By Noel T. Braymer
The latest proposal to stimulate the economy is to use tax credits to encourage private investors to build infrastructure. I don’t know what impact this will have on repairing existing infrastructure much of which is publicly owned ,unglamorous and doesn’t make money. Where there is private investment there needs to be income generated so investors get a return on their investment. Too often manipulation of the tax code does more to reduce taxes for large corporations than to build anything useful. Tax credits and accelerated depreciation are popular public subsidizes for private companies and is why many major corporations don’t owe taxes. These are activities which concerned the 18th Century Moral Philosopher Adam Smith. He criticized the British government’s subsidy of Herring fishing that ” it has, I am afraid, been too common for vessels to fit out for the sole purpose of catching, not the fish, but the bounty “. I remember in the 1980’s there was a boom in apartment building in California because of changes to the tax code. The result was poorly built apartments that didn’t make money but saved investors on taxes. I lived in one of these badly built apartments for a short time in 1990 which had more vacant apartments than rented ones.
For a Tax Credit scheme to work by generating income to pay investors, the investment must first make money. There has been much said about toll roads as the answer to our transportation infrastructure problems. The results so far have been that toll roads built in the last 20 years in this country rarely if ever make money, let alone pay back the borrowed money to pay for them. What usually happens is local governments take over ownership of the toll roads and bail out the investors. Where transportation can benefit from tax credits would be for upgrades on the railroads for long distance rail service, both freight and passengers. The most profitable rail service or any transportation service is in long haul service. In order to run more long distance passenger trains to have enough to be profitable, major trackwork is needed on the existing freight railroads to run both more passenger and freight trains. This track work is necessary so passenger and freight trains can share the tracks without creating conflicts that delay both freight and passenger service. These track upgrades will benefit the owners of the railroads by providing better service and more revenue with increase traffic. Recent double tracking by the BNSF has found that reduced running times for freight service greatly improved its productivity and customer satisfaction.
Long distance rail passenger service can make money and be a benefit to the host railroad. But to do this we need expanded service, for trains to run on time and for the host railroads to be paid enough from rail passenger service for it to be worthwhile for the host railroads. This will likely include new roles for Amtrak as other operators are involved in rail passenger service. There is an experiment now on the Hoosier State train supported by the State of Indiana with operation of the train handled by both Amtrak and a private company. Amtrak operates the trains while the other company is in charge of rolling stock and on board passenger services which under them have seen increases in train revenue. There are plans under the current Amtrak law for at least 3 long distance trains to be put out to bid for operation by private operators. It is likely that Amtrak will still be responsible for liability insurance for these trains as well as reservations and connections to other trains.
In California management of the three intra-state intercity trains is done by local Joint Powers Authorities for each train which contracts with Amtrak for operation of the trains. In the future we could see more equipment bought to be less dependent on Amtrak and save money . We might see other train related services sub-contracted out to save money. The key to profitable rail passenger service is good long distance service with connections to as many markets as possible. The subsidy needs for rail passenger service even now on a per passenger basis is much less than for most transit bus service which have much shorter average rides. By extending and even combing existing routes it will be possible to operate intra-California passenger trains at a profit.
If tax credit are available for track improvements it would be possible to extend rail passenger service from San Diego past San Luis Obispo to San Jose. There is now one daily train that runs from Los Angeles to San Jose and up to Seattle. There are now 2 round trips from San Diego to San Luis Obispo. This coastal area of California has potential for heavy ridership and connects the 2 largest populations centers of California. Extending the 2 roundtrips from San Diego to San Jose would greatly increase the revenues of the these trains. Already the current route to San Luis Obispo is the most productive of the Surfliner trains. In order to provide a decent service and be profitable there is the need for track and signalling improvements as well as more double tracking. These improvements could be handled by the UP with tax credits for this track work. With an improved railroad UP would be able to handle better service for both its freights and passenger customers.
Now what would greatly improve this service and profitability would be to extend this train from San Jose to Reno/Sparks Nevada. This would create a joint service of Surfliner and Capitol Corridor trains. The more frequent local services of the Capitol Corridor and Surfliners would remain. But up to 3 San Diego/Reno-Sparks train would do well. For this to happen track improvements will be needed between San Jose and Reno. Major track work would also be needed between Roseville and Reno. But the result would be a more profitable intercity rail passenger service and increased revenues for the host railroad .
So where would High Speed Rail fit into this? High Speed Rail around the world is considered long distance rail service. When you are traveling at over 100 miles per hour distances go by quickly. Around the world most High Speed Rail services operate at a profit. Most passenger rail services around the world operate at a profit with government subsidies for short distance service, but with profits from their long distance services including High Speed Rail. In Europe the railroads do this while working in a competitive environment with other operators.
Much the same could be done for the San Joaquin Trains. Modest improvements of tracks in the San Joaquin Valley will reduce running time and allow more operation of more trains. What is long overdue are more trains between Bakersfield and Sacramento. There have long been plans to raise train speeds up to 90 miles per hour in the San Joaquin Valley. It would be possible to run trains up to 120 miles per hour with the necessary upgrades. With the construction of High Speed Rail there is increased need to run connecting service with the San Joaquin trains from Madera just north of Fresno to the other cities without direct service by High Speed Rail and for connections up to Stockton and Sacramento. These will improve the economic performance of both the San Joaquin trains and High Speed Rail.
For California High Speed Rail there is need for more money to continue building the service. Speeding up construction will create a larger system sooner which will bring in the revenues to repay investors. But there will also be need for investment for the redevelopment that will be created with High Speed Rail in California around the stations. A major result of High Speed rail and the profits from it will be from the development around the stations and economic growth along its route. Development around stations have been seen just from the improved rail passenger service California has had in roughly the last 40 years. Major changes have happened around stations in San Diego and San Jose. Major new development is coming to Los Angeles Union Station with more rail passenger service. In Oceanside, California the creation of a transportation center in 1985 with rail, bus and transit service was central to the city’s redevelopment plans. This has resulted in turning around a blighted, downtown area with crime and vacant lots into a thriving beach resort today.
If Tax Credits are used to improve rail travel and development around the stations, these same results can be replicated around the County.