“We’ll Save on Operating Costs”

Rail advocates sometimes argue that while the capital cost of rail is higher than for buses, the operating cost is lower, and in the long run the operational savings will make up for the higher capital cost. It doesn’t take much effort to prove this isn’t true.

First of all, streetcar operating costs are considerably higher than bus costs. In almost every city that has both streetcars and buses, the cost per vehicle mile of operating the streetcars is about twice as much as the cost per bus mile. In most cities, streetcars also carry fewer people per mile than buses, making the cost of streetcars per passenger mile far higher.

The numbers are little less obvious for other forms of rail transit. Although there are some light-rail lines that are really costly to operate, the average light-rail car costs about 60 percent more per vehicle mile than the average bus, and the average heavy-rail car is just about 10 percent more than the average bus. Since the average rail car carries about 2-1/2 times as many passengers as the average bus, rail advocates are correct to say that rail’s operating cost per passenger mile is often lower than buses.

But there’s a hidden cost that is not being counted here, and that is maintenance. Under generally accepted accounting principles, maintenance is an operating cost because it does not increase the revenue-generating capacity of the system. But the Federal Transit Administration allows transit agencies to count maintenance as a capital cost, probably because it fluctuates over time. Agency data distinguishes between capital costs of expanded service–which are real capital improvements–and capital costs of existing service, which is really just maintenance.

Maintenance costs become particularly high when rail systems reach about 30 years of age, when almost everything in the system–railcars, tracks, power facilities, and even much station infrastructure–needs to be replaced. Since the financial plans for most new rail lines only look ahead about 30 years, they deliberately ignore this large cost.

Moreover, most American rail transit agencies are deferring maintenance of their systems so they can put most available capital funds into new rail construction. The result, according to a 2010 Federal Transit Administration report, is that the country has a $60 billion maintenance backlog for its rail transit lines. This backlog is growing because transit agencies aren’t even spending enough money on maintenance to keep rail lines in their current state of poor repair. Due to this deferred maintenance, we don’t even have reliable data for estimate the long-run cost of maintaining rail transit.

For example, the Washington, DC Metro system cost about $12 billion to build (not counting the recent Silver Line). The system is rapidly deteriorating due to poor maintenance, and broken rails and broken-down trains are frequent problems. In 2009, a collision between two trains that killed nine people was due to the agency’s failure to maintain its signaling systems. In 2015 smoke in the subway tunnels sent 85 people to the hospital and one of them died. The agency that runs the system estimates that it needs $13 billion over the next decade to maintain it.

What this means is that cities can’t make a one-time capital expenditure on rail transit and then save money forever on operating costs. Every 30 years or so, the cities will have to spend roughly the original capital cost on maintenance or suffer the same kinds of dangerous conditions riders of the Washington Metro system face today.