NewGeography.com blogs

High Speed Rail in Brazil: The Need for Guarantees

In an article entitled Fourth Time Unlucky, The Economist wonders why Brazil, with "a long list of more worthwhile infrastructure projects", does not dismiss high speed rail "out of hand."

After three unsuccessful attempts to attract international bidders to build its Rio de Janeiro to Sao Paulo and Campinas line for a bargain basement price, the nation has decided that taxpayers will foot some (probably all) of the bill.

The Economist continues:

"Everywhere, new-build rail projects are horribly likely to come in way over budget and to be used much less than expected. A 2009 paper by Bent Flyvbjerg of Oxford’s Saïd Business School, ominously entitled "Survival of the Unfittest: Why the worst infrastructure gets built—and what we can do about it."

As Flyvbjerg and others have noted, promoters, whether private or public, often seem to have a simple goal: to get the line under construction. That positions the projects for taxpayer bailouts when they run into problems.

With bidders able to call upon other people's money (taxpayer's money) this time, it seems likely there will be takers. And, based upon the experience with major infrastructure projects around the world, that will be just the start of the taking.

If elsewhere provides any guidance, the winning bidder can be confident that, down the road, the captive customer (the taxpayers) will pay any cost overruns. At the same time, the routine could be repeated in which a government kicks and screams, claiming it had no warning.

They did. In this day and age, a link to the Economist's warning is forever. A wise government will obtain the unlimited guarantees any company involved in the winning joint venture. Only then will Brazil's taxpayers be protected.

Texas High Speed Rail: On the Right Track?

The Central Japan Railway (Note 1), which operates one of only two high-speed rail segments (Tokyo Station to Osaka Station) in the world that has been fully profitable (including the cost of building), proposes to build a line from Dallas to Houston, with top speeds of 205 miles per hour. This is slightly faster than the fastest speeds now operated. This line is radically different from others proposed around the nation and most that have been proposed around the world. The promoters intend to build and operate the route from commercial revenues.

There is the understandable concern that eventually, the promoters will approach the state or the federal government for support. Not so, say Texas Central High Speed Railway officials. According to President Robert Eckels, not only is there no plan for subsidies, but "investors would likely walk away from a project that couldn’t stand on its own." He also told the Texas Tribune “If we start taking the federal money, it takes twice as long, costs twice as much,” Eckels said. “My guess is we’d end up pulling the plug on it.”

Eckels is a former Harris County Judge (Houston), a position the equivalent of a county commission or county board of supervisors chair in other parts of the nation. Eckels developed a reputation for fiscal responsibility during his tenure at the county courthouse.

The Texas project is in considerable contrast the California High Speed Rail project, which if built, is likely to require a 100 percent capital subsidy and perhaps subsidies for operations. It is also different from the Tampa to Orlando high speed rail project, which would have required a 100 percent capital subsidy and was cancelled by Florida Governor Rick Scott. The Texas project can also be contrasted with the Vegas to Victorville, California XpressWest high speed rail line that would require at least a $5.5 billion federal loan and a subsidized interest rate. Our recent Reason Foundation report predicted that XpressWest would not be able to repay its federal loan from commercial revenues and could impose a loss on federal taxpayers of up to 10 times the Solyndra loan guarantee loss (see The Washington Post, "Solyndra Scandal Timeline").

From the horrific record of private investment in startup high speed rail lines and the huge losses that have been typical, I am certainly skeptical. The Taiwan high speed rail private investors have lost two-thirds of their capital investment and debts are guaranteed by the government. The Channel Tunnel rail line to St. Pancras station has been bailed out by British taxpayers. However, if any company can make money at high speed rail in the United States, it would be the Central Japan Railway.

So far the Texas Central High Speed Railway seems to be doing it right. Like the other intercity modes, the airlines system and the intercity highway system (Note 2), this project would be paid for by people who use it.

Without government subsidies or loans, the Texas Central High Speed Railway will certainly have an incentive to get the sums right. If they are not, it sounds like the plug will be pulled. If they are, high speed rail could be on the right track in the United States for the first time. More power to them.

------

Note 1: Central Japan Railway, and other companies purchased the assets of the Japanese National Railway in the late 1980s. The nationalized railway had run up a debt of nearly $300 billion, which was eventually transferred to taxpayers.

Note 2: There is a small subsidy to the airline system from the Federal Aviation Administration. Intercity highways have been financed by users until contributions from the federal general fund in recent years. However these contributions have been far less than diversions over the past 30 years from highway user fees, principally to mass transit a major transfer of highway trust fund interest to the general fund and now ongoing interest transfers.

