NM’s Rail Runner Is “Financially Healthy”?

I’ve heard there is an election somewhere today, but it doesn’t sound all that important. What is important is that the state of New Mexico recently released a report on the “Cost Effectiveness and Operations of the New Mexico Rail Runner Express.” The most positive finding in the report is that, since hardly anyone was riding the train before the pandemic, the loss of ridership during the pandemic had little impact on the rail line’s finances. Taxpayers provided nearly all of the line’s financial support before the pandemic, and they continue to do so today. The report calls this “financially healthy,” and I suppose it is in the sense that bank robbers are financially healthy until they get caught.

Click image to download an 888-KB pdf of this report.

Such financial health will be small comfort to the state taxpayers who spent some $400 million getting the train running and are on the hook for spending well over $40 million a year operating it. The line carried 1.35 million riders in 2009, the first year it went all the way from Albuquerque to Santa Fe, and ridership declined in almost every year since then. By 2019 it was down 45 percent to 744,000. Operating expenses more than doubled during that time but fare revenues declined until they covered just 7 percent of operating costs.

Of course, riders and fares declined even more after 2019. Though the report brags that ridership has recovered to 74 percent of 2019’s already low levels, fares covering just 2 percent of operating costs in 2022 and 2023. The agency is “financially healthy” because the difference between 2 percent and 7 percent is so small.

Despite the title of this report (which is an update from a similarly titled report from 2019), neither the report itself nor its 2019 predecessor said anything about cost effectiveness. A project or program is cost effective if its cost is lower per unit of output or its output higher per unit cost than any alternatives. That’s clearly not true in this case: a rail line that covers only 7 percent of its operating costs (and none of its capital costs) because most people are driving is clearly not cost effective.

Before the train began running, a state-supported bus between Albuquerque and Santa Fe cost passengers $3 and took 60 minutes to make the trip. The train tripled the fare and increased the time to 100 minutes at subsidies that were far greater than those for the bus. If some form of mass transportation is needed in this corridor, buses are far more cost effective.

The line can’t even claim that it produces environmental benefits, as the report admits that the trains generate more carbon dioxide than the few automobiles they take off the road. Buses would not only be more cost-effective, they are also more environmentally friendly as half-full buses would generate far less CO2 per passenger-mile than the trains. The report estimates that the train could be carbon neutral, generating no more than automobiles, only if could increase its ridership by 23 percent, but it isn’t optimistic that this will happen so long as fuel prices remain relatively low.

In short, this rail line is a complete failure and the most cost-effective thing the state can do is to shut it down. Since New Mexico didn’t accept any federal money to get the line started, it won’t have to worry about repaying that money (which the federal government insists upon if agencies shut down federally funded transit projects before they are fully amortized).

The excuse for not immediately cancelling the train is that the state is still paying off the debt it incurred to start it up, and politicians never want to admit a mistake before they have finished using taxpayer dollars to pay for something. But they should, because cancelling it today would save taxpayers more than $250 million between now and 2030, when the last payment will be made on the debt.

Unfortunately, the authors of this report weren’t brave enough to say this. Instead, they offered inane recommendations that the transit district running the train develop “performance measures,” including operating cost per hour, passenger trips per hour, and pounds of CO2 emitted per rider. These numbers can easily be calculated from the National Transit Database, yet the fact that this recommendation is being made suggests that the agency hasn’t bothered to do so. The real problem is that just having a performance measure doesn’t offer a way to improve performance when the project doing the performing is a turkey in the first place.