Saturday, June 25, 2016

Another lie from the high-speed rail authority

California High-Speed Rail Authority Chairman Dan Richard in April assured skeptical legislators that high-speed rail operations are known to make profits. There is much evidence to the contrary.
Photo: Al Seib, LA Times

From the LA Times (Did bullet train officials ignore warning about need for taxpayer money?):

...In April, [high-speed]rail authority Chairman Dan Richard assured skeptical legislators during a hearing that they shouldn’t worry. Assemblyman Jim Patterson (R-Fresno) asked Richard, “Do you know of any high-speed rail operations around the world that make substantial profit?” Richard answered, “Actually all of them, virtually all of them, make operating profit.” He defined that as being able to cover costs after the expenditure of capital to build the systems...

The assertion that similar systems around the world do not get subsidies is broadly disputed. “It is very easy to falsify a claim like ‘Every HSR system in the world collects revenues that cover their cost,” said Bent Flyvbjerg, a University of Oxford business professor and one of the world’s leading experts on bullet trains.

Flyvbjerg noted that a number of systems became insolvent after starting operations, including the English Channel tunnel train system and Oslo airport train. The Gautrain in South Africa is subsidized, he said. And a national government audit of the Arlanda Express airport link in Stockholm found that agencies had secretly supported the money-losing system.

A 2015 study by Spain’s Foundation for the Studies of Applied Economics concluded that the nation’s massive investments into high-speed rail were not yielding economic benefits to businesses or individuals. Gerard Llobet, the lead author, said in an email exchange that he obtained data showing the system’s northern line did not cover its operating expenses, separate from repayment of capital.

A study of international high speed rail systems by four Silicon Valley financial experts — including Stanford University emeritus professor Alain Enthoven and former World Bank executive William Grindley — found that California’s system could be among the worst performing in the world.

Its prospective fares would be the lowest on a per-mile basis, driven by a need to compete with the state’s cutthroat airline market. The California bullet train could only be profitable if it also had the world’s lowest per-mile costs, roughly one-fourth the typical European system, the report said. But given the costs of doing business in California, that is not likely, Grindley said.

“The authority,” the report said, “is in a trap of their making.”

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