Category: Incompetence

American Commuter Rail and Job Access

Uday Schultz, a.k.a. A320LGA, has been poking around frequency and job access in New York and Boston. The Boston tables are especially enlightening because the commuter rail corridors are clearly distinguished from the subway corridors, and then it is possible to see which mode provides good access and which doesn’t:

Jobs accessible within 45 minutes at rush hour, departing in the period 07:30-08:30

Commuter rail lines are in thin black lines, subway and light rail lines are in thick white lines. Buses are not shown but are included in people’s transportation modes. Departure time is treated as fixed – passengers have five randomly selected departure times in the period between 7:30 and 8:30, and access and waiting times are added to in-vehicle travel time. Better job access is in blue, grading through green and yellow into red where job access is the poorest.

Observe that the subway lines are surrounded by much greener census tracts than places farther out. In particular, the tracts around the Red Line, which heads from Downtown Boston to the south-southeast, and the tracts around the Orange Line, heading south-southwest, are a lot greener than areas in between the two lines. The point where the Red Lin appears to branch is an orange census tract, but that area has no station, and where the stations are, the tracts are a lot greener, underscoring the importance of the subway for job access. The Red Line then crosses into Cambridge, where the tracts are green-blue thanks to the concentration of jobs in that area, but again, the northwestern tail of the line is visibly green, while the northern end of the Orange Line is still yellow while farther-out regions are red.

Unfortunately, commuter rail mostly does not have the same effect, even at rush hour, when frequency is more reasonable than off-peak. There is some yellow around Readville, the rail junction station in the far south of the depicted area, where peak frequency is around 20-25 minutes, before dropping to worse than hourly midday, but by and large the commuter lines do not generate noticeably greener areas around their stations. The difference between the Red Line and the Fitchburg Line to the Northwest is the starkest, but it is not the only place. Where we do see more green around train stations, such as the tail of the Needham Line southwest of the end of the Orange Line, it’s often bus service connecting to the subway or express buses to Downtown Boston, rather than commuter rail service.

The Fairmount Line

The worst case seen on the map is that of the Fairmount Line, extending south of Downtown Boston between the Red and Orange Lines, terminating at Readville. It has poor service both peak and off-peak; when the MBTA recently announced that it would move to an all-day clockface schedule to improve off-peak headways, it gave the Fairmount Line 45-minute frequency all day, which is neither viable for urban trips nor clockface.

On the map, we can see how there is visible yellow and green on the Orange and Red Lines, but not so much along the Fairmount Line. Even at rush hour, job access there is not on a par with what the more frequent subway provides. Nor is the Fairmount Line good for providing access to the jobs most typical of the needs of the working-class neighborhoods it passes through:

Jobs <$40,000/year accessible within 45 minutes at rush hour, departing in the period 07:30-08:30; the color scheme is relative

The color scheme is relative, so blue is better than red, but the absolute numbers differ. With this restriction, Cambridge is still green-blue – it is full of middle-class jobs but also working-class ones. And the Fairmount Line remains noticeably redder than both the Red and Orange Lines, because the frequency is so low that passengers wait too long for the trip to remain under the 45-minute line.

Captive riders are not captive to your line

American transit planners like to differentiate between choice riders, who can drive if public transportation isn’t good enough, and captive riders, who can’t. It’s a bad distinction and Jarrett Walker for example has been criticizing it for at least 11 years. Regardless, captive riders who have no alternative to public transportation do have an alternative to one specific line. If the Fairmount Line is bad, they will ride buses and have hour-long commutes, or walk long distances to the subway for same. As a result, the ridership of the Fairmount Line is very weak.

Between the idea of captive riders and the idea that commuter rail is only for the suburban middle class and isn’t really public transit, it’s not surprising why the people who manage the MBTA underserve the line. They hesitate to expand commuter rail beyond its suburban commuter niche, to the point of thinking 45-minute frequencies are good service. Nor do they think in terms of alternatives – captive riders are not supposed to have them, so the idea that they can just ride something else is not usually part of how American transit planners do business analysis.

With such hesitation, they rely on government-by-pilot-program to test new ideas. But all pilots are doomed to failure when the Orange Line runs every 6 minutes and the Red Line’s Ashmont branch every 9. Small increases in service do not lead to high ridership, because riders can still more easily ride a bus or the subway, and this will not change until Fairmount Line frequency is raised to near-urban levels, at worst every 20 minutes, more likely every 7.5 or every 10. Until this happens, commutes in Mattapan and the western parts of Dorchester will remain very long and job access will be poor.

Streaming the Biden Infrastructure Plan

I streamed my thoughts about the Biden infrastructure plan, and unlike previous streams, I uploaded this to YouTube. I go into more details (and more tangents) on video, but, some key points:

  • Out of the nearly $600 billion in the current proposal that is to be spent on transportation, public transportation is only $190 billion: $80 billion for intercity rail, $85 billion for (other) public transit, $25 billion for zero-emissions buses. This 2:1 split between cars and transit is a change from the typical American 4:1, but in Germany it’s 55:42 and that’s with right-wing ministers of transport.
  • Some of the spending on the car bucket is about electric vehicles, including $100 billion in consumer subsidies, but that’s still car spending. People who don’t drive don’t qualify for these subsidies. It’s an attempt to create political consensus by still spending on roads and not just public transit while saying that it’s green, but encouraging people to buy more cars is not particularly green, and there’s no alternative to sticks like fuel taxes in addition to carrots.
  • The $25 billion for zero-emissions buses is likely to go to battery-electric buses, which are still in growing pains and don’t function well in winter. In California, in fact, trolleybuses are funded from the fixed infrastructure bucket alongside light rail and subways and are ineligible for the bucket of funding for zero-emissions buses. It is unknown whether in-motion charging qualifies for this bucket; it should, as superior technology that functions well even in places with harsh winters.
  • The $85 billion for public transit splits as $55 billion for state of good repair (SOGR) and only $30 billion for expansion (including $5 billion for accessibility). This is a terrible idea: SOGR is carte blanche for agencies that aim to avoid public embarrassment rather than provide useful service to spend money without having to promise anything to show for it, and Amtrak in particular cycles between deferring maintenance and then crying poverty when money becomes available. Federal money should go to expansion alone; a state or local agency that doesn’t set aside money for maintenance now isn’t going to do so in the future, and periodic infusions of SOGR money create moral hazard by encouraging maintenance deferral in good times.
  • The Amtrak money is a total waste; in particular, Amtrak wants $39 billion for the Northeast Corridor while having very little to show for it, preferring SOGR, climate resilience, and agency turf battles over the Gateway project over noticeable improvements in trip times, reliability, or capacity.
  • The expansion money is not by itself bad, and in fact should grow by $55 billion at the expense of SOGR, but I worry about cost control. I’m just not sure how to express it in Washington policy language, as opposed to agency-level language regarding in-house design, more flexible procurement, civil service independence, adoption of foreign best practice and not just domestic practices, keeping station footprints small, using cut-and-cover more, and so on.

You should go watch the whole thing, which has some on-screen links to the breakdowns above, but it’s a 1:45 video.

The Need to Remove Bad Management

I’ve talked a lot recently about bad management as a root cause of poor infrastructure, especially on Twitter. The idea, channeled through Richard Mlynarik, is that the main barrier to good US infrastructure construction, or at least one of the main barriers, is personal incompetence on behalf of decisionmakers. Those decisionmakers can be elected officials, with levels of authority ranging from governors down to individual city council members; political appointees of said officials; quasi-elected power brokers who sit on boards and are seen as representative of some local interest group; public-sector planners; or consultants, usually ones who are viewed as an extension of the public sector and may be run by retired civil servants who get a private-sector salary and a public-sector pension. In this post I’d like to zoom in on the managers more than on the politicians, not because the politicians are not culpable, but because in some cases the managers are too. Moreover, I believe removal of managers with a track record of failure is a must for progress.

The issue of solipsism

Spending any time around people who manage poorly-run agencies is frustrating. I interview people who are involved in successful infrastructure projects, and then I interview ones who are involved in failed ones, and then people in the latter group are divided into two parts. Some speak of the failure interestingly; this can involve a blame game, typically against senior management or politics, but doesn’t have to, for example when Eric and I spoke to cost estimators about unit costs and labor-capital ratios. But some do not – and at least in my experience, the worst cases involve people who don’t acknowledge that something is wrong at all.

I connect this with solipsism, because this failure to acknowledge is paired with severe incuriosity about the rest of the world. A Boston-area official who I otherwise respect told me that it is not possible to electrify the commuter rail system cheaply, because it is 120 years old and requires other investments, as if the German, Austrian, etc. lines that we use as comparison cases aren’t equally old. The same person then said that it is not possible to do maintenance in 4-hour overnight windows, again something that happens all the time in Europe, and therefore there must be periodic weekend service changes.

A year and a half ago I covered a meeting that was videotaped, in which New Haven-area activists pressed $200,000/year managers at Metro-North and Connecticut Department of Transportation about their commuter rail investments. Those managers spoke with perfect confidence about things they had no clue about, saying it’s not possible that European railroads buy multiple-units for $2.5 million per car, which they do; one asserted the US was unique in having wheelchair accessibility laws (!), and had no idea that FRA reform as of a year before the meeting permitted lightly-modified European trains to run on US track.

The worst phrase I keep hearing: apples to apples. The idea is that projects can’t really be compared, because such comparisons are apples to oranges, not apples to apples; if some American project is more expensive, it must be that the comparison is improper and the European or Asian project undercounted something. The idea that, to the contrary, sometimes it’s the American project that is easier, seems beyond nearly everyone who I’ve talked to. For example, most recent and under-construction American subways are under wide, straight streets with plenty of space for the construction of cut-and-cover station boxes, and therefore they should be cheaper than subways built in the constrained center of Barcelona or Stockholm or Milan, not more expensive.

What people are used to

In Massachusetts, to the extent there is any curiosity about rest-of-world practice, it comes because TransitMatters keeps pushing the issue. Even then, there is reticence to electrify, which is why the state budget for regional rail upgrades in the next few years only includes money for completing the electrification of sidings and platform tracks on the already-electrified Providence Line and for short segments including the Fairmount Line, Stoughton Branch, and inner part of the Newburyport and Rockport Lines. In contrast, high platforms, which are an ongoing project in Boston, are easier to accept, and thus the budget includes more widespread money for it, even if it falls short of full high-level platforms at every station in the system.

In contrast, where high platform projects are not so common, railroaders find excuses to avoid them. New Jersey Transit seems uninterested in replacing all the low platforms on its system with high platforms, even though the budget for such an operation is a fraction of that of the Gateway tunnel, which the state committed $2.5 billion to in addition to New York money and requested federal funding. The railroad even went as far as buying new EMUs that are compatible not with the newest FRA regulations, which are similar to UIC ones used in Europe, but with the old ones; like Metro-North’s management, it’s likely NJ Transit’s had no idea that the regulations even changed.

The issue of what people are used to is critical. When you give someone authority over other people and pay them $200,000 a year, you’re signaling to them, “never change.” Such a position can reward ambition, but not the ambition of the curious grinder, but that of the manager who makes other people do their work. People in such a position who do not know what “electronics before concrete” means now never will learn, not will they even value the insights of people who have learned. The org chart is clear: the zoomer who’s read papers about Swiss railroad planning works for the boomer who hasn’t, and if the boomer is uncomfortable with change, the zoomer can either suck it up or learn to code and quit for the private sector.

You can remove obstructionist managers

From time to time, a powerful person who refuses to use their power except in the pettiest ways accidentally does something good. Usually this doesn’t repeat itself, despite the concrete evidence that it is possible to do things thought too politically difficult. For example, LIRR head Helena Williams channeled Long Island NIMBYism and opposed Metro-North’s Penn Station Access on agency turf grounds – it would intrude on what Long Islanders think is their space in the tunnels to Penn Station. But PSA was a priority for Governor Andrew Cuomo, so Cuomo fired Williams, and LIRR opposition vanished.

