The View from Washington, DC

While Robert is out of town (Congratulations to you and your fiancee!), it's an honor to help fill the big shoes he leaves behind for the time being. I represent the National Association of Railroad Passengers, the only national, membership-based organization that works for better intercity passenger train service in the country.

As consumer advocates representing the traveling public, we understand the tremendous benefits that HSR will provide to Californians. The Executive Committee of our Board of Directors formally endorsed the project last week. As a Los Angeles native, I grew up to become painfully aware of the differences between the California we have now, and the greener, more dynamic California we will have once HSR is up and running. I greatly look forward to working in the coming months with state rail advocacy groups such as RailPAC, our allies with environmental and other public interest concerns, student organizers, and other citizen proponents of Proposition 1.

From Washington, DC, the outlook for intercity passenger trains in general is brighter than it has been for a long time. The bipartisan, blue-ribbon National Surface Transportation Policy and Revenue Commission submitted its report to Congress this year to provide a framework to reauthorize surface transportation programs for the next five years.

What's significant is that the report recommends that the Congress allocate $9 billion annually in dedicated funding for passenger rail, currently the only mode of surface transportation that does not have a dedicated funding source. (Until this year, states like California could not leverage a federal match for its investments in new trains or tracks. We now have a $30 million federal pilot program for the current fiscal year. It's paltry, but it's a start.)

Amtrak and passenger rail programs received $1.362 billion in the current year, against an estimated need of $1.8 billion just to keep pace (and after years of even worse starvation diets). As the appropriations process moves forward for 2009, we may see a slight increase, but until we get the kind of federal commitment called for by the NSTPRC, it's just tinkering around the edges.

NSTPRC also provided a framework of ten major programs around which Congress should base future investments. The only one that was mode-specific is Intercity Passenger Rail, reflecting the short shrift that trains have gotten in a distorted market over the past several decades (examples of other programs include Metropolitan Mobility, Federal Lands, and Research & Development).

Proposition 1 will be a major shot of adrenaline to HSR in America, giving Congress greater policy and political incentives to heed the Commission report and emboldening other states to follow California's lead. As California-style innovation goes, so goes the nation. NARP's resolution notes, "California's initiative in high-speed rail will likely be replicated elsewhere in our country, placing California, once again, in a transportation leadership role."

As for the private sector, we are seeing more examples every day of investors coming to understand HSR operations as a good risk. Italy, notoriously stereotyped for its bureaucracies, will see its first private HSR service in 2011:

The new rail operator, NTV, is a $1.4 billion project that will link Rome, Milan, Turin, Venice, Florence, Bologna, Naples, as well as Bari and Salerno in the south, officials said. It will make a total of 54 journeys a day.

...

The service, which will run on Italy's existing rail network, will use 25 11-car AGV trains by French engineering company Alstom SA, which will be delivered in three years.

Alstom said NTV will be the first operator worldwide to use its AGV very high-speed train. The trains will be equipped with specially designed seats, Internet connections and on-demand TV, traveling at a cruising speed of around 190 mph on existing Italian high-speed rails, the company said.

California may end up looking to Italy as a model, one in which passengers will enjoy a range of options for fast, safe travel along publicly-owned, well-maintained trackage.

But none of that can happen here until we have the kind of glistening, new infrastructure that only the public sector can provide, to unleash the potential of public-private partnerships.

There's no question that the federal government can end modal discrimination and make it a national priority to assist states like California that want to end their dependence on oil-based mobility, enliven their economies, and improve their environment and quality of life. But it takes political commitment, and we and our members will do everything in our power to make it happen. But we'll need your help on the grassroots level, too.

Prop 1 will be a great start, but not the end of the heavy lifting. Stay tuned.

Arnold Schwarzenegger Says "Travel the World, Support High Speed Rail!"

I've occasionally mentioned that the origin of my support for high speed rail was a trip on Spain's AVE line from Madrid to Sevilla in 2001, in the context of a broader argument that a surefire way to generate support for rail travel is to put people on a train and show them how useful it is, and how good it could be at a high speed.

Today Governor Arnold Schwarzenegger made much the same argument, but in a rather odd way:

Speaking at a forum on global economics held by the nonprofit Milken Institute, the governor suggested lawmakers would be more willing to embrace his plans to privatize the building of roads, schools, high-speed rail systems and other public works if they could see how effectively it has worked in other countries.

"Some of them come from those little towns, you know what I am saying, they come from those little towns and they don't have that vision yet of an airport or of a highway that maybe has 10 lanes or of putting a highway on top of a highway," Schwarzenegger said. "They look at you and say, 'We don't have that in my town. What are you talking about?'

