Two years ago, nearly 90 percent of the six million people traveling between Madrid and Barcelona went by air. But early this year the number of train travelers on the route surpassed fliers. The trajectory is ever upward.

The shift has political and economic benefits for Spain, which like other European Union countries has set out to lower its carbon dioxide emissions by 20 percent over 10 years. Analysts say that such emissions per passenger on a high-speed train are about one-fourth of those generated by flying or driving.

But AVE’s passengers are not necessarily thinking green. Like high-speed railroads in France and China, Renfe — Spain’s national train operator — also has performed the ultimate green sleight of hand simply by making the low-emissions option more comfortable and convenient.

“Since the day this train opened, I have never, never set foot on the plane again,” said Mr. Martínez, 31, a lawyer who travels between Madrid and Barcelona twice a week. “Why would anyone fly?”

In other words, people in Spain really like taking the train even over other previously popular options. That’s even though Spain chose a different approach than France when setting its HSR fares:

But unlike the French, who sought to maintain a low-cost image as their trains gained speed, Renfe decided to go upscale, said Josep Valls, a professor of marketing at the Esade Business School in Barcelona.

AVE tickets cost as much as plane tickets — from about €120 to €200 one way, or $160 to $300, though cheaper advance fares can be found. The train offers assigned reclining seats, computer outlets, movies, headsets, good food, even gloved attendants…

Spain’s high-speed train sector seems well positioned to expand. All AVE lines turn a profit and have easily survived price wars waged by airlines, Mr. Valls said. What is more, trains require fewer employees and far less costly infrastructure than do planes.

What’s even more remarkable about this is that the AVE is maintaining these ridership levels, and generating operating surpluses as a result (something I really wish the NYT article had mentioned), despite Spain being one of the hardest-hit countries in the Eurozone by the recession. Only Greece and Ireland appear to have taken a bigger hit than Spain, which had a big property bubble that burst, leaving nearly 20% of the country unemployed. The fact that the AVE maintains its ridership and profitability during the recession is testament to the resilience and popularity of high speed passenger rail.

Of course, it’s not the only way to price HSR service. As DoDo’s Puente AVE post from a year ago today showed us, France’s decision to emphasize ridership over revenue in the first years of the TGV 30 years ago paid off both in terms of generating riders and long-term financial support for the system. We’re nearly 10 years away from making final decisions about fares for California HSR, but both France and Spain offer different, compelling models to study.

I’m sure that the NYT article about the success of the AVE will bring out those who claim that Europe is more suited to passenger rail, that it has different attitudes about travel – in short, that Spain isn’t California. This is as good a time as any to recall Matt Melzer’s excellent post comparing Spain and California from July 2008, and showing just where demand for the initial, wildly successful AVE line from Madrid to Sevilla came from. Melzer offered the following charts:

Notice the population density: almost exactly the same. What’s not noted here: distance between Madrid and Barcelona (386 mi/621 km) is similar to the distance between SF and LA (432 mi/695 km). The geography is very similar as well.

Notice the traffic coming from automobiles and induced demand. HSR deniers like to argue such “induced demand” does not exist, but the AVE indicates it does, both in 1992 when the first line opened and more recently, in 2008 when the Madrid-Barcelona line was finished.

This not only shows that HSR quickly became the dominant mode of transportation on the Madrid-Sevilla route, but that it happened on a route where conventional passenger trains had only a small fraction of the share before the opening of the HSR line.

Now that I think about it, there are a few members of the state legislature who could stand to read both the NYT article and Melzer’s original post, charts included…

Trips like these always remind me of how much easier HSR would be. To get here, my wife took me to San Jose Airport yesterday, where I took a flight to LAX. Flights from Monterey to LAX were insanely expensive by the time I booked my flight just over a week ago, and I couldn’t find any affordable flights that met my schedule needs from San Jose to John Wayne Airport. So I flew into LAX and then hopped on board the FlyAway Bus to Irvine, where my family picked me up and drove me back to Tustin. Door to door, it was 6 hours:

Left Monterey at 7 AM, arrived at SJC at 8:15
Plane boarded at 9:15, took off at 9:45
Landed at LAX at 11
Boarded FlyAway bus at 11:45
Arrived at Irvine around 12:40
Arrived in Tustin around 1 PM

Sure, there was some waiting around at LAX for the FlyAway bus, and perhaps I could have left Monterey around 7:30. But even if I had left Monterey then, and had caught the FlyAway bus as soon as I made it out of the terminal (which took a good 15 minutes since I flew into the commuter terminal) I’d have saved 45 minutes or so. So 5-6 hours is the ballpark.

Now how long would that take on HSR? According to the CHSRA, Gilroy to Anaheim will be 2 hours, 16 minutes. Of course, depending on the mix of local stops, it might take longer. Still, it’s 45 minutes from Monterey to Gilroy, so let’s say I leave Monterey 60 minutes before departure (since I’d want to leave some time to spare). Then spend maybe 2:30 on the train, and 20 minutes or so from ARTIC to Tustin, depending on which family member picks me up. That’s about 4 hours’ travel time. Much better than 6, even if fares were set at 83% of comparable airfares. And even if I needed to pad my trip a bit more between Monterey and Gilroy, it’s still a savings over air travel, if not quite as dramatic, and likely for a cheaper price, especially once you factor in the increases in oil prices over the next 10 years.

Every time I travel back to Southern California, I always think “this would be so much easier on high speed rail.”

• There is a significant demand for intercity passenger rail. Both trains, going to and from Seattle, were packed, and the #11 train that I was on (departing Seattle yesterday and currently en route to LA) was totally sold out. Amtrak does very well at the holidays, as do the airlines. The Pacific Surfliner trains between San Luis Obispo, LA, and San Diego also see enormous ridership during the holiday season. The notion that there’s no demand for passenger rail in this state is therefore not only absurd, but disproven by the facts. HSR will tap into that demand with faster and more reliable service along those high-traffic corridors.
• Amtrak is hamstrung by the fact that it doesn’t own the rails it uses. Amtrak trains are at the mercy of the freight rail operators, primarily Union Pacific and BNSF here on the West Coast. During the height of the previous economic bubble UP freight was so frequent that the Coast Starlight experienced delays so bad the train became known as the “coast starlate”. That record has improved considerably since the economic crisis began. But even with dependence on freight, some Amtrak routes have been able to post impressive on-time performances. The Capitol Corridor has a 92% on-time performance rating even though it runs 32 trains per day, primarily on UP tracks. Capitol Corridor management, primarily under recently-retired Gene Skoropowski, innovated an incentive payment structure whereby UP makes more money when they deliver a better on-time rate.

  Delays still happen. On the day I left for Seattle (December 23) the southbound Coast Starlight, #11, was delayed between 8 and 9 hours after it hit a tree near Mount Shasta. That’s bad, but then I’ve experienced similar delays when snow near Mount Shasta or Siskiyou Summit forced a closure of I-5 and I either had to stay the night in Ashland, or take the long way around via Highways 199 and 101. On my own trips, the train going north (#14) left Salinas 15 minutes late, and arrived at Olympia 10 minutes late. Coming south, we left Seattle on-time, and arrived at Salinas about 40 minutes late. Not perfect, but not bad either, given how little control Amtrak has over the rails it uses.

  That all being said, HSR significantly outperforms Amtrak since it will be using its own purpose-built rails that the state will own. In Japan, delays of even a minute are infrequent, and as in Spain, delays of 5 to 15 minutes will produce a refund of some or all of a passenger’s fare. Given that Amtrak can still attract lots of riders even with a reputation for delays, that further suggests to me that HSR will have little trouble attracting many more riders with much faster and much more punctual service.

• It’s true that Amtrak’s lines, aside from the Acela, do not generate enough revenue to pay the operating expenses. Then again, neither does any single one of the freeways in California, and the Orange County tollroads are frequently being bailed out by the public. So Amtrak is being held to an unreasonable and hypocritical standard. That being said, if a service can produce 100% farebox recovery ratios while still offering a timely and affordable service, it’s always worth going for. The Capitol Corridor again offers a model of how this can be accomplished, where state funding of infrastructure (cars and rail projects) has produced significant gains. The charts below are from 2008, and while ridership has declined since then, ridership remains above the 2007 level, suggesting that the long-term trend remains in effect:

  

  These charts show a steady increase in both ridership and revenue on the Capitol Corridor, even before the 2008 spike.

  

  This chart is even more impressive and significant. It shows that state subsidy levels (Capitol Corridor is funded by the state of California) have remained pretty much static for the last eight years, yet the Capitol Corridor has had dramatic success at growing ridership and bringing its costs under control.

  The current battle over HSR funding isn’t really about the operating costs, since there won’t be a need for ongoing subsidies for that (not that there’s anything wrong with such subsidies). The battle is instead over who foots the bill for the cost of the construction of the dedicated HSR rail corridor. Seeing as nobody has yet proposed we pay back the entire $400 billion cost of just the Interstate Highway System alone (subsidized entirely by tax dollars), not to mention the billions California has spent on its own freeway system, it is again hypocritical to demand that the public NOT be asked to pay for the cost of HSR.

Anyhow, that’s a brief set of HSR-related Amtrak thoughts. Keep in mind that though this blog is focused on California HSR, we do support the reconstruction of the a broader national passenger rail network we had until about 40 years ago, when it was abandoned in a very short-sighted and foolish move. HSR is a necessary part of that renewed national network, but it’s not the only part, either here in California or nationwide.

Back to our usual topical posting tomorrow. My planned post on assessing the CHSRA will still happen, but not until later in the week. Happy new year, everyone!

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 so it is with Jon Coupal, who is the head of the Howard Jarvis Taxpayers Association, a right-wing organization determined to oppose government spending because somehow, somewhere, it might lead to someone’s taxes going up. Coupal ran the No on 1A campaign in 2008, such as it was, and had a decent amount of success getting pliant reporters to repeat his often errant claims.

He’s resurfaced as an HSR critic this week with a post at Fox and Hounds Daily, a conservative website focusing on California politics. The post repeats many of the same claims as in the debunked MNG and San Diego Union-Tribune editorials, but also introduces a few new ones, so it’s worth taking apart Coupal’s nonsensical attacks on HSR.

