Monday, March 21, 2011

Instead of screwing around with un-affordable and useless high-speed rail, we should fix what's broken.

Where are the smart and responsible adults when you need them?

Below you'll find the lead editorial from this morning's New York Times.  It talks about the deplorable condition of the Nation's infrastructure, such as dams and bridges, and what we can do about it.

I agree, and believe that we should be making every effort to salvage, repair, restore, maintain and upgrade our infrastructure. The United States has stunningly large infrastructure problems including the nations, airways, highways and railways. They need fixing. They are shovel ready to be fixed. Fixing them will create jobs NOW, not a year and a half from now (as with California's HSR).

The United States has a deplorable urban/regional public mass transit system. In many major metropolitan areas, there is no "system," only discreet operators competing for too few dollars.   (Just check out the transit chaos in the Bay Area.)  That's also infrastructure that ought to be fixed.

The entire inter-city rail transit system in the US is in fundamental conflict between passenger and rail.  The freights, who gave up passenger service decades ago as a losing proposition, oppose the intrusion of high-speed rail on their rail corridors.  We have the best freight rail network in the world. Why are we working to risk that?

The Infrastructure Bank

The current solution for these problems now on the table is the federal creation of an infrastructure trust, or bank.  The idea is that the government puts billions into the bank and individual states can draw -- that is, borrow -- funds for their infrastructure problems and projects.  Presumably, the drawn funds have to be paid back.

Furthermore, private investors will be asked to participate in a public-private partnership.  That's also very popular talk among both Parties right now.

So, first, about this bank. It would take "earmark" control out of the hands of the Legislature.  But, it also creates greater opportunity for projects that have no genuine benefit except for the promoters and builders. There are many questions to be answered about management, control and accountability. 

Also, there has to be a distinction made between projects that will attract private investors and those that won't.  Private lending is based on return on investment; that is, there has to be a profit generated by the project upon completion in order to justify the investment.  For example, public utilities such as power distributors are profitable public service providers and good places to invest.  See P.G. and E. as a case in point. (And boy, do they need upgrading!!)

The US water delivery system is also in disrepair.  Potable water will become a greater problem than ever.  By the way, the two issues converge, as we are now learning from Japan, when we discover that nuclear generators -- the power producing infrastructure -- consumes more fresh water than agriculture does.

But, what if a project doesn't generate such profits?  Should this infrastructure bank decide against it and not lend government funds since they won't attract private loans as well? And, if these are all to be loans, who will pay them back, and how?

High-Speed Rail as an example of what not to do

All of which is to say, that high-speed rail does not fit into any part of this equation.  It won't generate sufficient revenues to pay for itself, much less produce surplus revenue.  It will never be able to pay back the capital investment funds; we are seeing this worldwide.  It will never have sufficient ridership that pays ticket fares sufficient to exceed the operating, maintenance and replacement costs. That is to say, HSR operations will have to be permanently on the government's heart-lung machine, as they are elsewhere in the world.  

In short, HSR is a lousy investment; it's a loser.  Will it help American in the race to the future?  Are we blindly determined to compete with the rest of the world with high-speed trains, even as many countries are now struggling to cope with their HSR efforts economically?  And what is this racing other countries obsession about anyhow?  This isn't about a game on the Sports Page. 

Please notice that we are returning to our old habits of our debts exceeding our income on our credit cards.  And that is what high-speed rail will become, only on a national order of magnitude.

Yes, invest in public utilities; our power/energy system is in critical condition. Without entering into this debate here, the problem includes oil access and affordability, nuclear power and its discontents, the maxxed-out power grid, the coal dependency, and lavish consumption.  That's a good domain in which to invest and if done right, promises an ROI.  But, that's not the case with HSR.

The US has a massive infrastructure component which is a critical part of the US economy.  That infrastructure is in massive disrepair. Shouldn't we be fixing it?   Shouldn't we be fixing our leaking roof before we borrow money we can't pay back, in order to buy a fancy car we can't afford?

March 20, 2011

A Chance to Build Again

Many of the 85,000 dams in the United States are so old — an average of half a century — that every time one is repaired, two more become dangerously weak. Cities across the country discharge billions of gallons of untreated wastewater into rivers and lakes, and more than a quarter of all bridges are either deficient or obsolete.

The statistics are both frightening and familiar, though they tend to come up only in the “crumbling infrastructure” articles that appear after major disasters. In practice, government — with its lack of cash and consensus — keeps most of these projects on distant back burners until people actually lose their lives.

And then a disaster occurs — like the one in Japan, which was a reminder that even a well-prepared small country can suffer terribly from a natural disaster. The hazards are even greater for a sprawling one with a long history of indolent maintenance and planning.

Last week, though, a bipartisan group of senators came up with a promising idea to get some of these projects started, and very possibly put thousands of people back to work by doing so. The proposal, to create an infrastructure bank that would lend out seed money, represents a refreshing break from the extremist culture of cutting for the sake of cutting that grips Washington and so many state capitals. That culture blocks vital investment just to avoid sensible tax increases.

The proposal was presented by John Kerry, Democrat of Massachusetts; Kay Bailey Hutchison, Republican of Texas; and Mark Warner, Democrat of Virginia. The bank would lend money to build big-ticket transportation, water and energy projects that have a clear public benefit. The loans, or loan guarantees, would be designed to attract private capital as well. In fact, at least half a project’s financing would have to come from the private sector. As much as $640 billion could be leveraged this way over the next decade, proponents say.

The bank would initially be funded with $10 billion from the treasury, which would be given out as loans, not grants. To make that possible, the bank would invest largely in projects that generate money, like toll bridges and tunnels, water systems backed by ratepayers, and energy projects built by utilities, governments or corporations. An independent, bipartisan board appointed by the president and Congress would choose the investments and oversee construction, audited by an inspector general and the Government Accountability Office.

By providing low-cost capital to states, cities and authorities, the bank would help these strapped governments kick-start projects that are now unaffordable, while attracting investments from pension and private-equity funds that are looking for stable money-generating ventures in which to invest. “We can either build, and compete, and create jobs for our people,” said Mr. Kerry, “or we can fold up, and let everybody else win. I don’t think that’s America.” The bank was backed by unions and the U.S. Chamber of Commerce.

The idea builds on one that President Obama has proposed, a $30 billion bank limited to transportation projects that would also make grants. It is designed to be more palatable to lawmakers who are politically averse to spending, but already conservatives are railing against what some have called a “boondoggle,” a phrase used to demonize virtually any public investment.

What will these opponents tell voters when the dams break and the bridges fall? Before more lives are lost, lawmakers should ask themselves whether they used their public office only to slash spending (and taxes for the wealthy), or to spend money wisely.