Letter Writer:

Gregory Michaud

Date Posted:

Aug. 22, 2006

Letter:

Are you guys real economists? Lambasting light rail is amazing. You claim that cities such as Baltimore and St. Louis have only around 20 percent revenue. Well, tell me how much revenue do automobiles generate? You have $39 billion spent on the federal level, and I would estimate the same on the state level. And I don't mean taxes as revenue. Building more roads, forcing people to use cars, forcing people to pay taxes on oil, etc. so they can get around is not revenue. Cities are so poorly designed that the automobile is the only option individuals can use in many cases. The truth is this country needs new leadership at all levels, including economists. Government is nothing more than spokesmen for corporate interests. The clearest example is the obvious need to develop energy savings strategies. Such thinking is completely ignored by government at all levels. Why, because the auto, oil, road building lobby is tickled pink with the way things are. Let's see: Government can't guide the design of cities so that the car is but one aspect of a larger transportation system. We have a government that can't develop energy policies except those that stick money into the pockets of the already wealthy. We have a government with naive economists who have never been out of the country and don't realize effective mass transit can be built for all income levels and be a delight to use. And finally we have a government that works only for insiders, lobbyists and corporate raiders of all types. I can say more. But this is not the government of Jefferson, Hamilton, Franklin and Washington. It is not a government of the people, for the people and by the people.

Editor's Response:

I assure you that we are real economists, although it shouldn't take an economist to know that revenue generated by taxing gasoline is revenue. You can redefine the word if you like, but that would be silly. Doing so would simply ignore the fact that revenue generated in this way goes toward paying the costs of infrastructure to support auto travel. Nevertheless, you seem to have ignored the third and fourth paragraphs of the article, which discuss the inefficiencies of auto travel. Even so, the solution does not appear to require spending billions on little-used light rail systems that come nowhere close to covering their costs. The solution certainly does include efficient pricing of all types of travel so that benefits and costs can be more closely aligned.

Letter Writer:

Tom Fairbairn, retiree, of South Richfield, Minn.

Date Posted:

July 29, 2004

Letter:

This article was excellent, as far as it went. I think there was one point overlooked entirely, however. There is a tendency to treat mass-transit cost entirely differently than road costs in that mass transit, especially nonroad varieties, is required to justify every cent spent on every line cost with the maintenance facilities and other infrastructure included, while highway use costs appear to never include either ongoing maintenance or, indeed, the actual cost of highway/road construction.

To compare apples to apples, these costs need to be included in the overhead charges for highway use in detail, and that cost divided by the number of people who use the facilities, so that the real cost of use per boarding is seen. It should then be incumbent upon the governments involved to be certain that the governments pick up no more cost per boarding for highways/roads than for other forms of transportation. The user's portion can rightly be apportioned through the fuel taxes paid, which not only is regulated by the mileage the individual drives but also by the fuel efficiency of each vehicle. This should be a flat fee per gallon regardless of user.

If we are to have equitable forms of transport of all types, the costs of providing the services have to be equalized to the extent of being truthful with everybody about the real costs of providing each form of transport. Europe and other areas do this much better than we in the United States; that's partly why their fuel costs are so high compared to ours and why they have such superior public transport in most cases.

Both highway and air transportation incur huge ongoing costs to the taxpayer that are basically invisible to most people because individuals don't directly pay the real line-item costs of these methods. Rail and bus services have to explain and justify every single penny spent—why not air, river, and highway/road services as well? All are equally basic utilities/services, not much different than potable water, electricity, telephone and natural gas.

Editor's Response:

Mr. Fairbairn is quite correct in saying that all of the enormous government expenditures on transportation should face serious cost-benefit analysis. But if light rail seems to get picked on too much, it is probably because it is so much more expensive than autos in terms of taxpayer subsidy per passenger mile. As outlined in the report by Garrett cited in the Castelazo and Garrett article, the subsidy per passenger mile for light rail is more than 38 times that for automobiles.

Letter Writer:

Bob de Forest, a retired engineer in Oregon

Date Posted:

July 28, 2004

Letter:

Thank you for your excellent article on light rail. I live in a state whose resources are often squandered by its only large city, Portland.

There is one problem in the article: your question, "Why do voters continue to approve new taxes for construction?" We Oregonians NEVER approved light rail. Light rail was defeated at the ballot box three times, twice in Oregon and once in Washington. As a result, some of the money for it came from a source many of us consider to have been illegal. While Oregon law originally stipulated that funds collected from the state gasoline tax were specifically to be used on roads, this has been subverted. I my opinion, we have some very arrogant people in power who ignore both the law and the electorate.

