2008/12/03

Melbourne 2030 Plan: Good Riddance

Note

This piece was originally posted in March 2005 as an issue of “The Public Purpose,” at http://www.publicpurpose.com/pp86-m2030.pdf.

It is republished here today on the occasion of the virtual abandonment of the plan by the state of Victoria as reported in The Age. This was written before my extensive direct involvement in the issue in Australia, and when the piece talks about having new home owners pay for infrastructure, it was not envisioning the kind of confiscatory and intellectually dishonest infrastructure fees charged by some Australian jurisdictions, the best example of which is the state of New South Wales (Sydney, etc).

MELBOURNE 2030: A VISION FAR TOO TIMID

Premier Bracks Swallows L.A. Fish Story


March 2005

By Wendell Cox

The State of Victoria’s Melbourne 2030 plan is a vision far too timid. Over the next 25 years, it is projected that another 1,000,000 residents will be added to this urban area of approximately 3,500,000. In times past, the urban area would have been permitted to expand to provide the next generation with a better lifestyle.

But not now. Across Australia, and to a lesser extent in urban areas outside, there is a rush to make the city more compact --- urban consolidation it is called in Australia. The plan is simple. Instead of allowing the city to continue to expand geographically, the government intends that more people should be piled into the same space already occupied by those who already live
there. Why, one might ask, does a country as large as Australia need urban (consolidation) densification? Is there a fear that without it, some day, as much as a total of 0.5 percent of the land might ultimately become developed? Is it that the food supply is threatened as land is taken for urban development? Or is it that public officials have heard the siren call to the effect that suburban development costs more --- so much more that we can no longer afford to live as we have? Or is it, as some suggest, that Australian cities might begin to sprawl like Los Angeles? Premier Steve Bracks even talks about Los Angeles as having “house after house without any
services provided.”

The facts demonstrate that positive answers to any of these questions would be absurd. Australia has plenty of land, and even if future growth were permitted to take up as much space as past, little of the nation’s plentiful supply of land would be used. As for the food supply, agriculture has become so productive that over the past quarter century an area the size of Victoria has been taken out of farming production. Indeed, all of the urban land that has been developed or might be in the future could be fit into an area the size of Victoria many times over. As for the suburban cost myth --- and it is a myth --- even if it were true, the answer would be simple. Make
the people who move into the new areas pay for their services. If it costs too much, they won’t move there. If doesn’t, then those who want will move there. But to the high priests of urban planning, letting people do what they want would be far too radical. Who knows better what is good for people and families than the university based planners thousands of kilometers distant?

As for Los Angeles, that’s where it really gets hilarious. If Australian cities sprawled like Los Angeles, they would be more compact, not less. The secret is that the most densely settled urban area in the former colonies (Australia, New Zealand, Canada and the United States) is Los Angeles. This inconvenient fact is often either missed or even ignored. Los Angeles also has the worst traffic congestion and probably the worst air pollution. But it is the Premier who has proven the most gullible. Somehow, despite living 20 years in Los Angeles serving more than eight in public office, the service-less houses that Premier Bracks talks about escaped me. In fact,
public services in the Los Angeles area are among the best in the nation, or for that matter in the high-income world. Indeed, across the United States the least costly and highest quality municipal services are to be found (to the horror of urban planners) in the suburbs. But that does not keep the urban planning fundamentalists from making up stories.

And, as for the higher density of Los Angeles, at least planners there had the good sense to allow the city to continue to expand. Never did they come back, as the Victorian planners have, and try to force higher density onto lower.

And that’s where it will probably all fall down, along with the Bracks government. Melbourne is not alone. Other urban areas have headed down this dead end. Portland, Oregon is the best example. It is in Portland that one finds the most fundamentalist urban consolidation rhetoric, yet its plans were never as radical as Melbourne’s. Nonetheless, when densities began to increase, as authorities forced high density development into low density neighborhoods, the people said “enough.” Under an initiative passed 2-1, densification of Portland neighborhoods is now prohibited. As a result, Portland expanded its urban growth boundary in two years more than it had planned for 2040. But all of this occurred after things had already gotten worse. Portland lost housing affordability at a greater rate than any other major US urban area during the 1990s, according to US Census data.

All of this is the result of urban planning fundamentalism --- a view that we are running out of land (wrong) and that we use cars too much. The solution is a philosophy that densifies and seeks to get people out of their cars. But the problem is that the urban planning fundamentalist have never “penciled” out the costs. Why does one need analysis when there is ideology. In fact it all
simply does not add up.

Already the Portland style housing affordability losses, and more, are being experienced in Australia’s “consolidating” urban areas, urban planning fundamentalism makes land scarce and when land becomes scarce housing prices rise. That part of Economics 101 is not required for urban planners. And with Portland’s neglect of, and indeed hostility toward automobile capacity improvements, traffic congestion has increased to become the worst of any similar sized urban area in the nation, according to data from the standard source for such information, the Texas Transportation Institute.

Like Portland, Melbourne’s housing affordability has tanked --- even worse. Now, according to the Demographia international rankings, Melbourne has a “severely” unaffordable housing market, ranking ninth worst out of 88 urban areas in the four former colonies. Much of this appears to be the result of the urban growth boundary and the attendant fundamentalist policies.
There are those who claim that there is a housing “bubble” caused by low interest rates. If that were true, then one would expect Melbourne’s nearly 6.9 to 1.0 median household inc ome to median house price multiple to be repeated in other places where interest rates are low, such as Atlanta, Dallas-Fort Worth and Houston. These urban areas rank first, third and fourth in the
high-income world among urban areas with more than 3,000,000. Yet, the combination of very strong growth and low interest rates have produced a housing affordability multiple not of 6.9, but rather 2.6, 2.6 and 2.7 respectively. What is missing? The gospel of the urban planning fundamentalists has thus far been rejected in Atlanta, Dallas-Fort Worth and Houston.

Fortunately some are watching. Monash University’s Bob Birrell, Kevin O'Connor, Virginia Rapson, and Ernest Healy have evaluated the 2030 plan in their book Melbourne 2030: Planning Rhetoric versus Urban Reality and found it severely wanting. Because I am in Paris for two months and have not yet been able to arrange for my own copy, I don’t know the criticisms. But, if Birrell et al have managed to cram a complete critique of the Melbourne 2030 plan into just a couple of hundred pages, then it is quite an accomplishment.

One of the intentions of the 2030 plan is to get people to give up their cars and ride public transport. The problem, of course, is that public transport is not a viable alternative to the automobile, except for trips to downtown. Even the public transport improvements proposed by the government would not begin to change that. What is needed is a public transport system that is as convenient as the car and takes people from their origins to their destinations when they want and at a speed as fast or nearly so. It is indeed possible to construct such a public transport system in Melbourne. All that’s needed is money, and a populace prepared to live through
construction disruptions that would make US urban freeway construction in the 1960s look like a Sunday afternoon picnic. To achieve the automobile competitive public transport service specification --- and attract a material share of trips from automobiles would cost more than the annual income of the Melbourne area --- every year.

The government’s objective, could, however, be met by another means. All it takes is a bit more strident commitment to densification. If the government could force everyone --- all 4.5 million people in 2030 to live within five kilometers of Flinders Street Station. This would achieve the density necessary (at least as high as Hong Kong) to afford the public transport system that could make the automobile a viable option for most trips. But the government is too timid for that.

The modest densification proposed by the government will only make things worse. Traffic congestion will get worse. Air pollution will be more intense, because traffic will be slower and more subject to stop and go conditions. Even so, traffic congestion will never get so bad that the less than adequate improvements the government intends to make in public transport would make it more convenient to switch from cars except for a small number of trips.

It can be expected that the urban consolidation policies will keep housing prices well beyond the ability of young households and others that have not yet purchased their own homes. Melbourne, which has long been a place where most people own their own homes is poised to become a city of renters. This will not be a fairer or more prosperous city. Unless the government plans are
reversed, Melbourne is poised for a yesterday of less affluence and greater social division.

But there is hope, and it is inherent in the government policies themselves. Densification may well be the sword on which the Bracks government falls. When serious densification begins and neighborhoods start to be ruined, the people are likely to forget other issues and vote to throw the urban planning fundamentalists out.

Wendell Cox is principal of Wendell Cox Consultancy, an urban policy firm that sponsors www.demographia.com. He also serves as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. He was a three-term member of the Los Angeles County Transportation Commission.

2008/11/27

Griffith University Misrepresents Research

(Based upon an email commenting on a report by Griffith University, Queensland, on GHG emissions in Australia.)

The Griffith University researchers have really stretched on this one, having charged us with saying far more than we said. They painstakingly point out that correlation is not causation and then basically say that we found a causal relationship between urban consolidation and higher GHGs.

We did no such thing. Virtually exclusively we used the word "association" (or lack of it) to note the relationship between the studied variables and urban consolidation (the word appears 32 times).

Our report simply took the Australian Conservation Foundation (ACF) analysis to its logical conclusion. It is fine for ACF to do a report that identifies GHGs by local authority area --- and indeed their work so far as it goes is by far the best I have seen in the world. Since they did not complete the job, however --- to increase the size of the analysis zones so that a more "macro" view could be obtained, we did. In light of the causal relationship that urban consolidation proponents have liked to suggest between inner city living and lower GHGs, this was important and their failure to put this data out there was a serious omission. One can only wonder why the research was not completed (imagine the headlines in the Courier-Mail, Sydney Morning Herald, etc.).

We did offer conclusions, none suggesting cause. Our most important conclusion was that, given the strong association that seems to be in opposition to the widely held views of the urban consolidation agenda, policy should not leap before looking much more closely.

In my view, our research stands (along with that of the Australian Conservation Foundation, which is its data source), unscathed and has been criticized principally for something that it did not do. We noted association, not causation.

Specifically, the conclusions of our report are (page 14):

1. Lower GHG emissions are associated with locations farther from the core.
2. Lower GHG emissions are associated with more detached housing.
3. Lower GHG emissions are associated with greater auto use.
4. Lower GHG emissions are associated with lower population density.


What the ACF data says is that before “sleepwalking” into GHG reduction policies based upon preconceived (and even ideological) notions, it is essential that reliable data be developed so that policies can genuinely address the objective.

ACF Australian Conservation Atlas
Housing Form in Australia and its Impact on Greenhouse Gas Emissions
Griffith University Paper

2008/11/24

Ways to Work Program: A Nobel Prize?

Ways to Work Program: A Nobel Prize?

The national Ways to Work program has improved the employment and education opportunities of low-income households across the United States. The model is similar to that used Mohammed Unus, who recently won the Nobel Prize for his small loan program in Bengladesh.

WAYS TO WORK PROGRAM

Economist Mohammed Yunus recently won the Nobel Prize for his groundbreaking project that makes small loans available to the low-income residents of Bengladesh. In making the award, the Nobel Committee noted the importance of finding ways for people to break out of poverty. Unus’ Grameen Bank has developed an impressive record of assisting poor households to enter the mainstream of economic life in Bangladesh.

The applicability of the Unus model is not limited to low-income nations. The national Ways to Work program has been working for more than 20 years to bring low-income households across the United States into the economic mainstream. A principal strategy has been to provide loans, like Unus, to low-income households. Ways to Work helps households buy cars.

Why cars? Simply because in modern urban areas, whether in the United States, Western Europe or the low-income world, cars expand exponentially the geographical area in which people can search for employment. Research at the University of California, the Brookings Institution and the Progressive Policy Institute demonstrates that cars are crucial to obtaining better employment. The problem is, of course, that despite the romantic affection for transit, it is simply unable to provide mobility to much more than the downtown area, and that’s not where most of the jobs are.

A recent evaluation report looked at a representative sample of Ways to Work borrowers, and found the following:


    Working families who have received Ways to Work loans have, on average, increased their incomes more than 40 percent in the first year.

    More than 80 percent of the borrowers who were previously on cash grant public assistance programs saw their incomes rise so much that they were able to leave the public assistance programs.

    Many of the borrowers indicated that having the car made it possible for them to complete education and training programs.

    Demonstrating how success breeds success, one-third of borrowers have since been able to obtain new loans through conventional sources.

    Finally, nearly all of the borrowers said that having a car increased the time they could spend with their families and improved their quality of life.


It may be time for the Nobel Committee to honor the model Ways to Work program.

(Originally published 20061130)

Tata's One Lakh Car

A growing body of research indicates a strong relationship between mobility and household income. Throughout the high-income world, the automobile and other motorized forms of personal mobility (such as the motorcycle or the auto-rickshaw) provide the greatest mobility, making it possible for their users to travel from their residences to jobs throughout the urban area. This works best in high-income world urban areas where there motorized personal mobility are much more widely available. Non-motorized transport (such as walking and bicycles), despite its romantic appeal to some, simply cannot provide mobility throughout the modern urban area because it is too slow.

Medium-income and low-income urban areas will need much better mobility for their incomes to increase (along with the even more important issues of rule of law and property rights). It thus comes as good news that India’s Tata Motors is developing a “1 lakh” ($2,200) car. “Lakh” is an Indian term meaning 100,000. Thus a 1 lakh car is a 100,000 rupee car. This translates into approximately $2,200. Currently, Tata’s lowest price car is approximately $7,000.

