Railroading The Taxpayer

COST Commentary: The Forbes.com article below makes the point which applies to almost all major train transit projects in the past 25 years. The lure of “free” federal dollars has led many local government officials down the path of implementing rail transit only to discover that all of its promises are bloated and irresponsible. The result is financially unsustainable because it dramatically increases taxpayer subsidies for transit, reduces cost effectiveness and degrades the overall transit system with reduced service and higher fares. The resulting disproportionate expenditures on train transit reduce funds available for roadways which serve 97-99% of travelers. This focus on trains increases congestion and has little overall impact on air pollution.

Beware of Federal Government train transit subsidies which are a small portion of the total implementation and operating costs of these very ineffective transit systems. The vast majority of the costs must be paid by local communities and taxpayers. Of course, the federal portion is also paid by taxpayers, primarily through federal gas tax. There are no free lunches.

Austin’s Cap Metro commuter train is paid totally by local taxpayers because it did not qualify for any federal funding.

Forbes.com, Fact and Comment
08.30.10, 6:00 PM ET

Washington likes to think that government-funded infrastructure projects boost economic activity. It was just such a belief that the President tapped into last year to justify part of his expensive grab bag of projects and programs that constituted his initial $787 billion stimulus package. But there is at least one form of Washington-generated infrastructure spending we could manifestly do without: high-speed rail projects.

If the White House has its way the federal government–as well as state and local ones–will spend hundreds of billions of dollars over the next couple of decades on projects that will be mammoth moneylosers and serve but a tiny fraction of the U.S. traveling public. Despite the fact that almost all the world’s bullet trains operate in the red, they have cast a spell over political elites.

Environmentalists love them because they will allegedly get us out of our automobiles. Unions love them because government projects mean bloated payrolls, pay packages and pensions. And the poor taxpayer gets railroaded.

Nevertheless, with great fanfare the Administration announced last year that it would shovel out $8 billion to help fund several high-speed rail corridors around the country. While that’s seemingly small change by today’s government standards, transportation officials understand that these appropriations are but a down payment on massive amounts of money yet to come. Traditionally, once a pork barrel scheme is started, nothing in heaven or on Earth is likely to stop it. Like barnacles on a ship, too many vested interests will glom onto it and fight to protect it.

But we may be entering an era where old assumptions about the inexorable growth of government and the unstoppability of pork will undergo a profound shift. Voters are recognizing that the money for these schemes isn’t manna from heaven; one way or another it comes out of their pockets. Moreover, a recent study from the National Bureau of Economic Research has found that congressional districts receiving a lot of pork appropriations end up getting hurt more than helped, in terms of economic growth. The presence of government spending distorts private markets, with the result that entrepreneurs shun them.

So the new Congress that comes to Washington in January would do well to take a hard look at the Obama offensive on high-speed rail. Take, for example, the proposed 84-mile bullet train project to connect Tampa and Orlando. Such a scheme has been kicking around for decades, but Florida voters decisively rejected it in a 2004 referendum. Ever disdainful of public opinion, Obama and his stimulus have given the project a new lease on life. Estimates are that it will cost $3.2 billion, and Florida applied to have the feds pick up $2.6 billion of the tab. The Administration is ponying up $1.25 billion. The rest of the money? The expectation is that Uncle Sam will provide more. And certainly more will be needed because these projects always bust their budgets on average by 50%.

But will this ridiculously expensive bullet train across Florida be worth it? No. Because that question brings up a more basic one: Who will take it? The train ride, if all goes well, will last just under an hour, yet driving takes only 90 minutes. That train hour doesn’t count getting to the Tampa train station, parking your car and waiting for the train itself, or the wee problem of what to do when you reach Orlando. The area is sprawling. As Hoover Institute transportation expert Liam Julian wrote: “To call it a Tampa-Orlando route is rather disingenuous because the trains will avoid Orlando entirely–the last stop heading east is Orlando International Airport, some ten miles outside of town.” So the passenger will have to take a cab or bus or rent a car to get to wherever he or she wants to go.

The Administration is giving California $2.3 billion to help launch the construction of a highly ambitious rail line that will ultimately connect Sacramento, San Francisco, Los Angeles and San Diego. As in Florida, this notion has been rattling around for a long time. In 1996 proponents estimated something similar would cost $18 billion. By 2000 the estimate was $25 billion, in 2004 $37 billion and today California officials say it will take $45 billion, a number no one takes seriously. In fact, independent experts believe the outlays will be more than $80 billion. Just making the connection between Anaheim and San Francisco will cost more than $40 billion. Moreover, La-La Land expects private investors to kick in $12 billion because so many people will want to ride the train that it will turn a handy profit. That’s about as likely as Fannie Mae ( FNM – news – people ) and Freddie Mac ( FRE – news – people ) making honest money. The passenger estimates assume the line will attract more riders than the bullet trains in Japan, even though Japan’s population density is about ten times that of the U.S.

And on it goes with other rail projects. For instance, the feds have endorsed pumping $1.1 billion into a high-speed rail line that would better the driving time between Chicago and St. Louis by all of 10%.

Bottom line: All of these rail projects couldn’t pass even a laugh test in the private sector, yet they will soak up capital that otherwise could be used for productive purposes. And it’s not just the capital. Almost all high-speed rail schemes around the world operate at a loss. Even those touted as turning a profit are usually helped with off-balance-sheet government subsidies.

European countries have gone for passenger rail projects with gusto. Despite substantial subsidies, though, the rails attract only 6% of all travelers in Europe. In the geographically gargantuan U.S. there is no reason to think we will do any better. No wonder the St. Louis Post-Dispatch concluded: “Investing … in passenger railroads is a little like building a bridge to the 19th century.”

But the Administration’s destructiveness doesn’t stop here.

One of America’s impressive transportation achievements has been moving increasing volumes of freight by rail, particularly since the historic Staggers Rail Act of 1980, which gave carriers enormous operational and rate-setting freedom. While Europe focused on moving people by rail, we focused on moving freight, which is why the U.S. has by far the best and most efficient freight railroad system in the world. Today our railroads’ share of freight-ton-miles is four times that of Europe.

Nevertheless, the Administration is undermining this impressive achievement. Transportation expert Robert Poole of the Reason Foundation points out: “[There is an] inherent conflict between high-speed passenger rail and freight rail. Because the service characteristics are so different, you can optimize a rail system for one or the other, but not both.” Yet the White House is doing just that, putting intense pressure on major carriers to upgrade their freight rail lines to handle fast-moving passenger trains, which will impose huge, additional costs for maintenance and system upgrades. This constitutes a double economic crime: wasting capital and undermining excellent infrastructure. The mission of the next Congress is clear: Tear up all of this pork-laden, misbegotten track.

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