TCO

 

 

"Don't worry, if get the Feds pay, it won't cost us anything"

For those who have gone to business school, TCO is a familiar term. It stands for Total Cost of Ownership. For companies with a solid bottom line, every investment is looked upon not just from acquisition cost, but also total cost - a total cost of ownership. However, many times government investments ignore this all important issue.

A good example of this are the discussions on the NLX - the Northern Lights Express. The current guessers are saying this railroad line running from the Twin Cities to Duluth, will cost just south of $1B to build. That would be only a part of the costs. Once it is built, it needs to be operated. A responsible company would look at the "pay back" period - how long before the initial investment is recaptured for the investors. This train, which most people cannot imagine taking to the North Shore, will never pay for itself. The operating revenue (price of a ticket) would have to be astronomically high to cover the development costs, cost to service the debt to build, ancillary costs, maintenance costs and of course, operations costs.

If the NLX was presented to the taxpayers with all the anticipated costs, as well as a realistic revenue estimate, it would never be built. The same could be said if we had done that for light rail, the Northstar, and the multi-billion dollar rail they want to build in California. None of these rail lines are now or will ever be self supporting. That is unless you can charge $100/ride and enough people are willing to pay it.

Again, back to the NLX. This is a solution to a problem which does not exist. I could almost understand the logic if the city of Duluth had a wonderful transportation system which could pick you up at the train station, take you anywhere in town, or if you wanted, Points North. However, this is not the case. You get off the train and do ---- what? People like to drive to Duluth for a variety of reasons. They need their car to explore and haul stuff. Taking a train up there makes no sense what-so-ever.

It is comforting to know that even though the NLX will never happen, we are already spending money to look into how to build it. This is madness. This would never happen in the private sector. When asked why so many are cynical of government, this is a prime example. The TCO for the NLX would be sky high and would end up being the train to nowhere. Like Amtrak before it, the NLX would just stop running due to lack of support. All that money would have been wasted, and once again, the taxpayers would be stuck with the bill.

As taxpayers, we need to demand our representatives show us real cost and real revenue estimates prior to any public investment. The way of doing business in the past will not suit us in the future. We are broke and getting broker. Time for a change. Time to get real. Time to stop wasting our money.