The State of Private HSR Financing
The question regarding private financing for high speed rail in California has typically been “when?” and not “if?” A recent article in the LA Times suggests the answer may be much less clear:
Investors may not be willing to back the state’s bullet train project until after it begins operating, the California High-Speed Rail Authority said in a letter to key legislators, an acknowledgment that again raises serious questions about how the $43-billion construction cost will be paid over the next decade.
The letter gives a preview of the authority’s upcoming business plan, a critical document that is supposed to address long-standing concerns that it lacks a credible blueprint for building and operating the system. Even supporters of the Southern California-to-San Francisco system have said the previous business plans were unrealistic in their estimates of construction costs and ridership numbers, among other things….
Although it is not impossible to find some private money, the letter said “the authority is planning for a more likely market scenario in which private capital is attracted based on the revenues of the project once revenues are proven.” The failure to attract private investors earlier is seen by many critics as evidence that the state’s plan is excessively risky.
The problem here is that “private money” is not really very well defined. Is it private investment in the system’s operation? In its construction? Or is it something more substantial, like a private builder-operator bringing some of their own money to the table up front, leveraging state and federal dollars to essentially build and run a system for their own profit?
The other question is what is meant by “private.” Is it institutional or individual investors? Or is it a national rail company like Japan or China, both of which have indicated interest in funding and building California high speed rail as well as HSR systems in other countries?
There is plenty of evidence to suggest no matter how you define “private money” the interest in HSR is there. A UBS study showed that HSR was a good investment, with the main risks being political. In Florida private investors had confidence that the system would be profitable – so much confidence that they pledged to cover cost overruns.
What would make California any different? Hard to say. The key seems to be connecting the Central Valley to either the Bay Area, LA, or both. And that requires expensive tunneling under the coastal ranges. More public money is going to be required to make that happen, which is fine – those links are obviously essential to HSR meeting the state’s travel needs.
Yet federal funding for HSR is stalled thanks to the temporary ascendance of extremists in the House who are ideologically opposed to passenger rail, whether or not it’s a good investment. There’s just enough federal funding to get started but not quite enough to get finished. The project is stuck in this odd limbo, imposed by the Republicans.
As we’ve pointed out, that situation is likely to be temporary. If Democrats take back the House in 2012 and maintain control of the Senate and the White House – all of which are quite possible – then HSR funding will again flow. If not, then other options will have to be explored.
HSR critics like Elizabeth Alexis, who is quoted in the LA Times article as calling the project “wishful thinking,” have never believed that passenger rail needs to be part of this country’s future. They’re happy to see the project die, since they believe despite all the available evidence that California can continue to afford dependence on oil and on driving everywhere. We know it can’t, we know the recession and ongoing economic crisis is in large part due to oil dependence, and we know that people are shifting away from driving anyway.
HSR is going to be built. The question is only whether it happens sooner or later. If sooner, it will be less expensive and save more money. If later, the costs go up and the savings are delayed. Let’s hope the federal funding situation improves soon, so that these benefits and savings can be delivered now. We don’t really have the luxury of waiting.
Keep the private sector out. This project will make lots of money in profits, and we need to put those profits back into our transportation system, not let some corporate empire run off with it.
Also, July Amtrak numbers are out, and both the San Joaquin and Pacific Surfliner hit record highs. People really want to ride these trains. Anyone who believes otherwise is simply covering their ears and shouting “na na na.” The demand exists, so let’s hurry up and fill that need.
Paulus Magnus Reply:
October 19th, 2011 at 11:15 pm
1. No it will not. If it did, you would see HSR systems entirely funded by the private sector. You don’t, however, because the operational profits aren’t high enough to recoup the investment cost.
2. By law, CAHSRA surpluses are not to be put back into the transportation system, but rather deposited into the general fund.
JJJ Reply:
October 19th, 2011 at 11:38 pm
I disagree. Even if the project were able to cover it infrastructure cost, it would see zero private investment.
Why? Opportunity cost. Spend 40, 60, 80, whatever billion, to start making the sweet, sweet profit 45 years later? No. There are more profitable places to invest that (for a private company), not that many companies have that amount of billions lying around ready to go.
The general fund also funds transportation.
Howard Reply:
October 20th, 2011 at 12:30 am
By law any “profits” from CHST Phase 1 operation must go to CHSR Phase 2 construction, that is the extensions to San Diego and Sacramento. I think that “profits” from a combined CHST Phase 1 & 2 operation must go to the Altemont Corridor improvements. My opinion is that after the Altemont corridor that “profits” from a combined CHST Phase 1, 2 & Altemont operation should go to the Capitol Corridor and Pacific Surfliner corridors, or a high speed rail extension from the Inland Empire to Phoenix (and Tucson) if Arizona splits the cost.
swing hanger Reply:
October 20th, 2011 at 12:34 am
Private and pseudo-private companies may be willing to swallow losses (look at JR Central Rlwy/Japan Bank for International Cooperation regarding cost overruns for Florida HSR) in order to get a crack at building and running HSR in the U.S. because it will be a showcase operation, with marketing potential to other, more promising markets in developing nations as well as Eastern Europe. Some companies do look at things very long term, not just to the next quarterly report, especially in the world of infrastructure.
D. P. Lubic Reply:
October 20th, 2011 at 4:20 am
I concur with JJJ. In addition to what he had to say, there is also the perception–and I think it’s real–that the game is rigged against rail. We have known and discussed here the size of the subsidy of the road system; it seems the potential private backers know this as well. The freight railroads certainly do.
There is also the question of who has a huge amount of capital available. Where did they get it from? Are they in the oil business or car business? Well, maybe the car business was a poor choice–they just came out of bankruptcy, but you can see they wouldn’t be interested in backing this. Those banks some of us have been savaging lately? Since when have bankers shown any imagination or even competence in anything besides raking in money for nothing? For them, to actually manage a construction project and run a facility of any kind–why, that’s too much real work!
Geez, who would have thought bankers chief inspiration was Maynard G. Krebs?
http://en.wikipedia.org/wiki/The_Many_Loves_of_Dobie_Gillis
http://en.wikipedia.org/wiki/Maynard_G._Krebs
http://www.youtube.com/watch?v=pqzpQPDSr2s
D. P. Lubic Reply:
October 20th, 2011 at 4:22 am
Touch more:
http://www.youtube.com/watch?v=NXL4lfgzIt0
synonymouse Reply:
October 20th, 2011 at 11:26 am
What absolute nonsense. What profits? Where are BART’s profits? Merced to Bakersfield is going to produce an operating surplus. Ditto for the wannabe BART from Palmdale to LA. No regional mass transit generates profits.
It will be interesting to see where the EC gets the money to fund grandiose hsr projects all the while hemorrhaging mounting tons of Euros to bankroll welfare states in Greece, Italy, Spain, etc. That drama has yet to play out.
And it appears that the US guvmint is becoming more militant about keeping funding and spending stateside:
http://progressiverailroading.com/federal_legislation_regulation/news/US-transportation-commerce-departments-partner-to-enforce-Buy-America-standards–28486
And then alleged demographic shifts can go both ways. Look at Cuba drifting. Where will post-Hugo Venezuela shift? The old guard generally loses favor, as you see in the headlines today. Maybe even our 3 teflon machine crones will face an upstart challenge.
Finally the Dutch have decided modern weed is as hard as heroin. Besides once you legalize cannabis in California all the dealers will shift to heroin, coke, speed, etc. to retain their profits as the price of pot will collapse. It is just a reality we will have to cope with.
Derek Reply:
October 20th, 2011 at 11:41 am
“No regional mass transit generates profits.”
The Acela Express does. “The [Northeast] corridor’s high-speed Acela Express made a profit of about $41 per passenger [in 2008].” http://www.businessinsider.com/report-amtrak-loss-comes-to-32-per-passenger-2009-10
Tony d. Reply:
October 20th, 2011 at 12:21 pm
How much profit has I-5 turned out?
synonymouse Reply:
October 20th, 2011 at 12:43 pm
How much profit does the military or police generate? Roads are considered a necessary public expenditure. Very popular with the voters since forever. Find a politician who will oppose road spending.
Jousting with the highway lobby over the idea of “free”-ways is not very productive. Re-visiting the the CHSRA scheme is the way to go. Start by dethroning San Jose. Tolmach has the right idea.
Tony d. Reply:
October 20th, 2011 at 2:33 pm
You didn’t answer my question. And way to ignore Derek’s post above re Acela (the truth hurts you to much a syno).
synonymouse Reply:
October 20th, 2011 at 7:11 pm
Accounting methods are controversial. For instance In mine you have to count property that is either publicly owned or private but taxed at a very low rate as a debit. Of course that would make highways even less “profitable”, but the public considers them a requisite utility.
Alon Levy Reply:
October 20th, 2011 at 1:02 pm
Did JR East disappear from the face of the planet between when I last checked and when you wrote that regional mass transit loses money?
synonymouse Reply:
October 20th, 2011 at 7:19 pm
And SF pols want to allow kids to ride Muni free. To quote Robert Shaw as Doyle Lonigan in “The Sting”, “”Ya follow?”
Point being the public demands low or, in this case, no fares so you cannot establish an adequate fare to make a profit. What private entrepreneur would want to get stuck with a piece of dreck like that?
