Trophy, Hammer, Lottery, Transit

The proposed urban rail route’s operational costs are too high. This will undermine the overall transit system by slowing down frequency increases for productive bus routes; it could potentially also lead to outright future cuts to system coverage. The likelihood that there could be an improvement in the outlook for urban rail operating costs is small.

Project Connect does not release relevant data on a timely basis. This hampered previous attempts at assessing the system impact of the rail proposal’s operating costs. Specifically, I focused on quick ‘reality checks’ to determine the relative value of Grove-Highland rail (GHR) versus regular bus and Bus Rapid Transit (BRT).

A big part of the problem is the apples-to-oranges nature of what Project Connect has made available. Some estimates are for the present day and others are 16 years in the future; it’s unclear if units being referenced are the same across different documents. Below, I try and resolve this and create something closer to a tangerines-to-oranges comparison.

GHR rail is not cost-effective relative to bus due to selection of a low-ridership route.


To evaluate the productivity of the proposed rail investment, we first need to understand the existing subsidies for the bus routes it would replace. This is how we compute something akin to a mobility return-on-investment.

Sadly, Capital Metro does not provide an on-going report with this data.  To overcome this, I examined the distribution of revenue hours by bus route from the 2010 Service2020 plan. Imperfect, but the best I can do with public documents.  Here’s my methodology:  I assume that the 2014 distribution of boardings per revenue hour remains the same amongst bus routes.  I divide the total 2014 costs of ridership ($4 per bus boarding) across the revenue hours.  I assume that all buses have similar average fare-per-boarding ($0.40 for an overall 10% farebox recovery rate for bus, which is the 2014 average).

As a result, the 7 and 20 routes GHR replaces have a combined 2014 per boarding subsidy of $2.21.  You can check the computations by examining this Excel file.

The chart above  discounts Project Connect’s asserted 2030 annual ridership to the present day based on their growth projections for the Highland and East Riverside ‘sub-corridors’.  I also discount Project Connect’s 2022 assertions about rail operational costs at the 4% rate they’ve used as an inflation assumption in public discussions. Those costs are then allocated to my estimated 2014 ridership numbers for rail.  This helps us consider the route’s productivity if it magically appeared tomorrow.

Even though the Mayor’s rail advisory group selected a route, we don’t know the actual fare level. Recently, Project Connect has indicated that the fare might resemble a “premium” amount. This might help with farebox recovery, though it certainly puts additional pressure on the ridership estimates given the price-sensitivity of our riders. A recent high profile example of our riders’ price-sensitivity: the sluggish boardings numbers from the MetroRapid rollout.  In any event, I calculate both a conventional CapMetro bus farebox recovery rate (10%) and a national light rail benchmark farebox recovery rate (25%). Under either scenario, GHR creates a relative operational deficit. It’s an annual $5.1 million loss with the former farebox recovery rate (FRR), $2.7 million with the latter FRR.  The current bus operations budget is $110 million.

Here’s an Excel file  with the calculations for the above chart.

But wait, this isn’t that bad. How could one think this could be ‘Red Line’ bad?

rail_opex_ntsd1Source: National Transit Database. “UPT” means unlinked passenger trip (i.e. boarding). Median values for a category in bold.

It’s certainly possible that the $5-3 million gap could be covered by a contribution from the University of Texas, or some special federal grant, or a quirky transit financing scheme.  But to understand how this proposal could quickly become a big speed bump to high-frequency bus service – the Red Line has an annual operating subsidy of $11 million – we simply have to adjust some of the Project Connect assumptions to realistic benchmarks.

Benchmarks are based on the table above, which was computed using data from the National Transit Database. Here’s the source data and computations in an Excel file.


For starters, today’s 7/20/100 bus routes combine for 13,000 boardings and that covers much more than GHR. Let’s discount the ridership 25% to get to a more realistic boardings number, especially given the “premium” fare.  Second, let’s make the operational costs match the Houston and Charlotte (Southern labor costs, low miles) peer systems at $2m per mile.  Finally, let’s use a 20% FRR based on comparable non-coastal cities (Houston, Dallas, Charlotte). With these changes, GHR opens up an $8.6 deficit relative to conventional bus.

But wait, won’t anticipated growth fix these issues?

There is a certain political genius of Project Connect releasing 2013 operating cost assertions (lowest point ever) with 2030 ridership assertions (higher point than today!). The temporal mismatch makes it seem as if the proposal might be cost-competitive. Proponents typically pangloss over the fiscal short-comings of the proposal by appealing to the healing power of anticipated future growth.

But that optimism isn’t justified by the facts. Core GHR ridership is East Riverside to UT (70% of asserted ridership). Per Project Connect assertions, that area will grow at a slower rate than the areas north of UT. For the sake of argument, let’s add all of the asserted 2030 growth in areas north of UT to my calculation of 2014 GHR East Riverside-to-UT ridership total. That’s 5.43 million annual boardings estimated for 2014 GHR.

Hence, the per-passenger cost is $3.13 given the 2014 $17 million in operating costs. This, incredibly, would require a 30% FRR to match 2014 peer bus costs.  Even if the unrealistic growth towards Highland comes to fruition, its starting point is so low that it can’t really save that segment. Worse, the route points towards northern suburbs and the airport, neither of which promises the housing and residential density needed to improve productivity.

