The article by Robert Samuelson, which is linked below, ought to stir a bit of controversy. Samuelson is a respected economics and business columnist for Newsweek and the Washington Post.
http://www.newsweek.com/2010/10/29/why-high-speed-trains-don-t-make-sense.html
Global pronouncements are pretty much worthless, although he raises points that we all know need to be considered.
The case for HSR exists when the alternatives are less attractive. This clearly has to be done case by case (duh!)
I am not so sure that Amtrak’s NEC load dumped on I-95 would go unnoticed. My back of the envelope calculations led me to think Amtrak was worth 1/2 to one whole lane of interstate at peak times. Needed some 5th grade math for that one. That would put the road over capacity more hours of the day and more days of the year.
Providing rail vs building highway and air capacity in already crowded lanes might just be the best alternative. But, you have to do the math, case by case.
Samuelson didn’t do that math…
But again the dollars and cents isn’t the only costs to be considered. Pollution, land use or even the avaliablity of land, how many cars can you fit on Manhatten Island or in Hudson County, NJ …there is so much more than just money to be taken into account to rely on Samuleson, CPA’s, investrment bankers, and other bottom liners. If you relied only on all or any of them to give an ok on anything we’d still be using oats for fuel and shovels or high boots in the roadways.
Robert Samuelson is a fine columnist who writes about a variety of topics. He is not an economist - that would be Paul Samuelson. Robert didn’t even major in econ at Harvard (Government).
He mentions an 800 mile HSR line from Anaheim to San Francisco. Perhaps that was a typo, but it suggests a pretty hastily-written column.
I am not an economist either. But I completed more than 40 hours of economic at the undergraduate and graduate level. I know a bit about it. One does not need a Phd in economics to understand the basics and how to apply the knowledge in a practical sense.
Eight hundred miles of track is not far off the mark. The current route profile for the California High Speed Rail Project is 378 miles from Anaheim to San Francisco. Ultimately, the line will be extended to San Diego and Sacramento. This does not add up to approximately 800 route miles, but it will be close to 800 track miles. The line will be double tracked.
And I wasn’t commenting on you. But even adding on SD and SAC is only 200 more miles. The route is measured in miles between points, no matter how many tracks. It just seems like a sloppy article.
Clearly, the case for each high speed rail project needs to be examined on its own. Moreover, the definition of high speed rail needs to be agreed. Whether one means a 220 mph train or a 125 mph train is important. The costs are dramatically different.
The GAO’s findings tend to support Samuelson’s universal views. That is to say, they came to similar conclusions regarding the projects that they reviewed, i.e. most of them overstated the benefits whilst understating the costs.
The projected cost of the California High Speed Rail Project (CHSRP), including weighted average financing charges, is approximately $206 million per mile. This is the average construction cost per mile. Clearly, construction costs in the metro areas to be served would be much greater than in the country. These numbers assume the project comes in on time and within budget. If it does, it will be a rare happening.
The cost to construct 130, which is limited access four lane toll road, was approximately $31 million per mile. It goes around , so it is not a fair comparison of what it would cost to expand highway capacities in the LA or SF areas, but I would be surprised if expanding them would cost anything like $206 million per mile.
Sam1,
I think you are forgetting to factor in operating and maintenance costs after wards. Not to mention which mode is going to be more easily adaptable to increase in ridership. Adding another lane or another train/coupling multiple sets together.
One should also consider how much that the California system is going to tie into the mass transit and light/heavy rail systems. It may actually become more appealing for travelers to use a fine tuned system over driving, and may be willing to pay the extra cost.
One of the things I keep harping on is to stop thinking running trains but rather providing a service. Service is the bigger picture of operations and results than the nuts and bolts of one track or one train. After you get by that, then you can understand the economics of a railroad service versus a highway service for instance.
The figure published in several reports on the California project has been between $30 to 60 mil. per mile. Even that seems high, but where does a figure several times that come from?
I found the 800 mile figure refers to the whole system with a bunch of eventual branches beyond the core.
As ever…one man’s pork is another man’s dinner.
From what I understand, it is the price of the land in the city areas that is really jacking up the price. [2c]
Which makes you wonder why they didn’t plan to use existing ROW/track in those areas. It would be a great place to start the conversation about FRA car construction standards and maybe be able to deliver a more sensible HSR product.
The cost projections for the CHSRP, which are published by its proponents, only consider construction costs. They don’t include the financing costs.
The cost of servicing the debt (financing costs) will be capitalized to the project in accordance with Generally Accepted Accounting Principles. As a rough rule of thumb, the cost of financing a project over 30 years, which is the likely debt terms for the project, would nearly double the cost. Of course, it depends on the terms of the financing, i.e. interest rates, bond terms, etc.
The latest estimated cost of the project is $42.6 billion. I assumed that the project managers could borrow the funds at the current municipal bond rate (4.53 per cent) for 30 year debt. The rate is higher than the rates for many other states because of ’s heavy debt burden. The state is a financial basket case. Some of the project will be funded by the federal government, which can borrow money for less than the municipal rate, at least for now, although it will probably eventually cost the feds more to borrow money than , if historical patterns re
[quote user=“Sam1”]
The cost projections for the CHSRP, which are published by its proponents, only consider construction costs. They don’t include the financing costs.
The cost of servicing the debt (financing costs) will be capitalized to the project in accordance with Generally Accepted Accounting Principles. As a rough rule of thumb, the cost of financing a project over 30 years, which is the likely debt terms for the project, would nearly double the cost. Of course, it depends on the terms of the financing, i.e. interest rates, bond terms, etc.
