some $60-70 million - give or take some millions - per year to operate. Bear in mind that the agency has been stating that the ticket revenues for the train have been less than $2 million per year. This matters because that implies the agency has not been even coming close to collecting the annual operating expenses needed to operate the Main Street train, much less having those same passengers pay for the capital costs of building the train. This in turn leaves open the long run specter of the agency having to break its 2003 Metro Solutions bond election promise that it would not have to raise taxes in order to implement its plans. However, what rail fans are counting on is that once the rail tracks are in place, there will be - how shall I say - facts on the ground, which will force matters in the future and for which people will say that we have sunk those costs, we can't just tear them up now!
Moving onwards. The same NTD profiles state that for Metro to operate its 1,000 buses (the agency has over 1,400 buses in its fleet, 20% plus of which are spares), cost $263 million in 2005. This implies that the annual cost per year to operate a bus is some $250,000. This might seem outrageous, but maybe not. If you pay a bus driver $50,000 - $60,000 total compensation (wages, benefits, health care, 401k) per annum, that it would take 2 bus drivers to operate a bus for 18 hours per day, then thrown in fuel costs and maintenance, then that figure may well be accurate. I do have it on good word that "typical" buses operated by mass transit agencies get about 3.5 miles per gallon, bearing in mind that buses are the ultimate stop and go vehicles when operating in urban areas. Throw in the fuel costs have gone up about $1 per gallon since 2004-2005 and you are probably looking at another $20,000 per year (for $270,000), assuming that the bus runs 180 miles (10 mph for 18 hours) per day at 3.5 mpg.
Now then, believe it or not one of my biggest complaints against Metro as it has been run all these years has nothing to do with rail. It has to do with how it spends money on buses. The latest transit industry hybrid fuel buses cost $450,000 - $550,000. They do get some 20-30 percent better fuel economy, but that is absolutely absurd to think that this is a bargain when you can look at the Texas Bus Sales website and find used buses for as little as $4,500!
And where would you deploy such buses? This is another part of my complaint. Going back to the 2004 and 2005 NTD profiles for Metro, one will notice another metric. This one is the unlinked passenger trips per vehicle revenue mile metric. For the year 2005, one notices that Metro has 81.546 million unlinked trips for buses, while traveling 41.555 million miles. This equates to Metro buses carrying an average of 1.96 passengers per vehicle revenue mile traveled. That is statistical language for saying that Metro's buses run empty most of the time, something that should be obvious to anyone who spends time watching those buses go by. What makes the issue even more scandalous is to then view double attached buses run empty.
Moreover, even the 1.96 passengers per vehicle revenue mile is statistically skewed, probably with a very interesting kurtosis, by the fact that the agency does have a number of very productive bus routes, such as the #82 and #53, both of which operate on Westheimer and which I often see with nearly full buses everyday since I live right off of Westheimer. The #2 Bellaire is another route which gets good boardings. This anecdotal evidence should leave little room for doubt that a handful of very productive routes achieve much higher passenger per vehicle revenue mile metrics.
I also should bring up the Main Street rail line here, while on the passengers per vehicle revenue mile metric. One might notice that the Main Street train achieves much higher (about 14) passengers per vehicle revenue miles than does the bus fleet. Bearing in mind what was said about the bus fleet above, one also has to remember that the Main Street train was placed on the corridor which had the heaviest concentration of buses and boardings patronage. As far as I can tell, there were some 25,000 - 30,000 boardings along the Main Street corridor (some argue much differently) before the train was implemented. It would therefore make sense that the train would get high levels of passengers per vehicle revenue mile because the agency already knew that the Main Street corridor represented its highest and best corridor for ridership. In other words, the agency picked off its lowest hanging fruit. Now, in wanting to build out trains to other corridors, it will be spending vast sums of capital on successively lower performing routes, including the #50 Harrisburg whose entire route achieves a mere 4,500 boardings per day and which has few other routes around it which can be truncated towards it. I should state here that some people I know who live or work along the corridors have tried spending entire days counting the number of people on bus routes and have told me that these numbers are full of - well, you know what.
