This article, below, is from Ron Utt of the Heritage Foundation. He published it in April of 2010. (Just to let you know what side of the political fence this discussion comes from.)
Before you dismiss it on ideological grounds, you need to know that it's a very good systematic analysis, country by country, of what high-speed rail actually is and what it costs.
We have the opportunity to compare what he said one year ago, now that the winds of political change have come to Washington. Also, receiving national attention now is the further documentation of California's Marx Brothers high-speed rail authority and their zany antics, by the LAO. The rail authority's activities would be hilarious if they weren't so expensive and so harmful. The determination to dig up highly valuable farm land in the Central Valley, intentions about which they are so proud, is merely their latest pratfall. Without future funding, the tracks to be laid in the Central Valley will be for the "train to nowhere."
Since Utt wrote this article, the House became Republican and the Republicans cut HSR out of the remainder of the FY2011 budget. Now-retired Democrat James Oberstar, who was so eager put $50 billion in HSR pork into the Transportation budget which has been delayed for several years, has been replaced by Republican John Mica as head of the House Transportation Committee, the key player in this game.
The Congressional support for Obama's vision of high-speed rail, "for 80% of the population by 2035," is rapidly declining despite the Administration's desperate effort to cling to this pork distribution opportunity.
You have to ask, what is so critical that Americans all over the country must get from one place several hundred miles to another place in a huge hurry? If 80% of the population has access, will they all jump on high-speed trains? Right now, all Amtrak inter-city transit ridership is a very tiny fraction of the population. They had 28 million riders last year. For 80% of a nation of over 300 million, what's the hurry? Remember, true inter-city HSR is not commuter public mass transit. The California rail authority will be the first to tell you that.
It remains true that the high-speed rail gang at the FRA have about $3 billion or more (it's unpublished) HSR dollars to squander. If all the outstretched hands hope for more from Washington, and given how the DOT will spread it around, it won't be much and it won't make much difference in their strategy and plans. Some of us believe that, per White House directive, LaHood will hang on to this last amount, and release the funds for political purposes in the next Fall election cycle.
Over the past year, since Utt's article, we have read a series of papers written by William Grindley and company that elucidate the actual financial situation that this project will impose. As we've been saying on this blog, it will be far too expensive, will under-perform in terms of the number of people it will carry and the dollars it will produce. Indeed, it will be a cash-flow burden on the State of California forever and in the amount currently projected for that drain will be between $1 and $3 billion dollars annually, forever.
Although the HSR program for the US, and the project in California continue to be hotly contested by advocates and opponents, we are now watching as "the truth will out!" The media (which thrive on conflict to sell papers) are exposing the reports and other critical documents of the high-speed rail agenda and giving all supporters an opportunity for second thoughts.
Final point here: Private investments. There are no private investors. In California, the rail authority seeks to assure the state Legislature that there will be such investments when the train is completed and the State offers revenue guarantees. That's a dilemma.
The train can't be completed without private investments since it is so highly unlikely that the federal government will pick up the total tab. Furthermore, that state bond issued for high-speed rail, $9 billion worth, has authorizing legislation prohibiting revenue return guarantees. That, in turn guarantees no private investors. None of this is rocket science. Why the Democrats persist in supporting this project is head-scratching. As Grindley has frequently illustrated, it doesn't pencil out.
Some speculation. All this hard-charging HSR Vision promotion on the part of the Administration and all the Democrats in all the States is a lead-up to the 2012 election. The Democrats hope to ride this train project, even before shovels hit the dirt, to election victory. And, that would be the result of having secured federal funding in sizable amounts for the "lucky" states to invest in their failed economies and to bolster, at least temporarily, their severely impaired job market.
I can predict the following, regardless of which way the 2012 election turns out. If more Republicans win, HSR will be pretty much over for the US. If Democrats keep the White House and gain in Congress, HSR won't be going away and government funds will find their way into all the states with HSR corridors for the duration of their tenure.
Whatever does or doesn't happen in California, keeping our eye on political events in Washington, particularly regarding the budget, is important because that's where the decisive action will be.
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http://www.heritage.org/research/reports/2010/03/america-s-coming-high-speed-rail-financial-disaster
Transportation and High Speed Rail
America's Coming High-Speed Rail Financial Disaster
by Ronald Utt, Ph.D.
