A Few Ideas for Funding High Speed Rail

The big challenge for getting high speed rail built in the US is not technology, political will or popular support. Those import elements seem to be in place. No the big challenge will be finding the funds to pay for it.

With a sky high national debt and two political parties dedicated to not solving the problem this could be trickier that we think but not impossible. After all other nations with massive debt problems have managed to build massive infrastructure projects including high speed rail lines. Argentina is even trying to build one now despite debt and inflation that make ours look tame in comparison.

So here are a few proposals for high speed rail funding:

• A 5% or 10% tax or tariff on imported oil with part going to highways, part to alternative energy, part to mass transit and part to high speed rail. Democrats would love this because it would encourage alternative energy. Republicans should like it because it would reward domestic production.

• Since a lot of high-speed rail lines would pass through undeveloped areas with a lot of federally owned lands particularly in the West. Give high-speed rail developers the right or ability to sell undeveloped federal or state land along the right to sell it off. This is called land grants and it is how the transcontinental railroads were financed in the 19^th century. A related idea to this would be to give rail developers the right to sell unused or foreclosed land near rail stations in big cities.

• Property taxes. Since transportation infrastructure projects often increase property taxes. Tax property values or property sales along the route to pay for the line. An example of this could be special tax districts around stations and lines.

• Trackage rights. The owners of new high speed rail lines could sell other railroads such as freight railroads the right to operate trains on their routes. I know the self proclaimed rail experts that reporters like to interview claim that high speed rail will not be profitable. I tend to doubt them because high speed freight trains will be far cheaper to operate than planes. Therefore a large percentage of the freight now moved by air will shift back to the rails when high speed rail lines become available. Also a lot of freight that moves by trucks will shift to this method. Examples of companies that might run these trains include fruit and vegetable growers or packers, UPS, FedEx, and big retailers like Wal-Mart or Safeway. The big freight railroads may also want to run trains over high speed lines.

• Finally, there are passenger fares. People will have to pay to ride the trains. Since high-speed trains can attract high rider ship passenger fares can cover a large percentage of their costs. One way to generate additional income would be to launch luxury passenger trains similar to Europe’s Eurostar. These could be competitive with the airlines. Especially if such features as private compartments and the ability to ship your car with you on the train were added.

These are just a few ideas, I’m no expert here but if my brainstorming could come up just a few proposals. Think what the professionals that work in the industry might think of.

Unnecessary Deaths on the Rails

Our refusal to invest the money needed to create a modern railroad system is leading to unnecessary deaths.

The latest example occurred near Fallon, Nevada, on Friday June 23, 2011. Six people died when Amtrak’s California Zehphyr crashed into a gravel truck that had run through a crossing signal. This tragedy was a direct result of failure to invest in modern rail infrastructure.

There is a simple way to prevent tragedies like this one build railroad lines like freeways or interstate highways. Eliminate all the crossings where roads or highways run over the tracks. Vehicle traffic would run under or over the railroad tracks. It is called grade level separation and it works. It is the real secret to successful high-speed rail lines in Europe and elsewhere.

Yes, such investment would be expensive but it would save lives and make our rail system faster and far more efficient. We could run more trains at higher speed and increase the speed and frequency of both passenger and freight trains. Now this would not have to be done on every rail line but it could be done on the main lines.

If we can spend $10 billion a month on the war in Afghanistan and $14 billion on the auto industry bailout, we can certainly come up with the money for safer ground transportation. This would also improve everyday driving for millions of Americans.

After all eliminating surface level crossings would not just help trains it would help drivers. How many of us have had to wait for an eternity at a crossing waiting for a train to pass? It would also eliminate the need for trains to blow their horns going through towns which is a major complaint residents have about rail.

Why can’t we invest money to save lives and improve things for everyday Americans here in the USA? Investing in a national network of high speed trains and adding grade separation to all crossings on a major rail lines would be a good start.

Rail vs. Automobiles & Airlines: What Does the Market Say?

Many of the people who oppose passenger rail in the US claim to be believers in the free market. Their argument is based on the notion that the market favors the automobile over rail. Now there is obviously no way to put these claims to the test using methodology that would meet a scientific standard. Yet there is a litmus test we can apply to such claims by using something the rail haters claim to believe in: the market.

Since there is no free market in transportation in the US, we’ll have to use a different sort of exchange as our test namely the stock market. So let’s see what the stock market says about railroads and automobile companies. Anybody who doesn’t believe me can check the internet, stock values are public knowledge.

At the beginning of trading on June 24, 2011, Union Pacific Corp (one of the largest US railroads) was listed at $100.04 a share. Persons who follow stock should note that UP has been steadily increasing in value in a bull market. UP’s earnings per share were listed at $5.82 which is a good return.

On the same day the Ford Motor Company, the "healthiest" us car maker, was trading at $13.24 a share. Ford is supposed to be the best managed of the US automakers but the market values it at around 15% of the value of Union Pacific. General Motors, did a little better, its new stock was moving at $29.92 a share. Better than Ford but nothing compared to the railroads.

It is not just UP the market likes on June 24, 2011, another major US railroad the Norfolk Southern Corporation was trading at $71.67 a share. Even the little known Kansas City Southern (one of the smallest rail operators) was fetching $55.59 a share. Also notable is Warren Buffett’s Berkshire Hathaway, which owns the Burlington Northern, its class A stock traded at an astronomical $113,100 a share on June 24, 2011. Buffett is a value investor, he bases his trades on what he thinks has value and he’s usually right. He could have picked up either Chrysler or GM for a pittance in the last couple of years notice that he didn’t.

One auto stock that did well on US exchanges was Toyota Motor Corp which traded for $81.29 a share. Toyota is a Japanese company that operates under very different conditions than American firms so that isn’t a fair comparison. The other major US automaker, Chrysler is in such sorry shape that its management doesn’t even try offering stock.

What this shows is that the market thinks there is real value in railroads but not in America’s auto companies. Despite generations of favorable government policy and taxpayer support the market thinks little or nothing of the U.S. car makers.

It’s not just auto companies that fare badly when compared to rail. Southwest Airlines, considered the best of the airlines, traded at $11.36 a share on June 24, 2011. That’s about 11% the value of a share of UP stock. A much larger airline, UAL or United Continental, was trading for $22.99 a share on the same day. Another big airline, Delta was trading for $9.43 a share.

What these findings indicate is that in a truly competitive market, airlines and automobiles have a hard time competing with rail. Despite the massive amounts of tax funding and generations of government policy directed at those transportation modes, they still can’t be as profitable as rail.

One has to wonder what would happen if passenger rail were allowed to compete in a free market environment. The auto industry might survive in some form, but I seriously doubt passenger airlines would. One also has to wonder if the self-proclaimed champions of the free market in transportation are really scared of the free market. They don’t want a free market in transportation because it would quickly destroy their cherished illusions.

A final thought here I wonder how much automobile and airline stock, rail critics like Wendell Cox actually own(Probably none, like Noam Chomsky they only base decisions on their ideology when their money is not involved). I have a suspicion that the champions of “free market transportation” don’t own a single share in the companies that should profit from their socialist transportation infrastructure. Although I bet they own more than a few shares of Exxon, BP, Shell and other oil companies which profit from the current status quo without paying for it.