Category: RailRunner

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Economy RailRunner Spaceport Tax and Budget Transportation

The Spaceport and RailRunner: When Do We Stop Digging?

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How long do you keep spending money on something before you quit and cut your losses? New Mexico’s Legislature will soon face some difficult decisions as to how much taxpayer money to spend on two high profile, Richardson-era projects, the Rail Runner and the Spaceport.

Let’s start with the RailRunner. The train already costs taxpayers nearly $50 million a year in payments on the initial infrastructure and operations. That doesn’t include two balloon payments of $230 million (made in addition to operations costs) which will come due next decade.

Now, due to a new federal regulation, New Mexico taxpayer could be on the hook for another $30 million to implement a federally-required safety system for the Rail Runner. It is worth pointing out that the federal regulation behind this requirement is a huge waste. Even Cass Sunstein who was President Obama’s administrator of the Office of Information and Regulatory Affairs has stated during testimony in the US House that the new “Positive Train Control” regulation produced benefits that are lower than its costs.”

The fact that this regulation is an absurd waste of money is of little consolation to New Mexico taxpayers who will nonetheless be forced to pay this $30 million in addition to the ongoing costs for infrastructure and operations.

A second project that just keeps getting pricier is New Mexico’s Spaceport. Taxpayers initially spent $210 million to construct the facility in hopes of bringing a new, private space industry to the state. Unfortunately, the launch schedule of the facility’s main tenant, Virgin Galactic, has repeatedly been delayed. These delays along with costly additions to the facility have led to a nearly abject lack of positive economic activity generated by the facility and have instead caused the Spaceport to suck up even greater amounts of taxpayer money above-and-beyond the original cost.

In 2012, taxpayers spent an unexpected $7 million to extend a runway at the Spaceport that was allegedly too short for spacecraft to launch. Now, as delays continue and Virgin Galactic continues to push back expected launch dates, the Spaceport will be requesting another $6.8 million to pave the road to the facility from the South. The 23-mile road is currently an unimproved dirt road maintained by Doña Ana County. The northern road, which connects to the Spaceport via Truth or Consequences, is paved.

Lastly, in terms of the Spaceport, taxpayers are on the hook for yet another $5 to $6 million required for management and operations for each year that Virgin Galactic delays commercial flights from the southern New Mexico spaceport.

Obviously, as New Mexico’s economy continues to struggle and tax revenue growth remains slow, the Legislature faces some difficult decisions on these two projects. Are there any limits as to how much taxpayers should be expected to pay to support these facilities before we decide to abandon them or take drastic steps to cut costs? If so, when is enough, enough?

What priorities are we giving up in order to attract a manned, private space industry that has yet to take flight and a train that can never come close to breaking even at a total cost of over $1 billion (before accounting for this new federal regulation)?

While it is easy to dismiss the additional money as just another cost of these publicly-beneficial projects, from a budgetary perspective, a dollar spent on spaceports and trains is a dollar diverted from schools, tax reform, and other economic development priories.

Regardless of how the Legislature decides to move forward regarding these two projects, I hope that policymakers in Santa Fe understand realize that the embracing the basics of government is tough enough.

The painful lessons here are that hitching one’s star to “the next big thing” or spending massive amounts of taxpayer money in an effort to change transportation patterns may prove a costly gamble.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

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Economy Public Comments and Testimony RailRunner Tax and Budget

Paul Gessing’s Testimony on Free Market Criminal Justice Reforms

Testimony Before Courts, Corrections, and Justice Interim Committee
Friday, August 23rd, 9am, Room 322

Rep. Gail Chasey, Co-Chair
Sen. Richard C. Martinez, Co-Chair

Introduction

Good morning Madame and Mr. Co-Chair, members of the Committee. My name is Paul Gessing, I’m President of the Rio Grande Foundation, New Mexico’s free market public research institute or think tank. We’re based in Albuquerque, NM. Thank you for inviting me to participate in this hearing.

I’ll be the first to admit that I am not an expert on criminal justice issues. That said, criminal justice issues are by definition economic issues. New Mexico’s economic policies are the bread and butter issues of my organization. Criminal justice policies impact the economy in three major ways:

1. Direct spending on the criminal justice system including everything from police to prisons;

2. Foregone revenues including everything from potential taxes paid (or not paid) by those who are incarcerated or unable to find work due to their criminal records to the economic potential to tax drugs like marijuana;

3. Lost economic growth due to crime/inadequate public safety.

While I don’t consider myself an expert on criminal justice issues, I am one of the original signatories of the Right on Crime statement of principles. This statement has now received support from 54 conservative leaders across the nation.

The basic premise is that the traditional “lock em up” mentality that has historically dominated conservative thinking on crime is too expensive and lacking in effectiveness to continue without a serious re-evaluation of the goals, tactics, and fiscal implications of our criminal justice policies.

Background

To be clear, New Mexico is historically not a state that has followed conservative criminal justice policies. Incarceration rates, for example, are far lower here than they are in most surrounding states. That does not mean that New Mexico policymakers are doing everything right or as cost-effectively as possible, it just means that “lock em up” has not been the criminal justice model in New Mexico as it has been in Texas, for example. That also doesn’t mean that policymakers in our state can’t learn something from what other states are doing on criminal justice issues.

