Saturday, March 24, 2007

Some lessons from the annual meeting today

I just came back from our annual meeting. Here are some of the things I've learned. Forgive my lack of attribution for these ideas, but they came from speakers like George Chilson, Marc Magliari, Anne Canby, Bob Bauman, James Coston, and Rick Harnish.

The Illinois Amtrak expansion has proven to be an unprecedented success. For most rail expansions, it takes a few years to generate ridership. Not here. Sometime this summer, ridership in Illinois is going to double from where it was a year ago. From now on, it's conventional wisdom in passenger rail policy that if you increase frequencies on existing routes, you will increase ridership dramatically. And even better, you will decrease the per capita cost, because which service will double, costs will not (some of the infrastructure like stations, tracks, trainsets and some labor) stays constant.

Here are some more statistics: since the new service started, we've sold 150,000 more tickets (and thus 150,000 more passengers) in the four and a half months of the new service than the tickets sold during the same period last year. That's a lot of people. People want trains.

The National Highway Trust Fund is out of money and out of ideas.

We ought to rename the National Highway Trust Fund the National Transportation Fund and allow any mode of travel -- highways, local roads, mass transit, intercity passenger rail, airports, waterways, bike lanes -- to access the same pot of money based on their ability to deliver mobility. We should also tie transportation investments into reducing emissions and not into either vehicle miles traveled (current policy) or simply enriching the road builders (sometimes current policy). I wonder how much we subsidize business, particularly Wal-Mart, by making just-in-time delivery possible. It would be nice to know. I don't think that's a bad thing, as that's another way of saying we're investing in infrastructure to make our nation more economically competitive (low prices are a very good thing), but it would help to rationalize who should get taxed in order to finance the infrastructure investment.

I'd like to apply the concept of dynamic scoring for tax policy (if we cut this type of tax , it will generate more income and thus more tax revenue, so the theory goes), long a crusade of the high incomes (best articulated by the Wall Street Journal editorial page) to transportation policy. For example: if we invest one dollar into a transit system or Amtrak, most of that money goes to labor costs to pay for the bus driver or train conductor or ticket agent. And those wages get taxed, which goes back to the government, and keeping that person employed means he or she buys things, which sends tax money back to the government. So the government 'spends' a dollar on transit or Amtrak and 'receives' back 30 cents or whatever in taxes.

For every dollar we spend on a road or highway maintenance, we hire the contractor to do the work, which sends some money back, and then we encourage a lot of driving, which basically means drivers spend a lot of money on oil and cars. And any money we spend on oil gets sent overseas to enrich the other wide of the War on Terror, certainly not back to the government. You'd have to think that the government gets a better return on spending dollars on transit or Amtrak instead of roads or highways, since the latter causes so much more money to get spent on foreign oil than the former, but I'd like data on the question.

There are more tham 40,000 people who die on the highways every year. That's a huge cost, financially and emotionally. Apparently, the policy goal in Europe is zero highway fatalities. Our federal policy goal on highway facilities is unclear, but probably something like a 10% reduction. I'd have to bet the benefits to reducing highway fatalities by spending more on transit and Amtrak would outweigh the costs of that extra spending. I'd like our transportation policy to include that calculation somehow.

What's the point of diner cars, sleeper cars and other unique attributes of overnight trains? The point is to sell tickets on trains, because the ability to buy a drink while you're traveling 100 miles or to leave a city at night and arrive in another city in the morning, well-rested and ready for work or fun, is a unique benefit that trains have over driving or flying. (Well, I guess you can buy a drink on a plane, but strapped into that coach seat isn't the same as strolling around on a train). So, we shouldn't try to strip out those benefits of a train -- we should include the cost of those benefits in a train ticket. Not every part of a train or a plane or a highway should be a profit center. Saying that a diner car should be a profit center is like saying that a toilet should be a profit center. Or air conditioning. The service should be provided as efficiently as possible, but it doesn't make sense to eliminate the unique benefit of train travel because it isn't by itself a profit center. We should just sell more tickets.

How many Americans just will not fly? It's probably something like a third to a half of the population. It's at least a quarter. That's at least 75 million people who have to subsidize our aviation system that will never use it. We should make a bigger deal about that. And we should find out what that number actually is.

