Cost Projections and Rail

Something to keep in mind as Florida and Hillsborough County both consider “investing” (a euphemistic term often used by some politicians in place of “spending”) in high-speed and light rail systems is that initial government cost projections tend to be off. And not off in a good way; these projections tend to underestimate the costs. We know this in the case of federal government programs like Medicare, but state and local governments are not immune to this phenomenon.

In the rail example, Penny Herman, writing on Tallahassee.com, notes the following example from the Tri-Rail experience in south Florida:

Tri-Rail is a South Florida commuter rail system operating at near record levels of ridership, but it still requires an 80-percent subsidy of $40 million to $50 million annually to cover its operating cost, and it owes the federal government $256 million. Three counties it serves are experiencing budget woes and are therefore cutting back on their subsidies, which could cause it to fail.

Today, ridership covers only 19 percent of cost, and that is with near record levels of ridership and added tracks.

The private sector certainly runs into similar problems. Cost projections in private business can also be wrong. When a private business realizes its service is not profitable, it either has to cut costs, improve quality or give up.  

But, unlike the private sector, government can just subsidize (read: tax) more to make up the difference. Forget whether the service is actually one that people really value enough to voluntarily pay for.

Advertisements

5 Responses to Cost Projections and Rail

  1. […] Cost Projections and Rail Possibly related posts: (automatically generated) […]

  2. […] types of systems don’t always pay for themselves (I wrote in more detail on this subject in a previous blog). This is just another example of government redirecting the economy, because politicians believe […]

  3. […] Cost Projections and Rail (12/4/09) […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: