Thursday, June 30, 2011

Do the toll roads make a profit?

In comparison to my earlier post about the operational profits of high speed rail, I thought it might be useful to take a gander at various toll roads in America and see whether they made a net profit; that is, revenues in excess of operational, depreciation, tax, and interest expenses; since the major complaint I've run into is persons complaining that high speed rail ought to repay its capital investment costs as well. I'm specifically breaking out interest in order to help illustrate the capital costs, but annual net deficits or profits are based on the totality of revenues and expenses as reported by the toll road.

Operating income: $81,668,000
Interest expense: $112,817,000
Annual net deficit: $19,690,000


Operating income: $94,669,000
Interest expense: $132,418,000
Annual net deficit: $10,702,000

Operating income: $31,366,289
Interest expense: $95,419,612
Annual net deficit: $60,068,817

In addition to toll revenue (from some of the highest in the country, with a full length trip from I-25 S to I-25 N costing 31.8¢ per mile), E-470 also received more than 8.6 million dollars in vehicle registration fees.

Operating income: $229,583,106
Interest expense: $116,887,849
Annual net income: $132,199,306

Operating income: $258,200,000
Interest expense: $377,500,000
Annual net deficit: $111,200,000

Note that the numbers here may be deceptive. According to Tollroad News, "one reason NTTA was able to build the TX121 Sam Rayburn Tollway so cheaply was that they took over a half-built pike from TxDOT and excluded TxDOT's costs from their figure for Project Costs." There may, therefore, be additional depreciation and interest costs not properly accounted for.

Operating income: $5,688,946
Interest and amortization: $66,745,615
Annual net deficit: $127,139,586

In this case, I ignored 63 million dollars in outside capital contributions and transfer payments in recording the net deficit. This does not materially affect the matter as it only offset half the losses. It is also interesting to note that in 2009, after depreciation, the CTTS ran a negative operational income, a result not seen in any of the earlier examined figures regarding high speed rail.

Pennsylvania Turnpike, 2010, page 24
Operating income: $71,359,000
Interest expense: $263,749,000
Annual net deficit $162,295,000

In 2009, the PA Turnpike had a negative operational income. The annual net deficit figure I've used is after eliminating transfers to PennDOT and likewise ignoring capital contributions. It is quite possible, however, that the PA Turnpike would run a net profit were it not for the revenue bonds funding transfers to PennDOT under Act 44.

EBITDA: $138,800,00
Operating income: $59,100,000
Interest expense: $268,000,000
Net annual deficit: $260,800,000

Total revenues: $209,348,000 (includes 2.1 million in gas tax allocations)
Total expenses: $199,701,000
Interest expense: $30,730,000
Net annual profit: $9,647,000

Much of the revenue for the Ohio Turnpike comes from commercial vehicles which represent 20% of the traffic and 53% of its revenue collection. As a result, increased intermodal competition from railroads, such as the new CSX intermodal yard, may represent a major threat to the sustained profitability of the Ohio Turnpike.
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Wednesday, June 29, 2011

Bad arguments for high speed rail: Oil consumption

While HSR can be an important and worthy endeavor, it's important to make sure that arguments in its favor are actually valid ones rather than a simple throwing out of various minor benefits. We might distinguish this best as primary benefits and ancillary benefits. A primary benefit such as road and air traffic mitigation is one where high speed rail is highly cost-effective and performs best. Ancillary benefits, such as relatively minor reductions in environmental pollution, are nice to have, but the project is not a cost-effective means of reaching those goals and they do not necessarily provide major gains (which, admittedly, is a large part of the reason that they are not cost-effective). Ancillary benefits, because of their cost-ineffectiveness, should not be highlighted and used as major talking points in support of high speed rail, as opposition think-tanks will seize upon this and use it to help convince independents that high speed rail should not be supported.

One of the ancillary benefits which is often inappropriately highlighted as a primary benefit by high speed rail proponents is that of reducing American oil consumption. Often, our reliance upon foreign oil, including some from Middle East nations such as Saudi Arabia, is seized upon by such proponents and the defense costs added to the price of oil. This, however, is a flawed notion that ignores the interconnected nature of global trade. Even if we were completely independent from foreign oil, or at least oil not from North America and Europe, including our shipping, we would still fund foreign militaries and place troops in these areas. A sudden lack of oil shipments from Saudi Arabia would cause major oil price shocks globally, not merely to those depending on oil from Saudi Arabia. Even if we were, by perhaps some magical free energy device, completely free from oil use except in raw industrial processes, we would still be gravely damaged economically because our economy depends on foreign trade. Major economic recessions or depressions in our trading partners will cause the same problems here as well.

