Lies, damned lies, and statistics

This particular bit of propaganda, especially the claim about high speed rail ticket prices per mile, has been making its way around lately, including by State Assemblyman Jerry Hill. It provides an excellent example of the value of cherry-picking one's data to support the conclusion.

Using empirical evidence from analyzing fares on high-speed train routes in Europe and Japan, it appears the CHSRA’s high-speed rail per mile rate should be about $0.44/mile to recover operating and construction costs; 80% higher than their presently-used $0.24/mile. Setting aside for a moment the fact that all but two of the world’s high-speed rail routes are subsidized, and assuming they at least break even, the analyzed per mile rate would make a one-way SF to LA ticket cost about $190.5 Therefore, if the CHSRA’s assumed private operator must charge enough to break even, four tickets for a LA/SF round trip would cost at least $1,520.

First the lie: The California High Speed Rail Authority is not required to recover construction costs, only operating costs and any revenue bonds sold on the basis of HSR ticket revenue. It is therefore, irrelevant, to cite what may be needed to recover construction costs.

With regards to the damned lie, as I have already shown before, every high speed rail operator recovers operating costs based on passenger revenue. The claim that "all but two of the world’s high-speed rail routes are subsidized" is a falsehood based on which routes have fully paid off their construction bonds, an assumption that does not necessarily work if, as SNCF has chosen to do, profits are used to invest in expansion rather than paying off the extant loans. It is a rather foolish person who considers a business unprofitable simply because the original loan is not yet paid off.

Lastly, we come to the statistics. Their empirical evidence fares in Europe are peak hour next day 2nd class fares upon Paris-Lyon, the most congested and hence profitable line within France. As any economics student could easily point out, when lines are operating at or near maximum capacity and there is still substantial demand, the fares will, absent outside regulation, reflect the highest price the market will bear. At 425 kilometers and 86.4 euros peak, this reflects a price of €0.20/km or $0.47 per mile. However, if we look at the Paris-Marseille segment, which covers 783 kilometers in three hours, we have next day fares ranging from €54 to €97, or $0.16-0.29/mile. Advanced fares drop as low as €39.90 for two weeks in advance, twelve cents per mile. Seen in this light, if anything, the 24¢/mile fare proposed for CAHSR is actually too little.

Similarly, the Japanese fares referred to appear to be from JR East's Tokaido Shinkansen who charge a flat fare of 14,050 yen on the Nozomi express trains between Tokyo and Shin-Osaka. That equates to a hefty 53¢ per mile, but again, this is not a sign of actual operational need rather than profit-taking. The congestion and demand on the Tokaido Shinkansen is sufficiently high that JR East is planning to build a ¥9 trillion maglev line to supplement it (a line which will be entirely privately funded and expected to be operational). A longer journey from Tokyo to Hakata, again using the Nozomi express along the congested Tokaido Shinkansen, is ¥22,320, 40¢ per mile. It is, of course, notable that that fare level does not impair traffic, contrary to the assertions of the Community Coalition on High Speed Rail.

A more proper response by CC-HSR would have been to try plugging in numbers for themselves and seeing if the numbers worked. Then, and only then, would it be appropriate to criticize the 24¢/mile figure if the numbers did not pan out. Since they failed to do so appropriately, I'll make some effort at doing so.

Assumptions:

1. The trainset will resemble a Siemens Velaro E with a cafe car and a total of 405 seats in three classes (however, for the purpose of this analysis, all seats will be treated as coach).

2. The notional average trainset will travel an express route from Los Angeles to San Francisco with no stops.

3. Attributed maintenance costs will be equal to $33.74 per mile, in accordance with the tolls SNCF pays along Paris-Lyon.

4. Electricity use shall be 35.41 kilowatt hours per mile, similar to the TGV Atlantique (page 74), and the price per kilowatt hour 8.46 cents.

5. Three employees (engineer, conductor, and cafe attendant) whose total compensation per hour is 40, 30, and 25 dollars per hour respectively, with an assumed 3 hours of paid time per notional average trip.

6. The average train will have a capacity factor of only 50%.

These direct marginal operating costs come then to a total of $16,154.82 for the 432 mile journey. At 24 cents per mile, the 202 passengers paid a total of $20,943.36 ($21,210 if we round up to the $105 ticket cost) in fares, meaning that the average train should cover its costs handily. Amtrak's experience is that the cafe car adds an additional 7% to the revenue, boosting total revenue to $22,694.70, an operating profit of $6,539.88. Provided that these numbers truly represent the average train, the California high speed rail system should not face any difficulty in raising sufficient operational revenue to run an operational profit at the 24 cents per mile fare level.

Why did freight electrification fail in America?

Having recently acquired a copy of The Milwaukee Electrics by Noel T. Holley, I thought it might be worthwhile to go through and post some thoughts on why electrification did not become more widespread and was generally dismantled in the United States.

1. Electrification was extremely expensive. The Milwaukee Road’s 654 miles of electrification cost 23 million dollars when completed in 1920, some 200 million dollars adjusted for inflation using a GDP deflator or some 3.78 billion as a relative share of GDP. While that would not pose a major problem for the Class I railroads of today, that amount was a rather large sum for the Milwaukee Road and, in part, led to its bankruptcy in 1925.

2. It did not produce major financial gains, even with regards to steam locomotives. After subtracting the cost of bond and interest payments, electrification amounted to only one million dollars in annual savings on the Rocky Mountain Division and $100,000 on the Coast Division (the Coast Division having had construction and interest prices increase greatly compared to the Rocky Mountain due to World War II). Higher traffic would have greatly increased the savings, however the Milwaukee Road was the Johnny-come-lately transcontinental and suffered accordingly. It is tempting to believe that had it been the Great Northern which electrified instead, the electrification might have been maintained to the present day.

3. The World Wars, Great Depression, and economic troubles for some in the 1920s put severe limits on the financial capability of the major railroads to make the major investments that electrification entailed.

4. Diesels provided nearly all of the advantages of electrification at far less cost. While electrification required the construction of extremely large amounts of infrastructure before a single locomotive could run, diesels could be integrated into the normal purchasing cycle and gradually replace steam locomotives.

5. For quite a long period of time, electrics did not offer a significant difference in motive power cost compared to diesels and could in fact be more expensive to operate. To quote the aforementioned book:

A study performed by Laurence Wylie in 1949 indicated that new diesels would be slightly cheaper to operate on the Coast Division than the old electrics. The purchase price, interest and taxes are what made diesels are more expensive choice.

This closeness of costs was not unique to Milwaukee. A 1948 study on the Great Northern electrification found diesels to be slightly cheaper to operate there also. The Great Northern blamed this on the exorbitant rates it was paying for electric power. Its variable rats went as high as $.01 per kilowatt hour (kwh) including demand charges. Joe Gaynor, who headed the G.N. electrification, felt the rate would have to be cut to $.005 per kwh for economics to justify expansion of their electrification.

Energy costs were one of the factors favoring electrics on the Milwaukee. From the late 1940’s through the late 1960’s, the Milwaukee paid $.09 per gallon for diesel oil compared to $.068 for enough electricity to produce equivalent power. (Calculations and locomotive tests showed that one gallon of oil equaled 12.5 kwh which were purchased for $.00544 per kilowatt hour.) This rate was quite good in comparison to the Pennsylvania RR which paid roughly $.009 in 1950 and $.013 by 1966.

Today of course, the situation is quite different when it comes to the price of fuel. However, that does not necessarily support electrification of the mainline corridors as a real possibility within the next few years. With only a limited amount of funding available for improvements, expansion of freight service is likely to be a more profitable endeavor, and so receive the monies, than electrification absent a public-private partnership for the purpose of electrification.

Oil prices lead to higher usage of intermodal rail services

Survey Sees Major Shift of Truck Freight to Intermodal

Shippers shifted freight from all-truck modes to intermodal at the fastest pace in years during the second quarter, according to a closely watched survey by the Wolfe Trahan research group.

