Is China Building Too Much HSR Too Quickly?
That’s the claim from two economic analysts that was written up in today’s New York Times:
The line is part of China’s 2 trillion renminbi, or $292.9 billion, investment in a nationwide high-speed passenger-rail network that may be too much train, too fast.
The time savings that the new system delivers may not justify the cost, creating a potential drag on long-term growth, said Michael Pettis, former head of emerging markets at Bear Stearns. The losers are Chinese consumers, who will have to wait for new health care and old-age benefits while the government focuses on public works spending, he said….
Investment in fixed assets like factories and the rail network accounted for more than 95 percent of China’s 7.7 percent growth in the first three quarters of 2009 and made up 45 percent of gross domestic product, which is higher than any major economy in history, according to Stephen Roach, chairman of Morgan Stanley Asia.
Without a surge in consumer spending and with export growth stalled, investment must rise even further to stoke growth, he said in a Dec. 18 speech in Beijing.
“These are ridiculous, unsustainable numbers for any economy,” Mr. Roach said.
This may be part of an effort to counteract the Congressional push for more HSR funding, or even more infrastructure spending period, as one of the frequent arguments made for more HSR spending is “look at what China is doing.”
Yet the article and analysis misses some key points, and understates others. First, China isn’t assuming that HSR can replace consumer exports as a permanent basis of economic prosperity. They’re using HSR construction to bridge the gap from the last economic boom and the one they assume is going to come once the global recession is over.
Is that a wise move? Maybe, maybe not. But even if the other boom doesn’t materialize, China is doing something else that’s important with its HSR spending, which is making its domestic transportation network less dependent on foreign oil, and therefore less vulnerable to oil shocks. The two analysts in the article don’t mention that at all – once again taking a typical short-term look that excludes the longer view.
But there’s another aspect of Chinese HSR that the article DID mention, but didn’t properly analyze. It’s the same issue we’ve been talking about here in California – the cost of a ticket:
Most Chinese rail travelers will not pay the premium to ride on the fast trains, Zhao Jian, a professor of economics at Beijing Jiaotong University, said in a September interview on Chinese television.
A second-class one-way ticket for the half-hour Beijing-Tianjin trip costs 58 renminbi, about three-quarters of the workers’ average daily pay. A so-called hard-seat ticket on a slower train, which covers the distance in two hours, sells for 11 renminbi.
Passenger reluctance means revenue from the high-speed lines will not be enough to service the debt if railway expansion continues at its current pace, Mr. Zhao said in the TV interview. The Ministry of Railways has 383 billion renminbi in bonds outstanding.
“If America had its subprime crisis, in China we have a railroad-debt crisis, or you could call it a government-debt crisis,” Mr. Zhao said in the TV interview.
Here again we see the issue that DoDo first pointed out back in March: if you set train fares too high in hopes of rapidly servicing your debts, you’ll not get the ridership you need quickly enough and will fail to make the finances work. That’s what happened in Taiwan and that’s what seems to be happening in China.
It should be noted that “higher” HSR fares aren’t necessarily a ridership killer. Spain’s AVE has fares considered higher than on the French TGV and has had no problems attracting riders. Similarly, the projections from the 2009 Business Plan indicate that at 83% of airfares, HSR fares would still bring in enough riders to meet financial obligations. Which is plausible – HSR would still be a savings over the plane, and would offer more conveniences anyway.
The difference is that in Spain and France, the government has paid for the HSR construction mostly out of its own pocket. When governments don’t do that, and try to finance it, that’s where problems come into play. California’s HSR system is going to be partly paid for by state bonds, which is a sensible approach since those $10 billion in bonds will be repaid by the general fund – i.e. taxpayers and not riders, meaning the state funding doesn’t require higher fares on its own. Nor should federal funding. The question is the level of private investment which, as this blog as consistently argued, should be low.
As to the “crowding out” argument, as I’ve also repeatedly said, the choice in California isn’t one of teachers or trains. California has not been willing to raise taxes to a proper level to fund its services since 1978. Were politicians willing to do so, there would be enough money to service the Prop 1A debt and pay for teachers, doctors, nurses, firefighters, welfare programs, etc.
And in California, HSR really is the only job engine on the horizon. Nobody is talking about spending 45% of CA’s GDP on HSR, so we should be at the right amount to fund HSR without damaging the economy. In fact, it will prove a classic New Deal-style stimulus the way the Golden Gate Bridge and Shasta Dam did 75 years ago.
