Saturday, May 30, 2009

The Idiocy of the Glassboro to Camden Rail Line

I remember as a graduate student, I took a class in Economics of the Public Sector. I had a hypothesis that rail lines were a good thing for government to be subsidizing. However, when I did a study of rail lines, I was very quick to learn that the rail subsidies are staggering and that, it would probably be better to get rid of those lines and switch to bus transportation.

A current example of a rail lines that doesn't serve the public well is the River Line. (An even more drastic example is the Philadelphia to Atlantic City Rail Line). The River Line runs from Camden to Trenton. The River Line attracted about 9,000 passengers a day (probably closer to 4,500 passengers when you consider round trips) in 2008. The operating subsidy for the River Line was $22,500,000 because the ridership generates very little revenue. Thus, the operating subsidy, which doesn't include the cost of building the line is about $5,000 for each round-trip passenger per year.

Then we add the capital subsidy. The line cost $600,000,000 to build. If we depreciate this over 25 years, our depreciation cost is $24,000,000 per year, which comes to another $5,000 or so per passenger per year. Then we add the interest cost of $600,000,000 at 4% or whatever the state's long-term borrowing rate is. That is another $5,000 per passenger per year. That amounts to a subsidy of about $15,000 per passenger per year.

And Corzine wants to build a Glassboro to Camden Rail Line which may even be more idiotic. Projects like the River Line are among the reasons that the state is in such fiscal trouble. We don't need any more of them.