For purposes of full disclosure, Howard Jarvis Taxpayers Association ran the unsuccessful campaign against Prop 1A (not to be confused with 2009’s Prop 1A, an attempt to raise $16 billion in new taxes). Our most potent weapon was a devastating study by the Reason Foundation which revealed that the proponents’ representations regarding costs, fare price and profitability were pure fantasy. But, from the start, we had an uphill battle convincing voters how poorly thought out this measure was. The California Legislature had already stacked the deck by providing such a biased title and summary for the measure that the issue of that deception is still the subject of litigation today. The deceptive ballot material, in addition to the campaign contributions from those who would profit from the project, was enough to ensure victory at the polls – albeit by a very small margin.

In other words, Coupal is saying California voters were stupid and fell for politicians’ tricks instead of believing what the Reason Foundation said. Of course, this blog thoroughly debunked that report, which was full of misleading statements and bad analysis. He cannot bring himself to accept the fact that Californians saw through his claims and voted to approve HSR in spite of his arguments.

Coupal claims the new business plan proved their claims that HSR somehow wasn’t viable:

Although this revised plan calls into question the entire viability of the project, the news is bound to get a lot worse. In short, even these revised figures by the Authority were born in dreamland.

But this is just plain wrong. The revised plan shows how HSR is viable. It calls nothing into question. It shows that even with the federally-mandated cost calculation shift, HSR can still pay back private investors and meet its operating expenses by attracting enough riders even with higher fares than previously anticipated. The business plan shows a resilient system that meets pent-up and significant demand for this service. I personally don’t like the higher fares, but they do show a system that is financially viable. Coupal is wrong to claim otherwise.

Another fantasy: “The cost of the project — recently pegged at $33.6 billion in 2008 dollars — is now estimated at $42.6 billion in time-of-construction dollars.” Sure, that’s a projected increase of about $10 billion, which is jaw-dropping by itself. But the Reason study suggests the final costs will be more than twice the revised projection. Many who analyze the trend lines of these megaprojects think that, if it is ever built, the cost will far exceed $100 billion.

Coupal here omits the explanation for the increase, which is that the federal government mandated a shift to “year of expenditure” accounting. In 2008 dollars, the cost only increased by $1 billion, owing to the adoption of a tunnel for part of the LA-Anaheim segment. That’s a small increase, and certainly disproves Coupal and Reason’s argument of inherent cost increases in megaprojects. They still have no explanation or justification of how it would ever cost $100 billion – it’s just a number they’re throwing out there because it looks and sounds big.

Those are familiar arguments from Coupal. He has a new one though: an argument that somehow HSR won’t actually help the environment. This is a case of what is often called “concern trolling,” where someone pretends to share an ideological view merely in order to raise “concerns” to others of that view. In this case Coupal, who normally is a strong opponent of laws and programs to help the environment, pretends to be interested in the issue in order to raise “concerns” about how HSR would reduce carbon emissions:

But it turns out that, from an environmental perspective, this is not so simple. Recent studies by the University of California regarding the environment life-cycle assessment of various passenger transportation systems cast specific doubt on California’s high speed rail project. In reporting on those studies, the Institute for Transportation Studies noted that “if high-speed rail draws only half the ridership it says it will attract, its environmental performance will be twice as bad per passenger mile traveled. And, if compared to typical aircraft travel in situations where 70 percent of rail passenger seats are filled, high-speed rail performs worse (the crossover occurs when high-speed rail achieves 65 percent of estimated ridership compared against current aircraft utilization rates at 70 percent).”

This refers to research presented at a HSR forum in Berkeley earlier this year. We’ve written about this before, particularly about the extremely biased way the forum was reported by the Institute for Transportation Studies.

Coupal is specifically citing the work of UC Berkeley professor Arpad Horvath, who claimed at the forum that HSR wouldn’t generate the carbon reductions it needed without “very high ridership.” But Horvath’s claims, based on research that hadn’t been peer reviewed at the time it was presented at the forum, makes some curious assumptions:

These must include manufacturing of the vehicles themselves, their required infrastructure, and the fuel used to power them. High-speed rail will produce some 10 million metric tons of carbon dioxide per year during its construction, said Horvath. It will need to run very full trains almost immediately to offset the emissions expended in building tracks, stations, rail cars to “compete environmentally” with air or road travel.

In addition, if the train’s electricity is produced by coal-fired or natural gas-fired plants there will be substantial, harmful emissions produced until cleaner, alternative fuel sources, such as wind power, are available for use.

The bottom line, he said, was high-speed rail “only outperforms other modes if there is a very high passenger load or a very clean energy source, neither of which is assured at the moment.”

There are two problems with this: specific and conceptual. The specific problem should be obvious, that HSR will indeed by powered by renewable energy, by official policy of the California High Speed Rail Authority.

The conceptual problem is this: Horvath is assuming that the cost of doing nothing is zero, that if we just sit on our hands and don’t build HSR, that global warming won’t cause any kind of crisis. Yes, the construction of HSR will generate carbon emissions, but we have no other choice if we are going to build long-lasting infrastructure that will reduce carbon emissions. I agree with Horvath that the state should maximize the reductions by maximizing ridership, but that’s not what Coupal wants – because to maximize ridership means using more public money to construct the system, which he opposes.

And perhaps that’s the greatest irony of all. The new business plan shows higher costs largely because that’s what’s needed to help attract private investment – which is what Coupal and Reason Foundation have been saying all along, that the private sector should be doing this. CHSRA has no apparent plans to seek more money from the state of California, so Coupal should be dancing a jig that even though he lost the Prop 1A battle, he’s winning the subsequent battle to prevent more state money from helping build the thing.