And note that China is not borrowing money from anyone but itself. Chinese debt denominated in RMB¥ and owed to Chinese individuals and financial institutions is simply not the kind of things that creates a debt crisis. There’s over a hundred years of history of international debt crises to draw on, and that kind of debt is not any problem out in the real world where history happens.
China still has an trade surplus, just a smaller one than in 2007 … and is using a mix of domestic resources that would otherwise be idle and imported resources that it is paying for in real time without going into debt to people overseas to invest in its country.
And under the same kind of mainstream economic model that did not find any problem with the US Economy in 2007 (and which can not, after all, get its stocks and flows to agree with each other), there’s supposed to be a problem with that.
Between the track record of the Chinese and the track record of the kind of economists that the NYTimes quotes, it would be foolhardy to bet on the Times.
i find it amusing that american reporting on chinese carbon emissions invariably harp on the growing number of cars and highways, but never mention the insane large scale of rail and transit construction going on at the same time. additionally, while most chinese workers may not be able to ride HSR at the prices given, that does not mean there still won’t be hundreds of millions of chinese who can. right now, chinese passenger rail is incredibly crowded, to say nothing of the mass insanity that is the chinese new year migration to one’s home county. even if HSR is a luxury more like air travel in china, it may still pull enough passengers off slow rail to ease the pressure on that system and carry a ton of passengers.
finally, when oil prices go back up, those economies with electric modes of transport will fare far better than those dependent on the black stuff. even if it seems wasteful now, electrified rail will seem an incredibly important investment down the line.
And in California, HSR really is the only job engine on the horizon. Nobody is talking about spending 45% of CA’s GDP on HSR, so we should be at the right amount to fund HSR without damaging the economy.
Even if $60B (a pessimistic estimate) was spent in one year (impossible) it would only amount to about 3.2% of California’s GDP. $10B in one year (possible) would only be 0.6%. Arguably California ought to be trying to do more sooner if the more pessimistic jobs forecasts are accurate.
I’m mainly pissed that China singlehandedly destroyed the Copenhagen deal.
The fact that China is a net creditor nation doesn’t mean its infrastructure investment is sound. Japan ran huge trade surpluses, too, and it still ended up with so much construction debt it had to break up JNR and wipe 19 trillion yen’s worth of its debt.
(P.S. I haven’t ridden Chinese high-speed trains, but I’ve ridden subways in Shanghai, and the people who designed them are idiots. The transfers are inconvenient and require walking hundreds of meters. The ticket vending machines only sell single-ride tickets, not multi-ride tickets, and the single-ride tickets expire in a day so you can’t buy many of them; the machines are often out of order, leading to 10 minute lines for tickets when many people try to board. The trains sometimes terminate at intermediate stations without warning and ask people to get on the next train.)
“former head of emerging markets at Bear Stearns”
Stellar credentials right there, the company was on the brink of collapse not long ago. So boohoo, the Chinese government is taking a very long view on investments in urban planning, transportation infrastructure, reduced dependence on oil etc. Sure, there are environmental brutalities and some investments won’t pan out the way the Politburo currently anticipates. However, the Chinese are at least creating jobs to avert a recession there and, they are creating numerous lasting assets.
Still beats letting Wall Street greedmongers securitize mortgages until even they no longer have any idea of the risks on their books. The notion that they’re all so much smarter than the rest of us – always questionable to begin with – completely went out of the window in 2008. China isn’t the US and it isn’t behaving as stupidly as the US did.
Alon Levy Reply:
December 23rd, 2009 at 8:00 pm
Rafael, China is scuttling climate agreements while all of Greater Shanghai, most of Greater Guangzhou, and chunks of Greater Beijing are at sea level in floodplains. The link I provided above explains that not only is China against binding agreements, but also it opposes having other countries commit to large reductions, since they could lead to binding agreements in the future. China’s activities make the US war on its cities look like picnic.
Rafael Reply:
December 23rd, 2009 at 9:08 pm
First off, just how exactly would you enforce an internationally “binding” agreement anyway? Trade sanctions? War? Time to get real, this sort of thing always depends almost entirely on the enlightened self-interest of the parties involved.