Let’s start with some data. I have provided the Committee with a regional breakdown of the 2012 Peace Index which is put together by an organization called Vision of Humanity. The most notable aspect of this data for New Mexico is the high rates of homicides and violent crime (and relatively low rates of incarceration, lower than any state in the region besides Utah).

The crime problem in New Mexico is not limited to violent crime. According to 2011 data from the FBI’s Uniform Crime Reports, New Mexico has relatively high rates of property crime relative to the rest of the region. Notably, the entire southwest region has relatively high rates of most crimes.

Personally, as a resident of Albuquerque’s West Side, I can attest to the fact that crime can be a blot on life in New Mexico. Having lived for 8.5 years in Washington, DC and its inner-suburbs with no problems, I have witnessed a drive by shooting in my neighborhood and our car has been broken into as well. One of my former employees, Paige McKenzie was beaten within an inch of her life on the side of a road in Bernalillo.

My family and I love New Mexico and can’t see moving, but more timid souls might have simply left. This is lost talent and lost economic activity for our businesses and our economy. Worse, those people tell their friends and put their message on social media. Word spreads.

But I’m not here to say we need to spend more money on criminal justice or even that hiring more police is the answer. Rather, I think we need to re-deploy resources to improve our justice system in ways that keep violent offenders behind bars, rehabilitate those who can be rehabilitated, keep those who are not real threats in the workforce and involved with their families, and reduce contact with the criminal justice system among those who have no need to be involved in it at all.

There are some specific ways to reduce crime and/or reduce the costs of criminal justice at the same time. These have been outlined in Rio Grande Foundation policy papers including the 2009 “Criminal Justice Policy in New Mexico: Keys to Controlling Costs and Protecting Public Safety” and an opinion piece “Reforms can cut costs, improve public safety.”

1. Drug Courts: New Mexico has 853 inmates incarcerated for drug possession.

Drug courts are a proven alternative to incarceration for low level drug offenders. Drug courts offer intensive judicial oversight of offenders combined with mandatory drug testing and escalating sanctions for failure to comply. According to the National Association of Drug Court Professionals, the average recidivism rate for those who complete drug court is between 4 percent and 29 percent, in contrast to 48 percent for those who do not participate in a drug court program. Similarly, the General Accounting Office reported recidivism reductions of 10 to 30 percentage points below the comparison group.

A 2006 California study found drug courts cost less than $3,000 per participant, far cheaper than prison.12 New Mexico has 35 drug courts in 25 of 33 counties, which have processed 9,500 offenders since 1994. The recidivism rate of New Mexico drug courts is 11.9 percent. A New Mexico Sentencing Commission study of the Bernalillo County Metropolitan DWI Drug Court found graduates were one-third as likely to recidivate as comparable offenders who did not participate in the drug court.13 As recommended in the June 2008 report by Governor Bill Richardson’s Task Force on Prison Reform, New Mexico can benefit further from the expansion of drug courts.

If we assume that half of these drug possession offenders should not be eligible for diversion from prison because they had large quantities of drugs that are associated with dealing or have too many prior offenses, New Mexico could still save $13.2 million based on the state’s $31,000 annual per-prisoner cost of incarceration.

2. Another source of potentially significant savings lies in diverting from prison probationers and parolees who are revoked for technical violations of their supervision, not new offenses. In 2008, there were 413 such revocations to prison. Instead, New Mexico could use a graduated sanctions matrix that relies more on intermediate sanctions such as curfews, electronic monitoring, supervised work crews, and short periods of incarceration in county jails. If this diverted just half of this pool of offenders, it would save $6.4 million.

3. Law Enforcement Assisted Diversion (LEAD), otherwise known as pre-booking diversion:

Law Enforcement Assisted Diversion identifies low-level drug offenders for whom probable cause exists for an arrest and redirects them from jail and prosecution by immediately providing linkages to treatment and social supports including harm reduction and intensive case management. By diverting eligible individuals to services, LEAD is committed to improving public safety and public order, and reducing the criminal behavior of people who participate in the program.

4. Research has proven that treatment is effective. In Arizona which also implemented this policy more than a decade ago, a study by the Arizona Supreme Court found that 77 percent of drug offenders got clean as a result of the treatment. The national Drug Abuse Treatment Outcome Survey of 10,000 participants found that residential treatment resulted in a 50 percent reduction in drug use and 61 percent reduction in crime while outpatient treatment resulted in a 50 percent reduction in drug use and 37 percent reduction in crime. Dr. Nora Volkow, Director of the National Institute on Drug Abuse (NIDA), stated, “Research findings show unequivocally that drug treatment works and that this is true even for individuals who enter treatment under legal mandate.”

Performance-Based Probation Funding: In December 2008, Arizona implemented performance-based probation funding. Under this incentive-based approach which has not been adopted in New Mexico, probation departments receive a share of the state’s savings from less incarceration when they reduce their revocations to prison without increasing probationers’ convictions for new offenses. The probation departments are required to reinvest the additional funds in victim services, substance abuse treatment, and strategies to improve community supervision and reduce recidivism.

Unlike Arizona, New Mexico has one unified, statewide probation and parole department. The Pew Center on the States Public Safety Performance Project recommends that a performance based probation funding system appropriate 30 percent of savings from a reduced revocation rate to the department and an additional 5 percent if the department demonstrates improvement in employment, drug test results, and victim restitution collection. Although results of Arizona’s measure are not yet available, Ohio adopted a somewhat similar funding policy called RECLAIM

(Reasoned and Equitable Community and Local Alternative to Incarceration of Minors) that gives money to counties that treat juveniles who would otherwise be incarcerated and deducts funds for low-risk juveniles who are sent to state facilities. The policy has been highly successful, as the recidivism rate for moderate risk youth placed through RECLAIM was 22 percent, compared with a
54 percent rate for such offenders in state lockups.

5. New Mexico can also join 36 other states by implementing a policy to release geriatric inmates who are no longer a danger to the public. Such inmates are even more expensive to incarcerate due to health care costs.

Based on Oklahoma’s experience, 17 infirm New Mexico inmates could be released every year on geriatric parole with savings of $844,594, which assumes a higher $50,000 incarceration cost per year that is supported by research on geriatric inmate medical costs. Geriatric inmates have a recidivism rate of less than five percent and not a single participant in Oklahoma’s model program has committed a new offense.

6. Finally, more halfway houses would provide an alternative for the 130 inmates who have been paroled but \await release because they lack housing. A halfway house costs only $25 a day, while prison is $85 a day. Assuming 120 days of time at a halfway house instead of prison, this policy would save $936,000.

7. Some other reforms would provide long-term benefits by making it more likely that ex-offenders will become productive members of society rather than career criminals going through prison’s revolving door. Currently, 41 percent of New Mexico probationers and parolees are employed. Employed ex-offenders are three times less likely to re-offend. One barrier to employment is that New Mexico employers have been held liable for negligent hiring of employees with questionable backgrounds.

The Urban Institute noted, “The high probability of losing coupled with the magnitude of settlement awards suggest that fear of litigation may substantially deter employers from hiring applicants with criminal history records.” That fear is not without basis. Employers lose 72 percent of negligent hiring cases with an average settlement of more than $1.6 million. New Mexico can address this by immunizing employers from such suits – suits should be permitted for failure to supervise but not merely for hiring an ex-offender.

8. Barriers for Nonviolent Ex-Offenders to Obtain Occupational Licenses: Under the New Mexico Criminal Offender Employment Act, even convictions not directly related to the occupation are grounds for ineligibility. One solution is to allow ex-offenders to obtain provisional licenses that are valid for a shorter period of time and subject to immediate revocation if they commit a new offense, violate a term of probation or parole, or violate a rule of the occupation. Such provisional licenses provide a positive incentive for success while still holding the ex offender accountable.

Texas lawmakers enacted House Bill 963 in 2009 authorizing provisional licenses. The legislation specifies that a provisional license becomes a permanent license after six months if the license holder is in full compliance.

The Rio Grande Foundation has done considerable work on the issue of occupational licenses. While we’d love to see a reduction in their number, scope, and expense, the very least we can do from a criminal justice standpoint is to not throw up additional barriers in front of ex-offenders.

9. Use of Private Facilities. The recent decline in New Mexico’s prison population coupled with the potential of many the proposals outlined here for controlling the demand for prison beds should render the current capacity adequate. However, to the extent new capacity is needed at some point, expanding an existing private prison would be the most economical solution. Private prisons are proven to be less costly to operate.

A Rio Grande Foundation study examined per-prisoner department of corrections budgets across 46 states and found that states with at least 5 percent of their prison population in private prisons spent about $4,804 less per prisoner in 2001 than states without any private prisons.

The study further found that cost savings increase along with the percentage of inmates in private facilities. For example, New Mexico was calculated to save more than $50 million as a result of having 45 percent of its inmates in private prisons. Similarly, a December 2007 study by Vanderbilt University researchers found that states with a higher percentage of inmates in private facilities had lower public prison costs per inmate, suggesting that competition drives efficiencies in state-run prisons.

10. On this point, I want to clarify that the views here are my own and those of the Rio Grande Foundation, not Right on Crime. According to Harvard Economist Jeffrey Miron who visited New Mexico earlier this year, completely legalizing and taxing marijuana would result in total savings/revenue increase of $52 million annually. $33 million of that would come from reduced expenditures. Were New Mexico to tax marijuana at a reasonable rate that maximized profits, it would collect approximately $19 million annually. In essence, we could pay the total operating and infrastructure costs of the RailRunner and have a few million left over for those balloon payments coming down the road.

Barring such an aggressive approach, it is certainly worth considering HB 465 as introduced by Rep. Kane and passed the House during the 2013 legislative session. The Fiscal Impact Report for the bill was inconclusive in terms of cost-savings, but they would seem to be significant.

Conclusion

I have laid out for you 10 points on criminal justice issues that could be considered by those of all political stripes when dealing with criminal justice issues.

Each of these proposals, if adopted, would:

• Reduce direct spending on the criminal justice system including everything from police to prisons;

• Increase potential taxes paid into the system;

• Reduce lost economic growth due to serious crime issues/inadequate public safety.

I hope you’ll carefully consider these ideas and consider them in a bi-partisan manner.

