29Bent Flyvbjerg, Mette K. Skamris Holm, and Soren L. Buhl, “Underestimating Costs in Public Works Projects: Error or Lie?,” Journal of the American Planning Association, vol.
68, no. 3 (2002). Fifty-eight of the total 258 transportation infrastructure projects studied were rail projects.
30Bent Flyvbjerg, Mette K. Skamris Holm, and Soren L. Buhl, “Inaccuracy in Traffic Forecasts,” Transport Reviews, vol. 26, no. 1 (2006). The study covered a total of 210 transportation infrastructure projects.
31In this context, a model is a mathematical equation describing a relationship among a set of variables.
that we reviewed, formal benefit-cost analyses32 have been conducted for 4 of them33—although many proposed projects have not advanced to the stage of conducting in-depth analyses. Of these analyses, none have formally compared the proposed project with alternative modal
investments, such as airport or highway expansion, although the proposed high speed rail line between Los Angeles, California, and San Francisco, California, has created a rough comparison of high speed rail investment with stated investment needs on the highway and air modes. Even if a formal benefit-cost analysis has not been done, public benefits of some domestic projects are considered in some ways within the context of the National Environmental Policy Act (NEPA) process.34 Under NEPA, the weighing of the merits and drawbacks of the various alternatives need not be displayed in a monetary benefit-cost analysis, but an environmental impact statement should at least indicate factors not related to
environmental quality, which are likely to be relevant and important to a decision.35
Project sponsors with whom we spoke—domestically and
internationally—cited several types of public benefits that were significant in determining the economic viability of proposed high speed rail lines, including:
32Benefit-cost analysis is an established method for evaluating infrastructure projects in the United States. For example, Executive Order 12893 states that expected benefits and costs should be quantified and monetized to the maximum extent practicable when evaluating federal infrastructure investments in the areas of transportation, water resources, energy, and environmental protection. Federal spending infrastructure programs include direct spending and grants. Executive Order 12893, Principles for Federal Infrastructure Investments, 59 Fed. Reg. 4233 (Jan. 31, 1994).
33Studies of proposed domestic projects that have been conducted have found the potential for positive public benefits. For example, a study of the proposed California statewide high speed rail project found that the total benefits exceeded costs by more than 2 to 1. See Daniel Brand, Mark R. Kiefer, Thomas E. Parody, and Shomik R. Mehndiratta, “Application of Benefit-Cost Analysis to the Proposed California High-Speed Rail System,”
Transportation Research Record, no. 1742, Paper 01-2959 (2001). Also see DOT/FRA, High Speed Ground Transportation for America (Washington, D.C.: September 1997), 7-23 through 7-28, which finds numerous corridors with the potential for positive economic benefits.
34Pub. L. No. 91-190, 83 Stat. 852 (Jan. 1, 1970); 42 U.S.C. § 4321 et seq.
3540 C.F.R. § 1502.23.
• Travel time savings: Travelers using alternative modes may experience travel time savings as a result of reduced highway traffic and airport use by travelers shifting to high speed rail.
• Environmental benefits: Environmental benefits could result from
reducing pollution and carbon dioxide emissions, to the extent that the rail service reduces congestion on highways or at airports and makes use of fuel-efficient technology (i.e., high speed rail service using diesel
locomotives would provide less environmental benefit than service that is electrified, all else being equal).
• Traffic safety: Benefits from increased traffic safety include reduction in traffic accidents, to the extent that the rail service reduces congestion on highways.
• Economic development, land use, and employment: A high speed rail system that encourages relocation of households and firms, and in cities where passenger rail stations are located, could experience growth of population and business presence—increasing retail sales, rental income, and property values.
Government officials in the countries we studied told us that a national policy decision had been made that the public benefits flowing from high speed rail are sufficient to justify some amount of public subsidy in high speed rail systems. In other words, passenger fare revenues are not necessarily expected to cover the full cost of constructing, operating, and maintaining the system. For example, in Japan, government officials told us that the construction of a new high speed rail line will be built only if certain criteria are met, including stable public subsidies, profitability of the operator, and a positive benefit-cost ratio. In Spain, one of the goals of high speed rail is to increase social and territorial cohesion. French officials said subsidies depend on the line—core lines like Paris-Lyon can cover construction costs from passenger fares.
Quantifying public benefits can be difficult, however, and the level at which to value some benefits can be subject to disagreement.
Furthermore, there are currently multiple federal guidelines in the United States for valuing public benefits, yet none have been designated for use in analyzing proposed high speed rail projects. For example, high speed rail service that reduces congestion on highways or at airports and makes use of fuel-efficient technology may provide an environmental benefit (i.e., reduced pollution and greenhouse gas emissions). However, the value to assign to the reduction of pollution and greenhouse gas reductions is
difficult to determine, since there is no current market for pollution reduction in the United States.36 Thus, the valuation of pollution
reduction—defined as the public’s willingness to pay—is generally left to economists to estimate by indirect methods. The valuation of greenhouse gas reductions entails additional considerations that are based on
uncertain future benefits. Other intangible benefits, such as economic development impacts, are also difficult to estimate and are subject to disagreement. Officials in Japan told us that, although they previously calculated regional economic development benefits and included them in high speed rail decision making, they abandoned the practice because it was too difficult to isolate the impacts and because they believe that benefits accrued through revenues and passenger benefits alone are sufficient to meet their criteria for constructing new high speed rail lines.
Moreover, while benefits such as improvements in economic development and employment may represent real benefits for the jurisdictions in which a new high speed rail service is located, from another jurisdiction’s
perspective or from a national view they may represent a transfer or relocation of benefits.
Once domestic projects are deemed to be economically viable, efforts to develop those projects will continue to encounter significant challenges in financing the high up-front construction and other costs. In addition, sustaining public and political support for project development will also be a challenge. Uncertainties regarding rider forecasts and cost estimates can undermine confidence in whether projects will actually produce claimed benefits. Project sponsors must also sustain political support over several electoral cycles and coordinate project decisions among numerous stakeholders in different jurisdictions, typically without the benefit of an established institutional framework.