Obviously the 1 lakh car will not have all of the features that would be expected of a Japanese, American or European economy car. However, it will provide the same basic need --- mobility throughout the urban area. It is expected that the 1 lakh car will be on the market by 2008. This revolutionary development has great potential to facilitate the economic advance of millions of households in India and in low-income and middle-income export markets.

2008/11/23

Fushun (Liaoning, China) Rental Car Tour Released

Fushun (Liaoning, China) Rental Car Tour Released

Urban Tours by Rental Car announces release of a rental car tour on Fushun: Rust Belt But Hopeful

The article can be downloaded at this address.

The tour includes 142 photographs, including an array from throughout the urban area.

Alphabetical List of Rental Car Tours
Geographical List of Rental Car Tours

Shanghai Rental Car Tour Update Released

Shanghai Rental Car Tour Update Released

Urban Tours by Rental Car announces release of an updtated rental car tour on Shanghai, subtitled “Big Changes Ahead.”

The article can be downloaded at this address.

The tour includes 198 photographs, including an array from throughout the urban area with particular emphasis on The Bund, the new Shanghai World Financial Center and the new high-rise condominium, townhouse and detached house developments.

Alphabetical List of Rental Car Tours
Geographical List of Rental Car Tours

Ho Chi Minh City Rental Car Tour Released

Ho Chi Minh City Rental Car Tour Released

Urban Tours by Rental Car announces release of a rental car tour on Ho Chi Minh City, Viet Nam, subtitled “Mobile Urban Area.”

The article can be downloaded at this address.

The tour highlights the continuing economic advance of Viet Nam, which is following China’s market reform path and achieving similar results.

The tour includes 234 photographs, including an array from throughout the urban area and pictures of the burgeoning new high-rise condominium, townhouse and detached house developments.

Alphabetical List of Rental Car Tours
Geographical List of Rental Car Tours

2008/10/23

Seattle’s Expensive and Ineffective Rail Tax Proposal

Rail tax advocates are at it again in a number of US metropolitan areas, including Seattle. A recent story in the Seattle Post-Intelligencer caught our attention because of claims being made proposed rail expansions that would be financed by a proposed tax increase. Two issues stand out:

Greenhouse Gas Emissions: According to the article, the proposed plan will reduce greenhouse gas emissions (GHG) in the Seattle area by nearly 100,000 metric tons annually. Sounds like a big number. It isn’t. Based upon previously announced Sound Transit spending announcements (an equivalent increase of $1.1 billion annually, including capital and operations costs), the cost of this reduction would be about $11,000 per metric ton. That is 220 times the United Nations International Panel on Climate Change ceiling of from $20 to $50 per ton (the amount of spending per ton is the maximum amount necessary to accomplish deep reversal of GHG concentrations between 2030 and 2050). The Sound Transit plan is not only expensive in general terms, it is profligate in the amount of spending required to reduce GHG emissions. This is illustrated by the fact that at $11,000 per metric ton, it would cost more than double the Gross Domestic Product each year to reduce US GHG emissions by 50 percent --- an often cited goal.

Traffic Reduction: The article also cites a Sound Transit report indicating that the expanded rail system could reduce driving by 30 percent. Never before has there been a forecast of such a reduction in traffic in any urban area in the world and surely it won’t happen in Seattle. Indeed, it would be charitable to call the 30 percent reduction prediction “laughable.” In other rail projections, the expected traffic reduction rarely exceeds 1 percent, and even then is not achieved. Despite having studied transportation investments for decades, never before have we seen such absurdity. If Sound Transit were subject to the same regulations as apply to used car salesmen, heavy fines and even jail terms might be in the offing.

Wendell Cox is principal of Demographia (St. Louis) and a visiting professor at the Conservatoire National des Arts et Metiers in Paris. He was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley.

2008/10/17

This Bubble was Easy to See

Re: http://online.wsj.com/article/SB122420268681343047.html?mod=djemITP
Fed Rethinks Stance on Popping Bubbles (October 17)

Dear Mr. Lahart (The Wall Street Journal):

A very useful article. You are right that identifying bubbles is difficult. However, this is hardly the case with the housing market. The bubble was obvious and completely predictable.

We have (at least) six decades of good data on the relationship between household incomes and housing prices. The historic norm has generally been 3 --- a median price at 3 or fewer times that of median household incomes. That ratio was greatly exceeded --- for the first time --- over the past decade. Moreover, its increase was very geographically focused. As Paul Krugman has pointed out... there was not housing bubble in much of the country. If the Fed and others had bothered to look at the geographical distribution of the bubble and then asked questions about why, the answer would have been very obvious. Areas with very strong land use regulation were unable to accomodate the increased demand, and the regulation constrained supply worked to explode housing prices --- a tripling of the ratio for example in the Los Angeles area and at least a doubling in most of the other highly regulated markets. Meanwhile, where the more traditional, liberal land use regulation that had characterized virtually all parts of the country until about 20 years ago, there was little change in the ratio. These markets include Atlanta, Dallas-Fort Worth, and Houston, which are the three fastest growing metropolitan areas over 5m population in the developed world.

It is not as if people were not watching the inflating bubble. Real estate and market analysts were falling all over themselves, cheerleading the "performance" of the housing market. tt should have been obvious. One of the lessons of this affair is that to simply look at the economy (or specifically the housing market) from a macro-economic perspective is not enough. All of this could have been predicted (and perhaps avoided) if those whose job it is to encourage economic stability had simply been watching.

We have dealt with these issues in four annual editions of the "Demographia International Housing Affordabilty Survey," the fifth edition of which will be published early in 2009. The current edition is available at http://www.demographia.com/dhi.pdf.

Best regards,
Wendell Cox
Co-Author, Demographia International Housing Affordabiltiy Survey
Principal, Demographia (St. Louis)
Visiting Professor, Conservatoire National des Arts et Metiers (Paris)

2008/10/09

Levittown & the American Dream: Still Alive Some Places

Re: Why We Can't Build an Affordable House, by Wytold Rybczynski

Rybczynski rightly points the finger at overly zealous regulation as a principal reason for the escalation in housing prices. Missing, however, is the fact that the American Dream as embodied in Levittown is still alive where regulatory excesses have been avoided. Rybczynski notes that Levittowners could be purchased for three times the average wage. The average wage in 1950 was virtually the average household income, since there was rarely more than one worker in a household.

In much of the country median house prices today remain at or below three times median household incomes. Notably, these are areas where smart growth style land restrictions have not taken hold and it includes metropolitan areas like Atlanta, Dallas-Fort Worth and Houston --- the three fastest growing metropolitan areas in the developed world over 5,000,000 population. In all, at the peak of the housing bubble, 46 of 129 US markets had house prices at or below the Levittown ratio (see 4th International Demographia Housing Affordability Survey, http://www.demographia.com/dhi.pdf) --- such as Kansas City, Columbus, Des Moines, Indianapolis, Louisville and other metropolitan areas that are generally recipients of domestic migrants from the more highly regulated and unaffordable markets. Moreover, the median sized house is at least double the size of the Levittowner. Finally, new starter homes can be found at or below the Levittown ratio in many of these markets.

Wendell Cox
Co-Author, Demographia International Housing Affordability Survey
Demographia, St. Louis &
Conservatoire National des Arts et Metiers, Paris

2008/10/01

California High Speed Rail: Service Unlikely to Livermore-Pleasanton-Dublin

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

California High Speed Rail: State Agency Misleads State Senate & Public

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue Emerging public opposition will likely spread as site-specific urban, suburban and rural impacts become better understood. It is unlikely that the California HSR program will find smooth sailing among impacted communities. This finding is based in part on nascent opposition to the project. Opposition to prior HSR projects has been based on underestimated costs, overestimated ridership, eminent domain and environmental impacts. Also, the credibility of HSR promoters has waned as pledges of “no subsidy” or “only low subsidies” turned into calls for high subsidies. This Due Diligence Report identifies such factors as weaknesses in the CHSRA planning process.

In prior cases opponents have shown great resourcefulness in sustaining campaigns to oppose HSR construction. Opposition could spread, particularly in communities where train speeds and noise would be considered excessive, where massive elevated railways would create a “Berlin Wall” effect that divides communities—a prospect that has caused Menlo Park and Atherton to join in a lawsuit against the CHSRA’s environmental review process—or where a history of staunch opposition exists, such as in Tustin or San Diego County.


Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

California High Speed Rail: Big Losses & Huge Taxpayer Subsidies

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue There is little likelihood that the passenger or revenue projections will be met, that the aggressive travel times will be achieved, that the service levels promised will be achieved, that the capital and operating costs will be contained consistent with present estimates, that sufficient funding will be found, or that the system will be profitable.

It is likely that these circumstances will represent an expensive and continuing drain on the state’s tax resources. Under three of the four scenarios outlined in this report, an early bond default, taxpayer bailout, and investment losses by private funding participants could occur.

To address a fiscal shortfall, past and present proposals to finance HSR’s construction and operation through general obligation state bonds and sales taxes—along with matching funds from the federal and local governments—could be futile. Hence, the HSR system is unlikely to be completed in any form consistent with the current plan and that even the delivery of a recognizable Phase I could be most difficult.

The outcome could mean investors in the project will see no financial returns and the HSR system as proposed could require significant subsidies from California taxpayers in perpetuity.


Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information
California High Speed Rail: Projections Attacked by Senator Mills & UC Berkeley Professor

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue Even before the much higher 2030 ridership projections were released, the CHSRA’s forecasts had come under unusually provocative criticism. University of California professor and transportation textbook author William Garrison characterized claims of massive ridership and low fares as “outrageous statements and lies,” which echoed the evaluation of the world infrastructure research previously cited.

Additionally, Former State Senate President James Mills, who is also considered the “father” of the San Diego Trolley, served on the CHSRA board. He expressed similar views. It is reported that Mills resigned from CHSRA at least partially because he “couldn’t get the truth” out of staff. He is reported to have “described the entire project as ‘based on a fallacy’ of wildly exaggerated ridership projections. It stems, he said, ‘from hiring a consulting firm (and) letting them know what you want them to say.” This is an extraordinary statement from a long-time and continuing rail supporter, who nonetheless, points to a significantly flawed planning process.

Both of these statements were made on the basis of earlier ridership projections, which were far less aggressive than are being currently used by CHSRA.

There are multiple indications that the CHSRA ridership projections appear to be absurdly high. Ridership inflation is consistent with the experience of demand exaggeration that has been identified in the world infrastructure research. As a result, it can be expected that CHSRA fare revenue will be far less than anticipated, leading to financial difficulties.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

California High Speed Rail: Projections Attacked by Senator Mills & UC Berkeley Professor

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue Even before the much higher 2030 ridership projections were released, the CHSRA’s forecasts had come under unusually provocative criticism. University of California professor and transportation textbook author William Garrison characterized claims of massive ridership and low fares as “outrageous statements and lies,” which echoed the evaluation of the world infrastructure research previously cited.

Additionally, Former State Senate President James Mills, who is also considered the “father” of the San Diego Trolley, served on the CHSRA board. He expressed similar views. It is reported that Mills resigned from CHSRA at least partially because he “couldn’t get the truth” out of staff. He is reported to have “described the entire project as ‘based on a fallacy’ of wildly exaggerated ridership projections. It stems, he said, ‘from hiring a consulting firm (and) letting them know what you want them to say.” This is an extraordinary statement from a long-time and continuing rail supporter, who nonetheless, points to a significantly flawed planning process.

Both of these statements were made on the basis of earlier ridership projections, which were far less aggressive than are being currently used by CHSRA.

There are multiple indications that the CHSRA ridership projections appear to be absurdly high. Ridership inflation is consistent with the experience of demand exaggeration that has been identified in the world infrastructure research. As a result, it can be expected that CHSRA fare revenue will be far less than anticipated, leading to financial difficulties.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

2008/09/30

California High Speed Rail: The Exorbitant Cost of Greenhouse Gas Reduction

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The inconsequential contribution of high speed rail (HSR) to the California greenhouse gas (GHG) reduction goal would be achieved at great cost.

    • Assuming the most optimistic figures (Scenario 1), the HSR cost per ton of CO2 removal is nearly 40 times the IPCC ceiling of $50 per ton and nearly 200 times the price of carbon offsets now for sale and being purchased by leading California political officials.

    • Assuming the least optimistic figures (Scenario 4), if the HSR cost per ton of CO2 removal were used for the entire 169,000,000 metric ton California objective, the total cost would be more than the current California gross state product ($1.8 trillion). If the nation were to reduce CO2 emissions by 3,000,000 tons (consistent with the McKinsey report) at the same cost per ton as HSR, the total annual cost would be 2.5 times the present gross domestic product of the United States ($33 trillion). Obviously, reducing CO2 emissions at this cost would decimate the economy and increase both unemployment and poverty.

    • HSR’s impact on CO2 emissions is so inconsequential that a similar reduction would be achieved by a statewide 0.5 mile per gallon improvement in car and SUV fuel economy in 2030. This is less than the apparent improvement in national new auto and SUV fuel efficiency between the first six months of 2008 and 2007, based upon an analysis of the 20 leading vehicle models (10 autos and 10 SUVs).

