Category: Politics and Society

Good Practices for State Planning and Local Public Transportation

Earlier this week, I complained about the OPM (other people’s money) problem: federal funding of American public transportation, which is managed locally, leads to cost-raising behavior as local and state governments seek to maximize federal infusion of cash. This is a companion post about more positive and fruitful interactions of government at different levels on this side of the Pond. The examples here often look pointless or acrimonious by local standards, but at the end of the day, they produce cost-effective infrastructure and are positive examples to learn from.

Of note, all the examples below are from unitary, not federal states. This is just an artifact of where I have talked to the most people about this – from what I know of Germany, Austria, Switzerland, and Belgium, they all fall within the spectrum spanned by Italy, Turkey, France, and Sweden when it comes to state-local funding allocation. Moreover, the extent of subnational fiscal autonomy in Germany is not greater than that of Sweden, where there are extensive county and municipal taxes funding subnational government, whereas in Germany nearly all taxes are federal and the Länder mostly rely on transfers.

This is a theme I’ve been investigating ever since I talked to a planner at DOTr. Philippine construction costs are high, although that’s mainly for subways, while elevated lines have fairly average costs. The planner explained to me how planning and procurement are done and specifically how it contrasts with the role of the federal government in the US. Manila Metro projects are planned and designed by DOTr, and ever since that conversation I’ve learned to interpret interviews with European experts in that light.

Sweden: state-local negotiation

The Nordic states practice consensus government. This means that decisions are done by majority vote without veto points, but also there’s no such thing as a majority. In practice, infrastructure involves negotiations between different stakeholders. Bigger projects, including the subway megaprojects we study, require funding from different sources, creating more stakeholders in the process.

In the case of Stockholm, it’s instructive to compare Citybanan and Nya Tunnelbanan. Citybanan is a regional rail tunnel, and therefore the lead agency was the state’s Trafikverket – but even then, Stockholm County had extensive input. Regions send wishlists to the state, and compete for a fixed pot of funding for grants, but there are further negotiations about project details. Nya Tunnelbanan is a subway project led by the county’s SL, but funding comes 25% from local sources, 25% from the county, and 50% from the state.

Crucially, Trafikverket builds rather than just nudges. It has a strong professional civil service capable of designing and supervising the construction of infrastructure megaprojects – and the same pool of civil servants move between agencies within the Swedish public sector, so that some of the people I’ve spoken to have moved between Trafikverket and SL. The example planners I have in mind are mid-level, not top management – this is not a case of a mobile executive suite lording over mid- and low-level career bureaucrats who can’t move between agencies easily.

There is also integration of transport and housing, in the sense that residential upzoning in Stockholm County focuses on areas that have or will soon have urban rail access. Construction rates in Stockholm County are some of the highest in Europe: per SCB, annual completions were around 6.5-7 per 1,000 people in the five years before corona. I’ve been told that it’s a consensual process, with no further elaboration; in Oslo, in contrast, the state has to compel wealthy NIMBY municipalities to upzone as a precondition of giving them subway expansion, but state-local coordination is as far as I can tell otherwise similar to the situation in Stockholm.

Turkey: state-local competition, but no OPM

Turkey has one of the world’s lowest construction cost levels; more details will be available in a report to appear soon, led by Elif Ensari. Wages in Turkey are low by European standards and social protections are weak, but the direct labor share of subway construction is small enough that it is a secondary contributor to the low costs; Turkey dos some things more efficiently than Sweden and others less efficiently.

The situation of state-local relations there is the exact opposite of Sweden’s. There is no collaboration – rather, there are metro tunnels in Istanbul funded and built by the state and others funded and built by the city.

The city is not quite local – the municipality covers the entire metropolitan area of 15.5 million people, and Istanbul politics has an ideological left (i.e. anti-Erdoğan) vs. right (i.e. pro-Erdoğan) characteristic rather than the hyperlocal ties of New York and other American cities. Moreover, now that AKP lost the municipal election and the mayor is CHP’s Ekrem İmamoğlu, who will likely challenge Erdoğan in the 2023 presidential election, there is friction between the state and the city, each trying to argue that it builds more and better infrastructure. There are arguments between pro- and anti-Erdoğan sources over who is to blame, but the city has much less access to state financing now than before İmamoğlu’s victory, which it has been able to replace with financing from the European Investment Bank and other sources of loans, like JICA and Deutsche Bank.

In this situation, there is no coordination, and this is a drag on efficiency – one of the ways Istanbul has been able to keep costs down is finding parks and state land to use for station footprint to keep station construction costs down. However, because there is direct responsibility for the state or the city for infrastructure, there is no OPM problem – İmamoğlu’s political career depends in part on his ability to build infrastructure, and Erdoğan’s ability to interfere is real but limited.

Housing construction is extremely rapid. Istanbul has a housing surplus thanks to the construction of around 160,000 annual housing units; neighborhood character is not a priority there. But I do not know whether it is integrated with subway construction as in Sweden.

France: the capital is the state

France has a convoluted set of local and regional governing mechanisms. However, in Paris, much of the power remains in state and state-appointed organs. The transport association Ile-de-France Mobilités, which would be called a Verkehrsverbund in Germany, is coordinated by the Ile-de-France region, but its two largest components, SNCF and RATP, are both state-owned (though SNCF-RATP agency turf battles remain). Public services that elsewhere in France might be devolved are in Paris often run by the state – for example, the Paris Police Prefecture is part of the National Police, and it’s smaller cities, for example in the Riviera, that have local police departments.

This is not unique to France. In infrastructure, Sweden too exhibits more state involvement in urban rail planning in the capital than in smaller cities – Västlänken in Gothenburg is a Trafikverket project but more of the planning and funding come from the county than was the case for Citybanan. London is a mix: TfL is run by the mayor, offering much more devolution than the Metropolitan Counties of England have, but conversely the construction of infrastructure megaprojects like Crossrail is really within the purview of UK-wide politics.

The issue here is one of scale. Grand Paris Express is a 200 km, 80% tunneled project, and France is a medium- rather than low-cost country. Even the state barely has enough planning capacity for it – the Cour des Comptes report on the cost overruns, not seen before for smaller Métro extensions, blamed the insufficient size of existing planning organs, but unfortunately, the solution arrived at, the special-purpose delivery vehicle (SPDV) GPE, is not good, and is either in imitation of or evolved toward convergence with Crossrail. Nothing below the level of the state could build such a project.

And because the project is so large, it’s been forced into a situation that rhymes with Sweden’s intergovernmental negotiation. It’s also been discussed as part of national politics, with some redesigns stemming from the Sarkozy-Hollande transition. In some cases, this has led to OPM – namely, M18 is unpopular among the region’s public transportation advocates and remains because of pressure by the high-income suburbs it would serve. However, there is no visible impact on unit costs; it’s notable that the OPM the state would dispense is additional infrastructure at per-rider costs that are high for France but common in the United States, rather than extras of little use like signature stations or more expensive construction methods.

Finally, housing construction in Ile-de-France is, as in Stockholm County, among the YIMBYest in Europe. Yonah Freemark’s paper on the subject is indispensable: stating around 2017, the annual construction rate rose to 80,000 units regionwide, around 6.5/1,000 people. Construction is largely in the Petite Couronne suburbs, and not the city, and focuses on regions with current or future urban rail extensions, as in Stockholm.

Italy: state planning and austerity

A full report on Italy will appear soon, on a similar timeline as Turkey, written by Marco Chitti. In Italy, there has been a transition from municipal funding and planning of metros to state funding; in Rome, there was always more state involvement as I understand it.

The situation leading up to the Financial Crisis had similarities with the United States: state funding, municipal or regional responsibility for construction. However, the state always exercised far more oversight. The Italian state builds rather than just nudging. State regulation is done through administrative rather than judicial mechanisms, and thus questions of environmental and historical protection are decided by civil servants trained in engineering, archeology, history, and ecology; there are clear rules, providing similar final outcomes to the Nordic process of negotiation and superior ones to the American process of lawsuit.

More recently, the state has devolved some of the funding to regional, provincial, and municipal governance. This was an artifact of post-Crisis austerity, so the state would fund the majority (I believe 70%) of each project’s budget but not all of it. The result has not been positive – subnational governments have no money, not even wealthy ones like Milan, and to fill in for missing state funding they’ve resorted to PPP financing, which has not impacted construction costs but in effect required hidden loans at high interest bonded to future revenue.

The Other People’s Money Problem

I did a poll on Patreon about cost issues to write about. This is the winning option, with 12 votes; project- vs. budget-driven plans came second with 11 and I will blog about it soon, whereas neighborhood empowerment got 8.

OPM, or other people’s money, is a big impediment to cost reform. In this context, OPM refers to any external infusion of money, typically from a higher-level government from that controlling an agency. Any municipal or otherwise local agency, not able or willing to raise local taxes to fund itself, will look for external grants, for example in a federal budget. The situation then is that the federal grantor gives money but isn’t involved in the design of where the money goes to, leading to high costs.

OPM at ground level

Local and regional advocates love OPM. Whenever they want something, OPM lets them have it without thinking in terms of tradeoffs. Want a new piece of infrastructure, including everything the local community groups want, with labor-intensive methods that also pay the wages the unions hop for? OPM is for you.

This was a big problem for the Green Line Extension’s first iteration. Somerville made ridiculous demands for signature stations and even a bike path (“Somerville Community Path”) thrown in – and all of these weren’t jut extra scope but also especially expensive, since the funding came from elsewhere. The Community Path, a 3 km bike path, was budgeted at $100 million. The common refrain on this is “we don’t care, it’s federally funded.” Once there’s an outside infusion of money, there is no incentive to spend it prudently.

OPM modifying projects

In capital construction, OPM can furthermore lead to worse projects, designed to maximize OPM rather than benefits. Thus, not only are costs high, but also the results are deficient. In my experience talking to New Englanders, this takes the form of trying to vaguely connect to a politician’s set of petty priorities. If a politician wants something, the groups will try pitching a plan that is related to that something as a sales pitch. The system thus encourages advocates and local agencies to invest in buying politicians rather than in providing good service.

This kind of behavior can persist past the petty politician’s shelf life. To argue their cases, advocates sometimes claim that their pet project is a necessary component of the petty politician’s own priority. Then the petty politician leaves and is replaced by another, but by now, the two projects have been wedded in the public discourse, and woe betide any advocate or civil servant who suggests separating them. With a succession of petty politicians, each expressing interest in something else, an entire ecosystem of extras can develop, compromising design at every step while also raising costs.

The issue of efficiency

In the 1960s, the Toronto Transit Commission backed keeping a law requiring it to fund its operations out of fares. The reason was fear of surplus extraction: if it could receive subsidies, workers could use this as an excuse to demand higher wages and employment levels, and thus the subsidy would not go to more service. As it is, by 1971 this was untenable and the TTC started getting subsidies anyway, as rising market wages required it to keep up.

In New York, the outcome of the cycle of more subsidies and less efficiency is clearer. Kyle Kirschling’s thesis points out on PDF-p. 106 that New York City Transit’s predecessors, the IRT and BMT, had higher productivity measured in revenue car-km per employee in the 1930s than the subway has today. The system’s productivity fell from the late 1930s to 1980, and has risen since 1980 but (as of 2010) not yet to the 1930s peak. The city is one of a handful where subway trains have conductors; maintenance productivity is very low as well.

Instead of demanding efficiency, American transit advocates tend to demand even more OPM. Federal funding only goes to capital construction, not operations – but the people who run advocacy organizations today keep calling for federal funding to operations, indifferent to the impact OPM would have on any effort to increase efficiency and make organizations leaner. A well-meaning but harmful bill to break this dam has been proposed in the Senate; it should be withdrawn as soon as possible.

The difference between nudging and planning

I am soon going to go over this in more details, but, in brief, the disconnect between funding and oversight is not a universal feature of state funding of local priorities. In all unitary states we’ve investigated, there is state funding, and in Sweden it’s normal to mix state, county, and municipal funding. In that way, the US is not unique, despite its federal system (which at any case has far more federal involvement in transportation than Canada has).

Where the US is unique is that the Washington political establishment doesn’t really view itself as doing concrete planning. It instead opts for government by nudge. A federal agency makes some metrics, knowing that local and state bodies will game them, creating a competition for who can game the other side better. Active planning is shunned – the idea that the FTA should have engineers who can help design subways for New York is unthinkable. Federal plans for high-speed rail are created by hiring an external consultant to cobble together local demands rather than the publicly-driven top-down planning necessary for rail.

The same political advocates who want more money and care little for technical details also care little for oversight. They say “regulations are needed” or “we’ll come up with standards,” but never point to anything concrete: “money for bus shelter,” “money for subway accessibility,” “money for subway automation,” etc. Instead, in this mentality the role of federal funding is to be an open tab, in which every leakage and every abnormal cost is justified because it employed inherently-moral $80,000/year tradesmen or build something that organized groups of third-generation homeowners in an expensive city want. The politics is the project.

We Ran a Conference About Rail Modernization (Again)

Modernizing Rail 2021 just happened. Here’s a recording of the Q&A portion (i.e. most) of the keynote, uploaded to YouTube.

As more people send in materials, I’ll upload more. For now, here are the slides I’ve gotten:

A bunch of us tweeted the talks using the hashtag #ModernRail2021, including some that were not recorded.

Modernizing Rail, and a Note on Gender

Modernizing Rail starts in 15 hours! Please register here, it’s free. The schedule can be viewed here (and the Zoom rooms all have a password that will be given to registered attendees); note that the construction costs talk is not given by me but by Elif Ensari, who for the first time is going to present the Turkish case, the second in our overall project, to the general public. But do not feel obligated to attend, not given what else it’s running against.

I made a video going into the various breakout talks that are happening, in which I devoted a lot of time to the issue of gender. This is because Grecia White didn’t have enough time at last year’s equity session to talk about it, so this time she’s getting a full session, which I have every intention of attending. The video mentions something that fizzled out because of difficulties dealing with US census UI, which is a lot harder to use than the old Factfinder: the issue of gender by commuting. So I’d like to give this more time, since I know Grecia is going to talk about something adjacent but not the same.

The crux is this: public transit ridership skews female, to some extent. US-wide, 55% of public transit trips are by women; an LA-specific report finds that there, women are 54% of bus riders and 51% of rail riders. The American Community Survey’s Means of Transportation to Work by Selected Characteristics Table has men at 53% of the overall workforce but transit commuters splitting 50-50; the difference, pointed out in both links, is that women ride more for non-work trips, often chaining trips for shopping and child care purposes rather than just commuting to work.

In the video, I tried to look at the gender skew in parts of the US where transit riders mostly use commuter rail, like Long Island, and there, the skew goes the other way, around 58-42 for men. In Westchester, it is 54-46. In New York, which I struggled to find data for in the video, the split is 52-48 female – more women than men get to work on public transit.

But an even better source is the Sex of Workers by Means of Transportation to Work table, which (unlike Selected Characteristics) details commute mode choice not just as car vs. transit but specifies which mode of public transit is taken. There are, as of the 2019 ACS, 3,898,132 male transit commuters and 3,880,312 female ones – that’s the 50-50 split above. But among commuter rail riders, the split is 533,556 men, 387,835 women, which is 58-42. Subways split about 50-50, buses skew 52-48 female.

In the video, I explain this referencing Mad Men. Commuter rail is stuck in that era, having shed all other potential riders with derogatory references to the subway; it’s for 9-to-5 suburban workers commuting to the city, and this is a lifestyle that is specifically gendered, with the man commuting to the city and the woman staying in the suburb.

This impacts advocacy as well. In planning meetings for the conference, we were looking for more diverse presenters, but ran into the problem that in the US, women and minorities abound in public transit advocacy but not really in mainline rail, which remains more white and male. I believe that this is true of the workforce as well, but the only statistics I remember are about race (New York subway and bus drivers are by a large majority nonwhite, commuter rail drivers and conductors are the opposite), and not gender. Of course there are women in the field – Adina Levin (who presented last year) and Elizabeth Alexis are two must-read names for understanding what goes on both in general and in the Bay Area in particular – but it’s unfortunately not as deep a bench as for non-mainline transit, from which it is siloed, which has too many activists to list them all.

Quick Note: Waste and Missed Projects

If the state spends money on a bad infrastructure project, or too much money beyond what was necessary for the project, then this is waste of money, and should be avoided. But the opposite situation can occur too: some worthwhile projects are not pursued, and that too is a waste, because society forgoes the benefits coming from such projects. This situation should be avoided equally. Moreover, there is no priority between those two types of error. Planning should treat them symmetrically and aim on balance to avoid both equally.

The reason is that just as infrastructure projects are generally not critical, the money that is spent on them is not critical. The US is spending around $1.5 trillion over the lifetime of the program on the F-35 plane, and the money is buried deep in a defense budget that by the standards I grew up with isn’t even that large – and that program consists of documented waste and suffers from poor planning, including serious cost overruns and delays. None of this is an existential threat; the problems the F-35 is intended to solve are not existential but neither are its costs, and likewise, neither infrastructure problems such as delays, capacity limitations, and congestion nor the costs of the projects that intend to fix them are existential.

And if none of this is existential, then the decision of whether to build is about comparing two finite, bounded quantities: costs and benefits. This is why one does a benefit-cost analysis and respect its conclusions, without spiking. But this is also why the state should not systematically aim to err in one direction. If a project with a BCR of less than 1 is built then there is waste, but if a project with a high BCR is not built then there is waste as well.

Note that this principle of not biasing one’s error in one direction (typically the bias is toward inaction) is separate from the question of what the best estimates for costs and benefits are. There is a real tendency to underestimate costs, which is why the minimum BCR that should be funded is not 1 but slightly more, the typical range in Europe being 1.2-1.4. But subject to that limit, decisions should still be symmetric, i.e. if the limit is 1.4, then building 0.7 is symmetrically bad with failing to build 2.8. Alternatively, some projects, like high-speed rail, have upfront costs and long-term benefits, and so it’s better to think of them in terms of financial and social returns on investment, as is done in France (source, pp. 11-12), rather than a BCR in which the discount rate is hidden in a box. But ROI analysis should still be symmetric around one’s chosen limit.

This becomes relevant especially for projects that can expect benefits to rise over time due to economic growth. It is tempting to have a bias toward inaction and only build something once its benefits are unimpeachable, a large multiple of the cost. But this means that in the interim, society has forgone the smaller-but-still-real benefits. Worse, when the BCR grows too large, surplus extraction might pull it back down through an increase in costs, and thus building later can be very risky.

In essence, what this means is that if there’s infrastructure out there with a very high BCR or ROI – and if you ask me, preliminarily, Northeast Corridor high-speed rail done right has a purely financial ROI of maybe 13% – then something is deeply wrong. There shouldn’t be 13% returns out of anything. If there is one, the first question to ask is “why was this not built 50 years ago?”.

In the opposite direction, what looks like building infrastructure prematurely is in fact the prudent decision. South Korea and Taiwan both opened high-speed rail in the 2000s, both underperforming initial expectations. But both have seen steady growth in ridership; at this point, Taiwan HSR returns 4% without social benefits, which is decently healthy, and KTX has somewhat higher ridership than THSR on only slightly higher total construction costs. In the mid-2000s the projects looked like white elephants, that is they were doing just better than minimum. But the 15 years of benefits since then have been considerable. The 20% of society least interested in paying for things should not have veto power; economics exists on the margin and politics on the median.

New Leadership for New York City Transit and the MTA

Andrew Cuomo resigned, effective two weeks from now, after it became clear that if he didn’t the state legislature would remove him. As much of the leadership of public transportation in the state is his political appointees, like Sarah Feinberg, the incoming state governor, Lieutenant-Governor Kathy Hochul, will need to appoint new heads in their stead. From my position of knowing more about European public transit governance than the New York political system does, I’d like to make some recommendations.

Hire from outside the US

New York’s construction costs are uniquely high, and its operating costs are on the high side as well; in construction and to a large extent also in operations, it’s a general American problem. Managers come to believe that certain things are impossible that in fact happen all the time in other countries, occasionally even in other US cities. As an example, we’ve constantly heard fire safety as an excuse for overbuilt subway stations – but Turkey piggybacks on the American fire safety codes and to a large extent so does Spain and both have made it work with smaller station footprints. Much of the problem is amenable to bringing in an outsider.

The outsider has to be a true outsider – outside the country, not just the agency. An American manager from outside transportation would come in with biases of how one performs management, which play to the groupthink of the existing senior management. Beware of managers who try to perform American pragmatism by saying they don’t care about “Paris or such,” as did the Washington Metro general manager. Consultants are also out – far too many are retirees of those agencies, reproducing the groupthink without any of the recent understanding by junior planners of what is going wrong.

Get a Byford, not Byford himself

Andy Byford is, by an overwhelming consensus in New York, a successful subway manager. Coming in from Toronto, where he was viewed as a success as well, he reformed operations in New York to reduce labor-management hostility, improve the agency’s accessibility program, and reduce the extent of slow orders. Those slow orders were put in there by overly cautious management, such as Ronnie Hakim, who came in via the legal department rather than operations, and viewed speed as a liability risk. Byford began a process called Save Safe Seconds to speed up the trains, which helped turn ridership around after small declines in ridership in the mid-2010s.

The ideal leader should be a Byford. It cannot be Byford himself: after Cuomo pushed him out for being too successful and getting too much credit, Byford returned to his native Britain, where Mayor Sadiq Khan appointed him head of Transport for London. Consulting with Byford on who to hire would be an excellent idea, but Byford has his dream job and is very unlikely to come back to New York.

Look outside the Anglosphere

High operating costs are a New York problem, and to some extent a US problem. Canada and the UK do just fine there. However, construction costs, while uniquely bad in New York, are also elevated everywhere that speaks English. The same pool of consultants travel across, spreading bad ideas from the US and UK to countries with cultural cringe toward them like Canada, Australia, and Singapore.

The MTA has a $50 billion 5-year capital plan. Paris could only dream of such money – Grand Paris Express is of similar size with the ongoing cost overruns but is a 15-year project. The ideal head of the MTA should come from a place with low or at worst medium construction costs, to supervise such a capital plan and coordinate between NYCT and the commuter rail operators.

Such a manager is not going to be a native English speaker, but that’s fine – quite a lot of the Continental European elite is fluent in English, though unfortunately this is not as true in Japan, South Korea, or Taiwan. If it is possible to entice a Spanish manager like Silvia Roldán Fernández of Madrid Metro to come in, then this is ideal, given the number of Spanish-speaking New Yorkers; Madrid of course also has legendarily low construction costs, even today. Gerardo Lertxundi Albéniz of Barcelona is a solid option. Italian managers are an option as well given the growing networks in Italy, not just building new lines but also making old stations accessible: Stefano Cetti of Milan’s public works arm MM, Gioia Ghezzi of the operating company ATM, Giovanni Mottura of Rome’s ATAC, etc. Germans like Munich’s Bernd Rosenbusch or Ingo Wortmann or Berlin’s Eva Kreienkamp have experience with juggling conflicting local and state demands and with more labor militancy than people outside Germany associate Germany with. Laurent Probst may well be a good choice with his experience coordinating an even larger transit network than New York’s – assuming that he wouldn’t view New York as a demotion; the same is true of RATP’s head, the generalist Catherine Guillouard.

This is not meant to be a shortlist – these are just the heads of the transit organs of most of the larger Continental Western European systems. Japanese, Korean, and Taiwanese heads should be considered too, if they speak English and if they don’t view working in the US, in a city smaller than Tokyo or Seoul, as a demotion.

Let the civil service work

American civil service is broken – or, more precisely, was never allowed to become an administrative state, thanks to postwar anti-state paranoia. Professionals learn to be timid and wait for the word of a political appointee to do anything unusual. Cuomo did not create this situation – he merely abused it for his own personal gain, making sure the political appointees were not generic liberal Democrats but his own personal loyalists.

The future cannot be a return to the status quo that Cuomo exploited. The civil service has to be allowed to work. The role of elected politicians is to set budgets, say yes or no to megaproject proposals, give very broad directions (“hire more women,” “run like a business,” etc.), and appoint czars in extreme situations when things are at an impasse. Byford acted as if he could work independently, and Cuomo punished him for it. It’s necessary for New York to signal in advance that the Cuomo era is gone and the next Byford will be allowed to work and rewarded for success. This means, hiring someone who expects that the civil service should work, giving them political cover to engage in far-reaching reforms as required, and rewarding success with greater budgets and promotions.

Why It’s Important to Remove Failed Leaders

Andrew Cuomo has a Midas touch. Everything he touches turns to gold, that is, shiny, expensive, and useless. Bin Laden killed 3,000 people in New York on 9-11. Cuomo, through his preference for loyalists who cover up his sexual assaults over competent people, has killed 60,000 and counting in corona excess deaths – 50% more than the US-wide average. And the state let it slide, making excuses for his lying about the nursing home scandal. Eventually the sexual assault stories caught up with him, but not before every state politician preferred to extract some meaningless budget concessions instead of eliminate the killer of New Yorkers at the first opportunity. Even now they delay, not wanting to impeach; they do not believe in consequences for kings, only for subjects.

Time and time again, powerful people show that they don’t believe in accountability. After all, they might be held accountable too, one day. This cascades from the level of a mass killer of a governor down to every middle manager who excuses failure. The idea is that the appearance of scandal is worse than the underlying offense, that somehow things will get better by pretending nothing happened.

And here is the problem: bad leaders, whether they are bad due to pure incompetence or malevolence, don’t get good. People can improve at the start of their careers; leaders are who they are. They can only be thrown away, as far as down as practical, as an example. Anders Tegnell proposed herd immunity for Sweden in early 2020 and then pretended he never did, and the country remained unmasked for most of the year; deaths, while below European averages due to low Nordic levels of cohabitation, are far and away the worst in the Nordic countries, and yet Tegnell is still around, still directing an anti-mask policy. Tegnell is incompetent; Sweden is a worse country for not having gotten rid of him in late spring 2020. Cuomo is malevolent; New York is a worse state for every day that passes that he’s not facing trial for mass manslaughter and sexual assault, every day that passes that his mercenary spokespeople who attacked his victims remain employed.

This is not a moral issue. It’s a practical issue. The most powerful signal anyone can get is promotion versus dismissal (there’s also pay, but it’s not relevant to political power). When Andrew Cuomo stripped Andy Byford of responsibilities as head of New York City Transit, it was a clear signal: you can be a widely acclaimed success, but you failed to flatter the monarch and prostrate before him and this is what matters to me. Byford read the signal correctly, resigned, and ended up promoted to the head of Transport for London, because Sadiq Khan and TfL appreciate competence every bit as Cuomo does not.

Likewise, the retention of Tegnell sends a signal: keep doing what you’re doing. The same is true of Cuomo, and every other failure who is not thrown away from the public.

If anything, it’s worse for a sitting governor. Cuomo openly makes deals. The state legislators who can remove this killer from the body politic choose to negotiate, sending a clear signal: corrupt the state and be rewarded. 60,000 dead New York State residents mean little to them; many more who will die as variants come in mean even less.

The better signal is you have nothing anyone wants, go rot at Sing Sing. This is the correct way to deal with a failure even of three fewer orders of magnitude. Fortunately, there’s only one Cuomo – never before has New York had such mass man-made death. Unfortunately, incidents that are still deadly and require surgical removal of malefactors are far more common. Many come from Cuomo’s lackeys; in my field, the subway, Sarah Feinberg is responsible for around a hundred preventable transit worker deaths, and should never work in or adjacent to this field again. But apolitical managers too screw up on costs, on procurement, on maintenance, on operations, on safety – and rarely suffer for it. But then the fish rots from the head. Chop it off and move on.

Modernizing Rail 2021 Announcement

We are happy to announce that on Sunday the 29th of August we will hold this year’s Modernizing Rail conference, on the heels of the success last year.

Please register using this form. And please give details on what you’d like to see, and if you’re willing to lead sessions – the schedule of the breakout sessions is still up in the air depending on popular demand. Even the number of breakouts depends on how many registrants we get, compared with the about 200 we had last year. Perhaps the news of the infrastructure bill will tilt the demand toward more political sessions regarding how to ensure what is built is good and less toward technical best practices.

Our keynote is certainly political: Rep. Seth Moulton (D-MA), who represents the northern suburbs of Boston (6th district) and for years has been pushing the North-South Rail Link. He will give brief remarks at 16:00 Eastern time, or 22:00 Central Europe Summer Time, to be followed by a Q&A; if you have a question that you’d like to hear an answer to, you can mention it in the registration form, or email the organizing committee at modernizingrail@gmail.com. We will be taking questions throughout the conference, which will start 11:00 Eastern, so if your questions depend on what you hear at the breakouts, you’re in luck.

The Leakage Problem

I’ve spent more than ten years talking about the cost of construction of physical infrastructure, starting with subways and then branching on to other things, most.

And yet there’s a problem of comparable size when discussing infrastructure waste, which, lacking any better term for it, I am going to call leakage. The definition of leakage is any project that is bundled into an infrastructure package that is not useful to the project under discussion and is not costed together with it. A package, in turn, is any program that considers multiple projects together, such as a stimulus bill, a regular transport investment budget, or a referendum. The motivation for the term leakage is that money deeded to megaprojects leaks to unrelated or semi-related priorities. This often occurs for political reasons but apolitical examples exist as well.

Before going over some examples, I want to clarify that the distinction between leakage and high costs is not ironclad. Sometimes, high costs come from bundled projects that are costed together with the project at hand; in the US they’re called betterments, for example the $100 million 3 km bike lane called the Somerville Community Path for the first, aborted iteration of the Green Line Extension in Boston. This blur is endemic to general improvement projects, such as rail electrification, and also to Northeast Corridor high-speed rail plans, but elsewhere, the distinction is clearer.

Finally, while normally I focus on construction costs for public transport, leakage is a big problem in the United States for highway investment, for political reasons. As I will explain below, I believe that nearly all highway investment in the US is waste thanks to leakage, even ignoring the elevated costs of urban road tunnels.

State of good repair

A month ago, I uploaded a video about the state of good repair grift in the United States. The grift is that SOGR is maintenance spending funded out of other people’s money – namely, a multiyear capital budget – and therefore the agency can spend it with little public oversight. The construction of an expansion may be overly expensive, but at the end of the day, the line opens and the public can verify that it works, even for a legendarily delayed project like Second Avenue Subway, the Berlin-Brandenburg Airport, or the soon-to-open Tel Aviv Subway. It’s a crude mechanism, since the public can’t verify safety or efficiency, but it’s impossible to fake: if nothing opens, it embarrasses all involved publicly, as is the case for California High-Speed Rail. No such mechanism exists for maintenance, and therefore, incompetent agencies have free reins to spend money with nothing to show for it. I recently gave an example of unusually high track renewal costs in Connecticut.

The connection with leakage is that capital plans include renewal and long-term repairs and not just expansion. Thus, SOGR is leakage, and when its costs go out of control, they displace funding that could be used for expansion. The NEC Commission proposal for high-speed rail on the Northeast Corridor calls for a budget of $117 billion in 2020 dollars, but there is extensive leakage to SOGR in the New York area, especially the aforementioned Connecticut plan, and thus for such a high budget the target average speed is about 140 km/h, in line with the upgraded legacy trains that high-speed lines in Europe replace.

Regionally, too, the monetary bonfire that is SOGR sucks the oxygen out of the room. The vast majority of the funds for MTA capital plans in New York is either normal replacement or SOGR, a neverending program whose backlog never shrinks despite billions of dollars in annual funding. The MTA wants to spend $50 billion in the next 5 years on capital improvements; visible expansion, such as Second Avenue Subway phase 2, moving block signaling on more lines, and wheelchair accessibility upgrades at a few stations, consists of only a few billion dollars of this package.

This is not purely an American issue. Germany’s federal plan for transport investment calls for 269.6 billion euros in project capital funding from 2016 to 2030, including a small proportion for projects planned now to be completed after 2031; as detailed on page 14, about half of the funds for both road and rail are to go to maintenance and renewal and only 40% to expansion. But 40% for expansion is still substantially less leakage than seen in American plans like that for New York.

Betterments and other irrelevant projects

Betterments straddle the boundary between high costs and leakage. They can be bundled with the cost of a project, as is the case for the Somerville Community Path for original GLX (but not the current version, from which it was dropped). Or they can be costed separately. The ideal project breakdown will have an explicit itemization letting us tell how much money leaked to betterments; for example, for the first Nice tramway line, the answer is about 30%, going to streetscaping and other such improvements.

Betterments fall into several categories. Some are pure NIMBYism – a selfish community demands something as a precondition of not publicly opposing the project, and the state caves instead of fighting back. In Israel, Haifa demanded that the state pay for trenching portions of the railroad through the southern part of the city as part of the national rail electrification project, making specious claims about the at-grade railway separating the city from the beach and even saying that high-voltage electrification causes cancer. In Toronto, the electrification project for the RER ran into a similar problem: while rail electrification reduces noise emissions, some suburbs still demanded noise walls, and the province caved to the tune of $1 billion.

Such extortion is surplus extraction – Israel and Toronto are both late to electrification, and thus those projects have very high benefit ratios over base costs, encouraging squeaky wheel behavior, raising costs to match benefits. Keeping the surplus with the state is crucial for enabling further expansion, and requires a combination of the political courage to say no and mechanisms to defer commitment until design is more advanced, in order to disempower local communities and empower planners.

Other betterments have a logical reason to be there, such as the streetscape and drainage improvements for the Nice tramway, or to some extent the Somerville Community Path. The problem with them is that chaining them to a megaproject funded by other people’s money means that they have no sense of cost control. A municipality that has to build a bike path out of its own money will never spend $100 million on 3 km; and yet that was the projected cost in Somerville, where the budget was treated as acceptable because it was second-order by broader GLX standards.

Bad expansion projects

Sometimes, infrastructure packages include bad with good projects. The bad projects are then leakage. This is usually the politically hardest nut to crack, because usually this happens in an environment of explicit political negotiation between actors each wanting something for their own narrow interest.

For example, this can be a regional negotiation between urban and non-urban interests. The urban interests want a high-value urban rail line; the rest want a low-value investment, which could be some low-ridership regional rail or a road project. Germany’s underinvestment in high-speed rail essentially comes from this kind of leakage: people who have a non-urban identity or who feel that people with such identity are inherently more morally deserving of subsidy than Berlin or Munich oppose an intercity high-speed rail network, feeling that trains averaging 120-150 km/h are good enough on specious polycentricity grounds. Such negotiation can even turn violent – the Gilets Jaunes riots were mostly white supremacist, but they were white supremacists with a strong anti-urban identity who felt like the diesel taxes were too urban-focused.

In some cases, like that of a riot, there is an easy solution, but when it goes to referendum, it is harder. Southern California in particular has an extreme problem of leakage in referendums, with no short- or medium-term solution but to fund some bad with the good. California’s New Right passed Prop 13, which among other things requires a 2/3 supermajority for tax hikes. To get around it, the state has to promise somthing explicit to every interest group. This is especially acute in Southern California, where “we’re liberal Democrats, we’re doing this” messaging can get 50-60% but not 67% as in the more left-wing San Francisco area and therefore regional ballot measures for increasing sales taxes for transit have to make explicit promises.

The explicit promises for weak projects, which can be low-ridership suburban light rail extensions, bond money for bus operations, road expansion, or road maintenance, damage the system twice. First, they’re weak on a pure benefit-cost ratio. And second, they commit the county too early to specific projects. Early commitment leads to cost overruns, as the ability of nefarious actors (not just communities but also contractors, political power brokers, planners, etc.) to demand extra scope is high, and the prior political commitment makes it too embarrassing to walk away from an overly bloated project. For an example of early commitment (though not of leakage), witness California High-Speed Rail: even now the state pretends it is not canceling the project, and is trying to pitch it as Bakersfield-Merced high-speed rail instead, to avoid the embarrassment.

The issue of roads

I focus on what I am interested in, which is public transport, but the leakage problem is also extensive for roads. In the United States, road money is disbursed to the tune of several tens of billions of dollars per year in the regular process, even without any stimulus funding. It’s such an important part of the mythos of public works that it has to be spread evenly across the states, so that politicians from a bygone era of non-ideological pork money can say they’ve brought in spending to their local districts. I believe there’s even a rule requiring at least 92% of the fuel tax money generated in each state to be spent within the state.

The result is that road money is wasted on low-growth regions. From my perspective, all road money is bad. But let’s put ourselves for a moment in the mindset of a Texan or Bavarian booster: roads are good, climate change is exaggerated, deficits are immoral (German version) or taxes are (Texan version), the measure of a nation’s wealth is how big its SUVs are. In this mindset, road money should be spent prudently in high-growth regions, like the metropolitan areas of the American Sunbelt or the biggest German cities. It definitely should not be spent in declining regions like the Rust Belt, where due to continued road investment and population decline, there is no longer traffic congestion.

And yet, road money is spent in those no-congestion regions. Politicians get to brag about saving a few seconds’ worth of congestion with three-figure million dollar interchanges and bypasses in small Rust Belt towns, complete with political rhetoric about the moral superiority of regions whose best days lay a hundred years ago to regions whose best days lie ahead.

Leakage and consensus

It is easy to get trapped in a consensus in which every region and every interest group gets something. This makes leakage easier: an infrastructure package will then have something for everyone, regardless of any benefit-cost analysis. Once the budget rather than the outcome becomes the main selling point, black holes like SOGR are easy to include.

It’s critical to resist this trend and fight to oppose leakage. Expansion should go to expansion, where investment is needed, and not where it isn’t. Failure to do so leads to hundreds of billions in investment money most of which is wasted independently for the construction cost problem.

Infrastructure, Stimulus, and Jobs

I’ve talked before on the subject of infrastructure as stimulus, arguing that it’s ideally used for projects with one-time costs and ongoing benefits. Tonight I want to discuss a specific aspect of this: jobs. American infrastructure projects always talk about how many jobs they will create as a benefit rather than as a cost, and even in Europe, the purpose of the Green Deal investment package is to create jobs. In contrast with this view, I believe it is more correct to view infrastructure stimulus as an unusually bad way of creating jobs to deal with unemployment. The ideal infrastructure package really has to be about the benefits of the projects to users, and not about temporary or permanent employment.

The key question when designing stimulus is, unemployment for whomst?. Unemployment is predominantly a problem of unskilled workers. The OECD has a chart of unemployment by education level, and the rates for people with tertiary education are very low: in 2019, the US and Germany were at 2%, France at 5%, and even Spain only at 8%, all standing around half the overall national unemployment rates.

In theory, this makes infrastructure a good solution, because it employs people in the building trades, who are not university graduates and who have swings in employment rates based on private residential construction. In practice, it is not the case, for two reasons.

First, infrastructure projects have a long lead time, and therefore by the time physical construction happens, the recession has ended: the Green Line Extension in Boston, funded by the Obama-era stimulus, has mostly been under construction at the peak of the current business cycle, with such a shortage of labor that the contractors had to offer workers a full day’s pay with overtime for just five hours of nighttime work to get people to come in.

And second, while the building trades have large swings in employment, they are not good targets for absorbing the mass of laid off workers in recession. It takes years to get certified. This is not the 1930s, when construction was more labor-intensive and less skilled, so that armies of unemployed workers could be put to work building bridges and hydroelectric dams. Construction today is more capital-intensive (how capital-intensive, I can’t tell, since the full capital-labor ratios for the projects we’ve delved into are buried beneath layers of subcontracting), and the workers, while not university-educated, are much higher-skill.

Swings in employment are the most common among unskilled workers who do not have a special qualification. Those are workers in retail, restaurants, sundry small non-essential businesses that depend on the state of the economy for sales. The public sector is rather bad at absorbing them, because the stuff the public sector is or should be doing – the military, police, health care, education, social work, transportation, infrastructure – employs workers who are not so interchangeable. Health care, education, and social work involve massive numbers of people in intermediate professions; the military requires long training and a long commitment and countries that use soldiers as cheap labor for civil infrastructure projects end up weak in both infrastructure and defense; infrastructure uses workers in trades that usually involve years of apprenticeship. The main employers of the workers most at risk of unemployment are private, doing things the state would not be able to provide well.

So if the point is to limit unemployment, it’s best to stimulate private-sector spending through direct cash aid, and not through large state-directed development programs. Those have their place, but in the economic conditions of the 2020s rather than the unfairly romanticized middle of the 20th century, they are not good tools for reducing the impact of business cycle on workers.

And if the point is to build infrastructure, then an infrastructure package is a great tool for this, but it must be built based on maximum value and long-term savings. The number of jobs created should under no circumstances appear in any public communications, to deter groups from extracting surplus by claiming that they provide jobs, and to deter false advertising when in reality the jobs created by public-sector construction tend to be created when the recession is over among groups that do not need stimulus by the. Instead, infrastructure should center the benefits to the public, to be provided at the lowest reasonable price; labor, like concrete and lumber, is in that case a cost, and not a benefit.