Brother, Can you spare a dime?

Trains Magazine Transit
1

What’s a reasonable cost to construct a LRV system? (Ok, a loaded question)[:)]

Is there a change in cost greater than might be accounted for in general inflation if we look at a short history of LRV projects? I’m no forensic accountant. Also, my list is far from complete (still researching additional projects and their costs), but I thought it might be worth sharing what I’ve got so far (the resulting discussion may help guide research)

A couple of disclaimers – the cost to construct typically includes all equipment (including the vehicles) which can really sway the number; some of the sources include bond interest and other financing fees; I’ve arranged the list from highest per mile cost to lowest, but could post the list sorted by system opening date if helpful; yes I know I missed some systems so if you have information about them (not just that I missed them) please share whenever possible and I’ll add it to the list.

THANK YOU for your comments and constructive criticisms – I really appreciate your candor and “grace” in posting to the forum

City

System-Route Name

Type

LRV Open Date

System miles at Opening

Cost to construct

Per Mile Cost

Norfolk VA

Tide Light Rail

E-LRV

2010

7.4
2

Paul:

Wow is that an accurate number for the Norfolk system? 31 BILLION dollars per mile?

The 2004 date for the trolley in Charlotte must have come from CATS. The restored historic trolley was running long before that. I believe that 2004 is when Charlotte put three new replica trolleys in service, and the non profit group who restored old Trolley #85 gave it to CATS.

3

Oops, that’s a mistake. The budget is 232 MILLION, not BILLION. Need to fix that.

http://www.geocities.com/greg_vassilakos/norfolk_lrt/norfolk_lrt.htm

http://www.hrtransit.com/developmentproject/regionaltransitplan.html

4

I suspected as much. [swg]

They might want to rethink their plan to buy 9 trainsets.

Charlotte started with 16 trainsets for the initial 9 mile line and it turns out it was not enough. They have already ordered 4 more.

Lynx Blue line runs single trainsets every 15 minutes for most of the day and double trainsets every 7 1/2 minutes during rush hours and during games at the NFL stadium & games and concerts at the NBA stadium. They really need triples during the games and concerts, but the platforms were shortened to double train length in an attempt to put the brakes on rising costs during construction.

It will probably get worse when the 11 mile Blue Line Extension opens in 2010.

5

Capitalized construction costs include labor, materials, equipment, overheads (IT, HR, Legal, Procurement, Audit, etc.), financing and training associated with the operation of the project.

The cost of financing can raise significantly the cost of a capital project. For example, a 30 year municipal bond ($1,000) issued at 4%, which is reasonably close to the interest rate for AAA municipal bonds, would require $2,200 (correction) to pay the interest every six months and the principal upon maturity. The interest and principal is chargeable to the cost of the project, together with the investment banking fees associated with organizing and issuing the bonds. Therefore, the cost of the project would be $2,200 (correction), plust the issuance fees, for every $1,000 of bonds issued to pay the project invoice costs.

If the numbers presented for the various systems do not include the same elements, as per above, they are not comparable. Equally important, if the numbers do not include the cost of financing, the accounting is not proper.

The costs per mile numbers are shocking, especially when compared to the cost of rehabbing existing rail lines. The cost to upgrade the Leander to Austin portion of the Austin & Western for commuter rail service averages approximately $3.8 million per mile. The estimated cost to build a bypass around Austin and San Antonio for UP’s freight trains, which TxDOT and UP say is necessary to implement commuter rail between Austin and San Antonio, averages $16 million per mile, while the estimated cost to upgrade the UP for expanded passenger train service averages $5.6 million per mile. The estimated cost to implement BRT in Austin averages $702 thousand per mile.

I would like to know the source of the numbers for the systems presented in the opening posting for this thread.

6

a 30 year municipal bond ($1,000) issued at 4%, which is reasonably close to the interest rate for AAA municipal bonds, would require $3,281.03 to pay the interest every six months and the principal upon maturity.

I presume that you mean “over the life of the note”. The way you phrased it it sounds like $3,281.03 every 6 months.