Categories
RailRunner Tax and Budget Transportation

Put Rail Runner Out of Its Misery Sooner, Not Later

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Originally marketed at a price of $122 million and as possibly being “high-speed,” the Rail Runner shuttles (mostly) tourists and government employees from downtown Albuquerque to Santa Fe and from Albuquerque south to the bedroom community of Belen.

Only recently have New Mexico taxpayers been made aware of the full scale of spending that this project entails. The issue has exploded onto the pages of the Albuquerque Journal and other papers. According to newspaper reports, the train will cost a total of $1.3 billion over the next 20 years.

Regardless of whether you think the Rail Runner is worth the money or not, there is no doubt that the process that created the train is rotten to the core.

Rather than paying the train off in equal annual payments over 30 years as a family would do with a mortgage, Gov. Richardson set up the train’s financing so that he got the credit, but future generations would pay the bills. Future taxpayers are on the hook for two lump sum payments of $230 million per year in 2025 and 2027. These $460 million payments do not include replacement costs for the train sets and track which, according to transportation expert Randal O’Toole, must be replaced at something approximating their original cost every 30 years.

Such shady financing schemes must be prohibited from happening in the future. If a particular project is desired, payments on that project should be spread out evenly over the life of the project, not designed so that current generations reap the benefits while future generations are stuck with the bills.

While it would be painful to do so, the best possible decision at this point is to shut the train down right away. We can’t throw good money after bad forever and, if we shut the train down right away, taxpayers will save $453 million over the next 25 years.

In addition to the system’s shady and costly finances, there are several other reasons to shut the train down sooner than later.

Buses would be more flexible and faster: A system of buses running between various parts of Albuquerque and Santa Fe would be able to transport people at a fraction of the cost and much less time than it takes the Rail Runner to take people from a fixed downtown location to Santa Fe. The train takes 90 minutes to make this trip while a bus could make the trip in 60 minutes. This disparity doesn’t even consider time needed to drive to the train station and wait for the train.

The Rail Runner isn’t really “green”: Amtrak trains (the best available analog available for the Rail Runner when it comes to energy usage) uses 2,700 BTUs per passenger mile, while automobiles currently use about 3,300. That is a slight advantage for rail, but by 2035 (due to federal requirements), the train will still be using 2,700 BTUs, but cars will be using approximately 2,500 BTUs per passenger mile. Amtrak trains – the best comparison available – emit approximately the same level of CO2 gas as automobiles do today.

The Rail Runner has not and will not do anything to reduce traffic on I-25. That’s because daily traffic volume on I-25 (both immediately north and south of town) is so massive as to dwarf the impact of the Rail Runner’s ridership. More than 80,000 cars travel daily on I-25 just north and just south of Albuquerque, while the train’s daily total ridership of 3,397 for the entire system is essentially a rounding error.

New Mexico’s economy is still in the doldrums. Only oil and gas are holding steady. Rather than letting the Rail Runner suck up more money and resources, it’s time to throw on the brakes and stop the wasteful spending.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Categories
RailRunner Tax and Budget Transportation

New Rio Grande Foundation Study: Time to Stop the Rail Runner in its Tracks

(Albuquerque) The Rio Grande Foundation has long been critical of the Rail Runner and its finances. A new report from the Foundation outlines the top “Ten Reasons to Shut the Rail Runner Down Now.” The report is available here.

Originally marketed at a price of $122 million and as possibly being “high-speed,” the Rail Runner shuttles (mostly) tourists and government employees from downtown Albuquerque to Santa Fe and from Albuquerque south to the bedroom community of Belen.

Regardless of whether you think the Rail Runner is worth the money or not, there is no doubt that the process that created the train is rotten to the core. For starters, the train has been operational for five years, but only recently have the system’s true finances been explained in any detail.

Most egregious among the revelations is the fact that rather than paying the train off in equal annual payments over 30 years as a family would do with a mortgage, Gov. Richardson managed to set up the train’s financing so that he got the credit, but future governors and legislators would have to pay the bills. New Mexico taxpayers are on the hook for two lump sum payments of $230 million per year in 2025 and 2027.

According to newspaper reports, the train will cost a total of $1.3 billion over the next 20 years. This does not include the replacement cost of the train sets and track which transportation expert Randal O’Toole estimates must be done at approximately their original cost every 30 years.

If the train is shut down, taxpayers will save at least $18.12 million in annual taxpayer-financed operating costs beginning with the system’s shutdown. This would add up to $453 million over the next 25 years if the train is shut down right away. The train’s total per-passenger subsidies come to $50 per-passenger, enough to purchase a car (costing more than $18,000) for each passenger annually.

Said Rio Grande Foundation president Paul Gessing, “As painful as it might be in terms of prestige, the Rail Runner is not an integral part of New Mexico’s transportation system and is simply an unaffordable luxury. It is time to shut it down.”

Read the full report and all 10 reasons to shut the train down here.

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Economy Film Subsidies RailRunner

Union Pacific, Film Industry Deals Very Different

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The state of New Mexico and southern New Mexico in particular, face a great opportunity. One of America’s great railroads, Union Pacific, is hoping to build a $400 million railroad hub in Santa Teresa. While there would be a few, relatively minor, tax incentives given to the company, this deal, if it is approved by the Legislature, would be a huge economic boon for the state.

