Why Valley Metro (Phoenix Light Rail) Can't Be Trusted and Shouldn't Be Given More Tax Money to Play With
I was reading this article in the Arizona Republic (which is generally an unskeptical cheerleader for light rail investments) and looking at the claim that Valley Metro (the operator of Phoenix light rail) had a 45% fare recovery ratio in 2013. One would think that means that their fares cover 45% of their costs -- which would be awful for any real enterprise but is pretty good for government-run rail systems.
But in fact, Valley Metro (along with rail supporters in the Administration) stack the deck by defining most of the costs out of this metric so it looks far better than it really is. In fact, by my reading of their financial statements, the true fare recovery is at best 15.2% and likely much worse.
Here are the Valley Metro financials for 2013, from their annual report
Look at their costs of $75+ million and fares of about $12.8 million. How do they get to 45%? Simple -- they leave the majority of their costs out. They exclude administrative costs, financing costs, and depreciation (essentially their capital cost) from the equation. This means that their fare recover is 45% -- IF you ignore their large administrative costs and you ignore the $1.4+ billion the line cost to build. Further, because of the way the government does its finances, it is also missing any financing costs (interest and such on debt).
So the true cost recovery, stated in a way that a reasonable person would think about such a number, is 16.8% at best. If one takes into account the $8.28 million in "non-operating expenses" the number is 15.2%. And it is even lower if you were to include interest and other financing costs.
I am sure Valley Metro will argue that this is the way the Feds measure it. I don't care. It has an obligation to accurately report its financial position to the public who is paying for it, particularly when the public is considering further investments in the form of higher taxes. The 45% is a meaningless number that is crafted solely to make light rail look financial stronger than it really is.
This, by the way, is why total ridership of rail + buses has stalled since the construction of the light rail line. Light rail is so expensive per rider that it is starving cash from the rest of the system.