"Now Everyone Wants a Train"

Can Light Rail Pull Its Own Weight Economically?

Many opponents argued that the Hiawatha light-rail line shouldn’t be built unless it was self-supporting, with all of its operating costs paid by riders. That would be comparable to the situation with state highways, whose construction and maintenance costs are mostly covered by user fees of various kinds. (County roads and side streets, however, rely in part on property-tax funding.)

According to Minnesota Department of Transportation projections for 2008–2009, license tabs will cover 27 percent of the total state highway budget (of which less than 7 percent goes to administrative expenses); state fuel taxes, 34 percent; grants funded by the federal fuel tax, 17 percent; the motor vehicle sales tax, 9 percent; with the remaining 13 percent covered by other federal grants, other fees, and income from agency investments of idle cash.

In contrast to that, 2006 figures from Metro Transit, which is operated by the Metropolitan Council, show that just 30 percent of operating costs for its buses are covered by passenger fares. The Hiawatha light-rail line did significantly better, with a “farebox recovery ratio” of 42 percent. That means that transit lines require state and federal subsidies of more than 50 percent. But advocates argue that the subsidies pay off—that a good transportation system actually helps build economic strength.

Jim Erkel is land use and transportation director for the St. Paul–based Minnesota Center for Environmental Advocacy and co-author of the group’s 2006 report “Getting on Board: Transit’s Role in Regional Economic Competition.” “One of the biggest points I tried to make in ‘Getting on Board’ was that transit really serves three economic functions: basic mobility, congestion management, and location efficiency (and the economic development that would flow from it),” Erkel says. “In this region, we have spent a lot of time arguing between the mobility function—in some ways treating it as nothing more than a welfare program that is grudgingly provided and reluctantly paid for—and the congestion management function, helping suburban residents get through the congestion caused by the sprawling pattern of growth they have benefited from.” But, he adds, Federal Transportation Administration studies show that public transit’s best ROI “comes from supporting location efficiency—that is, a more compact arrangement of housing and jobs.”

He says Denver is the most recent example of this: “Last November, Denver opened up its fourth light-rail line. It is 19 miles in length and has 14 stations. Before a single fare-paying passenger stepped onto one of those trains, Denver already had $4.25 billion in economic development either constructed, in construction, being permitted, or walking through preliminary planning within a half mile of the 14 stations. Not bad for an investment of $879 million.”

“Getting on Board” compares the Twin Cities with other urban regions that are further along in developing transit systems. With regard to the proposed Southwest light-rail line, Dallas provides the most useful comparison. The Texas city expanded its 45-mile light-rail system into the suburbs a few years ago, and reported in September 2005 that office properties near the line’s suburban stations had increased in value 53 percent compared to only 19 percent for properties that weren’t near the tracks.

Erkel also points to the Washington, D.C.–based Urban Land Institute’s “Emerging Trends in Real Estate” to support his arguments. He says ULI picked up early on public transit’s capacity to stimulate mixed-use, compact forms of development and to establish a 24/7 character in a community, which in turn attracts the skilled work force needed for a knowledge-based economy. “When ULI looks at the places where smart investors should put their money, the Twin Cities doesn’t even rate a mention. Instead, its economic competition of Denver, Dallas, Phoenix, San Diego, and Seattle are touted, and in almost every case, the fact that a transit system is planned and funded makes a difference,” Erkel says. “In this region, we argue endlessly about the wrong things and then build one project at a time. As we spin our wheels, our competition is more than happy to be passing us by.”