The Rio Grande Foundation

So New Mexico needs a passenger rail system, or so some would argue. The Albuquerque Journal has devoted a series of articles, mostly favorable in slant, to this proposal. Certainly rush hour traffic is dense between Belen, Albuquerque, and Bernalillo, and it makes sense, in the abstract, to believe that commuter trains would ease some of this congestion.

Those who share the Rio Grande Foundation’s concerns about economic liberty and the overreach of state government, however, will have serious doubts about the legitimacy of such projects. They will be alert to the strong likelihood that such a project would lose huge sums of money and fail to accomplish its objectives.

Higher taxes are guaranteed
First of all, the ground truth of commuter rail systems in the United States is that all of them—every single one—requires a subsidy from taxpayers. This necessarily involves a transfer of money from all taxpayers to those who happen to benefit from the cheap transportation system.

Traffic “experts” will point out the benefits to those who continue to drive cars at rush hour, but those benefits usually evaporate as roads continue to fill up, owing to economic expansion and population growth.

The rail proposal is reasonable only in the abstract; in New Mexico the situation is such that a commuter rails system is sure to be a money loser on a massive scale.

Although several studies of the proposed system have been made, it appears that no one has a firm grip upon the following magnitudes:

1. Initial cost of construction and equipment.
2. Annual operating costs
3. Number of passengers (for a range of fares)..
4. Revenues from fares.
5. Required subsidy from the state,

Number 1, initial cost, is uncertain. Numbers like $250 million and $300 million have been conjectured, but as we will see later such off-the-cuff figures are likely to be much too low.

Number 2, annual operating costs, appears to be a complete unknown.

Numbers 3 and 4, the projected demand for rail services, are very uncertain and have usually been the downfall of failed systems across the country. The basic problem is that New Mexico is just not situated properly for commuter rail to make sense.

Number 5, the required subsidy, is just revenue minus the costs of construction and operation. This tabulation is a simplified version of what’s needed, but it is at least a framework within which we can consider whether such a system would be beneficial or a vast albatross for the tax payers.

Does rail transit ever work?
Let’s look at the more instructive examples, some of which have been cited as “proof” that passenger rail would work out in New Mexico.

Fort Worth and Dallas
This example has been cited by proponents of an Albuquerque-area system. Rail service between these cities is one of the more successful situations because of the demand for services. The population of the two cities is substantially greater than that of all of New Mexico, and many times the population of all the cities along the route of New Mexico’s planned system. Furthermore, there are plenty of buses and parking lots to serve rail riders whose destination is not exactly at the rail terminals.

Bay Area Rapid Transit
This system looked like a natural, given the crowded roads and dense population of the San Francisco Bay area, but it has never paid for itself.

Fredericksburg (Virginia) to Washington, DC.
This line has every advantage but still loses money and has done little to alleviate traffic congestion. An already existing passenger rail line reduced initial costs. Commuters into Washington’s Union Station can easily transfer onto the Metro, which takes them anywhere in the city. Moreover, auto congestion is so hideous between Fredericksburg and Washington—far worse than anything seen here—that commuters are anxious to escape it. Nevertheless, the existence of this line has made no detectable difference in road congestion.

The key point in all these examples is that New Mexico is different, in ways that will prevent ridership from ever reaching levels to make rail economically viable. And only in the most favorable cases does passenger rail come even close to paying for itself.

Another factor in the relative success of existing rail systems is that they were built decades ago, when construction was cheaper and before urban sprawl had taken over. Once a city has grown into the spread-out fashion of Albuquerque, it is too late to change. As one letter to the Albuquerque Journal put it, “You can’t have sprawl and public transit. It’s one or the other.”

Passengers do not move merely from one rail station to another. They must travel from their homes to the station, and then from the terminal to their work places. This means that the great majority of them must drive from home to a parking lot near the station, and then take a bus, or whatever, from the terminal to their ultimate destination. This has two implications:

1. The state has to build parking lots and furnish connecting buses. Both of these would increase operating costs very substantially.

2. More important, many commuters will find that this three-part commute is just too expensive and time consuming to bother with; they will prefer a shorter and less expensive drive in their own cars. Imagine someone who lives in Belen and works in northeast Albuquerque; the rail-bus journey would take twice as long as driving, even assuming there was connecting bus service taking him anywhere near his job.

It is this second factor that will doom the proposed system to failure. The small New Mexico towns at the end points of the route simply do not contain enough people who will find the system useful enough to pay for it.

Does anyone benefit?
At this point some readers may object to our repeated assertions that the proposed system would not pay for itself and would require a large subsidy from the state. Of course it will lose money, they might say, but this loss will be more than outweighed by the benefits of reduced congestion on highways.

This is a foggy argument at best. Even supposing that ridership is enough to reduce traffic appreciably, this relief would last for only a short time. Less highway congestion is an incentive for still more urban sprawl, as people choose to house themselves farther from their jobs, thanks to eased driving conditions. Before long, the highways would be back to their old status.

Once again, we have no clear estimates of what decongestion might be worth. Moreover, we would also need to figure in the depressing effects of the higher taxes needed to construct and run the system.

Facts please
Could we at least see some attempt to cost out the proposed rail system before it is too late to cancel it? Proponents of the rail system scoff at the several studies that have already been done, saying that we need concrete plans, not more studies. But none of these studies has satisfactorily addressed the issues raised here, and unless some clear headed analysis is produced, the system may be assumed to be a clear money loser for as long as it exists.

Of course, the mere existence of a “study” with favorable conclusions does not guarantee the soundness of a rail system. Cost and revenue projections are inevitably paid for by proponents of rail systems. Thus, we would expect them to be biased.

Indeed, such bias appears to be the general case. The Independence Institute, located in Denver, cites a survey of major urban passenger rail systems. Of 16 regions that ultimately built rail systems, 15 were based on studies that grossly underestimated construction costs. Of the ten projections of ridership for major projects, all ten overestimated ridership, and by margins of 50 percent and more. Even projections of improved safety were overly optimistic.

Again, we return to the principles that guide the Rio Grande Foundation. New Mexico’s economy is weak mainly because of high taxes and intrustive government. So when someone proposes a huge new government project based on platitudes rather than clear analysis—watch out.