This same principle can be done at scale. Managers who refuse to learn from successful examples, which in capital construction regardless of mode and in operations of mainline rail are never American and rarely in English-speaking countries, can and should be replaced. Traditional railroaders who say things are impossible that happen all the time in countries they look down on can be fired; people from those same countries will move to New York for a New York salary.

This gets more important the more complex a project gets. It is possible, for example, to build high-speed rail between Boston and Washington for a cost in the teens of billions and not tens, let alone hundreds, but not a single person involved in any of the present effort can do that, because it’s a project with many moving parts and if you trust a railroad manager who says “you can’t have timed overtakes,” you’ll end up overbuilding unnecessary tunnels. In this case, managers with a track record of looking for excuses why things are impossible instead of learning from places that do those things are toxic to the project, and even kicking them up is toxic, because their subordinates will learn to act like that too. The squeaky wheel has to be removed and thrown into the garbage dumpster.

And thankfully, squeaky wheels that get thrown into the dumpster stop squeaking. All of this is possible, it just requires elected officials who have the ambition to take risks to effect tangible change rather than play petty office politics every day. Cuomo is the latter kind of politician, but he proved to everyone that a more competent leader could replace solipsists with curious learners and excusemongers with experts.

High Costs are not About Scarcity

I sometimes see a claim in comments here or on social media that the reason American costs are so high is that scarcity makes it hard to be efficient. This can be a statement about government practice: the US government supposedly doesn’t support transit enough. Sometimes it’s about priorities, as in the common refrain that the federal government should subsidize operations and not just capital construction. Sometimes it’s about ideology – the idea that there’s a right-wing attempt to defund transit so there’s siege mentality. I treat these three distinct claims as part of the same, because all of them really say the same thing: give American transit agencies more money without strings attached, and they’ll get better. All of these claims are incorrect, and in fact high costs cannot be solved by giving more money – more money to agencies that waste money now will be wasted in the future.

The easiest way to see that theories of political precarity or underresourcing are wrong is to try to see how agencies would react if they were beset mostly by scarcity as their defenders suggest. For example, the federal government subsidizes capital expansion and not operations, and political transit advocates in the United States have long called for operating funds. So, if transit agencies invested rationally based on this restrictions, what would they do? We can look at this, and see that this differs greatly from how they actually invest.

The political theory of right-wing underresourcing is similarly amenable to evaluation using the same method. Big cities are mostly reliant not on federal money but state and local money, so it’s useful to see how different cities react to different threat levels of budget cuts. It’s also useful to look historically at what happened in response to cuts, for example in the Reagan era, and spending increases, for example in the stimulus in the early Obama era and again now.

How to respond to scarcity

A public transit agency without regular funding would use the prospects of big projects to get other people’s money (OPM) to build longstanding priorities. This is not hypothetical: the OPM effect is real, and for example people have told Eric and me that Somerville used the original Green Line Extension to push for local amenities, including signature stations and a bike lane called the Community Path. In New York, the MTA has used projects that are sold to the public as accessibility benefits to remodel stations, putting what it cares about (cleaning up stations) on the budget of something it does not (accessibility).

The question is not whether this effect is real, but rather, whether agencies are behaving rationally, using OPM to build useful things that can be justified as related to the project that is being funded. And the answer to this question is negative.

For every big federally-funded project, one can look at plausible tie-ins that can be bundled into it that enhance service, which the Somerville Community Path would not. At least the ongoing examples we’ve been looking at are not so bundled. Consider the following misses:

Green Line Extension

GLX could include improvements to the Green Line, and to some extent does – it bundles a new railyard. However, there are plenty of operational benefits on the Green Line that are somewhere on the MBTA’s wishlist that are not part of the project. Most important is level boarding: all vehicles have a step up from the platform, because the doors open outward and would strike the platform if there were wheelchair-accessible boarding. The new vehicles are different and permit level boarding, but GLX is not bundling full level boarding at all preexisting stations.