Based on preliminary results of the survey conducted in July and early August, the shift from roads to rail occurred more than at any point in the last eight years, the analysts said, and shippers expect to shift more domestic cargo to intermodal in the months ahead. The full results of the survey are scheduled to be released before Labor Day.

During the April-June quarter, “shippers in our survey shifted a net 4.5 percent of their volume from truck to rail,” said analysts Edward Wolfe and Scott Group, for “the highest net shift to rail in the past eight years of our survey.”

Shippers also said they expect to move a net 3.6 percent more to rail from highway-only transport over the next 6-12 months, which is a pickup from recent surveys. In this year’s first quarter, shippers projected a 3.2 percent net shift in the coming year, up slightly from last year’s fourth quarter.

For most of last year, surveyed shippers told Wolfe Trahan they only expected to shift a net 1.3 percent to 1.9 percent of their business away from road delivery to intermodal.

While rail industry officials often credit the shift to improving rail service times and investments to convert more of their rail networks to doublestack clearances, researchers found a strong correlation between modal shifts and oil prices.

When average quarterly oil prices were below $70 a barrel for West Texas Intermediate crude during 2009, the survey found freight shifting back to trucks and the delivery convenience they provide.

But when WTI quarterly pricing moved above $70 per barrel in 2010 followed by a spike this year, shippers increasingly put more cargo aboard trains for the long-haul part of the trip.

With realistic long term oil prices remaining above $70 a barrel for the foreseeable future, freight rail is increasingly going to be the shipper of choice. Electrification, which offers energy prices roughly one third of the current cost of diesel, may become a means of competition between shipper; however, this is presuming that there is sufficient capacity on the rail lines to warrant such, which is generally not the case at present. Certainly however, the expectation of 500 hybrid locomotives sold by 2020 is one that should be easily matched. My own expectation is that such a number is probably on the more pessimistic side, should the claimed fuel savings hold up in practice.

When rail spending is depressing and an outrage

Earlier today, Secretary LaHood announced an additional $336 million in Federal funding for the purchase of new intercity locomotives and rail cars. This brings the total of such awards to $782 million for a total of 33 locomotives and 120 passenger cars. This is, quite frankly, an absurd amount of money. At an average of five million for each vehicle, the utility of continuing to purchase individual locomotives and cars rather pales. Diesel or electric multiple unit train sets, even FRA compliant USRailcar models, become a far better value for the money as they offer increased performance over traditional locomotive and car consists. Their relative novelty to American passenger railroading may also offer a useful public relations boost with a "futuristic look."

Consider, for instance, that NCTD in San Diego County was able to purchase twelve Siemens Desiro DMUs at a total price of 52.2 million when they set up the Sprinter rail service, a price of 4.35 million per unit. For this price, instead of receiving 6 locomotives and 42 rail cars, California could have purchased 48 such multiple units. Four unit consists would enable 478 coach seats and 24 business class seats, using Desiro Classic specifications and assuming each end car contains business class seats. These twelve trains would be capable of taking over, in part or in full, for any of Amtrak California's routes and providing increased service in the process, perhaps allowing even for an authentic Surfliner Express rather than the paltry 15 minute savings currently offered.

As a further note, it is outrageous that California is the only state to spend substantial sums of it's own money on increasing capacity through this measure. 42 million, 20% of the total funding, came from California's own funds. Only Illinois paid as well and their funding amounted to a paltry 11.6 million, barely 5% of the purchase that was made for and about 2.5% of the total projects Illinois is involved in. Further Federal funds should require a state match similar to that of California's.

Why do I, as a conservative, support high speed rail in California?

