New reports have raised questions about and spurred opposition to California’s grandiose high-speed rail plans. First, last April, the California state auditor reported that the state’s high-speed rail authority suffered from “inadequate planning, weak oversight, and lax contract management,” which is not exactly what you want to hear about an agency that is about to build the most expensive state-sponsored public works project in history.
Second, a new report from the University of California found that the state’s ridership forecasts “are not reliable.” Based on a re-assessment by economist David Brownstone (who is fast becoming one of the Antiplanner’s favorite economists) and two UC engineering profs, the fares needed to cover the trains’ operating costs would have to be more than double the original projections, which is also more than the cost of flying. Since the measure approved by voters in 2008 forbade any state operating subsidies, such high fares would doom the project.
Many questions had been raised about the state’s ridership forecasts prior to this report. Of course, the Reason Foundation questioned the numbers as long ago as 2008. More recently, several California groups argued that the state rail authority developed a peer-reviewed model, then discarded it in favor of a questionable model that produced higher numbers. Some groups have gone so far as to sue the state for lying about the numbers.
The University of California report has led several newspapers, including the Oakland Tribune and San Diego Union-Tribune, to argue that the high-speed rail authority has lost its credibility and that the state should “abandon the high-speed train fantasy, spend the $2.25 billion in federal funds on more realistic rail projects and not sell any of the [$9 billion worth of] bonds” that voters approved in 2008.
It offers discounts and also promises to make that shop viagra no prescription quick delivery. Boneless penis https://regencygrandenursing.com/life-at-our-facility/virtual-tour sildenafil sales depends on the sensitive veins for erection. But it is still recognized by the medical industry to cheapest viagra from india help in certain health disorders including neuromusculoskeletal dysfunctions. The earlier the underlying cause is discovered, cheapest viagra generic navigate here the more likely it is that other protein complexes, which build up in the heart walls. In response, high-speed rail advocates complain that the media has given so much attention to the University of California report while it supposedly ignored a report from CalPIRG claiming that high-speed rail has been “successful” all over the world. (Update: It turns out the blogger who complained also happened to write the CalPIRG report — something he never mentioned in the blog post that purports to objectively review the report.) The reality is that, as one commenter notes, the press has given high-speed rail a “free pass” until recently, notably ignoring the Reason Foundation critiques when they were published two months before the 2008 election.
As for CalPIRG’s report, its definition of “success” is apparently, “if we subsidize it enough, they will come.” They note that heavily subsidized trains in selected markets managed to capture market share away from heavily-taxed autos and unsubsidized airlines. They also repeat Amtrak’s claims about its share of Boston-Washington travel without mentioning that Amtrak ignores intercity buses, which carry more travelers in that corridor than Amtrak.
In counting “successful” rail lines, CalPIRG ignored the line in China that was recently shut down because it could not compete with slower, lower-fare trains. It also ignored the line in Taiwan that went bankrupt late last year. Nor did CalPIRG bother to ask how much subsidy was needed to make the lines it did consider appear “successful.”
Meanwhile, at the federal level, the GAO just published a report arguing that federal high-speed rail plans were hastily drawn up and not well thought out. Unfortunately, the GAO mainly looked at high-speed rail as a part of the stimulus package and not on its own merits. As a result, it missed several important points.
For example, it divides rail into “conventional” (up to 79 mph), “higher speed” (80-150 mph), and “high speed” (150-plus mph). But the critical distinction should be at 90 to 110 mph, which are the maximum speeds that most railroads will allow passenger trains to run on the same tracks as their freight trains. Anything above that, whether 120 mph or 200 mph, will require construction of new tracks that will cost at least 10 times as much as improving existing tracks to run at 90 to 110 mph.
One major problem is that high-speed rail advocates want the public to pretend that capital costs don’t count, only operating costs — and then want the public to believe that fares will cover operating costs, when they won’t even in the most populated corridors.
Trains operating at top speeds of 90 to 110 mph (meaning average speeds of 60 to 75 mph) will not attract enough riders to make a difference in any market. Trains operating at top speeds of more than 200 mph (meaning average speeds of 140 mph or so) might attract more riders, but their extremely high cost makes them just as infeasible.
The Antiplanner wrote:
> Many questions had been raised about the state’s ridership
> forecasts prior to this report.
The ITS Berkeley report makes for interesting reading.
What gives me the most heartburn regarding the forecasts is the extensive use of stated preference survey data (please see Wikipedia article about contingent valuation here for details) to develop the model that was used to project high-speed train patronage in California.
Quoting from that Wikipedia article:
[Emphasis added above]
I strongly agree. To use stated preference surveys to justify spending billions of taxpayer dollars for a new train system comes perilously close to malpractice.
Not to worry. The CAHSRA and their consultants are sticking to their guns:
“Authority officials and consultants portrayed their estimates, which generally have shown tens of millions of annual riders and profits likely to attract major private investors, as state-of-the-art and realistic.”
http://www.latimes.com/news/local/la-me-high-speed-rail-20100708,0,2173027.story
It might be a good idea to vote for Meg Whitman in the fall:
“Meg believes the state cannot afford the costs associated with high-speed rail due to our current fiscal crisis,” said the Republican gubernatorial candidate’s spokeswoman Sarah Pompei in an e-mailed statement.
Read more: http://www.sacbee.com/2010/07/09/2878527/the-buzz-atherton-resident-meg.html#ixzz0tCSELiY7
They note that heavily subsidized trains in selected markets managed to capture market share away from heavily-taxed autos and unsubsidized airlines.
