Charlie Arlinghaus

November 18, 2015

As originally published in the New Hampshire Union Leader

The Pappas-Van Ostern Express is a good example of bad math driving debt and leaving taxpayers with an empty wallet. Last week’s news release was not a new train plan but simply the old unaffordable plan with all the estimates revised down to make it appear cheaper but grotesquely unrealistic. This sort of new math is how governments go bankrupt.
Efforts to spend $300 million on a train that would require large annual operating subsidies have stalled. In an effort to revive the plan — or perhaps just to put out a news release — Executive Councilors Colin Van Ostern and Chris Pappas put out what they described as a “draft financing option.” Their goal is to jump start discussions that have lagged.
Pappas and Van Ostern have been the leading supporters of the train since their elections in 2012. And for Van Ostern, he has it at the heart of his economic development agenda in his gubernatorial campaign.
Their news release is not a new plan but rather a wildly optimistic reworking of already unrealistic numbers in a train study from a year ago.

The train would require a huge capital investment and then an annual operating subsidy. Underestimating each of these factors leads supporters to conclude the train is suddenly more affordable.
The Manchester option would require a total capital investment of $303 million. As the initial study did, the Pappas-Van Ostern plan counts on a capital investment from Massachusetts of $63.6 million. Given the significant budget problems in Massachusetts, their aid seems less than realistic as does the hope that the federal government would count the Massachusetts contribution as part of our local commitment to be matched.
The federal matching program supporters hope to tap is described as “chronically oversubscribed and thus extremely competitive.” But then again there is no financial cost to optimism.

If all goes well and Massachusetts rides to our rescue and we win the competitive federal process, supporters would then have us use about 75 percent of the state’s bonding capacity for one year on the train project. The annual cost of bonding, if all goes well, will be about $6 million.
At this point, supporters are merely guilty of optimism. Now the problems come in.

Supporters would have to believe that — unlike any other commuter train in existence — operations will more than pay for themselves and reduce the state’s annual costs below the $6 million bonding payment.
The closest analogue to the proposed train is the Portland-Boston Downeaster. It is remarkably successful by train standards, carries 530,000 passengers per year, but requires an annual subsidy of $8.4 million. Despite that, the Pappas-Van Ostern projection is that their train would be the best performing in the entire country — better than any New York train where the population density is extraordinary, better than all the other Boston trains in any direction, and exponentially better than anything seen or projected. Rather than covering 45 percent of its costs like most trains and the Downeaster, the PVO projection is closer to 90 percent.
That sort of optimism leads to financial problems. In planning for our own train, we would be more realistic to think of the $8 million the much-touted Downeaster loses. That raises the state’s annual need to $14 million each year.
Both last year’s plan and the PVO news release assume some offsets. The plan anticipated parking revenue of $500,000 to $900,000. The PVO release raises that to $1 million on higher fees.

As a discussion starter, the PVO release suggests local property taxes — through a local development district and supplemented by a local charge when that falls short — to cover $1-$3 million. I’m sure that will be very popular in Manchester and Nashua.
Even if they’re right about parking and local property taxes, they need $10-$12 million per year or double their estimate.

The policy goal is to aid commuters. The Downeaster moved 530,000 people for $8.4 million. The express buses in the I-93 corridor moved 550,000 people for just $750,000 — and didn’t require $300 million in capital costs.
Too often government loses sight of the policy goal and the most efficient way to achieve it.

Even worse, politicians are regularly tempted to use unrealistic numbers to make choices easier. Optimistic but unrealistic budget numbers created a huge hole, required a federal bailout, and led to the largest budget crisis in history. This is how it starts.

8 Responses to “Pie in the sky train estimates will bankrupt us”
  1. 1CINDY LEWIS on Nov 20, 2015 at 9:08 am:

    WOULD THESE POLITICIANS SPEND THEIR OWN MONEY THIS WAY? IT IS A BAD BUSINESS DECISION ANY WAY YOU LOOK AT IT.

  2. 2Bill Fortune on Nov 20, 2015 at 10:28 am:

    How about we discuss how we create industrial parks in most communities in NH so people don’t have to travel to MA and other places to be gainfully employed ?

    And taxpayer funded subsidies are phony/crony capitalism. (some believe that money that comes from Government is “free money”. Those that say and believe money is free are either the most stupid among us or think that everyone else is stupid enough to believe them) .
    Likely the most dysfunctional phony/crony subsidies involve renewable energy. I contend that electric rate payers pay about an 80% “tax” on electricity. One State Rep. and some other “Greens” think that the 80%, or any percentage, are profits for the utility companies. Now I know that that State Rep. and many others have an agenda that hurts the general public, but how many people are gullible enough to believe them ?

