Here are Part 1 and Part 2 of a lengthy discussion of HSR in Michigan for your Sunday reading.
As you may know, Michigan received around $200 million from the Department of Transportation, drawn from the pool of dollars returned by the Governor of Florida who rejected the high-speed rail project due to its inevitable debt burden on his state.
This is Randal O'Toole's calculations about what those dollars will actually mean for Michigan. Should we, in California, care?
Why is it any different in California than in Michigan regarding these mega-train boondoggle projects? We're also jumping, like starving fish, at the bait that the Obama Administration is dangling over California. We've aready been hooked on the prior awards and are now desperately praying for more.
And what will be the outcome of these dollars sent our way? It ain't good. As O'Toole says of Michigan, they "cooked the books." Why would we believe that this is not going on here, in California? The CHSRA already cooked the books with ridership numbers, and tried to do so with their budget documentation before the State Auditor called it to everyone's attention. To turn an aphorism around, "Free money corrupts; a lot of free money corrupts a lot."
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Last Updated: May 12. 2011 1:00AM
O'Toole: The Great Train Con
Randal O'Toole /
The Michigan View.com
When U.S. Secretary of Transportation Ray LaHood announced this week that he was awarding Michigan nearly $200 million for high-speed rail, he claimed that the project would bring "trains up to speeds of 110 mph on a 235-mile section of the Chicago to Detroit corridor, reducing trip times by 30 minutes." But Michigan's own grant application says the $196.5 million will only increase average speeds from 60 to 64 mph - with the top speed remaining unchanged at 79 mph. That is, travelers will save a mere 12 minutes - not 30.
Why the discrepancy between the claimed 110 mph-and-30 and the real 79 mpg-and-12? Page 12 of the grant application tells the tale: After spending the $197 million, the state is applying for another grant that will require hundreds of millions more to increase speeds to 110 mph.
Together with Michigan's senators and governor, LaHood's press conference was an exercise in high-speed deception.
Last year, about 480,000 people rode the Chicago-Detroit trains, which are some of the biggest money-losers in the Amtrak system. Can anyone really believe that saving 1,315 people 12 minutes a day is worth $196.5 million? The state will have to spend a lot more money to have trains reach top speeds of 110 mph (which means average speeds of around 75 mph). Michigan's 2009 Chicago-Detroit rail plan projected costs of more than $1.3 billion, of which the state has less than $400 million so far. So bringing the tracks up to 110-mph standards will cost at least $900 million more.
This doesn't count the cost of locomotives and railcars, which the plan projects will be more than $350 million for enough trains to make 20 daily round trips. Last Monday, the federal government also gave $268.2 million for locomotives and railcars to five Midwestern states. Assuming a third of that goes to the Michigan corridor, the state still needs some $250 million more.
In short, anyone who thinks they will soon see bullet trains in Michigan has been misled.
The state needs at least a billion additional dollars before you will see those trains. Given current economic conditions, those dollars won't be available for a long time - if ever. And the costs won't stop there. Last year, Amtrak lost $19 million running three round trips a day between Chicago and Detroit. Amtrak fares start at $31 and the subsidy per ride is almost $40. Increasing the number of trains to 20 per day could cost taxpayers as much as $100 million a year on top of the capital costs.
By comparison - with virtually no subsidies - Megabus carries people between Chicago and Detroit at fares of $15 to $18. While Amtrak takes 6-1/2 hours, Megabus takes just 5-2/3 hours, mainly because it stops only in Ann Arbor, while Amtrak trains stop 8-9 times.
The best way to save people time is to simply end Amtrak subsidies, which unfairly compete with buses, airlines, and other relatively unsubsidized forms of transportation. Megabus or some other bus company would no doubt step in and provide non-stop service from Chicago and Detroit to Lansing, Kalamazoo, Battle Creek, and other Michigan cities. That would serve those 1,315 Amtrak passengers, saving them time and the taxpayers money.
Back in 2007, the congressionally chartered National Surface Transportation Policy and Revenue Study Commission urged the federal government to invest heavily in passenger trains. But it also warned that, before making such investments, the government should do "a rigorous quantitative analysis" comparing trains "with alternative approaches [including] intercity bus, aviation, and highway modes."
Of course, the administration conducted no such analysis.
Congress has zeroed out funding for high-speed rail in 2011 and it appears unlikely that the federal government will give Michigan any more grants to upgrade its track to 110 mph. This mean the $350 million or so dedicated to this line so far is almost a complete waste - but not as much of a waste as spending another billion to get trains that are a little faster than a bus but far more expensive to ride.