Photograph: Central Japan Railway corporate headquarters at Nagoya Station (by author)

Congratulations to America: Huge Greenhouse Gas Emission Reduction

Congratulations to America. According to the US Department of Energy, Energy Information Administration, carbon dioxide (CO2) emissions were reduced 526 million tons from 2005 to 2011. This is no small amount. It is about the same as all the CO2 emissions in either Canada or the United Kingdom. Only five other nations emit more than that.

The bigger news is that this was accomplished without any of the intrusive behavioral modification proposed by planners, such as by California's anti-detached housing restrictions, Plan Maryland, or the state of Washington's mandatory driving reduction program.

Of course, part of the national reduction was due to the economic difficulties since 2005. However, even with 1.8 percent gross domestic product growth in 2011, EIA shows that CO2 emissions fell 2.4 percent in 2011.

The magnitude of the decline over six years is impressive. Actual GHG/CO2 emissions were reduced more annually between 2005 and 2011 than smart growth proponents claim for their strategies after 45 years of draconian policy intrusions.Modeled smart growth forecasts in Moving Cooler's middle scenario (by Cambridge Systematics and the Urban Land Institute) show the annual GHG/CO2 emission reduction in 2050, calculated from 2005, to be less than the emissions reduction in the average year between 2005 and 2011.

This is despite what would be four decades of trying to force people to live where they don't want, in housing they don't prefer, while trying to drive them out of the cars that required to sustain economic growth in modern metropolitan areas.

Moving Cooler's forced densification and anti-automobile strategies were so radical that the Transportation Research Board authors of Driving and the Built Environment, could not agree that a similar approach was feasible, because it would be prevented by public resistance to the personal and political intrusions (Note 1). They would also be hideously expensive, as the Moving Cooler authors ignored the much higher costs of housing associated with smart growth's behavioral strategies.

This comparison demonstrates the conclusion of a recent Cambridge University (United Kingdom) led study (see "Questioning the Messianic Conception of Smart Growth", which stated:

In many cases, the potential socioeconomic consequences of less housing choice, crowding, and congestion may outweigh its very modest CO2 reduction benefits.

Government policies have had little to do with the reductions, except to the extent that they precipitated the greatest economic downturn since the Great Depression (such as by encouraging loose lending standards and the smart growth housing policies that drove house prices up so much that the housing bust became inevitable).

Market forces have made a substantial contribution to the reduction. There was a substantial shift to the use of natural gas from coal, a conversion that is really only starting. There was also a modest improvement in automobile fuel efficiency (though much more is to come).

In 2007, the McKinsey Corporation and The Conference Board published a study (co-sponsored by the Environmental Defense and the Natural Resources Defense Council), which said that sufficient GHG emissions reductions (Note 2) could be achieved without driving less or living in more dense housing. Our more recent Reason Foundation report showed that the potential for GHG emission reduction from more fuel efficient cars and carbon neutral housing far outweighed any potential for reductions from smart growth's behavior modification.

------

Note 1: Transport consultant Alan E. Pisarski evaluated Moving Cooler in an article entitled ULI Moving Cooler Report: Greenhouse Gases, Exaggerations and Misdirections.

Note 2: Most of GHG emissions are CO2.

Infographics: The Decongestion of Manhattan, New York Walking Commutes

Jim Russell pointed me at an interesting article about densification vs. de-densification over at the Urbanization Project at NYU Stern. It contains this very interesting map of the change in census tract densities in Manhattan over the century between 1910 and 2010:



Walking Related Commutes

Streetsblog, in an article covering the annual NYC DOT scorecard, included this graphic of the percentage of commutes that include walking as a core component (e.g, transit) in various parts of New York:

This post originally appeared at The Urbanophile.

German Renewable Power: Making Sustainability Unsustainable?

Der Speigel reports that Germany's rushed program to convert to renewable energy is already imposing an economic burden. Part of the problem is the inherent instability of power produced by renewable sources such as wind and solar:

The problem is that wind and solar farms just don't deliver the same amount of continuous electricity compared with nuclear and gas-fired power plants. To match traditional energy sources, grid operators must be able to exactly predict how strong the wind will blow or the sun will shine.

A national energy expert said:

"In the long run, if we can't guarantee a stable grid, companies will leave (Germany). "As a center of industry, we can't afford that."

An important principle of the international impetus to reduce greenhouse gas emissions is that there be little or no economic loss. Certainly, an industrial powerhouse like Germany cannot subject itself to such risks.

At the same time, other locations would be similarly threatened by implementation of renewable power mandates whose "time has not yet come." Not only is there the potential to inflict economic harm on industry (and consumers through higher prices), but higher electricity prices would reduce discretionary incomes and could lead to greater poverty rates. The eradication of poverty has recently been declared to be a virtual prerequisite to sustainability at the Rio conference.

eradicating poverty should be given the highest priority, overriding all other concerns to achieve sustainable development.

Environmental sustainability requires economic sustainability. A litany of failures could do serious damage to GHG emission reduction efforts.

Toronto's Greenbelt: Pushing up Congestion, Local Air Pollution and House Prices

I had the pleasure of participating on Jerry Agar's program on Newstalk 1010 in Toronto, with host Tasha Kheiriddin on August 15. The subject was a new report by the David Suzuki Foundation lauding the benefits of Toronto's greenbelt greenhouse gas (GHG) emission reduction role as a carbon sink.

Ms. Kheiriddin was interested in the other side of the issue, which I was happy to summarize. First and foremost, for all of their claimed benefits, greenbelts around growing cities have serious consequences. They force population densities up, which makes traffic more congested. This is because as densities rise, traffic volumes increase. There are various estimates of the increase in traffic congestion from a doubling of density, from (for example) 61 percent (Sierra Club) to 96 percent (Ewing and Cervero). The greater congestion produces more intense local air pollution, with the predictable health effects. Beyond that, as any Economics 101 student should know, rationing anything (such as land) tends to be associated with higher prices. It is no wonder that house prices have skyrocketed since the greenbelt was established.

It is important to understand the dynamics of GHGs. It doesn't matter whether they occur in the Toronto greenbelt or Patagonia. This means that there is no reason for GHG reduction to emanate from the Toronto greenbelt. It would be far better to forest some of the 7.5 million acres of disused farmland in Ontario (since 1951). This is many times as much land as the Toronto greenbelt. In other words, from a global (or local GHG emission perspective), the Toronto greenbelt is irrelevant (Note).

The purpose of the city (metropolitan area) should be to facilitate higher discretionary incomes for its residents, while minimizing poverty, all within the constraints of sufficient environmental protection. The greenbelt reduces discretionary incomes by restricting mobility (more traffic congestion) and raising house prices. It increases poverty by raising costs and preventing job creation. The greenbelt's claimed GHG emission benefits can readily be replaced by strategies elsewhere that do not reduce economic growth.

Note: Large portions of the farmland in Ontario and Quebec have been taken out of production since 1951, as production has been transferred to the Prairie provinces (Alberta, Saskatchewan and Manitoba). Meanwhile, the real value of agricultural production in Canada increased 160 percent from 1961 to 2005.

Subjects:

Could a Las Vegas Train Produce Losses 10 Times More Than Solyndra? (Report Announcement)

The Reason Foundation has released our "Xpress West" (formerly "DesertXpress") analysis. This high speed rail train would run from Victorville (90 miles from downtown Los Angeles) to Las Vegas. Promoters predict high ridership and profits. They are seeking a subsidized federal loan of more than $5.5 billion, which is within the discretionary authority of the US Department of Transportation to fund.

Our analysis concludes the following:

1. There is serious question whether there is a market for Las Vegas travel that would require driving one-third of the way and transferring to the train. If there is no such market, as seems likely from the international experience, ridership could be as low as 97 percent below projections. The reality can be known only after the line is running.

The balance of the report is based upon the assumption that there is a market for driving to Victorville and boarding a train to Las Vegas.

2. The ridership and revenue projections (by URS Corporation) are based upon data that is more than 7 years old and predates the Great Financial Crisis. There have been significant downward demand trends in the travel market and Las Vegas tourist market since that time, especially in the share of the market from the Los Angeles Basin. It is inappropriate to use such old data in projecting system performance (Certainly no private company would rely on such old data in a due diligence analysis).

3. Even after adjusting the obsolete data (which our report does), the ridership projections are implausibly high --- at four times the Amtrak Acela ridership between Washington, Baltimore, Philadelphia and New York.

4. Over 24 years (the forecast period in the project document), we project that expenditures will exceed revenues by between $4 billion and $10 billion. This would mean that there would be insufficient revenues to pay the federal loan. This could result in a taxpayer loss approximately 10 times that of the Solyndra federal loan guarantee.

