Monday, September 05, 2011

Detroit: Since it didn't work last time, lets do it again, but bigger.

The Detroit News: Lessons from the People Mover

he rail system circles downtown Detroit and was built in 1987 on the theory that it would help fill office buildings and draw new restaurants, residents and retail outlets. It was also supposed to connect to hoped-for subway and rail lines.

But like many government projects built without regard for a return on investment, the People Mover never delivered on its promise.

Ridership never reached the 12 million annual passengers predicted before it opened, let alone the 20 million needed to break even. So the city has kicked in huge subsidies to keep if from shutting down and standing as yet another reminder of Detroit's struggles.

Read that last paragraph again.

Detroit knew it would take 20 million riders for the People Mover just to break even and they opened it predicting it would get 12 million and then it didn't even reach that. It was opened with a prediction that it would lose money, but they under-predicted the loss. Currently the city is subsidizing each rider's trip by $2.

This is known as Governmental Math: "We lose money on every rider, but we make it up in volume!"

So they're going to do it again, only bigger, using federal transit dollars as well as some private investors and city money:
Detroit is now moving ahead with plans to build a light rail system up Woodward Avenue from downtown. It's an ambitious project funded with private and federal dollars.

Once again, the promise is that the rail line will hasten downtown's recovery and spark pockets of development around the stations.

It's an enticing project. But we hope the city will be more realistic in its ridership estimates, as well as projections of spin-off economic benefits, before taking on annual operating subsidies that could dwarf what it takes to keep the People Mover-to-nowhere spinning nearly empty cars around downtown.

Any bets on who gets to cough up the annual subsidy when the rail line fails to reach the break-even point?

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