Randal O’Toole is a senior fellow with the Cato Institute and author of Gridlock: Why We’re Stuck in Traffic and What to Do About It.
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Last Updated: May 13. 2011 1:00AM
O'Toole: The Great Train Con 2 - Michigan Cooks the Books
Randal O'Toole
The Michigan View.com
When the Michigan Department of Transportation first applied for federal high-speed rail funds, it justified its application using a 2006 economic analysis that claimed the benefits would be 1.8 times greater than the costs. A close scrutiny of that analysis, however, shows that Michigan cooked the books.
The state wildly exaggerated the benefits while underestimating the costs of high-speed rail. The report was written by a consulting firm called Transportation Economics and Management Systems, which specializes in analyses of passenger rail projects. From the reports it has written, its staff never met a train they didn't want someone else to subsidize. Rail advocates like to hire consultants like this because they know they will come up with the answer they want - no matter how much the proposed train project will cost.
Exhibit 11.2 of the Midwest report is a chart projecting benefits and costs (in billions):
System revenues: $8.3 billion
Consumer surplus: 8.9
Air congestion relief: 1.6
Highway congestion relief: 2.7
Airline benefits: 0.9
Emissions benefits: 0.6
TOTAL BENEFITS: $23.1
Capital costs: $6.1 billion
Track maintenance: 0.3
Operating costs : 6.5
TOTAL COSTS: $12.9
COST-BENEFITS RATIO: 1.8
True? Let's take a closer look at the ingredients.
The largest benefit is "consumer surplus." This means that some really wealthy people might be willing to pay a lot more to ride the trains than the actual fares. The analysts are counting that willingness to pay as a benefit - even though those people won't actually have to pay it! Note that if they did have to pay it, they wouldn't be able to spend the money on something else, so someone else would lose.
The point is the analysts are saying that they want to use your tax dollars to subsidize tickets for really wealthy people who would be willing to pay more but won't have to - and they count that as a benefit. How generous of them!
While economists debate the importance of consumer surplus, the idea that it can be used to justify subsidies to the wealthy is absurd. This is especially true since poor people will still have to ride a bus because today's rail fares are at least twice bus fares, and high-speed rail fares tend to be even higher.
The calculations of air and highway congestion relief assume that nothing else will be done to relieve that congestion. Yet there are many things that can be done to relieve congestion that would cost a lot less than high-speed rail. In fact, most of those things probably will be done whether high-speed rail is built or not, so the congestion won't even be there to be relieved.
The supposed "airline benefits" are the most laughable part of the analysis. The writers literally say the airlines will be so happy to lose customers to high-speed trains that they would be willing to pay $28.13 per stolen customer. (The to-the-penny precision makes it even more laughable.) Of course, no one has any intention of asking the airlines to pay $900 million to support the trains, but the report still counts this as a benefit.
The calculations of emissions benefits assume that cars in the future will be no cleaner than cars today. In fact, our auto fleet is getting cleaner every year - while pushing diesel locomotives up to 110 mph will produce a lot more pollution. By 2025, the average car on the road will be cleaner than any diesel-powered high-speed train, so the report should really calculate an emissions cost.
On the cost side, $6.1 billion for capital costs is ridiculously low. The Midwest Regional Rail Initiative calls for five 110-mph corridors, three 90-mph corridors, and two 79-mph corridors all of roughly the same length. But Illinois says it needs at least $4.9 billion just to get the Chicago-St. Louis corridor up to 110 mph, and the Michigan corridor needs at least $1.6 billion.
The real cost for all ten [Amtrak] corridors [in Michigan] will be well over $10 billion.
In estimating track maintenance costs, the analysts appear to have looked ahead only 30 years. But the real rail maintenance costs begin AFTER the system is 30 years old - when the entire system must be rebuilt at nearly the same cost as the original construction. The 35-year-old Washington Metrorail system is falling apart today because no one foresaw or budgeted for this cost. Discounted to the present, the cost is likely to be well over $3.0 billion on top of the $0.3 billion calculated for the first 30 years.
A more realistic assessment would look something like:
System revenues: $8.3 billion
Capital costs: 10.0
Maintenance costs: 3.3
Operating costs: 6.5
TOTAL COSTS: 19.8
COST-BENEFITS RATIO: 0.4
In short, for every dollar spent on Midwest high-speed rail, taxpayers and the economy will lose 60 cents. That's a bad deal for Michigan taxpayers.
Randal O’Toole is a senior fellow with the Cato Institute and author of Gridlock: Why We’re Stuck in Traffic and What to Do About It.
