When Immobility Secretary Ray LaHood gave $200 million to Michigan for high-speed rail last Monday, he claimed this grant 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.” That’s a lie. In fact, the state itself says the top speed will only be 79 mph, and the money will only save 12 minutes.
Photo courtesy of Michigan View.
Some journalists even got conned into thinking that the money would reduce travel times in the corridor by 50 minutes. In fact, the state says it will need nearly $1 billion more to bring the tracks up to 110-mph standards–and that’s not counting the cost of locomotives and railcars.
The Antiplanner explains this in detail in Michigan View, a political news site published by the Detroit News.
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The editor of the View also asked me to take a look at a 2006 benefit-cost analysis about the Midwest high-speed rail program. I found that this analysis was also full of lies exaggerated benefits and underestimated costs.
For example, the analysts counted “consumer surplus” as one of the benefits of high-speed rail. What this means is that some wealthy people might be willing to pay a lot more to ride the trains than the actual fares. The analysts count that as a benefit. Consumer surplus is valuable for explaining why monopolies are a bad thing. But using it to try to justify government spending biases the decision toward the desires of the wealthy at everyone else’s expense.
On the cost side, the analysis estimated capital costs of about $6.1 billion for ten rail corridors. But two of those corridors alone–Chicago-St. Louis and Chicago-Detroit–are now projected to cost $6.5 billion. All ten corridors are likely to cost well over $10 billion and probably closer to $20 billion.
Rail advocates have little conscience when presenting their plans and proposals to the public. Of course, that isn’t any different from proponents of any big-government projects. The solution is for taxpayers to insist that infrastructure projects pay for themselves out of user fees, not tax dollars.
Though O’Toole, you lie all day here without conscience, at the bidding of your master Koch.
Ok, I only spent a few minutes and saw several glaring errors. But the biggest seemed to be that simply that it is one-sided. According to the report, if the government taxes people and spends it on HSR there will be significant benefits (personal, social, economic, and environmental). But where is the section about the benefits if individuals are allowed to keep their money and spend it how they desire? Seems that the implied benefits are $0.
Good catch, ‘consumer surplus’ what a nutty idea!
Antiplanner:
Your sloppy reporting boggles the mind.
First, the Amtrak portion of the Michigan corridor from Porter to Kalamazoo is to be upgraded to 110 mph as soon as the signal system under construction on the line RIGHT NOW is complete. Amtrak used $42M of its ARRA stimulus money for track, signal, and communication upgrades on this line.
Second, the State document you link never mentions a 12 minute time savings or 79 mph limit. It talks about 110 mph from Porter to Ann Arbor, and a schedule time savings of between 42 and 61 minutes per train on the proposed schedules compared to the present Amtrak schedule – i.e an average of 50 minutes.
Third, the cost of improvements for 110 mph operation is given as $357.81M for the NS portion of the line, including purchase, and was fully funded with FY2010 and FL dollars. For the rest of the line items, the Amtrak improvements were funded out of Amtrak stimulus dollars. The Conrail line item and West Detroit connection was funded with FL dollars and scaled back to just a connecting track for now.
The equipment line item is being provided and funded out of the $268M provided to the Midwest equipment pool for IL, MO, and MI plus the 60 Amfleet cars and 20 P40 engines Amtrak rehabilitated under the ARRA stimulus program for $70M. Dearborn, Battle Creek, and Troy stations were all funded with ARRA Stimulus dollars given to MI. Create P1 was funded with ARRA Stimulus dollars given to IL. The only unfunded line item is CN improvements.
Also funded but not included in the MI document is $71M to Indiana for improvements to the Chicago-Porter section of the line. This has not yet been obligated. When implemented, it would allow for more Amtrak trains to be run through this section of line, and improve the reliability of NS and CSX freight operations. Michigan did not anticipate this award when writing up their document.
So the Phase I application MI made is essentially fully funded and will be implemented.
Andrew,
The table on page 7 of the state application clearly shows that the “future outcome” of spending this $200 million will be a top speed of 79 mph. The trip “scheduled trip time” after spending the money will be 145 minutes, which is 12 minutes less than the 157 minutes before spending the money.
