HSR’s Green Dividend For California

Jun 15th, 2010 | Posted by

I’ve written a lot about the so-called “Green Dividend” at this blog in the last two years. It’s a phenomenon found in cities with good mass transit networks: residents save money that would have gone to buy gas because of available transportation alternatives, and that savings creates new economic activity and value. Portland, Oregon was where this phenomenon was first identified, where the Green Dividend was estimated at $2.6 billion.

The concept is now being applied to high speed rail, in California and across the nation, in a new study from the US Conference of Mayors (PDF). The vice-president of the US Conference of Mayors is Los Angeles Mayor Antonio Villaraigosa, who clearly understands the concept of the Green Dividend, as he is pushing hard to expand all forms of mass transit in his region through the 30/10 plan. And the US Conference of Mayors report features LA prominently as one of four case study cities (Chicago, Albany NY, and Orlando are the other three). On the 4th page, next to a picture of the LA skyline at twilight, we read under the heading “Key Economic Impact Findings”:

In Los Angeles, as much as $7.6 billion a year in new business sales, producing up to 55,000 new jobs and $3 billion in new wages.

Depending on the tax rates, that new economic activity in LA alone would be enough to pay off the entire $10 billion Prop 1A bond within about ten years. By the time the SF-LA HSR route opens around 2020, the massive expansion of LA’s Metro Rail system should be complete, with its hub at Union Station – likely increasing the ridership and therefore the success and economic benefits of HSR in the LA area.

The report finds five specific ways that HSR will deliver economic growth and a Green Dividend (a term that wasn’t used in the report, but should have been):

1. HSR service can help drive higher-density, mixed-use development at train stations.

2. HSR service can increase business productivity through travel efficiency gains.

3. HSR service can help expand visitor markets and generate additional spending.

4. HSR service can broaden regional labor markets. (Note from Robert: Bakersfield should pay particularly close attention to that point. Kern County residents would be able to get jobs in the LA area, a potential bonanza for a county with an 18.3% unemployment rate.)

5. HSR service can support the growth of technology clusters.

These same things hold true for San Diego, Sacramento, and the Bay Area. And while Fresno and Bakersfield may see themselves initially as bedroom cities on an HSR route, sort of like Ciudad Real on the Spanish AVE between Madrid and Sevilla, those cities could also take some economic growth and job creation for themselves, with HSR enabling skilled workers from the coastal metro areas to seek cheaper office/industrial/housing space inland.

Considering that the $10 billion or so in annual HSR dividend in the study was just for the LA area alone, one could envision maybe $25 to $30 billion a year once the system is built out (including Phase II to Sacramento and San Diego). That would more than pay for the costs of construction and operation of HSR.

Yet there remain those who are being pennywise and pound foolish with the HSR project, preferring to let a temporary budget problem here in 2010 prevent us from creating tens of billions of annual economic value for years to come through building HSR. Given low interest rates and low construction costs, with bids routinely coming in well below budget, this is exactly the right time to get to work building high speed rail for California.

  1. Alon Levy
    Jun 15th, 2010 at 16:59

    I’m going to ask the same question I posed on The Infrastructurist: who peer-reviewed this report?

    TomW Reply:

    Personally, I think for studies like this, the organisation should sponser a university to conduct the research and then publish it in a peer-reviewed journal.

    Elizabeth Reply:

    It was paid for by Siemens. The LA numbers rely on the Cambridge study :)

    As far as I can tell, everything remotely related to transportation infrastructure in the US is paid for by Siemens or PB or HNTB etc ect. The private sector is so incredibly enmeshed with the public sector in transportation as it is in energy as it is in defense and so on and so forth.

    At all levels of US government there has been this pressure to privatize and cut costs, which means there is no money for research. The private sector has been more than happy to pick up the slack.

  2. Eugene
    Jun 15th, 2010 at 21:19

    It’s good to be skeptical, but I don’t think you understand what “peer-reviewed” means. I’ve published papers that have been peer reviewed, but I will never know who did the reviewing (although, since they are in my field, I can make guesses). One of the points of the process is that it is anonymous.

    The proper way of asking this question would be “Was this report peer-reviewed?: But this is also a bit nonsensical, since it is a report published by a political entity (albeit “non-partisan”) and not by a scientific journal.

