Caltrain continues to be a major topic of
discussion on the Peninsula in its local
newspapers. However, most commentary about
Caltrain or other urban rail systems is either
erroneous or free of facts entirely.

This article is an attempt to provide a more
factually and research based discussion of urban
rail as a transit mode, including its strengths
and weaknesses. Robert Poole, the author, is
director of the Reason Foundation, a libertarian
think-tank in LA. Ordinarily he would be most
unlikely to agree with studies emanating from the
Brookings Institution, a liberal Washington
think-tank. That makes this article really
interesting reading.

Martin
==================================

Reason Foundation

The Train Drain: Brookings Institution on Rail Transit in America
By Robert W. Poole, Jr.

The Brookings Institution is America's oldest
public policy think tank. Based in Washington,
DC, it is well-respected and generally considered
to be moderate-liberal in orientation. As
American Enterprise Institute is informally
considered a place for Republican office-holders
to reside when out of power, so Brookings is
regarded for Democratic icons.

One of Brookings Institution's leading
transportation policy experts is Clifford
Winston, a well-respected economist and author of
numerous books and papers dealing with
transportation issues. His most recent paper is
"On the Social Desirability of Urban Rail
Systems," co-authored with Vikram Maheshri, an
economist at the University of California at
Berkeley. It appears in the Journal of Urban
Economics and is available online at
www.sciencedirect.com.

The purpose of the paper is to estimate the
contribution of U.S. urban rail systems to social
welfare. The authors define the net benefit of a
rail transit system as the difference between its
benefits, broadly measured, and its net cost to
taxpayers. If this difference is positive, it
means that the dollar value of the rail system's
benefits is greater than its net cost to
taxpayers (i.e., the difference between what the
rail system's customers pay as fares and the
total cost to build, operate, and maintain the
rail system).

On average, rail transit systems cover about 40
percent of their operating costs from farebox
revenues and none of their capital costs,
according to figures in the National Transit
Database. That means their net taxpayer subsidy
is large.

Winston and Maheshri construct an elaborate
econometric model to estimate the "consumer
surplus" of 25 rail transit systems. This is
economists' term for the benefits to users, over
and above the fares they pay. The large systems
(New York, Washington, DC, San Francisco's BART,
etc.) all produce significant consumer surpluses.
But most of the smaller ones do not.

Next, the authors compare the consumer surplus of
each system with its net taxpayer cost. On this
measure, every single one of the 25 systems has
negative net benefits-i.e., the annual value of
the benefits to users is much less than the
annual cost to taxpayers. Surprisingly, this is
true even for the massive New York City rail
transit system, which by itself accounts for
two-thirds of the nation's rail transit passenger
miles.

But what about larger benefits to the metro area?
Rail systems are advocated not just to benefit
their riders, but because they are expected to
reduce traffic congestion, reduce air pollution,
save energy, etc. So the final step in Winston
and Maheshri's analysis was to estimate the value
of these "externality" benefits.

They first conclude that the only one of these
purported benefits large enough to make any
difference is congestion relief. Adding the
congestion savings to road users to the consumer
surplus gives the total benefits of rail transit.
When this total is compared with the net taxpayer
costs, only San Francisco's BART produces net
social benefits. Each year the system improves
social welfare by an estimated $36 million. All
23 other U.S. rail transit systems are net
losers. This means that each of those urban areas
is made poorer by many millions of dollars each
year.

Winston and Maheshri anticipate that some
advocates of rail transit will protest that these
systems offer other benefits that are not
accounted for in their calculations. For example,
rail supposedly stimulates development around
rail stations: "But case studies have yet to show
that after their construction transit systems
have had a significant effect on employment or
land use close to stations and that such benefits
greatly exceed the benefits from commercial
development that would have occurred elsewhere in
the absence of rail construction."

And there is also the claim that rail systems
increase the mobility of low-income residents.
But the authors point out that the median annual
income of rail users in 2001 exceeded $50,000,
which was greater than the median income of the
general population in that year. So rail's
primary market is not the poor (unlike bus
transit).

Overall, then, the authors conclude that rail
transit is erroneously believed by the public to
be socially desirable, because "supporters have
sold [rail systems] as an antidote to the social
costs associated with automobile travel, in spite
of strong evidence to the contrary." They
conclude that, in fact, rail transit is "an
increasing drain on social welfare."

Robert W. Poole, Jr. is Reason's director of
transportation studies. He has advised the last
four presidential administrations on
transportation policy.

Copyright © 2007 Reason Foundation

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