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Bridges | Winter 2003-2004

Light-Rail Transit: Myths and Realities

MetroLink
The MetroLink light-rail system in St. Louis carried an average of 44,539 riders a day in the fiscal year that ended June 30, 2003.

Whether light-rail systems in the United States are a benefit or a boondoggle in the communities that build them has been argued for many years. Proponents of light rail argue that rail transit increases community well-being by creating jobs, by boosting economic development and property values, and by reducing pollution and traffic congestion—all while providing drivers with an economical alternative to the automobile. Opponents counter that light-rail transit provides little of these benefits to citizens and that the costs of such systems greatly outweigh any potential benefits.

This article discusses six key issues surrounding light-rail transit and is a starting point for debate. The issues are property values, job creation, traffic congestion, citizens' preferences for car over rail, air pollution and solvency. The facts are important for residents in cities with existing light-rail transit and in cities considering proposals for building or expanding light-rail transit.

Property Values and Development

One benefit of light rail is its potential impact on nearby property values. There is much academic literature on this angle.

The research generally finds that rail transit has a positive impact on residential property values, although the impact is relatively small. One study found that property values in Portland, Ore., increased by $75 for every 100 feet closer a home is to a light-rail station, and the average home price in New York declined by about $2,300 for every 100 feet farther from the station.1 In another study of the Portland rail system, the authors found that home prices increase as a result of being closer to a rail transit station, but the effect was only significant within 1,500 feet of the station.2 Another study found that the typical home in San Diego sold for $272 more for every 100 meters closer to a rail station, but the distance to a rail station in Sacramento had no significant impact on residential property values.3

Studies have also found a small impact of light rail on commercial property values.4 This increase in commercial property values reflects the value added to property as a result of being closer to a rail transit station. In many cities, there is an organized effort by business leaders and city government officials to actively promote the benefits of being closer to a rail transit station in hopes of fostering greater demand for property near these stations.

But some studies also show that residential property values can be affected negatively because light rail is seen by some as a nuisance. Noise, unsightly tracks and obstructed views are factors that could potentially lead to a decrease in property values.

Job Creation

Light-rail transit provides jobs during both construction and operation. Construction jobs are temporary, however, and may go to contractors outside of the local area, depending upon the bidding process and job requirements. In Los Angeles, for example, transit cars came from Japan, Italy and Germany, while other components such as rails, power supplies, ticket vending machines and signaling equipment were not produced in the Southern California area.5

While rail operation creates jobs in that industry, an important point is that these jobs are mostly taxpayer funded (given the large subsidies to rail transit). The salaries of rail transit workers paid for by subsidies should not count as new income to the local area—tax dollars have simply been transferred from local residents and state and national taxpayers to rail transit workers, effectively taking jobs from other industries. It is true that the income of rail transit workers that is spent helps the local economy, but the same would be true for the dollars of citizens if they had not been taxed. In addition, while transit workers provide a benefit to society by operating light-rail transit, the value of this benefit compared to the benefit citizens would receive from lower taxes is subjective.

If private development occurs around light-rail transit stations, giving people easier access to businesses, residential housing units and other facilities, then this private development will create jobs. Unlike rail transit jobs, these jobs would provide a net benefit to the local economy.

Traffic Congestion and Urban Sprawl

One idea behind adopting light-rail transit is that some automobile drivers will choose rail transit over their personal vehicles, thus alleviating traffic congestion, decreasing commute times and increasing highway safety. However, there is little evidence that rail transit has reduced traffic congestion. According to the 2002 Urban Mobility Report, traffic congestion in American cities both with and without light-rail transit has steadily increased since the 1980s.6 The report presents roadway congestion indices for 75 cities from 1982 to 2000. Cities with light-rail transit, such as St. Louis and Portland, have all experienced a continued increase in traffic congestion.

