INFORMATION #2 08-02-2004Mark Olson
state Representative
Speaker Pro Tempore
District 16B
Sherburne County
July 13, 2004
INFORMATIO!
.11!1 1 5
Minnesota
House of
Representatives
COMMITTEES: CAPITAL INVESTMENT; VICE-CHAIR, EDUCATION POLICY;
Joan SchlTlid~NVIRONMENT AND NATURAL RESOURCES POLICY; TRANSPORTATION POLICY
City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Dear Joan:
Thank you for taking the initiative to send a resolution of support for the new Northstar
Commuter Rail proposal during the recent legislative session and for allowing time on your
agenda to have a good discussion on the issue. I appreciate hearing from you and your
patience in allowing time for a more personal response.
Out of respect to all, the following letter and information is what I have been sending to both
supporters and opponents of this proposal. I do appreciate hearing more about your concerns
and would be happy to come back to hear any appeal that you would like to make. Good
public dialogue is essential for good policy. I have not always opposed the Northstar proposal
nor do I fault anyone for supporting it. Research has generally shown that the public stream
of information is often misleading.
The enclosed information identifies most of my concerns with the new proposal. There are,
however; a few additional points to consider. The first being: What is different about the new
shortened proposal to justify support over the 2003 proposal?
The 2004 Northstar rail service distance was cut in half. The rider-ship projections were
reduced by about half. In contrast, the total projected cost was only reduced by less than a
fourth.
These initial facts did not lead me to believe that this new Northstar proposal would be more
cost-effective and affordable than the previous one. The first one was not acceptable, these
factors only led to more research. Not to mention, we still do not have agreements with the
Burlington Northern SanteFe Railroad (BNSF).
Another concern came from the Federal Transit Authority's (FTA) new Cost Effective-ness
Index (CEI). This new index establishes the soft ceiling for a cost per passenger benefit of
$25.00. The current CEI is at $24.80. The difference in projected railroad
upgrade costs between BNSF and the state is over $50 million. For every million of increased
capital costs the CEI increases ten cents. In other words, a $3 million dollar increase will put
us over the FTA's $25.00 CEI, $50 million will put us way over. Failure to meet FTA's
standards would jeopardize Federal funding.
17085 - 142nd Street, Big Lake, Minnesota 55309
State Office Building, 100 Rev Dr Martin Luther King Jr Blvd, St. Paul, Minnesota 55155-1298
FAX: (651) 296-4307 TTY: (651) 296-9896 Email: rep. mark.olson@house.mn
(763) 263-3500
(651) 296-4237
The $25.00 CEI is a soft ceiling and accounts only for benefits to transit passengers. I'm not
aware of any state documents that identify any congestion relief from the Northstar proposal,
despite what is often stated publicly.
In the area of transportation policy, there is now a newly proposed option of Fast Lanes where
private sector entities will come forward, build a highway lane, earn a profit and eventually
turn the new road back to the state. Yet in the area of railroads, the actual owners of existing
railroad tracks will not spend one red cent to expand their services on their own existing
infrastructure to include commuter passengers. Why? Because so few people can or will use it
and it will not even come close to breaking even just in operations.
I do not however believe Fast Lanes are a preferred option to meet commuter needs. The
point of insight and contrast here is the fact that state highway user funds should be very
sufficient to provide needed roadways for commuter demands. There is no real excuse for the
state's continued failure to meet our transportation needs.
Additional evidence to this point is on the enclosed transportation funding graphs on page
three. There you can see that our state highway system is being used as a cash cow for the
state's general fund. Minnesota highway users are producing far more revenues than the state
is spending to build and maintain our highway system.
Good economic policies have been and always must be about sustainability. American
economics have been and always must be about everyone, as much as possible paying their
own way - sustainability. That is why we should not turn our backs on what should be
considered the most successful transportation system in the history of the world - our roads
paid for by users.
These and the enclosed points of concern reflect many of the reasons why I authored
legislation to keep the Northstar Commuter Coach bus service going in 2003 and again in
2004. I believe the bus service with an annual subsidy of approximately $2,000.00 per daily
passenger per year is much more cost effective than the train subsidy at $7,670.00 for the
same. It also reflects why I authored legislation to establish an HOV/Dedicated Bus way
from Elk River to Minneapolis. With better planning, there are sustainable options available.
In time, a rail initiative may become viable.