Charlotte is paying as we go from a 1/2% sales tax and Federal and State money, that’s why it is taking 25 years to build it.

So far we have 175 new buses and one light rail line “Blue Line” up and running. The next light rail project is in progress. The commuter rail “Purple Line” up the lake has been turned down for federal participation, but is being built anyway with local and state money.

7

Newspaper articles, transit authority websites, and (cough, cough) “Wikipedia”

These merely supplied the “big number” to shock readers or spin their version of the “facts” (ie. quoting the initial estimate of costs rather than the final cost with overruns and delays, etc.) I could take an hour or two rounding up hyperlinks to these “sources”, but you’ll most likey have very little audit/accounting information.

A qualitiative review does yield some interesting observations. Heritage trolleys seem to have lower cost per mile (probably due to limited budgets, ability to take longer time to implement). As mentioned in other threads, some systems had a lot of bridges or tunneling – that would drive the price up by a significant factor. The type and sourcing of equipment (ie railcars) may influence a large swing (ie. off the shelf versus custom design, starting with minimum number of railcars, or buying for the future extentions)

Until this post, I drew no conclusions, only asked questions. I’m still interested in what people think about the cost of building LRV systems. Thanks

8

I made a mistake in calculating the interest cost. Over 30 years the cost of the interest, payable every six months, would be $1,200. Added to the principal of the bond, the total cost would be $2,200 for every $1,000 bond issued. I made the mistake of compounding the interest as it it was to be paid upon maturity.

The sales tax is used to service the sales tax revenue bonds that are issued to acquire the capital to pay for the construction of the system. I have not looked at the construction scheme in Charlotte, but this is the way it usually works. If Charlotte built the system on a pay as they go basis, it is very unusual.

The transit authority usually gets the construction money by issuing tax free municipal bonds, just like the ones that were issued to finance the construction of most of the country’s airports. The amount of bonds issued would be the difference between the estimated cost of the project and the amount of monies anticipated from federal and state authorities.

Even if Charlotte was able to build the system on a pay as they go basis, they would not, in all probability, have received the federal and state monies until the project was complete, although they might have gotten percentage of completion payments. In this case, they would have had to borrow working capital for the on-going costs of the project, and this cost would be capitalized.

If Charlotte collected the sales tax necessary to pay for its portion of the light rail system before construction began, it would have had to collect it for years.

In 2007 Dallas Area Rapid Transit (DART) collected approximately $389.9 million in sales taxes from its participating communities. Dallas and its surrounds are considerably larger than Charlotte. The Dallas / Fort Worth metropolitan area has a population of approximately 6.3 million compared to the Ch

9

Samantha:

You are assigning the entire cost to the sales tax revenue. Remember the Federal and State Paid a huge portion, and they HAVE been collecting the sales tax since 1998.

10

That’s partially true. I calculated the time required to save the sales tax revenue for a pay as you go system without taking into consideration any state and federal payments. I did not have the state and federal payments to CATS. I did, however, point out that some of the sales tax revenue probably was used to support the bus operations. As shown below I was correct.

After a little digging through the CATS webpage, I found some information on funding. It shows that CATS has issued a significant amount of short and long term debt securities. A pay as you go system would not issue any debt, although it could have some short term borrowings for working capital purposes.

CATS received the first sales tax proceeds in 1999. It had been estimated to be $50 million, although the actual number undoubtedly varied. In 2004 it generated $53.9 million or approximately 54.9 per cent of CATS operating program income, whilst in 2007 it produced $69.2 million or approximately 58.5 per cent. The estimate for 2010 is $80.9 million or approximately 58.7 per cent. Forecasts of future financials more than a year out are subject to significant variation.

In 2004 CATS total capital program was $52.9 million. Federal grants contributed $9.7 million or 18.3 per cent of the total, whilst $8.million or 15.1 per cent came from state grants, $1.7 or 3.3 per cent from miscellaneous income, and $33.5 or 63.3 per cent from operations. This means, amongst other things, that a portion of the 2004 sales tax proceeds were consumed by operation of the bus system.

In 2005 CATS ap