Why is that? First and foremost, no taxpayer funds would actually be spent on this project. The tax on locomotive fuel would be eliminated, but millions of tax dollars would flow into state and local coffers annually with Santa Teresa becoming an important hub of economic activity. Also, the Union Pacific facility represents a huge investment of private capital in the state. This rail yard would stay in the state for decades (or more) and could even lead to further increases in rail and intermodal transportation activity in southern New Mexico. All of this is good news, not to mention that freight rail is a green industry.

Unfortunately, some of our elected officials, failing to understand the difference between spending and taxes left uncollected have conflated the Union Pacific issue with that of the film industry’s generous 25 percent subsidy on all activities the industry undertakes in New Mexico. This is not taxes uncollected; rather it is spending to the tune of $70 million annually.

Sen. Michael Sanchez, one of the most powerful Democrats in the state Senate recently questioned Gov. Martinez’s pledge to cut New Mexico’s film subsidy from 25 percent of everything spent in the state to 15 percent, while at the same time eliminating the locomotive fuel tax to help close the Union Pacific deal. Of the Union Pacific deal, Sanchez said, “Isn’t that a subsidy? Isn’t the railroad one of the most subsidized industries in the country?”

I don’t pretend to know all there is to know about the railroad industry and its finances, but this is about New Mexico and what it offers various industries. Viewed from that lens, New Mexico does very little for the freight railroad industry (the RailRunner is another matter entirely) but does a great deal for film.

In my view, no industry has a right to take my hard-earned money directly in the form of taxes. That makes the two issues very different with the Union Pacific arrangement far superior both for taxpayers and New Mexico’s budget.

Further differentiating the deals is the fact that once it is built, Union Pacific is not likely to move its rail hub as it would be prohibitively expensive to do so. The film industry, on the other hand, is already threatening to pick up and move based on the mere threat of a reduced annual subsidy. They can easily do so because the industry can and has quickly moved to states that offer the sweetest deals. Simply put, it is not a sustainable industry in New Mexico.

While the Union Pacific deal will ultimately be a big winner for New Mexico, some purists will question why the state should offer special deductions and deals in the first place. This is indeed a valid point and, ideally, taxes would be low enough that New Mexico would not need to offer special deals to Union Pacific or anyone else. Until then, however, large businesses with the power to do so will continue to negotiate special deals.

Small businesspeople, on the other hand, must bear the burden of New Mexico’s unique gross receipts tax which covers services and business inputs, while also paying income taxes at a top rate of 4.9 percent while Texans pay nothing. This is the reality of tax competition and it is one reason why Texas has continued to create jobs and attract businesses despite tough economic times.

If New Mexico taxpayers are smart, they’ll phase out or abandon welfare payments for movies, provide the limited exemptions necessary to attract Union Pacific, and work to make the state’s tax and regulatory climates more attractive to generate more growth at home.

Paul Gessing is the president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Categories
RailRunner Transportation

Reports of Rail Runner’s success greatly exaggerated

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Gov. Bill Richardson has been touring New Mexico touting the “success” of the taxpayer-financed Rail Runner commuter train. Recently, he has promoted the idea of transforming the train from a regional, commuter rail system operating between Santa Fe and the southern suburbs of Albuquerque to one that bisects the state traveling through Las Cruces on to El Paso and keeps going far beyond Santa Fe all the way to Denver.

Ambitious goals indeed, but they are founded on the assumption on the part of Richardson and other policymakers that the Rail Runner is a “success.” The problem arises in defining what success should look like.

In financial terms, it would be extremely hard to say the train is successful. After all, the infrastructure needed just to set the current 100 mile system up from Belen to Santa Fe cost average taxpayers, whether they use it or not, $400 million. This is a sunk cost that will never be paid back. That’s because the system operates at a significant and growing loss.

As the Rio Grande Foundation points out in a new study, “Red Ink Express,” according to information obtained from the managers of the Rail Runner, from the first date of service in July 2006 through May 31, 2009, the average daily “ridership” on the train was a mere 2,539. That number shrinks even further when its meaning is clarified. The Rail Runner’s “ridership” is calculated based on each individual boarding. That means a roundtrip commuter to Santa Fe from Albuquerque is counted twice, since they get on the train coming and going. The actual average number of daily commuters using the Rail Runner for its three years of operations is just under 1,270.

In addition, its annual operating and maintenance deficit is exploding. The data received from the Rail Runner’s management show that in 2006, the train’s first year of operation the operating deficit was $7.8 million. Its operating deficit last year was $10.8 million. Its operating losses for its third year of operation to May 31, 2009, already exceeded $13.4 million. That is a total of $32 million in operating losses so far.

This means that the taxpayer subsidy per commuter has also been increasing as the Rail Runner produces ever higher operating and maintenance costs far in excess of the fares it charges. The subsidy has grown from $6,128 per commuter in its first year to more than $10,500 this past year.

Taxpayers are effectively paying a select few to ride the rails instead of a taking a bus or driving. At the average daily ridership of 2,539, taxpayers were kicking in $16.89 per ride during the past year.

Considering that the trip from Las Cruces to Belen — the current southern terminus of the Rail Runner — is 191 miles, nearly twice the system’s current length, and that the proposed Raton to Santa Fe leg is an additional 176 miles, such an expansion of train service would cost an additional $1.5 billion just to construct. Since the prospective Rail Runner service areas are far more sparsely populated than the current service area, operating losses would likely exceed $50 million annually. These costs would, of course, be financed by New Mexico taxpayers, whether they ride the train or not.