Page 12 says that spending this $200 million “will position the corridor for future infrastructure improvements planned to begin in FY 2012 as part of the SDP application for funding to complete Track Rehabilitation and Positive Train Control/Signal investments which would increase passenger speeds to 110 mph.” In other words, they need more money to bring it up to 110 mph.
Page 12 of an earlier application defines three phases in the project. Phase I is purchase of the right of way, which was funded last year. Phase II is this $200 million, which saves 12 minutes. Phase III is to increase top speeds to 110 mph, which saves 30 minutes.
How much will phase III cost? Page 16 of Michigan’s corridor plan estimates total costs of $1.3 billion. Since they only have about $400 million, that leaves $900 million.
Even if everything Andrew said is 100% correct, this project is a shocking waste of public money. How can anyone justify capital spending in the high 9 figures for the purpose of moving a couple of thousand people (at most) across the rust belt every day? Even that overstates the practical benefit, since it’s not like the trip is particularly harrowing now–there’s virtually no highway congestion unless you hit either end at rush hour, and flights are frequent and cheap. Also, how did funding for this line get prioritized? There is no way traffic (include passengers and freight, all modes, if you want) on the Chicago-Detroit corridor is growing.
Antiplanner:
The new document you link is for a $5.7M emergency tie and surface job (see page 4), not a $200M grant application. The $5.7 million of tie and surface work is to bring the track back into compliance with FRA Class 4 track standards to allow speeds to be restored to 79 mph.
Page 20, item 2c lists the deliverables of this grant as 24,000 ties and 136 miles of spot surfacing. The actual unit costs of these activities are about $100+/- to purchase, deliver and install a tie, and $2-3/foot to surface track.
This grant apllication has nothing to do with the $200M to raise speeds to 110 mph. The second document you link gives costs of $385M to purchase and improve the line, with the variance from the earlier plan total in your third link being in the purchase price. The improvements in the second document aren’t needed for the 79 mph speed – that is covered by the $5.7 million to restore previous conditions. These improvements expand the ITCS signal system that allows 110 mph speeds with FRA approval, retime the grade crossings for 110 mph (no need to retime for them 79 mph, since that was the speed limit until 1 year ago), performs the needed curve modifications (easements, superelevation and spiral modifications), and brings the track structure into compliance with FRA Class 6 standards. As noted on pg. 16, item 2, “additional travel time reduction … will be realized once top speeds are APPROVED to go to 110 mph” (emphasis added). The approval process by the FRA requires a test-bed period of operation at slower speeds to proof the system – first 79 mph, then 95 mph, as happened on the Porter-Kalamazoo section.
Lastly, your final document linked does not discuss Phase III costs, but full build out costs. These costs are to allow an increase in trips to 10 round trips per day from 3 round trips at present. As is very clear in that document, 110 mph speeds are realized at the 3 round trip level with the initial investment of $400M in tracks and signals in Michigan. I noted previously how almost all of the initial $900M in costs were funded via the awards to Michigan, the CREATE aware to Illinois, the Amtrak equipment spending and equipment money awarded jointly to IL, MO, and MI (which appears to produce 18 new trainsets of six cars), and Amtrak spending on its own Michigan line. The final $400M in the $1.3 billion total would include additional passing sidings and double track between Porter and Detroit, the $71M in improvements awarded to Indiana, and any other improvements needed to increase frequencies – not money to raise speeds, because that is physically acocmplished by the Phase II improvements.
There is a simple way to look at this. 135 miles of line has 439,000 ties at 3250 ties per mile. The $5.7M job replaces 24,000. To operate at 60 mph (FRA Class 3), the railroad must have around 1215 good ties per mile. To operate at 79 mph, the railroad must have 1760 good ties per mile. The 24,000 ties covers 44 miles of track under slow orders. Pg. 12 of the $5.7M application notes that the NS implemented 41.2 miles of slow orders in 2010, with more to follow. Obviously, $150M is not needed to get a 79 mph line up to 79 mph.
n4:
How can anyone justify capital spending in the high 9 figures for the purpose of moving a couple of thousand people (at most) across the rust belt every day?
