Taxes are Not Benefits, and an EIA is Not a BCA

California is intent on moving forward with building a high speed train. There are lots of supporters of the project, and lots of attempts to make the project economically justified. For instance, here is a new economic impact report from the Bay Area Council Economic Institute that has high speed rail supporters excited. Here is what America 2050, an enthusiastically pro-high speed rail group, reported on the Bay Area report:

The Council's study identified a potential economic benefit of up to $2.5 billion for the region over time from construction-related jobs and investment, improved real estate values near stations and the right-of-way, and employee time savings. The additional benefits of the fewer polluting diesel locomotives and shorter travel times are in addition to this economic boon.

The headline of the America 2050 piece claims that the two reports cited in their story show the benefits of the project outweigh the costs. Neither report did any such thing. The BACEI report is an economic impact analysis (EIA), which is substantially different than a benefit cost analysis. See here for details. An EIA only looks at how a project will affect a given location's economy. There are no mentions of costs, and because many of the economic effects are transfers rather than new activities EIA should be used with caution.

For instance, according to Table 14 of the BACEI the report (page 27), the $2.5 billion in benefits is the high estimate. The low estimate of benefits is just under $1.5 billion.The BACEI counts state, local and property taxes as benefits, which in this EIA they are because it is new money to the state. But to evaluate the project's benefits against costs you recognize that taxes are not benefits (and certainly taxes should not be called an economic boon). They are transfers. The state gets revenue from taxes, but the people who pay the taxes don't have that money anymore. The costs and benefits balance each other out.

If this report was a BCA, then many of the benefits claimed get wiped out. The report highlights increased property values as a benefit and travel time savings as a benefit. You don't get to count both of these. The reason the property values increased, according to the study, is because of travel time savings. So either travel time savings are capitalized into property values, in which case you do not include travel time savings in your cost benefit analysis, or they are not, and then you estimate travel time savings as a benefit and leave property values out of it.

In any event, the BACEI economic impact report is fine for what it is, but it isn't a benefit-cost analysis. The EIA makes no claims as to whether or not the project makes sense economically, and this should be made clear when this, and similar, reports are highlighted.

China's Airport Expansion

James Fallows has a post with a number of links regarding China's aviation ambitions. One link to highlight is the story about the remarkable growth of the number of Chinese airports. The Telegraph reports that China will build 70 new airports and expand 100 more in the next few years. In contrast, the US has built two new airports over the past 30 or so years (Denver and Indianapolis) and many airports have expanded, but very few have added new runways. This does not mean that the US should go on an airport expansion binge to keep up with China. (The logic that the US has to keep up with China is the main argument for high speed rail investment in the US, at least according to Andy Kunz, the CEO of US High Speed Rail, and America 2050.)  The rapid expansion of Chinese airports reflects the poor quality of existing facilities (if there are any), rapidly growing demand for services and lots of speculative construction of currently empty airports. The key lesson from Chinese infrastructure investment is that the country is investing widely in many different technologies, and it is doing so because the infrastructure needs are widespread. Transportation planners and officials in the US should keep in mind the US needs for transport investment are very different than China's.

NO TAV: Anarchists Debate the Merits of High Speed Rail

This past weekend I was in Milan, Italy and I saw lots of the this image:

It is the work of the NO TAV movement, which is a social movement opposed to the proposed high speed rail line between Turin and Lyon. I saw similar images in Lyon, France last summer. Here is a summary of the movement. This is the crux of the opposition:

The simple principle behind the movement is that a new high speed railway line in the Valley is completely useless and not needed, its only purpose being the profit of the many private companies that have shares in it. The NO TAV think that the current railway line between Piedmont and France is more than sufficient, considering that traffic in the area has never been incredibly high. More importantly, the construction of the line would utterly and irreversibly destroy a huge part of the Susa Valley, causing not only an environmental but also an economic and social disaster, with businesses closing down and villages being completely disfigured or disappearing.

High speed railway lines in Italy are considered to be of “strategic interest”, which translated from political bullshit language means that the law allows this type of works WITHOUT consulting the local population and institutions whatsoever. At a time of economic collapse such as Italy is going through, the works require billions of Italian taxpayers’ money, at the expense of primary services like education and health. It would mainly be construction and other private companies profiting from it, but when finished and in use, the low demand for the line would end up making it a loss-making burden on the taxpayers. Like in Rossport, Ireland, the locals’ concerns and proposals are being completely ignored in the name of the only Modern God: money. 