But, as we know, Coupal isn’t interested in something that helps private enterprise. Like many right-wingers, he’s internalized the false argument that passenger rail is anti-conservative, doesn’t help anyone except the poor, doesn’t help business, and is just plain bad.

There’s a reason the California Chamber of Commerce has joined the Sierra Club and the California Labor Federation in support of high speed rail – unlike Coupal, they actually understand that HSR will be a major economic boon to the state at a time when we desperately need it. If Coupal wants to avoid tax increases, he needs to support the creation of jobs, which in turn generates tax income for the state. High speed rail will accomplish it, in spite of Coupal’s ideological and misinformed objections.

UPDATE: Jeff Barker of the California High Speed Rail Authority has a response to Coupal up at Fox and Hounds Daily, pointing out the ways in which high speed rail is actually gathering momentum, instead of losing it as Coupal claimed.

Those hoping to ride the state’s high-speed train next decade will have to dig much deeper into their wallets than officials originally thought, a harsh reality that will chase away millions of passengers, according to an updated business plan released Monday.

Of course, as we pointed out, the estimated higher fares are entirely optional. The CHSRA could still have train fares at 50% of airfares if they wanted to. But since they believe they need more private funding, that means a need for more fare revenues, even at the expense of ridership, and so they’re contemplating setting fares at 83% of airfare. As I explained yesterday, I think that’s the wrong choice – but it is a choice.

And there’s a crucial underlying factor that explains this choice. From the same Mercury News article:

Authority Deputy Director Jeff Barker said while the numbers have changed, the “spirit of what the people voted for” with Proposition 1A remains the same.

“What they voted for was to put $9 billion toward construction of a high-speed rail system,” Barker said. “That’s still what we have today. We’re not asking the voters for additional money.” [Emphasis mine.]

Barker is reflecting the political assumption that there’s no way at all that any more money can be generated to pay for the project from public sources, and that private sources are the only way to make up the difference, and that we have to sacrifice ridership in order to pay those private investors.

I think we can all agree that for the time being, it’s probably accurate that California can’t pony up any more funds for HSR, not until we’ve resolved the budget crisis. But several years down the line, the state may be in a much better position to help support the project, and could well afford to kick in a few extra billion. And of course, the federal government should be able to kick in much more than just $2.5 billion a year nationwide, or the paltry but welcome $8 billion in one-time HSR stimulus funds.

However, when transit planners assume public resources are scarce, they tend to make bad decisions as a result. Sometimes the decision is to hide the true cost until well into construction, then say “surprise!” and force a politically difficult bailout – the Big Dig model. Or they feel forced to build an inferior system in order to make the money go farther, which is one charge that’s often leveled at BART.

Another option is to go to voters with a financial ask that is too low, and then try and finance the difference, jeopardizing the project as a whole. That’s a model I have some familiarity with, having watched it happen in Seattle earlier this decade with the rise and fall of the monorail project.

The Seattle Monorail Project was a genius of an idea. Generated from the people, against the wishes of the political establishment, it was an early form of 21st century transit activism that argued the best way to build mass transit affordably in a dense, geographically constrained city like Seattle was to, in the words of its backers, “rise above it all” with a monorail.

Although monorails have been the object of scorn and derision since most people know them either from Disneyland or The Simpsons, this project was more credible in its ridership numbers and technology. In 1997 and in 2000, Seattle voters approved two different initiatives to create and fund a monorail proposal, and in 2002 city voters were asked to approve a Motor Vehicle Excise Tax (MVET) to fund construction of a “Green Line” from Ballard to downtown Seattle to West Seattle, a corridor currently lacking mass transit, at a cost of about $2 billion. The tax narrowly passed with a 1% margin of victory. Construction was to begin in 2005, and an opening date of 2007 was projected.

However, the monorail project had set the MVET too low. Worried that a higher tax would fail at the ballot box, they proposed a 1.4% MVET, instead of something closer to 2% as had been recommended. The result was that as tax receipts began coming in during 2003 and 2004, revenues were about 2/3rds below projections. The project had a genuine funding shortfall, and no real answer how to close it.

Meanwhile, opposition to the project had grown, from a few folks who claimed that an Interstate 5 corridor should be used to downtown developers who were flipping out that trains might pass by the 4th story windows of their tenants. Since the city’s political establishment had never bought into the monorail concept, they didn’t feel moved to defend it, and Seattle Mayor Greg Nickels even convinced the council to deny the use of city streets for the monorail project. And the project opponents began making noise about a vote to repeal the MVET that had been so narrowly approved in 2002.

Afraid that they couldn’t get voters to agree to close the funding gap, the monorail board sought a number of solutions. They pushed back completion to 2009, and explored opening a shorter “starter line” with the promised full route to open some time after that. They also explored a bond financing model that would have saddled the agency with $9 billion in interest, 450% of the construction cost. Hostile media outlets like the Seattle Times breathlessly reported on the financing plan as a sign that the monorail had become a “boondoggle” that should be killed.

Cornered and friendless, the monorail board felt compelled to go back to voters in the November 2005 election – but NOT with a plan to raise more revenues. Instead they proposed to shorten the line and add the complete route at a later date. In an election where the monorail was outgunned on the campaign trail by an avalanche of developer money, 65% of voters rejected the plan. And even though they were still collected MVET revenue and had even bought property along the ROW, the Seattle Monorail Project chose to fold. They fired their staff, sold the property, terminated the MVET, and officially went out of business in early 2008.

I voted for both the 2002 and the 2005 monorail initiatives, but wasn’t surprised the 2005 initiative failed. The monorail board had made some poor decisions, from making an ask that was too low in 2002 to undermining their project’s credibility in 2004 and 2005 with more and more complex and costly plans to deal with the funding crisis. The board’s leadership was notoriously aloof, and their inability to effectively communicate with the public didn’t help matters. The lack of meaningful support from city, county, and state government didn’t help either. As an independent authority, the monorail board wound up lacking the political buy-in it desperately needed, especially in 2005 when it began circling the drain.

Ironically enough, the need to build mass transit on the Ballard-West Seattle corridor remained obvious to everyone, and Mike McGinn made a promise to build light rail on that route a cornerstone of his winning campaign for mayor last month. It will probably cost more than $2 billion to build that project, and since light rail would be on the streets, it would provide slower travel times than the monorail would have.

In other words, despite the monorail project’s flaws, Seattle will have to build high capacity passenger rail on that corridor eventually. And the city is going to spend more money to do it than they would have on the monorail. (Of course, had the Forward Thrust plan been approved in 1970, the city would have had a modern heavy rail system for only $500 million.)

There are any number of similarities between the Seattle monorail project and California high speed rail, from the issues finding complete funding to the lack of solid political support in the state legislature.

But there are also important differences. Unlike monorail, high speed rail is a flagship project of the current presidential administration, and more and more members of Congress and other stakeholders understand that HSR is a necessary part of our nation’s future. Whereas monorail was an untested technology never built on the scale Seattle was proposing, HSR is an off-the-shelf technology with plenty of global expertise on how to build this the right way, on time and on budget.

Still, it’s clear that California HSR needs to avoid some of the core mistakes made by the Seattle monorail. The #1 mistake to avoid is panicking and making stupid choices when you’re concerned about funding. Maybe the Seattle monorail would have died anyway if they had asked for an increase in the MVET, but we know that their attempts to survive without such an increase killed the project anyway.

California HSR should not be afraid to return to voters with a clear and honest ask for more funds when the time comes. Such an outcome is preferable to cutting back on system features, stations, or segments. It’s preferable to setting fares so high that ridership fails to materialize, setting in motion a series of other difficult problems. It’s preferable to bringing in too much private investment that would force setting those fares too high.

Of course, some of this discussion is theoretical. There is a level of private investment that is acceptable (probably around 20%) and it’s entirely possible that the CHSRA can build a good system without ever having to ask California voters for another dime. The Authority has been honest in its cost projections, even when duplicity might have caused them fewer political problems. That’s a very good sign for the project’s future, including its financial future.

The best solution to this is to have a robust federal funding source for HSR, so that California neither has to seek private funding nor has to ask voters to plunk down even more money. All of us should begin organizing to achieve the goal of stable, sustainable, long-term federal funding for HSR. But we should at least keep in mind the possibility that at some future date, we might have to indeed ask California voters for more money to complete the system.

We should not be afraid of that prospect, and neither should the CHSRA. Instead we should all strive for openness and accuracy in cost projections and discussions, to build a sense among voters that the project is well managed. Those are good goals in and of themselves, but they are also necessary pieces in the event that we need to put a proposition on the 2016 ballot to generate the funds to finish up the system properly.

1. The estimated cost to build Phase I of the project is $42.6 billion

2. Estimated HSR fares are 83% of airfares

Both of those are higher than before, which will almost certainly lead to a new round of “oh my god high speed rail is a boondoggle we can’t afford, we have to kill it before it bankrupts us!” nonsense from the usual suspects.

But here at the California High Speed Rail Blog, we prefer common sense over misinterpretations. Even at $42 billion, HSR is a bargain given the cost of expanding freeways and airports to meet the same demand, a cost estimated to be anywhere from $80 to $150 billion. It’s also a bargain given that the cost of doing nothing is not zero – unchecked global warming, soaring oil prices, and a lack of green jobs will all cause widespread economic damage, whereas HSR is an investment in our future that will not only pay for itself, but will generate new savings, new income, new jobs, and new economic opportunities for generations to come.

That has to be weighed against the HSR deniers, the defenders of the status quo, who WILL argue that any change in the basic elements of the project, particularly cost, somehow proves the project is flawed, somehow proves the CHSRA is less than honest, somehow proves they were right all along. It does no such thing. So as the usual suspects ready their slings and arrows, let’s be clear on what the new business plan means.

First, the cost.

The 2008 Business Plan assumed a system cost of $33.6 billion. The 2009 Business Plan assumes a system cost of $34.9 billion. So where does the $42.9 billion number come from?

The first two numbers are in 2008 dollars. However, as a condition of receiving federal stimulus money, the CHSRA was told they had to cost it out in “year of expenditure” dollars – the projected cost when the money is actually spent. Assuming inflation, the overall cost rises to $42.9 billion dollars.

In other words, the cost increase is entirely outside the CHSRA’s control. It’s not because they screwed up, it’s not because the system is flawed. It’s because the feds told them to take a guess at inflation over the next 10 years.

And it’s a guess. Inflation could be much higher. Or deflation could continue and the final cost could be much lower.