That modern American conservatism is, in general, highly opposed to high speed rail programs is not a matter of dispute and one that I do not believe I need to source or prove. In certain respects it is even understandable where passenger rail advocates have grossly misrepresented or wrongly implied basic passenger rail improvements as being “high speed rail”, such as was the case in Ohio and Wisconsin and is the case, although the funding remains, with line upgrades and extensions in Illinois and Iowa. That is not to say that I oppose those projects, merely that I understand why, with the lackluster reality of 79 and 110 mph trains when the implication is one of bullet trains, conservative opposition might greatly result. However, opposition to the lines in Florida and California, where the lines are truly high speed, is less clear, if perhaps even more vociferous. So what are some of the reasons that I, as a self-identified conservative, support high speed rail in California if the zeitgeist of conservatism is opposition to high speed rail programs in the United States?

1. High speed rail systems support themselves

As I have previously noted, every high speed rail system in the world brings in enough revenue to cover its operational costs. While they may not necessarily cover the initial capital costs of constructing the lines, that makes them no different from most toll roads and certainly no different than any newly constructed highways. The overall economic benefits of increased mobility and commerce are sufficient to make the initial capital investment a worthwhile expense, especially given that the government can take the long view and evaluate investments not merely over the next few quarters, but over a century or longer (which is not to say, of course, that projects are necessarily a good idea if they take a century to recoup their investment value).

2. High speed rail, especially where it overlays commuter rail, decreases congestion

Currently, despite not being time competitive against cars, the Metrolink commuter rail system ”clears the equivalent of one lane of the 91 Freeway per day” and is expected to do so with another lane following the Perris Valley Line extension. Trains operating on the OC Line add an additional half lane of capacity in terms of riders and cars removed between the hours of 4am and 8am while the San Bernardino Line, over the course of one hour (5:15am to 6:12am) removes just under 2,000 riders, or a full lane of traffic, from the highways. 125 mile per hour commuter trains sharing lines with high speed intercity trains will represent trip times that are not merely time competitive with cars, but outright faster than automobiles on uncongested roads, leading to greater use of them and decreasing overall trip times for those who stay on the roads while others change modes.

Similarly, because high speed rail is competitive with airlines on shorter distance hops of five hundred miles or so, with rail journey times under three hours taking approximately 70% of the air-rail market, air congestion can be lowered (assuming proper regulatory authority is granted to airport managers to ensure that flights are actually dropped rather than replaced with smaller jets and turboprops), resulting in safer air travel with fewer delays.

3. High speed rail reduces the need for other capital investments

We do not live in a static world, but rather a dynamic world of fairly continual growth (at least for the next few decades), and our infrastructure planning must plan for the future. That means we must rationally look at the most cost-effective means of expanding transit mobility to keep up with the expected population growth, expected to reach approximately 44 million by 2020 and 49 million by 2030.

What the recent “Carmageddon” flap in Los Angeles showed, although it was not remarked upon, is that it can no longer be taken as a given that highway spending is the most cost-effective means of reducing traffic congestion. One billion dollars is being spent upon that project in order to add a single carpool lane in each direction for a total of ten miles. One hundred million dollars per mile is tremendously expensive, on par with the cost of building and upgrading urbanized high speed rail lines, and more expensive than building greenfield rail lines (even with America’s cost inflation relative to the rest of the world when it comes to infrastructure projects). For all that, the additional capacity is only up to 2,300 vehicles per hour per direction, or about 4,600 persons since this is a carpool lane requiring at least two persons per vehicle. By contrast, a rail line, for the same money or less, would be capable of carrying as many as 8,300 passengers with ten minute intervals between trains, not including standees, effectively doubling the capacity of the highway improvement for similar amounts of money. With the tremendous population growth in the Inland Empire that we have seen in the past decade and expect to see in the future, it makes far more fiscal sense to utilize high speed rail to expand our mobility solutions rather than the continual expansions of highways that has previously been the case in the California. This is especially the case when high speed rail is more than capable of operating without additional government spending and as the Phase II expansion through the Inland Empire, in particular, is currently intended and expected to be financed through CAHSR revenues and private investment rather than taxation or general obligation bonds.

