Rail Runner from LC gets a little closer to reality

[funkymonkey]

I checked the solar panel thread again and determined the mortimer accounting method is to subtract the same expense twice.

[mortimer]

Not twice. There is :

(1) the initial investment ... < plus > ...
(2) the cost of the investment over time

(2a) if borrowed, you pay interest until the loan is paid back
(2b) if you used cash, you gave up the money from that investment forever

In the case of the $500 million spent to extend the line to downtown Santa Fe,
the State of New Mexico is, in effect, paying interest on $500 in bonds that they
would not be paying on right now had they not used that cash to build out the line.

I don't know what rate a newly issued NM bond goes for, but assume
it is 3.5% then the SF extension costs about $18 million every year.
That is $18 million even if the Railrunner was to be shut down. (*)

There is always interest cost associated with cash. Always.

Even if you buy a car or solar panels for cash, you pay interest by not getting the money from that cash over time.

.. I'm using the term "interest" loosely here since new money today .....
.. effectively does not earn interest, but it could be earning dividends ..
.. or invested for a capital gain or otherwise invested somewhere ........

It's easier than writing "opportunity cost" and is more easily understood.

Whether it was worth it to build out the line to downtown Santa Fe is up for debate, but the cost of it is not.

Whether it is worth it to extend the line to El Paso is also up for
debate, but it will have an associate opportunity cost of not
having that money available for something else.

Earlier in this thread, it was stated that operating costs are $24 million/year.
Therefore, the cost of having that train is $42 million/year.
- - - - - - - - - - - - - - - - - - - -
(*) Of course I can always introduce another accounting term - "relevant cost."

Since the $500 million is gone forever, the associated $18 million in interest is not a "relevant cost" any more. It's still being paid, but not "relevant" to any decision to shut down the line.

[Zoidberg]

I think most of mortimer's principles make sense from a business perspective. It's a little muddier when it gets to government spending; for instance, if the state government is running a surplus (which it was, isn't now, but probably will again at some point in the future) it's harder to make a case for the interest rate being that high. The state does not get 3.5% on its surpluses. I don't think it gets any percent, actually.

The $500 million is not "gone forever" any more than your $250,000 is "gone forever" when you buy a house*. You may not get it all back if you someday choose to close out your position, or you may actually make a profit. If they spent the $500 million on, say, box lunches for people whose last name ends with "r", or construction of the University of Nowhere- BFE Campus, then that's a fairer use of "gone forever".

*If you bought the house in the middle of nowhere, say on top of a toxic waste dump, this wouldn't apply. This assumes you buy the house in Albuquerque.

[bradly]

Good luck getting that good for nothing train, it is slow and mostly tourists ride it.

Can somebody say waste of TAXDOLLARS!!

[mortimer]

Originally Posted by bradly

... it is slow ...

That is fixable.

Originally Posted by bradly

... and mostly tourists ride it.

My impression from the news and such is that mostly ABQ-SF commuters ride it.

If it is mostly tourists, then the value of their butt on a seat is greater
than the value of the commuter since it contributes to the tourist industry.

Just saying the Railrunner has no value is as wrong as saying that
it is a success beyond expectations.

There are also really two parts to the Railrunner and that is the Belen-ABQ-Bernalillo part
and the ABQ-SF part. It is possible to close either one and keep the other one running.

Since this thread is about a possible Las Cruces expansion, that would add a third part
to the Railrunner. Any through traffic SF-LC I would guess will be negligible.

[Zoidberg]

Originally Posted by mortimer

Any through traffic SF-LC I would guess will be negligible.

You might be surprised. In addition to politicians who have that commute, many NM State students are from there or points north.

From point A to point B you have your choice of bus or private car; no plane goes that way.

I'd think the smarter first move for LC would be a train to El Paso, perhaps with the same Railrunner name. Amtrak doesn't go that way, and LC alone is a far weaker economic proposition for a southern extension than EP + LC. Then you'd add all sorts of Mexico-US, US-Mexico, and concert/professional/tourism traffic by adding another major city to the line.

[bigsandyb]

Originally Posted by Zoidberg

You might be surprised. In addition to politicians who have that commute, many NM State students are from there or points north.

From point A to point B you have your choice of bus or private car; no plane goes that way.

I'd think the smarter first move for LC would be a train to El Paso, perhaps with the same Railrunner name. Amtrak doesn't go that way, and LC alone is a far weaker economic proposition for a southern extension than EP + LC. Then you'd add all sorts of Mexico-US, US-Mexico, and concert/professional/tourism traffic by adding another major city to the line.

Found this discussion interesting and I wonder if anyone can give me an update on status of El Paso to Denver route?

[mortimer]

Originally Posted by bigsandyb

... update on status of El Paso to Denver route?

If you read what's here, you know everything anyone on here knows.

[bigsandyb]

mortimer, thanks