Is the Oil Industry Subsidized?

Civil engineer and transportation expert David Levinson starts with the premise that the oil industry receives $20 billion in subsidies from the United States each year, and concludes that this subsidy has minimal impact on urban transit. When, a few years ago, gasoline prices were double what they are today, transit ridership was only about 0.1 percent greater than it is today. Assuming ridership would have kept up with population growth, a “100% increase the price of fuel gets you a 5% increase in ridership,” says Levinson.

But back up a minute. Who says the oil industry gets $20 billion in annual subsidies? As the anti-petroleum group, Oil Change International admits, most of that “subsidy” is a tax deduction for oil exploration. As Forbes points out, this is the kind of subsidy that is “also available to any U.S. manufacturer such as Apple or Microsoft.” As the pro-petroleum OilPrice.com says, “The suggestion that depletion or depreciation deductions on income from investments that might not otherwise exist amount to a subsidy is a remarkable interpretation of the rules of accounting and the English language.”

Some countries, such as Iran and Saudi Arabia, actually give their residents direct subsidies to use oil. The United States does so only to help low-income people buy fuel oil to heat their homes. Otherwise, the “subsidies” people complain about are really just tax deductions for ordinary business expenses.

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Atlanta’s Streetcar Named Disaster

The Antiplanner’s friend, Benita Dodd, reviews the Atlanta streetcar on the second anniversary of its inaugural run. It was supposed to cost $72 million to build. It cost $97 million. It was supposed to cost $1.7 million a year to operate. It actually costs $5.3 million.

It was projected to earn $420,000 a year in fares. During its first year, it earned nothing because it was free. In the second year, the city began charging $1 a ride, and it earned under $200,000. When it was free, it carried 2,600 riders a day. After they began charging, ridership fell to less than 1,500 a day, less than half the projected number.

It normally runs on Saturday nights until 1 am. Last Saturday, “to accommodate large crowds” for New Years Eve, the city stopped running it at 4:30 pm. (Despite the absurdity of the claim that not running the streetcar will accommodate large crowds, the Atlanta Journal-Constitution reprinted the city’s press release word for word.) Naturally, after all these great successes, the city wants to build 22 more miles of streetcar lines.

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The $4.5 Billion New Year’s Party

New York City celebrated the new year by opening the insanely expensive Second Avenue Subway. Just two miles and three stations long, this subway line cost nearly $4.5 billion, or more than $35,000 per inch, making it the most expensive subway in the world.

Of course, not all of that money went for digging tunnels and laying track, which cost “only” $734 million (which is still more than $5,000 per inch). The three stations cost $800 million each. But that’s not all: to complete the Second Avenue subway, the city also spend $500 million on engineering and $800 million for “management, real estate, station artwork, fare-collection systems and other sundry items.” If the entire New York City subway system cost that much, it would have cost more than $500 billion, or roughly the cost of the entire 47,856-mile Interstate Highway System in today’s dollars.

Of course, the city didn’t pay for it alone. The federal government chipped in at least $1.3 billion. The state of New York put in some money, but much of the money probably came from bridge tolls paid by auto drivers. Actual riders of the Second Avenue subway will pay very little of the cost and what they do pay will be paid indirectly.

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2015 Transit Data

As I promised yesterday, I’ve compiled what I consider to be the most important data in the 2015 National Transit Database into one spreadsheet. These data include trips, passenger miles, vehicle revenue miles & hours, weekday trips, fares, operating costs, maintenance costs, capital costs, BTUs of energy consumption, and grams of carbon dioxide emissions.

The 2015 database is expanded from previous years, which just included data from transit systems in major urban areas over 50,000 people. The 2015 data also include transit systems in minor urban areas of under 50,000 people, rural areas, and Indian reservations. The major urban area data fill the first 2,066 lines of the spreadsheet, while the rest fill the next 1,549 lines. The major urban areas accounted for 10.377 billion transit trips in 2015, while the smaller areas accounted for a mere 128 million trips.

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New Transit Data

The Federal Transit Administration has posted 2015 transit data as part of the National Transit Database. However, the Department of Transportation’s new web sites have made downloading data fairly tedious.

To save you time, I’ve downloaded the data and then uploaded them in two zip files. First is the Historic Time Series showing data from 1991 through 2015. Second is a more detailed 2015 database, providing safety, energy, and other detailed data not found in the historic time series. Each of these files is between 10 and 11 megabytes in size.

