Adam Jonas, head of auto research at Morgan Stanley, is predicting the end of the auto industry “as we know it.” Or, at least, that’s what Business Insider is reporting–Jonas’ actual article appears to be behind a paywall.
As near as the Antiplanner can tell, what Jonas is actually saying is that self-driving cars will completely change the auto industry, and industry analysts who fail to account for that change will lose out. The actual title of Jonas’ article is “Death of an Auto Analyst.”
According to the report, Jonas “sees a world in which everyone rents a car instead of owning one.” This means the industry will have to change from one that sells cars to consumers to one that sells cars to car-sharing firms that rent them to consumers. He may believe that this will change the dynamics of auto making such that, for example, style becomes less important than functionality.
After going to the effort of writing an environmental impact statement in order to be eligible for a federal Railroad Rehabilitation and Improvement Financing loan, All Aboard Florida has suddenly switched tracks and says it wants a private activity bond instead. Private activity bonds are issued by cities or states, but the funds are given to private entities that are responsible for repaying them–for this reason, they are sometimes called conduit bonds.
Since they are issued by a government entity, they are tax exempt. Yet the private companies that get the funds range from American Airlines, which built new terminals at JFK and other airports, to Transurban, which built HOT lanes on Virginia’s I-495. The tax exemption allows bond issuers to pay lower interest rates, giving companies that receive such bonds an advantage over their competitors. The tax exemption is also controversial, as it effectively costs the federal government money.
All Aboard Florida, which is part of the Florida East Coast Railway, promises to build a moderately high-speed (110-125 mph) rail project without any subsidies. Yet it also wants government loans of one sort or another to do it. It has already issued $405 million in bonds paying a whopping 12 percent interest–which one critic notes puts them in junk bond territory–with the up-front expectation that the bonds will be repaid out of a much lower interest $1.6-billion loan that the company expects to get from the federal and/or state governments.
Given that President Obama supports high-speed rail and noted fiscal conservative Robert Poole, of the Reason Foundation, has specifically endorsed All Aboard Florida, why would the company suddenly switch from the planned RRIF loan to a private activity bond? The company’s press release emphasized that the new bonds wouldn’t pose any risk for taxpayers, suggesting that company was sensitive to local critics who claimed that the RRIF loan could leave taxpayers holding the bag when the company defaulted.
Another possibility is that the Federal Railroad Administration let the Florida company know that full funding of the proposed RRIF loan was unlikely. This would have been the largest RRIF loan in history and one of the few dedicated to passenger rail.
The Antiplanner remains suspicious that running sixteen trains a day in each direction between Miami and Orlando is not really a viable project. If it truly were viable, would Florida East Coast really need to get tax-subsidized loans to make it work? Why doesn’t it save itself the trouble and red tape that comes with federal or state support and simply go to the truly private bond market? I suspect the answer is that not enough private investors would have faith in the company’s ridership and fare projections to fully fund the project.
A new Reason Foundation review of the condition of state highways (which includes interstates) finds that, in general, they are improving. Highways are doing particularly well in Georgia, Kansas, Missouri, Nebraska, Ohio, and Texas. However, highways in Alaska, California, Hawaii, Massachusetts, Michigan, and New Jersey are faring poorly.
“A widening gap seems to be emerging between most states that are making progress, and a few states that are finding it difficult to improve,” says the report. Moreover, “There is also increasing evidence that higher-level road systems (Interstates, other freeways and principal arterials) are in better shape than lower-level road systems, particularly local roads.”
Some of the differences between states are purely geographic. For example, fatality rates per billion vehicle miles are higher on rural roads than urban roads, so states with higher shares of rural driving, such as South Carolina and Virginia, have higher overall fatality rates.
According to pro-rail transit Metro magazine, American cities face a dilemma: the demand for rail transit continues to grow, yet there is a scarcity of federal dollars to pay for it. Fortunately, writer Cliff Henke continues, cities have come up with innovative ways to get around this scarcity.
In fact, most of the things the article says are wrong or, at least, they indicate that cities have too much money, not a shortage. If it weren’t for this surfeit of funds, cities wouldn’t plan ridiculously expensive rail lines that, in most cases, do nothing for transit riders or transportation users in general. This is shown by all of the examples in his article.
The Overpriced Los Angeles Subway: The first example in the article is Los Angeles’ Westside Subway, which will be less than four miles long yet is expected to cost well over $2.8 billion, or more than $725 million per mile. This insane project is expected to attract just 7,700 new transit riders per day. That means the cost of getting one person out of their car for one trip on the subway will be $65. (I calculated this by amortizing the capital costs over 30 years at 2 percent interest, multiplying the daily new trips by 315, which is the average weekday trips per year on L.A.’s existing subway, and dividing annual new trips into the sum of the annual operating and annualized capital costs.)
Portland doesn’t need to apologize for spending more than $1.5 billion on a 7-mile light-rail line, says Secretary of Immobility Anthony Foxx. “Cities, counties and state need to have bold visions, not be unapologetic about them, and explain them to the public,” he was quoted as saying. Presumably this quote was garbled; otherwise the Department of Transportation is in even worse trouble than the Antiplanner thought.
