High Speed Rail: A Competitive Advantage

High Speed Rail Will Require Cross-sector Cooperation to Work

 
By Ryan Velez

The professed benefits of a high-speed rail system for America are certainly appealing, nearly utopian. Going from Boston to Washington DC in a few hours, timing your arrival within a ten-minute frame, all while eschewing the hassles of airports or highways. Businesses can hire employees from different cities or even states, send current employees to meetings across the country cheaper and more conveniently than planes, and even move products faster than a fleet of trucks. It’s a more efficient future and more attainable than many detractors would claim.

More people are being drawn to rail. For businesses, high speed rail brings efficiencies that can reduce costs and bring in new revenue. Such benefits have been clouded by a lack of knowledge about the benefits and the potential.

As the United States economy continues to compete in a global world, a world-class transit system is key to long term success.

Traditionally airplanes have been the ideal choice for business commuting. The Eastern Airlines shuttle from Boston to New York, Southwest Airlines from Los Angeles to San Francisco: these have been profitable commuter routes. But with added security, high prices, baggage restrictions, inclement weather and other inconveniences, planes are becoming less and less attractive as an option both for business commuters and people traveling for personal reasons. High-speed-rail – that is trains that travel as much as 250 mph – are already proven to serve this function well in countries like Spain, France, China, Japan, and Korea. Japan’s is so ingrained in the urban infrastructure that most people don’t even need cars. In Spain, someone can commute from the coast to Madrid in an hour with no fear of being late — something that certainly can’t be guaranteed on any U.S. highway.

A 2010 survey by the American Public Transportation Association (APTA) shows that 62% of the population would use a high-speed rail system. In California, plans for high speed rail are moving ahead. A recent RFP (Request for Proposals) went out for rail cars from Caltrans, the state authority in charge of the project. A winner, Nippon Sharyu USA noted that the costs for them began way before construction starts. Their response process involved gathering data on the 15-20 major systems for each model, reaching out to vendors and subcontractors in order to give Caltrans a realistic bid for material, parts and labor to complete the project. This process alone cost $350 million, according to Ken Kuriyama, for a projected project cost of $68 billion. 

Benefits

While the costs are high, so are the benefits. Andy Kunz, CEO of the U.S. High Speed Rail Association notes that China has already spent $200 billion on their high-speed rail system, well ahead of the $68 billion for the California project. For the United States, Mr. Kunz talks about the long term economic efficiencies of high speed rail. As he says, transportation is America’s circulatory system. ‘Artery clogs’ — such as security hassles at airports, congestion and accidents on roads, the uncertainty of weather delays — stem the flow, resulting in costs as people are late to work, product that isn’t shipped on time, delays along a supply chain that lead to missed idle factories, and commuter time that lengthens… and lengthens. The benefits for businesses cover a range that includes:

  • Sales:
    Large retail chains, technology and finance companies have a sales force constantly moving around the country, meeting with clients and making sales. A high-speed rail system would allow a Silicon Valley company to be in Los Angeles for a 9 am meeting and be home for dinner by 6pm.  
  • Retail: 
    For companies that are currently losing business to internet fast delivery, fast delivery would reduce the need to store inventory, potentially allowing brick and mortar facilities to become destination centers, where customer service, information and even entertainment bring in customers who get their products the next day.
  • Light Freight:
    Retailers using rail to bring items from their distribution centers save time and keep trucks off already over worn roads. France is already using older High Speed rail cars to deliver mail. 
  • Employee Retention and Recruitment:
    Ideal talent can be located in other cities and towns, and have family members with jobs or kids in schools that make moving prohibitive or very costly to the recruiting company. Imagine a job Chicago, but the ideal candidate is in Springfield, IL, or Toledo, Ohio. With high speed rail, this candidate would have a reliable commute for the job, either continuing to commute by rail, or easing a complicated transition over months instead of ‘overnight’.
  • Community Hubs:
    “Transit Villages’, which connect modern urban city centers with smaller communities along its route, consume far less land than constantly expanding highways to accommodate an ever-increasing number of drivers. These villages reflect a bygone small-town feel that many Americans are drawn to for a quieter quality of life, as shown by the number of them already being built in the Northeast.
  • Job Creation:
    A 2012 report by the California High Speed Rail authority determined that the first wave of direct construction on the California project would provide 33,000 job years, a job year representing a year of employment on a particular project. The report goes on to state that an additional 65,000 job years would be created indirectly by the first wave of construction, and by the final completion of Phase 1 (from L.A to San Francisco), a total of 1,246,000 job years would have been created surrounding the construction. Add to this the jobs building rail cars in the United States, like Nippon Sharyu USA is doing, the potential could rival the automotive industry in creating long term jobs at multiple levels with a wide variety of skill sets.
  • Environmental:
    The Environmental Law and Policy Center, a Midwest-based organization dedicated to legal advocacy and eco-business innovation, released a report about some of the benefits of a high-speed rail system. The report notes that an HSR system in the Midwest region would be three times as efficient as a car and six times as efficient as a plane. As smog from emissions rises in the area, the demand for a solution could support high-speed rail.
  • Reducing dependency on foreign oil: 
    Mr. Kunz remarks that foreign oil dependency is a burden that can’t easily be circumvented. Since transportation represents 70% of our use of oil, it’s a reality that demands preventative action. As the effects of this dependency weigh on both our wallets and planet, high-speed rail could potentially provide a means to help when it is put into place. 

Mr Kunz concluded his remarks by saying that “businesses may not want to get involved in politics, but advocacy now could result in profits later.”

Skeptics

Skeptics say that there isn’t much point of talking about money to be made in the end of there’s no money in the beginning. There is some validity in their claims. However, professionals in the transportation industry have ideas on how to generate the funds to get these projects underway. 

Richard Arena, President of the US High Speed Rail Associaion, (USHSR) emphasized that no one sector had the means to get a system of this size, and that the key will be private-public partnerships. Public-private partnerships are ventures funded and operated through a combination of government and one-or-several private companies. 

Mr. Arena believes that this kind of collaboration is best poised to deal with some of the unique roadblocks that high-speed rail faces in America. For the investors, transportation is a trillion dollar opportunity that can provide long term, reliable income along with steady growth. For public entities, loan guarantees and tax benefits can provide credit enhancements that make projects attractive for conservative investors, while expertise in system integration and land-use policy can help projects move forward smoothly. As an example, any rail project needs right-of-way, the legal ability to lay tracks where the route physically will be going through. The public aspect of the partnership can secure the proper permits and funding to allow the rail to be built, while private manufacturers and construction companies can finance the construction. The line can be owned by either by the public or the public-private entity, resulting in long term financial benefits for owners.

Other critics are quick to say how extremely expensive it is to implement in America because the infrastructure is not designed to support it. In that regard, they’re not entirely wrong. The current transportation infrastructure is clunky and inefficient, and as inefficiency grows, so do the costs associated with it, both direct and indirect. For high-speed rail, cutting corners for cost’s sake is not an option. Amtrak’s Acela line was to be a compromise, promising fast rail service from Boston to Washington D.C. However, running new trains on old tracks has resulted is a ride that is often only somewhat faster than a trip on the highway, especially along the Boston to New York route. 

For riders, the APTA survey reveals that 91% would demand a faster trip than they could get by driving and 89% would need tickets to be cheaper in order to use the system. Although the projected fares are about half of the cost of flying, there is a ‘break-even’ point that bring that down while satisfying the need for real speed improvements. Karen Hedlund, Deputy Administrator for the Federal Railroad Administration, noted in a talk at a US High Speed Rail Association, that a new system in London, England, was profitable with trains running at speed of 150 mph. This would meet the expectations of US riders. 

High-speed rail needn’t by a far off-fantasy, but at the same time, one cannot fall into the trap of thinking that it’s an easy project. Ultimately, for high-speed rail to enter the American landscape, political advocacy, financial investment, and public interest are required from all levels of the country’s populace. It’s indeed a lot of work, as sweeping change often is, but the potential gains to be had for everyone reach dizzying heights.