Friday, April 15, 2011

Randal O'Toole's understanding of Washington Budget decisions regarding high-speed rail

A very insightful article by Randal O'Toole, one of the best transportation analysts around, (along with Wendell Cox, Ken Orski, Adam Summers and others).  Let me hasten to add that I am fully aware of these guys' political orientation, which is in the Libertarian direction. 

Nonetheless, they are factual, and discerning. As we've been saying, while the HSR funds have been removed from the FY 2011 budget, with an additional cut of $400 million still in the FY 2010 budget also "clawed" back, we are far from watching a program in its death throes.  

Yes, it does look like the Transportation Budget authorization, part of the FY 2012 negotiations, when finally agreed upon, may be totally devoid of HSR funds.  That would extend over the six year duration of the budget, but as O'Toole points out, the rail promoters and their self-serving agendas are not going to go away.  It's like putting a computer to sleep until the 2012 elections, rather than turning it off.  Contrary to Randal's comment that HSR is "dead," I suspect that it has been seriously traumatized by these budget cuts, is trying to recover from this Congressional blow, but only to return.  (For us, "Eternal Vigilance is the Price of Liberty")

Randal points out that highways are capital intensive while rail and other public transit modes are labor intensive and the latter has seen dramatic cost increases due to Union pressures for higher salaries and better pensions.  While that does indeed seem to be the case, it is also true that public transit systems such as rail are also capital intensive and requires extensive operating subsidies for all such systems, local, regional or inter-city. Caltrain, with no sense of irony, prides itself on paying almost half of its operating expenses out of farebox receipts. The other half, now cut way back, is bringing them to their knees.

The question is how will transit development and operations be paid for and how will they be made more cost-effective.  Since public sector passenger rail is not profitable, when is it appropriate to have government invest in capital development, and when is it appropriate for government to assume a permanent cost burden for operation?  That it's either profitable and based on private investor dollars, or it shouldn't exist, is not an adequate answer. 

The best answer I can think of is demand driven tax based investment.  What we are talking about is a public, social utility sustained for the benefit of everyone.  That, by the way, excludes the luxury, high-end high-speed trains. The government has no justification to use everyone's tax dollars to build luxury trains for the rich.  There must be a large enough population base, with extensive potential use to justify tax revenue support.  The CHSRA's false ridership claims for HSR illustrate how critical honest use projections must be in the justification for developing expanded and hugely expensive transit systems.   

We have no qualms about paying for traffic signals, highway striping, signage, or highway patrolmen since we all use the roads and highways and appreciate the benefits of safety management.  We pay for those services with our taxes, regardless of how those taxes are collected.  Highway/gas taxes confine these subsidies to the users who benefit.  

My own sense of that is to increase such operational investments with tax based subsidies in order to make highways far safer and far more efficient, leading to higher road capacity, reduced driving time and reduced fuel consumption.  While we envy the Europeans their high-speed trains, at the same time we ignore the safety and management improvements of their highways, such as the Autobahn. 

As for rail, we do not yet have universal PTC (positive train control) throughout our transportation network. Is that not a higher priority than a completely new layer of high-end transit?

The Chinese apparently have vastly overbuilt their HSR capacity, even as they apparently skimped on margins of safety in their construction, incentivised by an obsession for prestige, and are now beginning to acknowledge their errors.  We must not go down that road.  It is not at all clear that our inter-city transit needs are by any measure as compelling as our urban and regional ones.  The Northeast Corridor may be the one exception.

Finally, I have no qualms about investing in the upgrade of current rail operations, such as are being supported by FRA high-speed rail funds.  The term 'high-speed rail' is being used very loosely, except in California. It really means passenger rail improvements.  However, these investments need to be able to justify themselves by demonstrating increased demand.  Running trains half empty should dissuade greater investment in transit operations. Meet the need, don't create it.

The US is not a public transit culture or extensive transit user (Manhattan being an exception).  Despite the constant claims of ridership record breaking, the percentage of all transit users is still a tiny fraction of the moving public.  In highly dense population areas, public transit is a good thing, worthy of public investment.  By leaping into inter-city high-speed rail with the "build it and they will come" ideological underpinning, we put the high-speed cart before the demand horse and create a calamity of extraordinary proportions.  

Nor do I accept the "jobs" justification either for construction or operations of transit systems.  The construction jobs are temporary and I would urge the greater automation of transit operations, diminishing the costly payroll.  (Remember "featherbedding?")

High Speed Rail Dead for Now, What’s Next in Transportation, Ticking Time Bomb for Transit

Thursday, April 14th, 2011

A late-night budget deal made between Senate and House leaders on Monday night, April 11, zeroed out funding for high-speed rail and rescinded $400 million of unspent funds that had been approved for 2010. The deal also cut Amtrak’s budget by $80 million and rescinded funds that had been approved for highways in 2010 but remained unspent by the states.

History shows that rail projects are never truly dead as long as rail nuts and rail contractors work together to keep them alive. The Florida high-speed rail plan, for example, was approved by voters in 2000, rejected by voters in 2004, approved by the governor in 2009, and rejected by a new governor in 2011.