BACKGROUNDER #2389
Revised and updated April 13, 2010
Abstract: President Barack Obama has committed the United States to building at least 13 high-speed rail (HSR) lines, one of the most expensive forms of transportation that a nation could choose. Even in a strong economy, building HSR makes little sense, offering minimal reductions in travel times at exorbitant costs. In the current weak economy and with the government facing massive budget deficits, the country simply cannot afford to squander $8 billion in stimulus funding, $5 billion over the next five years, and billions of dollars in matching state funding on a transportation system that will at best serve a minute fraction of the traveling public. The country would be better off either not spending the money or spending it on something productive.
In January 2010, the Federal Railroad Administration (FRA) of the U.S. Department of Transportation belatedly awarded $8 billion in the stimulus grants for high-speed rail (HSR) as authorized by the American Recovery and Reinvestment Act (ARRA).[1] By pushing for these grants and promising to spend an additional $5 billion over the next five years, the Obama Administration has committed the United States to one of the most expensive forms of transportation that a nation could choose.
In addition to the billions of dollars in capital costs that the federal and state governments will incur, domestic and international experience indicates that the President has committed the nation to providing a perpetual stream of substantial subsidies to offset the difference between fare revenues and operating costs of HSR and passenger rail in general. As a result, the HSR program could come to rival the nature of some entitlement programs in how much it will contribute to out-of-control annual federal deficits.
High Costs of Low Technology
At present, the United States has no genuine HSR lines, although some consider the Acela, which operates in the Northeast Corridor, to be an HSR line. Although there is no fixed rule as to what constitutes HSR, a common definition is a rail line that operates at an average speed of at least 125 miles per hour (mph). Some HSR lines in France and Japan maintain average speeds in excess of 180 mph. While the Acela averages about 85 mph, it can reach about 150 mph on a short section of the line between New York City and Boston.
To sustain these speeds over long routes requires a substantial investment in a secure and exclusive roadbed built to precise standards and tolerances, using equipment that meets the same high standards. As a result, an HSR line costs much more to build and operate than an ordinary passenger rail line. It is believed that only two HSR lines in the world earn enough revenue to cover operating and capital costs: Paris-Lyon and Tokyo-Osaka.[2]
The world's passenger rail systems consist mostly of "ordinary" passenger rail, which operates at average speeds between 50 mph and 85 mph. Some systems include a few genuine HSR lines. In the United States, passenger rail (Amtrak) is the most heavily subsidized of all passenger travel modes, requiring a federal subsidy of $237.53 per 1,000 passenger miles, compared to $4.23 for commercial aviation and $1.50 for intercity busses.[3] Rail subsidies in Europe are just as high, if not higher.
In addition to the high costs that the HSR program will impose on taxpayers during a period of economic hardship and slow recovery, the President's commitment to HSR raises serious questions about his judgment and the judgment of his economic advisers. They presumably thought, given all of the options before them, that this program would be a good use of scarce taxpayer money to spur the economy. As the editorial board of the liberal St. Louis Post-Dispatch recently concluded, "With apologies to futurists, people in the construction industry and rail buffs, investing $13 billion (or even $8 billion) in passenger railroads is a little like building a bridge to the 19th century."[4]
How Could They Have Gone So Wrong?
The FRA report listing each of the HSR awards and the brief justification for each award actually reveals how little benefit the FRA can find in each of these projects relative to their cost. This deeply flawed outcome makes one wonder what could possibly have transpired during the FRA decision-making process to produce this multi-year, multibillion-dollar commitment to obsolete technology.
One has to wonder what exactly motivated the FRA review team to endorse the proposed $1.1 billion investment in the Kansas City-St. Louis-Chicago route, which would allow customers to reach their destinations 10 percent faster than they could by driving between Chicago and St. Louis. The same thought applies to the $1.25 billion federal investment in a $3.2 billion project to build a high-speed rail line between Orlando and Tampa, which would reduce travel time between the two cities to less than one hour, compared to about 90 minutes by car.[5] In essence, the federal government is paying massive subsidies to achieve minor benefits for a tiny fraction of the traveling public.
From another perspective, the Obama transportation team apparently thinks that shaving a few minutes here and a few minutes there from a handful of intercity trips will soften the pain of the Great Recession and propel the economy forward. Yet achieving these modest goals will require a number of years, $8 billion in federal taxpayer money today, another $5 billion in federal money over the next five years, and an even greater sum from the unfortunate taxpayers of the states that are receiving these federal awards.