"So they are kind of shocked when you say certain things. So I like them to travel around."

It's a pretty strange way to frame the argument for a number of reasons. The overall context is Arnold's effort to defend travel junkets paid for by his corporate allies, and using high speed rail trips as an example. A closely related context is Arnold's effort to privatize everything in sight despite the poor track record of privatized government. In fact, if legislators traveled to France or Spain, they'd see a government-run high speed rail system that turns enough of a profit to seed the construction of new lines. Somehow I doubt Arnold's corporate buddies are interested in showing off the positive benefits of European socialism.

Nor am I convinced that telling legislators from small California towns that their horizons are narrow is going to accomplish much. It had a mixed effect on a Republican assemblyman from Hesperia:

Assemblyman Anthony Adams, a Republican from the mid-size city of Hesperia (population 83,000), said Schwarzenegger's comments, "while I'm sure well-intentioned, reek of a certain elitism that doesn't help foster a cooperative working relationship."

Last month, Adams toured Japan's high-speed rail system on a trip organized by the Senate Office of International Relations. He said he paid for the week of travel with campaign money and personal funds, and was impressed that Japan's system is efficient and well-managed.

"I'm awful grateful I did it," said Adams. "It will help me make the case for why high-speed rail is right for California."

I do believe that Arnold is right that Californians should embrace technologies and systems used successfully around the world. We've done this many, many times before, and in a global economy California has to keep up with Europe and Asia or fall permanently behind. And while a surefire way to create a lifelong HSR supporter is to put them on the TGV or the AVE or the Shinkansen, it's not necessary to leave the continent or even the state to see the value of HSR.

Many Californians instinctively understand why HSR is necessary when we explain the need to replace air travel for financial, environmental, and practical reasons; or when we explain the economic and climate benefits of the system. But if we want to go a step further, Arnold should be encouraging Californians to take trips on the state's extensive train network. Ride Metrorail, or Caltrain. Take a trip to Santa Barbara on the Pacific Surfliner, or a trip from Sacramento to the Bay Area on the Capitol Corridor. That would show Californians the value of rail travel as well as get them to see why high speed rail would be so much better than what we already have.

Of course, that would all require Arnold to stop trying to destroy public transportation in California. We welcome his support on HSR, but he also needs to understand HSR works best when there is a strong feeder network of mass transit.

Looks Like Jim Battin Needs Our Help Too

It looks like high speed rail in California is starting to get more attention - especially from conservative op-ed writers. Last week I examined why Dan Walters' HSR ideas were so flawed. And now Republican legislators are getting in on the HSR-doubter act. Jim Battin is a Republican State Senator representing the 37th district (Riverside County), and last week published an op-ed in The Desert Sun titled "High-speed rail plan off-track". As Sen. Battin just returned from the Japan HSR trip, it's a more interesting piece than Walters', but it also repeats many of the same basic flaws - particularly a myopia about the continued availability of cheap oil-based travel. Below I deconstruct Sen. Battin's flawed arguments.

I know The Desert Sun disapproves, but I recently spent a week in Japan leading a bipartisan delegation that met government officials and studied the country's high-speed rail system. In November, Californians will be asked to approve our own high-speed rail project. From what I saw, firsthand, taxpayers need to approach the idea with great caution.
Advertisement

High-speed rail works in Japan because of the country's geographical uniqueness and the smart government policy decisions. The country is roughly the size of California, but has four times the number of people, 80 percent of whom are located in major urban centers.

And according to the latest figures some 97.7% of Californians live in an urban setting. Not all of them live in the state's "major urban centers" but well above 50% do, living in close proximity to the proposed HSR line.

Japan's geography is not all that different from California. The two main differences are that Japan is an island nation, and does not have anything like our massive Central Valley. But like Japan, most California urban areas are located along coastal plains and valleys, hemmed in on several sides by mountain ranges. This actually creates fairly natural corridors for HSR.

In the 1980s, Japan National Railways was a public sector failure, running a yearly operating deficit, with a huge debt, declining ridership, high fares, and poor service. Japan broke up the public sector monopoly and created private, passenger-rail companies to serve different areas of the country and compete for the consumer's yen.

The three companies serving the most urban areas operate with no government assistance. One way they do this is by owning the key real estate around train stations, allowing the rail companies to operate retail centers that offset the cost of service.

This should be balanced out by noting that SNCF and RENFE, the French and Spanish public sector railways respectively, are both public sector successes. Ridership continues to climb on both countries' HSR systems. And they DO provide "competition" - not with each other, but with the airlines that serve the same corridors. In both countries they are competing with a great deal of success.

As to owning the real estate around the stations and building transit-oriented development (TOD), that appears to be a central part of the California HSR plan.

