Do Metrorail and Virginia Railway Express Really Boost Virginia Tax Revenues by $600 Million?

by Robert Martin

The Northern Virginia Transportation Commission (NVTC) issued a press release on September 5 of this year claiming that Metrorail and Virginia Railway Express (VRE) boost state revenues by $600 million. This “revenue boost” shows that Virginia’s investment in rail transit provides a 250 percent return on investment, according to the press release. The NVTC is charged with the funding and stewardship of those two agencies in Virginia, so this claim may not be completely unbiased.

The press release is being used to argue that, based on the “boost” in tax revenues, Metro and VRE are good investments for Virginia taxpayers and warrant additional funding.  The information contained in the press release does not justify those claims.  Unfortunately, the “study” announced in the press release is not available from the NVTC website nor has it been provided to the NVTC Commissioner who requested I review this “study,” although the Executive Summary is available.  This article will address the claim that Metrorail and VRE boost state revenues by $600 million.

The “study” finds that Metrorail and VRE are responsible for 130,500 jobs and 85,000 households deciding to locate in Northern Virginia. They argue that, absent Metrorail and VRE, many jobs and households would be relocated outside Northern Virginia because of the added traffic congestion resulting from a shutdown of the two systems.

Undoubtedly, Metro and VRE do reduce congestion somewhat, but the premise that without them economic development in the area would halt or even decline is patently absurd.  The easiest proof is that ridership on Metro has declined from 750,000 a day in 2008 to 639,000 a day in 2016 without any apparent slowdown in the local economy or reduction in tax revenue.

People and businesses choose locations based on many factors including housing prices, school quality, taxes, the quality of the labor pool and, of course, transportation options. A slight increase in travel time (the study estimated about a 5% increase) would make the area somewhat less attractive. On the other hand, the current tax burden of supporting the systems and any further increases to fund their ever-increasing costs makes the area less attractive. Virginia (state and local) contributes about $282 million a year to Metro according to the FY 16 budget, which works out to nearly $1,500 for every rider.

The heart of the study is the “finding” that if Metrorail and VRE were removed, traffic congestion would increase. This is certainly true. About 200,000 Virginians ride Metro every day, some thousands from Washington, D.C., and Maryland commute to jobs in Virginia, and 20,000 riders use VRE. The study models the impact of those trips as if they were shifted from Metrorail to existing bus service & highways. They estimate that if trip times remain the same, travelers will make 5% shorter trips, a fancy way of saying travel times will increase about 5%.

It is impossible to evaluate the methodology and assumptions used in these models without the complete study. However, it is likely travel times increase by some non-trivial amounts, and the results seem reasonable. The problem is the study’s implicit assumption that, as a result of the increase in travel times, 130,500 jobs and 85,000 households will relocate from Virginia. Further, the study estimates that “the land use supported by Metrorail and VRE generates over $600 million in general fund revenues”.  The study does not provide information on how it got from lost jobs and households to the $600 million, but notes that “this is 3 to 4 percent of the $18.2 billion collected in the state in fiscal 2016.” Absent some explanation of the methodology, that number appears questionable. And remember, this assumes these jobs and households would be lost in the face of a 5% increase in the average commute time of 30 minutes, less than 2 minutes (though rail riders undoubtedly have longer average commutes than most others).

Now, let us consider the flaws in these assumptions. First, if Metrorail were to shut down, Virginia could invest another $300 million or so a year in better roads and bus service, which may well eliminate the loss of jobs and households by ameliorating the congestion. Secondly, the distribution of jobs and residences reflects the existing transportation system. In its absence, some people and jobs would move to optimize their location in the new environments, also mitigating the impact, especially as time passes – it would take some time for these changes. Zoning changes could also mitigate the impact.

The study also seems to take credit for development around Metro stations. While partially correct in some areas, Tyson’s was a major employer before Metro arrived and current rail ridership is only about 7,000 a day, probably less than 10% of employment in the area. Closing Metro might lead to another Tyson’s Corner being created in other areas with equally good highway access. Route 28 is a good example of significant development without rail access but good highway access.

If bus service were improved, much of the high rail ridership in Arlington and Alexandria could be captured. It should be noted that the large number of Federal employees riding Metrorail are heavily subsidized. If that subsidy were eliminated or cut, ridership and hence presumed transit benefit, would drop. Indeed, future federal support of Metro and VRE should not be taken for granted as Virginia may have to bear even more of the subsidy burden, further reducing any benefits to the state.

None of this addresses the biggest Metro problem – the drop in ridership. Ridership in 2008 was about 750,000 a day; in 2016 it was 639,000, even though the Silver line came on line, as did two stations in Maryland. Based on the study’s assumptions, the drop in ridership should have halted all growth in jobs and housing in the area, since traffic would have become much worse – but it didn’t.  That proves the error of their model assumptions, overlooking changes people make to respond to removal of a transit option.