The fact is that New Mexico faces a $300 million budget shortfall for the coming fiscal year. We could really have used the $400 million that was spent to build the Rail Runner right now, but we are beyond that point. With money scarce and the economy still in bad shape, it would seem that we should do the wise thing when one finds oneself in a hole: stop digging.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Categories
RailRunner Transportation

Red Ink Express: Rising Losses and Low Ridership Show Rail Runner is an Increasingly Bad Deal for Taxpayers

The Rail Runner’s losses are mounting and its relatively low ridership makes it an incredibly inefficient mass transit system. Information obtained by the Rio Grande Foundation through a public records request shows the Rail Runner is proving to be the grossly expensive, low benefit waste of money critics predicted.

According to information obtained from the managers of the Rail Runner, from the first date of service in July 2006 through May 31, 2009, the average daily “ridership” on the train was a mere 2,539. That number shrinks even further when its meaning is clarified. The Rail Runner’s “ridership” is calculated based on each individual boarding. That means a roundtrip commuter to Santa Fe from Albuquerque is counted twice, since they get on the train coming and going. The actual average number of daily commuters using the Rail Runner for its three years of operations is just under 1,270.

The Rail Runner cost $400 million to get rolling. That start-up investment will never be recovered through the fares charged passengers. In addition, its annual operating and maintenance deficit is exploding. The data received from the Rail Runner’s management show that in 2006, the train’s first year of operation the operating deficit was $7.8 million. Its operating deficit last year was $10.8 million. Its operating losses for its third year of operation to May 31, 2009, already exceeded $13.4 million. That is a total of $32 million in operating losses so far.

This means that the taxpayer subsidy per commuter has also been increasing as the Rail Runner produces ever higher operating and maintenance costs far in excess of the fares it charges. The subsidy has grown from $6,128 per commuter in its first year to over $10,500 this past year.

Taxpayers are effectively paying a select few to ride the rails instead of a taking a bus or driving. At the average daily ridership of 2,539, taxpayers were kicking in $16.89 per ride during the past year.

Governor Richardson recently announced that since the Rail Runner added Santa Fe service, its daily ridership has grown to 4,700, which equals 2,350 commuters a day. This is still less than half the number of passengers who daily use Albuquerque’s Rapid Ride Central Avenue buses. It pales in comparison to the number of people moving along the Rio Grande Corridor every day. And, compared to Albuquerque’s overall mass transit system, the Rail Runner looks as expensive and exclusive as the Orient Express.

Over the past twelve months, more than 10 million rides were provided by the city’s buses. And Albuquerque’s entire transit department operating budget (which includes the purchase of buses) is only about a tenth of the $400 million it cost to build the Rail Runner and purchase the engines and cars. And while it carries more than ten times as many passengers as the Rail Runner, the city’s transit department budget is less than three times what taxpayers lose each year in keeping the Rail Runner on the tracks.

Even based on the new, higher ridership numbers, the Rail Runner will underperform and cost far more per passenger than buses. Rail Runner ridership is growing, but its losses are growing, too. The Albuquerque bus system is also experiencing growth in ridership but without the same sort of soaring deficits being suffered at the Rail Runner. The experience of both systems during the coming twelve months will show whether the Rail Runner was as bad a deal for taxpayers as predicted, or an even worse boondoggle than anyone had expected.

Categories
RailRunner Tax and Budget Taxes

The Issue is Higher Taxes, Not The Rail Runner

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If you haven’t traveled between Santa Fe and Albuquerque recently along I-25, you may not be aware that the Rail Runner – Governor Richardson’s commuter rail train from Santa Fe through Albuquerque to Belen – is progressing rapidly. Tracks are being laid in hopes of having the full system in service by January.

Despite the fact that the Rail Runner is clearly on its way to completion, voters in Bernalillo, Sandoval, Valencia, Santa Fe, Los Alamos, Rio Arriba and Taos counties are being asked to approve a one-eight cent increase in the gross receipts tax. If a majority of voters approve the hikes, taxpayers throughout the region will be on the hook for an additional $27 million annually. If passed, this tax hike would push Santa Fe’s gross receipts tax rate to over 8 percent.

Let’s make one thing clear: this vote is not about the Rail Runner. The question that voters in these areas must ask themselves is whether they like paying higher taxes or not. If this tax hike fails, the Rail Runner will still be completed. The trains will run whether voters approve higher taxes or not. Why would voters approve a tax increase simply to give the bureaucrats more money?

If you simply want to pay higher taxes, then by all means vote “yes” on the Rio Central tax hike in November. If you think taxes are high enough already, then vote “no.”

Although the vote is really about higher taxes, not the Rail Runner or new services, it is true that the Rail Runner’s operating costs, which are expected to rise to $20 million, are not expected to eat up all of the money raised by this tax hike. The rest is supposed to be used for expanded mass transit. But, little is known about how this money will actually be used and what specific transit needs must be met. The real issue in this election is the Rail Runner since it is the first time voters will have a chance to vote on the issue.