From my own experience, it is clear the Japanese "Shinkansen," or bullet train, model has been a success. Private-sector efficiencies reduced costs, while rail fares remained stable. The trains, operating at up to 186 mph, are clean, safe and service is readily available. Consumers responded by increasing ridership more than 20 percent.

Still, the service is not cheap. The line fare from Tokyo to Osaka, which at 251 miles is a little shorter then from Los Angeles to San Francisco, costs 13,200 yen, or about $130 one way. In contrast, Californians can find a flight from LAX to SFO on Southwest Airlines as low as $39 one way, and Southwest gets a traveler there in half the time.

It is good that he recognizes the success of Japanese HSR, but he then goes on to make probably the greatest possible error one can make while assessing HSR - assuming that present travel conditions will continue indefinitely into the future. They won't.

Does Sen. Battin really want us to believe that Southwest will be able to offer $39 flights for much longer? As one of our commenters explained, those super-cheap fares are not the usual price a traveler pays for a one-way trip. And even the more accurate $65 figure is not long for this world. As oil prices continue to soar and peak oil puts the squeeze on fuel supplies, airlines will have no other choice but to raise fares. Last week rising fuel costs put three airlines out of business - Aloha, ATA, and Skybus. And the remaining carriers are feeling pinched too, as they increase fares, fees, and fuel surcharges while passenger numbers continue to decline.

We cannot use "cheap, fast Southwest airlines" as a reason to not build HSR because there is a very good chance that neither they nor any other carrier will be able to offer cheap fares for much longer. And it only takes "half the time" to fly as opposed to take HSR if you don't count the actual travel time involved with flying, including travel time to the airport, check-in, security, etc. When all that is factored in, HSR is about even with flying.

The plan itself has been a boondoggle even before voters have their say. The Legislature initially placed the bond on the 2004 ballot, but then moved it from one election to the other trying to "time" when both the state budget and economy were healthy. While waiting for that electoral magic, taxpayers have spent millions to fund a California High Speed Rail Authority that has had no rail to build.

That isn't a "boondoggle." The CHSRA has had very modest funding, which they have used to develop a solid plan that voters will evaluate this fall. The only person responsible for the two delays of the HSR vote has been Arnold, who didn't want it on the ballot in 2004 or in 2006, when his other infrastructure bonds were facing voters. To call this a "boondoggle" is to misuse the term.

The $9 billion bond gets the rail line started, but the authority estimates the total capital cost for the project at a staggering $25 billion, a figure definitely lowballed. To put this in perspective, each Californian will spend about $715 dollars, almost $3,000 per family of four, to subsidize high-speed rail. That's before they even get a chance to buy a ticket.

And the 9/11 airline bailout was $15 billion alone, which doesn't include over $5 billion in other annual subsidies to the US airline industry. Yet Sen. Battin never discusses those kind of subsidies, nor the tens of billions in annual road subsidies spent here in California. For Sen. Battin, like most conservatives, somehow only passenger trains are seen as getting subsidies; all other forms of transportation somehow magically prosper all on their own.

The fact is that transportation has always been subsidized in America, ever since New York spent $25 million to dig the Erie Canal in 1825. Given the size of this country it cannot be any other way. Instead of unfairly and unrealistically attacking the existence of subsidies, Sen. Battin should be asking whether these subsidies will reap value for Californians. In the case of HSR, they will.

Of course there is no guarantee the rail service will be profitable. The proposal anticipates one-way fares set at only $55 in the year 2018 - a ridiculous presumption by a bureaucrat trying to "sell" the bond. Given Amtrak's sorry pattern of taxpayer bailouts, and Japan's own history with high-speed rail, government is bad at operating rail lines best run by the private sector.

This $3,000 subsidy will be the beginning of what California families will pay and pay and pay.

Of course, Sen. Battin gives us no reason why the $55 fare is "ridiculous." Nor does he explain the rather important point that the "$3,000 subsidy" wouldn't come all at once, but would instead be spread out over many decades. And there's no guarantee any of us would have to pay it. European HSR systems - which he routinely ignores - repeatedly turn an operating surplus, which can be used to pay off the bonds.

Nor does Sen. Battin provide this with any context. Even if every Californian would have to pay a $3,000 subsidy for HSR over 30 years, that pales in comparison to what Californians would have to pay over that time in plane fares, gallons of gas, airport expansion costs, and freeway widening and maintenance costs. Sen. Battin makes one of the common errors of HSR critics - assuming the project exists outside of any real-world context.