Further, the authors ignore all the factors working against Metro regaining ridership, including growth in alternate work schedules, telework, availability of Uber and Lyft, and the advent of autonomous vehicles.

Without seeing the full report, it must be concluded that this is clearly something put together to support increased funding for a failing Metro system — funding that will have to be increased regularly in the future unless major changes are made in how Metro operates.

Robert Martin, a retired transportation economist, held various positions in the U.S Department of Transportation related to rail and transit economics and policy. The article was first published in the Jefferson Policy Journal.

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11 responses to “Do Metrorail and Virginia Railway Express Really Boost Virginia Tax Revenues by $600 Million?

  1. Interesting thing is that bus ridership declined also, right?

    also .. aren’t people saying that the NoVa economy slowed down when the Feds capped DOD spending?

    the “study” is likely a one-off puff piece.. designed to maintain support.. try to head off political efforts to reduce funding.

    when you calculate cost per rider are you dividing total trips into total money? $1500 per rider is a hefty number… if that was for one rider for the year… like VRE… is about $2000 per rider for the year more reasonable… might be interesting to divide the cost of roads into “ridership”… we could use some better comparative metrics.. but also compare systems .. metro vs NY vs other systems.

    As far as I know – no city hs shut down it’s subway system and used the saved money for roads. How would you even be able to do that for a place like Arlington… there is no place for more roads.. you either move people or you are done.

  2. Do Metrorail and Virginia Railway Express Really Virginia Tax Revenues by $600 Million?
    Jim- title needs work – add “Boost” ?

    Wow, but OK, there you have it: tax dollars spent in NOVA actually gain profits. The GA ought to be spending more money here.

  3. maybe part of a wider conundrum… as highway advocates will also make a similar argument for new roads or added lanes… i.e. it will “relieve” congestion and enhance economic development. Make that argument for new bridges in NoVa… made that argument for the Inner County Connector .. Fairfax Parkways… and the current road transportation spending plan for NoVa has a slew of road widenings..

    Pro-transit, anti-road folks argue that more lanes and more roads that in theory enhance economic development will, instead , incentivize sprawl and encourage more solo driving at peak commuting hours.

    I still go back to this – and that is – as far as I know – I’ve never seen a “study” that shows if you close the subways and spend that money instead for roads – you get more bang for the buck – not even from the most vociferous critics!

    Yet.. critics do .. essentially walk up to that point in their criticism.. citing the costs .. reduced ridership.. etc.. perhaps such a study SHOULD be done then it would be a competing companion piece to the pro-transit “studies”!

  4. OK I am just realizing we have a guest author on this article. Thanks to Robert Martin for giving us food for thought.

    I find it a little confusing to mash up VRE and Metro, and thus paint VRE with the same brush as Metro. VRE seems to be effective (but way smaller ) than Metro. I would ask what are the comparable ridership numbers for VRE?

    I live close to VRE Burke and my family uses a combination of VRE, Metro, I-95 Slugging, work-from-home, Uber when it comes to getting into DC. Our VRE use would be greater, but perhaps many people do not understand the VRE schedule is limited to a few trains inbound in the AM and and few outbound back in the PM, and only on work days – no holidays no weekends. OK, one fun Fireworks express on July 4 and one Santa ride in December.

    Overall the guest author seems to be saying the same thing I was saying about the new I-66 Hot lanes, that is, we actually do have automobile traffic to manage with road expansion at the bottlenecks.

  5. Mr. Martin’s attempt to refute the study with minimal facts seems no better than the study’s attempt to justify Metro with minimal facts. Few who lived along Wilson Blvd in Arlington in the early 80s (as I did) can argue that Metro wasn’t one of the factors that led to the renaissance of that area. Few who grew up on Huntington Ave (as I did) can refuse the fact that the Metro station and related development greatly benefitted that area. Choosing Tysons as an example seems designed to deceive. There is considerable high density development occurring in Tysons which seems spurred by the Metro. The fact that 10% 0f the people working in Tysons may be commuting via Metro seems like a good start.

    The benefits of transit oriented development take time to happen. The Metro station on Huntington Ave changed nothing for a decade. But slowly and surely the area improved. I am sure the tax base for that part of Fairfax County is considerably higher than it was pre-Metro with Metro driving much of the higher value development. The Pimmit Hills area of McLean seems to be undergoing a similar improvement, driven by the plans for a more vibrant Tysons which, at least in part, are driven by Metro.

    Finally, I am always amazed by the ability of conservatives in Virginia to don ostrich costumes and stick their heads in the sand. As Virginia urbanizes it also becomes more progressive / liberal. This happens everywhere in America – from Houston, TX to Salt Lake City, UT to Henrico County, VA. Mass transit and the related high taxes and subsidies to support it are a fact life in urban America. Each year that a higher percentage of Virginians live in urban and suburban locales the state, as a whole, becomes more progressive. Hopping up and down crying about expanding mass transit in urban and suburban areas is no more useful than killing the rooster to stop the dawn.