What we do know is that this cost estimate is a more credible estimate. Assuming key elements of the project don’t change, such as route, there’s no reason to assume the final cost would be higher than $42.9 billion. That is, unless the Peninsula NIMBYs get their way and a tunnel is built from South San Francisco to Mountain View, in which case the cost would soar.

It’s good that we have a more credible estimate now. It produces less chance of sticker shock in the future. It helps us know what the costs are likely to be, and enables us to ensure we can deliver a project on-time and on-budget. And while the HSR deniers will claim that the 2008 estimates were misleading, the fact is that it makes sense to price it out in 2008 dollars, since especially these days, trying to determine future inflation rates is a total crapshoot.

The second issue is the cost of fares. This is linked to ridership, so it’s worth spending some time on the matter.

There is no inexorable force dictating fares. The Authority can basically choose the fares however they please. If they want to have fares set at 50% of airfare, they can do so. If they want to have fares set at 100% of airfare, they can do so. If they want to have fares set at 83% of airfare, as is assumed in the business plan, they can do so.

However, there are costs to doing so. A higher fare could generate more revenue to pay back private investors. But that might come at the expense of ridership.

It is worth quoting the business plan at some length on this topic. From page 67:

High-speed train fares are a key factor in the level of ridership and the revenue forecast. Forecasts for the programmatic EIR/EIS work used fares based on an LA – SF fare at half (50 percent) of the 2005 air fare, and varied proportionally with distance for other trips. This “50 percent” fare level generates relatively large passenger flows without requiring operating subsidy, and creates large public benefits from the public investment, e.g., air quality improvements, energy consumption reductions, and travel time savings. It also ensures that local and regional impacts of the high-speed train on items such as traffic, parking, sensitive lands, and water resources are not understated.

Tests of the sensitivity of riders and revenue to fare levels 33 percent higher and 66 percent higher than the “50 percent” base level showed progressively higher revenue, although lower ridership. The 66 percent higher case (which becomes the “83 percent” of air fare case) appears to be near the level that will generate the highest revenue, and reduces the operating costs and the number of trainsets needed. Because of the importance of increasing the amount of private sector funding in the construction and procurement of the project, the 83 percent fare scenario was adopted for this business plan. The fare is calculated in the same manner as the 50 percent, but is anchored by an LA-SF HST fare at 83 percent of the air fare, or in 2009 dollars a high-speed train fare of $105 vs. a $125 air fare, and a $118 cost to drive. [Emphasis mine]

In other words, the higher fares are there in order to generate more operating revenue to pay back the private investors who helped with the cost of construction. The business plan says that 83% of airfare is not unusual for HSR systems around the world:

The 83 percent level is in the middle of a wide range of experience in similar-length markets outside of California, based on prices examined in 200721. At the top end, weekend Acela fares in the New York to Washington market were higher than air fares, and on the Japanese Shinkansen fares were 108 percent of air fares for Tokyo- Osaka (322 miles) and 114 percent Tokyo-Hakata (722 miles). London – Paris Eurostar HST fares were 80 percent of air fares, both peak and off- peak. Madrid – Sevilla (333 miles) AVE fares were 71 percent of air, and Paris Lyon (244 miles) 71 percent of air. In the Paris Brussels market (191 miles) where HST has 95 percent of the air/rail market, and airlines are primarily connecting to long-distance flights, (similar to Central Valley service to San Francisco or San Diego-Los Angeles flights) air fares are very high, and HST fares were only 39 percent of air fares.

In any event, this discussion should sound somewhat familiar to you. In what was one of the most important posts of the year on HSR, DoDo’s “Puente Ave” article, he examined this very issue of initial fares and ridership, and concluded that initial fares should be kept low in order to generate riders – and that HSR systems should avoid seeking higher initial fares in order to pay back investors:

It happens actually quite often that a major new rail project gets off to a really bad start, generating bad publicity — and then turns into a solid mainstay of the transport system a few years later (with less media coverage). To sum up the reasons:

• an expectation that people will change travel patterns instantly;

• financing (e.g. interest rates and period of maturity) and rosy projections themselves are tailored for short-term expectations on profitability;

• after diverse construction delays, (especially high-speed) lines are often opened half-finished (missing sections, stations, local transit connections, trains, signalling), and thus can’t realise their full potential instantly;

• when the builders become nervous about their ridership projections (be it due to cost overruns or ‘half-finished’ openings as per above), they tend to bet on passengers accepting higher ticket prices — which usually doesn’t work out.

DoDo then explored SNCF’s success on the first TGV line that opened in 1983. Despite cost overruns and their own use of private financing, SNCF refused to hike their fare structure. They had a low fare structure initially, and that generated an instant success on the system, enabling it to quickly become financially viable.

The 2009 Business Plan, ironically enough, suggests that the 83% fare isn’t all that necessary:

Predictably, ridership is better with fares at 50% of airfare. However, revenue isn’t all that much different – it looks like about $300M or $400M per year by 2035.

This would seem to be an argument for following the SNCF model. Of course, that would require more public funds in the project’s construction, and fewer private funds.

That’s a battle worth fighting in the coming years. The HSR deniers will take these numbers and use them to claim the system is flawed, there’s nothing we can do to stop them. But we can, and we must, continue to tell the truth about these numbers, explain why they’re there, why the cost estimate gives us a firmer and more accurate base to work with even while we realize inflation may not be that high going forward.