4. High speed rail insulates intercity travel and commerce from oil shocks.

The heart of economic growth lies in the rapidity and affordability of transport, both for goods and persons. With the current poor fuel efficiency of American cars and the general inefficiency of short distance airline hops such as represented by intrastate air travel, rising fuel costs pose a general harm to our ability to continue to engage in the normal travel and personal commerce to which our economy is accustomed, the loss of which most likely having a deleterious effect upon the economy as a whole. With extremely low profit margins hovering around 2% and cumulative losses of $54 billion over the previous ten years, it is entirely possible that, although the Bay Area-Los Angeles Basin represents the heaviest travelled air corridor in America, future oil shocks may result in curtailment of service, either by airlines seeking to cut costs, or from travelers cutting their own costs and forgoing travel and with it the commerce that would have resulted. Electric high speed rail, by contrast, is unaffected by increased petroleum prices. For those who have work commutes that may be accessed by rail, the steady fares of high speed rail and commuter trains on high speed rail trackage in the face of fuel price increases may very well represent a viable alternative which saves them money. Discretionary income saved (or rather, continuing to be spent in a discretionary manner) rather than being turned into non-discretionary income for transportation is far more beneficial to the economy.

5. High speed rail, as currently designed in California, expands travel and commerce opportunity and activities

Currently, if one wishes to travel in California somewhere other than between the LA Basin and Bay Area, their only choices are extremely expensive air fare or a lengthy piece of driving. Personally this was quite recently hammered home to me when, looking at the potential for meeting up with a friend from out of state who would be visiting Sacramento, I was faced with the options of either spending several hundred dollars on airfare, with inconvenient flight times, or 8-9 hours each way driving, the latter of which was not a feasible option due to work scheduling. For many areas, such as in the Central Valley, driving is currently the only option. With the more convenient transit that high speed rail can generally provide, travel and tourism, already major industries in the state, can only benefit.

Do we actually want DesertXPress?

Note: This was reposted to accurately reflect the day it was written rather than Blogger's insistence on publishing it from when the draft was first created.

The proposed private high speed rail line between Los Angeles and Las Vegas, DesertXPress, has gotten quite a fair bit of attention and some degree of government support, such as use of the I-15 corridor. As it would, if current plans proceed at their current rate, be the first true high speed rail line in America (Acela only briefly touching 150 mph for a few miles), it also has a strong degree of support from high speed rail proponents. Is DesertXPress necessarily a rail line we want however?

To begin with, DesertXPress is not likely to succeed financially. While they have claimed to have large amounts of private capital behind them, they have also applied for a 4.9 billion dollar Railroad Rehabilitation & Improvement Financing loan from the Federal Railroad Authority. These loans carry "interest rates equal to the cost of borrowing to the government"which is currently equal to 3.75% on a 30 year bond (the Wall Street Journal is reporting about 4.3% currently). At that rate, the annual loan repayments would equal 273.4 million dollars per year (292.2 million at 4.3%), around the same amount as Taiwan High Speed Rail paid in 2010 (NT$8.9 billion, page 5; that is US$308 million today, but the NT$ has risen in value against the US$ and one year ago, that amounted to $276.2 million). The Taiwan HSR system was unable to pay the cost of financing and required a government takeover to refinance the loans at even lower interest rates despite far higher revenues than DesertXPress expects. Page 16 shows the revenue levels that DesertXPress expects to make. It is not until 2031 that revenues would be sufficiently high as to lower financial charges to only a quarter of total revenues. Given that operational profits prior to interest and taxes is less than 10% of total revenues for European high speed rail operators (running from a Spanish 2% to SNCF at 7%), it is unlikely in the extreme that DesertXPress could meet its interest expenses and would be forced into bankruptcy. This would not be the case, of course, if there should happen to be an appropriate sum of private investment to build the line rather than building it on loans, however, it raises the question of why DesertXPress would apply for a loan sufficiently large to build the entire line if it had the requisite private investment secured.

When and if DesertXPress fails, it will be a tremendous PR blow for the case of the California high speed rail program and other high speed rail programs in the United States. Any initiative that has been gotten in the public mindset is likely to be lost with such a visible failure, especially as anti-HSR groups such as Reason and Heritage seize upon it to use as an example in their mantra of the unprofitability of high speed rail (while ignoring toll roads with much higher margins being similarly crippled by debt loads).