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Only Gilroy to Palmdale May be Affordable

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue Should insufficient funding be available, the Phase I San Francisco-Los Angeles line could be scaled back to new HSR infrastructure limited to the section between Gilroy and Palmdale (a skeletal system). This would make it possible for high-speed trains to complete the downtown San Francisco to downtown Los Angeles route by operating at lower speeds over the existing-but-upgraded commuter rail and freight tracks between San Francisco and Gilroy and between Palmdale and Los Angeles (and perhaps to Anaheim).

Given the difficult financing situation, and considering how HSR construction costs vary for different segments, such a skeletal system could well emerge. For example, it appears that approximately one-half of Phase I construction costs are attributable to the San Francisco–Gilroy and Anaheim–Los Angeles–Palmdale segments. Hence, it is possible that the Gilroy–Palmdale section of the line could be built for between $15 billion and $22 billion, depending on the extent of capital cost overruns. It would be possible to fund such a truncated line from the currently hoped-for financing sources (state bond, matching federal funding and private investment). However, as indicated in Due Diligence Financial Projections obtaining this even this amount of funding is likely to be difficult.

Further, the Authority has indicated that the earliest segments to be built will be in the San Joaquin Valley. The first segment includes “development of a test track from Bakersfield to Merced, regardless of whether the Altamont or Pacheco Alignment is selected. Thus, the Central Valley is served between Bakersfield and Merced for either alternative.”

Consequently, events could develop in such a way that genuine HSR service would operate only between the peripheries of the Los Angeles and Bay Areas, namely Gilroy and Palmdale, meaning that California would have the form but not the substance of high-speed rail. The speeds on such a skeletal system would be faster than current rail services, but would fall far short of HSR standards and would provide little or no competition to airlines between the two major markets.

Because the existing Bay Area and Los Angeles rail lines are heavily utilized, the CHSRA would need to add track capacity, electrify the lines, and enhance grade-crossing protections. Even with such upgrading the HSR trains would need to mesh with the operating schedules and travel times of the commuter trains.

The skeletal system would be able to provide service between San Francisco and Los Angeles on a non-stop schedule of up to 5 hours and 30 minutes and between San Francisco and Anaheim with a stop in Los Angeles on a schedule of up to 6 hours and 15 minutes.

Another factor relevant to the Palmdale–Los Angeles segment is that the Southern California Association of Governments (SCAG) envisages construction of a maglev train system. Plans include maglev lines from the Los Angeles International Airport to the Palmdale airport. Such a development could exacerbate financial challenges for the HSR line, resulting in truncating even the Phase I operation into Los Angeles. This could result in Palmdale being the southern terminus for the HSR system with passengers transferring between it and the maglev system.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Exaggerating the Impacts on Modal Alternatives

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue One of the most eggregious exaggerations in a planning process rife with exaggeration and over-promotion has been the California High Speed Rail Authority's estimates of the cost of accomodating the future rail customers by highways and airports if the system is not built.

If the system were built, diversion of traffic from the highways and airports would be imperceptible. On average the CHSRA-developed Highway Alternative (calculated by this Due Diligence Report would reduce traffic congestion five times as much as HSR. Meeting the demand that would otherwise be switched to HSR would require much less alternative investments compared to the cost of HSR. The costs of the CHSRA’s asserted Highway and Aviation Alternatives to HSR cost of $82 billion is highly inflated due to dubious assumptions and fundamental flaws. Examples include the CHSRA proposing far more highway construction than is necessary to accommodate the demand.

Moreover, the CHSRA treats the commercial aviation system as if it is static—as if efficiencies to enhance capacity are impossible.The diversion of passengers from aviation is over-estimated. The CHSRA assumes that airlines will cancel a large share of the flights within California because passengers will have switched to HSR—and the diversion will free up airport capacity and make it possible to avoid costly airport expansions. This is not the experience even on the premier Japanese and French systems, which show that strong air markets remain after HSR corridors are in operation. The CHSRA’s created Highway and Aviation Alternatives is of no value in genuine cost analysis or in evaluating future roadway and airport expansion needs.

Call it cheerleading.

California High Speed Rail: Service to Pomona Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Service to San Gabriel Valley Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Service to Ontario Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Service to Modesto Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Service to Temecula-Murrieta Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Service to Stockton Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

California High Speed Rail: Service to Riverside-San Bernardino & Inland Empire Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

California High Speed Rail: Service to Oakland & East Bay Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

California High Speed Rail: Service to San Diego Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

Additional information

California High Speed Rail: Service to Sacramento Unlikely

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue The CHSRA lacks a comprehensive financing plan. The proposed state bonds would be insufficient to build Phase I, much less the rest of the system. Little appears firm about potential matching funds from federal and local governments and from potential investors. The state Senate Transportation and Housing committee has issued cautionary statements about the availability of matching federal funds. Also, CHSRA advisor Lehman Brothers has outlined risks that can be a barrier to private investment, including cost overruns, failure to reach ridership and revenue projections and political meddling. Meanwhile, the cost of the project continues to grow.

In the final analysis, it will be most difficult for CHSRA to obtain sufficient financing to complete the Phase I San Francisco–Los Angeles–Anaheim route. This Due Diligence report concludes that commercial revenues from that route are unlikely to be sufficient to pay operating costs and debt service, much less finance Phase II and other extensions. As a result, it seems highly unlikely that the Inland Empire-San Diego, Sacramento, East Bay San Jose to Oakland and Altamont Pass routes will be built. Further, in the worst case, funding shortfalls could require greater use of modestly improved conventional rail infrastructure in Phase I, which could add hours to the promised travel times.

All of this could lead to negative financial consequences, such as substantial additional taxpayer subsidies, private investment losses, and commercial bond defaults.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: They Don’t Even have a Qualifying Train Design

California High Speed Rail: They Don’t Even have a Qualifying Train Design

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.


The Issue No existing HSR trains capable of meeting the speed and capacity goals of the CHSRA system can legally be used in the United States. The CHSRA’s intention to share tracks with commuter and freight trains complicates designing a train to meet Federal Railroad Administration safety standards that are considered the toughest in the world. Currently, no European or Asian HSR train meets U.S. crashworthiness standards. The necessary regulatory approvals of an overseas train are unlikely to be achieved without substantial changes in design and weight.

The CHSRA has yet to decide on basic design specifications for a train and has based studies on inconsistent seating capacities of 450-500, 650, 1,175, 1,200 and 1,600 per train. Also, a train redesigned for the U.S. will become much heavier and is thus unlikely to reach promised speeds. In short, the Authority does not have a usable train design and the eventually required modifications could substantially impair operating performance. Lower performance would negate the CHSRA’s assumptions on which it has based travel times, ridership projections, revenue forecasts and profits.