Unsubsidized airlines? Is that your claim, Randall, or is that what “they” (CalPIRG) claim?
It’s old news that the federal government has subsidized airlines. State governments also subsidize airlines.
Unsubsidized airlines? Is that your claim, Randall, or is that what “they†(CalPIRG) claim?
Frank,
The federal program you are referring to is the Essential Air Service program. It is funded by airline passengers through the Airport and Airways Trust Fund. It was initiated during airline deregulation in the late 1970s, and was initially supposed to be a temporary program. But like so many “temporary” federal programs it has not phased out, but rather grown in scope and lost its focus.
The state subsidies you refer to are generally efforts to entice airlines into providing services to smaller, marginally profitable markets. These programs aren’t particularly good policy either, but they are really “small beer” relative to the size and scope of the airline industry.
CPZ,
I don’t necessarily agree that the use of state preference data is the most troubling thing about the HSR forecasts. Actually, stated preference methods were designed to address matters like this one, where a new product is being introduced to a market. Since there really is no high-speed rail service in California, or really in the US (Acela is closest), revealed preference data are not really an option here.
Unfortunately, that is what they (CS) tried to do. But rather than using the model that they fit to their travel survey data, they chose to fiddle with the model parameters until they got the “right” answer. This is not just bad practice, it is troubling on many levels.
Asking people if they prefer a good where the costs are seriously underestimated and the benefits seriously overestimated is not how you discover real preferences.
MJ: Small beer or not, the state and federal programs are still subsidies.
In fact, the “planes to nowhere” program (EAS) is growing. Some claim that the per-passenger subsidy on such flights is over $1000 per person. I would like to know the average subsidy per passenger mile (since that is the rate Randall prefers) on these flights.
Additionally, there was the 2001 bailout: $5 billion in cash and $10 billion more in loan guarantees.
Governments have also provided direct subsidies for airport development and operation. Some argue that user fees (airport taxes), which weren’t introduced until the early ’70s, cannot come close to repaying the estimated $1 trillion value of airport infrastructure, the creation of which was largely financed by government.
And how about air traffic control? The FAA’s budget has steadily increased every year to about $16 billion. Do taxes and user fees completely cover the cost of air traffic control?
According to a 1998 CRS report for Congress, “[a]s the industry has matured, the level and expense of the federal effort has expanded and spending for capital infrastructure and operational activities have become specific components of annual federal budgets.”
Please correct me if I’m wrong on any points, and I’m not sure how much user fees compensate for federal spending. However, I think the phrase “unsubsidized airlines” is not accurate and is actually misleading.
The California project is being scaled back so that it might actually come in close to budget. Shared track is being considered for Anaheim-Los Angeles, for example. This is 30 miles that definitely did not need dedicated tracks.
People please run the numbers. Just from the articles linked by supporters, the Essential Air Service runs $175 million. The subsidy on California high speed rail alone is $2.25 billion. They are not comparable except by people heck bent on wanting high speed rail.
I doubt there is one person out there who believes that the California high speed rail could recover its operating cost, even with all the capital costs subsidized by taxpayers.
MJ wrote:
> I don’t necessarily agree that the use of state preference
> data is the most troubling thing about the HSR forecasts.
> Actually, stated preference methods were designed to address
> matters like this one, where a new product is being introduced
> to a market. Since there really is no high-speed rail service
> in California, or really in the US (Acela is closest),
> revealed preference data are not really an option here.
But there is high-speed service between the major cities of California. It’s called air transport.
And I suppose that there are data available for travel between Washington, D.C.; Baltimore; Wilmington; Philadelphia; Trenton; Newark, N.J.; New York; New Haven; New London; Providence; and Boston.
You are correct that the N.E. Corridor is not like the French TGV service or Japan’s bullet trains, but I still assert that data could have been used to inform the travel demand forecasting work done for California’s proposed high speed rail system.
> Unfortunately, that is what they (CS) tried to do. But rather
> than using the model that they fit to their travel survey data,
> they chose to fiddle with the model parameters until they got
> the “right†answer. This is not just bad practice, it is
> troubling on many levels.
That’s also not new.
It provides more proof that travel demand forecasts should never be performed by a public agency that wants to build or expand a passenger rail line of any kind.
Such work should be done by an independent third party that gets paid even if the forecasts are so bad that the rail project never gets built.
Frank,
The airline industry is and always has been self funded, even before deregulation. Any “subsidy” as you describe comes from the Aviation Trust Fund which is off budget and fully funded by system users. This funding method has been around since before deregulation. It is (was) intended to take aviation as a system off the governments books. The same way the highway fund was designed until politicians started robbing roadway money to pay for buses and trains.
Every item you mention as a subsidy including the cost of the FAA (Including the money for post 9/11 loans to the airlines) came or comes from the trust fund. The money for the trust fund comes from airline fuel taxes, airline ticket taxes and passenger facility charges. Not the general fund. Maybe high speed rail advocates like you should take notice???
Before you go off on a rant, you might want to validate your assertions. There wasn’t $1 trillion in airport infrastructure then and at best there is less than $500 billion in airport infrastructure today, the majority of which has been built since deregulation in the form of new terminals and runways with money from aviation system users.
Borealis said: People please run the numbers…They are not comparable except by people heck bent on wanting high speed rail.
False.
I am not bent on wanting high-speed rail. And I’m not comparing numbers. What I have stated is that using term “unsubsidized airlines” is deceptive. Airlines do receive subsidies. That other modes of transport receive larger subsidies does not change this fact.
Nor does it change the fact that government subsidized and continues to subsidize the creation and maintenance of airports and the operation of air traffic control.
