Sunday, May 18, 2008

The Cost of Doing Nothing is not Zero

NOTE: We've moved! Visit us at the California High Speed Rail Blog.

One of the points I have repeatedly tried to make on this blog is that the choice is not between spending $40 billion on HSR or spending $0 and doing nothing. The cost of not building the high speed rail project is very high - at least double the cost of building HSR, if the $80 billion figure for road and airport expansion that the CHSRA has offered is accurate.

So it's good to see this crucial point get picked up by the state's media, including the Fresno Bee. In today's excellent editorial they write:

High-speed rail makes sense for a number of reasons -- economic development, environmental improvements, reducing highway congestion, smarter growth patterns -- but here's one more: The cost of not building the system would be much greater than $40 billion.

Opponents of the high-speed system often sound as if this is a choice between spending the $40 billion or spending nothing. That notion is just dead wrong.

Take just one instance. Expanding existing highways and airports to meet the transportation needs projected to come with growth in the state's population would cost two or there times as much -- and would make air quality and congestion even worse. In some cases -- San Francisco, Los Angeles -- existing airports can't be expanded. Bigger and better freeways? Expanding Highway 99 in the Valley to an eight-lane interstate would cost as much as $25 billion alone -- and that's just to serve the Valley, not the entire state.

And as that editorial rightly suggests, the cost of not building HSR isn't limited to the construction costs on new freeway lanes - but should also include the cost of pollution that is already causing health problems in the San Joaquin Valley. To that we can add the cost of fuel for drivers and airline passengers, the cost in lost economic development, and the cost of carbon taxes or passed-on cap-and-trade fees.

It is possible that through no fault of the CHSRA - as global inflation in construction materials continues and as the US dollar loses value - the overall tab for HSR might rise above $40 billion. Of course, Californians will only be asked to front $10 billion, in the form of long-term bonds to be repaid from fares. Can the same be said of the alternative? Without HSR Californians will have to shell out billions in higher fuel costs, freeway and airport expansion, and will have to do so from the worsening environmental and economic position that would result from not having built HSR.

As countries around the world - including Iran, Morocco, and Vietnam - plan high speed rail systems, surely Californians would want to remain economically competitive AND save themselves money by building HSR. Of the many good reasons for building the system, fiscal responsibility and economic common sense are among the strongest.


Anonymous said...

Since the editorial quoted is from the Fresno paper, I would expect nothing expressed but extreme and unequivocal support for the project. After all, as pointed out by Lee Harrington on KQED radio the other day, the project sort of makes “Fresno the center of the state”. The central valley thinks 450,000 permanent jobs are going to be created by this project even after the 160,000 jobs to construct the project have long gone. Now is the time for Fresno to cash in on this bonanza.

What should be noted is thus far no support has yet to be approved and funded for HSR at the Federal level. Why in the world will California become the beneficiary of say $10 billion of the $14.4 billion, if indeed that is the correct number? What about the rest of the country?

I have heard no talk the $10 billion being put up by the state is ever expected to be repaid by fare revenues. That is not even on the table. The claim is that expansion of the system could be funded by generated surpluses. The surpluses seem to be going everywhere. The surpluses are promised to expand the system. They are also promised to pay back the private investors, which are supposed be a one third partner in the system.

With the fare structure as proposed at $55 in 2018 for a trip from LA to SF and knowing right now in 2008, trips of a similar distance in Europe are over $100 at the cheapest times of day, and up and over $200 in prime time, there will surely never be surpluses, but only deficits.

Why is this major capital infrastructure project being cast as an alternative to road and / or airport construction? Certainly with Pacheco now being the chosen route, any chance of HSR going to Stockton and on to Sacramento seems very remote. As stated before, a reduction in auto traffic will not be a major benefit. Today travelers on most trips of any distance want and need their cars to be available when they arrive, otherwise they would probably fly. That need and want is not going to disappear.

Robert Cruickshank said...

There are a lot of deeply flawed assumptions in your post, but that's typical of HSR deniers. Fresno is by no means the only area that will benefit from this, but they WILL benefit. I fail to see how that is a problem.

