Bullet Train Boondoggles

On November 4th California’s “High-Speed Rail Authority” released a press release entitled “Federal Funding for High-Speed Rail Dedicated to the Central Valley.” Apparently an additional $715 million in infrastructure investment is going to be directed to the development of California’s bullet train, bringing the total to $4.3 billion. All of these funds are to be spent on what will be the first segment of the high-speed rail system, running between Merced and Bakersfield.

A few years ago, when I worked as CFO for a short line railroad, I learned of a term familiar to railroad professionals, “foamer,” which is used to describe rail enthusiasts whose interest in everything having to do with locomotives, rolling stock and track, matched that of rock star groupies. But pleasing the foamers – and the foreign corporations who will gobble up most of the borrowed government loot that gets sunk into high-speed rail – is not reason enough to direct money at this project.

A commenter on a previous post here said something very insightful – “if we’re going to spend money we don’t have, let’s at least spend it on things we can see.” He was referring to the folly of using deficit stimulus money simply to continue to pay over-market compensation to government employees. But I would take that a step further. If you are going to spend money you don’t have, at least spend it on things you can see that will yield a return on investment. The bullet train boondoggle will never yield a return on investment – it will be a financial drain on our economy forever. It will never make money.

The reason high-speed rail makes sense in other parts of the world are because they are more densely populated, and because they are smaller geographically. There are nearly 100 million people living along the 250 mile corridor between Tokyo and Osaka. This is the industrial and urban heartland of Japan, a megapolis where the population density per square mile is often 50,000 people or more. In places like this, high speed rail makes sense. If you are traveling within this region, you can board a train and travel 200 miles in less time than you would require to board an airplane and travel 200 miles. And because there are nearly 100 million people living along the rail corridor, there is a large population of potential passengers.

California, by comparison, is contemplating an 800 mile system, with 24 stations, in a state with not quite 40 million people. How would high-speed rail transport compare with airplane transportation in California? Here is the “high-speed” route being contemplated to get someone from San Francisco to Los Angeles:
San Francisco to San Jose – 50 miles
San Jose to Fresno – approximately 150 miles, the Rail Authority doesn’t provide information for this leg
Fresno to Bakersfield – 130 miles
Bakersfield to Palmdale - 85 miles
Palmdale to Los Angeles – 58 miles

If you fly from San Francisco to Los Angeles, your experience isn’t that different from if you take a bullet train from San Francisco to Los Angeles, except for the actual transit time. You will still have to get to the airport or the station using a car or mass transit. You will still have to go through security. You will still have to wait to board the next available flight, or train. But the travel time from San Francisco to Los Angeles on a plane is about one hour. On a bullet train, this same journey would traverse at least 450 miles of track, and a non-stop trip at an average speed of 180 MPH would take 2.5 hours. The round trip would take five hours instead of two hours. And how many non-stop trips are they ever going to have on a bullet train per day from San Francisco to Los Angeles? There are literally dozens of non-stop flights each day from San Francisco to Los Angeles. It is not practical.

To estimate what this bullet train is really going to cost to build, consider the costs currently projected for the test track just funded. Apparently this first segment will comprise the “core of the system,” which is “either Merced-to-Fresno or Fresno-to-Bakersfield.” Since it’s 60 miles from Merced to Fresno, and 113 miles from Fresno to Bakersfield, if one divides the $4.3 billion in required funding by the average of those distances, which is 86 miles, you will get a cost of $50 million per mile! If you multiply this amount by the planned 800 miles of track, you get a cost of $40 billion. Is this accurate?

When the bullet train proposal was originally sold to voters, it was marketed as costing $9.5 billion. Simply by extrapolating the costs for the first stretch of track – in the most remote, sparsely populated area of the entire system, where the land is both far cheaper and also flat as a pancake, we get to a cost of $40 billion. And does this $50 million per mile cost include all the rolling stock, all the stations, all the corridor security fences? What about the costs for land where the high-speed rail right-of-way will be traversing the land between San Francisco and San Jose, or everywhere from just north of Los Angeles all the way to San Diego – arguably the most expensive acreage on earth? What about the cost to cut routes through the mountainous Pacheco Pass in Northern California, or the Grapevine in Southern California? It is difficult to imagine that the real cost, in today’s dollars, of the entire California high-speed rail system, as it is currently envisioned, costing less than $100 billion. If this gargantuan boondoggle is ever realized, it is probably going to cost a lot more than that.