What would make vastly more sense for agency bus operations would be for Metro to actually match bus vehicles to the demand curve for its services. Small cheap buses could be deployed on vast majority of routes which have fewer than 5,000 boardings per day. According to my spreadsheet, only 17 of Metro's 133 bus routes (including shuttles and local routes) achieved an average of more than 5,000 boardings per day in FY 2006, the year of Metro's highest ever ridership. Such vehicles would most certainly get much better fuel economy than the massive buses that the agency operates today, indeed my research into the matter indicates that many of these vehicles can get 12 or so miles per gallon. The agency should continue to operate the current bus fleet on its routes of heaviest patronage and in fact could consider the idea of operating double decker buses on its heaviest routes such as Westheimer. However, as we shall see, even that idea might not even be needed if I were in charge.
So let us circle back to the question of what the opportunity costs are of spending $3 billion on rail, along with an estimated $60-$70 million per year on basic maintenance. An alternate idea of what we are looking at looks something like this. The agency could otherwise (but cannot as we will see below) purchase 500 buses and add them to the existing bus fleet. Of these, 70 (or 14 percent) could be used to augment the existing buses that are on Metro's bus routes of more than 5,000 riders, giving them four more buses running on them. The other 430 could be used on all other routes. The 70 buses on Metro's heaviest routes could be similar to those running already, costing the above mentioned $450,000 apiece. The other 430 could be from a company like Texas Bus Sales or other fleet vendor and could purchased at a cost of $60,000 each. This would result in a capital outlay of a paltry $60 million.
So what to do with the other $2.94 billion? One idea would be to take that sum of money and have Metro invest in 30 year U.S.Treasury bonds, which are currently yielding 4.6%. Investing $2.94 billion at 4.6 percent would yield $135.2 million per year, which could be employed for bus operations. The agency collects a mere $50 million from bus fares. If improved bus services were to yield a mere $15 million in additional bus fares, that would bring us up to $150 million for bus operations. Since we have estimated that bus operations are some $250,000 per bus per year (and which we could bump up to $300,000 per year), then we should be able to sustain the estimated extra 500 vehicles on the road.
So what could we do with those extra 500 vehicles? One of my favorite pet peeves is what happened to the #18 Kirby route. The #18 Kirby is one of the casualties of the hugely expensive rail centric transit system. The #18 used to get some 1,500 boardings per day in the late 1990's, but that figure dropped to the current 1,000 boardings per day after the frequency of bus service was sliced in half when Shirley Delibero burned through Metro's cash horde to build the Main Street rail line. All routes could get more frequent service, cutting down some of those horrific wait times that people have to suffer through. Many routes now have bus service that runs every 45-60 minutes during off peak hours. Entirely new routes could be devised, including ones which run from the Galleria along Voss and Chimney Rock to Spring Branch. Mr. Barnes would get his circulator routes with very little fuss, but he won't get a thing anytime soon by dumping all that money to run rail down streets like Wheeler, a street which Metro, in its entire history, has never had a bus route run down. Having never, in its entire history, run a crosstown bus which connects the University of Houston and TSU directly to Westheimer, West Alabama, or to Richmond, the agency and rail fans now politically demand that a $800 million train be laid down which does this. The agency loudly proclaims that college students are a big market of users for public transportation. If that is the case, then why has the agency never bothered to run a bus route directly across town before?
Are you worried that the world is about to run out of oil soon? Great! With $3 billion on hand, why doesn't the agency go out on a limb and ask the Tesla Roadster folks to manufacture 24 seats buses which run on lithium ion electric batteries? Surely they could do such a thing for less than $500,000 per vehicle? We may have cellulose ethanol available to us soon anyway, but if you are someone who believes that civilization is about to come crashing down because we are exhausting economical oil supplies (and for which you believe that there are absolutely no substitutes), then you might want to ask yourself why are we spending billions of dollars to run light rail to airports of all places?