As to Congress, I do not expect this bill will be the only appropriation for HSR in the next few years - and there's no guarantee this bill will pass this year anyway. Train advocates inside and outside of Congress have every incentive to wait until 2009, for a much larger Democratic majority in Congress and a good chance at a Democratic White House, both of which will be interested in funding HSR at higher levels. You may recall that last month we carried the story that there may be as much as $60 billion for HSR budgeted in the 2009 transportation bill - whereas the $14.4 billion bill being discussed now is a standalone measure.

As to repayment of bonds, read AB 3034:

"Requires that net operating revenues, above and beyond operating, maintenance and financing obligations and construction completion costs of the HST system, must be deposited in the state's General Fund."

Just once, can you HSR deniers actually have a clue as to what you're talking about before making wild charges?

Finally, as to road and airport construction - those are simply not viable options for California's future. The number one reason why you HSR deniers are so wrong is your unwillingness to grasp this fundamental fact. That expansion will cost $80 billion at least - and CA would pay most of that cost - so why should we turn down the opportunity to provide the same mobility need for 1/8 the cost?

Further, roads and airports are not a viable form of transportation in the future. None of you HSR deniers ever accepts that the era of cheap oil has ended forever, and none of you have grasped its meaning - that roads and airports are not going to be the backbone of intercity travel in California for much longer.

The only reason travelers want a car at the airport is that airports are on the edge of town. HSR stations will be in the middle of urban centers, served by mass transit. That means a correspondingly smaller need for a car at journey's end.

The notion that Pacheco rules out a line to Stockton and Sacramento is absurd. They remain part of the plan and will be connected once the Anaheim-SF portion is completed, as will the LA-SD portion.

In any case, your entire comment has missed the whole point of this particular post - nowhere do you consider the cost of not building HSR. Even if $55 fares aren't possible, they will still be more affordable than the cost of flying or driving between LA and SF. The 20th century is over, Morris. Time to accept the realities of the 21st century.

Anonymous said...

In economics, what you're expressing is called opportunity cost. It's a very important concept, one many people fail to grasp.

Anonymous said...

"Why is this major capital infrastructure project being cast as an alternative to road and / or airport construction?"

Because that's what it is. California is a growing state, so there needs to be more transportation infrastructure built.

Morris Brown, I challenge you to find a way to move the same number of people as high speed rail rail does for less than twice what HSR will cost (40 billion USD). It can't be done. Not to mention the costs of pollution, congestion, etc.

That's why HSR is being proposed as an alternative to MORE air and road travel. No one is proposing the end of roads and airports, but the status quo of endless road and airport expansion is unsustainable. That's an easy straw man to knock down, but it doesn't address any real arguments.

Pantograph Trolleypole said...

Based on the following info, I would calculate the transfer is about $29.5B in California alone per year if we calculate the increase of $45 per barrel.

Anonymous said...


Well I can only say I get my information from reading and listening. Rod Diridon, on the radio in an interview on KCBS made quite clear that after the LA to SF segment was completed, surpluses would be used for expansion of the system, and not to repay the original investment.

AB-3034 indeed has the language you quote, but quite clearly the plan is to complete the whole 700 mile system, which this language certainly does not preclude.

Diridon also claimed taxpayers would not be asked for further funds and the surpluses would be used for expansion after the LA to SF segment was completed and generating the expected surpluses. Kopp in some statements seems to have already vacated that position by talking about needing local funding in addition to bond measure funds.

Diridon also made the broad statement that the project will not raise your taxes. (actually he made that statement 3 times) Well the money certainly needs to come from somewhere and that somewhere is general tax revenue.

This is a gigantic project and funding even if the bond measure passes is not at all assured. As you point out the Federal 14.4 billion may not even get approved, much less allocated to California.

