Tuesday, May 19th, 2009

Indy: Australian and Spanish Investors Hurting, Hoosier Taxpayers Smiling

The Hoosier State clearly got the better end of the bargain when it sold the Indiana Toll Road to Australia’s Macquarie and Spain’s Cintra.” – Barron’s, “The Long and Binding Road”, May 11, 2009.

That quote sums up beautifully an article in last week’s Barron’s how Indiana fleeced a consortium of “foreigners” who paid $3.5 billion to lease the Indiana Toll Road for 75 years. Barron’s estimates the value of the lease at a maximum of only $1.5 billion. Uh, oh, Spaghetti-O. My simple math says Indiana’s profit is a cool $2 billion. As Gov. Daniels put it in the article, “It was the best deal since Manhattan was sold for beads.” And according to Barron’s, “one of the most illogical prices paid for any major piece of transportation infrastructure”

I’ve written about this before, but it is worth again summarizing some of the huge reasons why Major Moves is a grand slam for Indiana:

  • The Toll Road was actually losing money when it was leased. Far from selling off the a key asset, or pawning the family silver if you will, the state actually got somebody to pay to take a liability off their hands. There was no prospect of the Toll Road ever being profitable so long as the state operated it.
  • Indiana leased the Toll Road at the peak of the bubble. All the stars were in alignment: the economy was booming, credit was readily available, interested rates were low (which increases the net present value of a future income stream), inflation was low, and gas prices were reasonable. Fast forward and we have a recession, we’ve experienced a gas spike that has people wondering about their driving choices, the era of easy money is over, and “Helicopter” Ben’s printing presses have people worried about inflation.
  • The most beautiful aspect of the lease is how it almost perfectly hedged Indiana’s future risk. In the environment above, VMT is actually down, not up like the lessee expected. Not Indiana’s problem. Oil spiked which boosted maintenance costs on the road. Not Indiana’s problem. America actually gives up cars 20 years from now and starts riding buses and trains? Not Indiana’s problem. Who knows what life in America will be like 50 years from now? I sure don’t. But whatever the case, it’s not Indiana’s problem.
  • In addition to paying to lease the road, the consortium was also required to invest something like $400 million in improvements. Electronic toll collection with EZ Pass integration, something INDOT had no plans to install, is already live. Road widening is in progress.
  • The lease proceeds are funding road improvements like the US 31 freeway upgrade, the Hoosier Heartland Corridor, and major improvements to I-465 and the Borman Expressway. As you may have read, construction cost inflation has been out of sight. By accelerating these unfunded projects, Indiana is probably getting an extra $2-3 billion in effective project throughput by getting these projects done more quickly. Realistically, without Major Moves a number of these projects would never get done. INDOT had already basically canceled the US 31 freeway upgrade in Hamilton County, for example.

Why did the consortium overpay? The same reason people overpaid for all sorts of assets during the bubble. But there’s another reason, and one not commonly understood. Mitch Daniels had Macquarie/Cintra over a barrel. You see, Mayor Daley of Chicago was also quick to grasp the financial equation here and had already leased the Chicago Skyway for a similarly inflated $1.9 billion. Now basically the only source of traffic to the Skyway is the Indiana Toll Road. Indiana’s border crossing toll was $0.50 while Chicago’s was $2. Seems unfair to me, but perhaps acceptable since Chicago’s toll was set by a judge since the Skyway was in receivership. (Daley subsequently restructured the debt, then leased the Skyway for big bucks – a genius move). I had been telling anyone at INDOT who would listen for over a decade that Indiana was being the chump here.

Mitch Daniels figured that out quickly and decided to make the consortium pay. When the Toll Road came up for lease, the same folks who took over the Skyway had no choice but to pay the maximum to make sure they controlled the Indiana Toll Road too. Otherwise a rival operator could jack up the Indiana toll to match Chicago’s and choke off their revenue stream. Checkmate.

The list of reasons why these deals were great for Indiana and Chicago goes on and on. I am always befuddled when people complain about leasing assets to “foreigners”. Well, right now those foreigners are hurtin’ for certain. Just like the Japanese investors who bought Rockefeller Center to similar sky is falling rhetoric and ended up losing a billion dollars on the deal, the toll road leases are proving that foreign money is often dumb money.

It’s like I said before. How can the US run trade deficits year after year? Well, at least partially it goes like this. They send us oil, Lexuses, TV’s, toys, etc, and in return we send them little green pieces of paper. You can’t do much with a little green piece of paper, so they send them right back to us and buy things like dot.com stocks, subprime backed mortgage securities, Rockefeller Center, Citibank stock, and the Indiana Toll Road. They might has well have piled all those dollar bills in a big heap and burned them. Thanks for the Foster’s and jamon, however.

It gets even better. A group led by Citibank – yes, Citibank – recently tried and failed to lease Midway Airport in Chicago. The deal fell through when the group couldn’t secure financing. So they had to forfeit a $126 million profit. Think about it, Mayor Daley made $126 million just by running an auction. That’s a pretty good ROI. I’m guessing Citibank thinks that breakup fee is a cheap price to pay to get out of having to close that deal.

This also shows the big advantage you can get from being progressive and a first mover. Gov. Daniels and Mayor Daley are high fiving each other right now while other states can only look on with envy. They will never get another opportunity for a multi-billion windfall like that. Gov. Rendell in Pennsylvania has to be particularly mad right now. He had a deal on the table to lease the Pennsylvania Turnpike at a nice rate. This was not nearly as good a deal as Indiana and Chicago got since people were starting to wise up, but certainly much better than they’d get now. The legislature refused to approve the deal.

By the way, Indiana also shows the right way to make use of one-time windfalls from things like the Toll Road lease. There are three basic good ways you can use one time money: pay down debt, put it in the bank, or spend it on one time expenditures, preferably major capex. You don’t want to use it to plug operating holes or on boondoggle start up programs you can’t afford to keep going once the money runs out. Indiana did two smart things. One, it put $500 million into a trust fund for future projects and contingency. Two, it spent the money on one time capital investments – the Major Moves program. Now obviously new roads come with an operating tail, but that’s true of any capital expansion. And reconstructing old roads can actually reduce opex. So all around a great move.

High Speed Rail

A couple of interesting pieces of high speed rail info came over the wire this week. Firstly, Secretary of Transportation Ray LaHood suggested the Midwest states appoint a high speed rail czar. There was much speculation as to the real meaning behind this.

And here is a classic. Amtrak’s President told a group of people in Chicago that true high speed rail is unrealistic. I don’t know about you, but I would not be taking advice on what a quality rail system would look like from someone at Amtrak.

I previously published an opus on high speed rail that you can read for yourself, but in my view, if you are going to do high speed rail, you need to do it right. High speed rail is about game changing reductions in end to end journey time + dramatic improvements in reliability and quality of experience. The 110MPH Midwest network proposal does not accomplish that, period.

Several times in the last year I saw people from the Midwest go off to Spain to ooh and ahh their high speed system and use it to tout the Midwest nework. I’ve ridden high speed rail in Spain and it’s fantastic. But the proposal on the table is nothing at all like the Spanish system. To use the system in Spain or elsewhere to sell a 110MPH system is dishonest and unproductive in the long run. There is a huge danger that an “Amtrak on steriods” solution labeled high speed rail will only ruin the high speed rail brand in the US the same way Amtrak has done it for regular passenger rail.

Back to Indiana for a minute, while Gov. Daniels signed the endorsement letter for high speed rail along with every other Midwest governor, I think it is fair to say that he is at heart a skeptic. He was quoted as saying that he doesn’t want to get stuck with a huge bill to run the thing. Fair enough, especially when you see the subsidies that Wisconsin and others pay Amtrak today. But there’s a big difference between saying that’s not a good end state and jumping to the conclusion that it will be the end state.

Ironically, there’s no one who would be more likely to get high speed rail actually implemented than Gov. Daniels. A Daniels-Daley reprise of their tollway coup could make a real demonstration project of a Chicago-Indy link. Believe me, I appreciate the governor’s fiscal discipline. Keeping lid on spending and taxes is critically important. I don’t think Hoosiers understand the value they are getting out of a triple AAA credit rating and the value they will get in econdev if they can stick with balanced budgets and no tax increases through this recession.

But with Indiana’s traditional industries in competition with offshore labor at pennies per hour, Indiana will never be a truly low cost place to do business again. And with its future industries dependent on attracting a labor force that is in demand and where price is an important concern but also balanced against they amenities, services, and quality of experience they way, Indiana (and the rest of the Midwest) will not be able to reach future prosperity in the 21st century through cost cutting alone. Innovation has to extend beyond the fiscal realm.

To a great extent building infrastructure isn’t a cost, its an investment. And high speed rail is something that is clearly going to be a federal led program. My belief is that the Chicago-Indy route is a perfect demonstration route for a real high speed rail line in the United States – new terrain, 200 MPH peak, etc. It won’t be cheap, but if the feds paid for it, and chartered a new operating authority to run it, and did it right, I think there could be advantages over the long term, just like their have been in other places that have built it. Enough to justify it? There’s certainly room for debate. But remember about first mover advantage? Sometimes you have to be willing to take a risk. And there isn’t that much risk in buying what is effectively a dirt cheap out of the money call option on high speed rail by forming partnerships with Mayor Daley, lobbying, and launching aggressive environmental studies, probably funded by stimulus dollars. That’s similar to what Indiana is doing with the I-70 dedicated truck lanes initiative.

Long but highly recommended are my two core postings on the subject:

Remember for something like this, the scope is the benefits, not the network.

I-465 Northeast Corridor Widening

The last part of this Indiana transportation trilogy involves the $565 million reconstruction and widening of eight miles of I-465 and two miles of I-69 in the northeast corridor. This is the most heavily congested section of road in Indiana by a mile and, now that the Borman Expressway is fixed, far and away the highest priority road project in the state – or at least it should be.

The project team recently held a Citizens Advisory Board meeting. The minutes from the meeting provide a lot of interesting updates.

The most interesting is the schedule. The project was originally scheduled to run from 2012-2016. Now this is an expensive project. How do you keep the costs from spiraling out of control? The best way to do so is to get things done faster. Construction cost inflation will eat you alive and every year of delay only jacks up the price tag. What’s more, if you do it more quickly, you get the benefits sooner. A double win. So it is great news to see that INDOT is planning to look at every possible part of this project to see what can be sped up. Impressively, some contracts might even be let this year! Here are some of them:

  • Contract one is an accelerated contract for the section between the White River and Carmel Creek bridges and could advance as early as the fall of this year (2009).
  • The mainline I-465 construction between College and Carmel Creek may be accelerated to the end of this year (2009).
  • The Keystone Avenue interchange may begin about one and a half years from now, in September 2010.
  • Another accelerated contract may be for overhead bridges at North River Road and Westfield Boulevard. The construction on these bridges could begin in late summer 2009.
  • The next contract to advance could be 82nd Street and 75th Street and may be accelerated to Year 2011.
  • The Allisonville Road interchange may be advanced to 2012.
  • Because the Fall Creek Parkway to 75th Street section does not include much right of way issues or utility conflicts, this section could be advanced to begin in 2010.
  • The largest interchange – I-465/I-69 – could advance to 2012.
  • The I-69 section could begin in late 2012 or early 2013.

Pretty cool, eh? I have to give a round of applause to INDOT on these efforts.

Also, the preferred interchanges were selected. Keystone is a partial cloverleaf, Allisonville a SPUI, and I-69/I-465/82nd St complex a hairy system interchange with several flyovers and a collector-distributor system. INDOT’s web site has the renderings.

There are two important things to get right on this project that I haven’t read about yet:

1. The roadway design – particularly bridges – need to be built to the same standards as were done on the I-465 west and northwest projects with regards to quality of design and pedestrian/bike access. In particular, the aesthetic design of the current west leg project as embodied in the 38th St. interchange and 46th St. bridge should be carried over and copied for this project. Why?

