San Antonio- The Texas Public Policy Foundation has obtained a March 29, 2000 Financial Assessment Report from VIA under the Texas Public Information Act. An examination of this report by Tom Rubin, CPA, CMA, CMC, CIA, CGFM, CFM, the former Treasurer and Controller of the Southern California Transit District, reveals major errors in VIA’s proposed light rail financial, capital, and operating plans.

Overall, Mr. Rubin has identified errors of up to $1.45 billion in VIA’s cost estimates, bringing the total cost of VIA’s light rail system to as much as $2.95 billion (current dollars). This total cost is higher than can be supported by a 1/4 cent sales tax and would require additional sources of funds, such as the debt financing, bus service reductions or fare increases as described in VIA’s report.

A summation of errors contained in VIA’s report is as follows:

  1. $525 – 750 million underestimation of capital costs
  2. $155 million underestimation of the cost of light rail vehicles
  3. $130 million underestimation of the number of vehicles required for the system
  4. $332 – 386 million underestimation of operating costs
  5. $20-30 million overestimation of advertising revenues, fibre optic leases and other revenues


“The errors in VIA’s light rail financial assessment reveal shoddy planning, at best, and outright deception of the public, at worst,” said Jeff Judson, President of the Texas Public Policy Foundation.

Equally as important, the VIA report reveals a number of other disturbing details about VIA’s plans:

    1. The new VIA cost estimate for light rail construction is $3.009 billion through 2025 (figure 7, page 32), up from $2.88 billion (escalated dollars).
    2. VIA contingency plans in the case of funding shortfalls are described in the section entitled Responses to Potential Capital and Operating Shortfalls (section 3.3.1 & 3.3.2) and include:


    1. Debt financing using $765 million in bonds (Also in figure 9, pg. 37)
    2. Delay in the growth of bus service
    3. Reduction of number of buses in operation
    4. Fare increases
    5. Construction delays
    6. Seek new sources of revenue.
  1. According to the report, farebox revenues (section 5.3.1) will cover only 18% of operating costs. VIA cash reserves will be reduced by more than 20%.
  2. Bus fare increases are accelerated. Previous VIA financial analyses shown for the light rail system assumed a $0.75 fare until 2013 rising to $1.00 through 2025. The current report indicates VIA will raise fares five years sooner, in 2008, to $1.00 and to $1.50 in 2020 (figures 5 & 6).
  3. Even though VIA claims that they can build two blocks of light rail in two weeks, will not have to acquire new right of way, and will not have to relocate utilities, VIA projects spending $2.05 million per mile for utility relocations, $1.9-3.2 million per mile for right of way acquisition, and $1.48 million for environmental mitigation. It is absurd to assume that such construction at any given point can be done in less than one year, not two weeks as VIA claims can be done. (Figure 3, pg. 24).


Detailed Explanation of findings

    1. TPPF has called into question VIA’s capital cost projections to build light rail indicating that VIA will only be able to build one of the three light rail lines being promised to taxpayers. VIA’s two schedules of “comparable” light rail systems, intended to justify VIA’s extremely low average capital cost per mile of $26.71 million per mile, contain numerous errors, including:


    1. Figure 11, “Comparison of Costs of Light Rail Transit Systems,” shows the year 2000 total capital costs of the New Jersey Hudson-Bergen light rail line as $354.3 million, $18.6 million per one-way route mile, or $37.2 million per two-way track mile, the standard way of expressing rail capital costs.
    2. The U.S. Department of Transportation, in its recent “Annual Report on New Starts” to Congress, shows this project with a total cost of $992.14 million in 1996 dollars for 9.6 (two-way) miles. Converted to year 2000 dollars using VIA’s methodology, the total cost is $1.146 billion, $119.33 million per mile, 320% of VIA’s cost per mile projections.
    3. VIA correctly reports the costs for the Sacramento light rail system, but fails to note that this was built, in part, as a “single track” system, which means that trains in opposing directions can only pass each other at special sidings. Because of the extreme cost-savings in this system, transit operations in Sacramento have been limited and millions have been spent to overcome the problems caused by the original penny-pinching. Since we understand that VIA does not plan on any single track line in Bexar County, their inclusion of Sacramento’s cost is not appropriate. (Due to a quirk in the National Transit Database reporting of single track rail systems, one mile of track used by trains running in both directions is counted as two directional route miles, which makes Sacramento’s per mile construction costs appear lower.)
    4. In “Cost Per Mile for Contemporary Light Rail Systems,” a companion document to the Financial Assessment Report, VIA shows the Dallas Red and Blue lines with 1999 costs of $634.30 million for 20.0 miles of track. However, the DOT “Annual Report” shows the Red (North Central) Line with a 1999 cost of $517.2 million for 12.5 miles and the Blue (Northeast) Line with costs of $475 million for 11 miles. The actual year 2000 combined cost per mile of $43.77 million is 33% higher than the $32.88 million shown by VIA.
    5. VIA shows total costs of $683.70 million for the Pasadena (California) Blue Line — which has not restarted construction for over two years after the first minor contracts were shut down due to lack of funding. VIA does not mention that this construction cost projection is highly questionable (in order to get the project restarted, the new Construction Authority had to promise to complete it for this limited cost, dropping the budget from $804 million, after this budget was in turn dropped from $998 million). VIA also does not mention that these costs do not include well over $200 million of direct project costs that will be borne by other agencies — the $683.7 million figure does not even include the light rail cars that will be run on this line, which will alone cost over $150 million. Adding a (very low) additional $200 million raises the cost per mile to $64.50 million, 29% higher than VIA’s $49.91 million. (Until recently, the co-interim CEO’s of the Pasadena Blue Line Construction Authority were Larry Miller of Gannett-Fleming and John Dyer, who have been assisting VIA with its light rail plans.)
    6. VIA has carefully chosen lines for “Cost Per Mile” to include primarily lower cost lines, including many that have not been completed, or even started, so their actual final cost cannot be determined. Almost all high cost light rail lines that have been completed are excluded, as are all high cost lines now in process. VIA includes the early San Diego lines, which had the lowest cost of any U.S. post-WWII light rail lines, but does not disclose the many unique factors that made this project so inexpensive, and which can never be duplicated elsewhere. San Diego’s more recent light rail extension cost in the $40 million per mile range for lines that are primarily in cheaper-to-build suburbs. VIA does not disclose that the costs of the first Saint Louis light rail line do not include the costs of a bridge over the Mississippi River that was “donated” to the project as most of area’s “local match” of Federal funds, or that Saint Louis was able to utilize a pre-existing rail tunnel under the Saint Louis Central Business District and an existing rail right-of-way. VIA also includes two Saint Louis extensions, but does not disclose that these projects have not even begun construction and will be built primarily in very low cost suburban and even rural areas. Perhaps most significantly, VIA does not include in its list of light rail lines the Long Beach to Los Angeles Blue Line ($58.19 million per mile in year 2000 dollars) or Green Line ($44.27 million per mile, not including many costs saved by placing it in the middle of a major freeway that was constructed at the same time) or Buffalo’s light rail system ($143.0 million per mile).

Correcting VIA’s obvious factual errors and adding in some completed rail lines to VIA’s lists of the lowest cost rail lines ever completed — or proposed — produces a capital cost per mile of $36.5 million per mile. At this unit cost, VIA’s light rail capital costs would be approximately $525 million higher than VIA has projected. The $36.5 million cost per mile is almost undoubtedly far too low, particularly in light of the current average for all light rail systems in the Federal planning process of almost $70 million per mile.

    1. VIA has underestimated the costs of Light Rail Cars by $155 million.


    1. In Figure 3, “Estimated Per Mile Costs In current Dollars of the LRT System,” (line 12) is, “Vehicles (@ 64 for System)” at $1.30 million, Composite Per Mile Cost of LRT. For the 53.47 miles of light rail in the entire proposed system (Figures 6 and 8), the total cost of light rail vehicles will be $69.51 million — which, divided by 64 vehicles, produces an average cost per vehicle of $1.086 million. However, the actual (year 2000) cost per vehicle will be over three times this amount. At $3.5 million per rail car — probably far less than what VIA will actually have to pay for the very small order quantities specified in the plan — the actual cost of rail cars will be $224 million — almost $155 million higher than what VIA has projected.
    2. Worse, VIA is unlikely to be able to operate the level of service it has stipulated in its rosy public statements. Assuming an average operating speed of 18.0 mph — Portland’s light rail system averaged under 15.0 mph in 1998 — VIA would require approximately 101 light rail cars to operate a consistent ten minute peak headway on all three lines with two-car trains (as per the statement in “Fact Sheet — VIA Metropolitan Transit — Transit 2025 — Advanced Transportation Plan,” “Light Rail vehicles arrive frequently, up to every 10 minutes during peak hour service”). With 64 vehicles, the shortest possible headway with two-car trains will be approximately 16 minutes. If VIA buys 101 vehicles, the additional cost will be $130 million for the 37 unanticipated vehicles. (In order to operate ten-minute peak headways with two car trains on all three lines with 64 vehicles, VIA’s trains would have to average almost exactly 30 mph, which is about double the speed that light-rail lines with high percentages of street running are capable of.)
    3. If VIA has to increase the size of the fleet to operate the promised level of service, operating costs will increase substantially, as much as 50% (see following item).
    4. At peak, the most heavily utilized light rail lines operate with two- or three-car trains on five minute headways. It is possible that VIA is planning on operating some or all of the rail lines with single-car trains and/or at headways longer than fifteen minutes. While this may make the 64 car order “workable,” this very low level of service makes it questionable why light rail, with its extremely high capital costs, would be considered for these routes, where there is not the ridership demand to justify it.
  1. VIA has also significantly underestimated light rail operating cost — by almost half. In Section 6.3 Bus and Rail Operating Costs, VIA projects annual operating costs of $696,000 per bi-directional vehicle track mile, claiming that this figure is based on the operating costs of four light rail systems in Texas, Colorado, Oregon, and California. Since there is only one light rail system now operating in each of the first three states — Dallas, Denver, and Portland, respectively — it is not difficult to identify three of the four. If we assume that the fourth light rail operator is Sacramento, the lowest cost operator of the five systems in California, the average of the 1998 costs per track mile for the four cities, inflated to year 2000 cost levels using VIA’s methodology, is $1,335,690 — almost $640,000 higher than VIA’s value. If this value is applied to miles of track that VIA proposed to have in service in its “pay-as-you-go” plan, the extra operating costs will be $497 million higher in current year dollars, or $332 million higher in constant year 2000 dollars. Under the “accelerated” implementation plan, the comparable additional costs would be $584 and $386 million higher, respectively.

    (While it is not possible for us to determine exactly how VIA came up with it’s $696,000 figure — which is only 45% of the national average of $1.540 million — it is interesting to note that VIA’s value is only half the average cost of the four light rail systems that appear to be specified by VIA’s procedure. The National Transit Database expresses light rail miles in “directional” miles, not the “bi-directional” miles that are commonly utilized for most calculations. It is interesting to speculate if the person who did the calculation of the $696,000 figure was not aware of how this data is reported, particularly since there are similar unusual uses of this data elsewhere in this report.)

    1. The Financial Assessment Report is filled with many other questionable assumptions, doubtful projections, and outright errors. To mention just a few:


    1. VIA is projecting that light rail — with “64” cars and 45 stations — will generate $1,252,000 in advertising revenues per year, compared to $560,000 per year for the entire bus system with approximately 500 full-sized buses. What the authors are evidently unaware of is that transit advertising revenues are driven primarily by “impressions” — the number of people who see ads, and the societal demographics. The far larger number of buses, with a far more extensive route system, offers many times the impressions of a light rail system. Unless VIA is planning on erecting billboard-sized ads in its stations, or otherwise making its rail stations major intrusions to the neighborhoods it serves, station ads can generally be seen only by passengers, and sometimes only passengers boarding and deboarding at the specific stations. Light rail advertising revenues are so minor that many agencies decide not to accept advertising because the minor revenues that can be received are regarded as being of lessor importance than maintaining a high status “image” for the rail systems.
    2. VIA is also projecting major revenues, or at least the possibility of major revenues, for fiber optics rights, real estate joint development, and benefit assessment districts. Evidently, VIA’s consultants from the Pasadena Blue Line have recycled their overstated projections used to “balance” this project’s budget, ignoring recent comparable deals that closed at a fraction of what was projected. For example, the fiber optics revenues of $1.1 to $2.2 million annually for forty miles of track (without an explanation of where the forty mile length was determined) bears a remarkable similar to the $1.8 million annual revenue projection for the 37-miles Pasadena Blue Line and planned future extensions. However, at almost the same time that this projection was being made, the Los Angeles County Metropolitan Transportation Authority (MTA) closed a deal for fiber optic rights on a 22-mile rail right-of-way for a one-time payment of $725,000. Light rail has such low patron drawing power per station that joint development deals are rare, unlike the far higher passenger volumes of heavy rail or commuter rail, which such deals have been struck with some consistency. This has not stopped the Pasadena Blue Line financial plan from including major revenues from station rights, revenues that were several times higher than MTA was realizing from a similar deal at the same time.