The private funds seem even much more remote than Federal funds. I can certainly see private investment in a toll road, where with history and current conditions you can pretty reliably forecast costs and revenues. This project has none of that certainty.
(I am not in favor of private investment in toll roads, or other infracture projects. I think they are mostly tax gimmicks. I do not favor the Governor's position for this kind of financing. I only use the example to point out why I think private funding for HSR will not materialize). What is indeed disappointing about AB-3034 is the lack of language that will keep the CHSRA for spending billions, and not being able to complete the project because of lack of funds. I don’t think anyone wants another Bay Bridge fiasco.

Robert Cruickshank said...

Morris, you have a serious case of misplaced priorities. You seem more interested in preventing new taxes than in providing for California's transportation needs.

For example, your argument on "surplus" - the surplus being discussed is what is left over after operating costs AND bond repayments are paid.

Rod Diridon is but one of many figures involved in the project. He can say that the project won't raise our taxes, and the history of HSR construction suggests he may well be right. But so what if he is not? Again, you fail to see the point of this post, which is that there is no free ride here. pantograph trolleypole noted that CA has sent $30 billion to oil exporters on a yearly basis. How is that possibly more preferable to spending $10 billion in bonds on HSR?

HSR opponents seem fixated on not spending money on a badly needed project, partly because they think taxes are evil, partly because they don't understand our transportation needs. In both cases they totally misunderstand our current needs and because of their outdated priorities are making bad economic and financial judgments. HSR is going to save Californians money - which is why it is so important to understand that the cost of doing nothing is not zero.

Paul said...

Here in Denver, municipal government spent money in both directions - added freeway lanes (went from 3 to 4) AND installed a commuter-type rail line. Of course this is a citywide solution, not one that extends hundreds of miles like the prospective route in Calif. But the solution has already shown a considerable lessening of stop-and-go traffic on the metro area's main north-south highway (I-25), plus light rail ridership has nearly doubled previous estimates. Rail travel is more fiscally efficient than highway travel - once the infrastructure is in place - because maintenance costs per mile are similar but you're moving a whole lot more people.

Anonymous said...


I am not familiar with the example that Paul points to in Denver, but it would seem to be the type of infrastructure improvement that was needed and which has yielded the promised results.. That type of spending is fully justified and is certainly needed here in California in our urban areas. That is certainly not what this project is about. No one should even try to justify this project because it is going to lessen congestion on the major portion on the route from LA to SF. Driving on I-5, some portions of which have 70 MPH limits is certainly not a problem with congestion.

Why is this project even proposed to go from San Jose to SF, when CalTrain already has a “bullet train” along this route and adding HSR to this relatively short portion will save at the very most only a new few minutes. Is the reason for this segment because the bond funds will produce multi-billion dollar stations in both San Jose and San Francisco?

The proponents keep saying we need HSR to solve upcoming problems that are clearly on the horizon. What about the existing problems that exist right now in our urban areas? Proponents seem to think that we should not try to solve more immediate problems that exist right now. As should be evident to anyone following the economic situation our state is currently facing, we do not have infinite resources. The notion of diverting this amount of funds, at this time when much greater needs are clearly evident just makes no sense. We need to get our priorities in order, and this project should be rejected.

Robert Cruickshank said...

Morris - what? Caltrain's "baby bullet" service is not remotely comparable to HSR. The Caltrain service tops out around 70mph and takes one hour to link SF to SJ. HSR will make the same trip in 20 minutes.

Similarly, HSR in Southern California will cut existing rail commute times in half, especially along Metrolink's corridors.

So I don't see how you can sit there and write with a straight face that HSR will do nothing for urban transportation needs. The beauty of HSR is that it is BOTH an intercity rail system AND a metro commuter rail system.

I cannot think of a more immediate problem for California cities than soaring gas prices and traffic-clogged freeways. HSR is exactly what California cities - including, yes, Fresno - need to become competitive in a 21st century economy.

Rafael said...

@ morris brown -

the HSR bond measure actually includes $950 million for upgrading commuter rail and other feeder services. Afaik, the idea is that these are considered complementary and essential for building ridership without generating a lot of road traffic near the stations, where parking will be for-fee and limited in capacity.