The US and California is different from Japan. Do they have anything like Oaksterdam?
Nathanael Reply:
October 21st, 2011 at 6:01 pm
Syn, you totally do not understand what’s going on in the EU. It would take too long to explain in a blog comment, and is way off topic anyway. Suffice it to say that they have the same crooked banking system as we do, but that it’s exacerbated by a currency union with no fiscal union, and the thing which is going to bring it down is that the European Central Bank has been taken over by hard-money lunatics.
However, there is not enough space here to explain why hard-money policies in a recession are lunacy — I suggest reading Keynes.
To fight the extremists, let’s demand cost-benefits analyses of all transportation projects and fund them in order from highest to lowest expected ROI. That means we must refuse to fund a project with an expected ROI lower than HSR until HSR has been funded. Because why would anyone with an ounce of financial sense fund the lower ROI projects first?
Paulus Magnus Reply:
October 20th, 2011 at 4:03 am
You do realize the ROI on HSR is pretty low, right?
Peter Reply:
October 20th, 2011 at 4:33 am
But as compared with highways?
Derek Reply:
October 20th, 2011 at 7:07 am
And bridges!
But make it a tolled highway or bridge, and suddenly it has a better chance.
joe Reply:
October 20th, 2011 at 7:14 am
Who the F knows how the economist did his calculations.
“In particular, the external cost has become more important factor for justifying HSR.”
joe Reply:
October 20th, 2011 at 7:08 am
Hilarious. Why is the ROI low?
Paulus Magnus Reply:
October 20th, 2011 at 8:58 am
Because it costs a lot of money and offers relatively low benefits, just the same as any other low ROI project. Even CAHSRA admits that, I believe one of their letters put it in the realm of 1.2. By contrast, CSX’s National Gateway project has a 35:1 ratio of public benefits for public dollars spent over the first thirty years. That’s somewhat to be expected, personal transportation is almost always a low value, low margin activity. HSR’s greatest benefits comes where it overlays commuter rail (hence why the coastal route is far superior to the Inland Empire dogleg). Second order benefits come from its PR value in the public consciousness raising support for increasing the capabilities of non-overlaid commuter rail routes (or creating them from scratch) as well as upgrading freight rail routes (such as by overhead electrification).
Derek Reply:
October 20th, 2011 at 10:11 am
If the ROI of the $43 billion CAHSR is 1.2, then the ROI of the $100 billion alternative must be about 0.5.
Paulus Magnus Reply:
October 20th, 2011 at 10:19 am
Not necessarily, it depends on the specific projects. And quite frankly, there’s nothing to indicate that:
1. Construction would actually be avoided thanks to HSR (politics being what they are)
2. That the $100 billion is an accurate figure. I’ve not seen anything referring to what those specific projects would be in the place of HSR.
Derek Reply:
October 20th, 2011 at 11:00 am
“1. Construction would actually be avoided thanks to HSR (politics being what they are)”
When one or the other is funded (HSR or the alternative), then the expected ROI on the other will be reduced, and therefore would have less of a chance of being funded, if we fund in the order from highest to lowest expected ROI.
“I’ve not seen anything referring to what those specific projects would be in the place of HSR.”
They are listed in the 2008 business plan. As is the claim that “The high-speed train system will create more than $150 billion in measurable present-value benefits – approximately three times the present value of the train’s capital and operational costs over the next 40 years.”
Alon Levy Reply:
October 20th, 2011 at 1:01 pm
Derek, if road construction in the US had been subjected to any cost-benefit analysis, the Interstates would not have been built.
Derek Reply:
October 20th, 2011 at 1:10 pm
If the interstates don’t bring enough prosperity and military advantages to justify their cost, then maybe they shouldn’t have been built.
Alon Levy Reply:
October 20th, 2011 at 1:17 pm
Military advantages, like, um, making the US more dependent on oil imports? Or prosperity like splitting cities and forcibly removing tens of thousands of residents?
joe Reply:
October 20th, 2011 at 1:30 pm
Watch and learn
http://www.youtube.com/watch?v=1_I4WgBfETc
http://www.imdb.com/title/tt0087985/
thatbruce Reply:
October 21st, 2011 at 10:25 am
@Alon Levy: At the time the Interstate’s inception, America produced more oil than it does now. I doubt that ‘all these interstates will make us dependent on foreign oil’ entered anyone’s mind at the time.