Second, China is still a communist country. Its leaders perceive strong economic growth as essential for avoiding a revolution, so they’re in no mood to let internal dissidents or outside critics tell them what to do. Is that irresponsible? Perhaps, but it’s not as if the US is trying particularly hard to do its fair share. All it has done is nuke its manufacturing base so its consumers can buy tchochkes that are made in sweat shops overseas. In terms of global GHG emissions, that’s no more than an accounting trick. Raising CAFE standards riddled with E85 loopholes is no substitute for a carbon tax, investing in alternatives to oil-based transportation, urban planning for higher densities, a smart grid capable of dealing with large numbers of small renewable electricity generators etc.
The reality is that on a per-head basis, China even now still emits a lot less CO2 than the US does. If CO2 is pollution, why should someone in one country be allowed to pollute more than someone in another? The perception in many developing countries is that the US is trying to use the climate change debate to keep them in poverty so Americans can continue to enjoy a very high quality of life at everyone else’s expense. This perception is what drives international politics on climate.
Third, Holland is one giant floodplain. They dealt with that reality by building a huge system of levees and other flood protection works. If and when global sea levels rise beyond a certain level, that’s exactly what every developed nation with threatened coastal cities is going to have to do if it doesn’t want to retreat to the interior (cp. New Orleans). Some countries may decide to build floating cities or at least city districts instead. While the technology of concrete pontoons filled with polystyrene foam is new, the concept as such is not: the Aztecs and Cambodians both had floating fields and, the Dutch and others have had people living in houseboats forever. On a separate note, Venice has been sinking into the sea for centuries yet it is still around. People can cope remarkably well with slowly rising water levels. Will that be inconvenient and/or expensive to deal with? Sure. But as long as the next generation has no say in the political process, the current ones will avoid making the economic sacrifices required to avoid that outcome. That’s just human nature.
jimsf Reply:
December 24th, 2009 at 9:47 am
They climate is going to change regardless of what we do or don’t do. All these agreements do is create economic hardship for those who have shoulder the costs.
adirondacker12800 Reply:
December 24th, 2009 at 6:50 pm
Whats cheaper, driving less or building a seawall so waves aren’t lapping around the edges of Union Square. I suppose they could institute gondola service from the BART and MUNI stations under Market St….
Alon Levy Reply:
December 24th, 2009 at 7:24 pm
Ask not what is cheaper for society; ask what is more profitable for ExxonMobil and Bechtel.
The main thrust of the NYT report is based on Michael Pettis’s opinion, who published an article in South China Morning Post a few weeks ago to argument against China’s HSR. He had a similar post on his blog. I had thoroughly disputed the view point in the comment section (http://mpettis.com/2009/10/chinese-railways-and-speculating-pig-farmers/).
Pettis is well known to be pessimistic about Chinese economy and usually try to argue from all kinds of perspective why China is doing everything wrong. You can quickly verify that from his blog posts. Since China’s HSR investments are attracting so much attention and have been generally praised, it’s not surprising he would offer such a negative opinion. In fact, Pettis has been consistently criticizing not just China’s HSR investments, but its overall infrastructure spending. I made opposing comments several times in his blog.
Understanding this, you will then not be surprised to find his opinion is pretty superficial. In fact, doesn’t know about the HSR industry, certainly compared with the regular readers of this blog.
Some of the key points about China’s HSR investments and plan:
1. Passenger rail has very slim profit margin in China, due to its public utility nature. The train fare is strictly regulated by the National Development and Reform Commission. The Ministry of Railway does not have the power to set fare price.
2. The freight transport is much more profitable for the Ministry of Railway, but has been often sacrificed due to capacity constraint and higher priority if the passenger transport. One of the reasons that China is building a separate HSR network is to release the existing lines to freight transport – therefore the official name of HSR in China is PDL (passenger-dedicated line). In that sense, even if some HSR routes will not be very profitable or even lose money, there is still net benefit due to increased freight capacity. China is experiencing severe freight transport capacity problem as of now.
3. HSR is a long-term infrastructure investment, which may last over 100 years. With Chinese economy growing so fast, the government is not aiming to recoup the investment in short-time period. It is laying the foundation for China’s future development and will profoundly shape economic and social landscapes, aid the urbanization process and has significant environmental implications. In economics terms, HSR has very favorable externalities.