5. The free use by the private Xpress West project of the Interstate 15 median could preclude cost effective expansion of this roadway. Even assuming the implausible Xpress West assumptions about the diversion of drivers to the train, the overwhelming majority of growth in the corridor would be on the highway, not on the train. This includes not only the heavy truck traffic, but also car traffic.

Related: The Las Vegas Monorail

Wendell Cox was also author of  "Analysis of the Proposed Las Vegas LLC Monorail," which indicated that ridership and revenue projections were extremely optimistic and that the project was likely to fail  financially. Subsequently the project filed bankruptcy and defaulted on bonds. The actual ridership on the Monorail was within the range predicted in "Analysis of the proposed Las Vegas LLC Monorail," and far below the level forecast by project consultant URS Greiner Woodward Clyde.

Also see this letter from other consultants reviewing the project (Thomas A. Rubin, Jon Twichell Associates, Professor Bernard Malamud  and Wendell Cox).

The Las Vegas Monorail case is described in the Reason Foundation report.

New Chicago Machine Scam In the Works: Eminent Domain Seizure of ‘Underwater’ Mortgages

With property values down 40% since 2006 in Chicago, the Chicago Democrat Machine has a new scam brewing. The Chicago Sun-Times reports:

Should Chicago use its sweeping condemnation powers to help stem the foreclosure epidemic — paving the way for underwater mortgages to be written down and repackaged under terms more affordable to struggling homeowners?

The City Council’s most powerful aldermen believes it’s a concept worth considering, which is why the Finance Committee chaired by Ald. Edward M. Burke (14th) will hold a joint committee hearing on the controversial idea on Tuesday.

If this passes, the potential for corruption will be unlimited in Chicago. Alderman Burke controls Chicago’s tax code. But, the conflicts are even more pronounced. Alderman Burke slates all the judges in Cook County which means a Burke-slated judge will hear the property seizure case. Even that’s not all; Alderman Burke's day job is running a property tax appeals tax firm. Being a client of Alderman Burke’s probably will be a good way to avoid a ‘takings’. Expecting a fair appeal, in court, on the seizure? Alderman Burke’s wife, Anne, is a justice on the Illinois Supreme Court. Expecting help from the Illinois state legislature to clamp down on Alderman Burke’s conflicted lifestyle? Alderman Burke’s brother, Daniel, is Assistant Majority Leader of the Illinois General Assembly.

In conclusion, you can be assured that seizing ‘underwater’ mortgages in Chicago will become a money maker for Alderman Burke. Nothing has left Alderman Burke’s attention in terms of making money off the taxpayers of Chicago. The Chicago Sun-Times has reported that Chicago Public Schools have a history of paying milk money to Alderman Burke. In Chicago, even if you have a checkered past you can still work with Alderman Burke as long as you pay tribute.

A New Brand for Houston

"We've probably spent in excess of $75 million in the past 30 years on image campaigns, and we keep coming back and saying, 'Well, that didn't work.'"

 - Former GHCVB CEO Jordy Tollett in the Houston Business Journal

A list of many of those can be found here, including the old standbys "Bayou City", "Space City", and "Energy Capital of the World" (Wikipedia has more here).  And despite many of my own previous attempts on this blog, inspiration has struck me again, especially after reading this recent article at Salon.com on why every city needs a brand (and more on that here).

A good city brand works on four different levels:

  1. It attracts tourists.
  2. It attracts new residents, especially highly talented and educated ones.
  3. It attracts expanding businesses.
  4. It inspires the citizens and creates a local identity.

But it's very hard to come up with a single brand that does all four.  Even some of the most successful brands don't necessarily hit them all.  Two of the most famous city brands are New York's "I {heart} NY" and Las Vegas' "What happens in Vegas stays in Vegas."  And in Texas we're all familiar with "Keep Austin Weird."  In this case, I think I've stumbled upon something that can work across all four.

Before I reveal it, I need everybody to drop their cynicism shields.  I don't think the most successful city brand in history, "I {heart} NY" could get off the ground today with our snarky cynical culture.  Just like new songs, sometimes ideas need time to grow on you.  So open up your mind, hold back judgment, and let me  reveal some context-setting definitions and the brand first followed by the supporting reasons.

Hospitality 

Noun: The friendly and generous reception and entertainment of guests, visitors, or strangers.

Hospitable 

Adjective: 1) Friendly and welcoming to strangers or guests.  2) (of an environment) Pleasant and favorable for living in.