It's not a question of either HSR or commuter rail. It's both and always has been, but on the latter cities and counties will still have to do much of the heavy lifting. Example: BART to SJ.

Before long, California will also need further upgrades the rail freight lines serving its primary ports in LA and Oakland, over and above the Alameda corridor project. All of these demands are becoming urgent at the same time because the price of oil is going through the roof and because California - like the rest of the nation - allowed its rail infrastructure to languish for so long.

HSR is a good place to start nursing rail back to health. Crucially, the EIR/EIS for HSR is completed, so there is something concrete for California voters to decide on.

Anonymous said...


Let's see. Seventy miles in 20 minutes that is an average of 210 MPH.

Come on let us be reasonable. They are going to stop at Redwood City and the airport. HSR in urban areas doesn't run at top speeds. It also takes a considerable time to get up to speed.

Twenty minutes is completely out of range. Forty-five to fifty minutes is reality. I'm not trying to compare CalTrain to HSR in terms of speed, but rather to point out on a short segment like this, in an urban environment, the time differences are not that great.

Pantograph Trolleypole said...

That's actually just $30B from the $45 increase this year in a barrel of oil. Not the baseline. Crazy huh?

Anonymous said...

I agree that the train wont go 210mph through the peninsula.


It is 48 miles from San Jose Diridon station to the SF Caltrain station. (source: Google maps)

The High speed rail website is predicting 30 minutes. (source: CAhighspeedrail website)

= average of 96mph = seems plausible

Considering that it will be grade separated and there will be express trains that dont stop at every station like redwood city, this seems quite plausible to me.

Rafael said...

From our adding-insult-to-injury department: more on HSR in Vietnam.

luis d. said...

It seems that a lot of HSR deniers/debunkers are in a love affair with their auto's and can't stop seeing them for an alternative that makes sense. Even though the auto will not be eliminated at all but co-exist alongside HSR. I don't understand. I love my card but I can leave it behind for HSR, Everyone should!

If we can eliminate or dramatically reduce our dependence on the auto to at LEAST get to work everyday we will be making a BIG difference in how we live and use oil responsibly.

Deniers also see this project as an "expensive toy" that only big-shots and business people will use Or they see it as public transit that is cheap, and unreliable and that is NOT the case. HSR will create a hub for all transit and will link the state how it should be! It will be reliable enought that we can use it on trips to work as well as long distance trips to all parts of the state, which I hope one day will link us to other states all the way up to Canada and down to Mexico and out East as well which is in the far future.

Finally, for people who whine and complain about the state being in debt and not being able to pay for this I would say to you that our country was built on debt, it runs on debt and it will always be in debt just because our governments system of money is extremely flawed! It is a big mess and the only thing we can do is to regulate the debt to get done what is most important in our state and right now it is how we get around. We should have had this up and running years ago and we would not see this spike in Oil prices since California is one of the biggest consumers of oil in the nation.

If you want a comparison check out the "Alameda Corridor" in Southern Los Angeles going towards Long Beach, Ca. and how it's grade seperation inside a trench helped the surrounding citie's. It was not as nearly expensive as this project but it was worth it.

Rafael said...

@ luis d. -

high speed trains can compete with air travel times up to distances of ~600 miles. Beyond that, it really becomes a question of how much a person values their time vs. their money and the environment.

Running high speed rail all the way up to the Pacific Northwest makes little economic sense. Running tracks down into Mexico is next to impossible politically.

Nevada could decide to drop both the DesertXpress and the maglev projects in favor of an HSR spur from Mojave to Las Vegas. California taxpayers would not participate in funding any of those.

Once the trunk line is operational and work on the already planned spurs is in progress, a number of additional extensions within California could conceivably be put on the drawing board:

- Burbank to Santa Barbara
- Oakland to Sacramento via Davis
- Sacramento to Redding via Chico

However, California also needs improved commuter rail and upgraded freight rail corridors.

Anonymous said...


I agree completely with your statement:

"If we can eliminate or dramatically reduce our dependence on the auto to at LEAST get to work everyday we will be making a BIG difference in how we live and use oil responsibly."

