Friday, September 2, 2011

High-Speed Rail is a dumb idea in the UK. And it's a dumb idea in California

Here's The Economist talking about the British intentions to build their HS2, the second version of their high-speed train. There's been a huge amount of conflict over this in the UK, perhaps even more than in the US currently. The parallel seems to be that the government has vested interest in making a multi-billion Pound ($53 billion at this time) expenditures in the train.(Once they start, will it be more than that?  What do you think?) People on the ground and who will be impacted don't care for that very much and have made that quite clear.  

The Brits know how to take to the streets and protest.  We have yet to learn that skill on the Peninsula and in California.  The Berkeley uprisings and student protests of the'60s are ancient history that most of us never knew about or have forgotten.

The Economist's article takes a look at the big picture of high-speed rail and its economic implications, something we've tried to focus attention on, and have provided William Grindley's many financial discussions on this blog.  

The article tells us that it's mostly business travellers who benefit from the train and that Chinese HSR trains run nearly empty.  The ticket to ride is expensive.  Most business people operate on travel expense accounts; they are travelling on "OPM," other peoples' money. That means that the taxpayers are supplementing corporate expenses, while those same corporations are paying ever fewer taxes.
All that will surely take place here in California, if this train ever does get built.

The meaning is clear, all of us taxpayers, rich and poor, are expected to pay to build a super-expensive train that will carry mostly well to do business travellers and those affluent enough to afford those top of the price charts tickets.

Let me not drop this point.  When the California voters were asked to support a bond issue for nearly $10 billion, they were told that those borrowed bond funds would be repaid with rail revenue surpluses which would cover all operating expenses as well.  After the election, we no longer heard that fairy-tale.  Indeed, now we are hearing less and less about any revenue surpluses and the threat of new legislation to create a subsidy stream for the train comes ever closer. 

I wonder how many Californians are aware that they have been screwed by that election into supporting a bond measure that will cost them over $20 billion to repay.  The bond language didn't spell that out. It's what one attorney called "fraud upon the voters." 

The article author does not dismiss HSR out of hand.  She or he argue for context specific justifications, such as being based upon a well developed rail system already in place and including slower trains.  (Something we actually don't have in California.  The HSR here would start from scratch.) The authors identify a number of benefits, but they fail to account for them in terms of costs.  Whatever HSR accomplishes, the costs for it to do so will far exceed any value attributed as outcomes from the existence of these trains.

Watch for value attribution to be a big thing in the next CHSRA business plan.  Those diligent book-keepers at KPMG who are putting this new-and-improved plan together have been instructed to pump up the values/benefits and give them monetary value.  Since the train can't pay for itself, it will have to produce other, ancillary benefits to be justified.  In this next business plan, the spin-meisters will list the virtues of HSR for every public pain they intend to cure. The magic never stops at the CHSRA offices.

The article admonishes the Brits to drop their HSR project.  We should certainly do the same.  Indeed, we are even less suited to utilize HSR than the British are.

"A good infrastructure scheme has a long life. But a bad one can derail both the public finances and a country’s development ambitions."

Infrastructure projects
The great train robbery
High-speed rail lines rarely pay their way. Britain’s government should ditch its plan to build one
Sep 3rd 2011 

AT THE launch of the Liverpool-Manchester railway in 1830, a statesman was killed when he failed to spot an approaching train. That was not the last time a new train line has had unintended consequences. Victorian railways ushered in a golden age of prosperity; these days politicians across the developed world hope new rapid trains, which barrel along at over 250mph (400kph), can do the same. But high-speed rail rarely delivers the widespread economic benefits its boosters predict. The British government—the latest to be beguiled by this vision of modernity—should think again (see article).

High-speed talk is everywhere at the moment. Six countries have put large sums into “bullet” trains: Japan, France, Germany, Spain, and, more recently, Italy and China. Australia, Portugal and Indonesia are all considering new lines. And the British government is pondering plans for a £32 billion ($52 billion) link from London to the north of England. 

Ventures elsewhere have stumbled: China suspended new projects after a fatal collision of two high-speed trains in July; Brazil delayed plans for a rapid Rio de Janeiro-São Paulo link, after lack of interest from construction firms. Yet governments remain susceptible to the idea that such projects can help to diminish regional inequalities and promote growth.

In fact, in most developed economies high-speed railways fail to bridge regional divides and sometimes exacerbate them. Better connections strengthen the advantages of a rich city at the network’s hub: firms in wealthy regions can reach a bigger area, harming the prospects of poorer places. Even in Japan, home to the most commercially successful line, Tokyo continues to grow faster than Osaka. New Spanish rail lines have swelled Madrid’s business population to Seville’s loss. The trend in France has been for headquarters to move up the line to Paris and for fewer overnight stays elsewhere.

Even if some cities benefit, other places beyond the rail network may suffer: speed is attained partly at the cost of stops, so areas well served by existing services may find new lines bypass them. Parts of Britain, for example, fear that a new zippy railway will create a second tier of cities supplied by fewer and slower trains. High-speed lines, like other regeneration projects, often displace economic activity rather than create it.

The advantages, meanwhile, mostly accrue to business travellers. In China ticket prices are beyond the reach of most people, so new trains yawn with empty seats. Yet because high-speed lines require huge investments, usually by governments, ordinary taxpayers end up paying. So instead of redistributing wealth and opportunities, rich regions and individuals benefit at the expense of poorer ones.

Full steam ahead

Ultra-fast railways will have their day. They are a good way to cut air travel and carbon emissions, particularly where, as in China, they connect dense but distant population clusters. On shorter routes, their advantages dwindle: they can neither transform a region nor replicate the advantages of wider networks. And there is not yet such a thing as a cheap high-speed link: China’s safety failures have shown the perils of skimping in any way. At present, for most places, the marginal benefits of these fantastic feats of engineering, in terms of reduced journey times, are outweighed by the high costs.

And those costs sap funding from humbler but more efficient schemes. Especially in smaller countries, upgrading existing, slower networks often makes more sense. Capacity can be increased with longer trains and extended platforms. Some spacious first-class carriages could be converted to more compressed second-class ones; pricing may ration demand more effectively at busy times. Better signalling can increase the average speed of journeys. 

Britain’s non-high-speed trains, for example, are already quicker than most other countries’ equivalents. Some trains that currently run at 125mph could go faster if signals were upgraded—even if unveiling a new signal box might appeal less to politicians than inaugurating a futuristic new service.

Britain still has time to ditch this grand infrastructure project—and should. Other countries should also reconsider plans to expand or introduce such lines. A good infrastructure scheme has a long life. But a bad one can derail both the public finances and a country’s development ambitions.

No comments: