A Train Ride to Financial Black Hole Station

On June 22 2012 it was announced by a Delaware senator and the Delaware transportation chief that a $10 million federal grant and a $16 million state grant have been approved to build a new rail hub in Newark Delaware. These approvals come following months of lobbying and proposals that have cited several issues with the current station in Newark. Problems cited at the existing station are that the platform, or the place where commuters board the train, has access to only one track and it needs better handicapped access. One track access, as argued, not only reduces commuter flow but also restricts the flow of trains in the area.

Newark Delaware is a nine square mile area surrounded mostly by state park and farmland. It is home to 31,000 people and already has a train station that actively services SEPTA regional rail. The existing station was refurbished less than five years ago and now has modern ticket booth additional parking and computerized timetables. The new station would have better track access and more modern amenities then the old one, and would be constructed less than one mile from the existing station. Wait... less than a mile from the existing station? Why does a town of 31,000 need a second station so close to the existing one? Perhaps some background on the service provider and facilities are needed.

The South Eastern Pennsylvania Transportation Authority (SEPTA) Operates in Philadelphia PA and it suburban areas. Up to five SEPTA trains will stop at the Newark station each weekday between the hours of 6am and 7pm; this is compared to 28 trains per day for stations in other suburban areas. The smallest train car used by SEPTA, the Silverliner V, holds a maximum 108 riders per car. Multiple cars can be tethered together to make up a train if needed. According to SEPTA, Newark Delaware is the furthest, and therefore the last stop SEPTA trains make. 168,840 passengers board trains at the Newark station each year. That is a big number, but how does a town of 31,000 people have 168,840 passengers annually?

The methodology used to count passengers was 'boarders per annum'. This does not mean that there are 168,840 unique passengers (although it was the number represented during the funding request) There are 260 weekdays per year so if these boarders are commuting to work each day, then we can divide 168,840 boarders by 260 work days per year. This suggests that there are 649 individuals that use at the existing Newark station. Now that we have a better count of actual passengers that use the existing station we can break down the costs of a new station to see if this project is financially feasible.

For this section, several assumptions will be made as they were during the funding request. The expected life of the proposed train station will be 30 years. All future maintenance costs during that lifetime will be ignored as they were not made public in the funding request. Actual estimates for the construction of the second Newark station were between $26 million and $36 million. The cost used here will be $31 million, the midpoint of the estimates. And that 100% of the ridership will switch from the old station to the new one.

First up is the cost per rider. This is figured by dividing $31 million required to build the station by 649 riders (product = $47,765.79) which is then divided by 30 years. This means that if private enterprise were building this facility, it would need to collect a breakeven fare, plus $1,592.19 per year from each rider to justify the cost of the new facility.

SEPTA's "Intermediate Transpass" allows a rider unlimited travel for $75.00 to $83.00 per month [1], depending on destination. This is the cheapest and therefore the preferred way for the regular SEPTA commuter to travel. A rider that buys a Transpass each month will spend up to $996 per year. To breakeven on the construction costs of the new facility, each rider that uses the new Newark stop would have to pay an additional $1592.19 per year. This means the Transpass price would need to increase over 260% to $215.67 per month. At this rate of increase, a commuter might choose to drive to work, potentially reducing train ridership to near zero. But even if the monthly price were successfully increased to $215.67, this is not actually the breakeven number.

Currently, which is to say without the new station, the average subsidy required for SEPTA rail is $3.22 per ride [2]. This is actually a low requirement relative to regional rail systems operating in neighboring urban areas like Baltimore, MD or Pittsburgh, PA. But what that subsidy means is that fares are already being sold at less than breakeven. So it is clear that the $83.00 is already insufficient to cover existing costs, let alone the increased fares required to support the new station.

Looking back at the daily commuter, each makes two trips per day, once to work and once from. These two trips multiplied by 260 days per year, and are subsidized at $3.22 per trip. That means the average subsidy per daily commuter is $1674.40 per year, or 168% more then what the commuter currently pays into the rail system per year. And now more expense is being added.

Having read all of this you might be wondering how this project will ever approach breakeven. Or better yet, how it is possible that state and federal funds were approved for this project? Did nobody examine the claims made in the proposals and ask critical questions? Did everybody forget that there already is an active station that is minimally utilized? I recommend that new station not be called 'New Newark Station'. Rather 'Black Hole Station' is more appropriate because that is what it is, a financial black hole. State and federal money keeps pouring in and will never come out.