This is not what this project is all about. It is not about building a commuter train. That would make sense. It about providing an alternate mode of travel from LA to SF in its initial stages. It seems to be about creating development opportunities in the central valley; i.e. urban sprawl. It is about satisfying the political and development interests in San Jose and San Francisco.

luis d. said...

@ rafael -

Yes, my vision of HSR north to Canada and South to Mexico might be a little to ambitious and much at the moment but I am imagining the connection to the north would be a connection to Oregon and Washington's own HSR wich should be funded by them in a north/south corridor which we can later connect to. The southern portion would be in place since the CA. HSR line will go to San Diego and with Mexico in the planning their own HSR line I thought that maybe all these lines could be compatible for future development. This might not happen anytime soon but it doesn't hurt to wish! I agree that after a certain amount of miles it's just better to fly, but I am imagining this as a national project that will connect most of the state's through the less enviornmentaly damaging areas and connecting the whole U.S. This would be very expensive indeed but if we really wanted it, our government really wanted it, it could be done. Instead of wasting money on the War!

Nevada should drop the DesertXpress and just fund their portion of the CA HSR line to Las Vegas. The DesertXpress is a needed line but in my opinion the equipment they would use would not be very efficient and the trains would not run as fast as our system. They would also use more diesel than electric power. The CA HSR would use NO Diesel in the end. The Maglev project sounds good to me but it might just be a "money burning" project at around $12 Billion for what the value really is of going to Vegas. If Nevada wants to fund it I have no problem.

@ morris brown -

I think in the long run this will work as a commuter train. It's Main goal is LA to SF but in the long run, we should be able to use it as a commuter train because their will be spurs throughout the state. That's why to make it work from the start we need to use that $950M to connect real Commuter trains and light rail to HSR and as more HSR lines get built we will rely less and less on commuter trains. But nothing can happen if we don't get it started. Everyone can't be pleased immediately when this thing opens. Some will benefit immediately and some will have to wait.

Anonymous said...


You do realize that the Bay Area to LA basin is one of the busiest air corridors in the world don't you? This project is meant to alleviate a lot of that congestion in the air and ground by reducing those flights which planes do the most polluting. There are A LOT of people going from the bay area to the LA basin and vive versa, commuters and tourists alike. So this plan will give a much needed alternative.

It its important to start a massive project like this now because of the long construction time frame regardless of the current economy. The economy will eventually improve like it always does and this project will help. So its better to do it now on a downswing and finishing when things are good, rather than the other way around.

We need to start looking at the long term transportation needs of this state instead of always trying to fix only the short term, which is like filling a pot hole that we all know will eventually open up again.

Pantograph Trolleypole said...

All I know is every time I go to my sister's in Bakersfield I dread I-5. Worst Freeway Ever!

Robert Cruickshank said...

I just don't think Morris gets it and I have to wonder if he is being willfully obtuse on this point. HSR is BOTH intercity rail AND regional commuter rail. And as eric pointed out, LA-SF is one of the world's busiest air corridors - and if the flawed Acela can grab 40% of the Northeast Corridor travel from the airlines, surely the CA HSR will do just as well.

More importantly, luis nailed the problem with the HSR deniers - they refuse to accept that the era of the automobile is at an end, at least as the backbone of our transportation system. Cars are rapidly becoming an expensive luxury, whereas HSR is the affordable workaday alternative. This post was designed to highlight that point but Morris consistently - and I must conclude, deliberately - refuses to see that HSR is cheaper than the alternatives.

Morris hasn't responded to pantograph trolleypole's point that CA has spent $30 billion *this year alone* in higher gas prices - whereas HSR is a one-time cost of $10 billion spread out over many years.

Thankfully I believe California voters are not as obtuse, and instinctively understand the need for projects like high speed rail. That's why it will pass this fall.

Anonymous said...

@ morris brown

As should be evident to anyone following the economic situation our state is currently facing, we do not have infinite resources.

