Back-of-the-envelope calculations for improving efficiency of public transit spending
The cost of building and maintaining public transportation varies widely across municipalities due to inefficiencies—for example, the NYC Second Avenue Subway has cost $2.14 billion per kilometer to build, whereas it costs an average of $80.22 million to build a kilometer of tunnel in Spain (Transit Costs Project). While many transit advocacy groups advocate for improving quality of public transit service (e.g. Straphangers Campaign in NYC), few advocate for reducing wasteful infrastructure spending.
BOTEC for operating costs
Uday Schultz writes: “bringing NYCT’s [the NYC subway agency] facility maintenance costs down to the national average could save $1.3 billion dollars per year.”
With a 6% discount rate, this equates to a $21.7 billion net present value. So an advocacy campaign that spent $21.7 million to reduce NYCT’s maintenance costs to the national average would yield a 1000x return.
Things that would make the cost-effectiveness of this campaign higher or lower:
(Higher) A lower discount rate would increase the net present value of the benefits
(Higher) In theory, we can reduce maintenance costs to even lower levels than the US national average; Western European levels are (I think) lower.
(Lower) We might not realize all of the potential efficiency gains for political reasons—e.g. if contractors and labor unions block the best possible reforms.
BOTEC for capital construction costs
The NYC Second Avenue Subway will be 13.7 km long when completed and cost over $17 billion. Phase 1 of the subway line has been completed, consists of 2.9 km of tunnel, and cost $4.45 billion.
So the rest of the planned subway line (yet to be built) consists of 10.8 km of tunnel and is expected to cost $12.55 billion, for an average of $1.16 billion per km of tunnel.
Phase 2 of the subway will be 2.4 km long and cost $6 billion, for an average of $2.5 billion per km of tunnel.
There will likely be cost overruns in the future, so let’s take the average of these two numbers and assume that the subway will cost an average of $1.83 billion/km to build.
As I stated before, the average cost per km of new tunnel in Spain is $80.22 million (Transit Costs Project). If NYCT could build the rest of the Second Avenue Subway at this cost, it would save $1.75 billion per km of new tunnel, or $18.9 billion overall (since there are 10.8 km of tunnel left to build).
N.B.: These are BOTECs for individual aspects of transit spending, and a transit spending advocacy project would benefit from economies of scope because it would be lobbying for cost reductions across all aspects of public transit, not just e.g. the Second Avenue Subway or operating costs.
Back-of-the-envelope calculations for improving efficiency of public transit spending
The cost of building and maintaining public transportation varies widely across municipalities due to inefficiencies—for example, the NYC Second Avenue Subway has cost $2.14 billion per kilometer to build, whereas it costs an average of $80.22 million to build a kilometer of tunnel in Spain (Transit Costs Project). While many transit advocacy groups advocate for improving quality of public transit service (e.g. Straphangers Campaign in NYC), few advocate for reducing wasteful infrastructure spending.
BOTEC for operating costs
Uday Schultz writes: “bringing NYCT’s [the NYC subway agency] facility maintenance costs down to the national average could save $1.3 billion dollars per year.”
With a 6% discount rate, this equates to a $21.7 billion net present value. So an advocacy campaign that spent $21.7 million to reduce NYCT’s maintenance costs to the national average would yield a 1000x return.
Things that would make the cost-effectiveness of this campaign higher or lower:
(Higher) A lower discount rate would increase the net present value of the benefits
(Higher) In theory, we can reduce maintenance costs to even lower levels than the US national average; Western European levels are (I think) lower.
(Lower) We might not realize all of the potential efficiency gains for political reasons—e.g. if contractors and labor unions block the best possible reforms.
BOTEC for capital construction costs
The NYC Second Avenue Subway will be 13.7 km long when completed and cost over $17 billion. Phase 1 of the subway line has been completed, consists of 2.9 km of tunnel, and cost $4.45 billion.
So the rest of the planned subway line (yet to be built) consists of 10.8 km of tunnel and is expected to cost $12.55 billion, for an average of $1.16 billion per km of tunnel.
Phase 2 of the subway will be 2.4 km long and cost $6 billion, for an average of $2.5 billion per km of tunnel.
There will likely be cost overruns in the future, so let’s take the average of these two numbers and assume that the subway will cost an average of $1.83 billion/km to build.
As I stated before, the average cost per km of new tunnel in Spain is $80.22 million (Transit Costs Project). If NYCT could build the rest of the Second Avenue Subway at this cost, it would save $1.75 billion per km of new tunnel, or $18.9 billion overall (since there are 10.8 km of tunnel left to build).
N.B.: These are BOTECs for individual aspects of transit spending, and a transit spending advocacy project would benefit from economies of scope because it would be lobbying for cost reductions across all aspects of public transit, not just e.g. the Second Avenue Subway or operating costs.
See also: “So You Want to Do an Infrastructure Package,” Alon Levy’s whitepaper on reducing transit infrastructure costs (Niskanen Center, 2021)