Thank you for contributing to this public dialogue. Your thoughts and concerns have helped
me wrestle with this issue and research it extensively. I hope you find this information
helpful. Please contact me again with any additional concerns.
Sinc~erely/~
M{lrk Olson
State Representative
District 16B
"t
In American economics users pay their own way
Non-user taxpayer subsidies
for state highways'
$0
Taxpayer subsidies for Northstar
Commuter Rail:
$7,670
per year, per daily rider
For more information, contact State Rep. Mark Olson at (651) 296-4237, or rep.mark.olson@house.nm.
Proposed taxpayer subsidy
per daily round-trip passenger:
*$7,67000 peryear
for 22 years without regard to passenger income
Average cash subsidy for a needy
mother with two children:
* $7,500 oo per year.
*This amount does not include health care or child care assistance.
For more information, contact:
State Rep. Mark Olson at (651) 296~4237, or
rep.mark.olson@house.nm.
*Figures from the Northstar Corridor Development Authority, MN/DOT, and Minnesota House Resarch.
Federal Gas Tax Paid Into Highway Account and
Received Back - Minnesota
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
~o,00o
$50,000
$0
Gas Tax Paid In
Received Back
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Total State Highway User Revenues Available
For Actual Transportation and Construction Spending
1982-2001
$2,400,000
$2,100,000
$1,800,000
$1,500,000
$1,200,000
$900,000
$600,000
$300,000
$0
Highway funds available through user
taxes plus 100% of motor vehicle sales
tax minus General Fund dollars
Actual revenues spent on
transportation system
Total state highway construction spending
(state total and est/mated local state aid roads)
The top line on the State Highway Revenue graph reflects the total highway user funds available for state roads. That is the gas
tax, tab fees and the MOtor Vehicle Sales Tax, minus any General Fund dollars.
The middle line represents what is actually spent on our transportation system. The bottom line represents road construction
spending. User revenues far exceed the highway funds that are being used to build or maintain roads.
Northstar advocates claim roads are too expensive at $50 plus million per mile while the train only costs $3 or 6 million per mile.
The national average for a four lane interstate highway is about $9mil per mile. More importantly, roads are totally paid for by
those who use them. The Northstar operations are not even fully paid for by users.
Research Department
Thomas Todd, Director
Minnesota
House of
Representatives
May 24, 2004
TO: Representative Mark Olson
FROM: John Williams, Legislative Analyst
RE: Northstar commuter rail total costs
This memo responds to your request for an analysis of the public costs of the Northstar
commuter rail project.
The enclosed spreadsheet shOws total costs over two periods:
.the 22-year period during which the state would be paying debt service on bonds
issued for the project (it is anticipated that 20-year bonds would be issued in amounts
of $37.5 million in FY 2005 and $49.066 million in FY 2007)
the 40 years that the 1998 cost-benefit analysis used in the report to MnDOT by
Parsons Brinckerhoff as the outer limit of the useful life of commuter rail system
components ~
The state capital cost is shown as $132.6 million, which is the total cost of debt service on $86.6
million in state bonding for the project as recommended in the governor's capital budget. The
federal and local shares are as reported to the House Transportation Finance committee by the
Northstar corridor authority (NCDA) in January, 2004.
The operating cost and operating subsidies are based on the operating cost and farebox revenue
assumptions for the first year of operation (2008) as shown in NCDA publications.2 The
operating cost and subsidy were forecast through 2047 using assumptions of a modest 3 percent
annual increase in operating cost and a constant 44.5 percent farebox recovery ratio.
The ridership estimates are derived from the estimates given at the House Transportation Finance
hearing of 4,030 daily one-way trips in the opening year of 2008, rising to 5,600 daily onerway
~ Parsons Brinckerhoff Quade & Douglas, Inc., "Twin Cities Metropolitan Commuter Rail Study, Phase II:
Benefit-Cost Analysis Report, revised draft, September 15, 1998.
2 NCDA, "Operating Cost Estimate and Funding Sources," 2004.
Research Department '
Minnesota House of Representatives
April 21, 2004
Page 2
trips in 2025. It was assumed that ridership would rise at the rate of 92.3 daily trips per year
from 2008 to 2025 in order to get from 4,030 to 5,600, and at the same rate from 2026 to 2047.3
Using all these estimates, it was possible to estimate the public cost per one-way trip. This was
derived by dividing total public costs (total capital cost including debt service on an annualized
basis, p. lus total operating subsidy on an annualized basis) by total one-way trips. For the 22-
year period the average annual public cost was $14.57 per trip, and for the 40-year period the
average annual public cost was $10.40 per trip.