The cost of the project is roughly the cost of rebuilding three major highway interchanges. I don’t think you have a sense of perspective of actual infrastructure costs. All other things being equal, if service is more than tripled to 10 round trips per day per the plan, we can expect 1.5 times as many new riders as trains as seen on many Amtrak corridors when service and frequency improvements have been made (Surfliner, Cascades, Capitol, Keystone, etc.), or a five fold increase in ridership to around 2.5 million per year. This is due to the increasing utility of each additional train in making more trips possible.
Also, I think you are confused possibly by assuming the focus of this corridor is the decaying city of Detroit. The city of Detroit station contributes less than 7% of the annual ridership, and the stations of Pontiac, Birmingham, and Royal Oak just another 7%. Most of the riders are at Dearborn, Ann Arbor, Jackson (26% for those 3), Battle Creek, Kalamazoo, and Niles (15% for those 3), and of course, Chicago (44%). There is, of course, only driving and the bus to compete from those towns, as there is no significant air service.
Even that overstates the practical benefit, since it’s not like the trip is particularly harrowing now–there’s virtually no highway congestion unless you hit either end at rush hour, and flights are frequent and cheap.
The trip is harrowing for anyone who doesn’t want to drive or fly and is forced to because that is the only travel modes available.
There is no way traffic (include passengers and freight, all modes, if you want) on the Chicago-Detroit corridor is growing.
Annual Amtrak traffic was stagnant since 1991 at around 375,000 on this route up to 2004. Since 2004, annual ridership is now (as of 3/2011) up to 515,000 and growing fast, with no improvements made, no new equipment in use, and longer running times from decayed track. Obviously significantly faster service one new equipment would attract more riders. I’m sorry that doesn’t fit the story you want to tell.
The trip is harrowing for anyone who doesn’t want to drive or fly and is forced to because that is the only travel modes available.
I also see two other cases where the trip would be harrowing:
o it would be harrowing if you were on your laptop while driving and missed the hazard you had to avoid.
o It will be harrowing in the future when gas is $7/gal and you are trapped in the freedom of your car and paying $7/gal and wondering why no one saw this day coming when alternatives to the freedom are needed.
DS
I was taught in economics class that “consumer surplus” is the whole point of just about any economic transaction. I think it is much more important than number of jobs or economic activity measures that are usually discussed about developments.
But if there is a great consumer surplus for the project, then why don’t they raise fares at least to the point where it breaks even?
Andrew wrote:
The cost of the project is roughly the cost of rebuilding three major highway interchanges. I don’t think you have a sense of perspective of actual infrastructure costs.
I won’t generally speak for others here, but one interchange generally serves tens of thousands or hundreds of thousands of persons (“person trips” in travel demand forecasting-speak) and generally hundreds or thousands of trucks carrying many tons of freight.
As compared to hundreds, or maybe in a few cases, thousands of person trips taking the train – and every additional passenger means more Amtrak operating losses.
So it’s a matter of scale, a concept that most advocates of taxpayer subsidies for passenger trains are not familiar with.
I took a look at the Michigan DOT Web site, and around Ann Arbor, I-94 carries from 53,900 to over 100,000 vehicles per day (note: not per year, like Amtrak likes to report its patronage). To the west, near Kalamazoo, the freeway carries from about 40,000 to over 76,000 vehicles per day.
All other things being equal, if service is more than tripled to 10 round trips per day per the plan, we can expect 1.5 times as many new riders as trains as seen on many Amtrak corridors when service and frequency improvements have been made (Surfliner, Cascades, Capitol, Keystone, etc.), or a five fold increase in ridership to around 2.5 million per year. This is due to the increasing utility of each additional train in making more trips possible.
Gee, if we expanded road capacity like that, the anti-highway industry would start to talk about “induced” demand for highways.
But getting back your assertion above, how much tax money would Amtrak consume in order to provide small increases in (slow) train service.
But if there is a great consumer surplus for the project, then why don’t they raise fares at least to the point where it breaks even?
