Trains For America

More choices for better transportation

CNN addresses high speed rail

CNN is running a significant and generally even-handed treatment of the Obama administration approach to high speed rail. You will need to sit down and take a deep breath because it does not get started on the best foot. Naturally, our always reliable libertarian friends (scroll down to item below) have grave reservations about whether high speed rail will ever cover its costs.

There is another serious error. According to Amtrak spokesman Clifford Cole, “the Acela unit is profitable. ” Yet a few paragraphs earlier the CNN report flatly states,

The Northeast corridor, linking Washington, D.C. to Boston, is the nation’s most highly developed high-speed rail service, according to the U.S. Department of Transportation. Most of it is controlled by Amtrak, a federally-funded railroad company that relies on government help, receiving more than $5 billion in federal appropriations and stimulus funds over the past three years, according to Amtrak spokesman Clifford Cole.

So, if the northeast corridor gets $5 billion in subsidies in the past three years, in what way is Acela profitable?

A Mr. Sam Staley of something called the Reason Foundation has added his most reasonable opinion, which coincidentally exactly coincides with the special interests which control the transportation debate.

Sam Staley said it’s possible for a well-designed high-speed rail to cover its operating costs, but even the best-run rail system won’t be able to cover the capital costs stemming from its development.

“I would really like to see high-speed rail work because I really like trains,” he said. “I just have trouble getting over the fundamentals. These things shouldn’t even move forward unless they can cover their operating costs.”

Indeed, that is a most “reasonable” concludion. So, let us consider another “reasonable” proposition: should highways cover their operating costs?

What are those operating costs? I suppose we must figure in the 40,000 fatalities each year of the billions in personal injuries and lost wages. Yes, it is an unfair argument but the human price of our transportation policy should not be entirely overlooked.

In Arkansas, a southern state which just appropriated the FIRST funding ever for any sort of rail project and in which the trucking association holds an absolute death grip on the general assembly, yet the state has enormous unmet road deficiencies.

  • 25% of Arkansas’ bridges are structurally deficient or functionally obsolete.
  • 32% of Arkansas’ major roads are in poor or mediocre condition.
  • 39% of Arkansas’ major urban highways are congested.
  • Vehicle travel on Arkansas’ highways increased by 58% from 1990 to 2007.
  • Arkansas has a $160 million backlog in highway maintenance needs.

Source: American Society of Civil Engineers report Sept. 2008.

There is more, so pay attention.

Last month, during the committee’s first meeting, state Highway Director Dan Flowers said the fuel tax has been a flat source of revenue and that the state is seeing a decline in that stream. Flowers also said Arkansas highways would need $200 million more annually just to maintain current conditions.

Source: Arkansas News Bureau report June 25, 2009.

In a poor southern state which is completely car dependent, gasoline tax receipts are flat and headed south. Automobiles will be more fuel efficient, and some will be electric. This demands a new source of funding and funding from sources other than those that have been labeled as “user fees.”

Truckers are explicit that fuel taxes must go only to highways. It is a self-serving argument and, not wishing to cause offense, Jane Fonda tried a similar line of reasoning about 40 years ago.  Transportation is undergoing an fundamental change and it is apparent when we look at the funding sources that have generally been available.

Put another way, why don’t highways cover their costs?

(I am not an accountant, so I cannot say with authority whether maintenance is included in “capital” costs. I doubt it and Amtrak has much the same situation in the northeast corridor. Ridership is high, but it take a lot of dough to keep tracks up to 125 mph. standards.)

This discussion has, so far, completely excluded the needs for additional road capacity, which even in Arkansas is substantial. When Mr. Flowers addresses this topic, it is in the billions.

To borrow a phrase from CNN, it’s the elephant on the highway.

In Arkansas, we hardly know the meaning of traffic congestion, but it is at crisis stages in some areas and the only solution is to expand to 10 lanes or more, or start stacking highways on top of each other. Is this the noxious eyesore we really want for the future?

One of the things discussed at some length at the recent National Intermodal Steering Committee and Texas High Speed Rail Commission meeting in Little Rock is the anticipated population growth. I recommend you all get up to speed on this issue. Many regions which might not support true HSR by population volume today will in 20 years.  That is why we must start now and, even to my own surprise, there is some urgency.

It is the Buckeye, Heritage and Reason that are falling on the emotional arguments, and largely based on the irrational and unfounded fear of a loss of personal freedom. That kind of assertion is simply beyond comprehension, but it might be worth saying that giving people choices is a fundamental bedrock of American government and free enterprise.