Yes that is absolutely true. If only you really thought about this, you would realize that the HSR is a much more effecient and inexpensive way to carry millions of Californians than ay road or air alternative.

Again I ask you, since you seem to be concerned with lower taxes, how are you going expand the infrastructure that will be put into place if HSR is not passed. And do it for less than twice the cost. If it costs more, it means more tax revenues have to be used for infrastructure. You do understand that point, don't you?

Anonymous said...

Now, Morris, how much does it cost, in fuel alone, to get from San Francisco to LA?

(I'll use comparisons from the great site at for this exercise with a bit of rounding for simplicity.) And remember, the metric here is equivalent Passenger Miles Per Gallon, or PMPG

Well, driving, it is 382 miles. If you drive alone in a CAFE standard vehicle at 27 mpg, it uses about 14 gallons of fuel. At the current cost of fuel ($4, a bit low these days in California), that costs $56. That's today. As prices rise, it could be more. But for now, driving uses $56 worth of fuel. Throw an average of 1.5 people in one of these cars and you do better, perhaps 40 pmpg, or $34 of fuel. Cars may become more efficient, but until/unless electrics hit the road, you're still under 200 pmpg (four people in a Prius). Cars are governed by the fact that rubber-on-pavement has much more friction than steel on steel. Plus which, driving is a lot slower.

Now what about flying? Well, the best you are going to do is about 59 mpg on a new 737, packed full. That's for a 600 mile route, so for a shorter route (It's 337 miles from SFO-LAX) it's likely less, as takeoff and landing take a lot more fuel than cruising at altitude. Let's call that 55 mpg. More likely, you'll have a 60-80% full plane, so that takes it down to 40 pmpg. Slightly better than a CAFE car, but still $34 of fuel. We won't factor in travel to the airport, either, but that's not free.

Now, how much for a train? Well, aside from the fact that electricity can be carbon-neutral, it's cheaper to produce than gasoline. But using a BTU equivalent (assuming the electricity for a HSR comes from equivalent amounts of gasoline), how much does HSR cost? Depending on load and system, HSR averages between 450 and 750 PMPG. Let's say 600. That's triple a fully-loaded Prius and fifteen times an average car or plane. At typical loads, it still averages, for the sake of simplicity, let's go with 432 pmpg. So the cost? For the 432 San Francisco to LA trip is $4.00. Yup, less than a gallon of gas.

Now how much does this save, in fuel alone? Well, say 50 million rides a year on this segment — I'm guessing, as is CAHSR, by about halving CAHSR's estimates. So if each of these people drove or flew, they'd use about 10 gallons of gas. That's 500 million gallons of gas each. Using HSR, they'd instead use 50 million (equivalent). So that's a savings of, at current gas prices, nearly $2 billion per year With $4 gas. Push that to $10 gas, and the savings become $5 billion per year. Using the $2 billion number, we'd save the cost of the project, $40 billion, in 20 years in FUEL COST SAVINGS ALONE! If gas goes up 250% (as it has in the last three years) in the next 20 years, the payback will be in eight. And this assumes ridership doesn't spike when driving and flying become prohibitively expensive.

This assumes no externalities. Such as wind-powered trains versus carbon-powered cars and planes. Or the time savings of fast CBD-CBD trips. Or better mobility, and fewer cars on the road. This is fuel savings alone. It pays for itself. And quickly, at that.

Anonymous said...

One should not take today's automobile gas consumption and cost without realizing that the cars of the future are going to much more efficient.

Yesterday GM announced production approval of a model Volt plug-in electric car. From the announcement you read

Fully charged, the Volt could drive about 40 miles without using any gasoline, and a small conventional engine would recharge the vehicle, extending its range and allowing it to get the equivalent of 150 miles per gallon.

Autos that can get anywhere near this kind of gas mileage change the equations of economics, CO2 production and competitive balance between private driving and the use of public transportation systems.

This blog is always pointing to the future and the future needs. Don't discount present auto technology as not being able to deliver much better efficiency in the future. Already the hybrid cars are changing these equations.