On June 22, 2012, a Delaware senator and the Delaware chief of transportation announced that a $10 million federal grant and a $16 million state grant were approved to build a new rail hub in Newark Delaware. These approvals come after months of lobbying and proposals that have cited various problems with the current station in Newark. The problems cited at the existing station are that the platform, or the place where passengers board the train, has access to only one track and needs better handicapped access. Access to a track, as argued, not only reduces the flow of passengers, but also restricts the flow of trains in the area.

Newark Delaware is a nine square mile area surrounded primarily by state parks and farmland. It is home to 31,000 people and already has a train station actively serving the SEPTA regional train. The existing station was remodeled less than five years ago and now features a state-of-the-art additional parking ticket booth and computerized timetables. The new station would have better track access and more modern amenities than the old one, and would be built less than a mile from the existing station. Wait…less than a mile from the existing station? Why does a town of 31,000 inhabitants need a second station so close to the existing one? Some background on the service provider and facilities may be needed.

The Southeastern Pennsylvania Transportation Authority (SEPTA) operates in Philadelphia PA and its suburban areas. Up to five SEPTA trains will stop at the Newark station every weekday between 6 am and 7 pm; this compares to 28 trains per day for stations in other suburban areas. The smallest rail car used by SEPTA, the Silverliner V, seats a maximum of 108 passengers per car. Multiple cars can be linked together to form a train if required. 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’s a lot, but how does a town of 31,000 have 168,840 passengers a year?

The methodology used for the passenger count was ‘shippers per year’. 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 commuters go to work every day, then we can divide 168,840 commuters by 260 workdays per year. This suggests that there are 649 people using at the existing Newark station. Now that we have a better count of the actual passengers using 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 useful life of the proposed train station will be 30 years. All future maintenance costs during that useful life will be ignored as they were not made public in the funding request. Actual estimates for the construction of Newark’s second station ranged from $26 million to $36 million. The cost used here will be $31 million, the midpoint of the estimates. And that 100% of the number of passengers will change from the old station to the new one.

First is the cost per passenger. This is calculated by dividing the $31 million required to build the station by 649 passengers (product = $47,765.79), which is then divided by 30 years. This means that if a private company were building this facility, it would need to charge a breakeven fee, plus $1,592.19 per year from each passenger to justify the cost of the new facility.

SEPTA’s “Intermediate Transfer” allows a passenger unlimited travel for $75.00 to $83.00 per month [1], depending on the destination. This is the cheapest and therefore preferred way to travel to work for regular SEPTA commuters. A passenger who purchases a Transpass each month will spend up to $996 per year. To cover the construction costs of the new facility, each passenger using the new Newark stop would have to pay an additional $1,592.19 per year. This means that the price of Transpass would have to increase by more than 260% to $215.67 per month. At this rate of increase, a commuter could choose to drive to work, potentially reducing train ridership to nearly zero. But even if the monthly price were successfully increased to $215.67, this is not really the break-even number.

Currently, that is, without the new station, the average subsidy required for the SEPTA train is $3.22 per trip. [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 this subsidy means is that the rates are already sold at less than the break-even point. Therefore, it is clear that the $83.00 is already insufficient to cover existing costs, let alone the rate increase needed to support the new station.

Looking back at the commuter, they each make two trips a day, one to work and one back. These two trips are multiplied by 260 days per year, and are subsidized at $3.22 per trip. That means the average subsidy per commuter is $1,674.40 per year, or 168% more than what the commuter currently pays on the rail system per year. And now more expenses are added.

After reading all of this, you may be wondering how this project will ever approach break even. Or better yet, how is it possible that state and federal funds were approved for this project? Did no one examine the claims made in the proposals and ask critical questions? Did everyone forget that there is already an active station that is minimally used? I recommend that the 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 coming in and will never go out.

Sources:
“SEPTA | TransPass”. SEPTEMBER | TransPass. Southeastern Pennsylvania Transportation Authority, June 1, 2011. Web. June 23, 2012. < http://www.septa.org/fares/pass/transpass.html >.
Thanks, Joe. “A Funding Formula for Failure at the Port Authority”. Pittsburgh Post Gazette. Np, March 16, 2012. Web. June 23, 2012. < http://www.post-gazette.com/stories/news/transportation/a-funding-formula-for-failure-at-the-port-authority-409186/ >.