Tuesday, November 29, 2011

HTNB and it's insight into the nature of public service utilities, like high-speed rail

Here is an interesting insight that has great applicability to high-speed rail. It comes from, of all places, the HNTB Corporation, which is helping the CHSRA build its high-speed trains.   

The basic premise is that transit infrastructure has tended to be funded as if it was a one time capital investment.  As we all know, when we buy a car and bring it home, it does not last forever.  Almost all eventually require repair. Often the repairs cost more than the replacement, but either way, to over-simplify the point, nothing lasts forever, especially if heavily used.

Therefore, this paragraph from HNTB is really provocative:

"There is a general tendency among the public to view assets as 'build-it-once-and-forget-it' systems, rather than as utilities that require continuing attention and investment. 

The result is a persistent shortage of appropriate funding for these assets as politicians fear voter reprisals should they raise taxes or initiate tolls. 

There is one way to break this impasse: Take the bold step of transforming our transportation assets into functioning public utilities. We need only to look at the success of our electricity, gas, and water utilities for inspiration."
--HNTB Think, "Envision Transportation Assets as Utilities," November 2011.  (pdf)

We are approaching the beginning of construction of one of the largest transportation projects ever conceived in the US, and that includes the Transcontinental Railroad of the late-19th century. Yet, all the attention is focused on the capital investment development process of building a railroad system from the ground up.  

And, we also ask that the CHSRA consider the operation of this train, about which they know even less than the initial construction.  And, to promote their product, they project profitability from operations, and that indeed is a testimony to their ignorance about HSR operations.  All of which it to say, they think, erroneously, that they are in the railroad business and will make money at it.

All the attention in California has been paid to the "build it once and forget it" approach. The long-term future of the infrastructure receives scant attention. 

This could not be more wrong. The rail authority's charge is to be in the public transit 'business,' which is a public social service utility, just as the HTNB comments tell us. 

The CHSRA train, if ever built, will cost huge amounts of funding to operate; far more than the ticket prices would permit. (If the ticket prices were to cover the operating costs. No one, not even our now famous top 1%, would be able to afford to ride. That may be a slight exaggeration, but you get my point.)

Furthermore, what has not yet been under consideration is the life cycle of this rail utility, which requires not only maintenance and upkeep, but eventual replacement.  Where are the funds for that to come from? Should those not be an integral part of the current conversation?

For lack of such replacement investments, America's public mass transit systems are deteriorating before out eyes, they operational and maintenance costs skyrocketing, with few replacements in sight.

If we believe that Amtrak ought to be preserved, then what the DOT has being doing, investing in replacement and upgrades, is commendable. I wish we would see more of that within the urban and regional population centers, where public mass transit is critical to our economic survival.

Several people have been making the observation the CHSRA 2012 business plan, recently presented in draft form to the public, is not really a business plan at all and should not be called one. 

Clearly, unlike a real business, this high-speed rail project will be not so much a "profitable" business, as it will be a failing public utility as described here; a public service which will require a highly subsidized operating budget, like all other passenger rail transit systems in the US, and everywhere else. And obliging the public to support such massive payments for the benefit of the few riders will soon result in a vast, abandoned railroad system that should never have been built in the first place.

This is where the HNTB conjecture and analogy is wrong.  High-Speed Rail is nothing like the electric, gas, trash removal or water public utilities. All of us use those services and all of us pay for them.  HSR will certainly not be used by all of us; indeed, the users will be a very limited, wealthy cohort.  And that changes the public service utility concept completely.

Talk about "profits" are irrelevant.  There will be no stock holders other than all of California itself. There are no "investors" save for the purchasers of state municipal bond funds (and they are non-voting), which are general obligation funds (GO), not rail-specific ones.

It is indeed far more accurate to think about what would become an overpriced, underutilized public service utility for only the very affluent parts of the population. Such a utility would, of course, have continuous and major operating and replacement costs in perpetuity. Without consideration of permanent funding sufficient to maintain and replace this infrastructure complex, we have no business getting into it in the first place. 

As they say about yachts, it's not the purchase price that kills you, it's the upkeep. And therefore, the two happiest days of a yacht sailor's life are the day he buys his boat, and the day he sells it.  Keeping that in mind, the obvious path of wisdom in the case of HSR is to never buy this project in the first place, since it is the upkeep that will kill us; that is, if the construction cost doesn't kill us first. 

See also: 

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