So, should voters support higher taxes as a symbol of support for the Rail Runner? We already know that the train is costing taxpayers $400 million to construct and $20 million to operate. Clearly, from a profit and loss perspective, the Rail Runner is not justifiable.

Of course, we are constantly told that transit projects like the Rail Runner are not supposed to make a profit. Proponents of mass transit offer no specifics or guidelines on limiting the amount of taxpayer resources that should be expected to divert to transit.

Fortunately, because people still have a choice about how to get from point A to point B, we do have real-world data on the relative effectiveness of transit as compared to other modes of transportation. The fact is that according to the U.S. Department of Transportation, transit’s nationwide market share of all travel fell from 1.5% in 1980 to 1.0% in 2005. Even with recent gas price induced increases in transit usage, the overall market share filled by projects like the Rail Runner is pathetically small.

Lest transit advocates argue that transit’s paltry market share is caused by under-funding, under federal law 20 percent of the federal highway trust fund must be spent on public transit – an amount that is far out of proportion to its market share. Clearly, transit is not suffering from inadequate funding.

Despite the fact that transit receives far more money than its market share would otherwise dictate, New Mexico failed to obtain federal funding for the Rail Runner. That’s because the Rail Runner runs through relatively sparsely populated areas with congestion problems that are trivial compared to areas like New York or Washington, DC. The federal government has allocated to projects in those areas instead.

Even with recent, high gas prices having induced “historic” increases in transit usage the overall market share filled by projects like the Rail Runner is pathetically small. This is not likely to change unless regional population densities increase dramatically.

The public should have been given a chance to vote on this project before it was well on its way to completion, but that is not the case and the Rail Runner is not going away.

Unless you simply like having the state take more of your money, I encourage you to oppose this unnecessary tax hike.

Gary Miller is a Policy Analyst with New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

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RailRunner Tax and Budget

Overspending Puts New Mexico in a Commuter Rail-Induced Budget Crisis

Editor’s note: The following article appeared in the January, 2007 edition of Budget & Tax News which is published by the Heartland Institute www.heartland.org. The publication is distributed to state legislators and policymakers in all 50 states.

When New Mexico legislators return to Santa Fe in early 2008 they will face a transportation crisis, the possibility of tax hikes, and the suspension of certain road construction projects pending adequate funding.

Tax hikes are nothing new in the state, but the current crisis is occurring less than one year after state General Fund spending increased 11 percent.

Fiscal conservatives have warned of a coming budget crisis for some time. Since Gov. Bill Richardson (D) took over from fiscal hawk Gary Johnson (R) in 2003, just as oil and gas prices were on the rise, General Fund spending has increased $1.5 billion, or 37 percent. While cutting taxes, Richardson has used volatile oil and gas revenue to expand state government.

Because oil and gas revenues constitute a greater part of the overall budget in New Mexico than in any state but Alaska and Wyoming, conservatives believed budget problems would be postponed until oil and gas prices dropped. They were wrong.
Train Derails Budget

One big problem, according to budget watchers, is the more than $400 million the state has spent on the Rail Runner commuter train. Richardson made this 100-mile train line from Santa Fe to the southern suburbs of Albuquerque one of his top projects.

Upon signing the contract with Burlington Northern Railroad to begin the project, Richardson said, “We have made considerable progress toward turning the dream of commuter rail into reality.” He added, “Getting people out of their vehicles and onto commuter rail makes sense. It’s also about safety, and putting more money back in the pockets of our citizens.”

State Sen. Kent Cravens (R-Albuquerque), an opponent of the Rail Runner and critic of Richardson’s spending, takes an opposing view.

“The Rail Runner will prove to be the biggest budget-buster New Mexicans have ever faced, mostly done by Bill Richardson without much true representation by legislators on behalf of their constituents,” Cravens said in an interview for this article.

The cost of building the railroad and rising prices for many of the materials used in road construction have caused the state to fall $500 million short of the amount needed for previously approved highway and transportation projects.
Additional Spending Hikes

The cost of the commuter train line, the currently finished portion of which runs 50 miles from the northern suburbs to the southern suburbs of Albuquerque, will soon rise. Currently, the system costs $10 million a year to operate, with $8 million of that coming from the federal government. The latter subsidy will end in 2009.

So just as the second half of the system is built to Santa Fe, operating costs will rise to $20 million a year and the entire cost will be borne by New Mexico taxpayers.

House Minority Leader Tom Taylor (R-Farmington) wrote in the Albuquerque Journal, “We’re now stuck with a $400 million train, growing expenses piling up on other road projects around the state, and no end in sight to the expanding mess that our roads face today. I imagine we can afford to go on as we have been for a couple of years before we hit the proverbial financial wall that will affect virtually every budget in state government, including education and health care.”

Hikes in the gross receipts tax (New Mexico’s sales tax) and gas tax are already on the table in the effort to bridge the transportation budget gap.
Governor Departs

Richardson’s transportation department has clung to the Rail Runner as an integral component of the state’s transportation system. In response to critics, S.U. Mahesh, a spokesman for the department, told the Albuquerque Journal, “These individuals (Rail Runner critics) are out of touch with reality. It’s time for these legislators to move away from the horse-and-buggy mentality and embrace the ideals of moving New Mexico forward.”

Cravens responded with harsh words of his own for Richardson.