However extravagant this commitment to jazzed-up 19th century technology may be, the ultimate costs of bringing HSR to the 13 corridors already approved by the FRA will be staggering. California received a $2.3 billion grant toward an HSR rail system with an official cost of $50.2 billion (in 2006 dollars), but independent analysts contend that it will more likely cost $81.4 billion.[6]
The supposed benefits do not even begin to justify the exorbitant costs. Along the Northeast Corridor, Amtrak's Acela pretends to provide high-speed train service. The U.S. Department of Transportation's Inspector General estimates that reducing travel time between Washington, D.C., and New York City and between New York City and Boston by 30 minutes each will cost $14 billion while reducing auto ridership along the corridor by less than 1 percent.[7]
The Foreign Experience
Other countries' experiences with HSR and passenger rail in all of its costly forms are instructive in judging how fiscally damaging the Administration's enthusiastic commitment to HSR may prove to be.[8]
Europe in General. In 2008, Amtrak's inspector general published an analysis of government subsidies to passenger rail in Europe and compared them to Amtrak's subsidies. One purpose of the review was to address the contention that passenger rail in other countries, especially HSR, operates at a profit (i.e., without subsidies). For 1995-2006, the study found that the governments of Germany, France, the United Kingdom, Spain, Denmark, and Austria spent "a combined total of $42 billion annually on their national passenger railroads."[9] The $42 billion that these six countries, which have a combined population of 269 million, spent on just passenger rail in 2006[10] is roughly proportionate to the $54.8 billion (most of which was funded by user fees) that the government of the United States (population of 309 million) spent on all forms of transportation, including highways, rail, aviation, water transport, and mass transit.[11]
To put the European commitment to passenger rail in perspective, rail ridership (high speed, conventional intercity, and metropolitan commuter rail) in these six countries accounted for just 7.9 percent of all surface transportation modes on a per passenger, per billion kilometer basis. This suggests that these countries received a poor return on their money given that more than 90 percent of passengers in these countries chose other travel modes-- mostly auto--despite the subsidies.
In Europe as a whole (EU-27), rail accounted for only 6.1 percent of passenger travel in 2007, including travel by air and sea. Buses accounted for 8.3 percent of the market, and air travel accounted for 8.8 percent. Despite Europe's huge investment in passenger rail, its market share declined from 6.6 percent in 1995 to 6.1 percent in 2007. Over that same period, commercial air increased its share from 6.3 percent to 8.8 percent. By providing faster service and competitive prices, it took passengers away from rail, buses, and autos.
This last point is of some importance because one goal of the HSR scheme is to shift travel from largely unsubsidized commercial aviation to heavily subsidized trains. Yet the same scheme in Europe seems to have failed over the past dozen years, despite massive government subsidies. Nonetheless, as problematic as the general European experience with passenger rail has been, some individual countries have experienced even worse results.
Japan . Japan's passenger rail--both high speed and not-so-high speed--has been extremely costly and has been a contributing factor in the genteel process of decline now enveloping this onetime economic superpower.[12] Japan began operating an HSR system in 1964 at speeds of about 130 mph. By the 1990s, speeds in excess of 180 mph were common.
As a result of this commitment to HSR and the costs associated with the rest of the passenger rail system, the Japanese National Railway (JNR) was losing $20 billion per year and was issuing debt to cover all but the $5 billion covered by direct government subsidies. By the mid-1980s, the JNR's accumulated debt exceeded $300 billion. Recognizing that the JNR was not financially sustainable as a government program, the government began privatizing the passenger rail system in 1987, converting the JNR into seven separate joint stock companies and selling them off to the public over the next several years.[13]
In Japan, unlike the United States, where Amtrak's losses can be attributed to half-filled trains, a trivial market share, and powerful unions, about 28.7 percent of passengers traveled by rail in 2007--the highest rate of rail use in the developed world.[14] Today, several of the restructured, privatized Japanese passenger rail lines run at a profit, but only because they were acquired at a fraction of their capital costs and the government absorbed much of the system's debt.
United Kingdom . In the U.K., 6.4 percent of surface passengers (excluding air and sea travel) travel by a passenger rail system that was privatized beginning in 1994 by way of concessions provided to private rail operators. Much like Japan, the U.K. decided to privatize its passenger rail system because of the burden of providing operating subsidies and the lack of government financial resources to refurbish the deteriorating infrastructure. Importantly, while a Conservative government implemented the privatization process, the subsequent Labor government made no effort to halt or undo the privatization process, despite the many problems that have emerged in the operations of the privatized rail system.
