Fiscal Train Wreck

Los Ranchos Mayor Larry Abraham, vice chairman of the railroad’s governing board, said the move was a wake-up call about a looming financial crisis and the future of the Belen to Santa Fe commuter rail system.

“I felt that we weren’t going to have substantial talks with anybody unless we made some cuts such as cutting the weekend service,” Abraham told Journal editors recently.

Abraham also did some math in an op-ed piece he submitted to the Journal (which appears today on Page B3). Using current revenue, operation expense and debt service, he calculates the Rail Runner will have cost $1.3 billion but generated just $60 million in fares by the time bonds are paid off in 2027.

In the short term, tax revenues designated for the train and fares paid by riders fall short of even operating expenses. And the state, struggling with its own budget problems, is already paying millions of dollars in interest on the train each year.

The immediate funding hole is caused by the expiration of a federal clean air grant. The weekend service cut, which came on a 6-5 vote June 17, makes up for that.

But more problems are coming down the track.

In December, the Rail Runner will exhaust federal clean air funding that makes up about 23 percent of projected operating revenue this year. The loss will leave a $5.4 million hole in the budget, beginning in the fiscal year that starts July 1, 2012.

Abraham points out that fares, estimated at $3.2 million in fiscal year 2012, will cover only a small portion of the train’s approximately $23 million a year in expenses – and nothing toward interest and principal on the $450.8 million in bonds the state issued to purchase track and rolling stock.

“This is a huge problem for the governor and the entire state, and we are all on this train,” Abraham said.

But the state, already paying off the $834 million it cost to get the system built and financed, doesn’t appear to be in a mood to kick in any more money.

Averaged across the life of the bonds, the state is on the hook for $41.7 million a year in financing costs through 2027, estimated Tom Church, a deputy secretary for the state Department of Transportation.

And other federal sources are drying up, too. Pending federal legislation threatens New Mexico with a sizable loss of federal highway funding, Church said – substantial enough that the state Department of Transportation could be left with enough money only for “maintaining what highways we do have.”

Scott Darnell, a spokesman for Gov. Susana Martinez, said the governor has made no decisions about the Rail Runner.

“The state is interested in ensuring that the Rail Runner is as self-sustaining as possible and provides a positive form of transportation for its riders,” Darnell said in a written statement. “We’re willing to work together to help ensure that happens.”

Santa Fe merchants in particular say they feel betrayed by the Rio Metro’s decision to cut weekend service.

“It’s pretty devastating,” said Jim Bradbury, executive director of the Santa Fe Convention & Visitors Bureau. The loss of weekend service “is going to take a lot of money over the course of a year out of (Santa Fe) businesses.”

In May, an average of 2,647 people boarded trains each Saturday and 894 each Sunday, Rail Runner operators reported.

The loss of weekend service also means New Mexicans who don’t commute to work by train will lose benefit from Rail Runner, said Debbie O’Malley, an Albuquerque city councilor who was one of five Rio Metro board members who voted against ending weekend service.

“The people who don’t commute are supporting Rail Runner (with taxes), and they want to use it, too,” O’Malley said.

Rail Runner remains largely dependent on gross-receipt taxes to pay for operating costs.

The train will receive an expected $12.6 million this year from an eighth-cent gross receipt tax collected in Bernalillo, Sandoval, Santa Fe and Valencia Counties. The tax will comprise 53 percent of Rail Runner’s expected revenue of $23.8 million.

O’Malley also said fare increases are a tactic the board should consider for balancing the budget.

Dewey Cave, executive director of the Mid-Region Council of Governments, which manages Rail Runner, said a fare increase is “on the table.” However, Rail Runner would require a 40 percent fare increase to overcome a $1.2 million shortfall, he said.

A significant fare increase has the potential to push down ridership, Cave said.

Currently, a train rider traveling between Albuquerque and the Santa Fe Depot pays a full-fare rate of $7 for a one-way trip, or they can pay $8 for a day pass that allows for unlimited travel between the “zones” that the stations fall within. A full-fare day pass to travel between the southern tip of the line, Belen, and the northern terminus, the Santa Fe Depot, costs a rider $9. To travel between Belen and Albuquerque costs a rider paying full fare $2 for a one-way trip; $3 for a day pass.

Weekend ridership declined about two years ago when Rail Runner raised weekend fares to make them equal to weekday fares, Cave said. As a consequence, the train realized no net increase in revenue, he said.

Cave said the system can likely find savings by cutting operating costs, eliminating some under-used trains and other strategies.

But Abraham said the Rail Runner “will die a slow death” unless the state finds ways of increasing ridership and better aligning the train system with the state’s tourism industry.

He noted that the Rail Runner averaged about 4,500 boardings each weekday in May, suggesting that some 2,250 people commute to work and back by train each day.

“That’s not a lot of boardings,” he said. “I think we probably need to provide more service and exceed people’s expectations. It’s not going to be an easy fix, but I think we can solve it.”
— This article appeared on page A1 of the Albuquerque Journal

Photo Credit – journal file photo
Cutline – Southbound Rail Runner Train No. 509 prepares to leave the Los Ranchos Journal Center Station on June 24. The Rail Runner will end weekend service in August. Photo Credit – Journal File Photo