Better transportation, including HSR and “high performance” trains, enhance the highway and airport systems. “Quality of life,” referenced in the CNN report is hardly a squishy “liberal” attribute for white wine swilling elitists.

Many parts of Arkansas attempt to compete for new industries. Quality of life is important and our non-congested system (a huge generalization, even in rural Arkansas) is a plus. Little Rock’s lack of good airline connections is a negative as is our anemic transit system. Businesses consider quality of life right along with taxation and education.

Filed under: Amtrak, Passenger Rail Transportatio Policy, United States High Speed Rail

6 Responses

  1. Avi says:

    There is no error, just a confusing paragraph. The Acela unit of Amtrak is profitable. Amtrak as a whole receives $5b in federal money. The same way any business can have profitable and unprofitable departments, Amtrak has profitable and unprofitable departments. Even a money losing company can have money making departments. So there is no reason why Acela can’t make money while Amtrak as a whole loses money.

  2. patlynch says:

    Your point is well taken. It is exactly the claim of profitability that I am approaching. I am suspicious of such claims because they contain a lot of subjectivity.

    Several overhead expenses need to be properly apportioned in the northeast corridor in order to make such a strong claim. Among the categories shared by Acela, long distance trains and commuter rail are: station personnel, reservations, ticketing, security, dispatching, and administration.

    There are some vested interests here that need to be identified. First there is me. I reside in a rural state that, because of scheduling, is largely unserved by long distance Amtrak trains. Some would say that it is in my best interests to emphasize the shortcomings of the Acela premium frequent service.

    On the other hand, Amtrak management has an incentive to appear more efficient and professional, “Those bad ‘political’ long distance trains just can’t make money but we graciously run them as the cost of operating our more sensible trains that, of course, run at a profit.”

    My honest opinion is that trying to figure out if Acela is “profitable” is objectively impossible and a fools errand. It might be possible to get a good idea of the real situation, but that would demand a degree of honesty that is not likely in such an emotional debate.

    Footnote: just try to imagine how many statistical distortions are used in the health care discussion.

  3. Allan says:

    First of all, the NEC is not profitable. Amtrak can only claim that thru accounting tricks that Enron would envy and would put people from the private sector in jail (such as allocating costs to the long distance lines that should be attributed to the NEC).

    Patlynch – “So, let us consider another “reasonable” proposition: should highways cover their operating costs?”

    I’ve touched on this before but I’ll be blunt here. I don’t think you realize the absolute absurdity of this statement and why it falls on deaf ears.

    1. Except for toll roads, highways do not have an operating cost. They do have a maintenance cost but not an operating cost and there is a significant difference between the two. So, from a strictly financial and logical point of view, you’re asking for something that not only doesn’t exist but cannot exist outside of a toll road.

    For toll roads, they do sell a service, therefore toll roads should cover their operating costs (the costs of the booths, equipment, and labor). If priced correctly, toll roads could even show a profit.

    2. Same thing with being “profitable”. If they don’t have an operating cost (they’re not selling a service or a product), then there can be no “profit”. Again, you’re asking for something from highways that doesn’t and cannot exist outside of a toll road.

    Thus, when you bring up non-toll roads being “profitable” or “covering their operating costs”, you’re already starting out on a false premise and you immediately loose your audience.

    I’ll give you a quick example. In a debate once, I had to defend a difficult position … almost impossible. My opponent had the morally superior position and should have easily won but she led off with, “It says right in the Constitution that all men are created equal.” No, it doesn’t (that’s in the Declaration of Independence). I jumped on that with both feet. Because she had made an incorrect statement, her credibility was gone and she lost the audience … and the debate.

    You’re doing the same thing! With the exception of your own cheering section, you’re losing the audience.

    3. You’re not even comparing apples to oranges, you’re comparing apples to watermelons!

    Look, we can debate all day about whether the gas tax covers the construction and maintenance costs of highways but it doesn’t matter and let me tell you why.

    People pay a gasoline tax. They know, or at least believe, that most of it is going to pay for road construction and maintenance. Very few actually know that some of it is siphoned off for transit. They believe, correctly, that they’re paying to use the roads. People are willing to pay an increase in the tax IF you convince them that it is needed FOR THE ROADS. For example, many years ago, my state easily passed a 5-cent increased in the state gas tax after a couple of bridges collapsed. The extra money was dedicated to repairing all the bridges with the state faithfully did. There was very little grumbling about the increase.

