2001-02-13

Overview

For people who are used to seeing public transit proposals that cost taxpayers huge amounts of money, for both capital costs and annual operating costs, the Sky Loop analysis will be very hard to believe. Why? Because the Sky Loop will make money for its investors.

Our cost data is based upon a complete system review in preparation for Taxi 2000 going to private investors with a business plan for investment in their full scale prototype. The figures herein are based upon this update.

Compared with prior estimates, capital costs are much lower, and operating costs are higher, due to the addition of depreciation.

In addition to Taxi 2000 estimated costs, we include an allowance of $500,000 per mile for right of way costs, which is primarily for overhead and underground utility relocation costs, plus the added cost of attaching the Sky Loop to three bridges: the Clay Wade Bailey, the 4^th/5^th Street bridge between Covington and Newport, and the L & N Bridge. These costs are included as a reminder that such costs will be incurred, but will need a realistic estimate later, done by Cinergy, the Kentucky Transportation Cabinet, and perhaps others.

Unlike bus or light rail systems, the Sky Loop is presumed to charge riders a fare based upon the true value of the convenience of using the Sky Loop. All market analysis done by those familiar with PRT indicates that the only competition for PRT is the automobile, as the level of convenience is equal to or greater than the auto in all cases where PRT is proposed. Therefore, there is no need to subsidize PRT users with cheap fares, to compensate for the delays and inconveniences typically associated with public transit.

The system we are proposing for the Central Area Loop Circulator, projects annual cash flow of nearly $13,000,000 per year, with an original investment of $70,080,000 for 12.84 miles and 30 stations. This would leave substantial annual cash flow for system expansion, just out of cash flow.

Note also, we have included figures for the same system with the Capital Costs doubled, and yet the system remains profitable, and has an annual cash flow of over $11,000,000, with an original investment of $140,000,000.

Now let’s go to the details…

Sky Loop Projected Income

The income side of our analysis is based primarily upon the attraction of the Sky Loop to daily commuters. By saving commuters more each month on their parking costs than it costs for a Sky Loop Card with unlimited use 24 hours a day, the Sky Loop starts as basically free to commuters. The fact that it will enable such commuters to get around the entire three city downtown area, with express service in five minutes or less between almost all points, should be an irresistible attraction to them.

Studies of PRT done by others for Minneapolis, Indianapolis, Los Angeles and Stockholm have estimated that 33% to 50% of total trips taken in their respective areas would be by PRT, assuming the operating characteristics of PRT (mode split analysis). However, we have been conservative, estimating no more than 20% of the 100,000 daily commuters to our regional downtown area will buy our Sky Loop Cards.

The remaining third of projected income to the system will come from tourists, conventioneers and others from the suburbs who will use the Sky Loop from time to time, and buy either 1, 3 or 7 day Sky Loop Cards, as well as package delivery services whose employees making deliveries would buy the monthly card.

Sky Loop Capital Cost Estimate

The cost estimate is partly based on having an average of 55 vehicles per mainline guideway mile, which, with 12.8 miles of mainline, gives us just over 700 vehicles. Yet, the maximum average number of vehicles a mainline guideway can handle will be over 100 vehicles average per mile. This illustrates that you can add vehicles to your starting system at very little added cost, as more riders discover the Sky Loop, and demand increases.

700 may sound like a lot of vehicles, but remember that they are re-used constantly. For instance, in the network simulation Taxi 2000 did for us in 1998, the 560 vehicles in the one hour simulation were used and average of 4.7 times while transporting over 5,000 people.

Even if we start with a system of 12.8 miles, there will likely come a point when we need to add stations and guideway, to meet growing demand, and to pick up even more riders. This is very easy to do, as adding stations does not slow down anyone’s trip, because they are off line. Guideway is also easy to add, as construction is modular, and the system is an expanding series of elevated loops (hence our name “Sky Loop”). As the system grows, more areas and population is served, making it more useful. This will allow demand to increase faster than the increase in cost of such additions, so the Sky Loop will grow more and more profitable as it expands!