Other benefits of a bus based public transportation scheme would include not having to tear up streets and roads along the corridors, which have deeply upset those who live along them. Residents who happen to live within a 1,500 feet radial of a proposed train stop would not find the deeds to their homes under the shadow of future condemnation because of their proximity to a Metro train stop. Metro may or may not condemn their property, but one needs to remember that Metro is not the only player in this game. Metro has formed a public private partnership with Washington Group International and I have some very good intelligence that WGI has made some - how shall I say - very interesting proposals to Metro regarding what might go on around the Intermodal Transit temple and around train stations. Without going into too much detail, there is a very strong argument to be made that this entire project has absolutely nothing to do with transportation, but does in fact have quite a bit to do with the politicizing of land use via real estate redevelopment. The building of rail lines represents, from the view of the economist in me, a massive concentration of capital along narrow strips of territory. The only way in which one can justify doing something like that would be because there already is a massive concentration of other capital directly in the area.
But I digress. What would ridership have been like with all these extra vehicles on the road? That is a good question. Metro achieved 68 million boardings in 1982. The agency achieved 82 million boardings in 1990 and 101 million in the year 2000. This steady increase of ridership over time was snapped after the light rail line was built. The latest 2007 figures show Metro with 97-98 million boardings even after 500,000 residents have been added to the county population.
It is quite likely, in contrast, that given population increases that the agency would have continued to slowly but steadily improve boardings. As things are, the agency is projecting to have some 120 million boardings after rail is built, but spending a whopping $3 billion to get a mere extra 60,000 net boardings per day (about 3 freeway lanes of passengers in SOV vehicles) is quite a feat. Indeed it is conceivable, based on past trends, that the agency could have achieved 115-120 million boardings by now without ever having spent a dime on rail.
The reason for the relatively paltry 20 percent gain in overall boardings for having spent this kind of money is because of what I wrote about above concerning the fact that Metro is not even collecting operating costs of the rail line, much less capital costs. Since the operational costs of the new rail lines will not be covered, that will force another truncation of bus routes towards the trains, cutting bus service to the wider area. My back of the napkin calculations are that Metro will have to cut back bus service by some $50 million in operational monies per year, which makes me think that about 20 percent of current bus service will be slashed after the trains are built. One also might think that Metro promised in the 2003 Metro Solutions ballot that it would improve bus service by 50 percent, but Metro stated a while back that there was no demand for an increase in bus service. That in turn makes one wonder why it was that the agency made such a promise and how is it exactly that the agency "knows" that the demand curve for extra bus service has been saturated? Read further down for what I say about politlcal markets and real world markets.
I have a story to tell about Metro telling the public that there is no demand for more bus service. Metro used to run a bus route, the #54 Aldine - Hollyvale Circulator. As one can notice from reading my boardings spreadsheet, the Aldine-Hollyvale route used to take in nearly 1,000 passengers at its peak in 2000. However, the Aldine-Hollyvale was one of the victims of Metro's cuts in bus service. Boardings went down in the early part of this decade, reaching a low of 510-690 patrons per day in its last months of operation in 2004 - 2005. In December 2004 (as part of its service improvements), Metro announced that the route would need to achieve an average of 855 boardings per day in order to justify continuing running the bus route - and I still have the publicly issued pamphlet in my possession to prove it. What the agency did not tell the public was that the route once upon a time actually was getting that kind of patronage! So in effect, the agency, having doomed the route to "fail" to begin with by cutting frequency of bus service, self justified its decision to shut the route down because of its supposed lack of success in drawing patrons and because of high operational costs.