One reason that congestion has increased in cities with light-rail transit is that the number of registered vehicles in these cities has also increased since the adoption of light rail. In St. Louis County, the most populous county in the MetroLink light-rail system, the number of registered vehicles increased by 12 percent from 1993, when MetroLink began operations, to 1999.7

Research has also shown that rail transit ridership is greatest in more densely populated, lower-income areas.8 As a result of this finding, light-rail proponents argue that rail will reduce urban sprawl by encouraging more concentrated development. However, the relationship between ridership and density and income is not simultaneous—that is, density and income do influence ridership, but not vice versa. So, simply building light rail in higher-income suburban areas is no guarantee that urban sprawl will be reduced. Parson's Place photo Parson's Place, a 3-year-old residential community in East St. Louis, Ill., was built because the land was near a MetroLink station, according to the developer.

Citizen Preferences: Rail vs. Car

It is not too surprising that most Americans prefer automobile transit to light-rail transit. Autos offer people personal space and a sense of independence. The fact that people choose to pay higher gas prices, gas taxes, vehicle registration fees, repair and maintenance costs, and the price of the car rather than ride rail transit all reveal the value that people place on their autos. The value people place on auto transit over rail transit is even more pronounced when one considers that rail transit fares can be less than a dollar a day.

Furthermore, rail transit is much more limited than auto transit because trains must follow tracks. This could certainly increase the time cost of rail transit relative to automobile transit. To ride rail transit to work, for example, people may have to drive to a rail station, board the train and then, upon exiting the train, walk several blocks or more to reach work. The time taken to complete a rail ride may be longer than commuting by automobile. Given the opportunity cost of time, especially during work hours, it is expected that many people choose not to ride rail transit.

Air Pollution

Proponents of light-rail transit claim that pollution will be reduced as a result of fewer vehicles on the roadways. A report from the American Public Transit Association (APTA) presents evidence that each person riding light-rail transit vs. driving an automobile for one year reduces hydrocarbon emission by nine pounds, nitrogen oxide emissions by five pounds and carbon monoxide emissions by 62.5 pounds.9 One electric light-rail train produces nearly 99 percent less carbon monoxide and hydrocarbon emissions per mile than one automobile does.

However, significant pollution reduction from light-rail transit may not be realized for several reasons. First, as discussed earlier, there is little evidence that rail transit has reduced the number of vehicles on the roadways. As traffic congestion continues to increase, cutting pollution won't get any easier. Second, large-scale improvement on pollution, assuming no growth in traffic congestion, can only be had if light-rail passengers substitute rail transit for auto transit. If many light-rail passengers do not own automobiles, then there is little reduction in pollution from the development of light rail. And, if traffic congestion does increase, there's even less improvement on pollution.

Solvency

Light-rail transit, like other public transportation systems, could not operate without subsidies from local sales taxes and state and federal grants. Subsidies to light-rail systems are not trivial. In 2001, MetroLink in St. Louis received at least $14 million in local, state and federal assistance. Sacramento received more than $18 million; and Portland received $24 million.10 Fare revenue in these cities was $8.6 million, $7 million and $15.7 million, respectively. However, fares cover on average about 25 percent to 30 percent of operating expenses, with local, state and federal subsidies covering the remainder. Fares cover 38 percent of operating expenses in St. Louis, 28 percent in Sacramento and 39 percent in Portland.

Clearly light-rail systems cannot cover their operating costs with passenger revenue. In St. Louis, for example, operating costs per rider in 2001 totaled $1.59 and revenue per rider totaled 60 cents. Fares would need to be nearly tripled for the transit system to cover operating costs. This would cause a drastic reduction in the number of riders, as evidence shows that fare increases result in a much larger decrease in ridership.11 This shows the value that residents place on their transit system is much less than the system's operating costs.

Taxpayers are also responsible for the start-up costs associated with rail transit. The capital expenditure needed to build or expand light-rail systems often totals hundreds of millions of dollars. The opportunity cost of this capital is high, given the low financial return on light-rail transit. The failure of rail proponents and officials to compute this cost understates the total economic costs of light-rail transit.12 Funding for light-rail capital is often obtained through city or county bond issues and state and federal grants. In addition to covering a majority of light rail's operating costs, taxpayers are responsible for funding bond payments and grants for light-rail construction.

If rail transit systems are so cost-ineffective, why do voters approve local tax increases to fund operations? An extensive academic literature exists that explains citizen voting for public projects.13,14 Essentially, people who would directly benefit from the construction and operation of light rail, such as laborers, bureaucrats, environmentalists and others, form specialized interest groups that actively promote the benefits of rail transit to the public. Because the tax cost per taxpayer is relatively small (in St. Louis, for example, it's about $6 per person annually), voters approve rail transit taxes if special interest groups can convince voters that social benefits (whether accurately or inaccurately portrayed) of rail transit outweigh voters' individual annual tax cost. While the tax cost per voter is small, in sum the total tax costs per year can be quite large.

Conclusions

Citizens can pay tens of millions of dollars annually to subsidize light-rail transit in their community. If the benefits exceed these costs, then rail transit would be socially beneficial. However, many of the argued benefits of light-rail transit, such as alleviating traffic congestion and pollution, may not come to bear.

One clear benefit of rail transit, however, is higher property values for homes and businesses located near a transit station. In fact, in many cities one can see economic development occurring around transit stations, although this may not be causal evidence of the relationship between rail transit and economic development.

But again, the increase in property values and economic development are subsidized benefits and may not be greater than the subsidy costs. Both citizens and local officials should have an understanding of the costs of light-rail transit relative to the potential benefits. Given the size of costs relative to the benefits, the creation of light-rail transit systems or the expansion of existing systems in American cities may be difficult to justify.

Endnotes

  1. Lewis-Workman, Steven and Brod, Daniel. "Measuring the Neighborhood Benefits of Rail Transit Accessibility." Transportation Research Record, No. 1576, 1997, pp. 147-153.
  2. Chen, Hong; Rufolo, Anthony; and Dueker, Kenneth. "Measuring the Impact of Light Rail Systems on Single Family Home Values: A Hedonic Approach with GIS Applications." Transportation Research Record, No. 1617, 1998, pp. 38-43.
  3. Landis, John; Cervero, Robert; Guhathukurta, Subhrajit; Loutzenheiser, David; and Zang, Ming. "Rail Transit Investments, Real Estate Values, and Land Use Change: A Comparative Analysis of Five California Rail Transit Systems." Monograph-048, Institute of Urban and Regional Development, University of California at Berkeley, 1995.
  4. Weinberger, Rachel. "Commercial Property Values and Proximity to Light Rail: Calculating Benefits with a Hedonic Price Model." Presented at Transportation Research Board 79th Annual Meeting, Washington, D.C., 2000.
  5. Rubin, Thomas A. and Moore, James E. "Ten Transit Myths: Misperceptions about Rail Transit in Los Angeles and the Nation." Policy Study 218, Reason Public Policy Institute, November 1996.
  6. Schrank, David and Lomax, Tim. The 2002 Urban Mobility Report. Texas Transportation Institute, Texas A&M University, June 2002. See http://mobility.tamu.edu.
  7. 1991 Statistical Abstract for Missouri, 1999 Statistical Abstract for Missouri, and Economic and Policy Analysis Research, University of Missouri.
  8. Gordon, Peter and Willson, Richard. "The Determinants of Fixed Rail Transit Demand—An International Cross-Sectional Comparison," a chapter in International Railway Economics, eds. K. Button and D.E. Pittfield. Hants, England: Gower, 1985, pp. 159-175.
  9. American Public Transit Association. 1993 Transit Fact Book, Washington, D.C., 1993.
  10. 2001 National Transit Database.
  11. American Public Transit Association. 1993 Transit Fact Book, Washington, D.C., 1993.
  12. The opportunity cost of light-rail capital is the foregone return to capital that could be obtained if the capital was allocated elsewhere. The opportunity cost of capital is the largest component of light-rail costs. See Thomas A. Rubin and James E. Moore. "Ten Transit Myths: Misperceptions about Rail Transit in Los Angeles and the Nation." Policy Study 218, Reason Public Policy Institute, November 1996.
  13. Barzel, Yoram and Silberberg, Eugene. "Is the Act of Voting Rational?" Public Choice, Vol. 16, Fall 1973, pp. 51-58.
  14. Kelman, Steven. "Public Choice and Public Spirit." Public Interest, Vol. 87, 1987, pp. 80-94.

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