The Economics of Rail Transit Projects
The economics of mass transit is the most pressing and controversial issue surrounding public rail transit projects. What will it cost and how will it be funded? What kind of economic impact will it have? Read on to learn more about this issue.
Costs
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Image source: Estell 2014
There are two main types of costs to consider: capital costs of building the system (tracks, cars, stations, land, etc.) and operating costs (staff salaries, maintenance, etc.).
Below are estimated ranges of transit systems based on costs reported from other similar systems across the country.
Streetcar Systems Cost Ranges
Light Rail Systems Cost Ranges
Below are estimated ranges of transit systems based on costs reported from other similar systems across the country.
Streetcar Systems Cost Ranges
- Capital Costs: $150-400 million (Transportation for America 2012, 13)
- Operating Costs: $2-2.7 million per year projected for Cincinnati's streetcar (HDR 2007); $5 million per year for Portland's streetcar system (Roth 2011).
Light Rail Systems Cost Ranges
- Capital Costs: $400 million - $2 billion (Transportation for America 2012, 13)
- Operating Costs: $8 - 51.4 million for systems in Denver and Los Angeles respectively (Lesley 2012, 162)
Funding Sources
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New investment in rail transit is taking place in an environment of limited conventional funding sources like federal grants. This is due to ongoing political gridlock in Washington, shrinking revenues generated from the federal gas tax (which has not been raised in over twenty years), and the elimination of earmarks from legislation. Demand for public transportation in the US, however, is on the rise compared to private automobile travel. The result is that funding these expensive transit projects often falls to the local level. (Transportation for America 2004, 6) Therefore, it is important to both understand how to maximize the efficiency of expenditures on public transportation and also to seek new and innovative sources of funding.
Capital Costs:
Public discussion often focuses on a system's capital costs (initial construction) due to the large amount of funding required to successfully establish a new system. However, over a given system's lifespan, operating costs can easily run much higher than the initial capital costs -- easily doubling or tripling capital costs. Learn more about operation costs.
- Federal Funding
A large amount of funding for rail projects in the US has traditionally come from the federal government from a variety of existing programs. Learn more about federal funding sources. - State and Local Funding
Federal funding is almost always supplemented with state and local funding for rail transit projects. Most federal funding programs require that some percentage of the project come from local sources, or otherwise cap the percentage that will be covered by federal sources. Learn more about state and local funding. - Public-Private Partnerships
Because of the stretch federal & local funding for transportation projects, there has been an increased interest in public-private partnerships. Learn more about P3s.
Public discussion often focuses on a system's capital costs (initial construction) due to the large amount of funding required to successfully establish a new system. However, over a given system's lifespan, operating costs can easily run much higher than the initial capital costs -- easily doubling or tripling capital costs. Learn more about operation costs.
HOW MUCH SHOULD GOVERNMENTS FUND? |
FACTORS AFFECTING SYSTEMS COSTS |
What Kind of Economic Impacts are Possible?
An economic impact analysis is a snapshot of an estimated impact on a geographic area. Since it depends on a large amount of variables and assumptions, it is often hotly contested in a transit debate.
The purpose of conducting an economic impact study is to estimate the potential financial benefit that a project will bring to the region. This particular analysis uses multipliers to determine the impact on different industries in the area. The total output generated by constructing a streetcar line in Northern Kentucky is approximately $266.32 million. Read a more in depth-analysis and explanation in our Economic Impact Analysis.
Property values are a concern when any major construction project is proposed. Some projects cause property values to rise, while other projects can have a negative impact. Generally, the construction and operation of a streetcar line tends to increase property values, primarily because the track is permanent and will have a permanent impact. Read a more in-depth analysis in our Rail Transit's Effect on Property Values.
The purpose of conducting an economic impact study is to estimate the potential financial benefit that a project will bring to the region. This particular analysis uses multipliers to determine the impact on different industries in the area. The total output generated by constructing a streetcar line in Northern Kentucky is approximately $266.32 million. Read a more in depth-analysis and explanation in our Economic Impact Analysis.
Property values are a concern when any major construction project is proposed. Some projects cause property values to rise, while other projects can have a negative impact. Generally, the construction and operation of a streetcar line tends to increase property values, primarily because the track is permanent and will have a permanent impact. Read a more in-depth analysis in our Rail Transit's Effect on Property Values.