St. Louis Streetcar Named Quagmire

In a recent study, I explored how federal subsidies induce state and local governments to spend on wasteful projects. Case in point: a new “streetcar named quagmire” in St. Louis.

Joe Barrett of the Wall Street Journal reports:

St. Louis business leaders looking to boost tourism and development spent years bringing the Loop Trolley to fruition, a $52 million streetcar project that runs for 2.2 miles between a historic park and an entertainment-and-business district on the edge of the city.

But it has been a bumpy ride, and now it may have reached a dead end.

The trolley, after just a year of offering limited service, is out of money. The nonprofit that operates the trolley is seeking $700,000 in local funds to continue, or else the service is set to close this month.

… The U.S. Transportation Department has awarded more than $1 billion to 18 streetcar projects across the country since 2009, a spokesman for the department said. The St. Louis project received a $25 million federal grant in 2010, part of a first wave of federal grants awarded in the wake of the financial crisis.

… Only two cars were ready at the outset, so the system could operate only part-time. A third car was needed to be held in reserve for full-time service to assure reliability.

That has held back cumulative ridership to 15,766 since last November and fare income to $32,500 through September this year—much lower than what had been projected under a full-time schedule. The Loop Trolley has also brought in about $689,320 through a 1% sales-tax on businesses along the route, since it launched service last year.

So after a year of operation, the $52 million project generated 15,766 rides, or just 43 rides per day. It garnered $32,500 in fares over 10 months. Let’s be optimistic and say the system generates $100,000 a year in fares if it keeps operating. Then it would still take more than 500 years to pay off the initial capital investment, let alone cover the operating costs.