    What Virginia’s conservatives should be doing is arguing for more local control so that more conservative areas in Virginia (generally small town and rural) are able to govern themselves. There are very conservatives areas in Maryland, on the Eastern Shore and in Western Maryland. Maryland’s state income tax is similar to Virginia’s. However, Maryland allows counties to impose income taxes. These county taxes range from 1.75% to 3.2% allowing counties to make meaningful decisions as to how much government (and related services) should be provided. As Virginia turns more and more blue the state’s strict adherence to Dillon’s Rule will turn out badly for conservatives. Perhaps it’s just irony that the same anti-democratic approach to home rule so beloved by Virginia’s conservatives over the years will be the very thing that bites those same conservatives in the ass.

    Disclosure: Politically speaking, I lean right voting approximately 66% Republican and 34% Democratic. I supported Mr. McAuliffe in 2013 and Mr. Gillespie in 2017.

    • At this point the problems are rampant and systemic, and baked into the system. The only solutions will be holistic, a total revamp from top to bottom. Otherwise I fear we are throwing tons of good monies after tons of bad monies grossly wasted for decades.

    • Metro does create wealth. But unlike the R-B Corridor in Arlington, which has been shown to keep real estate taxes lower than they otherwise would be, Tysons is no where close and County officials have no idea if and when it will occur. More of the capital and operational costs for Metrorail should be recovered from landowners in the immediate area of the rail stations. That would be much more fair to the public and would encourage developers to use their land to best uses.

      Fairfax County supervisors remain in bed with the developers. Fairfax County’s BPOL tax rate for developers is 5 cents per hundred. I wish I could pay that rate. In Arlington, it’s 16 cents per hundred. Tell me why that’s in the interests of Fairfax County residents.

      WMATA itself is a totally screwed up agency. It has a culture of “anything is good enough.” It’s labor costs are out of line with the private sector.

      Having said this, Metrorail is critical to keep more drivers off the roads. But that is not a blank check.

      • At some point there needs to be “total transportation cost” calculation. This would include Metro subsidies, bus subsidies, cost of bike lanes, costs of roads, etc. I’ve never been convinced that the people who live near Metro stops are the real drivers of transportation costs. My guess is that the average resident of McLean or Great Falls generates more in total transportation costs than the average resident of Ballston. Allocating the costs of Metro without allocating the costs of other transportation options seems unfair to me.

        Having written all that … Metro does seem like a mess. It seems there must be lessons to be learned from other multi-jurisdictional mass transit systems. In NYC there’s the city’s boroughs, the surrounding counties, New Jersey, etc. What have they learned about operating a mass transit system that could help Metro?

        • The 2012 cost estimates for new transportation needs for Tysons, excluding Silver Line costs, used by Fairfax County in adopting its transportation infrastructure funding plan was $3.038 billion. This was in 2012 dollars and covers the period from 2012 to 2030.

          If one divides that figure by 300,000 (total expected residents and workers by 2050) to use an extremely conservative estimate, that’s more than $10 K per person in capital costs, again in 2012 dollars. It does not include operating costs. It would be interesting to see comparable transportation capital requirements for 300,000 people in the “exurbs” of the Metro Area for an 18-year period. I have no guess as to what we would see.

  6. those who say look to other transit systems might read this:

    ” Transit woes could push Amazon away from New York in bid for corporate giant’s second headquarters”

    ” Mass transit missteps stand to disrupt the city’s efforts to lure Amazon here to build its second headquarters, according to a report.

    Chaos on the subway and commuter rails, along with chronic and debilitating delays, “present real drawbacks to the city’s bid,” said a report from Tri-State Transportation Campaign being released Wednesday.

    New York is relying on its reputation — not extra tax subsidies — in making its case to Amazon as the online retail giant searches for a North American city to set up its new headquarters, dubbed HQ2.

    But the city’s supposed crown jewel — its robust mass transit network that includes 24/7 subway service — routinely delays and exasperates the riding public. In addition, Gov. Cuomo and Mayor de Blasio are squabbling over who should pay to repair and upgrade the subways.”

    sound familiar?

    of course I still point out – that as bad as things seem – I’ve yet to hear of any major movement to shut down the subways and divert that money into roads.

    see the thing is – we look at the unrelenting congestion on ROADS differently that we do Metro . We say the problem with METRO is not money – that it’s mismanaging the money.

    Yet with roads and congestion, we say .. it’s MONEY that’s the problem – that we need MORE and MORE … MONEY!

    see the dichotomy? Oh.. and TMT says the problem is bad growth policies while DJ sez it’s the fault of a corrupt govt in Richmond that siphons road money away from NoVa.

    Hey… I’m guilty also! but it’s more fun to point out the flaws of others! 😉

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