Building HSR in a Financial Crisis

One of the more common attacks on the HSR that I'm witnessing, especially from the right-wing, is the argument that we simply cannot afford to spend all this money on high speed rail at a time when the state is in such dire financial straits. This is nonsense, but popular nonsense - I would argue it is the number one obstacle to victory in November. The latest expression of this view comes from Phil Strickland, who writes a regular column for the Temecula Californian:

Example: After we've railroaded our children's educational future to make up for our government's inability to mind its financial P's and Q's, we will be given the opportunity to go on yet another spending spree ---- a $10 billion bond for building high-speed rail service from San Diego to San Francisco.

Mind you, that's only about a quarter of the estimated $42 billion cost of Stage 1. Another $10 billion is said to be gathering dust in our federal piggy bank just waiting to be shipped to California to get the government ante up to $20 billion.

The balance is to come from a private partnership and/or ---- surprise! ---- a special tax.

It is career-threatening to describe in a family publication just how truly special that bit of pickpocketing would be.

As is typical for a conservative, Strickland lays the blame for our state's unspecific financial crisis at the feet of "government." But the specifics matter. We face a structural revenue shortfall - meaning California routinely takes in much less money than it needs to pay its bills. This is the product not only of 1978's Prop 13, but more immediately of some $12 billion in tax cuts made during flush economic times since 1993. Half of that sum - $6.1 billion - comes from the 1998 cutting of the Vehicle License Fee, a cut which Gray Davis planned to reverse and Arnold Schwarzenegger preserved as his first act in office. That VLF - which would cost the average Californian about $150 a year - would if restored eliminate the proposed education, health care, and state parks cuts.

So why should HSR suffer for the state's unwillingness to balance its books by getting realistic about revenue?

Of course, as I have noted here before, the state has spent bond money on massive infrastructure projects in the middle of tough financial times before. Both the Golden Gate and Bay Bridges were built with public bond money during the depths of the Depression. They were invaluable economic stimulus projects, putting thousands of people to work at a time when the state desperately needed new jobs. Our situation today is not much different.

And since the bond would be repaid from fares once the system opened, it is highly doubtful that the public is going to be on the hook for this. But even if the public were, would that be such a bad thing? HSR is a necessary project, for reasons of the environment, energy, and the economy.

But Strickland betrays himself when he argues that HSR really is not necessary. Like the other conservatives we have profiled - Dan Walters and Jim Battin what really lurks behind their opposition is a complete failure to understand why the project is necessary:

As has been pointed out more than once, high-speed rail north to south is not a necessity.

What we need is regional rail and, given the money being thrown at highways, it could become reality with far less fiscal pain than continuing to pour and repour concrete to no effect.

The November HSR bond provides $950 million for regional rail. But to say that "high-speed rail north to south is not a necessity" is just an ignorant thing to say. As we have discussed repeatedly here, the era of cheap is coming to an end, and with it the ability to easily fly and drive between the two halves of our state. California's economy depends on north-south travel, and high speed rail is the only solution to that transportation need that can actually survive here in the 21st century.

HSR would also itself serve as "regional rail," connecting SD to Temecula, Riverside, and LA; connecting the South Bay to San Francisco; Orange County to LA.

But, even given the tack of creating regional systems that actually benefit the payee and linking them by high speed as needed, the state of our affairs dictates that this hardly is the time to be borrowing $10 billion for darn near anything.

Actually, this is precisely the time to be borrowing $10 billion for high speed rail. Bonds have been used to pay for infrastructure projects for over a hundred years in this state. Their beauty is that they do not need to be immediately repaid in full, but can be repaid by the infrastructure project itself upon completion. The bay bridges and the State Water Project both functioned in exactly this manner.

And the need for HSR is immediate. Not just as economic stimulus, but as a transportation solution. Airlines are beginning to drop like flies - three went bankrupt last week and several more are right behind them. The price of oil is showing no limit in sight, and the onset of peak oil, which will cripple supplies, marches relentlessly closer.

If we allow an unrelated fiscal issue to stop HSR in 2008, it's going to take years to revive the project's momentum. In that time Californians will suffer as their oil-based transportation systems begin to come apart. 2008 may not be the ideal year to propose HSR to voters, but it has to happen sometime. Since it won't break the budget - a budget that can be easily fixed with a few simple revenue solutions - HSR is something we should all support so that California doesn't face an even greater fiscal and economic crisis in the future.

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.
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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.

Dukakis on High Speed Rail

Still recovering from my illness, which was apparently a kind of bronchitis, so I may not be back up to my daily posting schedule until the middle of next week. In the meantime I wanted to share a great op-ed published in yesterday's Sacramento Bee, Toll road bad news is high speed rail good news. It's written by Michael Dukakis, the Democratic presidential candidate in 1988 and now a public policy lecturer at UCLA, and Arthur Purcell, an LA land use analyst.

The op-ed is framed around the ongoing fight over the Foothill South toll road extension project in Southern Orange County. In February the Coastal Commission voted to reject the project, and although the TCA, which operates the OC toll roads, wants the US Department of Commerce to override this, Dukakis and Purcell make a strong case that $1 billion is much better spent to help build HSR than to build a toll road few will actually use:

What the commission really said is that if close to $1 billion is available to build this project, let's use it on projects that will deliver more bang for the buck, reduce environmental impacts and energy use, and make a real dent in the highway congestion that plagues Orange County and most of California.