East Side Access and Gateway

East Side Access and Gateway are two enormous commuter rail projects, and are the world’s two most expensive tunnels per kilometer. They are tellingly not bundled with any capital improvements that would boost reliability and throughput: completion of electrification on the LIRR and NJ Transit, high platforms on NJ Transit, grade separations of key junctions between suburban branches.

The issue of operating expenses

More broadly, American transit agencies do not try to optimize their rail capital spending around the fact that federal funding will subsidize capital expansion but not operations. Electrification is a good deal even for an agency that has to fund everything from one source, cutting lifecycle costs of rolling stock acquisition and maintenance in half; for an agency that gets its rolling stock and wire from OPM but has to fund maintenance by itself, it’s an amazing investment with no downside. And yet, American commuter rail agencies do not prioritize it. Nor do they prioritize high platforms – they invest in them but in bits and pieces. This is especially egregious at SEPTA, which is allowed by labor agreement to remove the conductors from its trains, but to do so needs to upgrade all platforms to level boarding, as the rolling stock has manually-operated trap doors at low-platform stations.

Agencies operating urban rail do not really invest based on operating cost minimization either. An agency that could get capital funding from OPM but not operating funding could transition to driverless trains; American agencies do not do so, even in states with weak unions and anti-union governments, like Georgia and Florida. New York specifically is beset by unusually high operating expenses, due to very high maintenance levels, two-person crews, and inefficient crew scheduling. If the MTA has ever tried to ask for capital funding to make crew scheduling more efficient, I have not seen it; the biggest change is operational, namely running more off-peak service to reduce shift splitting, but it’s conceivable that some railyards may need to be expanded to position crews better.

Finally, buses. American transit agencies mostly run buses – the vast majority of US public transport service is buses, even if ridership splits fairly evenly between buses and trains. The impact of federal aid for capital but not operations is noticeable in agency decisions to upgrade a bus route to rail perhaps prematurely in some medium-size cities. It’s also visible in bus replacement schedules: buses are replaced every 12 years because that’s what the Federal Transit Administration will fund, whereas in Canada, which has the same bus market and regulations but usually no federal funding for either capital or operations, buses are made to last slightly longer, around 15 years.

It’s hard to tell if American transit agencies are being perfectly rational with bus investment, because a large majority of bus operating expenses are the driver’s wage, which is generally near market rate. That said, the next largest category is maintenance, and there, it is possible to be efficient. Some agencies do it right, like the Chicago Transit Authority, which replaces 1/12 of its fleet every year to have long-term maintenance stability, with exactly 1/12 of the fleet up for mid-life refurbishment each year. Others do it wrong – the MTA buys buses in bunches, leading to higher operating expenses, even though it has a rolling capital plan and can self-fund this system in years when federal funds are not forthcoming.

Right-wing budget cuts

Roughly the entirety of the center-right policy sphere in the United States is hostile to public transportation. The most moderate and least partisan elements of it identify as libertarian, like Cato and Reason, but mainstream American libertarianism is funded by the Koch Brothers and tends toward climate change denial and opposition to public transportation even where its natural constituency of non-left-wing urbane voters is fairly liberal on this issue. The Manhattan Institute is the biggest exception that I’m aware of – it thinks the MTA needs to cut pension payments and weaken the unions but isn’t hostile to the existence of public transportation. In that environment, there is a siege mentality among transit agencies, which associate any criticism on efficiency grounds as part of a right-wing strategy to discredit the idea of government.

Or is there?

California does not have a Republican Party to speak of. The Democrats have legislative 2/3 majorities, and Senate elections, using a two-round system, have two Democrats facing each other in the runoff rather than a Democrat and a Republican. In San Francisco, conservatism is so fringe that the few conservatives who remain back the moderate faction of city politics, whose most notable members are gay rights activist and magnet for alt-right criticism Scott Wiener, (until his death) public housing tenant organizer Ed Lee, and (currently) Mayor London Breed, who is building homeless shelters in San Francisco over NIMBY objections. The biggest organized voices in the Bay Area criticizing the government on efficiency grounds and asserting that the private sector is better come from the tech industry, and usually the people from that industry who get involved with politics are pro-immigration climate change hawks. Nobody is besieging the government in the Bay Area. Nor is anybody besieging public transit in particular – it is popular enough to routinely win the required 2/3 majority for tax hikes in referendums.