Then you are lowering the utility and eliminating the perceived benefit (the “surplus”). Plus there is little elasticity in the pricing as the transportation market is not that competitive, as it is distorted in several modes by subsidies (and the fuel and corporations supplying it are highly subsidized).
Nonetheless, I agree with you that it doesn’t mean what Randal claims it means in this piece.
DS
CPZ:
One interchange is but a tiny cog in the system needed to transport people from Detroit to Chicago by car. The freeway might carry 20 to 50 times the number of people the Amtrak Detroit line does or will, but its capital cost is obviously far, far, greater as well. The Amtrak line also carries freight if that is relevant to the discussion. I believe it generates 5000 to 10000 tons per day of freight, but I would have to check that.
As to how much tax money would be consumed, it would presumably be a several million dollars per year based on present operations. The question would then be is it worthwhile providing alternate mobility and keeping people off the highway and saving lives by doing so. If Amtrak provides about 1% of passenger miles, for example, it is and lessening automobile use the consumption of imported oil from terrorist loving states and saving 350-400 lives per year from car wrecks. What is the economic value of a human life? At least several million, isn’t it? Is that not enough justification for Amtrak – that it costs less than would be paid out to compensate for people being prematurely killed on the highways?
I don’t understand how raising the fare to the break even point can wipe out the consumer surplus. If it costs more than the consumer surplus, then you never had a consumer surplus. Right?
Let’s place the responsibility of $7/gallon gas where it belongs: on the Federal Reserve and its loose monetary policy.
Frank:
While its undoubtedly true the Fed has inflated away the value of the American Dollar, that doesn’t explain why the price of a barrel of oil is also dramatically higher in all the other modern industrial economies that do not use dollars. The Fed didn’t inflate away the Pound, Yen, Euro, Australian Dollar, Rand, etc. In theory, shouldn’t the price only rise in dollars, while the dollar sinks versus these other currencies as it is debased? (Yes, I know I’m oversimplifying by ignoring the effect of selling oil in petrodollars.) That also suggests there are more dramatic forces at work driving the price of oil higher (namely rising demand in the mega markets of China and India).
More interesting is that oil at $100 per barrel is actually underpriced compared to its long term relation during the past 90 years to silver and gold in US dollars and on the world markets. Over the past 90 years, 1 ounce of gold has generally equalled about 35 ounces of silver (also the legal US definition of the price relationship since 1934) and 10-11 barrels of oil, with some exceptions. Right now, 1 ounce of gold will get you 15 barrels of oil. If the price relationship is restored, and it undoubtedly will be, either gas is going up $1.25 per gallon, or gold and silver are in for a horrific 33% crash.
The real problem is that a dollar is no longer 371.25 grains of silver, no thanks to LBJ and his guns and butter idiocy. But this has been going on for a while, as Will Roger’s insightful comment about the US not needing a good 5 cent cigar, but rather a good 5 cent nickel, so that 5 cent cigars would no longer cost 10 cents. We are now at the point where the dollar has been debased to 2.5% of its former value in just 44 years (2011-1967), including a 75% drop in just the past 7 years, since the Fed began its binge on the latest war bonds spewing out of Washington. Its sad too, because the wrenching economic dislocation under Volcker and Reagan in 1981-1982 had killed inflation for the following 22 years, with the American economy enjoying stable silver, gold, and oil prices, and the enormous prosperity such stability brings with it.
Although, O’Toole’s not interested in facts, just in bashing transit.
Andrew:
Good points. If you also look at the price gasoline in terms of silver, it’s at a historic low. While silver has recently corrected, the amount of silver in pre-1964 quarters buys 1.6 gallons of gasoline (assuming gas @ $4/gal). When people used silver to pay for gas, the average cost of gas was under 25 cents (a price that often included full service). Using silver a metric exposes the debasement of our currency and shows the irrelevance of statements like those in #9.
Here’s another Mises article that puts gas prices in perspective. Some tasty tidbits:
I don’t understand how raising the fare to the break even point can wipe out the consumer surplus
At a macro level, the surplus is the utility derived by purchasing a good or service for a price less than the highest price you are willing to pay (WTP). At a micro level, that’s where your welfare comes in.