As economists, you might be interested to know about the following example of an effort to control our government. A ballot measure, placed by initiative petition, would have required government to compensate landowners when a government action reduces the value of the owner's property. Those on the receiving end of "takings," as they are called locally, spent considerable money fighting the ballot measure. The measure passed in spite of their effort, but the Oregon Supreme Court tossed it out on a technicality.

Good article. Thanks again, and thank you St. Louis Fed!

Letter Writer:

From John P. Shelnutt, an economist from Little Rock

Date Posted:

July 26, 2004

Letter:

I was most impressed with the article on light-rail subsidies and related discussion of social cost comparison. The true costs of such systems have not been adequately debated because the federal government is seen as the amorphous and distant source of funding, a pattern not unlike health care funding. In the case of central Arkansas, external funding for a light-rail system was transformed into an inner-city tourism project with no opportunity for a referendum by the voters. A lightly used diesel-powered trolley bus is being replaced by a light-rail train system of questionable value to local users. The cost of the St. Louis rail system is only the tip of the iceberg, as smaller cities are pushed into the same inefficient and undemocratic decision-making process. It is most unfortunate that scarce transportation funds are being diverted from high-priority projects to fund experimental projects that are not fully debated or held accountable to the voters. I would suggest a few follow-up studies to explore the linkages between federal policy mandates on clean air and the inefficient and federally subsidized transportation projects that are used as enticements for transportation planning. Why charge the OMB with accountability enforcement and why pay consultants for performance review of programs when the most egregious cases of waste are overlooked and even expanded. Again, in the case of central Arkansas, the light-rail funding is coming at a time when the metropolitan planning authority is cautioning that highway dollars will not be there in the future to do anything more than maintain the current highway system in the area.

Letter Writer:

Jeff Leonard of Columbus, Ohio

Date Posted:

July 23, 2004

Letter:

I found the article on light rail a good starting point for dialogue. The authors make very valid points. However, the same inefficiencies that they attribute to light rail could also be made against cars, or more specifically, the road system that they depend on. Car owners do not bare the full cost of the road system they use. Instead, the federal government "subsidizes" the building and maintenance of the road system by providing dollars to state and local governments. I'd be interested in knowing what the true costs are of each mile driven once those subsidies are factored in. One other point worth exploring is the "inefficient" use of resources that come as a result of sprawl, which is certainly enabled through a heavy reliance on the car as opposed to other forms of mass transit.

Editor's Note:

One has to be careful when talking about subsidies paid for various forms of transportation. In each case, the proper way to think about it is that the subsidy is the amount paid to make up for the difference between costs and the amount paid by users. In the case of auto transportation, the vast majority of the money for building and maintaining roads is covered by fuel taxes and other revenue paid by users. Thus, the subsidy is relatively small, making auto transportation much cheaper than light rail in terms of subsidy per passenger mile. As outlined in the report by Garrett cited in the Castelazo and Garrett article, the subsidy per passenger mile for light rail is more than 38 times that for automobiles.

Letter Writer:

Art Ludwig, retired electrical engineer from Santa Barbara, Calif.

Date Posted:

July 20, 2004

Letter:

This type of analysis is welcome, but I believe that several very important costs have not been included in the comparison of cars vs. light rail, for example, the cost of roads, bridges, parking lots, gasoline distribution and other infrastructure needed to support automobiles. The current cost of gasoline is based mainly on the cost of getting oil out of the ground, neglecting the inherent value of an irreplaceable resource.

Editor's Note:

In the grand scheme of things, it is important to account for all of the costs of the various transport options. For the example in the paper, however, this need not be done because the number of passengers who use St. Louis' MetroLink is relatively small. Because of this, the effect on the road transport system of having all MetroLink riders use cars should be negligible.

Letter Writer:

Chris Catterall, a product manager for transit communications systems at Envitech Automation in Montreal

Date Posted:

July 19, 2004

Letter:

I am particularly interested in the societal impacts of providing a transportation infrastructure in urban areas. Given the stature and reputation of the Federal Reserve Bank, I anticipated a thoughtful and informative analysis of this issue. The article attempted to demonstrate the inefficiencies of light-rail transportation systems by comparing the subsidies received by the MetroLink system in St. Louis to the cost of buying cars for poor people in St. Louis who the authors estimate currently use the Metro Link system. Unfortunately, the analysis provided no meaningful insight into this issue due to the omission of critical factors, such as road infrastructure and travel time costs associated with the proposed alternative. The importance of these omissions raises the question as to the competence and/or bias of the authors. I was also disappointed that the article does not address the obvious environmental and health impacts of their alternative approach. Finally, I feel that, as editor, you have undermined the credibility of this newsletter as well of that of the Federal Reserve Bank by allowing the publication of an article with such obvious flaws. The development of intelligent mass transportation solutions is critical for our cities, and I would be pleased if your newsletter and the Federal Reserve Bank of St. Louis would make a meaningful contribution to this issue in the future.