4. The financing of the China HSR is primarily from government funding (both central and local), railway road bonds, long-term bank loans and some private investments (pension, insurance companies). In other words, these are more “patient” or long-term investments.
Overall, the HSR routes in the Eastern part of the country and coastal area are more likely to be profitable, as evidenced by the newly-opened routes of Ningbo-Taizhu-Wenzhou-Fuzhou along the coast. There have been some heated debate about some of HSR routes in the western part of the country, i.e., whether a lower speed technology (200 – 250 km/h) should be adopted instead of the current 350 km/h standard. Judging from the recently approved western HSR routes, Chinese government has elected to go for the higher speed solution for the sake of the completeness of the national HSR network and consistency of the standard.
For California HSR, tax payer should fund substantial portion of the capital cost. This is a public infrastructure that will have long-term economic, social and environmental benefits. It is hard to measure the return solely on short-term dollars & cents.
In fact, I would even go so far as to levy a gasoline tax to pay and/or accelerate the CAHSR. Once people have first-hand experience with HSR and more ridership emerges, it may become easier to convince people for more public funding. This may well send Californian down the road of building a European style PT infrastructure which includes not only HSR but also extensive metro systems.
Who knows, California may well again lead a trend in the US to a quite different future that is less dependent on auto and foreign oil. CAHSR is the only real HSR plan in the US and far ahead of other states.
China’s gonna do what China’s gonna do.
The point I was making regarded the shaky foundation of the argument made that China’s investment was unsound – for one thing, it is based on an underlying assumption that an economy automatically tends toward full employment.
Similar to a confusion between the Japanese setting up financial arrangements regarding rail construction and whether the investment was sound. There’s no automatic relationship between ability to satisfy a financial arrangement and the benefit of the investment to the economy – activities with substantial external costs can be easy to finance yet never yield a net economic benefit, while activities with substantial external benefits can be difficult to finance while yielding substantial net benefit.
Regarding Copenhagen, I’m shocked, shocked, that China did not make substantial real concessions in return for empty promises from the US that the Administration is in no position to see put into action. However, one cannot at one and the same time criticize China for not making unilateral concessions in return for rainbows and fairy tales, and also criticize China for unilaterally moving “too aggressively” on investment in HSR.
Alon Levy Reply:
December 24th, 2009 at 12:46 am
China wouldn’t have made anything unilateral. The EU and US were both offering substantial cuts if China agreed to cuts, as well. On the contrary, China’s scuttling of the deal and setting up Obama for the fall was unilateral.
As for full employment: if China is trying to build HSR as a way out of depression, it’s reinventing the wheel. In the Great Depression, the policies that got the economy back up and running the most quickly were those of Sweden, which included higher wages and social spending. The military- and public works-oriented stimulus spending of Germany was far less successful; while unemployment went down, living standards lagged, and most of the benefits went to the rich (e.g. in 1939 Germany had a higher percent of personal income spent on food than Britain, but per capita wine consumption was higher).
Maxi Reply:
December 24th, 2009 at 2:32 am
Alon, the US didn’t offer substantial cuts. The article states it put up 17% cuts from 2005 levels. Everyone else measures their cuts from 1990 levels, the world needs 40% emissions cuts from 1990 levels to mitigate potential disasters. From that, the US cuts only amounted to 4%. There was no winning in this conference dominated by the two powers. Either China wrecked the whole thing to serve its self interest, or the US got to put up a few more lovely windmills so Obama would look good at home.
Rafael Reply:
December 24th, 2009 at 4:00 am
The US was offering a measly 4% reduction in GHG emissions relative to a 1990 baseline. Hardly substantial and, even that would still need to be ratified by a US Senate containing 40 members who would rather lay waste to the nation before they vote for anything Pres. Obama proposes.
Minor point. The Golden Gate bridge was built during the depression and did provide many needed jobs but was funded by local bonds raised by the participating counties and not the State of California or the Federal New Deal program.
http://goldengatebridge.org/research/BondMeasure.php
The NYT report is essentially based on Michael Pettis’s article a few weeks ago on South China Morning Post. Pettis has been known to be pessimistic about China’s economy and has been constantly issuing opinions about why so many things are not right about Chinese economy, including infrastructure. You can check out his blog.
He actually had a post in his blog recently about Chinese railway expressing similar opinion. I disputed his view thoroughly in the comment section (http://mpettis.com/2009/10/chinese-railways-and-speculating-pig-farmers/).