Unfortunately, since we are going to a rail centric network, Mr. Barnes still won't get his routes even after we have spent $3 billion on rail transit, and we should investigate why that is so. The big problem with having the federal government diversion of the 2.8 cents per gallon gasoline tax diverted to transit is that because the way that the rules are written, the New Starts grant money can only be used for capital expenditures. Federal money is not to be used to operations expenses. Moreover, only public transit agencies are eligible for the start up grants. This in turn creates the following, warped incentives:
1) Local governments all over America had huge incentives to buy out any privately operated transit companies which still might have been around in the 1960's and 1970's. In their place, government transit agencies would be created and chartered, if for no other reason than to be eligible to get in line for federal handouts for transit. Who cares whether anyone bothered to take public transportation? What really mattered (and still matters) is that local interest groups get the grant money.
2) Since Congress has geared FTA programs towards capital expenditures, essentially the rules say that "we will give you big capital grants, but its up to you to come up with operating funds." This state of affairs completely warps the incentives facing local political elites,transit agencies, and transit supporters. The game is tilted towards spending huge sums of money on expensive rail lines which may cost dozens of times more money to build, but don't cost quite as much to operate. That in turn creates a ripple effect because very few transit agencies cover their operating expenses. That means that bus service usually is cut and reconfigured towards rail lines since doing anything else makes absolutely no sense at all.
I should say, in the light of what was said regarding Stephen Kleinberg's most recent transit survey, that there is a very big difference between political markets and real world markets. Someone participating in a real world market must come up with ideas that will pay their way on their own merits, otherwise, they are forced to exit the field. That, gentle readers, is a good thing. On the other hand, in political markets, ideas only have to win 50% plus one voter and the idea wins, regardless of what the conseqences are and regardless of whether the idea actually succeeds in doing what people think it will actually do.
If the current Main Street rail line were built in a real world market by a private operator, a good idea of what the train would take to be built would look something like this. Since the train cost $520 million and is costing $14 million per year to operate, the estimated annual carrying costs of capital (at 5% interest) would be $26 million. Add $14 million in operating expenses and you get $40 million per year. A private operator would probably have to pay off a loan at 2-3% per year, so the private train operator would need to collect some $50 million per year (if not more) for the idea to be viable in real world markets. Since the train had 11 million riders in 2007, that would equate to a private operator needing to charge about $5 per person per boarding (Metro would need to charge about $6 per boarding to fully pay its own way in the world instead of $1). Very few would be willing to pay that price to ride the train, ergo that is why you do not see rail being built by the private sector. But what you do see is the Houston Chronicle and rail fans in the political markets cheering on rail building while saying that "there is no demand for the increase in bus service".
One issue hanging out over the horizon concerns the 25 percent general mobility monies that Metro pays out to its constituent municipalities for road building and other transportation projects. This arrangement is set to expire in 2014. In theory, the agency could devote all of the money to improving bus service as promised which could fulfill the 50 percent bus service improvement aspect of the 2003 bond election vote, but that is contingent on the idea that the member cities and Harris County are going to actually come to an agreement that the current arrangement will end. That, ladies and gentlemen, is not a done deal. That issue also cropped up in Metro's Westpark rail line DEIS, as well as the FEIS's for the North and Southeast Corridors. In those documents, Metro claimed to the FTA and to the public that it would have $8 billion in cash on hand in the year 2030. Now let me tell you gentle readers something about myself and that is that I have read an awful lot about politics. If there is one thing I know, that is that no politician or group of politicians are going to let $8 billion in cash pile up without spending it. I do not know what will happen, but that money will be spent somewhere. So why did the agency make such a claim? Let just say that we already have covered that. It's because there are all of those all important federal grants to chase after and who gives a damn about what the consequences of that really are.
So we could have (or could have had) one of two things. We could have $3 billion in rail lines, with about 20-25 percent of the entire year 2000 bus system service cut and truncated. That would have offset any (if there were or are any) benefits which might have been gained from rail. Or were could have added 500 bus vehicles to the year 2000 fleet which was already in existence, which could be deployed anywhere - including some for Spring Branch which would help Mr. Barnes and those disadvantaged souls at the Spring Branch Family Development Center.
More Fireballs, Lightning Bolts, and Hell Storms to follow.
Wizard
Posted by The Mighty Wizard at November 25, 2007 08:36 PM