Editor's Note:

Mr. Catterall is incorrect in saying that the authors omitted critical factors, such as road infrastructure, travel-time costs, and environmental and health effects. In fact, the article addresses these factors specifically by claiming that "increases in pollution would be minimal with the hybrid vehicle, and 7,700 new vehicles on the roadway would result in only a 0.5 percent increase in traffic congestion." While one can argue about the accuracy of these claims, one cannot say correctly that they were not made.

Letter Writer:

James. C. Matthews, a project manager in the transportation equipment industry in Philadelphia

Date Posted:

July 16, 2004

Letter:

This article is, to say the least, highly biased and misleading. The implication is that the operating subsidy is solely for the benefit of the estimated 7,700 people who ride the system but are too poor to own a car. If that's the case, then why are the other 47,300 people riding public transit if it is no benefit to them? Clearly in your estimation driving a car is always preferable to riding light rail unless of course you have no car. What a ludicrous proposition.

Editor's Note:

Mr. Matthews has misinterpreted the numerical example in the article. Its purpose is to illustrate that the subsidies that are paid to build and operate light rail can be spent differently and all current riders better off. In the example, some of the money would be used to buy cars and pay the operating expenses for all riders who do not already have a car. The rest would be given to riders with cars so that they could cover their expenses when driving to the places that they currently use light rail to get to. The example is clearly designed to show how all light-rail riders, not just the poor ones, can be made better off by spending the same amount of money differently.

Letter Writer:

Kenneth A. Holmes,  an accountant and economist in the Ottawa suburb of Gloucester

Date Posted:

July 8, 2004

Letter:

Our city (Ottawa, Ontario, Canada) followed your advice 15 years ago and created an express bus system, complete with bus-only lanes. The system worked well for about seven years. Our population growth outstripped the capacity of this system. However, our system does fit your economic criteria. There are several problems with your observations and conclusions.

First: There are so many buses in our downtown core that one has difficulty finding their right bus after work. The primary downtown bus lane during rush hours has about 85 buses all lined up, and when they stop to pick up passengers, it is damned near impossible to catch your own designated bus. I end up missing my bus at least three times each day due to the volume of vehicles moving bumper to bumper.  During bad weather, it is difficult to tell the route number for each bus that passes by. All urban routes descend on the same downtown corridor. There are at least 35 routes which converge in our city core, and each bus for each route runs every 10 minutes or so. We look like Brazil at rush hour.

Second: The economics for volume passengers are not there for buses. For example, 10 buses require 10 drivers. That could be replaced by one train with one driver. In fact, the mess is so profound that although the city is growing, bus patronage has leveled out and the carryings have even declined. Surveys revealed that people are fed up with this. Our city is now planning an urban rail system.

Third: The fumes from these buses stink and are excessive. Many folks, including myself, have serious allergic reactions to the pollution.

Fourth: Trains may be costly in the short run, but once the system is in place and once the city grows, the utilization rates will climb dramatically. In many instances, it may be cheaper for transport to lead development than to have transport follow development. I believe that you Americans use this thinking when you plan your highways.

Five: What do you want your city to look like in the future? There are only so many cherries in the pie. How many roads can you construct through your city before the community becomes ugly. I love Chicago, for example. Its transit systems move volumes of people and, as a result, their city is one of the nicest in the United States. Florida is an example of a state where poor transit planning has had a terrible impact on the quality of many communities. I had to travel to Orlando last year. It took two hours to reach the downtown area from the airport due to extreme congestion. With a rail transit system, the journey would have taken about 15 minutes. I will never go to that city again, and I informed my accounting body that they should not plan any more conferences in that place again. I will not holiday or attend any meetings in Orlando after my experience.

In conclusion, I believe you left out some very important considerations. I am a professional accountant and an economist and I would appreciate if you would add these factors, described in points one to five above, the next time you conduct an analysis. They are real and important issues. Hopefully, one day upper middle class analysts will realize that public transit is not just for the lower classes and the poor.