Alon Levy Reply:
October 21st, 2011 at 11:26 am
Well, it should have. The US became a net oil importer in 1948; by 1953, it had already instigated its first oil war, the overthrow of Mossadegh for nationalizing Iran’s oil. With its oil consumption growing more rapidly than production, and with persistent air pollution (leading to the Great Smog in London in 1952), the US had no excuse for not thinking about the problems of mass motorization. Instead, it held to the believe that what’s good for GM is good for the US and vice versa, and no mere city was going to stand in the way of Progress.
Peter Reply:
October 21st, 2011 at 12:15 pm
There was no “military advantage” to building the Interstate system. That was just a subterfuge to gain popular support. The Soviet Union sure didn’t need to build a massive freeway network to stay competitive militarily with the U.S. for forty-odd years. They relied on good, old-fashioned rail networks.
Nazi Germany made the same argument when it built the Autobahn network. Then, when push came to shove during World War II, the VAST majority of all military transportation was done by train.
Nathanael Reply:
October 21st, 2011 at 6:08 pm
Rail has always been more useful for the military than roads. Bismarck wasn’t stupid.
The US would actually be in appalling shape (compared to most any other country) if we were invaded by land by an enemy with comparable military forces. The US has never seriously considered the possibility, however, at least not since Polk’s Mexican War. (Well, the Civil War too, I guess.) The US is not set up with a military which could effectively defend against a land invasion, which is what railways and roads are great for.
joe Reply:
October 20th, 2011 at 12:09 pm
Examples are Airport expansion; runways and gates. And air transportation have high externalities.
Alon Levy Reply:
October 20th, 2011 at 10:46 am
It’s not exactly true that passenger transportation is low-value and low-margin. More accurately, greenfield HSR tends to have very high EBITDA but very high construction costs coming with it. It’s different from lower-end transportation such as rehabilitating a commuter line or running a bus.
joe Reply:
October 20th, 2011 at 12:08 pm
Sorry – you can’t punt on investing in CA transportation.
You have to compute an ROI with the cost of externalities. Rail has low external costs.
Finally, dungeon master tricks work both ways. If “politics” means HSR doesn’t stop other transportation investments and thus we do not see a favorable ROI, I can equally claim your pet rock idea will also not prevent alternative investments and also has a low ROI.
Alon Levy Reply:
October 20th, 2011 at 1:00 pm
I don’t think you’re using the term dungeon master the way it’s normally used in ordinary English conversation.
joe Reply:
October 20th, 2011 at 1:20 pm
This blog isn’t ordinary.
“The Dungeon Master (DM) assumes the role of the game master or referee and describes for other players what they see and hear in this imaginary world, and what effects their actions have”
Paulus asserted:
“And quite frankly, there’s nothing to indicate that:
1. Construction would actually be avoided thanks to HSR (politics being what they are)”
So if that’s his rule it also applies to his favorite 35:1 ROI project.
Alon Levy Reply:
October 20th, 2011 at 3:17 pm
Okay, so you were using the term the normal way. Sorry.
RisenMessiah Reply:
October 20th, 2011 at 1:32 pm
You mean because it’s not capitalized?
Nathanael Reply:
October 21st, 2011 at 6:05 pm
Low compared to what? ROI for a high-speed train is great compared to ROI on highways. It’s superb compared to ROI on the military (which sometimes has negative ROI, that is to say it actually destroys value). And the military is 1/4 to 1/3 of the federal budget.
If you actually compared projects by ROI, the US military would be shrunk to a miniscule size, and there would be enough for practically everyone else’s pet projects, certainly including high-speed rail.
Now, if you pointed out that providing food stamps and unemployment compensation has a greater ROI than high-speed trains — why, yes, yes it does. So does single-payer health care. So does Social Security, so does Medicare, etc….
Or is it a national rail company like Japan or China, both of which have indicated interest in funding and building California high speed rail as well as HSR systems in other countries?
China? Really?
Useless Reply:
October 20th, 2011 at 11:31 am
@ Stephen Smith
> China? Really?
Yes really. But you don’t want Chinese contractors in the US.
Eric M Reply:
October 20th, 2011 at 11:38 am
We just need the money
Democratic anti-HSR zealot State Senator Joe Lowenthal isn’t finding the love in his bid to become US-Rep. Lowenthal’s weak performance is attracting other Dems to the race.
and
morris brown Reply:
October 20th, 2011 at 8:13 am
@joe
I don’t know the political situation facing Lowenthal, but your post here obviously doesn’t come close to telling the full story.
Look at:
http://maplight.org/california/legislator/1317-alan-lowenthal
a 2007 posting which has Lowenthal raising over $600,000. He has been a long time legislator, and he certainly knows how to raise funds. How much money does he currently have in his coffers unspent from previous campaigns?
You and Robert (and others here) label him as a Democratic anti-HSR zealot. Ridiculous! He has always stated his position as being pro HSR. I only wish he was anti-HSR.