Although service has improved and ridership has increased to record levels since privatization, ticket prices have also increased, and government subsidies have exceeded pre-privatization levels.[15] In the 1994-1995 budget year, just before privatization, government rail subsidies totaled an inflation-adjusted £2,178 million ($3.4 billion), but after more than a decade of privatization, government rail subsidies for the 2008-2009 budget year totaled £4,896 million ($7.6 billion).[16]
Demonstrating that poor judgment is not unique to any one party or ideology, the opposition Conservative Party has promised to introduce HSR if it is returned to power, notwithstanding the high subsidy costs and high government deficits incurred by maintaining an ordinary passenger rail service used by just 6.4 percent of the market.[17] In response, the Labor Party has promised to build an HSR rail line connecting London to Manchester and Leeds at an estimated cost of $45 billion.[18]
The point of reviewing the recent U.K. experience is not to criticize the rail reforms that the U.K. undertook, but to note that regardless of organization, ownership, and the intensity of the reform effort, building and operating a system of passenger rail service still requires massive public subsidies.
France. The French government operates 30,500 miles of track, 1,160 miles of which are genuine HSR lines (called TGV) that have average speeds of about 180 mph. Although the entire French passenger rail system receives an estimated annual government subsidy of approximately $10 billion (compared to the annual estimated subsidy of $22.8 billion for the somewhat larger German passenger rail system, which also includes an HSR component),[19] the HSR service between Paris and Lyon--one of 11 TGV lines and 267 miles of the system--is believed by some to be one of only two HSR routes in the world that generate enough revenue to cover both capital and operating costs.[20]
Taiwan. In 2007, a privately owned and partially privately financed HSR system began operating HSR on a 214-mile route connecting Taipei and Kaoshiung, the two largest cities in Taiwan. Building the system cost an estimated $15 billion. It uses Japanese technology, and the trains run at a top speed of 186 mph.
Since opening, the system has lost $2.1 billion, leading The China Post to describe the situation as a "hyper-modern technology [that] was meant to be a source of pride, but instead has turned into a rich source of embarrassment."[21] The company operating the system is now seeking government subsidies.
Spain. Spain opened its first HSR line in 1992. Since 2003, it reportedly has spent more on rail than on roads.[22] Despite this commitment, the EU reports that rail in Spain accounts for only 5.1 percent of ridership, almost 2 percentage points below the EU-27 average of 6.9 percent for all surface transportation modes.[23]
Decision Time for America
As the preceding analysis reveals, the potential for serious financial problems with an HSR program include:
-Perpetual massive government subsidies and larger budget deficits;
-Wasted money because few passengers will use the system even with the high per-passenger subsidies for operating and capital costs;
-Service provided to only a small fraction of the traveling public in a handful of communities;
-Additional burdens imposed on hard-pressed state governments, which will be required to match the perpetual federal subsidies to build the system;
-Little or no difference in passenger mobility or environmental quality; and
-The creation of high-paying, low-productivity union jobs for political supporters.
While these deficiencies make the HSR program a winner for some of the President's supporters and some Members of Congress, it will be a major loser for the taxpayers who will be forced to fund this new system.
Most taxpayers will continue to travel by more cost-effective and largely self-financed modes, such as cars and airplanes. They will also find that government will continue to shortchange their preferred transportation choices, notably autos and airlines, to pander to key constituencies: environmentalists, rail hobbyists, and labor unions. Given that more than 20 percent of federal transportation funding already goes to transit, which serves less than 2 percent of passengers nationwide, the federal government is quite capable of squandering even more money on additional low-value and underutilized transportation projects such as HSR.
Conclusion
As a chastened Congress looks back at the many mistakes it has made over the past year and a half, its more sensible Members will have many opportunities in 2010 to make amends and restore some measure of fiscal sanity to the federal government. Two of the first opportunities will be President Obama's over-the-top follow-up HSR spending plans: an additional $8 billion through the ARRA and $5 billion over the next five years in the Administration's FY 2010 budget proposal.
Meanwhile, Representative James Oberstar (D-WI), chairman of the House Committee on Transportation and Infrastructure, has introduced legislation to provide $50 billion to HSR over the next five years. All of these proposals would waste massive amounts of money that the nation can ill afford to waste.
Ronald D. Utt, Ph.D., is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