    The reason people accept a gasoline tax is because any individual in their own vehicle can use the road when they please.

    You can’t do that with a railroad. Imagine if the interstate system was exclusive for the trucking companies and passenger buses. Do you think that people, in general, would rush to subsidize the interstate so that SOME people could then PAY to ride the bus??? No? That is exactly what you’re asking them to do with railroads. It’s even worse with railroads because most of the tracks are privately owned. So now you’re asking people to subsidize the bus company in order to buy new equipment and pay the trucking companies a fee to use their privately owned roads … and you tell the people that not only does the bus company need money to buy equipment but it can’t even cover the operating costs! … And you wonder why you meet such resistance …

    Throw in the fact that Amtrak has been poorly managed for many years and you get even more apathy.

    Rather than ridicule Mr. Staley’s position about operating costs, you should turn to Amtrak and ask the management why Amtrak can’t recover at least the operating costs. For that matter, it should be able to recover the operating and maintenance costs from the fares.

  4. patlynch says:

    Nice try.

    It is readily apparent that highways do not cover their costs, logical and verbal gymnastics notwithstanding.

    And I am pleased to note that we are in general agreement on the profitability of the NEC. Even without sinister deception, the allocation of expenses gets pretty dicey.

    Those same people you claim I have lost in my argument know that truckers tear highways to pieces every day with their over-sized loads. Regular people know that is why the cost of keeping the highway up increases, and whether some bean counter with a green lamp and a visor puts the cost down as “operating” or something else, it is still a cost.

    It is also true that the cherished gasoline tax is insufficient to pay for the sacred highways. Fuel efficiencies, public preferences, and the advent of electric cars will make it increasingly so.

    Highways are an expensive proposition. Your argument, which I must salute for its raw cleverness, has some appeal in southern rural states like Arkansas. In places with real congestion, regular people can see the need for some options.

    And I think you were entirely correct to trounce on that little witch. Everybody knows (or should know) the difference between the Declaration of Independence and the Constitution.
    Pat

  5. Allan says:

    I did attend a meeting where an official from the the state DOT stated that the gas tax is currently covering the projects (indeed, it’s been a few years now but the general assembly did raid the the Road Fund to balance the state budget).

    However, for the very reasons you stated (increasing fuel efficiencies, electric vehicles, etc.), he said that a new revenue stream would be needed to keep the Road Fund solvent. He was proposing changing the flat tax per gallon to a sales tax.

    And yes, freight trucks do much more damage to roads than do cars. That is why the tax per gallon on diesel is higher than the tax per gallon of gasoline. Kind of sucks for those of us with diesel engines in our pickups but I see the logic behind since truckers use far more diesel than people with diesel cars and pickups.

    By the same token, I would say that freight trains cause more maintenance on railroads than do passenger trains … but then they own the tracks.

    The whole point of the argument is that highways are not a business … Amtrak IS a business!!!

    Highways are not just for truckers and buses … but railroad tracks are just for freight companies and passenger trains. Railroads are exclusive while highways are inclusive. That’s why you see so much public support for highways.

  6. patlynch says:

    Highways are a very big business operated by taxpayers with very large commitments. Your “inclusive” versus “exclusive” distinction seems rather arbitrary. Railroads and highways exist to transport goods and people.

    Highways were built with public funds using eminent domain to acquire property. In some cases, railroads did the same thing. In Arkansas, we have a big old highway department headquarters building that is probably 10 stories tall and has hundreds of engineers and administrators hard at work designing and planning.

    Taxpayers pay for all those people. It sure looks like a business to me, but what do I know?

    Truckers have a negative, and somewhat undeserved image, but you only need on incident of intimidation on the open road to change one’s outlook. Trucks tear up the roads and are seen as a principle cause of congestion.

    Whether or not Amtrak is a business is a good question, and I do not mean any disrespect in the observation. I think there is a very good argument to be made that all transportation is a social service and that we all benefit from good transportation.

    I do not by any means intend to excuse the instances of Amtrak mismanagement, an apparent example of which is being considered in the “Turboliner” thread above. Amtrak desperately needs some continuity in management and more businesslike operational philosophy.

    Yes, that is a contradiction and I have no idea how to reconcile my own differing positions. It is an area where government agency, with reasonable oversight, should take a leadership role.

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