In New York, this is almost as true. The Democrats have a legislative 2/3 majority as of the election that just concluded, there does not appear to be a serious Republican candidate for either mayor or governor right now, and the Manhattan Institute recognizes its position and, on local issues of governance, essentially plays the loyal opposition. The last Republican governor, George Pataki, backed East Side Access, trading it for Second Avenue Subway Phase 1, which State Assembly Speaker Sheldon Silver favored.

One might expect that the broad political consensus that more public transportation is good in New York and the Bay Area would enable long-term investment. But it hasn’t. The MTA has had five-year capital plans for decades, and has known it was going to expand with Second Avenue Subway since the 1990s. BART has regularly gotten money for expansion, and Caltrain has rebuilt nearly all of its platforms in the last generation without any attempt at level boarding.

How a competent agency responds to scarcity

American transit agencies’ extravagant capital spending is not in any way a rational response to any kind of precarity, economic or political. So what is? The answer is, the sum total of investment decisions made in most low-cost countries fits the bill well.

Swiss planning maxims come out of a political environment without a left-wing majority; plans for high-speed rail in the 1980s ran into opposition on cost grounds, and the Zurich U-Bahn plans had lost two separate referendums. The kind of planning Switzerland has engaged in in the last 30 years to become Europe’s strongest rail network came precisely because it had to be efficient to retain public trust to get funds. The Canton of Zurich has to that end had to come up with a formula to divide subsidies between different municipalities with different ideas of how much public services they want, and S-Bahn investment has always been about providing the best passenger experience at the lowest cost.

Elsewhere in Europe, one sees the same emphasis on efficiency in the Nordic countries. Scandinavia as a whole has a reputation for left-wing politics, because of its midcentury social democratic dominance and strong welfare states. But as a region it also practices hardline monetary austerity, to the point that even left-led governments in Sweden and Finland wanted to slow down EU stimulus plans during the early stages of the corona crisis. There is a great deal of public trust in the state there, but it is downstream of efficiency and not upstream of it – high-cost lines get savaged in the press, which engages in pan-Nordic comparisons to assure that people get value for money.

Nor is there unanimous consensus in favor of public transportation anywhere in Europe that I know of, save Paris and London. Center-right parties support cars and oppose rail in Germany and around it. Much of the Swedish right loathes Greta Thunberg, and the center-right diverted all proceeds from Stockholm’s congestion charge to highway construction. The British right has used the expression “war on the motorist” even more than the American right has the expression “war on cars.” The Swiss People’s Party is in government as part of the grand coalition, has been the largest party for more than 20 years, and consistently opposes rail and supports roads, which is why the Lötschberg Base Tunnel’s second track is only 1/3 complete.

Most European transit agencies have responded effectively to political precarity and budget crunches. They invest to minimize future operating expenses, and make long-term plans as far as political winds permit them to. American transit agencies don’t do any of this. They’re allergic to mainline rail electrification, sluggish about high platforms, indifferent to labor-saving signaling projects, hostile to accessibility upgrades unless sued, and uncreative about long-term operating expenses. They’re not precarious – they’re just incompetent.

More on Eno and Construction Costs

I spoke with Paul Lewis yesterday about the Eno study of construction costs that I criticized over a statistical error, and he pointed something out to me: the line that there is no US cost premium does not come from him or from elsewhere at Eno. Streetsblog’s coverage was just bad – it claims there is little to no US premium and quotes Lewis, but the quotations from Lewis do not actually say that, it’s Streetsblog’s own editorializing.

What’s more, Streetsblog took this editorializing into directions that were not mentioned by Eno or by me. On top of calling high US costs “a persistent myth” and “mostly bunk,” it turns it into a labor issue, saying that other countries get away with paying lower wages by linking to an article about construction costs in China, and talking about “hard-won wages of union construction workers.” Streetsblog even does so while linking to a 3-year-old article of mine in CityLab that states clearly that,

European subway construction uses union labor, just like American construction, but the work rules that have accumulated over the decades permit higher productivity and fewer workers doing each task.

The other source that transformed Eno’s analysis into “the US doesn’t really need to learn more from foreign countries” hurt more than Streetsblog. This was Beth Osborne, who spoke on a panel for Tri-State alongside BART’s president of the board of directors Lateefah Simon and consultant Peter Peyser. Osborne and Simon generally said the right things on the panel, while Peyser seemed pretty useless. But in between talking about good transit reforms, Osborne took my audience question about costs and said that per the Eno study there may not be a US cost premium – if I remember correctly her exact words were “there is no need to self-flagellate.”

Well, there is a need to self-flagellate. American mainline rail planners are barely aware of trends in other American cities; $200,000/year managers are unaware that FRA regulations permit buying standard European train, and people all over the industry say things are impossible that happen thousands of times daily in Central and Northern Europe. In urban transit the situation is better but not by much. Agencies make assumptions that are unwarranted about station footprint, fare collection, and similar engineering-level cost raisers and are usually unaware of economic research into best procurement practices.

And there’s the rub. Eno wrote a study – one that seems honest, even if it did make a statistical error of the kind that every data scientist abstractly knows they must avoid and yet every data scientist still makes. The clear text of the study – and I want to emphasize that Eno’s direct quotes to the media are in line with the clear text – is that the US has a small premium for light rail and a large one for subways. This turned into a screed about how the US cost premium is a myth and people just say this out of hate for organized labor. To the sort of American who has no interest in learning how the rest of the world works, everything boils down to internal American politics, it can’t possibly be that someone might get curious about why the Nordic countries do infrastructure so efficiently or how Italy brought down construction costs in the 1990s as part of the mani pulite process.

And the reason it hurts the most when it’s Beth Osborne is, she’s generally good on transit reform. I’ve never met her, and the panel alone was not enough to make an impression, but I know people who’ve met her who would not have a reason to give unwarranted praise, and they describe her as curious and sharp. American public transportation advocates who I trust were hopeful that she might even get appointed secretary of transportation in President Joe Biden’s administration, until Biden announced he picked Pete Buttigieg. And even she can’t get into a mindset in which the US really needs to learn to imitate places with lower costs and better outcomes.

In a sense, then, it’s not Eno’s fault, even unintentionally. In the last few months I’ve gotten to meet a number of American advocates who I otherwise think highly of who seem completely closed to any discussion of construction costs. They tell me that nobody cares, by which they mean they don’t care. They also insist, for political reasons, on including domestic and not foreign comparisons even when foreign ones work better. There’s so much demand out there in the American advocacy sphere for someone to come in and say that the US is doing fine, all it needs is more money with no oversight, that any criticism of high costs is equivalent to pro-car advocacy. Eno didn’t even say that, but Streetsblog could squint its eyes until it found something in there approximating the desired conclusion, and it appears that, regrettably, so did Osborne.

Friends Don’t Let Friends Build PPPs

Three examples of public-private partnerships screwing up urban transit are on my mind. The Canada Line in Vancouver is not new to me – I was poking around a few years ago. But the other two in this post are. The Maryland Purple Line in the suburbs of Washington was supposed to be the smooth PPP offering low-risk orbital light rail connecting suburbs to other suburbs without having to go through Downtown Washington, and now it is in shambles because the contractor walked away. Milan is not a new example either, but it is new to me, as we’ve discovered it during the construction costs project comparing high American (and British) costs to low Southern European ones; even there, the PPP bug bit, leading not so much to high capital costs but to high future operating charges. In no case is such a PPP program good government; the bulk of construction and risk must always lie in the public sector, and if your public sector is too incompetent to build things itself, as in the United States, then it’s equally incompetent at overseeing a PPP, as we’re seeing in Maryland. Don’t do this.

