High Speed Rail:Taxpayer Risk Assessment
Presentation by Wendell Cox
Heritage Foundation4 March 2011
High Speed Rail: Taxpayer Risk Assessment
Needs Versus Wants
Broken Promises: Capital Cost Escalation
Exaggerations: Air & Road Congestion
Exaggerations: Environmental Impact
Taxpayer Risk: International
Protecting Taxpayers
The California High Speed Rail Proposal: A Due Diligence ReportThe Tampa to Orlando High Speed Rail Project: Florida Taxpayer Risk Assessment
Needsv.
Wants
The ContextUNPRECEDENTED PUBLIC FISCAL CHALLENGES
Stop buying things we don’t need
Planning Process v. TaxpayersBROKEN PROMISES & EXAGGERATIONS
California V. the TaxpayersFALLING RIDERSHIP – ADVOCACY BY THE LEGISLATURE
Annual Ridership (Millions)
CALIFORNIA COURT DECISION
“Voters know that the arguments in the ballot pamphlet are advocacy, but they assume – wrongly, in this case – that the ballot label, title and official summary are objective. We are very pleased that the Court’s ruling demands that, in the future, only an objective party can prepare those portions of the ballot material which are currently recognized as being ‘official.’”
O’Hare International Airport: Chicago
Interstate 5 between San Francisco & Los Angeles
Chicago O’Hare International Airport
HighSpeed RailThe Need?
Per Passenger Mile: 2006$
Federal Profits & SubsidiesTRANSPORTATION PROGRAMS: 2006
COST PROJECTIONS
• SUBSIDIES• PROJECTIONS• FLYVBJ
Broken Promises:Capital Costs
Kunming (Yunnan) Railway Station
Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying.
Capital Cost OverrunsINTERNATIONAL RESEARCH
Low End
Of Range:
May have
Been 300%
Flyvbjerg Magnitude
Cost Escalation
Capital Cost Increases: CaliforniaBEFORE A “SHOVEL IS TURNED”
Projected and Potential Costs & SubsidiesTAMPA TO ORLANDO HIGH SPEED RAIL LINE
HSR not Principal
Justificationfor
Expansion
ExpansionNot
Justified
Faulty PlanningUSING URBAN HIGHWAY COSTS IN RURAL AREAS
CALIFORNIAPROJECTION
(EXAGGERATEDCOSTS)
$66 BILLIONHSR ATTRIBUTABLE
COST USINGFHWA UNIT COSTS
$0.3B
1. Expansion not needed2. Used urban costs in rural areas3. Attributed all avoided costs to high speed rail
IMAGE
Most High Speed Rail = Faux Speed Rail
Fast Mail1877
NYC-Niagara
Capital Cost Increases: Chicago - St. LouisTHE ELUSIVE 4-HOUR SCHEDULE
Faux Speed Rail
Generally
less effective than
high speed rail
Broken Promises:Ridership & Revenue
Los Angeles
Ridership Projections HighRESULT: LOWER REVENUES (& LOSSES)
Flyvbjerg Magnitude
Ridership Exaggeration
California: Faulty ProjectionsAIRLINES AND HIGH SPEED RAIL SYSTEMS
Before
Ridership
Projection
Reduction
Population: Florida & Northeast CorridorORLANDO-TAMPA V. WASHINGTON-NEW YORK
Population (Millions)
Ridership: Florida & Northeast CorridorORL-TPA COMPARED TO WASHINGTON-NEW YORK
Annual Rides (Millions)
San Francisco
Exaggerated Claims:Air & Auto Congestion
Faulty PlanningUSING OUT-DATED AIRLINE VOLUMES
Impact on Airlines & AirportsMARGINAL, AT BEST
O’Hare International Airport: Chicago
Even with the large diversion of air passengers predicted by the Rail Authority (35% to 56%), we found that the projected runway demand at SFO would only be reduced 4-7%, due to the large number of SFO flights not associated with the California market. …Finally, it is possible that the airlines wouldcompete more effectively with fares than assumed in the HSR report.