Note how when we talk here about equilibrium rents, we presume that the price elasticity reflects everyone’s knowledge and WTP about the housing market and with rents at equilibrium, there is no surplus.
The importance of surplus comes in here for example with the price of gas, as we are paying much less than we are WTP – the gas price is not at equilibrium, as it is held artificially low by subsidies and our foreign policy, so there is a consumer surplus and lots of utility – and thus political power exists and is wielded to hold prices low to continue the utility.
One might argue, thinking about surpluses and utility, that our low taxes and our relatively high service delivery gave us a surplus for a while – now that the services seek to be cut, there will be less utility in our country. How that lower utility translates in political power remains to be seen, as Citizens United has to manifest itself in distracting agents away from their lost utility. This is how arguments for maintaining surplus manifest themselves and why policy types consider them powerful.
DS
Andrew wrote:
One interchange is but a tiny cog in the system needed to transport people from Detroit to Chicago by car.
How does it compare in terms of complexity with the rails that serve an Amtrak train?
The freeway might carry 20 to 50 times the number of people the Amtrak Detroit line does or will, but its capital cost is obviously far, far, greater as well.
Is it? Unlike the rail line, the highway is so productive that its users pay to build, maintain and operate it. That’s not the case with Amtrak.
The Amtrak line also carries freight if that is relevant to the discussion. I believe it generates 5000 to 10000 tons per day of freight, but I would have to check that.
The reason that U.S. railroads earn money for their owners is because hauling freight is something they can do for a profit. It helps that those railroads only have to provide access to their rails for Amtrak’s passenger services.
But not all freight is appropriately carried on the rails – and there are plenty of freight movements on I-94.
CPZ:
Is it? Unlike the rail line, the highway is so productive that its users pay to build, maintain and operate it.
No, general roadway use pays for the construction of limited access freeways. It is very easy to demonstrate that users of a freeway do not pay for its costs.
If I94 has around 50,000 vehicles per mile as you state, and they are averaging 20 mpg paying 40 cents per gallon in gas taxes, then each vehicle produces 2 cents in gas tax per mile, or the road produces $1000 per mile per day or $365,000 per year. If the lifetime of the freeway is assumed 30 years before total reconstruction, then it only generates $11,000,000 per mile in that timeframe to amortize initial construction or pay for reconstruction, AND pay for interim maintenance measures, policing, snow removal, etc. This is obviously far below the actual costs of freeway construction, which are closer to $50+ million per mile before consideration of major bridges and interchanges, to say nothing of providing revenue for maintenance. And I am also completely ignoring societal costs, human life lost in roadway carnage, environmental considerations, lost property tax revenue, etc.
I challenege you to find a freeway where the actual vehicle useage gas fees pays all the construction and maintenance costs of the freeway.
That’s not the case with Amtrak.
No, Amtrak is paid for in the very same way freeways are, by a tax on the general population that benefits from its existence and use. Freeways are paid for by taxing all driving of the general motoring population, and the use of freeways is forbidden to pedestrians, bicyclists, and Amish horses and buggies, all of whom, of course, pay nothing. Amtrak is paid for by everyone, and everyone is free to use it as it pleases them.
Andrew asserted:
If I94 has around 50,000 vehicles per mile as you state, and they are averaging 20 mpg paying 40 cents per gallon in gas taxes, then each vehicle produces 2 cents in gas tax per mile, or the road produces $1000 per mile per day or $365,000 per year. If the lifetime of the freeway is assumed 30 years before total reconstruction, then it only generates $11,000,000 per mile in that timeframe to amortize initial construction or pay for reconstruction, AND pay for interim maintenance measures, policing, snow removal, etc. This is obviously far below the actual costs of freeway construction, which are closer to $50+ million per mile before consideration of major bridges and interchanges, to say nothing of providing revenue for maintenance.
I strongly suggest you go back and recompute the above, this time taking into account the road use taxes paid by trucks and buses. Slightly higher than those paid by passenger cars, SUVs and light trucks.