He is really the only guy in the whole legislature, who along with his excellent staff, led by Art Bauer, insisted that this huge project be subject to oversight and risk management. He should be applauded by all interests, pro and con, for his work on this issue.
If we had more legislators like him in the California legislature, California wouldn’t be in the terrible fiscal situation it now faces.
joe Reply:
October 20th, 2011 at 9:13 am
Parse this Morris:
The full story is he’s fund raising sucks bad. Dunn’s going to throw his hat into the ring so the Dems have a chance.
Lowenthal says he supports HSR and he aggressively opposes the current HSR project. What a bold stance.
He wants to fix HSR buy reprogramming alloocated ARRA and Prop 1A money for his district. That’s an option he invented himself. It isn’t supported by the Gov or DOT and puts Billions of allocated dollars at risk.
What union desperate to produce jobs for their members would sign up for that plan?
His fascinating double talk apparently *isn’t fooling anyone* or better put, isn’t pleasing many Californians. The set of people supporting HSR “done right” and opposed to the current HSR project is a tiny set apparently.
You are free to send him donations. CARRD members too.
BTW, I fully support the CA GOP. I just happen to oppose every candidate on the 2010 and upcoming 2012 CA ballot. Oh, and I want to redirect their campaign money.
morris brown Reply:
October 20th, 2011 at 10:35 am
Joe writes:
“He wants to fix HSR buy reprogramming alloocated ARRA and Prop 1A money for his district. That’s an option he invented himself. It isn’t supported by the Gov or DOT and puts Billions of allocated dollars at risk.”
Since you claim this, please back up your assertions with some facts.
joe Reply:
October 20th, 2011 at 11:52 am
What about this factoid? “If we had more legislators like him in the California legislature, California wouldn’t be in the terrible fiscal situation it now faces.”
and this
joe Reply:
October 20th, 2011 at 12:00 pm
Oh Morris;
Here are Lowenthal’s contributors since 2007 – how many of these contributors want Ca to stop HSR and risk losing billions in ARRA stimulus. How many think HSR is a waste and needs to stopped and fixed?
Any question over why Lowenthal’s not getting much funding in 2011 to continue his attack on the current CA HSR project from Congress?
Nathanael Reply:
October 21st, 2011 at 6:11 pm
“BTW, I fully support the CA GOP. I just happen to oppose every candidate on the 2010 and upcoming 2012 CA ballot. Oh, and I want to redirect their campaign money.”
OK, this cracked me up. Thanks for the laugh, joe!
CHSR is a political project and private firms will stay away from it. They hate political uncertainty.
The reason why private firms invest in French intercity rail and freeways is that the projects are kept out of the political field. The decision to let private firms build and operate intercity freeways was made by a right-wing government but was not affected by majoritiy shifts that followed.
Of course, if CHSR were a build-and-operate PPP its route would probably be very different from what is currently being planned. A private firm’s interest is to reduce building costs and break even as soon as possible. That means it would leave out problematic zones and target the most profitable (and not the highest) ridership.
RisenMessiah Reply:
October 20th, 2011 at 1:34 pm
No, the reason is that no one doubts because of Vietnam that France wants to minimize it’s holdings in both US currency and dependence on oil. Instead, it’s that no one is quite sure what America’s going to do because there’s such a major transformation taking place.
Andre Peretti Reply:
October 20th, 2011 at 6:11 pm
France has no surplus dollars to get rid of. It has no trade imbalance with the US. Imports=exports.
The products both countries import from each other are: 1) aircraft, 2) pharmaceuticals, 3) agricultural products. Airbus planes have a lot of US content and Boeings have a lot of French content (fortunately Americans ignore that, otherwise they’d stop flying…).
China, on the other hand, is awash in dollars and the best place to spend them is the US. Buying up CHSR would give the Chinese a foothold in the US. And, this time, they would own the railroad and Americans would work for them. Sweet revenge.
Need $50 billion in public investment for CAHSR? No hay problema:
1) TO GENERATE REVENUE: apply market-based tolls to all freeways and bridges; raise the gas tax to reflect the the true cost of all free public roads PLUS the full environmental AND military/security cost of petroleum import & consumption; eliminate mandatory parking provision laws and tax all private parking spaces; raise the cost of water to reflect the true cost of public water provision; tax all in-state flights to reflect the full environmental cost of high-altitude carbon emissions AND to retroactively pay for a portion of the capital investment in airport-to-downtown transportation systems including airport parking lots; tax airport parking and all train, shuttle and taxi rides between airports and downtown areas that would be served by HSR stations.