The NYT report is essentially based on Michael Pettis’s recent article in South China Morning Post. Pettis is known for his pessimistic view on China’s economic prospects. He basically faults a lot things about what China does economically, including infrastructure. You can check out his view in his blog.
Since China’s HSR has attracted a lot of attention and has been generally praised internationally, he came out with some rather negative view on China’s railway investments. He has a recent blog post on this and I had argued against his view thoroughly in the comment section (The NYT report is essentially based on Michael Pettis’s article a few weeks ago on South China Morning Post. Pettis has been known to be pessimistic about China’s economy and has been constantly issuing opinions about why so many things are not right about Chinese economy, including infrastructure. You can check out his blog.
He actually had a post in his blog recently about Chinese railway expressing similar opinion. I disputed his view thoroughly in the comment section (http://mpettis.com/2009/10/chinese-railways-and-speculating-pig-farmers/).
$292 billion invested by the Chinese on HSR. That is just amazing, shocking. I know that China’s economy is booming but they are still per capita a relatively poor country. How are they able to spend that much on HSR? I guess like they said, they are choosing HSR over better healthcare, etc.
Rafael Reply:
December 24th, 2009 at 4:01 am
They’re choosing to build civilian infrastructure over waging pointless wars in faraway countries.
wu ming Reply:
December 24th, 2009 at 4:46 am
they aren’t paying for two wars and a global network of bases.
Ken Reply:
December 27th, 2009 at 2:29 am
Because for China, this is their transcontinental railroad. Build it at any cost and at full speed ahead before the country becomes too rich and the populace becomes too vocal which will hinder such plans later on in the future.
Think about it…if we were to build the transcontinental railroad today, will we be able to do it in six years like in the 1860s? We were able to build it with such speed because all we had to do was steal lands from the Native Americans, use cheap Chinese and Irish labor with very little safety concerns, and the land was free-for-all frontier. But if we built it today, we have all these environmental and safety concerns, NIMBYs and the Reason Foundation LOL
considering how california pisses away 99 percent of my taxes dollars on stuff I don’t want, its about time I get something, one thing, that I can actually support. I can think of a long list of things we need to pull the plug on in this state. hsr isn’t one of them.
HSRforCali Reply:
December 24th, 2009 at 8:30 pm
If you don’t like anything this state is doing, move away.
It’s pretty simple: California is broke. We can’t afford this fancy train. Building it will not bring productivity, innovation, nor prosperity. It will only make us more broke.
Rafael Reply:
December 24th, 2009 at 7:10 am
California isn’t broke at all. The state government in Sacramento is broke because the state constitution has a 2/3 rule that prevents corrective action. Huge difference.
dwight david diddlehopper Reply:
December 24th, 2009 at 7:41 am
Clearly you are saying that you want to increase state income taxes. They are already at 10.3% aren’t they? Many of us are paying more than 50% of our income in federal, state and local taxes.
Or should we raise business taxes?
The trend is that people that pay the most taxes are leaving the state, and many businesses are leaving or expanding away from here. You can’t increase taxes and expect the tax base to grow. The people that contribute and pay for the system are leaving and we are left with people that don’t create wealth.
PeakVT Reply:
December 24th, 2009 at 10:15 am
Rafael is correct. The deficit for next year amounts to about 1.2% of California’s GDP. That is not an unfillable hole. But because California is hamstrung by 1) Prop 13, 2) a 2/3 requirement for all types of tax increases, and 3) spending mandated by initiatives, the government has very little flexibility to alter either side of the balance sheet.
Alon Levy Reply:
December 24th, 2009 at 11:28 am
California’s income taxes aren’t that high by US standards – California ranks 12th in state taxes per capita, and somewhat less in state taxes as a percentage of GDP. They’re progressive so they’re high if you’re rich, but if you’re middle class, they’re middle of the road; 10.3% is just the top rate.
The part about people leaving the state is no longer true. In the last 10 years, many Californians moved to the bubble states of Arizona and Nevada. This trend had begun to reverse itself now that Nevada has imploded.