On July 9th, 2010, Spokker said:
The California project is being scaled back so that it might actually come in close to budget. Shared track is being considered for Anaheim-Los Angeles, for example. This is 30 miles that definitely did not need dedicated tracks.
**********************
But it still costs $43 billion in taxpayer dollars and overe $100 million a year to operate. Is that supposed to make us feel better?
Here is what $43 billion will get you in the aviation world (these are what $43 billion could buy, you can’t get all of it):
40 runways, 10,000 feet in length.
The entire Southwest Airlines fleet (over 500 Boeing 737s)
The worlwide fleet of current generation Boeing 747s (over 150 aircraft)
A fleet of 240 ultra fuel efficient Boeing 787’s seatsing 250 passengers
Enough terminal space for 800 new aircraft gates.
Just a little reality.
I’m sorry Frank. But you are wrong, dead wrong.
You can’t subsidize an air carrier or an airport using general fund monies. It creates an anticompetitive environment benefiting one private corporation over another or one special district over another special district or private airport operator which violates the equal protection clause of the constitution. It’s also why money generated from the operation of an airport can’t be spent on roads and other forms of transportation.
There’s a ton of case law on this out there. It’s also why some want to re-regulate making it public transportation so they can rob the trust fund to pay for things like High Speed Rail.
Maybe high speed rail advocates like you should take notice???
Before you go off on a rant, you might want to validate your assertions.
And maybe readers of this blog ought to check their assumptions (and grammar). I am not an advocate of high-speed rail. Quite the opposite; I think it’s a waste of money. Additionally, I have not ranted; there is nothing vehement or violent in my previous comments.
As for subsidies, some smaller airlines do receive them. The LA Times article I linked states, “In 2008, according to Senate Appropriations Committee data, Great Lakes Airlines received a subsidy of about $1.8 million for the 414 passengers it flew to and from Ely — about $4,500 per person.”
Congress appropriates funds to the DOT to operate EAS, and DOT calls the program a subsidy.
These are the indisputable facts. Some airlines (mostly smaller but also including larger ones such as Alaska Air and UnitedExpress) are subsidized through the EAS program.
Yes it is small when compared to other transportation subsidies. BUT. A $4,500 per person subsidy to fly to Ely, Nevada is ludicrous. When people voice concerns about those riding MAX not paying the full fare (and on this issue, I agree), but choose to portray airlines as subsidy free, it reeks of bias.
You also failed to respond to the fact that the federal government bailed out the airlines with taxpayer funds in 2001.
Additionally, according to a paper printed in the Journal of Air Transport Management, “airport authorities…generally finance investments with State-guaranteed tax-free revenue bonds—an advantage that can be equivalent to about a one third capital subsidy, as Bombardier calculated for the Texas High Speed Rail project” and “receive direct capital subsidies from state, local and federal administrations.”
I think we ought to stop pretending that air travel is not subsidized. It, along with rails and roads, is subsidized. Again, I acknowledge the amount varies from mode to mode.
I don’t necessarily agree that the use of state preference data is the most troubling thing about the HSR forecasts. Actually, stated preference methods were designed to address matters like this one, where a new product is being introduced to a market. Since there really is no high-speed rail service in California, or really in the US (Acela is closest), revealed preference data are not really an option here.
Unfortunately, that is what they (CS) tried to do. But rather than using the model that they fit to their travel survey data, they chose to fiddle with the model parameters until they got the “right†answer. This is not just bad practice, it is troubling on many levels.
I’ve done some work with discrete choice analysis and often when using stated preference data to derive the choice models they include “inertia” factors that are calibrated in some manner with revealed preference data. This is, of course, where the models can be cooked since some data sources may not be applicable to the SP data being analyzed (or perhaps no RP data are used at all). So I wouldn’t say SP data are necessarily worse than RP data since they can be calibrated with reasonable inference and assumptions from RP data. I haven’t read the UC paper completely through, but if any of the factors in the demand forecast models were in fact cooked, then it would likely be the inertia factors.
BTW, first post but I’ve been a regular reader of this blog for about a year. Currently finishing up a MS in civil at Portland State with a research emphasis in freight logistics. As a side interest (I’ve also taken a few urban planning courses), I’ve found many of the controversies and debates within urban and transportation planning to be very fascinating.
ITS found no evidence of fraud carried out by Cambridge Systematics and Dr. Brownstone made that very clear at the HSR board meeting on Thursday.
For those of you whose professional memory extends beyond my own, how much is history repeating itself? I recently came across a reference to work Jonathan Richmond did in refuting HSR (then refered to as the “Bullet Train”) ridership/revenue forecasts almost 30 years ago. Are recent events just more of the same?
Frank,
You aren’t getting this.
The LA times is wrong because they don’t understand how the Trust Fund is funded, nor do they evern attempt to explain this. Its not a subsidy from the general fund (i.e. – taxpayer money). Its a subsidy from the Aviation Trust Fund who’s funds come from the operation of the aviation system. Yes, they call it a subsidy, but it is self subsidization. They dont’ take money from your income taxes and give it to the airlines. They take money from teh airlines and give it to other airlines. Thats why its called an appropriation and why the FAA goes through reauthorization where system user fees and fuel taxes are adjusted to fund the system.
Second, the funds for the “bailout” were loans guranteed by funds from the trust fund. Again, self funding. I might add they’ve been paid back already as well.
Finally, airports do not receive capital subsidies sir. You are wrong. Flat out wrong. They issue bonds, build infrastructure and pay them back from revenue derived from the operation. Airports don’t have taxing authority to take money from local taxpayers, payign taxes on those bonds is nothgin more than double taxation.
It’s ironic you use the Bombardier case given that the courts ruled in favor of the airlines on what was and wasn’t a subsidy with regard to high speed rail.
And by the way Frank, if you can’t grasp this what makes you think a reporter from the LA Times can?
But the Airport and Aviation Trust Fund IS taxpayer money. Income taxes are not the only revenue source used for subsidies. The AATF is funded though taxes on airline tickets, cargo, fuel, international departures/arrivals, flight between the continental US and Hawaii and Alaska, Frequent Flier programs, and flights from rural airports. Some of these tax funds (and yes, it might be small beer, potatoes, or whatever food metaphor you’d like) are diverted to airlines that serve rural populations to decrease the price of fare to make it affordable for the consumer and to keep the airline in business. (If it looks like a duck, walks like a duck, and quacks like a duck…)
(As an aside, this is not entirely unlike how user fees at larger, self-sustaining national parks, such as Yosemite, are used to subsidize visitation at smaller parks, like Eugene O’Neill NHS, where the actual cost per visitor is several hundred dollars.)
Say I fly JetBlue the first week of August round trip from PDX to JFK. The ticket costs $564 and taxes are $64. Some of that $64 will subsidize airlines and their passengers to fly to Ely or Pendleton or other rural towns. Some of it will subsidize FAA research and development grants. Some of it will end up on the AATF books as a surplus; the fund had a $2.7 billion surplus in 2007, which raises the question of whether the taxes collected are excessive and the taxpayers are getting their fair (fare;) share of benefits. Some of it, but not all, will go toward FAA operations. (The AATF’s share of FAA ops was $5.4 billion in 2007; where did the FAA get the other ~$10 billion in its budget? The General Fund?)
As for the “direct capital subsidies from state, local and federal administrations”, that comes from a paper from the Journal of Air Transportation Management.
1. The trust fund is not taxpayer money, its aviation system user money so that the aviation system can be self sustainable. You play you pay. Yes, it runs a surplus so that when a big project comes up the money is there to pay for it rather than going to taxpayers for General Fund money, or if revenues fall short there is money there to pick up the difference. The can’t deficit spend, so they have to run a surplus. Hence the term “Trust Fund”. This is a big differnece compared with HSR financing that is completely on the backs of taxpayers, whether you use the system or not. The only time you contribute to the AATF is if you fly. Period.
2. So what if your ticket tax subsidizes another air service route? Its all part of the same transportation system. This is a far cry from taking airline ticket taxes to pay for running a train. Taking money from one source and spending it on another source within a transportation system benefits the system as a whole. Its just like if you have a system of HSR stations and revenue from a large city station like LAX subsidizes a small station in say Bakersfield.
3. Only a portion of airline ticket taxes and fuel taxes goes to the trust fund, the rest is paid directly to fund operations – FAA trust fund money goes to R&D and equipment allocation such as NextGen. There are concerns about long term viability which is why everyone is fighting over how things will be structured financially in the future (ie General Aviation vs. the Airlines in terms of who pays what and hw much). Some beleive in higher fuel taxes others support higher system user fees and yet other support a direct fee system like Europe. Regardless how it shakes out, General Fund money won’t be a part of that.
As far as the Journal of Transportation Management, the term “subsidy is misused. If anything, airports directly subsidize cities. Airports don’t get the sales tax when you buy something at the airport such as a magazine or a cup of coffee or rent a car.
This is in contrast to what it proposed funding wise for HSR.
There are no ticket taxes proposed to fund a trust fund to ensure capital paybeack, that’s on taxpayers. There are no facility fees to maintain the stations. Any shortcomings will be borne by the taxpayer. That is a problem.
From the FAA Budget:
FAA Reauthorization: The Vision 100 — Century of Aviation Reauthorization Act, as extended by Congress, expires on September 30, 2009. Starting in 2011, the Budget assumes that the air traffic control system will be funded with direct charges levied on users of the system. The FAA’s current excise tax system is largely based on taxes that depend on the price of customers’ airline tickets, not FAA’s cost for moving flights through the system. The Administration believes that the FAA should move toward a model whereby FAA’s funding is related to its costs, the financing burden is distributed more equitably, and funds are used to pay directly for services the users need. The Administration recognizes that there are alternative ways to achieve these objectives. Accordingly, the Administration will work with stakeholders and the Congress to enact legislation that moves toward such a system.
The FAA prefers a fee based system in lieu fo the current excise tax on users system.
PlanesnotTrains:
The OMB website shows for 2011 about $7 billion in general fund subsidies for Air Traffic Control, Aviation Security through the TSA, and Essential Air Services, out of a total cost of roughly $21 billion.
There are other hidden subsidies which are not as obvious, such as the lack of property taxation on airline infrastructure (railroads are taxed), the lack of a requirement for airports to operate at a profit and earn a return on investment (railroads must borrow money from Wall Street or generate it via earnings), and the development costs spread over the creation of planes for the Department of Defense (a big problem with EADS/Airbus but also with Boeing).
There is also the social cost of the private airline industry being funded through its continual bankruptcies and failure to earn a reasonable return by massive investments by public pension funds. Its not like Hedge Funds and Investment Bank trading desks are buying the stock shares of these turkeys.
PlanesnotTrains:
“Finally, airports do not receive capital subsidies sir. You are wrong. Flat out wrong. They issue bonds, build infrastructure and pay them back from revenue derived from the operation.”
If they aren’t operating as private corporations paying taxes, dividends, etc., and working with opportunity cost and needing to earn their cost of capital, they are receiving capital subsidies.