And more importantly, we need to continue to argue for a major infusion of federal funds in this project, in order to ensure we get high ridership instead of creating a temptation to raise fares to pay back investors.

Because even if it does cost $43 billion when all is said and done, high speed rail in California is still a cheaper option than the cost of doing nothing. Carbon emissions, fossil fuel dependence and the economic cost of such dependence, the cost of expanding roads and airports, and the cost of giving up 150,000 construction jobs we’re unlikely to create any other way.

China Southern’s traffic on flights between Beijing and Taiyuan in Shanxi province fell about 60 percent after a high- speed rail link began operations, Si said. There was a 30 percent decline on Shanghai-Wuhan trips, he said….

China Southern Airlines Co., the nation’s biggest domestic carrier, will expand overseas flights in anticipation of a high-speed rail network causing traffic to decline on about a quarter of its internal routes.

Traffic may fall by more than half on 518 of the carrier’s weekly flights, Chairman Si Xianmin said today at a conference in Beijing. Of the airline’s about 160 domestic routes, 38 will compete directly with high-speed railway lines, he said.

“This will force us to expand overseas routes, on which we still have some competitive edge,” he said. “It will eventually cause an impact on the global aviation industry.”

The new rail network, due to be completed by 2020, will offer a cheaper alternative on routes covering about 80 percent of China’s domestic aviation market, Si said. That will force the carrier to challenge Air China Ltd. and Cathay Pacific Airways Ltd. on international services to offset dropping domestic demand.

“For short haul, passengers definitely won’t want to use the airlines,” said Jay Ryu Je-Hyun, an analyst at Mirae Asset Securities Co. in Hong Kong.

Some of the reasons for the shift:

High-speed train tickets will be about 40 percent cheaper than current air tickets, according to Si’s estimations. A five- hour rail trip from Shanghai to Beijing, for instance, will likely be about 700 yuan ($103), or about 60 percent of the price asked for the two-hour flight.

Train services may also be more convenient as stations are generally located downtown, while airports are on city outskirts. There are also fewer security procedures, which quickens boarding.

“Airlines will lose all their current competitiveness, like saving time,” said Si. “What’s more, the high-speed trains haven’t reported any fatal accident in the past more than four decades. That’s definitely a plus for passengers considering a trip by air or rail.”

Much of this is directly comparable to what will happen here in California. Although one can find some decent fares for a roundtrip flight tomorrow from SFO to LAX (around $100 on Virgin America), it’s very unclear whether that will be sustained in a future where oil prices are certain to rise significantly. HSR, powered by renewable electricity, will not have that problem.

And while there will still be those travelers who choose Virgin America or Southwest over the high speed train, the Chinese experience, along with that of Spain and on the USA’s own Northeast Corridor shows that many travelers will also pick HSR. HSR’s job isn’t to kill the airlines, but to enable them and the airports they serve to survive. Without HSR, we’re either going to see people priced out of air travel entirely, or if the expected oil price increases fail to materialize, there won’t be enough capacity to handle the passenger load. Either way, HSR is a necessary complement to maintain intercity connectivity in 21st century California, and to maintain California’s global competitiveness.

The California High-Speed Rail Authority, which is planning the nation’s most ambitious new rail project, has considered the effect of pricing on ridership. It predicts strikingly varying ridership outcomes depending on the cost of its future services; in 2030, with the full system operating, the agency estimates 93.1 million yearly trips if fares are set at 50% of air travel levels and 74 million if fares are set at 77% of air travel levels. Though final fares have not yet been established, one thing is for certain: California will not copy Amtrak and charge customers exorbitant rates to ride the train….

If American high-speed services offered similar prices for time traveled as Amtrak does today — at $45 per hour of running time for standard fares and $15 at reduced prices — on faster trains, U.S. commuters would switch to rail in droves. The San Francisco-Los Angeles route being planned by the State of California, with a travel time of 2h40, would cost $40 for reduced-price tickets and $120 for standard fares; those costs seem perfectly acceptable for just about everyone. A renewed Northeast Corridor, offering travel between New York and Washington in 1h40 (at an average of 220 km/h), would cost $25 for customers buying reduced-price fares. People currently driving their own cars or riding buses between the cities would take a second look at those prices.

Previous statements from the CHSRA have indicated that the fares would be around $55. I have repeatedly said we should not get attached to that number, and Freemark’s conclusion that the fares will range from $40 to $120 is much more sensible.

Of course, anytime we have this discussion, you get people arguing that airfares are already cheap, nobody would pick a train over a $49 fare on Southwest or JetBlue. So some remedial discussion of this matter is valuable before plowing ahead.

Those fares are advance purchase and are almost never available on the eve of travel. And Freemark’s suggestion is that CA HSR fares will work pretty much the same way. $40 or so for advance purchase, higher once you get closer to the travel date or for a “regular fare.” In exchange you get a smoother boarding and deboarding experience, no TSA to deal with, a comfortable ride, and most crucially of all, city center to city center travel. The proposed HSR stations are all in much more centralized locations than the airports in the metro areas they’ll serve.

More crucially, the ability of airlines to continue to offer those low fares is very much in jeopardy. Airlines received massive bailouts in 2001, but just a few years later began implementing fees for baggage and other previously standard, complimentary services. That’s the mark of an industry in trouble, of an airline crisis that threatens the future not of air travel but of cheap air travel.

