Does NLX rail make sense?

The proposed Duluth to Minneapolis Northern Lights Express (NLX) passenger train is on track to cost over $1 billion, and Pine County taxpayers could be forced to help subsidize the NLX for generations to come.

According to a 2004 study by the U.S. Department of Transportation, passenger rail requires more of a subsidy – state, local and federal tax dollars – per mile travelled than any other mode of transportation.

However, a 2007 feasibility study paid for by NLX from Transportation Economics & Management Systems, Inc. (TEMS) argued that NLX would eventually pay for itself, and would actually have an operating surplus in three years.

But are there any passenger rail projects in the United States which do not require a subsidy? Do any passenger trains pay for themselves through ticket sales? 

“None that I know of,” said NLX Director Bob Manzoline.

“No,” stated Professor David Levinson, University of Minnesota Department of Civil Engineering and the Richard P. Braun/CTS Chair in Transportation Engineering. “Amtrak claims to make an operating profit on lines, but it counts state subsidies as revenues.”

Pine County Commissioner Doug Carlson, who represents the county on the NLX Board, understands that a subsidy is possible. 

“NLX may end up having to have some help,” Carlson said. “But it’s positive help I believe. Because if you build a platform in Pine County it’ll bring in tourists, it’ll bring in people, it will give them an option to get to the airport.”

Expensive trip

Carrying those travelers to and from Pine County by train may prove to have a steep price tag.

According to the U.S. Department of Transportation, between 1990-2002 the federal government paid $186.35 per thousand passenger-miles  to subsidize passenger rail.

And those subsidies are often paid for by the counties the trains pass through.

The Anoka County Regional Rail Authority reported that the Northstar Commuter Train, which passes through Anoka County, carried 700,276 riders in 2012. 

Northstar expenses were $17,283,000 in 2012. Passenger fares brought in only $3,036,000. 

This means that taxpayers had to pay in $14,247,000 – an average cost of $20.34 for each rider on that train.

And Anoka County, as a member of the taxpaying body that funds the project, had to pay $7 million dollars towards the train in 2012. 

For comparison, Pine County’s total tax levy in 2012 for all county services came in at just over $14 million total.

Rail construction costs rising

The cost of getting NLX up and running has gone from an estimated $350 million in 2007 to the Minnesota Department of Transportation’s 2009 estimate of up to $1 billion.

Those start-up costs include infrastructure such as new rail, bridges, special high speed railroad crossing stops and signaling. 

This does not include millions of dollars more in additional NLX costs, including operating costs, train sets, and easement charges from Burlington Northern Santa Fe railroad, which the line will run on. 

Furthermore, each county and city stop would be responsible for financing and building its own station. 

Levinson said the cost of getting NLX up and running (capital expenditures) of $1 billion, could be recouped in 30 years, at a ticket price of $33 if there were a million passengers a year, with no discounted tickets and no inflation. The $33 ticket does not include what it would cost to operate the train once it’s on the tracks.

He also questioned the feasibility study estimate of 750,000 NLX riders per year.

“I would be surprised by 750,000 per year, which is over 2,000 per day,” Levinson said. “No one knows the real costs or the real number of passengers.”

Federal, state, county funding

The NLX board members are working with the Federal Rail Authority (FRA) and MnDOT to find federal and state funding for project construction.

The FRA could contribute up to 80 percent of the start-up cost of the project. The state could contribute as much as 20 percent.

However, if these funds are not available, the nine members of the NLX Alliance (St. Louis, Lake, Pine, Isanti, Hennepin Counties and Douglas County, Wis., the Mille Lacs Band of Ojibwe and the cities of Duluth and Minneapolis) could be expected to pay a share of the costs.

For example, if the FRA contributed only 70 percent and the state 20 percent, the nine members would pay the other 10 percent, or  $11.1 million each. If the FRA contributed 50 percent and the state 20 percent, members would pay 30 percent, or $33.3 million each. 

And it goes up from there.

Downeaster comparisons

In presentations around Minnesota, NLX proponents have compared the NLX project to the Downeaster, a train which has run from Brunswick, Maine to Boston, Mass. for the past 12 years. The population it serves is a million more than the NLX corridor.

Still, in 2012, the Downeaster carried only 528,000 passengers – and required a taxpayer subsidy of just over $9 million.

Economic development

NLX proponents also refer to the TEMS study to predict that over the next 30 years the NLX could produce up to $2 billion in economic development .

This development, according to the study, would take place at stations along the NLX route: $900 million for Minneapolis, $390 million for Coon Rapids, $170 million for Cambridge, $205 million for Grand Casino Hinckley, $90 million for Superior and $190 million for Duluth. 

It is not clear from that study if any economic benefit is predicted for cities along the route which do not have stations.

Leaving NLX

The Downeaster line runs from Maine to New Hampshire to Massachusetts, but just one of those three states pays  the ongoing subsidy for the rail service: Maine. The other two states opted not to join the project, and now do not have to contribute to its costs. 

In June 2012, Anoka County commissioners voted 4-3 to leave the NLX alliance.

By the rules of the joint powers agreement governing NLX, each member may leave within 90 days. NLX officials said that membership in the NLX Alliance does not commit members to any financial burden.

“Right now, our group, the Alliance group, is not committed to anything – any operational costs, any construction costs,” said Manzoline. “It’s a joint powers that has very strict limits on it. It’s there just for the planning purpose of the project.”

However, for the Anoka County commissioners already concerned about paying $7 million per year to subsidize the Northstar railroad, the thought of paying for ongoing NLX costs was enough to make them leave the NLX Alliance, and be freed from any chance of having to pay for the start-up costs or the subsidy for NLX.

“As we move forward there will be additional dollars that will be committed [to NLX},” said Anoka County Commissioner Rhonda Sivarajah. “They’re trying to move this thing forward in 2015 – and that means we’re going to be on the hook.”

Pine County remains in the NLX Alliance, and has paid $131,000 in NLX membership dues since joining in 2007.

In January 2013, Pine County commissioners voted 3-2 vote to remain in the NLX joint powers agreement, with Steve Hallan, Steve Chaffee and Doug Carlson in favor, and Mitch Pangerl and Curt Rossow against. 

As long as the county remains linked to the project, the possibility remains that – like Maine with the Downeaster, and Anoka with the Northstar – Pine County taxpayers could be required to pay for construction of the NLX at the time it is built, and pay a subsidy to support the operational costs for decades to come.

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