    Then again, perhaps you’re being rhetorical and I totally missed your subtlety.

    rafael Reply:

    I think the point is that the study wasn’t conducted by impartial academics and wasn’t peer reviewed. As such, it’s something of a marketing document and outside observers should take claims of “scientific proof” related to it with a grain of salt.

    Alon Levy Reply:

    I understand what peer-reviewed means, thank you very much (and yes, I’m totally with you about guessing who the reviewer is based on the referee report). But as the study in question wasn’t published in an academic journal, it’s outside the usual refereeing system. My question was intended not necessarily in a “Which person?” sense, but in a “which body?” sense. “It was peer-reviewed by Journal XYZ” would’ve been an acceptable answer for me.

  3. rafael
    Jun 16th, 2010 at 03:22

    For reference: the city of Vienna (Austria), pop approx. 2 million, recently reported 811 million annual trips on public transportation systems last year, of which the expanding subway network contributed 510 million. That means transit achieved a 35% modal share vs. cars at 32%.

    Granted, the overwhelming majority of those were strictly local and short-distance commute trips on an extensive network that is heavily subsidized by taxpayers. But then, aren’t roads subsidized as well?

    CHSRA’s ridership forecasts for HSR are, of course much lower. Even where fast trains are available, people don’t ride them unless they have a reason to travel to another city. However, many HSR passengers will use connecting transit at one or both ends of their trips, so over time a European-style transit culture could develop even in places other than SF, LA and increasingly, San Jose.

    Alon Levy Reply:

    Is this modal share for all trips, or just trips to work? It looks like all trips, which means it’s a lower number than what’s usually reported. It’s important, because 811 million divided by 2.2 million is 369 rail trips per capita per year, which is higher than in any other city in the world except Tokyo; in reality it may be higher than Tokyo, because those numbers count people who transfer from one company or system to another twice, and Tokyo has way more fragmentation than Vienna.

    For comparison, in Tokyo the all-trips mode share is if I’m not mistaken 43%. And in New York, which has 90 rail trips per capita, the trip to work mode share is 30%.

    dejv Reply:

    If I calculate corectly (too lazy to get calculator now around midnight), 5/8 of 35 % is 22 %, half of figure you give for Tokyo. (Yes, Vienna has trams, but their capacity is negligible compared to subway.)

  4. rafael
    Jun 16th, 2010 at 09:38

    Slightly O/T:

    California High-Speed Rail Authority and Reconnecting America are hosting a one-day seminar on real estate development near HSR stations.

    “California High Speed Rail TOD MarketPlace”

    Date: Thursday, 23 September 2010, 8:00 am – 4:30 pm

    Location: Anaheim Convention Center, 800 West Katella Avenue, Anaheim, CA

    Price: $25-$105 depending on which discounts apply to you

    Source: http://www.ulisd.org/events/230

  5. datacruncher
    Jun 16th, 2010 at 09:41

    The monthly unemployment rate in April (most recent available) for Kern County was 16.5% (prerecession it was 8.3% in April 2007).

    Additionally looking just in the city of Bakersfield in April it was 11.7% (prerecession April 2007 it was 5.7% in Bakersfield). 11.7% is the same as the April 2010 LA County number.

    The higher rates driving up the Kern County average are found in outlying cities like Delano (38.8% in April 2010 vs 22.6% in April 2007) 35 miles north of Bakersfield.

    I’m not sure the labor force job skills in those outlying towns would justify someone commuting 35 miles one way each day to a Bakersfield HSR station then paying the HSR fare. The added 1 hour RT commute to a HSR station plus the HSR travel time vs. the wages paid for the job skills found in the outlying towns makes that seem unlikely to me.

    I do think some labor force members will commute on HSR (i.e. telecommuters going to the office 1 or 2 days per week or higher paid workers seeking lower housing costs).

    But I think caution needs to be used when touting HSR as making a big dent in unemployment in small Valley towns.

    Peter Reply:

    It’s not even necessarily that all those people will be taking HSR to their jobs after commuting to HSR. It’s more an issue of HSR on its own generating business in cities that people in the local area are employed at.

    elfling Reply:

    While riding Amtrak I’ve met people commuting from Fresno to San Francisco for their security guard jobs. There are a lot of low-skill jobs in areas that don’t pay enough for the employees to live near their jobs.