The core problem is the selection of a low density route; unlike Houston, which built track targeting a high rate of boardings per mile, we’ve selected a route that will be middle-of-the-pack at 685,000 boardings per mile. And that is only achieved eight years into the operation of the line if growth meets the Project Connect estimate.

The second problem with the growth-ex-machina argument is that it doesn’t examine the marginal improvement in ridership compared to BRT or regular bus. Yes, the 18,000 2030 Project Connect boardings assertion is higher than the current 13,000 boardings for the the entire 7/20/100 coverage. But of those 18,000, how many would conventional bus service at higher frequency capture in 2030? Remember, the BRT estimate is 17,000; it’s quite possible that high frequency, regular bus service would capture maybe 15,000 of those riders in 2030.

Project Connect has not released any data modeling this central question; it’s unclear if it was even considered since it did not come up at the Mayor’s rail advisory group.

Given these analytical blindspots, GHR seems like a very expensive purchase of substantial excess capacity.  And this excess capacity is for a route where transit needs can be met with cheaper, more flexible tools (i.e. conventional bus, BRT). Why spend hundreds of millions to serve essentially the same number of people, with a more expensive technology?

Rail is a type of transit technology with high fixed costs and low variable costs. Rail is for transit at scale.

GHR is often defended as a political trophy (“A world-class city has rail”), or as a hammer (“This will force the NIMBY crowd to accept growth in the core”), or a lottery ticket (“Let’s see if we can shape the growth”). Discussion of GHR should focus on rigorous analysis of its cost-effectiveness as a mobility tool given the actual development realities on its route.

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26 Responses to Trophy, Hammer, Lottery, Transit

  1. Pingback: Austin Links Roundup - June 15, 2014 | Local MustardLocal Mustard

  2. Novacek says:

    The 22 Million operating costs are in 2022 dollars, not 2014 dollars.

    • Julio Gonzalez Altamirano says:

      Thank you for this important catch. I’ve corrected the table and analysis. It certainly makes the proposal more compelling, though still not productive enough in my judgement. Again, thank you for the attentive read.

      • Novacek says:

        I think there’s a bug in your chart. For the cost per 2014 rider cell for ER to UT, you’re dividing the 2014 cost by the 2030 ridership (=K6/F6).

        [From the post author: Thank you for the bug report! I’ve patched the Excel and the table image.]

      • Novacek says:

        Okay, with the above assumptions, it seems like you would estimate the total additional operating cost (over and above bus service) in 2014 dollars as 3.3 million /year (subject to the uncertainty as to actual amount of subsidy on “high performance” routes).

        Given that, it seems that fears of reduced expansion on other routes or actual cuts on other routes are probably unlikely. Between the possibility of federal operating grants, TIF money from property value increases, CoA pitching in additional operating funds from other sources, etc. it seems that $3 million could probably be covered from non CapMetro sources.

      • Julio Gonzalez Altamirano says:

        I think using the $3m is great contextualization. It’s certainly possible it could be covered by federal special funds, some local contribution (i.e. UT), or one of the typical transit-related financial tools.

        However, what I tried to do in this post was to paint a ‘good case’ for the PC projections. That the proposal remains mediocre on operations even under these friendly assumptions means that what we actually observe will be worse.

        The present day bus ops budget is ~$110m. If the ’14 $3m turns out to be ~$6m of which $3m doesn’t get covered, that’s a substantial consumption of free operations dollars that are needed for true expansion. By true expansion, I mean expanding the share of local population riding, not just maintaining current service by matching raising labor costs or growth in ridership counts. Because of where the route points (to the airport, towards northern suburbs) there’s not an obvious expansion that could ‘save’ it if the ridership doesn’t materialize. Like the Red Line, it would be this permanent productivity hit.

        There are also the opportunity costs from consuming general fund dollars to pay the debt service on the capital side (not to mention the $700m capital cost to satisfy essentially the same ridership).

        And of course, even a ‘good case’ scenario probably means 6-7 years of very bad ridership or farebox numbers as the route gets going. I worry about the political effects of that for the rest of the system for the ensuing decades subsequent to the rail launch. It’s just another risk that I’d prefer to avoid by using BRT or something like MetroRapid in this corridor instead of rail.

        I might just be too pessimistic. I wish they would have just done ER to UT, but the CCAG rec was a NEPA for the whole thing, so we are stuck with the northern expansion.

      • Mike Dahmus says:

        That’s 3 million that would be available for other transit services if not sucked up for rail operating subsidies. Or to keep pools or libraries open, in the case of city funds.

      • Novacek says:

        As I described, there are a variety of sources that would _not_ be otherwise available for transit, nor pools, nor libraries.

        There’s even some financial (though less than 3 million) value in the expense being predictable and less volatile. Any future increase in diesel prices starts to eat into that per-passenger subsidy pretty quickly.

        That’s not even counting the non-financial benefits, such as environmental benefits, keeping Austin in ozone compliance, etc. Heck, if late-night rail service prevents just one drunk driving fatality, it’s basically paid for (using a standard $4M /life measure).