Total capital cost of $70,080,898 works out to $5,458,014 per mile. This includes an allowance of $500,000 per mile for right of way costs. These costs cannot be known without a detailed engineering analysis of the route chosen by the Central Area Loop Study Committee (CALSC), but a number is shown to illustrate the point.

These capital costs per mile are a fraction of light rail (typically $35,000,000 to $65,000,000 per mile), or any other automated guideway transit technology we are aware of.

Sky Loop Operating Costs

The operating costs are broken down into four categories: operating software lease, guideway, vehicles, and stations. All utilities, central station costs, and administrative overhead are included in these categories.

Also shown separately is depreciation, as it is a non cash expense.

While these costs are substantial, it is important to note that the Sky Loop will operate with relatively few employees, as no drivers are needed. Vehicle maintenance and cleaning requires more people than any other single function, as it is assumed that vehicles will be cleaned on average 190 days a year.

Again, the annual operating costs are a fraction of those for light rail, streetcars, or bus systems, because typically 80% of the operating costs for these other systems are payroll costs for drivers.

Financing of the Sky Loop

We believe that roughly 50% of the capital cost can be financed through the Federal Transit Administration, under the New Starts criteria. Indeed, once the Taxi 2000 prototype is built, and both the engineering is fully tested and the costs are firmly established, we believe the Sky Loop is likely to go to the head of the class in priority for any public transit system. Why? Because it costs much less per mile to build, will attract far more riders per dollar invested than any existing public transit system, and will likely generate substantial profits to be used as equity for future expansion. No other public transit system anywhere can demonstrate this!

Assuming the federal share does not have to be repaid, this leaves the remainder for state and local public investment, and private investment.

First of all, the projected income should easily support financing 30% of the capital cost with a 30 year public bond issue, at an assumed 6% interest rate.

Next, we believe all stations should be financed privately, by building owners who want a station in or near their building. They will be direct beneficiaries of the Sky Loop, adding value to their property.

For illustration, let’s look at Atrium One and Two. According to the Book of Business Lists, these two properties contain 1,234,509 leasable square feet. We estimate normal station costs of $234,467 each, including $70,000 for an elevator. If the Atriums were to build a station in the atrium that serves them both, and it cost even double the normal amount, this would be $468,934. To get a 25% annual return on their investment, they would have to get an average increase in their net rent of just $0.09 per square foot! The added value to the buildings of having their own Sky Loop station inside should easily justify increased rents of $1.00 PSF or more.

We propose that these station stakeholders would own stock in the operating company of the Sky Loop, and have board members representing their interests. If it is a public, nonprofit corporation, these private “investors” would not be able to receive profits. However, they would be wise to promote the use of such profits to expand the system, as the larger the Sky Loop becomes, the more valuable it is to all who have stations on it.

That leaves state and local governments for the remaining 20% of the capital cost. For our largest system (Plan D), this amounts to only about $12,609,000.

The economic benefits to these state and local governments will be far above the investment required, and we leave this calculation to others. However, unlike all other public transit systems, this one will be extremely profitable!

We calculate the annual cash flow at $12,782,772, a return of 65.1% on total stakeholders’ investment of $19,643,388! The stakeholders will be able to use this cash flow to expand the Sky Loop system.

In summary, the Sky Loop Committee believes that the potential for this system is so superior to any other possible technology for the Central Area Loop Circulator, that the CALSC should choose it as the Locally Preferred Alternative, and then await the development of the Taxi 2000 prototype.

The prototype is projected to be built and fully tested within three years after Taxi 2000 raises $25 million. While the timetable cannot yet be determined for raising these funds, their Business Plan is nearing completion, and investors will be approached over the next few months.

Once the prototype is completed and tested, Taxi 2000 will be ready to sell working systems. We believe the Sky Loop could be built within two years from the date of awarding a contract, including only one year for on site construction.

Charles S. Tappan
Chairman

Copyright © The Sky Loop Committee of Vision 2015