At least for now, however, President Obama’s dream of spending at least $500 billion building a high-speed rail network connecting most major American cities is dead. The Congressional leaders who took high-speed rail out of the 2011 spending bill are not likely to put it back in to the six-year transportation reauthorization bill.

Since Obama’s own budgets never envisioned spending more than 10 percent of that amount during his administration, it is clear his strategy was to build a couple of demonstration lines, such as Tampa to Orlando, and hope they would spur political demands for a more complete system. That dream died when Florida Governor Rick Scott killed the Tampa-Orlando train.

A recent article in National Review Online credits Cato, Reason, and Heritage with doing the research and Tea Parties and the American Dream Coalition with doing the grassroots organizing that killed the program. This was indeed an ideal combination: neither policy analyses nor grassroots organizing alone can be effective without the support of the other.

With the Florida train dead and California train starved for funds, it is likely that Obama’s high-speed rail legacy will be limited to slightly faster trains in Illinois, North Carolina, and Washington state. 

These projects offer only slight speed gains over existing Amtrak service. The Washington plan, for example, will spend around $750 million to increase speeds by 2.7 mph and increase the number of daily round trips from 5 to 7. State taxpayers will be obligated to subsidize these operations for 20 years or the states could be liable to repay part of the capital grants to the feds.

Bloomberg news article:
National Review Online:
Congressional budget deal: (transportation section begins on page 410)

The six-year transportation reauthorization bill now being considered by the House Transportation Committee is likely to include more than $300 billion in spending on transportation projects. House leaders have agreed to keep earmarks out of the bill (though some, such as Michele Bachman, have waffled on this promise), and with high-speed rail out, the main question will be the perennial debate over how much federal gas tax revenues will be dedicated to public transit.

The Reason Foundation has proposed to zero out transit funding altogether, thus returning to the pre-1983 system in which fees paid by highway users are dedicated to highways. Under Reason’s proposal, any federal money spent on transit would have to come from general funds, not dedicated shares of gas taxes.

Another proposal is to keep transit funds in but reduce the number of “pots” of money in the bill. Currently, transportation funds are divided into more than 50 pots, each allocated to states using a different formula or grantmaking process. Reducing the number of pots would give the states more leeway in spending the money as effectively as possible.

The two basic ways of allocating those pots are formulas or grants. Obama has proposed an “infrastructure bank,” which effectively means putting a large chunk of money into a pot that would be allocated through a competitive grant process rather than a formula.

Competitive grants sound good on paper, as it suggests the money would be spent on the highest-priority projects. In practice, however, federal transportation grants have been highly politicized. Congress routinely overrules the Federal Transit Administration’s recommendations for high-priority “New Start” transit projects and instead spends the funds in the districts and states of the most powerful members of Congress. Recent GAO studies found that the Obama administration allocated high-speed rail and transit stimulus funds using largely political, rather than technical, criteria.

Once the formulas are decided, formula funds give Congress and the administration much less leeway in interfering with the states in spending the funds. Earmarks became popular because they enabled Congress to override the formula funds. With earmarks dead, at least for now, putting more transportation dollars into formula funds will improve the effectiveness of how they are spent.

Reason plan to rededicate gas taxes to highways:
Cato report on formula vs. competitive grants: (see pages 7 and 
GAO report on high-speed rail grants:
GAO report on transit grants:
Cato forum invitation:

Highways are capital-intensive. States lay the concrete and asphalt and then basically count the vehicles and monitor to keep them in good shape. Transit, by contrast, is highly labor-intensive, requiring lots of people to maintain and operate buses and other transit vehicles.

So it should be no surprise that transit agencies, along with other public employee programs, have large unfunded pension and health-care obligations. Rather than risk transit strikes, agency boards and leaders found it easier to give in to transit union demands for huge fringe benefits whose costs would have to be paid by future taxpayers.

Transit pay is probably not significantly greater than pay in the private sector, but pensions and health care benefits are much greater. Counting fringe benefits, New York City’s transit agency has more than 8,000 employees who earn more than $100,000 a year. The highest-paid employee of the city of Madison, Wisconsin is a bus driver.

Portland’s TriMet transit agency is the king of benefits, actually spending 50 percent more on benefits than on payroll itself. Many other transit agencies spend 80 to 90 percent as much on benefits as on direct pay.

These number don’t count the unfunded pension and health care obligations. TriMet has guaranteed to pay virtually 100 percent of health-care costs for all employees and their entire families for the rest of their lives.

New York City transit has more than $15 billion in unfunded liabilities, which is more than three times annual fare revenues. TriMet’s unfunded liabilities are more than ten times annual fares. These pension and health-care costs, combined with the high cost of maintaining rail transit, mean that transit will be a growing burden on the future taxpayers of these cities whether or not transit actually carries many riders.

Cato report on transit: (unfunded liabilities on page 9)
Randal O’Toole authors The Antiplanner from Camp Sherman, Oregon. See more at