Yesterday, Sound Transit’s University Link extension finally opened to much fanfare. And deservedly so. Sound Transit projects that the extension will serve between 71,000 and 78,000 riders per day by 2030. At a 1.9 billion total cost, the project’s cost per daily rider is between $24,000 to $27,000 or roughly speaking $25,000.
Now quick question: is $25,000 per rider for a subway project too much, a bargain or a fair cost?
The answer to this question is not obvious and the overwhelming majority of Americans, including and even many ardent transit supporters, would probably not have a sound argument about the cost-effectiveness of the project. Most arguments on public transit talk in general platitudes about the importance of regional transit, growth, the environment, and world class cities or, on the other side argument, general platitudes about how transit won’t work here or transit should pay for itself.
This is a problem and the reason it’s a problem is that the actual benefits of public transit are within an order of magnitude of the costs. A project may be worth twice its cost or even maybe four times its cost, but it’s impossible to find a project worth ten times its cost, at least in a developed country. This means that if $25,000 is a fair (per rider) price for a project we should wonder whether an $100,000 project is a fair (per rider) cost for a project and be extremely skeptical of projects whose costs per rider are in the range of $250,000.
So how valuable is a $25,000 per rider subway extension? The simplest way to answer this question is to assume constant ridership over 50 years with a 2% discount rate and then determine the value per ride that makes the project worth it’s cost. For my calculations I estimated 73,000 riders and a 1.9 billion dollar cost. At those figures U-Link breaks even if we value a ride on U-Link today at $2.20. More realistically we would need to value each ride at at least $2.40 for the project to be worthwhile as break-even is generally not worth government investment.
This type of analysis represents a useful starting point for reasoned conversation about costs and benefits. If instead of $2.40 per ride the calculations suggested that the minimum benefit necessary to justify the project was five times higher at $12 per ride, the conversation would be much different. At almost five times the current fare, $12 per ride is a lot of money to spend for each rider. But $2.40 per rider is well within a realm of reason and compares favorably to current U.S. public transportation spending. U.S. transit agencies’ farebox recovery is typically around 30% (King County Metro is 29.1%) meaning that if the fare is $2.50 then $5.83 is being spent to subsidize that trip. Now this is comparing operating costs to capital costs and comparing what is often lifeline transit service with premium transit service, but overall $2.40 is a reasonable subsidy per ride compared to existing public spending, while $12 should require serious justification.
Now this dollar per ride analysis is at best a proxy for the actual benefit of the investment. For starters, different ridership estimates may project different numbers of years into the future or use different nominal dollars and so the comparison is not always apples to apples. It also ignores systematic benefits. Many riders using Lynnwood Link will take advantage of the new tunnel between downtown and Husky stadium even if they don’t get off at one of the two stations. For this reason, core segments are more valuable than their ridership numbers would suggest.
But the more fundamental problem is that a particular ridership projection likely ignores some of the long-term growth potential around the station. Areas that have the opportunity for long range major development over 20 or 30 years should score higher than 10 year ridership estimates would suggest. Inversely, areas with minimal growth opportunities should score lower than 10 year ridership estimates would suggest. Nonetheless, cost per rider should serve as the jumping off point when discussing the merits of various high capacity transit investments.
Sound Transit is currently planning it’s ST3 ballot measure for November 2016. So with that in mind below is a table below showing the cost effectiveness of some potential Sound Transit 3 projects as well as Sound Transit 2 projects that are in the planning or construction phase.