Dwight David Diddlehopper Reply:
December 26th, 2009 at 9:37 pm
Just saw a link on yahoo to cnnmoney.com
http://finance.yahoo.com/real-estate/article/108478/biggest-losers-where-americans-are-not-moving
it’s not detailed and may be deceiving to make some political point in one way or the other but it does not confirm your opinion that emigration out of California is no longer happening. It has slowed but they attribute that to people not being able to sell their homes [for what they want] in a falling real estate market. The people that have wealth are not leaving as fast, only because they can’t.
Joey Reply:
December 26th, 2009 at 9:41 pm
Emigration or not, people are still immigrating, people are still reproducing, and California’s population is going to grow.
jimsf Reply:
December 24th, 2009 at 11:51 am
from the la times “Overall, California’s population hit 38,487,889, the state estimated. That amounted to a 0.93% growth rate, the lowest since the recession of the mid-1990s.”
What this means is that growth has slowed, just like it has done in the past during downturns, but just as we’ve seen, after a downturn and slow growth, we have an upturn and high growth. We’ve been through it before and it has never been the end of the world because california has certain qualities that never go away and those qualities attractive bright, innovative people regardless of other conditions.
also while growth was just under one percent, once percent of 38 million is 380,000 thats an entire new large city larger than santa ana or anaheim.
The naysayers who move away in a huff. good riddance to them. they’re downers anyway.
The new people keep coming and they want the same things everyone else wants. They are no different or less capable and new blood is good for innovation.
show me another capitalist country the size of california that is any less dysfunctional.
Most people who get upset and huffy about how bad everything is here, actually don’t know what they are talking about and just reacting to the reactionary media reports.
No other state offers the variety of lifestyle options, weather and geography that california offers. not one.
they can only offer one or two things, but not everything.
You get what you pay for.
sure you can go move to nevada and live in a senior trailer park in Fallon for next to nothing. but then what? you are living in a trailer park in Fallon. ooooohh ahhhhhh. please.
californian, just like sf, will be fine. don’t like it, get out cuz there’s someone else waiting for you apartment and your parking spot anyway.
jimsf Reply:
December 24th, 2009 at 11:56 am
and you can’t put a price onthis
Alon Levy Reply:
December 24th, 2009 at 12:08 pm
Canada’s doing pretty well for now. There’s a capitalist country the size of California for you.
adirondacker12800 Reply:
December 24th, 2009 at 4:06 pm
California’s taxes income at 10.3 % ….. on anything over a million dollars. People who earn a million dollars a year can’t do that in South Dakota. Some of them could, if they wanted to, move their job to South Dakota. I hear the weather in South Dakota is very pleasant once or twice a year. And that there’s a really good sushi bar in North Dakota.
Chris Reply:
December 26th, 2009 at 10:36 pm
We have a 2/3 requirement to simply pass a budget, not just to raise taxes. Even if a budget was proposed that was balanced simply by cutting spending, there’s no way it would pass, because 2/3 is required. The 2/3 rule simply makes it easy for both sides to do nothing.
jimsf Reply:
December 24th, 2009 at 9:50 am
If california is broke then how come when I look out my window I see californian humming along just fine like it always has?
@dwight david diddlehopper Your OPINION is a little irrelevant, isn’t it? California voters approved barrowing money, didn’t we? They, collectively, didn’t think we were broke enough to not consider this valuable infrastructure investment, did they? Further, voters currently support bringing on more debt to support the economy and bring jobs back… as reported by CNN about 2 days ago.
What’s breaking California, in my opinion, is the legisatures ability to generate revenue… because they fear for their jobs that they’ll lose them when they recommend that some taxes increase… such as VLF or upon fuel. Or, shake-up private property taxation.
dwight david diddlehopper Reply:
December 24th, 2009 at 12:18 pm
Yes, California voters approved a $10B bond to build the train, when it was presented that the federal was going to provide another 10 and that private business (I still remember the Lehmann brothers quotes on the slick brochures) was going to provide another 10 to get it all built. Let’s see how that works out. You can piss that $10B away in environment impact studies and all types of other preliminary work to line pockets and then we’ll see who loans us the rest. And keep in mind that California already has the lowest bond rating of all 50 (or is it 58?) states.
Rafael Reply:
December 24th, 2009 at 2:33 pm
Please read the text of AB3034(2008). Of the $9.95 billion, $950 million are reserved for capital investments in legacy public transportation services, with priority for Amtrak California, BART, Metrolink, LA Metro, Caltrain, SF Muni, ACE and NCTD.
