Program: Intercity Passenger and Freight (Section 117)

Appropriation:

Federal Funds:

$4,600,000

 

Special Revenue Funds:

$24,027,700

 

Total:

$28,627,700[8]

Program Description:

This appropriation funds a variety of programs intended to foster intercity bus and interstate rail passenger service, a state-owned rail line, and subsidies of private rail lines.

Recommended Action:

All line items under section 117 of the state MDOT budget could be eliminated.  There are no programs in these sections of the budget that cannot be performed by the private sector or funded by the private firms and users who benefit from them. 

Rail Freight programs.  The three programs that subsidize rail freight services in Michigan — freight property management, freight preservation and management and the rail infrastructure loan program — could be terminated.  Rail freight service is operated on a profitable basis throughout the country, and in those areas where such service is uneconomical because of limited traffic, alternative service can be readily provided by trucks.  Programs could be terminated and Michigan’s 700-mile state rail system could be sold by competitive bid.  Savings: $7,192,900.

Detroit/Wayne County Port Authority.  Established in 1978, the D/WCPA is a nonprofit, government-supported operation that promotes and plans shipping transportation involving Detroit and the surrounding area. The Authority does not own, nor does it operate, commercial terminals, but it has wanted to create new revenue streams for years and has recently revived an idea to create a passenger terminal to encourage passenger ships to visit Detroit. 

Private commercial marine operators have questioned the need for the Authority’s very existence.[9] This government entity performs services that already are provided by the private sector.  The Authority can safely be eliminated.  Savings:  $500,000.

Rail Passenger Service.  This program subsidizes service on two routes — Port Huron to Chicago and Grand Rapids to Chicago — operated under contract by Amtrak.  Nationwide, Amtrak serves only 0.6 percent of the inter-city passenger market, and because service on its Northeast corridor accounts for nearly 60 percent of its passengers, it is likely that its share of the market in Michigan is substantially smaller, probably no more than 0.2 to 0.3 percent.[10] If Amtrak service in the state is terminated, that tiny fraction of travelers can shift to cars and/or to unsubsidized inter-city buses that serve the same routes at less cost. Because Amtrak is in serious financial difficulties, its new president claims that in the future states will have to pay more for what passenger rail service they now have, indicating that Michigan’s share will likely go much higher than current levels, which have already more than doubled since 2000.[11] Savings: $11,300,000.

Intercity Bus Equipment and Service Development.  These two programs subsidize private bus carriers who provide intercity service to communities that might not otherwise have it, have it with lower frequency, or have it at higher costs.  Because intercity bus service accounts for only about 1.4 percent of the nationwide intercity passenger market, the number of passengers adversely affected by its termination would be small.[12] Expenditures on bus equipment have already doubled from the annual levels of spending in fiscal years 2000 and 2001.  Savings: $5,850,000.

Detroit/Wayne County Airport.  This program subsidizes operations at the Detroit/Wayne County airport.  Passengers and airlines that use and benefit from the airport should pay the full cost of the airport’s operations, not the general taxpayer.  Moreover, the airport could be privatized, as has been occurring in Europe and Australia to the considerable benefit of the users and the public at large.  An earlier analysis of the airport’s value suggests that it might have a gross value (before debt and other liabilities) of as much as $2.5 billion.[13] If sold, net proceeds could be used for tax relief or to provide other services. As a private, for profit entity, the airport would pay taxes instead of consuming taxes paid by others.  Savings $500,000.

Marine Passenger Service.  This program subsidizes ferry service on the St. Mary’s River and to Beaver Island.  Individuals who choose to live in relatively remote and inaccessible regions should bear the cost of that lifestyle choice. Savings: $800,000.

Terminal Development. This program subsidies the construction and improvement of a variety of passenger facilities throughout the state.  As subsidized transportation services are terminated or privatized, the state’s provision of this service is no longer required. Savings: $2,884,800.