While builder specifications for the CHSRA’s train do not exist, because of the above circumstance it is fair to state that the CHSRA’s design may become the world’s longest and heaviest HSR train—yet be expected to operate at the highest speed current technology permits. It is likely that a series of designs, tests, prototypes and safety reviews never before achieved anywhere in the world must succeed for the CHSRA’s train to become a reality.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail to Operate Far Slower than Advertised

California High Speed Rail to Operate Far Slower than Advertised

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.


The Issue Based upon international HSR experience, it appears that the CHSRA speed and travel time objectives cannot be met. As a result, HSR will be less attractive as an alternative to airline travel and is likely to attract fewer passengers than projected. Notably, the CHSRA’s anticipated average speeds are not being achieved anywhere in the world, including on the most advanced systems. Incomplete consideration has been given to California’s urban and terrain profiles where HSR trains must operate more slowly than circumstances allow in, for example, France. This study, by assuming realistic speeds, estimates that a non-stop San Francisco–Los Angeles trip would take 3 hours and 41 minutes—59 minutes longer than the statutory requirement of 2 hours, 42 minutes. In the future, the CHSRA’s travel times may be further lengthened by train weight and safety issues and also by political demands to add stops to the system.

The proposed HSR system appears unlikely to provide travel time advantages for long-distance airline passengers. It is likely that HSR door-to-door travel times would be greater and there would be considerably less non-stop service than air service. Moreover, HSR would be unattractive to drivers in middle-distance automobile-oriented markets because little or no door-to-door time savings would be achieved and costly local connections would often be required (rental cars or taxicabs). Another convenience factor is that California urban areas lack the extensive local transit infrastructure that connects with HSR systems in dense Asian and European urban areas. The HSR system will experience disadvantages and commercial challenges in competing with air and auto travel that have been understated in CHSRA documentation.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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California High Speed Rail: Phony Climate Change Claims

California High Speed Rail: Phony Climate Change Claims

The Project California voters will be asked to approve a nearly $10 billion bond issue in the November election as the beginning of funding for the a high-speed rail system intended to serve San Francisco, Los Angeles, San Diego, Sacramento, Fresno, Riverside-San Bernardino and points between. Promoters claim that the remaining necessary funding (from $45 billion to $71 billion, depending upon who you believe) would come from the federal government and private investors. There is no federal program to provide such massive funding and private investment seems highly unlikely given the overwhelming prospects for financial failure.

The Issue One of the principal proponent’s claims about high-speed rail is that it will reduce greenhouse gas emissions. In fact, high-speed rail’s environmental benefits have been greatly overstated.

California HSR will do little to reduce CO2 emissions (greenhouse gas emissions). Based upon California Air Resources Board projections, HSR would ultimately remove CO2 emissions equal to only 1.5 percent of the current state objective. This is a small fraction of the CHSRA’s exaggerated claims of “almost 50 percent” of the state objective. The Intergovernmental Panel on Climate Change (IPCC) has indicated that for between $20 and $50 per ton of reduced greenhouse gases emissions, deep reversal of CO2 concentrations can be achieved between 2030 and 2050. A McKinsey report indicates that substantial CO2 emission reductions can be achieved in the United States for less than $50 per ton. Yet the cost per ton of CO2 emission removal by HSR is far higher. ---.between 39 and 201 times the international IPCC ceiling of $50. The reality is that HSR’s impact on CO2 would be inconsequential while being exorbitantly costly.

Adapted from The California High Speed Rail Proposal: A Due Diligence Report By Wendell Cox & Joseph Vranich

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2008/09/28

England's Mortgage Bailout: The High Cost of Town Planning

The Daily Telegraph in London reports that the government bailout of mortgage lender Bradford and Bingley will raise the exposure of the United Kingdom taxpayers to £150 billion (nearly $300 billion). Overall, this is approximately $5,000 per capita, considerably more than the $3,000 per capita United States taxpayer exposure likely after the nearly $800 billion in bailouts, including AIG and the proposed congressional package.

It may be surprising that the cost in the UK would be competitive, much less higher than in the United States, until the causes are analyzed. Surely, US lenders appear to have been more profligate with their (and now taxpayers’) money than UK lenders. Yet the bloated prices have started to fall, as prices begin to return to reality.

Lending profligacy was only the start of the problem. Blame town planning, or what is called “smart growth” in the United States. Elsewhere, we have documented the fact that the excessive price increases that led to the US mortgage meltdown were concentrated in markets with strong land use regulation (smart growth). In these markets, land use policies limited the amount of land available for development, interfered with the competitive pricing of land for development and otherwise increased costs. The smart growth markets, while accounting for only 30 percent of the population, represented more than 85 percent of the housing price increases. Without smart growth, the financial crisis might well have been handled in the United States without government intervention.

The British are not so lucky. Because of the Town and Country Planning Act of 1947 and its subsequent administration, the entire nation is victimized by smart growth style policies that simply do not allow enough houses to be built. Last year, British house construction fell to the lowest level since World War II, and has dropped 30 percent just since 1992. This is barely one-third of the level required in the nation according to James Hearfield, in Let’s Build: Why We Need Five Million New Homes in 10 Years.

For all the good it has done, the Blair government has made the housing market a “dog’s breakfast.” By requiring an untenably high share of new housing to be built in brownfield sites, the government has raised the price of housing and discouraged its development. It is not as if housing has not attracted the attention of the government. Indeed, it seems as if the more it has talked, the less has been built.

But there is much more than national policy. Local authorities have long since caved to property owners who think that their rights to property they can see is no less than their rights to property they own. The result is a nation that is saying no to the next generation. Never mind that the UK is among the most poorly housed nations in the developed world.

It is not, therefore surprising, that housing prices have risen with a vengeance. Owner occupied housing costs have doubled in the last decade relative to incomes. This means that the value of the owner occupied housing stock stands at nearly £3.5 trillion, when historic norms would place it at £1.7 trillion. The £150 billion (£0.150 trillion) may just be the beginning.

2008/09/21

The Sub-Prime/Smart Growth Mortgage Market Bailout

The impending federal bailout of mortgage markets has a principal cause --- lax lending standards, such as sub-prime mortgages and an exaggerating cause --- excessive land use regulation, which drove house prices up beyond any precedent. More than 80 percent of the housing cost increase since 2000 occurred in markets with excessive land use regulation (also called "smart growth"). Without this excessive increase, the financial crisis would have been far less intense or may not have occurred at all.

These policies, often referred to as "smart growth," create a scarcity of land, artificially raise the price of housing, and, again, have increased the exposure of the market to risky mortgage debt. When more liberal loan policies were implemented, metropolitan areas that had adopted these more restrictive policies lacked the resilient land markets that would have allowed the greater demand to be accommodated without inordinate increases in house prices.

For more detail see:
How Smart Growth Exacerbated the International Financial Crisis (Heritage Foundation web memo)


How Smart Growth Exacerbated the International Financial Crisis (report)

2008/09/12

Google Chrome: A Step in the Right Direction (Review)

I was happy to be one of the first to download Google Chrome, a new web browser, within minutes of its being made available on the internet. Somehow, Unlike, Microsoft, Google has managed to bring products to the market that are generally well tested and I have been pleased to use G-Mail and Google Earth, almost without any difficulty, from the beginning. That is not to say that their products are without difficulties. There are design problems with G-Mail, for example, but these are not program bugs, but rather software architecture issues --- I would have designed them differently.

This, of course, is much unlike Microsoft, whose products I find so infuriating that I even briefly switched to Apple, in an expensive failed experiment.

My haste in downloading Google Chrome was due to an associate's bad experience with the latest version of Firefox, which I had intended to download, but had not pressed all of the necessary buttons. He had, and lost hours because of design glitches. This put me in the market for an alternative not only to Internet Explorer, but also Firefox.

Google Chrome is generally an improvement on the other browsers. It has a clean look and more of the page is available for web page display. Some of the features are a bit unusual (as in the case of G-Mail), but the program passed my one-half hour test --- I must be up and running pretty well with any software within 30 minutes or it is removed from the registry. Google Chrome seems to be faster than Firefox and its display of tabs is more attractive and user friendly.

The import of bookmarks from Firefox was not completely successful, but the 5 percent that was missed I will add as it becomes necessary.

There are two problems, neither of which is sufficient to require a return to Firefox or, God Forbid to Internet Explorer:

    URL’s do not show on downloaded PDF documents. This is a problem, because I often send links to these documents and have to go to a previous page to find the link. This may just be a setting problem I have not yet figured out, but it is annoying.

    The greatest annoyance, however, makes me fear that a strain of Gate’s Disease has struck Google. The one program that Google Chrome does not work well with is G-Mail, its own mail program. It routinely hangs up and when it does not is very slow, unlike other operations with Google Chrome. How Microsoftian can you get than to not be able to handle your own programs. I recall the previous version of XL (2003) rarely closed without crashing on a Windows system. The G-Mail problem is akin to that. Again, however, the problem is not great enough to justify a return to Firefox. I, however, do keep Firefox open only for the purpose of using G-Mail (that explains how serious the problem is).

All in all, however, Google Chrome is a significant step forward, despite being a “beta.” One can only hope that someone from the Chrome product will have coffee with someone from the G-Mail product and there will be “peace in the valley” again.

2008/09/08

Small Town America

With all of the discussion in the presidential campaign about small towns, it is well to review the situation of local governance in the United States.

According to the 2002 United States Census of Governments

    There were 19,429 municipalities (cities, towns, boroughs and villages) with a population of 175,845,000. The average sized municipality was 9,000.

    There were 16,504 townships and towns that are analogous to townships, with a population of 52,365,000. The average sized township had a population of 3,200.

    All together, there were 35,933 cities, towns, boroughs, villages and townships in the United States. The total population was 227,210,000. The average population was 6,300.

Small town America appears to be alive and well.

2008/08/26

Valley to West LA Monorail or Subway: A Real Loser

I was a member of the Los Angeles County Transportation Commission from 1977 to 1985 (appointed to three terms by Mayor Bradley) and a resident of the Valley (Chatsworth). It was my motion that created the Proposition A set-aside for rail construction in 1980. I supported rail at that point because of consultant and staff claims that it would make a material difference in traffic congestion --- indeed, it was that concern that led me to enter transportation public policy in the middle 1970s.

Since that time, it should have become painfully clear that rail has made virtually no difference in traffic congestion in Los Angeles. This should not be surprising, because new urban rail systems have not reduced traffic congestion anywhere in North America or Western Europe. As for the Sepulveda Pass (I-405), it is a classic corridor for which there is no transit solution. The basic problem is simply that not enough people are going to the same place. The destinations of people driving on such a peripheral (as opposed to downtown oriented) corridor makes it impossible to deter anything but a very small percentage of the traffic, and that would be quickly replaced by growth.

Because transit cannot serve door-to-door travel, nearly all trips by transit are much longer than by car --- the national average is double and the data in Europe is not much different. Regrettably, proposals such as monorails, subways and even express buses are a reflection more of rhetoric than reality. They will make little difference and that is especially true in a corridor like Sepulveda Pass.

As politically incorrect as it may be, there is no way to reduce traffic congestion and improve travel times except by expanding roadways. High occupancy toll lanes can be very effective and could make a real difference, especially in light of the fact that Census Bureau estimates indicate a near stagnation of population growth in Los Angeles County (and even Orange County)

2008/08/25

Las Vegas Monorail Bonds: More Bad News

According to a Business Wire story, “a default of some kind appears probable” on the bonds of the Las Vegas Monorail, based upon a “CC” Fitch Rating.

The monorail was developed as a private venture and supported by tax-exempt industrial development bonds issued by the state of Nevada. Project promoters produced an “investment grade” projection of 53,500 daily riders for 2004. In 2007, the average daily ridership was 21,600—60 percent below projection. This author had produced a report during the planning process projecting between 16,900 and 25,400 daily riders for 2004, the mid-point of which, at 21,200, was five percent below the actual 2008 year-to-date ridership (www.publicpurpose.com/ut-lvmono-0006.pdf).

The eventual results in Las Vegas may be unfortunate for investors. Moody’s Investors Services has downgraded the bonds to “junk” status and has indicated that “At current ridership and revenue levels, a payment default is anticipated by 2010 once reserves are exhausted.” (www.kvbc.com/Global/story.asp?S=7797066 and www.reuters.com/article/companyNews/idUSN2959008320080129). Finally, the bond insurer, AMBAC Financial Services, has run into financial difficulties and has had its credit rating dropped two levels (www.bloomberg.com/apps/news?pid=20601087&sid=asLtTQyLRQQs&refer=home). Holders of insured Las Vegas Monorail bonds could lose their investments, along with holders of uninsured bonds.

2008/08/21

Counterproductive GHG Policy in California

California’s Senate Bill 375 appears likely to pass tomorrow. The bill would establish greenhouse gas emissions targets for the state’s metropolitan areas and includes financial incentives that would seek to encourage more dense development and would ultimately interfere with local zoning prerogatives. The underlying assumptions of SB 375 are at best unproven and at the worst could lead to serious economic disruption.

One of the principal concerns in reducing greenhouse gases is to do so in a manner that allows strong economic growth to continue. Strong economic growth is much more than theoretical --- it is required to minimize poverty and to preserve the quality of life. Because of this concern, considerable research has been undertaken by the International Panel on Climate Change, which has concluded that significant (and sufficient) reductions of greenhouse gas emissions can be achieved at from $20 to $50 per ton.

