I wondered today what kind of subsidy a rider on the Phoenix Light Rail system was receiving. Hillary Foose, the public information officer of Metro light rail, was kind enough to send me a link to this board presentation. Since the rail system opened mid-fiscal year, I will use their own projections for the 2009/2010 fiscal year.
Public accounting is a pain in the butt for someone used to private finances, because it is all cash accounting rather than accrual and they mix together capital expenditures with operating expenditures. But the table on page 62 carves out the operating budget for the existing 20-mile line from the development and capital budgets. Here are the key numbers:
Fare Revenue: $8,985,159
Operating Expenses: $33,733,168
So already on an operating basis we have a 73% subsidy. But we have sunk $1.4 billion of capital money into building the line (actually this is a little low as Metro has spent tens of millions more this year). Unfortunately, in government accounting, there is no depreciation or interest charge that shows up. So I am going to charge them with the payment on a 30-year $1.4 billion 5% note, which would be just over $91 million a year.
Totaling the $91 million with the other operating expenses, we get a 93% subsidy for light rail. This means the true cost of the $1.75 ticket for a light rail ride is actually $25! METRO says that light rail riders love the service. I should think anyone who gets a $25 service for $1.75 should be happy.
Another way to look at the subsidy is on a per rider basis. So far, METRO has averaged about 17,000 round trip riders per weekday (based on about 34,000 boardings per day). The $115.8 million annual subsidy (capital+expense minus revenues) works out to just over $6,800 per rider per year that the rest of us (who may not live or work near the line**) pay each current rider.
There are a number of ways in which I have likely understated the subsidy:
- I used their June revenue projections, which likely will continue to be revised downwards as ridership continues to slump
- I used their own expense projections, and we know how often governmental bodies hit their expense numbers
- I assumed no new capital spending necessary over a 30 year life. Rail experience has shown this to be overly-optimistic. Rail lines have to be rebuilt every 15-20 years or so. They take tons of capital maintenance dollars. When we look back twenty years from now, we'll likely come to the conclusion I grossly understated the capital charge.
**Footnote: Since over a third of the capital to build the line came from the Feds, many of the people subsidizing the METRO riders don't even live in this state.
Update: The other thing I left out is lost parking revenue. The revenue numbers for fares is in fact overstated. It should net out lost parking revenues, for example at baseball games. This is the only time I ride the Metro, because I substitute a $2.75 Metro round trip ticket for a $10 city garage parking expense. But the city has never acknowledged this cannibalization.
Update #2: I have posted an update here