Southwest Airlines, which is frequently pointed to as evidence that we don’t need HSR (including by someone at the Menlo Park Town Hall), has avoided this fate only through the use of complex fuel hedges. They locked in their price at $51/bbl several years ago. We’re at $72/bbl, and virtually every observer expects that price to rise, if not soar, once global economic recovery finally happens. Southwest’s fuel hedges expire between 2010 and 2013. There’s no way they’ll be able to lock in those rates again. And either LUV is going to have to raise fares or cut services.

Freemark’s second post on the topic, Reframing the Fare Debate, focuses on what he sees as a more pressing topic: “attracting people away from cars and buses.”

There are two ways to encourage people currently relying on road-based transportation to travel by trains: one, lower ticket prices; two, increase speeds. Both actions would provide a substantial motivation for highway users to reconsider their options. The first would put train travel back into the sphere of the economical. Plenty of bus companies market service at less than $20 between New York and Washington. At $2/gallon, a 26 mpg car could be driven between the cities for less than $20 in gas. That number doesn’t account for maintenance and ownership costs, but drivers rarely consider those factors when making decisions about how to get from one place to the next.

By increasing speeds, train travel’s time benefit multiplies significantly. While buses get into traffic, they can still make the trip from the capital to Gotham in five hours — versus the three hours required by rail. This is an advantage for train users, but increasing speeds to allow for a 1h40 trip would make it nearly impossible to justify riding the bus or driving, even at a lower cost.

Freemark’s analysis is based on the Acela, but it applies even more strongly to California. Whereas buses play an important role on the Northeast Corridor, they play hardly any role in the SF-LA corridor, especially since Megabus dropped its experiment to provide their cheap service on that route last year. (Intercity buses do play a bigger role on other corridors in California, particularly Central Valley-SoCal-Mexico.)

So we’re looking primarily at driving. And a lot of Californians drive from the Bay Area to LA, or from either of those regions to the Central Valley. This is especially true at the holiday season, as I discovered on one 10-hour trip back to Berkeley on I-5 around New Year’s 2001.

Let’s assume a trip from SF Transbay Terminal to LA Union Station in a relatively fuel efficient non-hybrid car: my 2007 Honda Fit. By car that’s a 381 mile trip. I usually get about 300 miles to the tank on the open road, or about 36-39 mpg depending on conditions. That means two fillups – one at the trip’s outset, another somewhere along I-5. The first fillup is going to be at least $3/gal, likely around $24 if I’m nearly empty (usually 8 gallons). The second will be about the same. So that’s $42 for a one-way trip, and another fillup somewhere on the way back, depending on how much driving I do in SoCal, is going to bring the total in gas to at least $66.

True, that’s for the car. I can add several passengers at essentially no extra cost, whereas they’d have to pay their own tickets on an HSR train. Even when you add in wear and tear, which on a newish Honda vehicle isn’t all that much, driving is likely going to be cheaper, at least until oil prices rise dramatically again.

But when you add in time, the train becomes a compelling alternative. Google Maps gives a driving time of 5 hours, 51 minutes from SF Transbay to LAUS. If you hit no traffic at all and have lead foot you could do 5:30, maybe even 5:15. But for most people it’s at least a 6-hour drive.

Whereas the train is going to take 2 hours 40 minutes. That’s about half the time of driving. A lot of Californians will pay a bit extra to take the train in order to get the time savings – that’s what “competitive” means. For people looking at a weekend trip, that 6 hours saved is a huge deal – the difference between a Friday evening and a Saturday midday arrival, extra time at the grandparents’ or at the beach or at the ballgame.

For others it may not be enough of a compelling alternative. They may want the flexibility the car offers them, or they may have lots of stuff to carry that can’t be easily checked onto a train, or they may have other reasons to prefer to take a specific trip in the car. That’s fine. HSR isn’t about forcing people out of cars.

It’s about providing options and choices. Expanding transportation capacity in a sustainable, environmentally and climate-friendly method, giving our freeways and airports a chance to breathe. Giving people a fast way to get between cities without the higher fares or inconveniences of air travel, without the long travel times and other uncomfortable aspects of sitting in a car on I-5.

HSR isn’t meant to put the airlines out of business or to eliminate vehicle traffic on I-5. It’s intended to give Californians the choice of traveling at a fast speed for a reasonable price, thus fueling economic growth in the 21st century in a way that fossil-fuel based methods of travel are already proving incapable of providing. Californians instinctively understand this – it’s why Prop 1A passed last fall.

I’ll close this post by letting Freemark explain the reasons why this matters:

There are significant advantages to lowering ticket prices to the lowest level possible while keeping operational finances in the black. California predicts a higher revenue stream for its rail system if it charges customers fares that are at 77% of airline levels: $4.3 billion annually versus $3.6 billion with tickets at 50%, even though the latter would attract 25% more riders. But opening services to a greater percentage of the population has a number of benefits beyond those affecting the bottom line, and American policy should be to encourage low-cost rail travel. It reduces carbon emissions as people choose to drive fewer cars. It encourages the sense that trains are an engine for universal mobility, rather than a limousine on tracks for the rich. It will, most importantly, smash the conception that Americans won’t take advantage of rail services, and encourage the creation of a train-riding society.

And that’s why California’s HSR matters – as well as why it will be a financial success.