Of the remaining $9 billion, a maximum of 10% may be spent for stuff other than construction. Specifically, up to 7.5% on planning/early ROW acquisition/preliminary engineering and 2.5% (= $225 million) on administration. There’s a list of formal requirements that any application for any part of the remaining $8.1 billion has to satisfy. In any event, CHSRA has no authority to sell any bonds. It has to go back to the state legislature each and every year to ask for a fraction of the total to be appropriated (i.e. for bonds to be offered for sale). Even if CHSRA’s request in any given year meets every one of the requirements laid out in the bill, the legislature can still turn it down – e.g. because the debt ceiling or the prevalent interests rates do not permit a sale in that particular year, or only a smaller one.
There are a lot of safeguards against frittering away CA taxpayer bonds on HSR. Kindly educate yourself before trying to score ideological points.
dwight david diddlehopper Reply:
December 24th, 2009 at 6:57 pm
Thanks for the link to the text. My quick reading of it is different than the points you are trying to make.
For example I read it to say that 10% can be spent on studies, another 2.5% on administration and another 7.5% can be spent outside either of those. Maybe that is not the way it is to be read and you are correct that the 2.5 and 7.5 are within the 10. Regardless we both know and agree that the $9.1B that is there doesn’t make a dent in building the train line. I have some knowledge of the costs of some of the local projects in the Bay Area and I know that relatively small highway projects and grade crossing projects turn in to 100′s of millions of dollars very quickly.
You guys may be more knowledgeable about the details of how this train could be built but my reading of lots of global economics tells me that this project is not going to be funded. There is too much debt out there.
Rafael Reply:
December 24th, 2009 at 11:22 pm
Neither CHSRA nor anyone in the state legislature is reading the bill as you have suggested.
$9 billion is not enough to build the starter line, but it will cover about 1/4 of the total based on year-of-expenditure accounting. A lot of the rest would have to come from Congress. There is a lot of enthusiasm there right now for beefing up rail spending, though the absolute amounts are still small relative to the task at hand at the national level. We will discover in January if the federal government is willing to invest in the California system. Once they’re in, they will have a vested interest in seeing the project completed, albeit not at any price. The money will come in dribs and drabs.
Joey Reply:
December 24th, 2009 at 11:47 pm
I would say with a good deal of certainty that the feds are willing to invest some amount in the California system. The question is how much…
Considering all the money california wastes down ratholes, at least this expenditure is an investment that will give us something tangible and useful.
Angry letter from SF over Authority’s trying to not use the TBT as the terminus of the project.
See:
http://sf.curbed.com/archives/2009/12/24/train_lovers_fed_up_with_beale_street_shenanigans_start_petition.php
Train Lovers Fed Up with Beale Street Shenanigans,start Petition.
jimsf Reply:
December 24th, 2009 at 12:38 pm
I just watched the TJPA on TV this morning from the most recent meeting and have also spoken briefly with a couple folks from over there and there is no indication whatsover that the city or tjpa is considering anything but tbt for the trains. its just not going to be anywhere else.
jimsf Reply:
December 24th, 2009 at 12:44 pm
and signed the petition.
adirondacker12800 Reply:
December 24th, 2009 at 4:11 pm
..where you gonna put the trains from Oakland that started out in Sacramento, Stockton, Cloverdake, Calistoga….
AndyDuncan Reply:
December 24th, 2009 at 7:43 pm
I hope you signed it forcefully, since that makes signing a useless petition even more gratifying.
and Merry Christmas from SF
I suspect that the true purpose of this Beale Street distraction is to scuttle the downtown extension, which is a nice idea and should have been done in the early 1990′s. The same interests who successfully killed it then are still around. As I have said numerous times before San Francisco will be lucky to have any train station at the TBT. Newsom doesn’t seem to be much interested in it, or in any transit issues for that matter, and the underlying reason is that at best it will be very expensive and mediocre. I could see this project being deferred again.
The future of this project is as dicey as the american economy. Long term trends are controversial. For example some business commentators are taking the position that US gasoline usage is actually going down and is going to continue to do so and that the US has too many refineries. That would be like heresy to the dubya crowd, but apparently refineries are being shut down because they are not making money. Personally I dispute this prediction – Americans live to burn gasoline IMHO. However, if the overall carbon imprint of transportation in the US is trending down that would undercut the environmental argument for hsr.