If you read the website of the California High-Speed Rail Authority, you can get additional clues as to just how expensive this system is going to be. For example, the page showing projections for the San Francisco to San Jose corridor projects passenger counts of 31,600 per day. You have to assume this is not a low-ball estimate, since the purpose of this website is to present a supportive perspective on the project. This means that 31,600 people are going to make 100 mile round trips approximately 250 times per year. Since this is the Bay Area, and not Fresno County, it is safe to assume the cost per mile will be well in excess of $50 million, but even at $50 million per mile this is a $2.5 billion expenditure to move 31,600 people to work and back. This will not make a dent in Bay Area traffic. There are nearly 7.0 million people living in the San Francisco Bay Area, and probably at least 3.0 million of them have to transport themselves to work every day. The bullet train will move 31,600 people out of 3,000,000 commuters, alleviating traffic congestion by about 1.0%. And that’s the best case, in the most likely segment of the rail system to be maximally used. Nobody who can board an airplane is going to use the bullet train to go to Southern California from Northern California. Relatively few riders will use the train to travel between the smaller urban centers, such as from Bakersfield to Fresno.

So how much will this system cost per year to pay off the bonds, if the system costs $100 billion and 30 year bonds are issued at 5.0% interest? Using an online mortgage calculator, you will see that a 5.0%, 30 year fully amortized loan will require total payments per year equivalent to 6.4%. That is $6.4 billion per year that taxpayers will pay in principal plus interest to service the debt for California’s high-speed rail system. Readers who disagree with these assessments are invited to convincingly prove that this system is going to cost less than $100 billion. Don’t count on ridership revenue to pay for this – it is highly unlikely ridership will even cover operating costs.

The question is not whether or not we need high-speed rail – if you want a 200 MPH theme park ride scarring California’s beautiful landscape for 800 miles from north to south – that is a matter of taste. The real question is what could we do instead with all that money. And the answers are plentiful. We could spend $20 billion (that will probably inflate, too) and reenact the water bond, which would invest in upgrades to our aqueducts and dams, introduce new sources of water storage, construct a peripheral canal around California’s delta, and hopefully even fund upgrades to our wastewater treatment facilities. We could invest in public/private ventures to build 2-3 nuclear power stations; for $10 billion of public money we could probably leverage construction of another 10.0 gigawatts of electrical output, plenty to guarantee California cheap electricity. And we could upgrade and widen our roads, getting them ready for tantalizing new designs for surface transport – busses and cars that operate on auto-pilot in high-speed lanes – there is no transportation medium as versatile as a simple road. We might even upgrade intercity trains in the densely populated Bay Area and Los Angeles, using existing rail corridors.

There are 12 million households in California. If this boondoggle is actually realized, it is going to cost each of them over $500 per year. Since half of the households in California don’t pay any taxes, or pay minimal taxes, however, those Californian households who do pay taxes will each be more likely to pay $1,000 per year to pay for high-speed rail. Is that worth it? Particularly when that financial sacrifice could be used instead to invest in nuclear power, water storage, conveyances and treatment, and more roads – which would deliver cheap energy, cheap water, and cheap and convenient transportation.

A legitimate role for government spending is to make strategic investments that reduce the costs for basic necessities. That is what makes a nation prosperous. That is a proper use of public funds. Artificially inflating the costs for energy, water and transportation – which is the current policy of California’s government – is a crime against the people of California, and the “environmental” justification for all of this is a smokescreen and a fraud. California’s bullet train boondoggle is just one example of this travesty.

5 comments to Bullet Train Boondoggles

  • Jean-Louis Beaufils

    A few facts about the French HST network:

    France has 65 million people and 1150m of high-speed track. The network is radial, linking Paris (with 12 million people) to Lyon and Marseille (1 million each), Strasbourg (about 500,000 but on the German border), Bordeaux (about 500,000 again), Rennes (500,000), Lille (1 million) but going next to London and the Benelux.

    The heaviest traffic is on the Paris-Lyon line with 75,000 passengers/day, 20% of the theoretical max capacity. TGV (Train à Grande Vitesse, French for High Speed Train) has nearly driven airlines out the Paris-Lyon market, and seriously affected the Paris-Marseilles (about 500m) market.

    Even if transit times are longer, most travellers in France go from city center to city center, so you save a lot of time going from city to airport and back: in France, you’d typically save at least an hour on a one-way trip. And you also typically save at least half an hour because boarding a train is much, much less hassle than boarding a plane. And trains don’t care about non-extraordinary weather, so they’re much less likely to be late than aircraft.

