Monday, March 14, 2011

Why California should reject high-speed rail

Last month the NY Times was baffled when Florida Governor Rick Scott rejected federal high-speed rail money: "There is no sound economic justification for the decision by Gov. Rick Scott of Florida to reject $2.4 billion in federal financing for the vital Tampa-to-Orlando high-speed rail project. Political pandering to his Tea Party supporters is the only explanation we can come up with."

Apparently they didn't do much research to come up with that dumb explanation. I don't know about the Tea Party, but in general conservatives have been a lot more sensible about high-speed rail than liberals, including the Chronicle's Debra Saunders. Wendell Cox explains why Governor Scott was right:

US rail grants will obligate taxpayers
by Wendell Cox
New Geography

The US Department of Transportation has announced a competitive grant program to reallocate funding that was refused by Florida for a proposed high speed rail line from Tampa to Orlando. The line was cancelled by Governor Rick Scott because of the prospect for billions of dollars of unplanned obligations that could have become the responsibility of the state's taxpayers.

Eligibility: Eligible applicants are states, groups of states, Amtrak or other government agencies that are authorized to "provide intercity or high-speed rail service on behalf of states or a group of states." The grant program requires recipients of grants (read "taxpayers") to provide financial support to intercity and high speed rail passenger rail programs in the event that cost and ridership projections are optimistic (a routine occurrence).

Obligation to Pay for Cost Overruns: As in the program announced in 2009, the state, group of states, or government agency will be required to demonstrate its financial capacity (that is, the capacity of their taxpayers) to pay for cost overruns (page 9). This open-ended liability led Governor Chris Christie of New Jersey to cancel a new transit-Hudson River rail tunnel, which had costs that were escalating out of control that would be the obligation of the state's taxpayers. Governor Christie and Governor Scott were both aware of the disastrous record of major infrastructure cost overruns, such as in the Boston Big Dig project, the Korean high-speed rail program, and the overwhelming majority of passenger rail projects in North America and Europe, according to a team led by Oxford University Professor Bent Flyvbjerg.

Obligation to Pay Operating Costs: Moreover, inaccurate passenger and revenue forecasts have been pervasive in high-speed rail systems, as has been documented by Flybjerg, who found that cost overruns occurred in nine out of ten projects: "...we conclude that the traffic estimates used in decision making for rail infrastructure development are highly, systematically and significantly misleading."

This is illustrated by the fact that even a decade and one-half after the Eurostar London to Paris and London service was opened, ridership remains 60 percent below projection. Ridership on the Taiwan and Korea high speed rail systems has been one-half or more below projections. Our analysis of the Tampa to Orlando line revealed exceedingly high ridership projections, which were inexplicably raised even higher in a new report just released. Failure to achieve ridership projections increases the likelihood that a line will need operating subsidies, which would be the ultimate responsibility of taxpayers under the USDOT program.

Federal Grant Repayment Obligation: Moreover, taxpayers of any grant recipient would be required to repay part or all of the federal grant if a sufficient level of service is not maintained for a period of 20 years (page 41). The operation of this provision is illustrated by recent Florida experience. Tri-Rail, the Miami area's commuter rail service only narrowly escaped having to repay $250 million when its service level was deemed to not meet requirements of a federal grant by early in the Obama presidency. Tri-Rail was rescued by a state subsidy of nearly $15 million annually, which restored an artificially high level of service.

Intercity and High Speed Rail Program: The federal intercity and high-speed rail program is largely limited to upgrades of Amtrak-type service. Before Governor Scott's decision, only two of the programs (Florida and California) would have achieved international standard high speed rail speeds.

Thanks to High-Speed Train Talk for the link.



At 12:12 PM, Anonymous Anonymous said...

Rail projects have been dubious as long as oil was cheap and abundant. However, as jet fuel and gasoline prices force more people to look for alternatives, we'll be glad that the California high-speed rail was built. I'll take a nuke plant (out of a tsunami's reach) and high speed rail over the oil hogging madness we've been, thanks.

At 2:39 PM, Blogger Rob Anderson said...

Alas, we have a nuke plant right on the coast of southern California! First Three Mile Island and now Japan. Nuclear power is dead again in the US.

People are already looking for alternatives to oil, but high-speed rail, which is electric, won't help with that.

But we don't even have enough money to get it built in California. Governor Brown should face that reality now and reject the federal money before we waste any more money on that boondoggle.

At 3:23 PM, Blogger Rob Anderson said...

By the way, the Flyberg book recommended by Cox is a good one. It's a study of this kind of mega-project. What almost all of these big projects have in common: ridership numbers are deliberately inflated to get the projects built, a tradition followed by California's HSR project: see page 45 in this study for a discussion of CHSR's deception about future ridership.

At 9:16 AM, Blogger murphstahoe said...

HSR is electric, so that's not an alternative to oil. Therefore we should focus on things like the Chevy Volt.

Begin ad-hominem attack.

At 11:59 AM, Blogger Rob Anderson said...

If the future ridership numbers are a lie, then HSR won't save energy because it won't lure enough motorists and airline passengers to make any difference in fuel consumption.

But this just in: the system won't/can't be built, and the sooner California understands that, it will cut its losses and stop spending on this ill-conceived project. Governor Brown should follow the lead of Florida's Governor Scott and decline the federal money.