Regional Airport System Plan (San Francisco Bay Area)
Potential for GHG Reduction: AirlinesCOMPREHENSIVE HSR SYSTEM: 2030
Jamin, Shafer, Ben Akiva & Waitz, 1999
• CONNECTIVITY (LAST MILE PROBLEM)• CAR NEEDED TO COMPLETE TRIP
• CONGESTION IS IN URBAN AREAS– NOT BETWEEN
• HIGH TOLLS:– TOKYO-OSAKA $100+– PARIS-MARSEILLE $75+
• GASOLINE– JAPAN: Nearly $6/Gallon– FRANCE: Nearly $7/Gallon
HSR Competes Poorly with CarsCOSTLY, SHORT TRIPS DOOR-TO-DOOR TIME LONG
Millau Viaduct, France
HSR Cannot Compete with CarsNEED FOR A CAR AT THE DESTINATION
Automobile travel differs from air or rail travel in that it generally involves door-to-door service, offers greater flexibility in time of departure, and does not require travelers to share space with strangers. Consequently, rail travel must be extremely competitive in other dimensions, such as speed or cost, to attract automobile travelers.
Higher isMore TrafficCongestion
Vol
ume/
Cap
acity
Rat
io
Highway Capacity
Before
Ridership
Projection
Reduction
Faulty Planning CLAIMED AUTO TRAFFIC CONGESTION IMPACTS
Faulty PlanningCLAIMING LITTLE PARKING NEEDED: USING TRANSIT
Southern Greenland
Exaggerated Claims:Environment
Shenyang, China
Cost Effective Greenhouse Gas ReductionUN IPCC MAXIMUM RANGE
$20 $50Market
Less than$15
McKinseyAverage
$17
Above $50 is wastefulDetracts from efforts to reduce GHGs
Cost per Ton of CO2 Removed: California2030 PROJECTIONS & IPCC CEILING
IPCC CEILING ($
50)
New Ridership
Projection would
Increase 50%
Potential for GHG Reduction: AirlinesCOMPREHENSIVE HSR SYSTEM: 2030
Jamin, Shafer, Ben Akiva & Waitz, 1999
GHG Emissions/Air Passenger MileLOS ANGELES-SAN FRANCISCO: LIFE-CYCLE
Grams/Air Passenger Mile
Estimated fromChester & HorvathU.Cal (Berkeley)
Adjusted for
Airline
Passenger Miles
Average OccupancyAirline, Car. HSR 60% Occupancy
California: 71 Year GHG PaybackCONSTRUCTION & OPERATIONS
• CHSRA ridership assumptions
• UC Berkeley “Mid-Point” Projections
HSR INDUSTRY
Misleading claims
Power Generation
(Nuclear Power)
Rail investments are in general not a cost-effective climate policy instrument. The reason is that despite great investment costs it is only possible to affect a very small part of carbon dioxide emissions from the transport market.
High Speed Rail & GHG EmissionsSTUDIES FROM SWEDEN & THE UK
Includes
Construction
Impacts
(Unique)
Taxpayer Risk:International DB Frankfurt Train: Gare de l’est
Iñaki Barrón de Angoiti, director of high-speed rail at the International Union of Railways in Paris, referred to the short Paris-Lyon and Tokyo-Osaka routes as the only ones in the world that have “broken even.”
The New York Times, May 29, 2009
Profitability Claims ONLY PARIS-LYON & TOKYO-OSAKA (MAYBE)
Japanese National Railroad: The RecordLOSSES, DEBT & PRIVATIZATION: 1950-1986
Tokyo-Osaka Opens
Privatization (1987)
Impact on NationalDebt ($US Billions)
European Passenger RailPUBLIC FUNDING: INCLUDING OFF BALANCE SHEET
AMTRAK IGREPORT
Perils of Private InvestmentTAIWAN & UNITED KINGDOM
Albuquerque
ProtectingTaxpayers
Stop buying things we don’t need
1: No tax funding: high speed rail is not needed.
2: If public financing:
(A) Surety bond (performance bond) for Flyvbjerg magnitude cost escalation.
(B) Consortium investors: Unlimited corporate guarantees (including repayment).
Paris 1890s
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