Addressing the Cost Problem

February 19, 2014 by
Filed under: Car Stop 

As regular visitors to this website know, one of our Center’s main themes is the need to bring down the cost of building rail transit lines, especially Light Rail and streetcar (heavy rail is beyond help).  Curiously, as costs continue to rise and increasingly threaten the future of rail transit, little is written on the subject.

An important exception is a recent piece on www.railmagazine.org by Rich Sampson, entitled “Passenger Rail’s Economic Duality: Why Rail Projects Are Expensive or You Get What you Pay For.”   I am not sure all projects do get what they pay for, but beyond the title this is a thoughtful and timely article.

I do not intend to repeat it here; rather I recommend you find it and it read it in its entirety.  But a few points are worth noting:

  • The increase in costs is real.  Sampson writes that construction of the original IRT subway line in New York City in 1902 ad 1903, a line 9.1 miles long, cost $1.4 billion in today’s dollars.  Now, the Second Avenue Subway, 8.5 miles long, is expected to cost $17 billion.  That is roughly a ten-fold increase.  I do not have the figures, but I know streetcar and interurban lines built in the late 19th century and early 20th century were usually undercapitalized.  That meant they were lightly built, but they worked.  As with subways, I suspect the construction cost of those lines was a small fraction of what we pay now to build streetcar or Light Rail.
  • A sizable fraction of the cost difference between then and now is the proliferation of governmental requirements, and with them endless studies (paralysis by analysis, some say).  The streetcar or interurban company then had essentially one government requirement to meet:  obtaining a franchise.  Now, the hoops to be jumped through before construction can begin seem endless.  Obtaining a franchise usually took weeks or months.  Today’s process requires years.  I remember Congressman Oberstar telling me it now takes 14 years to bring a rail transit project from conception to conclusion.  Then it was less than 14 months.  One fact does not change.  Time is money.
  • This phenomenon, everything getting more complicated, is not limited to rail transit.  We see it everywhere across our society.  It is a classic symptom of decay and decline.  If we look at the rise and fall of other countries, we almost always find increasing complexity marking the downward path.  It can reach a point where nobody can do anything: welcome to 17th century Spain.
  • Costs appear to vary enormously, often for little or no visible reason, i.e., tunneling.  For Salt Lake City’s UTA Frontlines effort, the total Light Rail share of the program came in at $57.8 million per mile.  An extension of Charlotte’s Blue Line LYNX Light Rail is estimated to cost $123.4 million per mile.  What gives?
  • What gives is that nowhere in the process of building rail transit is there any player who has an interest in keeping costs down.  There are, however, many players who have no interest in keeping costs down; indeed, they may have an incentive to drive costs up, because they make more money.

Sampson’s article is strong on diagnosis but weak on prescriptions.  Our prescription is to create a player, and a powerful one, whose job is to keep costs down.  The obvious candidate is FTA, which seems to be asleep at the switch on the cost problem.  Why isn’t FTA questioning the cost differences between Salt Lake and Charlotte?  You would think someone there would at least want to know.

Beyond knowing, FTA needs to do something.  As we have proposed before, FTA should set “should cost” figures for streetcar and Light Rail projects.  “Should cost” is a common cost control measure in business.  It reflects a best professional estimate of how inexpensively a job can be done.  If a city wants to build a rail transit line at a price higher than the “should cost” figure (after taking account of tunneling or elevating required by terrain, not NIMBYs), it is welcome to do so – – at its own expense.  FTA will only provide funds based on the ”should cost” number.

We have asked this before, but I will ask it again:  Are there any suggestions for what the “should cost” figures should be?  This is the crucial question.

William S. Lind serves as Director of The American Conservative Center for Public Transportation.      

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