All:
The ridership estimates for California High Speed Rail are obviously ridiculous. Ridership on the Amtrak Northeast Corridor is around 14 million including the Harrisburg, Albany, and Springfield branches. About 50 million people live between Boston and Richmond, while less than 35 million live between Sacramento and San Diego.
Yes, high Amtrak fares drive some potential rail ridership away, or over to Metro North, SEPTA, and New Jersey Transit. But those fares are needed to pull in the high revenue ($90+ million per month) Amtrak does on the Northeast Corridor.
The Northeast Corridor is also up against a congested toll road network in the northeast for the driving alternative. In California, they are FREEways. Its hard to swallow their projections as realistic.
Andrew:
ATC is an authorization, not funding. What that means is the excise tax structure charged to users must be set up in a way to generate the $7 billion. The TSA is funded from security taxes on your airline tickets. They aren’t trust fund based, but its a net zero item. Your assertions concerning Boeing are also unfounded teh WTO just ruled on this, Airbus is a different story, but last time I checked, Airbus is a foreign company.
As for the societal costs, how is that any different then any other corporation that is considered “unsubsidized”?
As for EAS:
“…Public Law 100-223 authorized the Department to enter into agreements and
to incur obligations from the Airport and Airway Trust Fund for the payment of subsidy
for the provision of EAS, effective fiscal year 1992. (Previously, the program was
funded from the general fund.)…”
http://ostpxweb.dot.gov/aviation/x-50%20role_files/essentialairservice.htm#Q&A
As for the ridership, you are dead on and that is what concerns me. This thing is looking like perpetual taxpayer debt.
What is the trust fund:
The Airport and Airway Trust Fund (AATF), created by the Airport and Airway Revenue Act of 1970, provides funding for the “federal commitment to the nation’s aviation system” through several aviation-related excise taxes (MS Excel). Funding currently comes from collections related to passenger tickets, passenger flight segments, international arrivals/departures, cargo waybills, aviation fuels, and frequent flyer mile awards from non-airline sources like credit cards.
http://www.faa.gov/about/office_org/headquarters_offices/aep/aatf/
The TSA is not just Aviation:
TSA employs a risk-based strategy to secure U.S. transportation systems, working closely with stakeholders in aviation, rail, transit, highway, and pipeline sectors, as well as the partners in the law enforcement and intelligence community. The agency will continuously set the standard for excellence in transportation security through its people, processes, technologies and use of intelligence to drive operations.
http://www.tsa.gov/who_we_are/what_is_tsa.shtm
Airline ticket taxes and fees:
http://www.airlines.org/Economics/Taxes/Pages/GovTaxesandFeesonAirlineTravel.aspx
I have certainly learned a great deal through this discussion. I’m still not completely convinced that airlines are 100% subsidy free, though. Certainly, other modes seem to be far more subsidized. At any rate, HSR, especially in California, is a stinker. Maybe if California legalizes weed, they can waste their weed tax on this boondoggle.
I agree this has been an enlightening discussion. Thank you to those who provided new information. Please keep doing so.
I have to wonder about the apparent requirement that the operating costs have to be covered by user fees/fares. It seems like the consensus here is that has no chance at all of happening. But you can’t prove or disprove that restriction until the capital investment has already been made, in which case you have a whole different issue of what to do with a built rail system. Interesting policy paradox.
On July 10th, 2010, Borealis said:
I agree this has been an enlightening discussion. Thank you to those who provided new information. Please keep doing so.
I have to wonder about the apparent requirement that the operating costs have to be covered by user fees/fares. It seems like the consensus here is that has no chance at all of happening.
******************
And thats the issue I have with this. If they had a funding mechanism that would pay for this thing and ensure its long term financial viability, including the capital cost – not just the operating cost – I’d support it(and I might even be willing to accept a few billion in seed money). The problem is at this point its $43 billion (pre cost over-runs), plus another $20 billion or so in interest, and enough passenger demand to only cover the cost of operating it (if that much because the initial model was based on 100 million riders) which means taxpayers are basically on the hook for $63 billion. No private investor in their right mind will invest in something this far upside down financially and taxpayers aren’t going to take that. Its like the Highway Trust fund. It ran a surplus for years, then it got raided. Now when we want to build roads, it’s on taxpayers backs – or a toll road. I’d rather pay an additional $1 a gallon for gas in the form of a fuel tax if it were wholly devoted to road and have better roads because of it vs. half of my existing fuel tax be diverted to other forms of transportation.
If we don’t move to pay to play – and I mean pay what it costs to play, we are headed for a transportation distaster.
Anybody who believes that CAHSRA will bring in High Speed Rail for $43 billion is smoking crack. Just out of New York comes word on more cost overruns for 2nd Avenue Subway and East Side Excess:
http://www.observer.com/2010/politics/feds-see-%E2%80%98grim%E2%80%99-delays-overruns-second-ave-subway-east-side-access
“All told, the situation involving East Side Access and the Second Avenue Subway tells a story that is all too frequent with giant public sector projects. The projects were approved and sold to the public with one price tag, only to see the budget prove far too insignificant (very rarely, if ever, do projects come in well below their initial projections). And once a project has started—once the foot is in the door—it becomes really difficult to pull the plug, even if the public would never have signed onto the initial price tag.”
Spokker said:
The California project is being scaled back so that it might actually come in close to budget. Shared track is being considered for Anaheim-Los Angeles, for example. This is 30 miles that definitely did not need dedicated tracks.
THWM: I’d build HSR lines in the center of expressways.
Like I-5, I-280, I-205, Hwy 99 & etc.
1. It’s public land.
2. It’s already grade separated.
PlanesnotTrains:
You can peruse the federal budget here. My assertions about airline subsidies are clearly spelled out in the document.
http://www.whitehouse.gov/omb/budget/fy2011/assets/dot.pdf
See pg. 11 of 80.
In the third tabel labeled outlays, one can see the actual spending that is to occur, which is well up north of $9 billion, $3.7 billion of which is coming out of the general funds, not the Aviation Trust Fund.
You can also see that up until 2009, grants-in-aid to airports and other expenditures were being made directly out of the general fund to the tune of billions per year.
For Homeland Security (TSA) spending see:
http://www.whitehouse.gov/omb/budget/fy2011/assets/dhs.pdf
Pg. 10 of 66 is where it starts. If you read carefully, you will note it states that $3.4 billion is to provided from general funds for airline screening and security. As the whole operation is only $5.6 billion, those security fees on your ticket price don’t even cover half the actual cost.
You are also ignoring very studiously the initial investment made from general funds on a federal and local level years ago to buy the land and build the basic infrastructure of the airport system we have today. It would be almost impossible to replicate this investment today given the cost of land in urban areas. As the railroads also pointed out at the time, frequently Union Station was being taxed on its property value by municipalities and the money being taken and spent directly on building new airports to compete with the railroads. The vast sunk costs of the air system which could never have been paid by the flying public out of market price tickets are comparable to the tens of billions being spoken of as needed for high speed rail lines. There is no reason to think that if vast sums of money are spent on rail lines for 50 years, as they were spent on airports and highways from 1920 to 1970, that after many decades, a self-supporting operating system could be created from the fixed infrastructure created by the government.
Its always humorous to see the socialistic highway and airport systems defended as the outcome of the free market, and the privately built rail system damned as a bygone oddity.
Andrew:
You are right – and really starting to grasp at straws. The third label does say outlays and out of a $15.4 billion budget the General Fund outlay is $182 million ($179 million + $2 million). Meanwhile, Chicago O’Hare is spending $6.6 billion to realign its runways, about a third of that comes from the trust fund (AATF); the rest comes from the operation of O’Hare. As for the rest of the commercial airports there are about $40 billion in projects going on right now – all paid for from the trust fund and/or the operation of the facilities the projects are associated with – not taxpayers.
As for the TSA, I really don’t get your point. Is security and public safety not a function of government? That’s pretty much what everyone expects from their government, especially after they ignore the recommendations of air carriers in the 1990’s on security. Come to think of it, since they failed so miserably to listen, maybe passengers shouldn’t pay a dime for airport security. Never-the-less, in 2009 there were 695,911,762 enplaned passengers which generated $1.7 billion in TSA revenue alone just in ticket fees. Which other industry contributed that much to the TSA?
By the way, has anyone actually done a demand study on high speed rail? I don’t mean ridership, I mean demand. Is there even passenger demand for this or are we just building something on the hope that people will select an alternative mode of transportation because it’s there. As it is today, there doesn’t seem to be more demand for people flying along the routes that overlap high speed real. In fact, air capacity overlapping the system has been cut back in recent years. I ask because air service along the route won’t go away. America doesn’t have the ultra high fees which give rail and advantage in Europe.
Just a very basic question, because if there is too much air capacity (so much so that airlines have cut back capacity 10-15% from 2008 depending on the region) and ample roadway capacity is available – which is the present case, then rail which presumably compliments air and car would create an overcapacity condition resulting in even worse ridership and an even worse yield environment.
Don’t give me the environmental argument either, an insignificant number of people will chose a mode of transportation based on the environment.
Also Andrew, if aviation were to start from the ground up today they would start with a self funding mechanism because airlines are private corporations so the infrastructure they use would have to be self funded.
PlanesnotTrains:
I just don’t think you are reading the document correctly.
Pg. 15 of 80 shows the “Trust Fund” accounting.
The Trust Fund has $12.65B in actual receipts and another bogus $250M in interest receipts (which are really just a payment from general funds since the trust fund doesn’t exist except as an accounting fiction because the money was spent long ago to cover the deficit).
The accounting shows expected sending of $6.046B for FAA operations out of a budget of $9.740B. The only source for the remaining $3.7B is general funds.
Note that this is a huge increase from last year, when the Trust Fund only paid $4B of the $9.7B operations budget. Essentially, Obama is proposing to spend more of the trust fund on the theory that either (a) receipts will go way up or (b) the trust fund should be spent down. Since the trust fund doesn’t actually exist outside a computer, this is really just $2B in additional debt being issued to the public by the US Government, not $2B more being suddenly generated by user fees.
As to the TSA, why should this be a government function? Railroads and public transit systems have their own internal security/police forces. Trucking and bus companies are also responsible for their own security at terminals. Shouldn’t the airlines provide their own security and be liable for damages caused by their operations? Other industries don’t get to socialize these costs among competitors and on the back of the public.
And obviously no other industries contribute much to the TSA because no other industries have any need for the TSA. We don’t have TSA agents at Greyhound terminals because buses cannot be loaded with thousands of pounds of jet fuel and flown into buildings at high speed. Ditto for trains and subways.
700 million enplanements and $7B unfunded by users. Why not just increase the taxes by $10 per segment to cover everything? That would result in a $40 mark-up per person on a typical round trip.
Andrew, Thanks for providing those links and the analysis. I spent a lot of time researching the issue and trying to find the things you uncovered. It sure does seem like airlines are subsidized. I think Randall should recant his claim, use a qualifier, or defend his assertion (with evidence) that airlines are subsidy free.