For simple things such as capital costs, operating costs, fares, trips, and passenger miles, the historic time series is an excellent source of information. The most useful files are table 2.1, “operating expenses and services,” which has separate sheets for operating costs, fares, vehicle revenue miles and hours, trips, and passenger miles, and table 3.1, “uses of capital costs,” which has capital expenses. All of the sheets in these two tables break down data by transit agency and mode. Unfortunately, the capital expense sheet does not break down the difference between new projects and maintenance of existing projects.

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More Fake News from New York Times

Americans are expected to buy a record number of cars in 2016. The American Community Survey says that the share of American workers taking cars to work grew from 86.3 percent in 2010 to 89.7 percent in 2015. So naturally, the New York Times says that America is “over the whole car thing.” The story is illustrated by a photo of riders on a rather empty Los Angeles subway, one of the least-used subways in America.

Despite the misleading illustration, the gist of the article is not that Americans are abandoning cars for transit but that they might abandon car ownership for car sharing. What the Times misses is that a car that is shared might travel 75,000 miles per year, compared with around 15,000 for a privately owned car. That means that shared cars will need to be replaced every three or four years instead of every 20 years.

In other words, car sharing doesn’t mean lower sales for automakers. It might give automakers that can rapidly introduce new products with new technologies a new advantage over manufacturers with longer product cycles. It will also reduce the demand for parking lots.

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Suffer the Auto Drivers

Jesus said, “Suffer little children to come unto me, and forbid them not: for of such is the kingdom of God.” Today, people use the word suffer in a very different way, as in, “Make automobile users suffer, and forbid them if you can, for of such is the work of the devil.” At least, that is the declared attitude of the Broward County Planning Council, as reported by the (Ft. Lauderdale) Sun-Sentinel.

The Antiplanner wishes everyone a happy holiday and hopes no one has to suffer this weekend no matter how they decide to travel. News will be slow next week so postings may be light.

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To Depreciate or Not to Depreciate

The Antiplanner has previously argued that Amtrak uses “accounting tricks” to make the Northeast Corridor appear profitable and the system as a whole appear to cover most of its operating expenses out of revenues. The most important of these tricks is that it appears to count maintenance as a capital cost. As a 2001 Congressional Research Service report noted, “Under generally accepted accounting principles, maintenance is considered an operating expense,” but Amtrak excludes it when it compares operating revenues and expenses.

Recently, I met with an Amtrak official who explained that the situation is a little more complicated than I described. Historically, he said, railroads had counted maintenance against revenues when calculating their bottom lines, but this led some railroads to defer maintenance in order to improve their apparent profitability. As I understood his explanation, the Interstate Commerce Commission corrected this several decades ago by changing the accounting rules so that maintenance would be included in capital costs. This eliminated any incentive to defer maintenance.

I sort of understood that, but I’m not an accountant, so I looked up the history of ICC accounting rules. The best explanation was in a 2007 paper in the Accounting Historians Journal called “The End of Betterment Accounting.”

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Light Rail Reduces Property Values

Rail advocates love to claim that light rail and streetcars increase nearby property values even if hardly anyone rides them. According to their theory, the permanence of the rail line gives developers and potential buyers or tenants a sense of security that transit will be there when they need it.

This isn’t true in the case of the Norfolk light rail, a.k.a., the Tide. According to a study by economists at the Cleveland Federal Reserve Bank, Norfolk’s light rail actually reduced property values.

Rail transit, notes the study, could increase values because “homeowners could benefit from increased accessibility and transit related economic development.” On the other hand, “homes in a close proximity to rail transit could experience disamenity effects from crime, noise and parking issues.” Whatever the cause, the study found that “properties within 1,500 meters experienced a decline in sales price of nearly 8 percent.” At least in this case, the study concluded, “accessibility benefits do not outweigh apparent local costs.”

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Aussie Housing Bubble

That sound you hear the next time you go to the beach (at least on the West Coast) may be the Australian housing bubble popping. After Hong Kong, Sydney is rated the second-least affordable housing market in the world (see page 12), with median home prices more than twelve times median household incomes–and that’s based on 2014 data. Prices since then have gone up much faster than incomes.

As of September, prices in the country as a whole are 7.2 times incomes; that’s more than all but a handful of urban areas in the United States. Home prices and price-to-income ratios have both risen sharply since 2000. The country’s housing stock is worth nearly US$4.5 trillion, or roughly 20 percent of the U.S. housing market, which is pretty high for a country that only has 7.5 percent of the U.S. population.

Economists have been expecting Australian home prices to collapse for some time, and it hasn’t happened yet. But the UBS Housing Bubble Index ranks Sydney as the fourth-riskiest housing market in the world, after Vancouver, London, and Stockholm.

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