77 Miles of Track

Each day, a shrinking (see below) number of Bay Area workers endure two-plus hour daily commutes to and from San Francisco on Caltrain. A typical commute involves driving to a train station, parking, waiting for the train, riding, then walking from the Caltrain terminal to their jobs. After work, they perform this same lengthy maneuver in reverse.

But Caltrain isn’t just unpleasant for its riders. The tax subsidies required to keep the line afloat, especially after the passage of Measure RR in November 2020, place an enormous financial burden on society, far in excess of any reasonable benefit the small number of mostly wealthy Caltrain riders receive from being able to work far from their homes.

A system of bottomless subsidies

A round trip ticket on Caltrain between, say, Santa Clara and San Francisco costs $20. If you buy a monthly pass, that amount drops to $15, assuming 20 days of commuting per month. That’s not to say commuters actually pay that much, but we’ll get to that later. Let’s first answer the question: how much does a single daily commute actually cost society?

Public transit, like most organizations, has two types of expenses, operating and capital. Operating expenses are the daily cost of running the train – salaries, utilities, etc. Capital expenses are fixed, long term outlays, like a new train car, or upgrades to existing systems, like the electrification of the Caltrain track.

Public transit advocates like to ignore capital expenses when looking at the true cost of transit. Their favored metric is the “farebox recovery ratio“, the percentage of operating expenses met by fares paid. But it’s an irrelevant number, as it only includes one of the two expense types.

Note: Caltrain’s fiscal or reporting year is from June to June, so “FY 2020” below, for example, refers to July 1, 2019 through June 30, 2020.

In FY 2019, Caltrain collected $112M in fares (and other things like parking), and had $147M in operating expenses. Looking at operating expenses alone, it appears taxpayers only have to cover 35% of the total Caltrain fare, meaning that that a $15 round trip actually costs about $21, with tax payers picking up the remaining $6. This doesn’t include capital expenses, but then, how much of these can 77 miles of track really have?

The answer is, when it comes to Caltrain, a truly unbelievable amount. In 2019, capital expenses were $405M, almost four times fares collected. All in, that $21 Caltrain ticket actually cost $73 in 2019. That’s almost $18,000 per year!

Back to that $15 per day, or $300 per month, commuter fare. No one actually pays that much out of pocket. San Francisco actually requires employers to provide a credit of the cost of a Muni A Pass ($98), and, further, provide an employee tax deduction for up to $270 (the federal limit) for money spent on public transit. Assuming a 40% state and federal tax rate, our commuter only paid the equivalent of $121 per month to ride Caltrain.

Let’s put it all together:

Who’s really paying for that ride? Mostly, taxpayers. The annual amount we spend allowing a single lucky commuter a year of long, sweaty commutes is enough, for example, to send 500 kids to a year of elementary school in a developing country. In the US, $14k/year pays the mortgage on an $300k house! The average home price in the US is around $200k.

Transit advocates have two, mostly bad, responses to these facts. The first is: “But roads are subsidized too!” In fact, the opposite is true, at least in California. In 2018, for example, our state received $16 billion (!) in gas tax revenues alone. This was so much more than was needed to maintain our roads that most of the money went to (surprise!) public transit subsidies, law enforcement, the “Department of Food”, Parks and Recreation, and other non-road related budgets. Drivers here provide subsidies – they don’t benefit from them.

The second response from transit advocates is: “But think of all the auto vehicle pollution we’re saving”! But that’s a false choice. It’s true that, absent Caltrain, some people might drive to work instead. But many others would move nearer their job, or telecommute. In fact, telecommuting is an option of such growing importance that the Metropolitan Transit Commission, which regulates transit in the Bay Area, recently proposed that 60% of commuters be working remotely by 2050 to reduce climate change. Once transit systems got wind of this, they quickly flexed their political muscle to get the project killed, which tells you a lot about their priorities.

And all that auto pollution? California is already phasing out gas vehicles, and many people – especially wealthy commuters – drive electric vehicles already.

Where do these phenomenal capital expenses come from? Caltrain’s electrification project alone, first conceived in 1921, is now projected to cost $3.2 billion, up from an initial estimate of $800 million. That’s 30 years of passenger revenue, for a single project, which will result in Caltrain having to increase its operating expenses by 33%. And there are a constant stream of smaller capital projects, from new control systems to bridge replacements. Maintaining Caltrain is very, very expensive.

Caltrain receives money from county, state and the federal governments, but in 2020 even those weren’t enough to cover the subsidies required to fund it. Enter Measure RR, a regressive 1/8-cent sales tax increase that is expected to provide around $100M in tax funds per year for the next 30 years.

The irony is that most Caltrain riders earn more than enough to pay the full cost of the fare. Former Foster City mayor Jim Lawrence, in speaking out against Measure RR, notes that 80% of Caltrain riders have household incomes over $200,000 per year!

A system in decline

Given the incredible subsidies commuters receive to take Caltrain, you might think people would be lining up to ride. After all, if you could get something – a car, or a vacation – that costs $18,000, for just $1,450 per year, you’d probably take it.

The problem is, more and more people are saying No to nightmare commutes, at any cost (source):

Even before covid-19, ridership had dropped over 20% from its peak in 2016. And that’s despite a booming economy and growing Bay Area population. The 2020 number there ends in June, so it does include 3-4 months of post-covid ridership data, but it’s clear where the numbers are headed.

Lower ridership, of course, brings the need for yet more subsidies. When you see the next proposed tax increase to subsidize a small number of rich people, think carefully before voting.

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