    One phony/corny program that is subsidized, and not incidentally, is rate payer subsidizes to people that want to “get off the grid”. Many of those people are rich enough to pay for their own solar system. And what makes that program and other similar programs not only stupid, but devastating to the people in NH, but are totally unnecessary.

    First, the technology exists so we don’t need to burn any fossil fuels to generate electricity. People that push for solar, wind, biomass, carbon credits, the Renewable Energy Portfolio, the Greenhouse Gas Imitative, subsidies to biomass generators either want to get rich off the backs of rate/tax payers backs or are just plain stupid.

    Second, most taxes, especially on utilities, are passed onto the consumer. So that means that women trying to support their families are finding it more difficult. And, because of higher taxes industries can be developed in NH because they can’t compete with the same industry in another state.

    So, the bottom line; NH is mostly a retail state and women mostly work at retail and retail doesn’t pay as much as manufacturing, resulting in women having to work harder and longer to pay for those subsidies and programs that they want.

    Note: although my monitor is very large I can barely see what I type. So if you see some errors, please notify me. And I never claimed to be a professional speller.

  3. 3Bill Fortune on Nov 20, 2015 at 10:46 am:

    And we will not need more surface rail when we generate all the electricity we want. With more electricity we can have more electric transportation for both people and materials.

    As I see things, we need to have someone a the governor’s position that represents all the people and not so many special interests; that represents the average person without the ability to donate to political campaigns and politicians.

    I and others have collected a few policy issues that can change the direction of NH and make NH First; not only first in voting in the Primary, but First In The Nation, a Leader, to start the process to make significant changes in direction of the State and the Nation.

    Instead of voting for a candidate I ask that people vote for policies. Policies that we are working to publish; policies that start to break the cycle of big $ in politics; that start to break the cycle of Government/Politician Worship.

  4. 4Jim Gatti on Nov 20, 2015 at 10:48 am:

    This is exactly what was discussed in this article: “What You Should Know About Megaprojects and Why: An Overview”, by Bent Flyvbjerg. Project Management Journal, April/May 2014. Flyvbjerg was interviewed by Russ Roberts on Econ Talk on 5/25. http://www.econtalk.org/archives/2015/05/bent_flyvbjerg.html

  5. 5John McClaughry on Nov 20, 2015 at 11:02 am:

    Aha! Some fools in NH have caught the passenger rail fever. Howard Dean in Vermont blew $28 million on the “Champlain Flyer” to haul commuters 13 miles from Charlotte to Burlington in coaches that were usually 3/4 empty. You might be able to get a great deal on the three coach cars if they are still warehoused in the Bombardier plant in Barre (but they may aha ve been sold by now)
    I hope the current plan is better than the grand Halifax NS-Bangor ME- Groveton NH-Montreal dream train that all the NE governors signed onto during the Dean years. Progress on that has been slow.

  6. 6Dan McGuire on Nov 20, 2015 at 1:06 pm:

    I’ve read that there is one commuter rail system in the world that works without a subsidy: the Tokyo subway system. That’s where the white-gloved workers pack riders into the trains like sardines.

    Trains always sound good to people because they hope everyone else will ride them, so their own car commute will go smoother. They are far inferior to buses, not only from the cost point of view as Charlie has shown here, but also from flexibility. Trains can only run on their tracks and stop at their stations. Buses can go anywhere. If demand changes, for example if a new plant or housing development opens, they can have bus service very quickly. There’s a reason that passenger trains became obsolete 100 years ago.

  7. 7rep. Ernie Bridge on Nov 21, 2015 at 9:14 am:

    How can there people continue to believe their on BS? Existing bus based services successfully meet existing needs and clearly demonstrate the size of the likely consumer base. Commuters who need or want to make the NH to Boston trip have already made their choice and pay their own way. There is no justification for all the rest of us to help to subsidize them.

  8. 8Howard L.Wilson on Nov 28, 2015 at 1:03 am:

    The proponents are Democrats, who don’t know much about Free Market Economic’s.Due to the Bankruptcy of the US Government, illustrated at:www.USDebtClock.org costs will rise exponentially beyond estimates.
    It were better did they wait until after the Revolt, that may be needed to repair our nation.
    For Liberty, Howard L Wilson