2) TO CUT DOWN ON EXPENDITURES: implement Derek’s idea above; ban public-sector unions and renegotiate all public-sector post-employment benefits; eliminate minimum sentencing laws and draw down the prison population; replace the war on drugs with an excise tax + educate/rehab scheme like the one that has decimated tobacco use.
That ought to leave plenty of money for filling slot machines in Vegas after the casinos finish building the Desert Express.
Paulus Magnus Reply:
October 20th, 2011 at 9:08 am
Illegal to do with Interstates under current Federal law.
Politically impossible in the current climate. Although you never know. Herman Cain’s tax plan screws over 80% of Americans yet is popular for some reason. Maybe we should hire GOP PR folks.
You’ve got a wild disparity of numbers there, some of which would prove economically crippling with our current infrastructure.
NORAD is fairly cheap. We protect the Gulf because someone screwing with it screws with us indirectly thanks to the global market for oil.
Congratulations, you’ve added two dollars to the cost of a ticket between LAX and SFO (at $20 per ton). Statewide, you’re making maybe 30 million a year?
Hell, I’m a conservative and I think that banning public-sector unions is a bad idea. Although certainly there should be some room for renegotiating pensions and such (in my opinion, they should not exceed military benefits)
Horrible idea and we actually don’t have that high of a tax on tobacco in CA. While a reasonably good argument can be made for doing so with marijuana, hard drugs such as heroin, cocaine, and meth need to remain criminalized and dealing harshly punished (while diverting as many users and addicts as possible to rehabilitation).
Derek Reply:
October 20th, 2011 at 9:59 am
“U.S. Transportation Secretary Ray LaHood said Wednesday that the federal government is open to tolls on existing interstate highways and indicated that the fees are part of the funding plans for the Ohio River Bridges Project.” http://www.ongo.com/v/501076/-1/7F04980394DB1C1D/federal-officials-open-to-tolls-on-existing-highways
Alon Levy Reply:
October 20th, 2011 at 10:49 am
Very recently Pennsylvania was barred from tolling the Turnpike on the grounds that it wanted to use the money for non-Interstate purposes. It’s legal to toll Interstates as long as the money stays on the road; I’m not even sure whether it’s legal to use the money to cross-subsidize other roads.
adirondacker12800 Reply:
October 20th, 2011 at 10:59 am
Barred from tollling I-80 which isn’t part of the Turnpike. Pennsylvania can put whatever tolls they want to on the Turnpike. Just like New York can on the Thruway. Or New Jersey on the Turnpike or the Parkway. Delaware has the gouging down to fine art.
Alon Levy Reply:
October 20th, 2011 at 12:59 pm
Ugh, I-80, you’re right. Sorry.
Derek Reply:
October 20th, 2011 at 11:05 am
http://www.fhwa.dot.gov/pressroom/fhwa1006.htm
“The Federal Highway Administration (FHWA) today announced that it had declined to approve an application to place tolls on the Interstate 80 because the application did not meet the federal requirement that toll revenues be used exclusively for the facility being tolled.”
Nathanael Reply:
October 21st, 2011 at 6:16 pm
The moment people employed by the CIA and DEA go to prison for their cocaine and heroin dealing operations (and there is ample evidence that both agencies have had many people heavily involved in dealing), I’ll believe that criminalization of drugs might work.
Right now, I say, legalize it all, tax it heavily, regulate it heavily, ban advertising for it, offer free rehab, and remove the profit from it. Seems to work better, frankly. I don’t think any drugs should be used except under medical supervision, but prohibition *just doesn’t work* unless a drug is very unpopular.
joe Reply:
October 20th, 2011 at 9:19 am
Yeah!!! Kill the Unions. Break their pensions. You forgot to triple executive pay.
Now how the F can CA raise a dime under Prop 13′s 2/3 majority?
Alon Levy Reply:
October 20th, 2011 at 10:51 am
Quadruple. Not all CEOs can afford their own private Learjet. And the Learjet is built by Bombardier, so its production needs to be encouraged.
joe Reply:
October 20th, 2011 at 11:08 am
http://www.aflcio.org/corporatewatch/paywatch/
This 23% increase happened in the middle of the great recession.
Obviously we need to cut workers’ wages, disallow unions and invalidate pensions.
Andre Peretti Reply:
October 20th, 2011 at 12:22 pm
Henry Ford thought top executives should never earn more than 20 times a line worker’s salary. Today, he would be considered a dangerous socialist.
synonymouse Reply:
October 20th, 2011 at 12:54 pm
On the other hand Henry Ford unfortunately got caught up in the xenophobic, anti-semitic fad of the early twenties and finally was shamed into revising his thinking along more cosmopolitan lines. But meantime Ford lost sales to GM and other because of the right-wing stigma.
