Light rail on a road to nowhere

While politicians rush headlong into expensive light rail projects, transit riders and taxpayers are being taken for a ride.

Cities across Ontario take note. As Ottawa, Waterloo, Mississauga and Hamilton all push ahead with ambitious light rail plans, they should be aware that those transit dreams may turn into a nightmare.

Advocates of light rail – streetcars separated from traffic that typically stop less frequently – sell it as the first step in creating bustling European-style boulevards lined with cafés and restaurants, where riders easily hop on and off as they jaunt through different neighbourhoods or commute to work. Light rail, they say, results in developers offering high density neighbourhoods flanked by transit, and that this eventually leads to higher levels of ridership, a drop in car ownership and less congestion.

The reality is that the light rail transit systems that have been built across North America in recent decades are essentially bankrupt and survive largely on government largesse. More simply, the costs of operating light rail lines far exceed the amount of money they earn in the form of fares – and that’s ignoring the billions of dollars in debt taken on by local and federal governments to actually build the lines.

And in every case, the optimistic forecasts for ridership and the cost to build and operate light rail lines has come up short, leaving the taxpayers and dedicated transit users to pick up the bill in the form of tax hikes and higher fares.

Take San Jose, which launched a light rail system more than 25 years ago that was heralded as a modern, state-of-the-art mode of transit to match the booming tech industry in Silicon Valley. But 25 years later, the nearly empty light rail cars attract just one percent of all riders and cost $10 in subsidies for every round trip. Taxpayers currently subsidize about 85% of every trip. In a clear example of city-planning gone wrong, the light rail was built in corridors that were expected to attract businesses and dense residential areas – but neither ever materialized.

An audit of the region’s transit system found the light rail farebox recovery ratio – which measures the amount of fare money as a percentage of operating costs – has never been higher than 14% and the transit agency seemed more concerned with convincing governments to give it money to build projects than considering the cost to operate them afterwards. The audit concluded that many projects were “political solutions” rather than a sound plan to tackle congestion or boost ridership.

Phoenix, a long-time poster child for suburban sprawl, began construction in 2005 on its $1.4 billion light rail line, quickly touting the new transit system a success and transformational for the car-dependent city. Yet five years after it first opened, the light rail recovers just 37% of the cost to operate it from fares, with the remaining difference coming from the budgets of Phoenix and surrounding towns. Over the next five years, the city’s transit agency expects that number to decrease by one percent, even though ridership will grow. Although the number of light rail riders has increased slightly in recent years, bus ridership has declined, meaning that many riders are simply switching from one form of transit – that costs less to operate – to a more expensive one.

In Denver, voters approved a sales tax hike to pay for 122 miles of light rail over the next 12 years at a cost of $4.7 billion. Fast forward to 2013 and only 40 percent of that system has been built, yet the price tag has increased by 57% to $7.4 billion. The transit agency now doesn’t expect the project to be built until 2044, if ever. Even before the agency put shovels in the ground, it was already $1 billion over budget. Officials scrapped a plan to double the sales tax to pay for the shortfall after public outcry. Recently, the region’s transit agency has also backtracked on a plan to build one of its more ambitious light rail routes. It is wise to do so, as the light rail system recovers only 42% of what it costs to operate it through the farebox. The city recently raised fares to try and improve this metric, but the increase in fare revenue was largely offset by a decrease in ridership.

Portland – long considered the mecca of light rail transit in North America – has failed to attract a greater percentage of car commuters over the last 13 years. According to a survey released by the city’s transit agency, the percentage of commuters who use the city’s light rail trains to commute to work has largely remained the same. While the number of people who drive to work has fallen slightly, much of that offset appears to be because of an increase in bicyclists, who have taken advantage of the city’s extensive bike network. Even though it’s often hailed as a success, the city’s light rail system sill recovers less than half of its operating costs from fares.

But those are just the beginning, as there are light rail failures in cities across America, including Buffalo, Los Angeles and Dallas, to name a few.

All of these examples should act as a warning sign of what’s to come as officials in Kitchener-Waterloo move forward with plans for an $818 million LRT, or Ottawa and Mississauga push ahead with their $2.1 billion and $1.6 billion, respectively, LRT lines.

Many supporters of light rail say it will produce “intangible” benefits, such as development along transit lines and a reduction in traffic that would help ease congestion. But one recent study showed that dedicated bus lanes provided more bang for their buck. And the evidence for light rail having a positive impact on congestion is mixed, at best. Traffic in San Jose and the surrounding area, for example, has only gotten worse over the 25 years since its light rail system was first put in place.

Worse still, is that the problems with light rail have been known for more than two decades. As far back as 1990, the U.S. Department of Transportation noted that the ridership levels at a handful of light rail projects were consistently more than 50% below the forecasts relied upon for approval. In some cases, the ridership levels were as much as 71% below forecasts. Meanwhile, the study noted that the costs to build the projects were almost all over-budget and the cost per passenger was significantly – sometimes as much as three times – higher than officials expected.

The point here is not that light rail is “bad” and should be thrown out as option when it comes to a city’s transit mix. A number of the streetcar routes in Toronto are cost effective and provide a viable transportation option for tens of thousands of people everyday. Streetcars were often used extensively by transit operators in the years before those companies were taken over by public officials – and in most cases, turned a profit. Montreal had, at one point, a streetcar system that was used by more than 60% of all workers everyday.

But the “build it and they will come” mentality that has surrounded light rail projects in recent years – and is being used to push ahead with projects across Ontario – often turns out to be nothing more than that: a dream. Both transit riders, who will face higher fares and less service, and residents, who will face increased taxes, will one day wake up and find that while they were dreaming, they were taken for a ride.

Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or at (416) 964-9223 ext 236.