Now, for the actual matter at hand, that of high speed rail's role in reducing our dependence on oil. The California High Speed Rail Authority estimates that, by 2030, the high speed rail system will be saving 12.7 million barrels of oil per year. This, however, represents only sixteen hours worth of US consumption in 2009 and only 1.9% of California's annual consumption (one week's worth). Clearly it would have minimal, if any, effect on oil prices or oil dependence.

Ultimately, the problem of oil consumption is going to be best handled through regulations and industrial subsidies (such as paying Ford to bring over the 65mpg Fiesta ECOnetic) which increase the average fleet fuel efficiency from its currently pitiful 22.6 miles per gallon to a rather higher figure. Saving fuel via HSR is helpful, but it is nothing more than a bandaid compared to what really must be done and it is a far from economical means of so doing.
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Sunday, June 12, 2011

California intrastate air travel and high speed rail

Using information from the Bureau of Transportation Statistics, I've compiled a rudimentary list of air travel within the state of California that may be affected by high speed rail.. The methodology was quite simplistic: Each airport in a city connected by high speed rail was selected and any California destinations within the top 10 destination airports recorded with the 2010 passenger data. It was assumed that Long Beach passengers would be served by Los Angeles Union Station, Oakland passengers by the San Francisco Transbay Transit Center, and Santa Ana passengers by the Irvine station.

California intrastate air travel (March 2010-February 2011):

Bakersfield (BFL): 19,000 to SFO, 14,000 to LAX

Burbank (BUR): 402,000 to Oakland, 230,000 to Sacramento, 220,000 to San Jose, 69,000 to SFO

Fresno (FAT): 111,000 to LAX, 44,000 to SFO

Los Angeles (LAX): 1,499,000 to SFO

Long Beach (LGB): 164,000 to Oakland, 160,000 to SFO, 70,000 to Sacramento

Oakland (OAK): 400,000 to Burbank, 375,000 to LAX, 363,000 to San Diego, 253,000 to Ontario, 249,000 to Santa Ana

Ontario (ONT): 260,000 to Oakland, 240,000 to Sacramento, 146,000 to San Jose

Sacramento (SMF): 360,00 to San Diego, 303,000 to LAX, 245,000 to Ontario, 229,000 to Burbank, 228,000 to SNA

San Francisco (SFO): 1,503,000 to LAX, 716,000 to San Diego

San Diego (SAN): 732,000 to SFO, 405,000 to LAX (almost certainly just connecting travel), 383,000 to Oakland, 357,000 to Sacramento

San Jose (SJC): 453,000 to LAX, 318,000 to San Diego, 247,000 to SNA, 223,000 to Burbank.

Santa Ana (SNA): 356,000 to SFO, 252,000 to San Jose, 249,000 to Oakland, 231,000 to Sacramento

Stockton (SCK): 11,000 to Long Beach

If we mirror any pairs with missing data on the assumption that nearly all passengers will return to their original airport, and we ignore SAN-LAX traffic as either being erroneous or solely composed of long distance connections, we find the following information, in the context of CAHSRA travel time estimates:

0-120 minutes:
Bakersfield-San Francisco: 38,000 (111 minutes)
Bakersfield-Los Angeles: 28,000 (54 minutes)
Fresno-San Francisco:88,000 (80 minutes)
Fresno-Los Angeles: 222,000 (84 minutes)
Stockton-Los Angeles: 22,000 (119 minutes)

120-180 minutes:
Los Angeles-San Francisco: 3,701,000 (160 minutes)
Los Angeles-San Jose: 906,000 (129 minutes)
Los Angeles-Sacramento: 746,000 (137 minutes)
Burbank-San Francisco: 802,000 (154 minutes)
Burbank-San Jose: 443,000 (125 minutes)
Burbank-Sacramento: 459,000 (133 minutes)
Irvine-San Jose: 499,000 (156 minutes)
Irvine-Sacramento: 459,000 (164 minutes)
Ontario-San Jose: 292,000 (153 minutes)
Ontario-Sacramento: 485,000 (161 minutes)

180-240 minutes:
San Diego-San Francisco: 2,194,000 (236 minutes)
San Diego-San Jose: 636,000 (207 minutes)
San Diego-Sacramento: 717,000 (215 minutes)
Ontario-San Francisco: 513,000 (182 minutes)
Irvine-San Francisco: 1,210,000 (186 minutes)

This presents us with a notional market representing approximately 14,460,000 annual trips which may be captured by high speed rail. Not all of these are valid trips for that market, as some represent connecting flights to longer distance flights, but that number is not easily quantifiable.