Again, it goes back to quality of space and the need to attract the labor force of the 21st century. Another of my must read archived blog posts is “The Importance of Aesthetic Design in Transportation Projects“. The only impression people will have of Indianapolis is through driving through it on the expressway. In the modern era, our roads are our public space par excellence. Cities and towns will spend huge amounts of money to make their Main Street look good. But increasingly that is not the space most people see or experience in their daily life. In the modern era, getting it right on the quality of our public spaces is absolutely imperative to attracting the labor force of the 21st century.

Let me just say that I know nothing of INDOT’s plans here. But with projects like I-69 to Evansville experiencing significant inflation caused price increases, the temptation to save on costs by eliminating “gold plating” like attractive bridges can be strong. But Indiana will never thrive in the future with an “East Berlin” style built environment. The new Indianapolis Airport, and the I-465 west and northwest projects, are great examples of what the future should look like.

That’s not to say we shouldn’t strive for cost efficiency. But let’s not mistake service level for efficiency. First go pick out the car you want in your general price range, then go dicker with the dealer. INDOT is doing it right on the Evansillve segment by looking at how to save money by cutting back on things like median widths that add effectively nothing to safety or anything else, but cost money. And on this project INDOT wants to pull things forward to save money by getting things done more quickly. That’s all good. You want to look to save on mechanical systems in the utility closet, not try to save a buck by ripping out the tile in the entry way that is the first thing people see when they walk into your house, or by trading in those stainless steel appliances in the kitchen for “harvest gold”.

And why copy the west leg designs? Two reasons. First, if you use the same designs, you save money. The tooling should already exist for the decorative railings. A lot of the engineering is already done. The bill of materials is right there. Standardization drives down unit cost enormously. Secondly, it is imperative for Indianapolis to start building a stronger sense of distinct visual identity to overcome its “Generica” image and surface appearance. Not only do those bridges look nice, if used as a standard, they can start being a design signature for the city and a major part of civic branding – all at a low marginal cost.

2. INDOT should be sure to provide ROW and horizontal clearance to accommodate five continuous through lanes plus a C/D lane between I-69 and US 31, not four as currently envisioned. Don’t build them yet, but create a road with future expansion designed into it. Deploy the capacity incrementally as you need it. Do this simple thought experiment. The I-69 corridor is the fastest growing region of the state. If three lanes is badly congested today, why would anyone believe four lanes will be adequate 30 years from now? Especially when interchanges are being upgraded to channel cars more efficiently onto the freeway. In most cases, the congestion is a matter of too many cars, not inefficient interchanges getting it off the road.

Why only the section between I-69 and US 31? Because at 56th St. INDOT built an overhead bridge that cannot have any more lanes added. It might be possible to restripe without shoulders and add a fifth lane, but the cross-section only supports four standard lanes. This is how not to do it. What we don’t want to do is to spend $565 million to add the minimum possible amount of through capacity to a road (one lane each direction), and do so in a way that we can’t ever expand it again unless we rip and replace the whole thing.

This is a once in a generation type project. We need to make sure it gets done right.

33 Comments

Cities: Chicago, Indianapolis
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33 Responses to “Indy: Australian and Spanish Investors Hurting, Hoosier Taxpayers Smiling”

  1. Ken says:

    Pencil me in as a high-speed rail skeptic. But if we're going down that route, then your build-it-right-or-don't-build-it-at-all approach is a good one. And your Chi-Indy proposal is an interesting suggestion for a pilot.

    I don't have the time to do the back of the envelope calculations, but can you figure out the amount that would be needed per passenger over 20 years to cover debt service if such a route cost, say, $15B with a 5% interest rate, and you assumed the train captured ALL the daily O&D air traffic between Indianapolis and Chicago (ORD and MDW.)

    It's an unrealistic scenario, of course, because the train would not capture all the traffic, and it doesn't begin to address operating costs. But it would be a first step toward examining the feasibility of the concept.

  2. Ahow says:

    After traveling by train and by air in Europe, my wife and I found that the cut-off is about 4 hours. If it takes longer than 4 hours by train, you need to take a flight. Note that a flight would include security checks, embarking/disembarking, and travel to the airport which is generally outside the city whereas the train drops you off city center.