You are dreaming if you think you can trash prop 13. Millions of Californians of humble means would be forced out of state. Aint gonna happen.
Beside the real money in the US is not in the hands of the ordinary citizens but in the hordes of the great corporations. Megacorps like Microsoft and Oracle are sitting on huge troves of cash. The reason why the Chinese can afford huge railway expansions, etc. is that instead of daft tycoons like Bill Gates and Larry Ellison controlling all that loot, the central government does and does not have to tax squat to spend it.
jimsf Reply:
December 24th, 2009 at 12:59 pm
Where are you getting the idea that the mayor isn’t interested? His position has always been that hsr must be in the tbt period.
Newsom does not appear to be a transit aware kind of guy. For example, he let the Doyle Drive project go ahead with no provision for a light rail ROW. He is not unusual – most pols could care less about public transport. They like roads and highways.
jimsf Reply:
December 24th, 2009 at 1:25 pm
Whos asking for light rail row on doyle drive? Ive never heard it come up. You can’t be a politician here without being transit aware. We have an incredibly high ratio of transit use, a very, very vocal transit ridership, a strong transit union, a transit first city policy, some of the best transit coverage of any city in america outside of maybe ny. Newsom has stated emphatically on many occasions that hsr is going to be in tbt, must be in tbt.
You have to realize though that the mayor does not run the city here, the BOS runs the city. and in this case, its one of the few, in fact, maybe the only issue, where the board and the mayor agree on things.
There are already plans for rail to the gg bridge eventually on the waterfront but its years away due to local homeowner opposition. There’s no use for light rail on doyle drive. ( and please dont suggest light rail over the bridge, hell would freeze over before anyone would be allowed to tamper with that bridge) that won’t be happening.
adirondacker12800 Reply:
December 24th, 2009 at 4:14 pm
some of the best transit coverage of any city in america outside of maybe ny.
You really have to get to Washington DC or Philadelphia or Boston or Chicago sometime. San Francisco’s mass transit is the best in California. It’s not much better than Newark NJ’s. …Though you can actually travel beyond the water’s edge in Newark… well once you cross the water you aren’t in Newark anymore.
The problem is that the ascendancy of these guys’ dogma has coincided with a deficiency of public works. Their criticism is therefore moot. They may not be able to account for the benefits properly, but that is a reason for doing some proper research in a university, rather than having corporate ignoramuses shooting their mouths off.
Newson could have chosen to campaign for light rail on Geary but demurred. He could have used the centennial date of 2012 as a target for at least part of the project. Instead you have the Central Subway stinker. Muni has lost its way but then San Francisco seems to resemble Berserkley more as time goes by.
If you want those HSR lines in place then the time to build them is now. One could argue whether investments in other infrastructure (e.g. freight rail, …) is more beneficial or cost-effective. But the ongoing rapid growth and development will not make building those lines easier in the future for the Chinese. First of all, costs in labor and materials are rising. Secondly, when HSR is not built something else will be literally built in its place (not everywhere of course). Which will make building HSR more difficult after development has occured, as the numerous ongoing and coming NIMBY battles and bureaucratic struggles of HSR in the rest of the world have shown. Now is the chance for the Chinese government to ‘ram through’ HSR lines without having to deal with ‘all that’. Thirdly, transportation has always come first, then comes development. That transportation infrastructure can be dominated by roads/airports with predictable consequences and you can try to construct HSR onto that (good luck, Yanks). Or you could build rail first and see the more resilient kind of development.
Whether all the lines are appropriate or whether the network investments work out economically is uncertain. However, from an opportunity standpoint this recession is probably the best opening for HSR in China.
Don’t they have a Mifare-based electronic ticketing system now?
http://en.wikipedia.org/wiki/Shanghai_Metro#Ticket_system
“In addition to a Single-Ride ticket, fare can be paid using a Shanghai Public Transportation Card. This RFID-embedded card can be purchased at selected banks, convenience stores and metro stations with a 20-yuan deposit. This card can be loaded at ticket booths, Service Centers at the metro stations as well as many small convenience stores and banks throughout the city. The Shanghai Public Transportation Card can also be used to pay for other forms of transportation, such as taxi or bus.
This transit card is similar to the Chicago card of the CTA and the Octopus card of Hong Kong’s MTR.”
-> Yes, they do.