Ford also took a real hard line against the UAW initially, hiring gangster types as goons. He was certainly correct about exorbitant ceo salaries but in many ways he was stuck in the 19th century.
Alon Levy Reply:
October 20th, 2011 at 12:58 pm
Ford lost sales to GM because he only sold one car model and thought that what customers wanted was irrelevant whereas GM sold multiple types of cars to reach different markets.
Nathanael Reply:
October 21st, 2011 at 6:18 pm
Ford was indeed stuck in the 19th century; a racist, sexist robber baron.
But a *smart* robber baron when it came to economics — he knew he had to pay each employee enough that they could buy a Ford. Thus cycling the money back to him.
Today we seem to have *stupid* robber barons. Perhaps the fact that they don’t work in manufacturing or real services, but in *finance*, the realm of doing nothing real, has something to do with it.
Additional perspectives:
http://www.thetransportpolitic.com/2011/10/20/with-little-hope-for-near-term-federal-support-california-high-speed-rail-struggles/
Risenmessiah Reply:
October 20th, 2011 at 8:26 am
Washington doesn’t want to do anything until the demographic shift is complete in 2016…they don’t like taking risks.
What California can do to raise the ante is, as I’ve said, switch some San Joaquin traffic to Altamont and then pursuing some equipment upgrades for Amtrak California.
I’ve said it once and I’ll say it again: SCREW THE FEDS! lets look overseas for our private investment (Japan, Korea, Germany) and leverage our current bonds, fed funds to the Max. It may get the line from SJ to Sylmar initially, but when we oust the RePIGlicans from congress next November, we could then focus on the entire line from SF-LA.
I wonder if upgrading the Capital Corridor to be electrified and/or run faster would be a good test. It only takes a little more time to get to Sacramento than driving and it has a high ridership level. Probably wishful thinking to believe if you at least start building it, “they will come”.
Paulus Magnus Reply:
October 20th, 2011 at 10:24 am
It’s not really feasible as I understand it. Going via Altamont would effectively accomplish that, but every time you suggest that, San Jose’s knickers get in a twist.
joe Reply:
October 20th, 2011 at 11:01 am
I’d try to improve the service by seeking to reform how the gov’t negotiates running service on private rail and improving the track where it is worn and adding passing track or improving grade separation like was done for Caltrain in San Carlos.
thatbruce Reply:
October 20th, 2011 at 11:07 am
The basic problem with the Capitol Corridor is that the underlying track curves a lot. You could put up electric poles, improved signaling and so forth, but without straightening out a noticeable number of curves, the maximum speed and journey time for the trip won’t change that much. If you want to be able to run the pointy-nose things close to their maximum speed, you need a completely new alignment separate from the existing freight-owned alignments.
In some ways the possible CAHSR alignments for Sacramento only help trips made between the South/West Bay and Sacramento (and Socal). They don’t help trips between North/East Bay and Sacramento, especially if your destination is along the current Capitol Corridor route.
Peter Reply:
October 20th, 2011 at 6:13 pm
I wonder how much time would be saved on the Capitol Corridor by running modern (as in European) tilting rolling stock, such as Germany uses on its non-electrified RegionalExpress lines?
swing hanger Reply:
October 20th, 2011 at 7:19 pm
On JR Hokkaido’s Hakodate Main Line between Sapporo and Hakodate, a route riddled with curves, tilt trains (281 series) make the run 20 minutes faster than conventional types, averaging 106kmh (66mph) for a three hour ride, which is the fastest schedule on narrow gauge lines in Japan.
swing hanger Reply:
October 20th, 2011 at 7:36 pm
Let me clarify that both types running on the route are dmus- the improvement will likely be greater comparing dmus to diesel locohauled trains.
Alon Levy Reply:
October 20th, 2011 at 9:13 pm
It would also be about as fast as the Acela between New York and Boston, which is electric and tops at 240 km/h.
Richard Mlynarik Reply:
October 20th, 2011 at 10:08 pm
Fix the curves all you like.
You still haven’t fixed the underlying problems, which are regulation (FRA = freight), ROW ownership (= UPRR) and track sharing (= slow crap infrequent service, curves or no curves.)
“Incremental improvement” under FRA is just a way to give public money to freight RRs and get nothing back.
But the foamers love it. Olde Tyme Railroading 4eva. And ever and ever, Highball on the green!
Nathanael Reply:
October 21st, 2011 at 6:21 pm
Richard, you probably haven’t noticed that many of the incremental improvements end up slowly but surely reducing and eventually eliminating track sharing (see Michigan, Washington state, etc.) and changing track ownership (who owns Metrolink tracks again? That’s right. Who owns Detroit to Chicago now? That’s right.)