The NO TAV came up with their own plan for the area which would include:
- changing the production and distribution processes to decrease transport of people and goods, especially on long distances
- supporting local sustainable trades instead of big industries
- creating or improving local means of sustainable and green transport for workers and students
- supporting and incrementing the use of the already existing local railway line

This is where thinking about political spectrum as a circle rather than a line is useful. NO TAV is opposition of high speed rail from the left, but they recently were joined in protest by neo-fascists. Then, of course, some anarchists started having a debate about the relative merits of high speed rail. I am not trying to send trolls their way. I want to highlight the odd politics of property rights, high speed rail, opportunity costs and other factors that are rife across all political persuasions when it comes to high speed rail. Support for and opposition of HSR is not because of one's politics, but rather a host of other reasons. Where European opponents are convinced that it is big money forcing HSR on people, in California supporters are convinced that opponents are on the take (while the train is on the dole). In truth, support or opposition is about values and priorities. But let's leave any fascists out of transport policy.

The Downside of Density: Shanghai is Sinking

China Daily reports that Shanghai, China is sinking due to too much high rise construction. From the story:

A diminishing water table, combined with a growing number of skyscrapers, is causing large areas of China to sink, increasing flood risk and endangering the rail network, according to a survey released recently by the China Geological Survey.
The government has already launched a number of measures to combat the problem and a plan of action was approved by the State Council in February.
Research shows the most vulnerable spots are in the North China Plain, the Yangtze River Delta and the Fenwei Basin, covering a combined total area of 79,000 square kilometers - more than 100 times the size of Singapore.
More than 50 cities in these areas are now at least 20 centimeters lower than they were in the 1970s, the survey said.

The sinking cities may threaten transportation links:

The situation may become worse with the construction of high-speed rail, Wu Aimin, director of the geological survey and technology department at the China Geological Environment Monitoring Institute, told the Economic Herald.
As China enters a boom period for high-speed rail construction, authorities should monitor subsidence near railways, such as the high-speed rail linking Beijing and Shanghai.
"If the ground sinks, even by a few millimeters, it will threaten the safety of high-speed rail," Wu was quoted as saying.

As if the Chinese high speed rail program didn't have enough problems. All of the skyscrapers come with a cost:

There are about 65 buildings higher than 200 meters in Shanghai, while Tokyo has 45, according to Emporis, one of the world's leading providers of building statistics.
A study released by the China Geological Survey in 2008 showed that total economic losses due to land subsidence reached nearly 333 billion yuan ($53 billion) from 1956 to 2008 in the North China Plain.

This is an unexpected downside of density.

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.

Why Didn't California Propose a Faster, Cheaper and Better High Speed Rail Project in the First Place?

California's High Speed Rail Authority has come up with yet another business plan, and this one really is faster, cheaper and better. Or so they say. U.S. Secretary of Transportation Ray LaHood says this plan will:

"deliver the economic benefits of high-speed rail faster and more affordably."

Saying that this project, now at $68 billion for a blended approach, is "more affordable" is similar to saying that a slightly used Ferrari is "more affordable" than a new one. Sure, it is. But it's still awfully expensive.

More to the point, however, is that to me it seems that cutting the price of the project by a third ($30 billion reduction) and claiming that it is now a better project makes it seem like the Authority doesn't have any idea what it is doing. (I know the new head of the Authority is well respected and this is his new business plan. One of the things he is trying to do is establish credibility with the Authority, and perhaps this plan will help. We'll see.)Any proposal that reduces costs by one-third and promises greater benefits makes me suspicious as to why it wasn't the original proposal. With California High Speed Rail it is especially weird because lots of people have been thinking about and planning this project for over forty years. Over the past year this project has tripled in cost, seen the size reduced, added an additional decade of construction time, had the cost reduced by a third, time for construction reduced and benefits increased. It just seems that no one has been minding the store since Proposition 8 passed. Here are the new benefits touted by the California High Speed Rail Association in their new business plan (Page ES-6):

• Accelerated delivery of advantageous investments
• Expanded early benefits for rail passengers
• Reduced costs
• Greater cost-effectiveness
• Fewer construction and operating impacts on communities
• Coordinated planning and investments among state, regional, and local agencies
• Improved transportation and reduced congestion in metropolitan areas
• Reduced air pollution, including greenhouse gas emission

Without being snarky, I will point out that "reduced costs," "greater cost-effectiveness" and "coordinated planning" are not benefits in the absolute sense, and most of these are what should be reasonably expected for any project. Claiming as benefits that a publicly funded project will cost less than $100 billion and will be managed professionally should not be reassuring to anyone, regardless of their support for this project. Also keep in mind that jobs are a cost, not a benefit, so a $30 billion reduction in costs dramatically reduces any plausible employment gains.

Ultimately, all of the business plans, wild swings in price and size, and dubious claims of benefits leave me with the feeling that no one knows what, exactly, this train is supposed to accomplish. We can optimize transportation networks for various purposes, but I don't see any evidence that the California HSR project is being optimized for any reason other than to prove that it can be built, at any cost.