And that means high-speed rail. The $1 billion its sponsors wanted to spend on a toll road could go a long way toward paying for the cost of that portion of the state's high-speed rail plan that could take travelers from Los Angeles to San Diego in 55 minutes and from Irvine to either of those cities in less than a half-hour while eliminating a lot of congestion on Interstate 5, not only in Orange County but along the entire route.

Now, I'm not entirely certain about these travel times. I hope the authors realize that, due to the unstable bluffs along the Coast Line near San Clemente, HSR is going to follow CA-91 and I-15 from LA to SD. But it would still be much faster than any toll-road aided trip would be, especially as the toll road would not serve the main population centers of Orange County at all.

The authors go on to make some more excellent pro-HSR points:

And don't let anybody tell you that Californians won't ride the trains if they are fast, safe and efficient. Amtrak's Pacific Surfliner from Los Angeles to San Diego is the second most popular train in the entire Amtrak system and carries more than 2.5 million people a year. Imagine how many people a high-speed train connecting those two cities would carry with a running time of less than an hour – one third of what it currently takes on the Surfliner and less than half the time it takes to drive it, even on a good day.

I think this is a very good way to combat the "Californians won't ride trains!" nonsense. Not only is the Pacific Surfliner a VERY popular train, its ridership has been steadily rising since 2002 - as has ridership on the other Amtrak California lines, as well as local mass transit systems. Californians already ARE riding trains and in growing numbers. The creates demand for HSR, which makes those train trips faster and therefore more popular.

Poll after poll tells us that reducing congestion and doing something about global warming are at the top of Californians' concerns about their quality of life. Building new freeways and expanding old ones is a last-century approach that will do neither. And with gasoline now hitting $4 a gallon, it's pretty obvious that California's long-standing love affair with the automobile is on the rocks.

This is another great point as well. As you've seen in some of the comment threads, the "quality of life" aspect of HSR is repeatedly cited as one of its major attractions. And it's not hard to see why. Californians love their cars, but that love affair has become a bitter and loveless marriage to gridlocked freeways and soaring gas prices. I know people who drive 580 over Altamont Pass every morning, and the 91 through the Santa Ana Canyon, and the 14 down from Palmdale - and they all hate their commutes, longing instead for a faster, cheaper option.

The proposed high-speed rail bond issue that will be on the ballot in November will carry an estimated cost of $9 billion. It would be matched by the federal government with a contribution that is less than the cost of a month of the Iraq war. And it could be supplemented by billions in contributions by major investors in development around the system's stations.

The $3 trillion we have spent in Iraq to no good purpose would have built a LOT of high speed rail. If a Democrat wins the White House this fall it seems likely that the federal government will contribute a significant amount of money to this project, greatly leveraging our state's $9 billion investment.

The bond issue is a small price to pay for a high-speed rail plan that will create thousands of jobs, reduce congestion on our highways and at our airports, cut pollution and global warming, help revitalize the state's older cities, preserve our parks for generations to come and save us a lot of pain at the pump.

It ought to be one of California's top priorities.

They are right about all of it. For all those reasons above, I firmly believe high speed rail is the most important project this state has considered in the last 50 years. Where the State Water Project of 1960 laid the foundation for the last 48 years of growth, HSR will do the same for the next century.

High Speed Rail Polling Details

Posting has been a bit light this week as I recover from one of the nastiest flu bugs I've had in some time. (Note to my readers: don't read The Stand during flu season - if you do read it and get sick afterward, you will be freaked out.) I'm also waiting on some reports to come in from yesterday's CHSRA board meeting in Sacramento, where an apparently "lively" discussion on transit-oriented development took place.

In the meantime I thought I would share some details of the high speed rail polling data I discussed last week. At the time all we had was Quentin Kopp's statement of a statewide 58-32 split in favor of the bonds, which was confirmed to me over the weekend by Fiona Ma and her staff. This week the San Francisco Examiner has provided some crucial details of that poll:

A statewide survey of 800 registered voters shows that 67 percent of Bay Area residents plan to vote “yes” on a $9.9 billion high-speed rail bond in November, an approval rating higher than any other California region.

Statewide, 58 percent of voters approved of the bond measure, and 61 percent said “yes” in the Los Angeles and San Joaquin areas, the study said.

Those are stunning numbers. The massive support in the Bay Area and the significant majorities in LA and the San Joaquin Valley would more than make up for whatever opposition might exist elsewhere in the state. Typically, to win a statewide election of any kind, you need to run up big numbers in the Bay Area and LA and break even in the Central Valley and the other parts of Southern California. This poll suggests we are in a good position to accomplish that goal.

Of course, the other important piece of California political wisdom is that support for an initiative always drops the closer we get to Election Day, as negative attacks begin to take their toll on public support. It is therefore crucial that a ballot measure be polling well above 50% in the early stages, and that is exactly what this poll shows.

We still have seven long months to go, and these poll numbers will almost certainly change in that time. But the situation looks very good for the high speed rail plan. November 2008 will see an enormous turnout of voters likely to support something like high speed rail, overwhelming the anti-government spending, anti-transit voters that tend to dominate low-turnout elections. And even as the negative attacks begin in earnest after Labor Day, we appear to have a strong reserve of support that can carry us to victory on November 4.