This debate is getting more and more interesting, especially as SAFETY-LU (current federal transportation policy) expires in 2009. Oil prices will probably be over $100 a barrel by then. It's time for new voices and new policies.

6 Comments:

Blogger jgiblin said...

Your impression presented that other modes do not have access to the Highway Trust Fund is extremely misleading and factually incorrect. Even though they make no contribution other modes do access it, and quite liberally. According to an analysis done by the Washington Post shortly after the passage of SAFETEA-LU in August 2005, approximately 18% of authorizations in the bill were destined for mass transit projects and 2% for transportation safety projects.

In the Chicago area both Metra and CTA received authorizations of approximately $100 million each for infrastructure and equipment improvements. There was also an $80 million earmark to finance the new Kenosha-Milwaukee commuter rail service. The bill also included $52.6 billion in funding for the Mass Transit Account which has provided operating subsidies for mass transit systems around the country since 1982. The bill contained almost $1 billion in earmarks for grade crossing separation projects around the country, which both reduce air pollution (from stalled traffic) and improve rail service. There was also a $50 million earmark for renovating Denver Union Station, which is still used by Amtrak. (And we should not forget the earmark for improvements on the Illinois Prairie Path, one of Mr. Harnish's favorites.) For more details please see my article in November 2005 TRAINS Magazine, pp. 16-20.

FYI, there are many in Washington today who feel that the high level of diversions from the Trust Fund is actually part of the problem rather than a solution.

Regarding your comments on Wal-Mart, they already do pay for infrastructure improvements that benefit them directly. Wal-Mart has the second largest private truck fleet in the country, with some 7,100 tractors and 44,500 trailers, all of which are subject to state and federal fuel and license taxes. In addition as one of the nation's largest freight transportation customers, Wal-Mart contributes directly (and substantially) to the nation's highway infrastructure development and maintenance as part of every carrier freight bill they pay.

J. Giblin

6:13 PM  
Blogger Christopher said...

1. True enough, transit has some access to the Highway Trust Fund - but Amtrak does not (excepting a limited amount of funds for intermodal stations that don't go through Amtrak and a select few earmarks that go to states).

2. Trucks pay taxes, but the amount is a fraction of the damage they cause.

5:36 PM  
Blogger jgiblin said...

First, I'm curious as to why we've had a broad national consensus since 1982 to fund mass transit operations out of the Highway Trust Fund, but no comparable level of support for funding Amtrak serivce.

Second, I'm somewhat confused about your comments on truck taxes. As you know the Federal Highway Administration (FHWA) has the legal and statutory responsibility for determining highway cost allocation formulas, subject to congressional oversite. In the conclusion of their 1997 Federal Highway Cost Allocation Study Summary Report, FHWA states that unit and combination trucks underpay Federal highway user fees by about 10 percent, i.e. trucks cover 90 percent of their direct highway cost allocation responsibility, as determined by the Federal agency in charge of the program. The FHWA report also goes on to say, "there is no compelling need to adjust Federal highway user tax rates to improve user fee equity at this time". This document was presented to the Congressional oversight committees in September 1997, as part of sworn testimony by the Acting FHWA Administrator.

J. Giblin

1:28 PM  
Blogger Nathanael said...

"The bill contained almost $1 billion in earmarks for grade crossing separation projects around the country"

Which, since the railroads often predated the highways, are pretty much *highway funding* to improve the *highways* which previously decided to cross the railroads at-grade.

6:33 AM  
Blogger Nathanael said...

"Second, I'm somewhat confused about your comments on truck taxes."

The report you cite most likely doesn't include the costs of damage to *non-federally supported* roads.

And it definitely doesn't include the carbon emissions or pollution expenses caused by trucks, which are enormous. (Compare trains, which are very energy-efficient.)

And even without considering all that, trucks are still federally subsidized to the tune of 10% of their costs -- far more than the freight rail subsidy in this country, which is essentially *zero*.

6:38 AM  
Blogger Nathanael said...

...actually, the net freight rail subsidy is *negative* in this country because most freight rail haulers pay *property taxes* on their rail lines. And yet freight rail is still profitable.

Meanwhile truckers get subsidized highways built, and pay less than 90% of the *direct* costs of highways, let alone the indirect costs. This is a pretty massive thumb on the scales in favor of truckers.

6:45 AM  

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