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Question
My city is looking into building a light rail system in an effort to drive city growth.  Would building this transportation system really benefit the city enough to spend a couple million dollars on it?

http://www.omaha.com/article/20130131/NEWS/701319902/

Answer
We can measure the success of infrastructure investing like this by measuring the total increase of tax revenues it generates, adjusted for inflation and any relative changes in tax rates.

Let's look a little closer at that.  A government is successful when its people and business are successful.  This can be measured in tax revenues.  To keep it simple, let's pretend the city of Omaha has a flat 5% tax on everything and 0% inflation.  If they earn $1 million in tax revenues in 2010, but earn $1.5 million in tax revenues in 2011 without changing their tax rate, inflation, or population size, then that means the people and business of Omaha, on average, have been more successful because they are earning more money and spending more money.

There's 2 primary ways that transportation infrastructure, like a train, can increase success.  First, it can make things cheaper.  People can use the train instead of a personal car, saving money.  Businesses can use a train for shipping, saving money.  These cost savings are the direct result of increased resource efficiency; fewer resources are used to accomplish the same task, so costs decrease.  The second thing that transportation infrastructure does is increase production potential.  Not only do decreased costs increase the total asset availability that people and businesses can use to invest in other pursuits, but the total speed and volume of transportation capacity is increased.  These improvements also tend to attract more business seeking to benefit from the additional infrastructure, which tends to attract more people who are seeking work with these companies.

Now, whether Omaha itself will benefit from a train depends on a few factors, and it's going to be highly dependent on their final plan for placement of the lines (i.e.: where will the train go?).  In order to optimize the returns on a train, they should maximize the volume of its usage.  Where will people use it most?  Will other forms of public transportation (e.g.: buses) be replaced?  Unfortunately, the article doesn't give many details about the exact proposal, but given the sheer geographic size of Omaha, and it's currently low but increasing population density, there definitely seems to be potential to benefit.  I would really recommend making train stops, or shuttles to train stops, available as an alternative to the current bus system, however, and also of particular importance would be accessibility to the nearby Air Force base, given the high number of people being placed there without personally-owned vehicles available to them.

The US has been behind other nations in rail infrastructure for decades, but the overall national potential is great, especially given the extremely high demand and relatively high cost of trucking.  It's good to see consideration finally being given to an updated model, particularly in Omaha where Union Pacific is headquartered.  Even if this won't be a groundbreaking moment in overall rail infrastructure, perhaps others will take Omaha's lead, should Omaha find a way to be successful in their implementation.

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Michael Taillard

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Economic Consulting: American Red Cross; US Strategic Command -- Economics Lecturing: Bellevue University (Bellevue, NE) Huijia College (Beijing), OPII Schools (Omaha), Madonna University (Livonia), Schoolcraft College (Livonia), ZomBCon (Seattle), Zombiefest (Lincoln) -- Media Appearances: Dead Man Working (2012 Movie documentary), The Heartland News (Omaha local news outlet)

Organizations
American Economics Association, Business Networks International, Midwest Writer's Guild, Zombie Research Society

Publications
Economics and Modern Warfare: The Invisible Fist of the Market (Palgrave Macmillan) -- 101 Things Everyone Should Know about Global Economics (Adams Media) -- Corporate Finance for Dummies (Wiley) -- Psychology and Modern Warfare (Palgrave Macmillan) -- Analytics and Modern Warfare (Palgrave Macmillan)

Education/Credentials
PhD (Financial Economics; honors) -- MBA (International Business Finance; honors) -- Grad School Certificate (International Business Management; honors) -- BS (International Business Economics; honors) -- AA (Business Administration; honors) -- Certificate (Chinese Language and Culture) -- Trade School (Transportation Logistics; honors)

Awards and Honors
Philanthropy awards and nominations for the OPII Schools economic experiment

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