Saturday, April 7, 2012

By This Logic, Perhaps the Whole Thing is Flawed

The California High Speed Rail project has dropped Anaheim from the latest business plan. Two things to note about this. First, the Anaheim hub was, at one point, supposed to host more travelers annually than New York City's Penn Station, which is the busiest transit hub in the Western Hemisphere. Seems odd to just drop it, unless it really wasn't all that central. (In fairness, connecting the train to Disneyland is a good thing to do in the context of the project.)

Second, Rail Authority Chairman Dan Richard explained omitting Anaheim based on the cost of travel time savings:
Electrifying and improving the Los Angeles to Orange County route would cost $6 billion and save only 10 minutes of travel time, said rail authority Chairman Dan Richard.

"Why would we do that, pay $600 million per minute?" he said in an interview Friday.
Let's do the math here. The project is justified on travel time savings, and the Chairman has now said that $600 million per minute is too high a cost. At about $70 billion, the current project needs to save more than two hours (116 minutes) to justify the expense if each minute is worth $600 million. Yet Richard says $600 is too high, but by how much? The current (new) business plan offers about 2 hour and 40 minute service from San Francisco to Los Angeles on some routes. (How travel times didn't increase with the blended plan is still a bit of a mystery.) So, can you get from Union Station to San Francisco in less than or equal to 4:40 under current technologies? Yes you can. Flying is faster, even with airport hassles (Try Burbank to Oakland!). Driving is a bit longer, but is much more likely to get you exactly to your destination resulting in similar door to door times.

Using the Chairman's logic that $600 million is too expensive to save a minute, the whole project is too expensive. Time savings do not justify the current business plan.  I am legitimately curious how much is the right amount to save a minute. This is a major issue for transport planning, since nearly all new projects are based on increasing travel speeds and saving time.

To illustrate the absurdity of travel time savings, I put together this table of needed time savings for various costs pr minute. I used $600 million as the upper bound, since we know that's too high. I also assume that the project cost is already fixed as are travel times, and use the recent total cost from the business plan.

What this table shows is that as the cost per minute declines, the more minutes you have to save in order to justify the project. The proposed high speed rail project cannot be justified through time savings except when the project spends over half a billion dollars per minute saved.  Based on the Chairman's value of a minute at somewhere south of $600 million, I don't see how the SF-LA project is any better than the LA-Anaheim leg. His stated preference of value of time at less than $600 million per minute is belied by his revealed preference for a value of time of about $600 million per minute for the balance of the project.

UPDATE: The table didn't show up when I first posted this, so I added it. To be clear of my point with this post, the entire project costs about $600 million per minute saved, so I don't know why that should prevent continuing to Anaheim. A broader point is that travel time savings is a suspect way to justify a project, but it is the primary way to do so. If Chairman Richard thinks $600 million per minute saved is too much, then the overall cost of the project still has to come down because the time saved will not be sufficient to justify the expense.

UPDATE 2: The data presented in the table assumes that travel time and project cost are held constant (I mentioned this).  Since the rail will save about two hours, depending on various factors, the cost per minute of travel time savings is about $600 million, which is said to be too high. Table 2 illustrates what the project should cost at various values of saving one minute. The train will save about 120 minutes. If it is worth $400 million to save a minute of travel time, the project should cost $48 billion. This is a more straightforward way of thinking about the value of time.

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