Of course, only government subsidies kept the major carriers in business the last 7 years, which suggests a rather major flaw in Sen. Battin's anti-public sector subsidy argument. Amtrak is routinely made to do much more with much less than their airline counterparts get - and still they've taken nearly half the market share from the airlines on the Northeast Corridor.

Battin closes his article claiming to welcome the greater use of public-private partnerships (P3) in HSR but says that isn't enough to back the plan: "Right now, this proposal is not a rail we should be riding."

But since his own arguments are so full of holes, flaws, and inconsistencies, I don't think Californians should feel any hesitation about HSR based on Sen. Battin's ideas. It's a shame more California Republicans don't grasp the actual issues and realities of HSR. But as the polls continue to suggest, neither are California voters buying what the Republicans are selling on HSR.

HSR and P3: A Shotgun Wedding?

As those of you who have been reading me at Calitics for the last year know, I love high speed rail. And you'd also know that I am deeply skeptical - to put it mildly - of public private partnerships (P3). So what am I to do when they are joined together in a shotgun wedding? From a press release put out by the California High Speed Rail Authority:

California High-Speed Rail Authority Executive Director Mehdi Morshed, joined Governor Schwarzenegger Tuesday in participating in a roundtable discussion at the State Capitol regarding the importance of investing in California's infrastructure and maintaining the state's economic growth through public private partnerships.

Mr. Morshed noted the California proposed system of high-speed trains offers a unique opportunity to develop a new model for “P3” or public private partnership financing....

Mr. Morshed noted that high-speed trains are attractive to private investors because California’s proposed system will bring a $1 billion annual profit or surplus, once built.

Now it's not as if this is totally new. The 2002 Implementation Plan always envisioned that private financing would play some sort of role in the HSR project, although at the time it was expected to be limited to the bonds.

But what exactly is meant by "private financing" - and how bad might this really be for HSR?

The Authority’s finance team anticipates public-private partnership opportunities will include project debt financing, vendor financing, system operations and private ownership.

I can live with private involvement in debt and vendor financing, even though government can always borrow more cheaply. System operations is iffy at best - government runs the French, Spanish, German, and Japanese lines quite well, and when system operations were privatized in Britain, the results were deadly. Private ownership, however, is a line we must not cross - public ownership of infrastructure is key to an effective, safe, and affordable transportation system for Californians. High speed rail is an economic catalyst and an environmental and sustainablity necessity. It needs to be held in public hands for public uses, and not hollowed out for private profit.

And that $1 billion is a very, very enticing figure, especially for private companies and investors, who likely see in public infrastructure the kind of profit opportunities that they are now being denied in real estate and financial speculation. But that $1 billion would also be incredibly useful in building out the full HSR network envisioned in the 2002 Implementation Plan - or extending the service beyond its current routing (building an Altamont Pass alignment, for example).

In Europe, those operating surpluses are regularly plowed back into expansion of the HSR network. Spain's first HSR line, the AVE train from Madrid to Córdoba and Sevilla, proved so profitable that RENFE (Spain's government-owned rail network) was able to plow that money into recent extensions to Malaga, Valladolid, and Barcelona. France's state-owned rail network, SNCF has been able to do the same with expansion of its TGV lines as well. The operating surplus alone does not pay for these projects, but it helps reduce the added bond or tax monies needed to construct the new lines. Or, the surplus could be used to pay the bonds off ahead of schedule.

So there is a strong incentive to use those operating surpluses for HSR upgrades and extensions or bond repayment, instead of handing it over to private investors. But it seems clear that P3 is the price of obtaining Governor Arnold Schwarzenegger's support for the plan. From the press release:

The bond measure, which is within the Schwarzenegger Administration’s current debt capacity guidelines, will also provide nearly $1 billion for improvements to local and regional passenger trains projects that complement and connect with the high-speed train system. The bond is also a significant component of the Governor’s Strategic Growth Plan as described in his proposed 2008-09 budget.

That section, especially the language about "debt capacity guidelines," seems a very clear signal to me that Arnold is going to throw his weight behind the November HSR bond - but only because it promotes his goal of P3 for public works.

It's a shotgun wedding, and the question is, how should we react? Is HSR worth the price of P3? Already we're having to accept a lot of tough things to get this project moving. The Pacheco Pass alignment seems less ideal from a ridership and environmental perspective. And the plan floated by Fiona Ma and Cathleen Galgani to drop the insistence that LA-SF be the first line to open risks building a system that contains a missing link.

But neither are these poison pills. As I noted above, the Implementation Plan always called for private investment, to leverage the state, local, and federal funding. What seems more worrisome here is that Arnold is using HSR to advance a privatization agenda that is already being implemented in our state. HSR is too important a project to force into a shotgun wedding with Arnold's privatization push.