If we assume market captures of 100%, 70% and 50% for the listed trip segments, in line with international and domestic experience, we come up with a total of 8,866,100 passengers who would transfer their mode of travel to the CAHSR system from air travel, not counting for population growth by the time the full system is built. This may be a potentially low number, since approximately 344,000 passengers are "lost" assuming 50% market share for Ontario and Irvine to San Francisco, despite being only a few minutes over the three hour threshold, however, this may also be an appropriate compensation for over counting long distance connections. The 905,000 apparent connecting passengers between Los Angeles and San Diego may be captured through the use of code sharing (as Amtrak and Continental do with certain trains connecting at Newark Airport) if an easy connection can be made via the Metro Rail Green Line from Union Station to Los Angeles International Airport.

At current airplane ticket prices (purchased in advance today for July 8th, one way, including fees; air passengers in the first category were ignored) and with the current HSR ticket pricing structure of 83% of air travel fares, these air travel diverted passengers represent $645 million in annual revenue. Even with the additional $100 million that Amtrak California currently generates in ticket revenue, it is clear that substantial revenue will need to be derived from automobile diversions and induced trips. Given the expectations of even higher levels of freeway congestion and higher gasoline prices, however, this seems to be a reasonable expectation, at least so far as the Los Angeles-San Diego corridor is concerned. Such ridership estimates are, however, beyond the purpose of this post.
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Monday, June 6, 2011

Bad arguments for high speed rail: CO2 emissions

While I am a proponent of high speed rail, not all of the arguments put forth in its favor are valid. One of those arguments is that there is a significant and worthwhile environmental benefit to building high speed rail one which is not merely an added bonus, but rather a good of sufficient value to justify its construction on that ground alone. High speed rail, however, is one of the worst ways to try and reduce CO2 emissions. This is not to deny that there are environmental benefits to high speed rail, but rather to point out that they are simply at the level of added bonus as far as carbon dioxide emissions and climate change (health effects from particulate matter may be a different issue).

The California High Speed Rail Authority claims that, by 2030, using 100% renewable energy, the high speed rail network will reduce carbon dioxide emissions by twelve billion pounds. At 43 billion dollars to construct in year of expenditure dollars, that represents a cost of $3.58 per pound or $7,901 per metric ton of emissions, a far higher level than any proposed carbon tax. Planting additional forests, however, may sequester 2.2-9.5 metric tons of CO2 per acre per year. At the article's suggested ranges of $200-2,000 per acre, 21.5-215 million acres of timber could be planted at the same price, representing 47.3 million metric tons at the extreme low end and more than 2 billion metric tons per year at the extreme high end. Simply shooting for the same goal as CAHSRA claims, 5.4 million metric tons per year, at the lowest sequestration rate and high end of costs, require an investment of 2.45 million acres and 5 billion dollars, nearly an order of magnitude less. In any case, this amounts to an absolutely trivial reduction in CO2 emissions.

An even better investment, however, would be in the phaseout of the generation of electricity using coal power while simultaneously pushing mass transit and low or zero emission privately owned vehicles through tax incentives and subsidies. According to the California Air Resources Board, the largest CO2 emitters in California are oil refineries although they are put to shame by coal power plants. The Jim Bridger Power Plant in Wyoming, which has a net summer capacity of 2,117 megawatts is responsible for 15,293,640 metric tons of CO2 annually. A $13 billion contract was signed in 2008 for two new reactors providing 1,100 MWe each in Georgia, a cost of some 850 dollars per metric ton of carbon emissions reduced if it were used to replace a plant such as the Jim Bridger Power Plant. While solar does not have the problems of nuclear waste, it's low generation capacity relative to nameplate capacity is a severe detriment in comparison to nuclear and coal and makes it a far more expensive alternative. Proper site design, safety procedures, and modern passively cooled reactors make the risk of a meltdown negligible. Therefore, if we were use to the same amount of money for the high speed rail system as for replacing coal power generation, we could reduce CO2 emissions by 50 million metric tons per year, a far higher amount than CAHSR.

All this is not to deny that there is some environmental benefit to high speed rail. But high speed rail is not the proper or cost-effective means of combatting pollution, especially not with regards to CO2 emissions. High speed rail backers should be wary of making claims that the system is worth the expense because of its environmental benefits when those benefits, when extrapolated to an actual financial cost, offset only a small fraction of the cost of the system.
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High speed rail operational surplus

Examples from across the world of high speed rail systems posting an operational surplus.