    This means that from Indy, on a 200 mile per hour train, given 4 hours, and a direct train ride, you could make it to places like Atlanta, DC, and Philly in less time than it takes to fly.

    As the father of infant twins, I would add Denver, Boston, and Houston (and even some West Coast destinations) to my list of places that I would prefer to take a train instead of fly.

    The biggest issue lies in the “doing it right” area which our federal government is notorious for botching. The last thing we need is another tax dollar suck-hole like Amtrak.

  3. Alon Levy says:

    Ken, it’s not going to be $15 billion, unless someone really corrupt is in charge of construction. In flat territory, HSR construction costs about $20 million per mile. That implies a cost of $3.7 billion, not $15 billion. With Chicago-Indy it could be even lower because the existing railroad right of way is almost perfectly straight, so for the most part all that’s needed is to put two extra tracks built to HSR standards next to the existing tracks, and hang overhead catenary above them.

    The best pilot in the Midwest is not Chicago-Indy, which is still short enough that most people will drive it. Good HSR should take 1:10 between Chicago and Indy; driving takes 3 hours, but takes you door to door. It’s better to start with connecting Chicago and St. Louis, which have a straight railroad ROW in better condition than Chicago-Indy, and are located at such a distance that HSR will be a vast improvement over both driving and flying.

  4. Anonymous says:

    On the Toll Road, come back in 35 years and see who is ahead. A lot of time left on the lease for things to change. They do.

  5. Lord Peter says:

    I wonder if there is a cash-flush foreign consortium that would be interested in leasing the ROW and then building and operating a high-speed rail line.

  6. the urban politician says:

    I’m still not convinced about the “branding” problem of HSR.

    Amtrak has a bad “branding” because it’s woefully slow and has been horribly underfunded for decades.

    This new “high speed rail”, which will probably average about 70-80 mph in the midwest, does not necessarily have to fail the way Amtrak did. We need to remember that for most flag-waving, car driving Americans, a 79 mph train is pretty fast, and as long as it is not bogged down with delays it can be a decent alternative to driving or flying along short distances, say 4 hours or less.

    The crucial issue isn’t whether trains START OUT whizzing people around at sexy European-esque speeds of 180-200 mph, mostly because most Americans just aren’t used to those speeds and may not expect them. The key to me is consistency, lack of delays, reliability, and regular maintenance–which means that this new “HSR” system cannot afford to suffer from the dearth of funding that Amtrak has had to deal with. It also means that some kind of agreement/investment that helps separate freight from passenger trains will absolutely have to be necessary–in this, it was great to hear recently that Senator Durbin had reached an agreement with freight rail companies to work together on this.

    I am optimistic that once Americans feel more comfortable riding the rails in good faith that it will get them to their destination ON TIME with few delays, its constituency will grow and calls for faster speeds may ultimately be answered. Amtrak accomplished none of these things.

  7. The Urbanophile says:

    Thanks for the comments.

    anon 11:30, 35 years we indeed shall see. But keep in mind the time value of money. A dollar earned 35 years from now is worth massively less than a dollar today. I think it is fair to say that few businesses cases use numbers 35 years out to justify things.

    Lord Peter, I think there would be many foreign operators and manufactures as well as domestic power suppliers and other players who would dearly love to bid on the system. I actually think there is interesting room to generate offsets here. For example, the Euro rail car provider would agree to establish its US HQ in Chicago and put a plant in Lafayette in return for the work. So while they may not pay the capex, I think there is plenty of room to let other people put some skin in the game for the system’s success.

    TUP, I’ll compromise and grant you that a 110 MPH service might be somewhat useful if it had the reliability and quality of experience you describe.

  8. Alon Levy says:

    The problem with making the vendor establish the US headquarters in Chicago is that to work well with all current projects, the vendor will have to establish headquarters in Chicago, Los Angeles, Charlotte, and Miami. You can’t have states engage in beggar-thy-neighbor policies with one another.

  9. Jeff says:

    It makes sense that Daniels would concentrate so much energy on interstates and highways.

    Given his hostile attitude toward municipal government, if the remainder of his directives and policy goals come to fruition, passing through Indiana as quickly as possible will become a more rational choice.

  10. JG says:

    Though I might not agree with some of Daniel’s policies, I would not charaterize him as “hostile” to local governments. His plans to consolidate many of the redundant township services was long overdue. Concerned citizens in neighborhoods and townships need to step up via better organized neighborhood associations and “grassroots” group to lobby representatives and elected officials. I would even go further to suggest the state improve their outreach to these groups – Save money, eliminate redundancy, get better results.

  11. SpeedBlue47 says:

    I agree here with JG and Lord Peter. First JG is right that consolidation of redundant township services was long overdue and further consolidations and streamlining should be done throughout not only municipal and county governments, but also the state government. REAL privatization and devolution of appropriate functions to the most relevant level of government has the potential for increases in tax dollar efficiency and decision making flexibility.

    Lord Peter’s idea I think is spot on. Opening an international competition amongst vendors, operators, and investors to develop HSR plans along the Chi-IND corridor would initially provide some extremely low cost idea generation. Selecting a plan that fits best and bidding the project out on amicable terms to all involved parties would be the next step. The states would need to create a legislative environment that would allow the system to succeed(such as allowing a true High Speed system), and create complimentary transit systems to feed the line in a reliable manner. The ROW would be leased pro bono for 10 years or so given that the operator invest a certain amount of capital into the line(miles of track, number of trains, number and location of stations, etc) and maintain a certain service level. ROW leasing from that point would be a profit sharing setup that would motivate the states and municipalities to support the line as much as possible, and the operator itself into throwing revenue back into the system as much as possible(to lower payments to the states).

    The government making sure that they are getting the most out of this asset and then sitting back and letting the private operator do what is needed to grow it is the best avenue to establishing a successful HSR line into the future.

  12. Alon Levy says:

    SpeedBlue: on the contrary, HSR needs to be public at the beginning, but can be privatized later on. Because low ridership is a real risk, the private sector may not build the fastest or easiest to extend line; it also skimps on connections to intermediate stops and terminal locations.

    For example, the privately funded Desert Xpress consortium, which aims to build HSR from LA to Las Vegas, is planning to build its LA-area terminal in Victorville, which is located on the edge of the Inland Empire and is an hour and a half’s drive from downtown LA even when traffic is clear. Meanwhile, the publicly funded California HSR plan calls for connecting LA Union Station as well as stations located in the San Fernando Valley and the Inland Empire with the major destinations of the Bay Area.

    It’s only after the main trunk line and basic extensions have been built that privatization can be entertained, as was done in Japan. Even this is not necessary, however – the TGV is run by the state-owned rail company, SNCF, which is profitable and hence politically independent.

  13. The Urbanophile says:

    Alon, that’s the advantage of being the first mover. They are the ones who are likely to be able to reap the maximum in terms offsets from vendors.

  14. Anonymous says:

    HSR = Pork Train

    Someone estimated the IND-Chicago route at $3.5 Billion. That does not include the operating costs.

    The current one way fare on Southwest is $104.

    For $3.5B you could purchase 135 seats on 12 flights every day for 57 years…add the operating cost of the Pork Train for 56 years and and you can add many more years of fully filled 737’s jetting to or from Chicago from Indy.

    The Pork Train would require enormous public support (taxes) to subsidize it to keep it competitive with Southwest….while Southwest gets zero tax subsidy and operates at a profit (hefty profit it it sold every seat for 57 years)

    HSR is a project that should be permanently derailed

  15. Alon Levy says:

    Anon: you’re pulling numbers out of your ass. The Paris-Lyon line got 50,000 a day within 7 years of operation, and unsurprisingly was and is very profitable; the entire TGV network gets 250,000 right now, connecting Paris to cities which are smaller than those Chicago is to be connected to. Lyon’s metro area, the largest in France apart from Paris’s, is about 15% smaller than Indy’s. I have no idea why you think the ridership between Chicago and Indy will be just 1,620.