However, I must take exception to your claim that the railroad system was “privately built”; I’ve argued this point before, but to reiterate:
1. Railroads received massive land grants (more than one tenth of the whole United States and larger than Texas), which economists consider a subsidy.
2. Railroads received loan subsidies, which have been shown to be “twice as large relative to investment costs as the land grant aid.”
Andrew. Trust fund revenue is $12.65 billion. System expenses are $9.74 billion. That’s a $2.91 billion surplus Andrew. That’s some kind of new math.
Second, safety and security is a basic function of government. The TSA is a policing force under the Department of Homeland Security – just like the Coast Guard and Customs/Border Patrol. Are we all to pay a monthly fee for the Coast Guard? How about the Border Patrol? I suppose you think the government is going to allow 220 mph trains without passenger screening. =
BTW… If a government fails to enact policies to ensure that planes aren’t hijacked, then the government is liable. Airlines aren’t law enforcement agencies. They have about as much law enforcement ability as a mall cop.
Finally, your assertion that no other industry has a need for the TSA is flat out false as explained here:
http://www.tsa.gov/what_we_do/index.shtm
He hasn’t uncovered anything Frank, he simply regurgitating the rail supporter talking points and misconstruing data.
Spokker…
Thats the common sense thing to do, but all that will provide a buffer for impending cost over runs. This thing is still $30 billion in the hole financially.
And no Andrew, I’m not misreading the budget. Its a budget. It describes expected costs. If there is a shortfall, one of two things has to happen.
A. It has to be reduced.
B. The revenue model has to be adjusted to make up the differnece.
The only viable option B because it is understood that long term the model is broken and that airlines pay a disproportionate share of costs.
This is why re-authorization is taking so long. The FAA wants one funding structure, the Airlines want another and Business Aircraft owners want yet another. Politicians have to find the common ground.
I still fail to see how CAHSR can go into this thing without such a plan. Like I said, I might even go for some seed money, but I refuse to support a system that does not even come close to covering its true cost. This thing is miles from coming even close to being a financially responsible project regardless ones view on subsidization.
Here is the difference Andrew, and I think this is where we part on views:
If Los Angeles, San Diego and San Francisco wanted to build three new airports at a total cost of $43 billion, they could not ask taxpayers to foot the bill. They’d have to develop a cost model that makes sure that they make enough to operate the airport and pay down the debt.
Why shouldn’t rail be held to the same standard?
You say, well, the airports are in place so that’s a subsidy. Well, these are new airports, so existing infrastructure does not matter. If I’m not mistaken there are miles of rail in place today to, so that too is a subsidy.
So I ask Andrew, why should rail not be held to the same financially responsible standards as airports? Why no trust fund from ticket taxes? Why no fees for using the terminal?
Though there also other places along the way from SF to LA.
Any ways what would be a good thing to do in the mean time is extend Amtrak Surfliner service from LA to SF.
PlanesnotTrains and Frank:
Lets try this once more.
http://www.whitehouse.gov/omb/budget/fy2011/assets/dot.pdf
FAA’s budget from the link I previously provided includes:
Income:
$12.650 billion income excluding fictious interest payments on the non-existant actual trust fund
$0.050 billion income for non-stop overflights of US airspace
Expenses:
$9.793 billion for operations
$3.550 billion grants-in-aid for airports
$2.970 billion for ATC facilities and equipment
$0.190 billion for R&D
$0.182 billion for Essential Air Services and Rural Airport Improvements
Total expenses (over $16 billion clearly noted on pg. 11 of 80) for the FAA exceed income by nearly $4 billion. As I noted, this does not include the annual operational deficit run up by the TSA’s airline and airport operations.
Others have previously noted that billion’s of dollars were given out after 9/11. The ARRA act also gave out over $1 billion for airport spending from general funds.
As I noted, the overall deficit is not big compared to the airline industry, but it is nontheless a subsidy, and it has been an ongoing subsidy which only recently, 80+ years in to the era of commercial aviation, which has begun to be seriously shrunk in the budget.
There is NO surplus.l
PlanesnotTrains:
“So I ask Andrew, why should rail not be held to the same financially responsible standards as airports? Why no trust fund from ticket taxes? Why no fees for using the terminal?”
I agree, the railway ticket tax should be reinstated at a 10% level to help fund passenger rail infrastructure. A trust fund with the receipts and earnings including interest for the ticket and waybill taxes collected from 1942 to 1962 would be worth around $50 billion today. Do you support giving that money back to the passenger rail industry in that manner?
There are no fees for using rail terminals because the railroads (especially Amtrak) own the major passenger terminals themselves. United and Delta don’t own any airports or terminals.
Really, the better question is why the CAHSR is estimated to cost so much. New track, signals, stations, catenary, power systems, minor structures, etc. are $10 million or so per mile for a double track line. That means well north of $30 billion plus is being estimated for land acquisition, grading, and major civil structures (tunnels and bridges). $40+ million per mile to acquire, grade, and clear a 100-200 ft. wide strip of land seems excessive. Its only 12 to 25 acres per mile of line, and most of the line is rural or wasteland – should be under $100,000 per acre which would be $1-2 million per mile. $20 per cubic yard for cuts and fills. If we leave $10 million per mile for structures and tunnels, that’s implying 1.5 million cubic yards of earthwork per mile – I don’t think so.
So where is the cost being run up in California? The French are building Paris-Strasbourg (252 miles) for 4 billion Euro’s including trains. Why is the California system projected at 4 times the cost per mile????