      • Mike Dahmus says:

        “Between the possibility of federal operating grants, TIF money from property value increases, CoA pitching in additional operating funds from other sources”

        All of those have opportunity costs, some of which are related to transit (federal operatin grants which can be used for bus service too) and some of which (CoA ‘additional operating funds’ and TIF money) are related to pools and libraries, e.g.

      • Novacek says:

        I believe the assumption is that we would only be getting the additional federal grant in the case of rail service, not bus service. Otherwise, we’d already be getting it (since we already have bus service in the riverside corridor).
        Similarly, TIF is based on the _increment_. It would be the additional taxes the city takes in _because_ there is rail service, that _would not_ exist with the existing (or even frequency increased) bus service.

        Basically, there can’t be an opportunity cost for money that simply doesn’t exist (for purposes of Austin/CapMetro/Texas budgeting purposes) in the opposing scenario. You can’t build a library with money the city never takes in.

      • Mike Dahmus says:

        TIF is a controversial funding mechanism these days among transit analysts. Most think it can’t produce substantial funds even in much denser cities (and in our area it’s dishonest to assert that the transit is producing the development when we only upzone a little bit – well short of where the transit-less market would demand density if we let it).

        There aren’t a lot of Federal operating funds which are available only for rail that I’ve ever heard of.

        And finally, you said “other city funds”, remember?

      • Novacek says:

        I don’t believe it’s possible for the 3M to turn into 6M (at least based on route performance). If we take the expense as a constant, then varying line performance basically only affects fare revenues. Your assumption above was fares would be on the order of bus fares, so even with a maximally non-performing route (literally 0 riders the entire year) it seems the maximum additional revenue shortfall would be 4.4M X ~$.40 = ~$1.76 M.
        And that doesn’t seem very realistic, given that the route partially overlays existing performant bus routes.

      • Novacek says:

        >> Most think it can’t produce substantial funds even in much denser cities

        It depends on what you mean by “substantial”. At least for the purposes of this discussion we’re talking about a couple of million over a 9 mile/16 station line. Also, TIF values aren’t limited to upzoning. Valuations (even of existing stock) rise with proximity to rail transit.

        >>There aren’t a lot of Federal operating funds which are available only for rail that I’ve ever heard of.
        I don’t know the details of this, just what was alluded to in the CCAG meeting and above. As I said, I’m just assuming that if they were applicable to existing bus service, we’d already be applying for/receiving them.

        >>And finally, you said “other city funds”, remember?
        Yes. And there’s still a variety of fund sources (to greater or lesser extent) that would still be new with rail service, and not an opportunity cost. For instance, the city could decide to install parking meters in the proximity to some of the non-park and ride stations. To the extent that the parking revenue exceeds hypothetical parking revenue from the same meters installed in the same locations without rail service, this would be new revenue. Similarly, it could be entirely justified for the city to kick some money over to the rail from the road maintenance budget, since changing modes in the corridor from bus to rail will save wear and tear on the roads.

      • Mike Dahmus says:

        If we’re handwaving, I could just as easily say that they could get the same operating expense help from the Feds for BRT service.

        I know you don’t like to take peoples’ word on things, but trust me – TIF isn’t going to generate much real money here. People a lot more experienced than you, me, and Julio put together have said lately they don’t think it would pay much even in New York City.

      • Novacek says:

        >>If we’re handwaving, I could just as easily say that they could get the same operating expense help from the Feds for BRT service.

        Perhaps. But then BRT would have even higher operating expenses.

        >>TIF isn’t going to generate much real money here
        Are you saying people have no subjective appreciation and value of rail transit? That absolutely no one will pay more to live right next to a rail station (that will get them downtown in 10 minutes in the middle of rush hour) than they would to live a mile away? I think they would, and that value will be reflected in prices and in appraisals (which results in more tax income).

  3. Mike Dahmus says:

    Hey Novacek: Wouldn’t it be neat if you applied your same argumentative rigor to the guys at Project Connect, who have staff who are actually paid (by the public!) to produce their claims, and yet still back them up far less than Julio does?

    • Novacek says:

      I did. I pinged them several times on either incorrect representations of data(map visualization of Lamar congestion, which they corrected) or where they misrepresented the meaning of a quote/datapoint(their use of TxDot’s quote on I35 traffic. TxDot’s definition of “local” means the 3 county area). I’m equal opportunity.

      • Mike Dahmus says:

        Waiting to see this done publically so we can see it. Start your own blog! You should be ten times as hard on the people with paid staff and the responsibility to do this analysis than on unpaid volunteers with day jobs.

      • Novacek says:

        It was very public, both on their (ProjectConnect’s) facebook page and their blog.

        Shouldn’t all people be held to an equal standard of objective facts?

      • Mike Dahmus says:

        No. You should expect a lot more out of people who are being paid by the public to do the job. I didn’t see your attacks on their methodology anywhere, so it wasn’t all that public. You’ve certainly been a lot harder on the unpaid volunteers with day jobs than you have at the agency spending millions of tax dollars on paid staff. I find that curious.

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