The latest estimated cost of the project is $42.6 billion. I assumed that the project managers could borrow the funds at the current California municipal bond rate (4.53 per cent) for 30 year debt. The rate is higher than the rates for many other states because of California’s heavy debt burden. The state is a financial basket case. Some of the project will be funded by the federal government, which can borrow money for less than the California municipal rate, at least for now, although it will probably eventually cost the feds more to borrow money than California, if historical patterns remerge, which they will in time. The private partners may have to pay more than the California rate to borrow money for the project, since its financial viability is in question, although it depends on thei
Questions and problems arise on these issues because the US has no firm universal transportation policy. Although we have come to accept government(s) building and maintaining roads, airports and policing airways, and maintaining and operating waterways along with commuter rail and transit systems, we cannot wrap our minds around a way to work with railroads because they have always been private enterprise and many think they should continue to be 100% so or die (I’m not saying the shouldn’t be, I am just saying it is so). We don’t look at transportation as a public need in order to maintain commerce, i.e. move people to an from jobs; create living areas and work areas; create private and public sector jobs; create private sector business opportunities; move products to and from sources and end user; in short, create a climate that encourages and helps develop enterprise that yields livelihoods for the population and profits for business. We keep fighiting private vs public, parochialism vs parochialism, self interest vs. self interest, etc. without seeing what will be the best overall interest of the USA. HSR, regular rail, airports, highways, water resources, fuel resources, even pollution control so the population can breathe and be able to work, all hve to be controlled and operated somehow. It just can’t happen by posturing idealogical arguements and stonewalling.
I was attempting to show that the total construction cost of the CHSRP will be considerably more than the costs projected by its proponents, and raising a point as to whether the cost of expanding the airways and highways would be more costly. I was not presenting a total cost model.
Clearly, there are other variables (quantative and qualitative) to consider in any comparison. Operating costs, maintenance costs, salvage values, environmental impacts, etc. would be factored into a complete analysis. This was not my objective nor, for that matter, could it be since I don’t have access to the necessary data.
The estimated cost of NextGen, according to the FAA, is $22 billion. I presume this does not include the financing costs. The government will fund the project with U.S. Treasury issues. Using the current weighted average interest rate for the U.S. Treasury (2.56%), the estimated cost of the project at this point, using the 10 year Note as the benchmark security, would be approximately $31.5 billion, which is considerably less than the project cost of the CHSRP.
I don’t believe that the CHSRP proponents plan to sell the project, especially given the fact that no one would buy it, as suggested by the fact that to date no private investors, other than the manufacturers of the rolling stock or infrastructure, have thrown their hat into the financing ring. They could hardly be described as arms length investors.
For rate making purposes the total costs of a power plant, including the financing costs, are recovered over the expected life of the plant. Under the regulated environment in Texas, whilst the plant was under construction, the sponsoring utility could begin to recover the financing costs through a process call Allowance for Funds Used During Construction. But for costs analysis as well as rate making purposes, the total cost of the financing or debt service is being recovered over the es
It used to be in railroading that a branch line or local train would be maintained as part of the service. It was deemed important in the scheme of things even if it didn’t pay its own way; it did add to the overall service, though. Other business, like broadcasting, used to deem it necessary to have newscasts as part of the program or live announcers to handle not just the on the air program, but to be there in case there was an emergency which had to be broadcast.; it was local, too. Today, often, everything is either controlled and fed from a remote location to multi locations or are pre recorded and autmatically presented even days later. The owner has saved money but the listener and advertiser has lost a lot. Other businesses have done the same. Investment business since the Reagan years has reduced the quality of products and services cheating the population out of what they used to have while the investor reaps huge rewards and does not often put back into the business or the community. We have to change our laws, get rid of the Reagan tax and business plans. Make it worth while for American business to invest in American business by building factories and hiring Americans. They also should not be able to send their profits out of the country to hide from American taxes. This bean counter mentality has killed off American business, slowed internal (inside the US) investments, and put the country in jeopard. The whiplash to all this is going to be similar to the labor unrest of the late 1800s.
Re: sam1’s postings on this thread and on the Russian HSR thread.
Your post 10/29/2010: “For example, the backers of the California High Speed Rail Project estimate the project will cost between $40 and $45 billion. However, when the financial costs are factored into the cost structure, the cost of the project is likely to be in the neighborhood of $73.2 billion to $82.3 billion.”
Your quote from Samuelson 11/3/2010: “California wants about $19 billion for an 800-mile track from Anaheim to San Francisco. Constructing all 13 corridors could easily approach $200 billion.” [In fact, the total mileage for all 13 corridors is more than 800 miles]
Your post 11/4/2010: “The projected cost of the California High Speed Rail Project (CHSRP), including weighted average financing charges, is approximately $206 million per mile. This is the average construction cost per mile. Clearly, construction costs in the metro areas to be served would be much greater than in the country. These numbers assume the project comes in on time and within budget. If it does, it will be a rare happening.”
schlimm -
You have identified the technique used by the anti’s for any project…
Throw enough apple, orange, pear, cherry and kumquat ‘facts & figures’ that can’t be verified and each measuring something different within the scope of the proposed project…Once you throw enough smokey figures and ‘facts’ into the proposed project you have totally obscured the ability of anyone to bring all the garbage together and make any meaningful understanding of the project and/or it’s Pros & Cons and anything approaching a true cost//benefit analysis.