Taking Taxpayers for a Ride

            Most Americans have a favorite train story.  When my parents took my brother, sister and me out West in 1966, we took the overnight train from Denver to Salt Lake City.  We were awed by the beautiful scenery from the dome cars, ate well, slept comfortably, and enjoyed every minute of the trip.

            Along with real trains, children and adults know all about Thomas the Train, Lionel trains, and the Hogwarts Train on Platform 9¾.  There is a fascination with trains that does not exist with other forms of travel.  That shiny locomotive pulling into the station is a sight that never grows old.

            Such nostalgia and excitement is one explanation for the Obama Administration’s announcement that it is moving forward with $8 billion in investment in high speed rail under the stimulus bill, followed by $5 billion over the next five years as requested in the President’s fiscal year 2010 budget.  On April 3, when President Obama was in Strasbourg, France, he admitted that he was “jealous about European trains” and that he was thinking “Why can’t we have high speed rail?”  So on April 16, he joined Vice President Joe Biden, who has gone back and forth to his home in Delaware on Amtrak for 35 years, in announcing the “future of travel” in the United States.

            While the President sounded excited about building a new system of high-speed rail that “will be cheaper, faster and easier than building more freeways or adding to an already over-burdened aviation system” his lofty ideals will run right off the tracks.  According to an April 16 ABCnews.com article, “Since 1980, every state effort in the United States to build high-speed rail has failed.”

            The closest thing to high speed rail in the U.S. is the Acela service between Washington, D.C. and Boston.  But the ABCnews.com article noted that the train can travel at 150 miles an hour “in one short stretch,” but “slows to 30 miles and hour near a Baltimore tunnel.”  Overall, the average speed is 80 miles per hour.  The varied speeds are the result of the geometry and curvature of the track, a longtime train engineer told ABC.

            The inability to go full throttle all the way up the Northeast corridor has a dramatic impact on the Acela’s schedule and appeal to travelers.  Currently, the Acela takes passengers from Washington to New York City in two hours and 50 minutes at a round trip cost of $266 with one week’s advance booking.  By contrast, Amtrak’s Northeast Regional or “regular” train costs $144 round trip and takes three hours and 20 minutes.  Therefore, it costs $122 more to save 30 minutes of travel time; that is also $22 short of the amount needed to make a round trip on the Northeast Regional train.  In other words, the Acela is sleeker, more comfortable, and faster, but the additional cost is hard to justify, especially for non-business travelers.

            In addition, a one-week advance booking for both the U.S. Airways and Delta shuttles from Washington D.C. to LaGuardia airport cost $223 round trip; travel time is one hour and 14 minutes.  The cost $43 less than the Acela and the time is 96 minutes faster, or a little more than one and a half hours.  The shuttle is $79 more than the Northeast Regional train, but it is two hours and six minutes faster.  However, as the ABC News article noted, more people use the train between Washington and New York than fly.

            Amtrak CEO Joseph Boardman told ABC News that he would like to increase the speed of trains that serve major cities to 110 miles an hour.  The associate administrator for railroad development of the Federal Railroad Administration talked about a “sweet spot” for high speed rail in cities that are “100 to 500 to 600 miles apart.”  That would include Chicago to St. Louis and Milwaukee; Miami to Orlando, Florida; and Fort Worth, Texas to Little Rock, Arkansas.

            Two recent studies provide ample evidence that high-speed rail will not work in the United States, undercutting the President’s arguments.  The Reason Foundation, Citizens Against Government Waste, and the Howard Jarvis Taxpayers Association published “The California High Speed Rail Proposal: A Due Diligence Report” in September 2008 (Due Diligence Report), and the Cato Institute released its analysis, “High-Speed Rail: The Wrong Road for America” on October 31, 2008.

            In the Cato report’s executive summary, author Randal O’Toole noted that “Close scrutiny of these plans reveals that they do not live up to the hype.  As attractive as 110- to 220-mile-per-hour trains might sound, even the most optimistic forecasts predict they will take few cars off the road.  At best, they will replace for profit private commuter airlines with heavily subsidized public rail systems that are likely to require continued subsidies far into the future.”

            Many supporters of high-speed rail believe it has a positive environmental impact.  But O’Toole wrote that “Planners have predicted that a proposed line in Florida would use more energy and emit more of some pollutants than all of the cars it would take off the road.  California planners forecast that high-speed rail would reduce pollution and greenhouse gas emissions by a mere 0.7 to 1.5 percent—but only if ridership reached the high end of projected levels.  Lower ridership would nullify energy savings and pollution reductions.”

            In fact, that has been the result in Europe.  O’Toole noted that rail market share in Europe has dropped from 8.2 percent to 5.8 percent since the rail lines opened in France, Italy and other countries.  A San Diego Union Tribune editorial on February 18, 2009 pointed out that the California High Speed Rail Authority had changed its estimate of 117 million riders each year by 2030 to “more than 90 million,” and in the past had projected only 23 million.  The editorial also cited figures from Amtrak in 2007:  the entire system, which covers 46 states and 500 destinations, had 25.8 million riders in 2007.

            Another factor that does not bode well for successful high speed rail is that conditions in Europe are more favorable than in the U.S.  The Due Diligence Report quoted Congressional Digest on this matter:  “Their population densities are higher (which makes train travel more efficient), their fuel prices, including taxes, are higher (which makes driving more expensive relative to other travel options), and their land area is relatively smaller (which makes travel time by train more competitive with air travel).”  In addition, the tracks are straighter, which make it easier to reach the highest speeds.

            The California High Speed Rail proposal, which was reviewed in the Due Diligence Report, was the subject of a November 2008 ballot referendum.  Voters approved the measure by 53 percent to 47 percent.  This means California, which is facing a $41 billion deficit over the next 18 months, has committed to spend at least $45 billion (closer to $61 billion to $85 billion according to the Due Diligence Report) on high speed rail in the state.

            The San Francisco Business Times reported on April 16, 2009, that the state had to provide an emergency loan to the California High Speed Rail Authority (CHSRA) since it had been unable to sell $10 billion in bonds approved in the November 2008 referendum.  One-third of the train’s costs will be paid for by the bonds, and the rest will have to come from private investors and the federal government.  The authority is seeking some of the $8 billion in the stimulus bill, and has been speaking to private investors about financing the project.

            The February 8 San Diego Union Tribune editorial expressed concern over the CHSRA’s business plan, which was released after the close vote on the $10 billion bond referendum rather than before, as promised.  Despite claims prior to the vote that it would be easy to finance the system, the business plan includes language warning private investors to be wary of the risks.  Investors have already told the CHSRA that they need assurances that the state and local governments will share in those risks.

            This cautionary private sector participation in high speed rail projects is among the reasons for their consistent failure, including a proposed San Diego-Los Angeles train in the 1980s.  In that case, private investors promised to pay for the entire project but could not raise enough money.  Now, the government is involved, but the credit crunch that has led the economy into a deep recession will make private investors even more reluctant to put up billions of dollars for something that has never made a profit.  For now, the President’s attitude seems to be, “Damn the costs, full speed ahead.”