No argument about the FRA. I think we all know the FRA needs to be reformed pronto.
Here is some TV coverage of Kings County supervisors passing a resolution saying no to HSR in their county.
http://www.youtube.com/watch?v=MbN7e4KZz2Y
joe Reply:
October 20th, 2011 at 10:57 am
How about a clip where Supervisors admit their resolution is symbolic and carries no weight.
Politicians pandering to have it both ways – kinda like Lowenthal.
The vote is going to backfire on them when their consitutents who want HSR are alienated by the symbolism and those seeking to block rail realize the Supervisors did nothing of significance.
I hope the California hsr right-of-way is kept in public hands. As for infrastructure maintenance and train operation, I can see advantages in private management.
The unhappy relationship of Amtrak with the freight railroads points to the problem of being at the mercy of the right-of-way owner. Amtrak pays to operate on the right-of-way. If Amtrak wants to go faster than a coal train, it has to pay to upgrade the right-of-way, which will be torn up by coal trains afterwards. If Amtrak wants to pass the coal trains, it needs to pay for extra tracks or sidings or switches. Grade separations, one of the most costly parts of a right-of-way, are 95% paid for by the public, anyway. After all that, the trains are 12 hours late. And there’s no guarantee Amtrak can run the trains it wants to run.
None of this is unfair on the part of the railroads. It’s their track, and the public has no particular right to use it. From the railroad standpoint, running passenger trains faster than the speed at which it is most economical to move freight is an expensive nuisance. The public should expect to pay for access to the system, and should be grateful for whatever access it gets.
A high speed rail line is an important public good. The public needs to be able to add trains, or routes, or capability, without lengthy negotiations and costly settlements. It’s unlikely there will be more than one hsr system in any region, so there will never be the free-market alternative of multiple private systems competing for riders. It’s best to keep control in public hands, and to keep the tracks and the right-of-way public.
A quick look at Russian HSR project PPP financing case.
http://www.railwaygazette.com/nc/news/single-view/view/ppp-model-to-fund-moscow-st-petersburg-high-speed-line/archiv/2011/10.html
2015-18 : half of 313 bn roubles construction cost
2019-2050 : 58 bn roubles per annum to 2050
——————————————————
So the private investors will have to come up with 160 billion roubles($5 billion) to construct the St Petersburg-Moscow HSR line, in exchange for $1.85 billion annual compensation for keeping the line open.
But the top speed requirement of 400 km/hr is simply crazy; not even the fastest bullet train in the world, the HEMU-400X, has the top service speed of 370 km/hr.
RisenMessiah Reply:
October 20th, 2011 at 12:28 pm
This is rent-to-own type construction. The only reason it makes sense is that Russia obviously needs to go quickly. This makes no sense if you can float your own debt as well as California and the U.S. can…
Useless Reply:
October 20th, 2011 at 1:39 pm
@ RisenMessiah
> This makes no sense if you can float your own debt as well as California and the U.S. can…
The difference being that the Russian project is actually going somewhere, unlike the California project.
RisenMessiah Reply:
October 20th, 2011 at 1:54 pm
Exactly, because this is the type of stuff that Schwarzenegger thought we would be able to do: sign and drive. The problem is that Japan has to borrow the money to fund the project at a higher rate than we do. So why would California pay a yearly premium to a private partner when it just ensues a longer payoff and more costs?
Put another way, this is not so far off from how Orange County, pitiless and bankrupt, funded all their highway construction recently. Even so, they still have roadblocks (no pun intended) to finishing “the system” that are not financial necessarily. And I’m not referring to NIMBYs…
Alon Levy Reply:
October 20th, 2011 at 3:18 pm
“The problem is that Japan has to borrow the money to fund the project at a higher rate than we do.”
Really?
Risenmessiah Reply:
October 20th, 2011 at 10:01 pm
The yen is much stronger today than a few years ago against the dollar. You may have heard of something called the “carry trade” where you use the weakened currency to issue debt. Now that the U.S. is in that position it’s hard to see who can borrow money more cheaply than us.
California beats expectations on bond prices
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/10/19/BUKG1LJM7V.DTL
Governor touts infrastructure bonds
http://gov.ca.gov/news.php?id=17286
D. P. Lubic Reply:
October 20th, 2011 at 5:54 pm
And in related news, Amtrak California carries record passengers:
http://stopandmove.blogspot.com/2011/10/amtrak-california-breaks-ridership.html
Nathanael Reply:
October 21st, 2011 at 6:24 pm
State general obligation bonds are the fourth safest investment in the USA. (After Treasuries, insured bank accounts, and cash).
And the only one paying significant amounts of interest.