Obviously there are pitfalls inherent in attempting to forecast operating costs, farebox revenue,
and ridership over a forty-year period for a rail line that is not yet operational. For this reason
the estimates should be regarded as projections based on a set of assumptions rather than as hard
figures based on certainties.
Please let me know if you have further questions.
31 am convinced that cost per trip is a more accurate and defensible measurement than cost per rider. The estimate
of 2,800 riders in 2025 (assuming each one-way trip is half of a roundtrip) is a daily estimate. Dividing that figure
into an estimate of annual capital and operating cost will inevitably produce an inflated figure. If it were known for
certain that it would be the same 2,800 people r/ding the train each day then the figure could be divided into the
annual cost to produce an annual "cost per rider." Since that information is not known there is no way to accurately
estimate the total number of individuals who will take the train.
Copied Attachment:
TOTAL PUBLIC COST OF NORTHSTAR RAIL OVER 22 AND 40 YEARS
Capital cost -- federal share
Capital cost -- state share including interest on state bonds
Capital cost - local share
Total capital cost
Average annual capital cost
Average annual operating subsidy
Average annual capital cost + annual operating subsidy
Total annual average one-way trips
Average annual capital cost + subsidy per one-way trip
Over 22-year life Over 40-year life
of state bonds of the project
$ 132,500,000 $ 132,500,000
$ 132,624,830 $ 132,624,830
$ 44,200,000 $ 44,200,000
$ 309,324,830 $ 309,324,830
$ 14,060,220 $ 7,733,121
$ 6,545,399 $ 9,484,669
$ 20,605,619 $ 17,217,790
1,414,491 1,656,339
$ 14.57 $ 10.40
CALCULATIONS FOR THE ANNUAL PER DALLY RIDER SUBSIDY:
$14.57 X 2 (for round trip) = $29.14
$29.14 X 5 (for one work week of single rider round trips) = $145.70
$145.70 X 52 (for single rider work week round trips per year) = $7576.40
Average cash assistance fora needy mother with two children is $7500 per year.
This figure does not include health care of child assistance. - Source: House Research
* These notations have been made on a copy of a Northstar Corridor
brochure for the full 82-mile proposal.
I* 10,000 trips per day actually respresents
I5,000 daily roundtrips (people per year)
*5,000 people are projected to ride the train.
6,000 housing units will bring at least
12,000 more people to the already fastest-
growing area in the state. Many of these
homes will have both adults working.
This Northstar will increase urban sprawl
and congestion by putting more people on
the highway and bring even more people to
this already fast-growing area.
Corr:ugor length:
~ m|h~ {Rice
Riders(estimated):
~--~ tripsperday/3 million ,perye
/ {Equ(valentt° 1 ~a ianesottraffic~ng
! / ]v~rthstar'fiares(estimated); '
[ / ~in..n. eipolis !o St.: Cloud: ........ ..S10
~,/ to Big Lake: .................
Cloud
EIkRiver to Minneapolis:._,.....$4
Cost of drivi'g a ear
(at $.50 per mile): so.=c
Minneopotisto StCloud: .........
(72mi!eS)
St. Cloud'to Big-Lake: .............. ~14..q0
(29 miles)
EJk River to Minneapolis: ........ ~16i50
(33 miles)
Economic ben,ts of Northstar: - 13;000. new}~bs
-$1,:~-billion in '.ne~ development
- ~;~ million sq. It. d office space
, It.ol;indo~trial
The NEW Northstar proposal's service
distance and ridership has been reduced by
approximately 50%. That's 40 miles with
2,500 annual commuters. Housing
projections are about 4,000 new housing
units--again, bringing far more people to
the area than are projected to ride the train.
Station. locations:
flice, St CloUd,-Becker, Big Lake, Elk-River,
Anoka, Coon Rapids(two stops),, Fridiey,
NE MinneaPolis, :downtown Minneapolis
(connection to:~, serving.,the airport,
Mall of America and other locations)
Thi~ you can do durmg your N~. nae:
I *Unless we stop this runaway train proposal, we as taxpayers will be subsidizing a
I train that will bring more people, urban sprawl and congestion to the already
I fastest-growing area of the state.
(*For more information or to comment, please contact Rep. Mark Olson at (651) 296-4237 or rep.mark, olson@house.mn)