It started with me thinking of "Houston Hospitality", but then the symmetry jumped out at me it became

Houspitality

What the "Aloha Spirit" is to Hawaii, the "Houspitality Spirit" can be to Houston.

Here are some of the key words and phrases people often use when describing Houston and how they fit:

  • Houspitality for visitors and newcomers: welcoming culture to outsiders, friendliness, hospitality (duh), openness to people from all over the world (diversity), amazing restaurants, museums, arts, and other amenities
  • Houspitality for businesses: business-friendly taxes and regulation (including no zoning), culture supportive of  entrepreneurship, open business culture
  • Houspitality for residents: friendliness, openness, affordability, ease of living, high standard of living, social mobility, opportunity, open-minded, charitable (especially after Hurricane Katrina), "big small town"

Some additional supporting reasons:

  • Short and sweet, and people "get it" pretty easily.
  • Fits well with the Texas Medical Center helping people from all over the world (and the word "hospital" is right there).  It also fits well with the airports, port, GHCVB, GHP, and others.
  • It differentiates us from other big cities (ever heard anybody talk about the friendly reputations of NYC, DC, Chicago, SF, or LA? I didn't think so) as well as tourist destination cities (which tend to become jaded towards visitors).
  • UH's Hilton College of Hotel and Restaurant Management uses the motto "We are hospitality", and is one of the top ranked schools in the country for that specialty.
  • Sounds like "vitality", which is another good brand association.
  • I found a cool, somewhat similar concept here, transforming Humanitarian to Houmanitarian.
  • I think more and more people today are hungry for real community, which is harder and harder to find.  Houspitality is a great brand to convey our real sense of community in Houston.

Finally, I'd like to end with some supportive excerpts from Ken Hoffman's recent excellent column on what Forbes got right and wrong about Houston being America's Coolest City.  I think you'll easily see the Houspitality Spirit running through them...

I remember thinking, am I going to have to change? Am I going to have to learn how to write Texan?
I didn't change anything. That's part of what makes Houston cool. You can come here and stay yourself and fit right in.
...
Houston is cool because whoever or whatever you are, you're welcome here. The first two years I lived here, I was burning out the copy machine at Kinko's applying for jobs anywhere else. Now I wouldn't leave here for anything. ...

Where better to get better?
When a congresswoman got her head half blown off, she came to Houston to get better. When Middle East oil sheiks need surgery, they come to Houston. We have the best medical facilities in the world. I didn't think that was cool until I was run over by a lunatic in a van and was taken to the hospital in an ambulance.
I still have no idea what hospital I was taken to. But they fixed me up. That was cool.
...
We're in this together
And please stop talking about Houston's "diversity." The only thing the word "diversity" does is separate people. Sure, we have ethnic neighborhoods; those are good for a city. It helps in picking a restaurant.
I've never seen a city where people blend more gracefully than Houston.
...
Houston is cool
I thought it was pretty cool when Houston welcomed Hurricane Katrina victims to ride out the storm's aftermath here. I spent a couple of days in the Astrodome, handing out supplies and clothes to Katrina refugees. I learned a lot about Houston after Katrina. The experience changed me, too.
...
Being cool is a city that makes you feel like you belong. 

This piece originally appeared at Houston Strategies.

Subjects:

Avoiding Expensive Municipal Mergers

An article in The Wall Street Journal discussed attempts to merge local governments in Michigan. While efforts such as these gain wide support because of the belief that they will save money, there evidence shows the opposite.

Government consolidations may seem to make all of the sense in the world academically. In practice, they cost more. There are no economies of scale in larger governments, except for spending interests. Voters have less influence in larger jurisdictions.

A simple look at the evidence, rather than the theory, indicates this. Our analysis in five states shows it, and the differences are stark. Lower per capita spending and taxation at the local general government level is associated with smaller units of government.

It is not therefore surprising that in Toronto, Hamilton and Ottawa there have been calls to "demerge" cities forcibly merged in the 1990s. In a debate in Toronto last October with a top transit official (a member of the left leaning National Democratic Party), we agreed on at least one thing --- that Toronto's amalgamation had been a mistake.

Nor is it surprising that despite huge electoral barriers erected by the Charest government, a number of municipalities voted to demerge from the forcibly enlarged ville de Montreal in the early 2000s.

For the most part, however, there is no going back. Mergers are forever. So are the higher taxes and higher spending.

My commentary in Canada's National Post  dealt with this issue on the 10th anniversary of the Toronto amalgamation.