Let’s see how well Portland is doing as a model for the nation:
- Its streets are falling apart even as it plans to build 140 miles of streetcar lines at a cost that would be enough to repave all 5,000 miles of streets;
- Portland doesn’t even have enough money to maintain city-owned office buildings;
- The general manager of Portland’s transit agency says it will have to reduce all rail and bus service by 70 percent between now and 2025 in order to meet all of its financial obligations;
- Despite all the money spent on Portland transit, transit is so unpopular that, of 50,000 new workers gained between 2005 and 2012, fewer than 100 take transit to work;
- For the Portland urban area as a whole, there were 124,000 new jobs between 2005 and 2012, of which about 700 took transit to work.
- Thanks partly to money stolen from schools by TIF-addicted planners intent on subsidizing TODs, Portland high schools have some of the largest classroom sizes and lowest graduation rates in the nation;
- The “creative class” of young people who have been attracted to Portland (most likely by the city’s 50 brew pubs) do so little work that they have reduced Portland’s per capita incomes, relative to the rest of the country, by 10 percent;
- Portland has funded only half of its pension obligations and just 4 percent of its health-care obligations, giving it one of the worst records of any city in the nation.
Sounds like a model for other cities of what not to do.
The Antiplanner turned 62 on October 1, and I celebrated by buying a “senior pass” from the National Park Service. This $10 pass is supposed to allow me free (or, at least, discounted) entry into every national park for the rest of my life.
Nymph Lake in Rocky Mountain National Park. Click image for a larger view.
Since I happened to be in Denver, I first used the pass to visit Rocky Mountain National Park, where I saw and heard elk bugling on my way to the Bear Lake trailhead where I hiked to Nymph, Dream, and Emerald lakes. The Park Service representative at the gate–who admitted he was older than I am–didn’t resent selling me a lifetime pass for just $10.
Advancing its “regional transit equity” plan, the Twin Cities Metropolitan Council issued a press release last week announcing it has received a $3.26 million federal grant to build or “enhance” 140 bus shelters. This money is matched, on a one-to-four basis, with $815,000 of local funds, meaning each bus shelter will cost a whopping $29,000.
Meanwhile, the Met Council is twisting the arms of city officials to gain support for a $1.7-billion light-rail line extending from Minneapolis to Eden Prairie, which is probably the Twin Cities’ wealthiest suburb. Three (out of 13) members of the Minneapolis city council voted against the project, partly due to concerns over transit equity.
“If we think equity means maybe we might build some heated bus stops in north Minneapolis sometime in the future that we can’t promise or guarantee and we won’t tell you where they’ll be, then good for us for standing up for equity,” one of the councilors who voted “no” sarcastically stated.
Tonight, the Antiplanner will be in Rochester, Minnesota to address a proposed high-speed train between Rochester and Minneapolis. I’ll speak at the Rochester International Event Center, 7333 Airport Drive SW, at 7 pm.
The Minnesota Department of Transportation is going through the process of preparing an environmental impact statement for the “zip train.” I suspect there is only a tiny chance that the train could be funded, but MNDOT wants to be ready in case money for high-speed rail falls out of the sky as it did in 2009 when Congress passed the stimulus bill. Not surprisingly, Parsons Brinckerhoff is also behind the effort.
The response to a request for comments on the scope of the planned EIS produced so much opposition that MNDOT is taking longer than it expected to produce a final scoping document. Among other things, MNDOT has decided to include a “no-build” alternative in the EIS, the absence of which would have been reprehensible. After all, the no-build alternative was found to be the environmentally preferred alternative in the EIS for the Tampa-Orlando high-speed train (see p. 2-38).
The Antiplanner squared off against regionalist Myron Orfield in Minneapolis yesterday over the question of whether governments should try to regulate land uses. My presentation (11.6-MB PowerPoint or 10.5-MB PDF version) argued that urban areas are too complicated to regulate and that attempts to do so end up doing more harm than good. Dr. Orfield responded that letting people do what they want led to housing discrimination and too many septic tanks destroying ground water supplies in exurban areas.
Perhaps the most difficult question anyone asked us is where we agree. We both stared at each other for a minute before answering. Obviously, we both oppose racial discrimination and water pollution. The question is how these problems are solved. Dr. Orfield thinks that regional government is needed; I would push things down to the local level as much as possible.
It is one thing to say that people shouldn’t impose costs on others by polluting the water table. It is quite another thing to have a regional government restricting growth beyond an urban-growth or urban-service boundary based on the idea that it is too expensive to allow leapfrog development.
The consortium that paid $3.8 billion to lease the Indiana Tollroad filed for bankruptcy yesterday. The operators–a Spanish company named Cintra and an Australian company named Macquarie–said that revenues were up and costs down, but it wasn’t enough for them to keep up on their mortgage payments.
According to toll-advocate Robert Poole, the problem was that Cintra-Macquarie had structured its debt to require a large payment after ten years, but the recession prevented it from collecting enough money to meet that schedule. On the other hand, toll critic Terri Hall argues that the bankruptcy helps demonstrate that such leases are inappropriate and cronyistic.
Coincidentally, Poole and Hall debated tollroads and public-private partnerships at the American Dream conference in Denver last Friday. (The debate also included Greg Cohen of the American Highway User Alliance.) Hall argued that long-term leases allowed governors such as Indiana’s Mitch Daniels to collect and spend large sums of money during their administrations but left travelers paying heavy tolls for generations to come.