And I am also completely ignoring societal costs, human life lost in roadway carnage, environmental considerations, lost property tax revenue, etc.
Ever heard of the serious Amtrak-involved wrecks in my home state of Maryland in Chase, Silver Spring and Kensington? How much do you think that Amtrak paid to the State of Maryland and its political subdivisions for fire and EMS services at the scene of those crashes?
I challenege you to find a freeway where the actual vehicle useage gas fees pays all the construction and maintenance costs of the freeway.
I suggest you reconsider such claims in light of my comments above.
No, Amtrak is paid for in the very same way freeways are, by a tax on the general population that benefits from its existence and use.
Wrong.
Most U.S. taxpayer would not notice any change in their lives if Amtrak were shut-down tomorrow. Or just required to pay its own way, without taxpayer subsidy.
Freeways are paid for by taxing all driving of the general motoring population, and the use of freeways is forbidden to pedestrians, bicyclists, and Amish horses and buggies, all of whom, of course, pay nothing.
Actually that ban is not imposed on all parts of the U.S. freeway network. And even people that do not drive derive tremendous economic benefit from that system.
Amtrak is paid for by everyone, and everyone is free to use it as it pleases them.
The vast majority of U.S. taxpayers do not patronize Amtrak’s services. For example, the last time I rode on an Amtrak train was in 1976.
CPZ:
I strongly suggest you go back and recompute the above, this time taking into account the road use taxes paid by trucks and buses. Slightly higher than those paid by passenger cars, SUVs and light trucks.
Tell me how many buses and trucks are on the road and I will compute it. I doubt it makes much difference in the end. Most vehicles on the road are cars and light trucks, not semits and buses.
Ever heard of the serious Amtrak-involved wrecks in my home state of Maryland in Chase, Silver Spring and Kensington?
Yes. Amtrak has a far better safety record than the roads. The Kensington wreck only involved Amtrak in the sense that another train hit an Amtrak train that was being properly operated. This is like blaming Amtrak for grade crossing accidents when someone runs the gates.
How much do you think that Amtrak paid to the State of Maryland and its political subdivisions for fire and EMS services at the scene of those crashes?
Amtrak was exempted from local property and sales taxes by Ronald Reagan and the US Congress in 1981. Amtrak does pay money to the freight railroads, which do pay local taxes. Is that the best you can offer – that Amtrak needed EMS and the like twice in 40 years in Maryland and didn’t pay enough for them?
I suggest you reconsider such claims in light of my comments above.
I have no interest in reconsidering my claims, because you have provided no evidence of a roadway paying its way through gas taxes generated by actual users. We all know toll roads cost far more than 2 cents per mile to use, and that toll roads are the only self-financed roads. If you’d be willing to see your gas taxes equalized with roadway tolls up around 8-10 cents per mile, or all freeways tolled at that rate, it would be interesting to see how many people still want to drive on them. I know that the PA Turnpike is rarely congested at rush hour because drivers hate the thought of paying for their road use.
And even people that do not drive derive tremendous economic benefit from that system.
They pay for that benefit in the cost of goods and services, so it is a wash. Non-drivers are not receiving extra checks for not driving. OTOH, anyone could say the same thing about Amtrak, that even people who don’t use it derive economic benefit from it existing because it facilitates transportation, yadda, yadda, yadda.
The vast majority of U.S. taxpayers do not patronize Amtrak’s services. For example, the last time I rode on an Amtrak train was in 1976.
And many drivers do not use freeways. I drive on a freeway no more than a handful of times per year (most of my driving on expressways is on the PA, NJ, DE, and MD turnpikes), yet I pay $500 in gas taxes. And don’t feed me a line of crap about societal benefits from your ability to commute or my buying food that was hauled on an interstate – if I want your services, my payment for them includes your cost of commute, and I pay the same amount for food as everyone else does – its not like I get a discount on any good or service for not driving on freeways.
You seem to have no compunction about benefitting financially from a multitude of drivers like myself who subsidize your use of Maryland’s vast network of freeways, but you are upset at the thought of your subsidizing rail users. That is just hypocritical.