    A 500-550-seat, 200mph TGV train costs about € 25M. During peak hours SNCF runs double trains for 1000-1100 seats per train.
    The total rolling stock is about 500 single trains, or € 12.5 bn.
    Current max capacity is 16 trains/hour each way, soon to go up to 19.

    HST’s are the only SNCF division that is actually making money. We pay for the rest of the network with our taxes.

    From the above, I’d think that an SF-LA line (or an NYC-Washington DC line) could make sense. What doesn’t make sense is buying it from foreign companies, instead of buying licenses for some critical technologies that took time to develop and building everything in the US.

  • jsm

    The responent familari with the French system’s post is far more insightful than the article which is just a rehash of typical anti-HST propaganda. Such one-sided rants that can’t see value are typically made by those that don’t own passports and have not spent time in Europe in Japan as the benefits are obvious to those that have experienced proper transportation systems. With dwindling oil supplies it is only a matter of time before JetA prices make such an HST mandatory, so we might as well take care of it now as it will only get more expensive. That doesn’t even take into account the huge carbon impacts of flying between SFO and LAX but I am certain that the author of this piece would deny anything to do with that.

  • Editor

    JSM: First of all, thank you for your comment. All opinions are welcome here. I take umbrage, however, to your approach. You characterize this post as “just a rehash of typical anti-HST propaganda,” and “one-sided rants,” and, of course, the “deny” word makes it into your comment as well – referring to this website’s clear position on climate change.

    You are encouraged to explain how a bullet train will ever pay for itself, in particular, you are encouraged to find a failure of logic in my calculations, some of which, frankly, I don’t think anyone else – pro or con – have managed to produce. In particular, please explain the flaws in these statements:

    (1) The bullet train will never be a more convenient way to get from SF to LA than a plane.

    (2) Even in our densely populated areas, the bullet train will never break even.

    (3) California’s bullet train will cost $100 billion, at the least.

    (4) At that price, every taxpaying household in Calif. will pay – on average – $1,000 per year in taxes JUST TO MAKE THE INTEREST PAYMENTS ON THE BONDS.

    (5) There are dozens of infrastructure projects, including upgrades to existing rail, that make far more sense economically.

    More fundamentally, what we have is a failure to agree on premises. I don’t think we are going to run out of fossil fuel before alternatives can be smoothly inserted into our energy economy, and you do. My position is based on a reasoned and fairly thorough review of the BP Statistical Review of World Energy, the projected global population peak, and likely per capita consumption of BTUs once the entire world is developed. What do you base your comment on? Similarly, I don’t think the earth’s climate is approaching some catastrophic “tipping point,” nor do I think that anthropogenic CO2 emissions have any deleterious impact on global climate whatsoever, and apparently you do. My position on climate change is based on personal interaction with several noted climate scientists, as well as independent analysis of many alarmist reports that, upon anything more than superficial evaluation are demonstrably fatuous. For more on this website’s position on climate change, ref. http://civfi.com/2010/11/28/investigating-climate-alarmism/

    What is exasperating about comments like yours, JSM, is that they are filled with insults but they are not offering reasoned rebuttals to the points raised.

  • MFox

    Hello,
    In re: Bullet Train Boondoggles, I was wondering if the author, whose name I can’t seem to find on the piece, could please expound on which transportation systems actually do make money in the United States? It may make his or her argument to point out that the rail subsidies being discussed are quite a lot of money, but what of the subsidies to airports and air traffic control? What about the subsidies to the highway system? Actually, in California, the population density is much higher to support HST than in most parts of the country, and federal outlays actually make more sense than in rural areas. Lastly, I have to concur with Mr. Beaufils: manufacture the train in the U.S. It’s the best way to justify the expenditure, to add fairly-compensated manufacturing jobs to our economy, and not outsource them.

  • Editor

    MFox: If you are going to view the bullet train as an economic stimulus, in-country manufacturing is a good place to start, so we agree on something. My biggest problem with the bullet train is the lack of alternative discussions. Not just that the road is the most versatile transportation conveyance ever conceived, one that permits transit by virtually any road-worthy vehicle, but also a discussion of appropriate rail investments. Why aren’t we simply upgrading existing rail to 120+ speeds, so passenger and freight consists can be optimized on already-installed infrastructure?