Look at the numbers---which grossly underestimate the real construction costs---from the CHSR's own business plan just to build the system:

Federal Grants $17-19 billion
State Prop. 1A bonds: $9.95 billion
Local Grants $4-5 billion
Private Funding $10-12 billion

State Treasurer Lockyer has said that the bonds are not marketable without the state guaranteeing a return, which is prohibited by Prop. 1A. And even if they were saleable, the annual debt service on those bonds would be more than $460 million for California, which already has a budget deficit of more than $26 billion.

We've already got several billion from the Feds, but it's unlikely we'll get the rest. "local grants" means money from counties and cities that are virtually bankrupt like California, and there's still no private investors more than two years after state voters passed Prop. 1A because there's no money to be made without state guarantees.

At 1:22 PM, Anonymous Anonymous said...

"If the future ridership numbers are a lie, then HSR won't save energy because it won't lure enough motorists and airline passengers to make any difference in fuel consumption."

Conversely then, you admit, if the ridership numbers are NOT a lie, then High Speed Rail, WILL save energy.

"People are already looking for alternatives to oil" - Rob Anderson

"Nuclear Power is dead again in the US" - Rob Anderson

How else can you run a car besides cheap oil or cheap electricity? If you can't, then the flexibility of the car will have to give way to the efficiency of mass transit.

The writing is on the wall, but all you can see is "DAMN PUNKS PUT UP GRAFFITI!"

At 2:07 PM, Blogger Rob Anderson said...

But the ridership numbers are a lie, which you would understand if you did a little homework before pulling comments like this out of your ass.

See pages 45-50 in this document for a full discussion of CHSRA's inflated ridership projections.

HSR is not an efficient form of mass transit as the numbers just to construct the project show. And if you had actually read the post you're commenting on, you would understand that California would be responsible for the inevitable cost overruns and for paying to operate the system if/when it's built, which would run into billons of dollars for a state that is already in effect bankrupt.

Even at $4 a gallon, driving a car is a better deal than this project. And there's still plenty of oil in the world. Whoever ends up controlling Libya will still sell its oil to the world, since that's the primary source of revenue for that country.

At 2:33 PM, Anonymous Anonymous said...

"People are already looking for alternatives to oil"

"And there's still plenty of oil in the world."

You don't see the contradictions. Frankly I believe you do, you simply think "There is plenty of oil left to make it until I die, and fuck the children".

At 4:15 PM, Blogger Rob Anderson said...

No contradiction, unless you think we're going to run out real soon. There's enough to give us plenty of time to make the transition to other sources of energy.

At 8:44 PM, Anonymous Anonymous said...

And if not, what do you care, you're in your sixties. Party on!

And you didn't take that photo, did you?

At 10:01 AM, Blogger Rob Anderson said...

If you're concerned about the future, you would oppose California's high-speed rail project, since it will put future generations in debt for a system that will serve mostly rich people.

I took that picture. It's a little blurry, so you probably can't see that it's the K Ingleside pulling into the West Portal station.

At 12:14 PM, Anonymous Anonymous said...

"put future generations in debt for a system that will serve mostly rich people"

Not a problem. When the debt comes due, we will print up zillions more, inflate the hell out of the currency, pay off the bonds, make all the rich people's money worthless, and we'll have a train to get around in.

Money is just dirty paper. If you bought the bonds and put yourself at risk of hyperinflation, you made a bad investment.

At 1:10 PM, Blogger Rob Anderson said...

General obligation bonds have to be serviced every year, not only at some future date.

The $9.95 billion in bonds authorized by state voters in 2008 are unmarketable as State Treasurer Lockyer said last year. They can't be sold because the legislation in Prop. 1A also forbids the state from subsidizing the high-speed rail system, which also means that the state can't guarantee a return to bond purchasers. No return/profit, no buyers for the bonds to build a system that clearly won't make a profit.

Besides, everyone would suffer under that kind of inflation, not just rich people.

The system is a terrible investment for the people of California and shouldn't be built.

At 1:30 PM, Anonymous Anonymous said...

"Besides, everyone would suffer under that kind of inflation, not just rich people."

I disagree. We still grow crops, we still do work. Just add a few zeroes, reset the system, and move on. If everyone is broke, then a days hard work is worth a lot.

If it happens, billionaires will be broke, and have nobody to blame but themselves. You can't grow veggies in a 50th floor penthouse.

At 9:27 PM, Anonymous Anonymous said...

"If you're concerned about the future, you would oppose California's high-speed rail project, since it will put future generations in debt for a system that will serve mostly rich people."

You sir, are the Republican Party/Tea Party's wet dream.

The money exists to build high speed rail. That money is in the pockets of the "rich people" you are denigrating. They do not want to pay for it, because they *will not* use it. It is for the middle class, even as oil starts to get pricier the wealthy will not be impacted and will be flying in planes. As such, they have no incentive to chip in for the social good of HSR, and therefore they fund places like Cato to fight projects like this.

Additionally, they don't stand to profit from the construction because they've gone all in on cars and highways, a good chunk of the contracts will go to foreign companies. Those foreign companies will take their profit margin overseas, but the hammers and nails will still be in the hands of Californians - you can't outsource laying a track. But that doesn't benefit the people pulling the levers.

America isn't broke. It's just that 50% of the wealth is held by 1% of the people, and they want to hold on to it.

At 3:16 PM, Anonymous Anonymous said...

TeXan says
Population density in USA is made for car and airplane transportation. it cannot change overnite. Our cities have been and continue to be built around automobile transportation. Considering we only provide 5 mil of the daily 20 mil barrels of oil consumed you would think that the states should reconsider urban planning.


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