From another standpoint, there must also be considered the nature of the line. While high speed travel between New York, Boston, and Washington D.C. is mutually enriching, high speed travel between the Los Angeles area and Las Vegas is unlikely to so be. The main industries of Las Vegas and the main reason for the relatively high level of travel to Las Vegas are parasitical in nature, gambling and the leisure and entertainment industries which serve its customer group. From the viewpoint of California, given the low return spending which the connection would bring from Las Vegas, it would be greatly preferable not to have it and instead encourage that gambling be conducted at Indian casinos within the state (such as the promotion between San Manuel and Metrolink), thus keeping the dollars and their related jobs inside California rather than exported to another state with little return.

Additionally, Las Vegas is itself of dubious quality. While there is nothing inherently wrong with responsible gambling, Las Vegas has consistently promoted itself as being the home for every vice it can, as being a destination and resort for debauchery and decadence, thus earning its nickname as "Sin City." Promoting and encouraging easier access to vice runs contrary to good order and the benefit of society and hence on that basis ought to be avoided except whereas deemed necessary by pragmatism (for instance, were it to lay upon one of the best routes connecting two worthier cities rather than being the entire purpose of the line itself).

Have Metrolink Express trains been a success?

On May 9th, Metrolink introduced express train service along the Antelope Valley and San Bernardino lines. These lines both received a pair of express trains, one heading to Los Angeles in the morning, and one leaving Los Angeles again in the evening. Now that a few months have passed, ridership data for the months of May and June have been posted, allowing us to see whether the faster train times resulted in higher ridership.

Antelope Valley Line total ridership

April 2010: 141,616

May 2010: 132,876

June 2010: 139,586

April 2011: 137,327

May 2011: 142,024

June 2011: 144,762

San Bernardino Line

April 2010: 281,242

May 2010: 268,550

June 2010: 279,766

April 2011: 290,095

May 2011: 295,575

June 2011: 298,514

Even a simple eyeballing of the numbers indicates that the combination of additional service and express trains has resulted in much higher ridership than would otherwise have been expected. However, the express trains appear to be underperforming. AV 282, the morning express service, averaged 214 passengers per weekday. That's only 55-60% of the performance of its preceding and following local services which averaged 383 and 349 passengers respectively. Similarly, the afternoon AV 285 averaged 291 passengers against the 411 and 366 of its earlier and later trains.

San Bernardino does far better however. SB 383 averages 522 passengers per weekday to Los Angeles, substantially better than the earlier SB 305 with 279 passengers and close to the following SB 307 with 583 passengers. In the afternoon, SB 384 carried an average of 563 passengers, substantially better than its neighboring trains at 531 and 511 passengers.

There are two explanations that come readily to mind for why the Antelope Valley express trains do so poorly. The first is that the commuting population is more concentrated in the stops served by the express trains on the San Bernardino Line than they are on the Antelope Valley Line. Considering the 2007 boarding pattern, the express train only serves 36% of commuters and serves the first, fourth, and eighth (third to last) busiest stations. Meanwhile, the San Bernardino line served the busiest three stations representing 46% of the total commuters.

The second explanation may simply be a lack of sufficient time saving to draw a suitably large number of commuters from other trains and from cars. The new express trains, if on time which the AV trains had some trouble doing at first, are slightly less than half an hour faster than their local counterparts (with the noted exception of SB 383 being 45 minutes earlier than its predecessor, arriving 15 minutes before it despite leaving 30 minutes later). San Bernardino is now competitive in terms of trip time with cars, although it is still slower when one accounts for the first and last mile problem of mass transit. Antelope Valley, however, is still slower than the car (in both cases, using Google Maps to determine trip time). In this case, the dominating factor is going to be the arrival timing since it cannot function as a suitable alternative to road congestion for those who are intent on minimizing their transit time.