HSR’s Green Dividend For California
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.