Ryan1200 wrote:
> I’ve done some work with discrete choice analysis and often
> when using stated preference data to derive the choice
> models they include “inertia†factors that are calibrated
> in some manner with revealed preference data. This is, of
> course, where the models can be cooked since some data
> sources may not be applicable to the SP data being analyzed
> (or perhaps no RP data are used at all). So I wouldn’t say
> SP data are necessarily worse than RP data since they can
> be calibrated with reasonable inference and assumptions
> from RP data. I haven’t read the UC paper completely through,
> but if any of the factors in the demand forecast models were
> in fact cooked, then it would likely be the inertia factors.
I am suspicious of stated preference data because there (seems
to me) to be huge potential for using such a survey as
a so-called “push poll” to advocate for (or against) something.
> BTW, first post but I’ve been a regular reader of this blog
> for about a year. Currently finishing up a MS in civil
> at Portland State with a research emphasis in freight
> logistics.
Freight does not (IMO) get enough attention when
transportation policy is discussed.
> As a side interest (I’ve also taken a few urban
> planning courses), I’ve found many of the
> controversies and debates within urban and
> transportation planning to be very fascinating.
Ever heard of Maryland’s under construction Md. 200
(InterCounty Connector) toll road?
Frank:
“Railroads received massive land grants”
SOME (not all) railroads received land grants at a time when the Federal Government had set the price of land at $0 per acre through the Homestead and Mining Acts. The railroads just got more land, not land at a different (subsidized) price. Also, less than 19,000 line miles of line got land grants in a system which at one point totalled near 300,000 line miles. The purpose of the grants was to allow the railroad to help develop the countryside they were traversing to make the land have an actual value. The railroads could hardly make much money off the grants when land was available free inside the outline of the grant as the railroads only received every other square mile in the grants in a checkerboard pattern. The land grants were ended in 1971 at a time when the system had but 50,000 miles of line. The development to well over 200,000 line miles was done without this aid.
Lastly the railroads repaid the land grants over time by providing discount shipping of goods and transportation of employees to the Federal Government for nearly 100 years. This fact somehow is never mentioned by anti-rail partisans who bring up land grants.
“Railroads received loan subsidies”
Again, this was done for SOME early railroads, not all to facilitate construction, and often it was for lines which would be quickly abandoned or privately rebuilt due to the primitive style of construction under government auspices. It would be equivalent to using bonds with tax incentives today in terms of the probably level of subsidy. The vast majority of railroad construction was undertaken by sale of stock and bonds on the open market without any subsidies.
“SOME (not all) railroads received land grants…”
Including Union Pacific, incorporated by the federal government. Today, Union Pacific (the name and assets having survived bankruptcy) owns and operates more miles of track than any other railroad company.
“Lastly the railroads repaid the land grants over time by providing discount shipping of goods and transportation of employees to the Federal Government for nearly 100 years. This fact somehow is never mentioned by anti-rail partisans who bring up land grants.”
Regardless of whether or not the loans were repaid, the fact remains that they were government loans, financed by taxes. If not a subsidy in your lexicon, it’s definitely government assistance. And it seems to be the point that planesnotrains has been making about loans (bonds) to build airports. No?
I said:
Andrew said:
This is one area where size doesn’t matter, and you can’t have it both ways. A subsidy is a subsidy. Just because not all railroads received land grants, it does not follow that some railroads, particularly the largest companies, did not receive subsidies, financial assistance from the government, whatever you want to call it.
It’s really interesting to see the different characters who comment on this blog claim that their preferred mode is subsidy free, the result of the free market, or free of government intervention. The truth is that all transportation has been subsidized to some degree. It’s too bad that those who comment here can’t see that or recognize the corporatist system we’ve had for more than a century.
Frank:
“Including Union Pacific, incorporated by the federal government. Today, Union Pacific (the name and assets having survived bankruptcy) owns and operates more miles of track than any other railroad company.”
Actually, the original Union Pacific went bankrupt TWICE before coming under the control of E.H. Harriman around 1897, who completely rebuilt the railroad with private money from the ground up (literally!) and set it on its modern trajectory of dominance. The modern power of the Union Pacific is very hard to credit to the initial shoddy construction accomplished by the government hired contractors. All they did was lay two streaks of rust through the dirt of the prarie. The entire enterprise was worthless until Harriman rebuilt it with modern construction and technology.
“Regardless of whether or not the loans were repaid, the fact remains that they were government loans, financed by taxes.”
Land grants are not loans and are not financed by taxes. I think you are mixing up forms of assistance. The land grants were a form of free land giveaways which were also available to any other American, just made on a very large scale given the size of the enterprises involved, rather than being limited to 160 acres.
“Just because not all railroads received land grants, it does not follow that some railroads, particularly the largest companies, did not receive subsidies, financial assistance from the government, whatever you want to call it.”
The largest, wealthiest, and most prosperous railroad companies traditionally were those in the “Official Territory” – east of the Mississippi and north of the Ohio – the Pennsylvania, the New York Central, the Baltimore and Ohio, etc. These railroads did not receive federal assistance and they comprised most of the industry by revenue, passenger-miles, and ton-miles until 50 years ago. The recent modern dominance of the western transcontinentals and southern roads dates only to the 1960’s and the development of the American sunbelt along with the transfer of population and industrial production from the northeast and midwest to the south and west.
“The truth is that all transportation has been subsidized to some degree.”
Exactly, because it is a legitimate function of the government to tie the country together with arteries of trade, communication, and travel. Hence the directives of the US Constitution for the congress to establish Post roads and regulate commerce among the several states.