From Stubaski's guide for Rail Nation
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The LM's RG requirements equate to every RG the city has ever hauled. So, a level 2 LM only has to haul what its L2 city has required.

Where people make a mistake, is in letting the gap get huge. That same L2 LM has to haul everything a level 8 city has hauled, plus passengers (from level 5 city on up).

A level 5 LM allows for a L25 city, L6 LM = L30 city. So, technically, you only need about level 5-7 LM for your city to be competitive. BUT, the LM offers about 2500 pts per level to the region (for ranking purposed) while each city level is only 500 (last I checked).