“It’s easy to pay bills on a credit card when you’re not going to be around when the bill comes in,” Cravens said. “Lame duck Governor Bill Richardson has mortgaged the future of New Mexico and is off to satisfy some other personal whim. The idea that he is prepared to be President of the United States is laughable.”

Categories
RailRunner Tax and Budget Transportation

Richardson’s Santa Fe Line

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Bill Richardson has done a lot of things since becoming governor more than four years ago, including cut taxes. But what he hasn’t done is earn his stripes as a “fiscal conservative.”

That may surprise those who follow the Democrat’s presidential campaign. But there is more to Mr. Richardson’s fiscal record than tax cuts. He’s also a profligate spender who is laying groundwork that will make it harder to keep taxes in check and the budget in balance in the coming years. Mr. Richardson isn’t a spending hawk. He’s more like a roadrunner — New Mexico’s state bird — darting across the landscape, trying to stay ahead of the anvil that is inevitably coming.

Consider the state’s general fund, that portion of the budget over which the governor and the legislature have the most control. This year it hit $5.6 billion, up $1.5 billion since Mr. Richardson took office in 2003. The governor asked for and received an 11% increase in spending this year, the biggest jump in memory, outstripping inflation and population growth in the state.

And where is this money going? One of Mr. Richardson’s priorities has been the State Children’s Health Insurance Program (Schip), which is run under federal guidelines but administered and partly funded by the state. Bill Clinton launched Schip a decade ago, and it has been used by Democrats to expand federally controlled health care ever since.

This year Mr. Richardson wanted Schip to cover children of parents who make up to 300% of the federal poverty line (up from about 200%). That was too much for the legislature. But Mr. Richardson did succeed at getting the children’s program to cover more adults. Previously, only the state’s poorest adult residents were eligible. Now adults earning two times the federal poverty rate can receive health benefits through the program. His record of expanding government-run health care on the state level is a pretty good indicator of what he would do as president.

Mr. Richardson also likes trains. One of his pet projects is the Rail Runner, a commuter train that connects the northern and southern suburbs of Albuquerque and has been beset with financial problems, although its full length has yet to be completed. An anticipated $75 million in federal financing for the project has fallen through, so state residents will have to foot the entire bill.

To complete the project, 20 miles of track will need to be run through the desert to Santa Fe at a total cost of about $400 million (not a small sum in this state). This for a train that will take an hour and 20 minutes to complete a trip that takes just one hour by car.

Usually, commuter rail is built to take automobiles off of the roads during rush hour. But Santa Fe is a city with just 70,000 residents, and some people wonder: How many cars can this train really replace? While there are isolated pockets of congestion, the problem in New Mexico isn’t too many cars but too few overpasses and too many stoplights.

Mr. Richardson’s secretary of transportation, Rhonda Faught, admits that the Rail Runner will need as much as $10 million a year in ongoing subsidies. Meanwhile, ridership lags behind other commuter rail systems. The Rail Runner averages about 2,000 riders a day. The Virginia Railway Express, which ferries commuters in the suburbs of Washington and which cost much less to build due to the use of existing track, has about 14,000 riders a day.

That puts the governor in a tough spot. He now needs funding from the Democratically controlled legislature for a project that residents are already showing that they’re reluctant to climb aboard. But pushing the project may not be a bad political decision on Mr. Richardson’s part. A few years ago, he took a political pounding when it was revealed that he was chauffeured about the state in gas-guzzling automobiles. He now sports around the state in an alternative-fuel SUV, something environmentalists and corn farmers in Iowa love. Commuter rail is his eco-friendly SUV on a grander scale.

Mr. Richardson won re-election last year in a landslide. And he’s been able to get away with his spending spree while cutting income tax rates for top earners to 4.9% and capital gains tax rates to 2.45% (both down from 8.2%). In large part he’s managed this feat because the state is awash in energy tax revenue, partly because he’s raised gasoline taxes, but mostly because New Mexico is an energy-producing state. It’s a funny phenomenon, but one that all oil- and gas-rich states experience. When prices at the gas pump squeeze drivers, the state brings in tax revenue by the truckload.

This year the state took in $1.23 billion in oil and natural-gas tax revenue. That’s up dramatically from four years ago when the state took in some $552 million. But if energy prices fall so too will tax revenue, and the party is over. Indeed, even in a booming economy, the state treasury could find itself coming up short — not good for a politician concerned with an image for fiscal conservatism.

But Mr. Richardson hopes soon to be on to something else. He’s actually been on the move for well more than a decade. In 1997 he left Congress to become U.S. ambassador to the United Nations. Shortly thereafter, he served as President Clinton’s secretary of energy. As governor, anticipating a lot of foreign-service work, he hired a part-time staffer to give him pointers on international etiquette. He also finagled, with sanction from the Bush administration, two meetings with North Korean officials, one of which took place in Santa Fe. He seems to enjoy being a go-between for the secretive Stalinist regime and the current administration.

It’s this foreign policy experience that he now hopes will propel him into the White House. While a Richardson presidency would likely be to the right of a Clinton, Obama or Edwards administration on fiscal matters, labeling the governor of New Mexico a “fiscal conservative” is a bit of a stretch.

Mr. Gessing is president of the Rio Grande Foundation.