  16. Anonymous says:

    Alon:

    My post did not estimate what the ridership would be it only suggested what that money would buy.

    Another consideration…if HSR happened…what impact would it have on the $1B+ spent on the spiffy new IND airport?

    Depending on the how HSR is routed into Chicago…the IND air passenger has 1 or 2 new options to continue their journey by air (ORD or MDW).

    HSR will likely cause reduction/possible elimination of air service between the markets and it would likely put an end to any hope that IND would attract international service.

    HSR = PorkTrain

  17. Anonymous says:

    A high-speed rail mirage
    Obama’s plan for a network linking major cities sounds good on paper. But as a practical solution for improving the way we travel? Not even close.

    http://blogs.usatoday.com/oped/2009/05/a-high-speed-rail-mirage.html

    That Pork Train is a coming and rounding round that track…OINK OINK OINK

    Much better to spend $ on new/improved rail to/from airports to the metro’s they serve along.

  18. Anonymous says:

    Here Piggy, Piggy, Piggy

    “The Government Accountability Office found: “In each of the countries we visited, the central government paid the up-front construction costs of their country’s high-speed rail lines, and did so with no expectation that its investment would be recouped through ticket revenues.”

    Thus, claims about “profits” that appear in the media refer only to operating profits—and even those appear to occur on only some of these lines. In the U.K., for instance, The Economist reports that in 2007 the British government subsidized the operating costs of UK rail operators to the tune of $6.6 billion. The new HSR line that opened in Taiwan in 2007 lost $1.5 billion in its first year of operation. University of Paris transport economist Remy Prud’Homme estimates that overall, passenger rail service in the European Union 15 receive about $100 billion in subsidies each year.”

    OINK OINK OINK OINK

  19. Anonymous says:

    Where did the dollars come for the airport improvements? How much does Southwest pay towards the infrastructure that supports the airport and everything that goes with it? How about some apples to apples comparisons versus a spew of disinformation?

  20. Anonymous says:

    Anon – 12:06

    Southwest and other carriers pay landing fees, rental fees and am sure assorted other fees to the airports they operate in. Passengers pay taxes/fees on every ticket they purchase that goes to pay for security and various aviation related infrastructure.

    There is no disinformation. The only thing missing is any support for the Pork Train…OINK OINK OINK

    If you don’t like to fly…build an extra dedicated lane on I-65 and populate it with luxury buses and allow the buses to zoom along at 90-100MPH. Still somewhat porky but is just a few slices of bacon vs the entire overbloated PIG that is HSR.

    OINK OINK OINK

    For you “OINKERS” consider that Acela will get you from DC to NYC a whopping 20 mins faster and $100 bucks more expensively than the regular ol Amtrak. The DC to Boston corridor is a whole different story than the idea of HSR emanating out from Chicago in multiple directions.

    OINK OINK

  21. Alon Levy says:

    So you don’t care about ridership… and you quote people saying that low-speed rail loses money as evidence that HSR does. Nice.

  22. Anonymous says:

    Alon: I have seen nothing that provides anywhere close to an ROI that might justify the initial and ongoing costs of HSR between Indy and Chicago (or anywhere in the US outside of the northeast corridor)

    If you can provide that, I will happily shut up.

    OINK OINK

  23. JG says:

    OINKER: You might have some good points to make against federal government spending on HSR, URBANO certainly did in his post – just try not to act like a jackass and embarrass yourself. (Sorry to URBANO for engaging another reader in this manner.)

  24. Alon Levy says:

    Anon: why are highways not subject to the same ROI requirements to be built? In terms of covering costs, they don’t even cover operating costs: the Texas DOT reports that its highways’ user fees never recoup more than half of the maintenance cost, and often recoup far less than that. HSR at least maintains consistently high operating ratios.

  25. Anonymous says:

    JG:
    I think more people should be jack-asses and embarass themselves when it comes to continued wasteful spending by the government. In regards to HSR, some become enamored with the entire idea of HSR (and there is much to be enamored about) BUT at the end of the day is that investment worth it vs spending on other priorities? Particularly when most governments are operating with huge deficits?