Revenue: 7.2 billion euros
Gross profit: 915 million euros
Operating income: 535 million euros

It should be noted that, although owned by the government, SNCF pays taxes on its income and annual tolls of 1.306 billion euros for the TGV to Réseau Ferré de France, the owner of the French rail network, and 3.6 billion euros in total from other rail operations.

SNCF (France) 2011, page 14
Revenue: 7,279 million euros
Gross profit: 1020 million euros
Operating profit: 581 million euros

Renfe (Spain) 2008, pages 163-164
Revenue: 1.067 billion euros
EBITDA: 146.05 million euros
EBIT: 25.94 million euros
Net income: -24.84 million euros

Renfe (Spain) 2009, pages 154-155
Revenue: 2,142.24 million euros
EBITDA: 257.89 million euros
EBIT: -36.37 million euros
Net income: 13.11 million euros

Renfe (Spain) 2010, pages 154-155
Revenue: 2,161.09 million euros
EBITDA: 270.65 million euros
EBIT: -4.77 million euros
Net income: 46.20 million euros

Although the total income is slightly negative, that is including depreciation. Even with 264 million euros paid to Administrador de Infraestructuras Ferroviarias, the Spanish rail network owner and operator, for trackage rights, the AVE system garners sufficient ticket revenue to pay for the operation of the system.

The 2008 numbers are not comparable with others. In 2010, Renfe merged all of its passenger services into one department, the numbers here include all ticket revenue for commuters and other trains as well plus subsidies for these services (382.98 million euros in 2009, 366.68 million in 2010)

Revenue: 3.565 billion euros
EBITDA: 504 million euros
EBIT: 141 million Euros

Sales: 3.356 billion euros
Profit from ordinary activities: 155 million euros

In the case of the 2010 report, my figures may be flawed since I do not read German, despite two years of college German classes.

DB Bahn Long-Distance business unit (Germany) 2011
Revenue: 1,825 million euros
EBITDA: 227 million euros
EBIT: 40 million euros

Transportation operating revenue: 1,142,369 million yen
Transportation operating expense: 870,358 million yen
Transportation operating income: 272,011 million yen

This includes revenue and expenses from both Shinkansen high speed rail and conventional rail systems. Shinkansen revenue amounted to 973.7 billion yen in FY 2009, indicating that it is fully capable of funding itself.

Railway operating revenues: 806,834 million yen
Railway operating expenses: 745,789 million yen
Railway operating income: 61,044 million yen

Page 27 of this document breaks down transportation revenue by rail line. The Shinkansen is responsible for 323.9 billion yen and conventional lines 404 billion yen. According to page 26, pure ticket sales amounted to 728 billion yen, and operating expenses excluding taxes, depreciation, and rental payments came to 568.7 billion yen.

Transportation operating revenues: 1,808,704 million yen
Transportation costs and expenses: 1,577,378 million yen
Transportation operating income: 231,326 million yen

It should be noted that JR East was severely affected by the Great East Japanese Earthquake on March 11, 2011. Revenue and operating income amounted to 1,772,493 million yen and 227,150 million yen respectively, with expenses not given. Page 33 breaks down totals between Shinkansen and conventional rail with 431.5 billion yen (2011) for Shinkansen and 1,177.5 billion yen for conventional rail.

Acela revenue: 449.9 million USD
Acela costs including OPEBs: 349.3 million USD
Acela fully allocated contribution: 100.6 million USD

Acela is the only high speed line in America, briefly reaching a top speed of 150 miles per hour, although it is limited to lower speeds along most of its route (for instance, a top speed of only 135 miles per hour between Washington D.C. and New York City).

2009 Operating income: NT$23,323,712,000
2009 Operating profit: NT$5,564,846,000
2010 Operating income: NT$27,635,351,000
2010 Operating profit: NT$9,071,545,000

It should be noted that 2009 was the first year in which the Taiwanese high speed rail system covered its operational costs, having begun operations in 2007. Even though it ran at an operational profit, high depreciation charges and high interest costs resulted in a net loss until the government took over the system. High speed rail is not necessarily capable of covering its capital costs on ticket revenue alone without government backing in some manner (at the very least, government backing of loans for lower interest rates).

Edit: For clarification purposes, I should note that JR Kyushu and Korail are not listed because I could not find data for them and SNCB does not appear to break out their data between regular travel and high speed rail. Anyone else not listed, I simply didn't look for. Taiwan HSR was added on June 10, 2011. Spanish 2009-2010, German and French 2011 added on April 14, 2012.
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