    Believe it or not, people commute from Bakersfield to Los Angeles today, in their cars, every day, because that’s where a combination of a house and job ended up. It’s especially true in two-career couples, since finding two jobs near the house can be challenging. Sometimes they go there (and related) for the cheap real estate, sometimes because they want more open space.

    Will it be a large percentage of the labor force? Probably not. But even 1-2% is something we celebrate when calculating unemployment numbers. Anything that makes labor more mobile while also allowing them to stay in their preferred communities (and not having to sell the house, uproot the kids, leave their community alliances) will benefit the state as a whole.

    Peter Reply:

    While not contributing to greenhouse gases, either.

  6. rafael
    Jun 16th, 2010 at 09:54

    Mayor Villaraigosa’s 30/10 plan boils down to securing a long-term loan from Congress to accelerate Measure R project implementation. The county would offer up the already-approved incremental sales tax revenue over 30 years as collateral.

    In principle, this sound like a smart way to bring economic stimulus to the region asap, as well as deliver a shift away from oil and toward transit much sooner. I wonder if Santa Clara county will try to accelerate its BART-to-Silicon-Valley project with a similar funding construct.


    Peter Reply:

    That may be a good approach. That way VTA could shift its focus from dumping all its coffers into BART to improving existing services such as Caltrain, light rail, and implement BRT.

    rafael Reply:

    Uhm, no. This wouldn’t be free money from Congress, just a way of spending it earlier – i.e. getting the BART extension built and operating sooner. Santa Clara county residents would still have to shoulder the 30-year sales tax hike they approved to get it built, except that it would be used to replay the federal loan rather than pay-as-you-go construction.

    So VTA would still be dumping its coffers into BART for exactly the same length of time. If Santa Clara county residents want to Caltrain, light rail, BRT etc. to expand – or just keep operating – they will have to bump up their sales tax rate yet again, because BART has a voracious appetite.

    Peter Reply:

    True. It would enable VTA to actually have something to show for all the money voters actually authorized…

    Alon Levy Reply:

    Now, if only 30/10 didn’t include chaff like the Foothills Extension…

  7. rafael
    Jun 16th, 2010 at 10:07

    Btw, the USHSR conference in LA is on Thu + Fri of this week. If any of our readers is planning to attend and would like to publish a brief summary as a guest post on this blog, please email it to cruickshank at gmail dot com.


  8. rafael
    Jun 16th, 2010 at 12:00


    Urban gondolas are now a big hit in South America: the 2km Medellin Metrocable is serving 40,000 passengers a day.


    Note that other South American local transit innovations have already been adopted in the US, notably Bus Rapid Transit (cp. LA Metro Orange Line) and cable car people movers (Oakland airport connector).

    Could urban gondolas provide additional connecting transit capacity for any HSR stations in California?

    James Fujita Reply:

    It depends upon the station. The trick seems to be having a relatively steep hill to climb, or at least a fairly nice, large hill. For example, Portland has a gondola which connects the riverfront (water level) with a college campus, which sits on a hill.

    In Los Angeles, you could have a gondola or aerial tram from the Union Station area to the Dodger Stadium area (Dodger games in the summer, the Elysian Park/ Sunset neighborhood the rest of the year).

    Bakersfield, Hanford and Fresno are pretty much flat. San Francisco might work.

    adirondacker12800 Reply:

    San Francisco already has tourist attraction transportation, the cable cars and the F line.

  9. Emma
    Jun 16th, 2010 at 18:18

    May I add:
    6. HSR service will improve the infrastructure by creating an attractive hub for other public transit systems.

    When I lived in Germany stations with high speed trains provided a great variety of alternative transportation.
    -Taxi, bus, light rail, and subway for the surrounding area.
    -Suburban metro railways (S-Bahn), regional trains (Regionalbahn), regional express trains (Regional-Express) for intrastate transport.
    -InterCity, EuroCity and real high-speed trains for interstate transport.

  10. elfling
    Jun 16th, 2010 at 22:41

    Anecdotally, I’m not even on the main HSR route, and if it were available today, with wi-fi, I would be able to justify traveling to clients far more often, which would significantly increase my productivity and my income.

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