    In the scheme of things it’s “just a few billion”…the problem is all these types of projects are “just a few billion”…well add them up over the years and you end up with the present day 11 Trillion $ Federal Deficit.

    OINK OINK OINK

    Alon:
    Part of the problem with highway ROI is the fact that the Feds spend close to 40% of the taxes, fees paid by motorists on Administration. That spend does nothing to maintain the highways; all it does is fund a bunch of paper shufflers.

  26. The Urbanophile says:

    Anon, I can appreciate and welcome your different point of view on high speed rail. I myself am not totally sold on the value in the United States. Back in my main HSR post, I suggested that the major business groups in Chicago and Indy get together to try to identify a basis of value for it. And clearly I would not advocate a state financed solution.

    And maybe HSR is pork, but at the end of the day, if somebody’s getting a ham sandwich out of this deal ($8 billion in spending on the table already), it might as well be us.

    There’s a legitimate anti-HSR point of view, but I might suggest that you’d be more credible if you dropped the OINK’s and such and focused on your links and math. While anonymous posting is allowed, feel free to post under your actual name or a handle as well.

  27. JG says:

    OINKER: Entitlement spending and military spending represent the vast majority of the budget, deficit, and debt. This is a part of the reason John McCain lost the election. He focused his rhetoric on about 2% of the budget, and most voters got wise this was the addressing larger problems in the economy.

    There are some corridors where I highly think HSR would ease airport and highway congestion, and cut down on door-to-door times in cases where the commute from city center to the airport is long. INDY to CHICAGO might not be that one – though I would like to see a good objective study and would hope it could be. I rather think SoCal up to the Bay Area in California would be the best place to try this out. Two large population centers.

  28. OINKER says:

    Urban:

    I have a real problem with:

    “And maybe HSR is pork, but at the end of the day, if somebody’s getting a ham sandwich out of this deal ($8 billion in spending on the table already), it might as well be us.”

    We, the taxpayers, must quit thinking like this. There should not be any ham sandwiches. More importantly our elected officials need to quit thinking like this.

  29. OINKER says:

    JG:

    I do not disagree that “Entitlement spending and military spending represent the vast majority of the budget, deficit, and debt.”

    Until and unless WE, (the citizens, taxpayers, elected officials) get those under control it should be ILLEGAL/UNCONSTITUTIONAL to provide funding for things like HSR.

    Obama was elected to change things…well I can not think of any better place to start.

  30. Alon Levy says:

    So what if 40% of gas taxes get spent on administration? TxDOT didn’t look at where gas tax money goes; it looked at how much gas tax revenues are generated, and how much money it spends on road maintenance.

    And it’s very nice that you keep telling us that you think HSR should be unconstitutional, but you need to also provide reasons. That Southwest can transport 1/30 as many people for the same cost isn’t a very convincing argument.

  31. JG says:

    OINKER (I truly would like you to take a name of your choosing): Yes large swaths of federal spending could use a hefty hair cut – I’m sadden that no matter who is elected that may never happen.

    However, would you oppose some federal assistance in HSR through corridors that could really benefit, and approach or exceed cost neutrality? For example Dallas Tx, to Little Rock, Ak sounds like a “pork train” to use your words, but downtown Los Angelos through San Fernando Valley and up to San Francisco might help relieve highway and airport congestion, provide reliable transportation to the central part of the state, and get great ridership and fare collection. Remember, one goal of HSR is to shorten door-to-door times, and with airports often 10 miles plus from population centers and central business districts, there are likely to be corridors that HSR is a homerun.

  32. OINKER says:

    Alon:

    “So what if 40% of gas taxes get spent on administration?” Hmmm, if the cost of admin was a more reasonable 5-10% the roads would be more self-sufficient.

    “Southwest can transport 1/30 as many people for the same cost isn’t a very convincing argument.” Hmmm, it transports 1/30th without any help from the taxpayer…big difference!

    JG: If there are HSR routes that really do makes sense, ok. Most of them do not. Chi-Indy DOES NOT

  33. The Urbanophile says:

    Ok, I’ll let OINKER have the last word. No more comments. Thread closed

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