The problem with SB 375 is that it applies no cost test. It is simply assumed that suburban development and driving are “bad” and that they must be curbed. There has been no cost-based modeling to justify this view. Indeed, Australian research indicates that, overall, GHG emissions per capita are less in suburban areas than in higher density areas (in a process that allocates every gram of GHG to a household location). Similarly, the average new car is as GHG friendly as the average transit ride (on a passenger mile basis) outside New York.

By skipping over the issue of costs, SB 375 could do far more harm than good. It will effectively ration land for development, which is likely to substantially increase its costs. This will lead to less affordable housing and higher product costs. Further, SB 375 would increase traffic congestion. Virtually all of the evidence from around the world indicates that more dense development, which will occur as a result of SB 375, leads to greater traffic congestion. This will increase the intensity of local air pollution and thereby local health risks. It will also increase GHG emissions, because cars emit more GHGs when they operate slower and in stop and go conditions.

All of this comes at a time that California faces a financial crisis, while there is a strong out-migration of residents to other states, according to United States Census estimates (1.2 million just from 2000 to 2007).

SB 375 represents a triumph of ideology over reason.

2008/08/20

"Ways to Work:" A Nobel Prize?

Ways to Work Program: A Nobel Prize?

The national Ways to Work program has improved the employment and education opportunities of low-income households across the United States. The model is similar to that used Mohammed Unus, who won the Nobel Prize for his small loan program in Bengladesh.

WAYS TO WORK PROGRAM

Economist Mohammed Unus recently won the Nobel Prize for his groundbreaking project that makes small loans available to the low-income residents of Bengladesh. In making the award, the Nobel Committee noted the importance of finding ways for people to break out of poverty. Unus’ Grameen Bank has developed an impressive record of assisting poor households to enter the mainstream of economic life in Bangladesh.

The applicability of the Unus model is not limited to low-income nations. The national Ways to Work program has been working for more than 20 years to bring low-income households across the United States into the economic mainstream. A principal strategy has been to provide loans, like Unus, to low-income households. Ways to Work helps households buy cars.

Why cars? Simply because in modern urban areas, whether in the United States, Western Europe or the low-income world, cars expand exponentially the geographical area in which people can search for employment. Research at the University of California, the Brookings Institution and the Progressive Policy Institute demonstrates that cars are crucial to obtaining better employment. The problem is, of course, that despite the romantic affection for transit, it is simply unable to provide mobility to much more than the downtown area, and that’s not where most of the jobs are.

A recent evaluation report looked at a representative sample of Ways to Work borrowers, and found the following:


    Working families who have received Ways to Work loans have, on average, increased their incomes more than 40 percent in the first year.

    More than 80 percent of the borrowers who were previously on cash grant public assistance programs saw their incomes rise so much that they were able to leave the public assistance programs.

    Many of the borrowers indicated that having the car made it possible for them to complete education and training programs.

    Demonstrating how success breeds success, one-third of borrowers have since been able to obtain new loans through conventional sources.

    Finally, nearly all of the borrowers said that having a car increased the time they could spend with their families and improved their quality of life.


It may be time for the Nobel Committee to honor the model Ways to Work program.

China: Send the Western Urban Planners Home

A cadre of Western urban planners has descended on China offering advice. Chinese officials are admonished “not to repeat our mistakes.” The mistakes, they explain are urban sprawl (a pejorative term for suburbanization) and automobile use. Chinese officials who visit the West must marvel as for the mistakes at the myopia of our planners after witnessing the high standard of living, which is something they would like to replicate. For good reason, they are largely ignoring the bankrupt advice they are receiving from the Western planners.

INTRODUCTION

China is experiencing unprecedented economic growth. Over the past two decades, living standards have risen seven fold. Gross domestic product per capita still remains below high-income world standards, at one-sixth that of the US level. Nonetheless, there is great regional disparity, with incomes in east coast urban areas up to three times that of urban areas in the central and western regions.

Like many developing nations, China remains more rural than urban. According to United Nations data, China’s population was only 40 percent urban in 2000. This compares to urban rates of over 70 percent in many high-income nations. People are moving in large numbers from rural areas to the urban areas, following the pattern of development that has occurred virtually wherever incomes have risen markedly. Opportunities are much greater in the large and expanding urban labor markets, and the standard of living is better in urban areas than in rural areas. The United Nations estimates that by 2030, 60 percent of the Chinese population will live in urban areas. This represents a staggering migration --- the movement of 340,000,000 people --- a population greater than that of the United States and Canada.

Already, China has very large urban areas. Shanghai, Shenzhen and Beijing have 10,000,000 or more residents. A number of other urban areas have approximately 5,000,000 people, such as Guangzhou, Wuhan, Tianjin, Shenyang and Dongguan. There are more than 25 additional urban areas with populations above 1,000,000 See DemographiaWorld Urban Areas.

The Western Planners

Not surprisingly, a cadre of Western urban planners has descended on China offering advice. Chinese officials are admonished “not to repeat our mistakes.” The mistakes, they explain are urban sprawl (a pejorative term for suburbanization) and automobile use.

The Reality of the West

And, as for the mistakes of the West, Chinese officials who visit the United States, Western Europe, Canada or Australia must wonder at the disconnect between the wasteland described by Western planners and the unparalleled quality of life enjoyed by people in the West.

It is not a mistake that the automobile has created mobile urban areas in which employers and employees have far greater choices and labor markets are more efficient. It is not a mistake that housing built on inexpensive land on the periphery of urban areas has made it possible for so many millions to build up financial equity in their own homes. Nor is it a mistake that nearbly inexpensive land has been developed by retailers and other businesses who are, as a result, able to provide lower prices than would otherwise be possible.

The West has achieved its unparalleled affluence because it was largely able to accomplish all of this before the planners were in a position to impose their wills that would have prevented suburbanization and the expansion of mobility. The planners would have imposed greenbelts and urban growth boundaries, making it impossible for low cost housing to be developed. Western nations would now be principally inhabited by renters rather than homeowners. Employees would be limited to those few places they could get on foot or public transport, rather than the whole urban area that the automobile has opened up. There would be less wealth and it would be less broadly distributed. The planners would not have allowed the “big-box” stores on the urban fringe, and as a result people would have had to pay higher prices with their smaller incomes.

Indeed, for any who might wish for China to stumble in its competition with the West, it is hard to imagine a more promising strategy than to export Western planning ideas, if not the planners themselves, to China. China would do well to ignore the Western planners, whose advice would retard the growth of the economy and spread of wealth. To China’s credit, the “fools gold” of Western urban planning principles is largely being ignored.