Washington: the Purple Line

Maryland planned on building two major urban rail projects last decade, stretching into the current one: the Red Line and the Purple Line. The Red Line was to be a conventional public project to build a subway in Baltimore, mostly serving low-income West Baltimore neighborhoods. The Purple Line, a light rail project in the DC suburbs acting as an orbital for Metro, was designed as a PPP. Governor Larry Hogan canceled the Red Line, most likely for racist reasons. The physical construction costs per rider were higher on the Red Line, but the overall disbursement including very high operating charges made the Purple Line more expensive, and yet Hogan kept the more expensive system and tossed the cheaper one.

One might expect that the PPP structure of the Maryland Purple Line would allow it to at least resist cost escalation – the risk was put entirely on the private contractor. And yet, the opposite happened. Costs turned out to be higher than expected, so the contractor just quit. Once the contract is signed, no matter what it says, the risk is in practice public, and this is no exception. The contractor stopped all work and left the region with a linear swath of ripped up roads; eventually the concessionaire and the state came into a settlement in which the state would pay $250 million extra and the concessionaire would hire a new contractor. The cost overrun was $800 million and the state said that the deal was going to save taxpayers $500 million, but what it signals is that even with very high public-sector payouts over decades that intend to put the entirety of the risk on the private concession, the public sector shares a high proportion of the risk, and the private bidders know this. This is a lose-lose situation and under no circumstances should countries put themselves in it.

Vancouver

Vancouver provides another good example of PPPs and operating costs. SkyTrain operates driverless equipment throughout the system, which means that operating costs should be low, and, moreover, should not depend on train size much. The Expo and Millennium Lines, built and operated publicly, cost C$3.20 to run per car-km, cheaper than on any system for which I have data (mostly very large ones plus Oslo) and less than half as expensive as the major European systems. But the Canada Line, operated by a concessionaire as part of a PPP scheme, costs $17.90/car-km, which is considerably worse than any system for which I have data except PATH. Even taking into account that the Canada Line cars are somewhat bigger, this is a difference of a factor of more than 3.

This is not a matter of economies of scale. The Canada Line’s trunk runs every 3.5 minutes most of the day, which is better than the vast majority of non-driverless systems I am familiar with off-peak, so the high costs there cannot be ascribed to poor utilization. In fact, before the Evergreen extension of the Millennium Line opened in 2016, the two systems’ total operating costs were almost identical but the operating costs per car-km were about 3.5 times worse on the Canada Line – economies of scale predict that unit costs should be degressive, not almost flat.

Milan

Marco Chitti is busy collecting information and conducting interviews regarding subway construction in Italy as part of our construction costs report. Italian costs are low, which makes it feasible to build metros even in very small cities like Brescia, where per Wikipedia the cost of the metro was around €65 million per km and €15,000 per weekday rider. However, the use of PPPs has not been good in the places where it happened, due to fiscal austerity following the Great Recession.

  • What is the impact on the cost of the PPP? The impact on costs of the potential transfer of risk from the Public to the Private is hard to calculate, but it appears to have an impact more on higher gross operational costs (the fee that the Municipality will pay in the 26 years of the concession for the operation and pay back a return to the private operators) than on the actual construction cost. But that is unclear yet. A bit of detail: the municipality will pay to the concessionaire a 1.09 €/passenger as a minimum granted fee up to 84 million passengers/year, 0.45€/passenger for each additional user up to a maximum determined as an increase of the IRR of 2 percentage points more than the “base IRR” of 5.93%. That means that this is basically the rate at which the private investors are de facto borrowing the money to the municipality, with most of the risk from low ridership transferred to the municipality. What makes calculations complicate is that the city is directly a majority stakeholder of the concessionaire Metro M4 S.p.A. and also, indirectly, as the owner of ATM, which will be the “private” operator. It’s very blurred compared to other PPP schemes where the concessionaire is 100% private (like M5).
  • PPP emerges as a stratagem to finance the project without increasing the municipal public debt. The PPP schemes is used to compensate for the lack of local public funds matching the national ones, limited due to the debt cap imposed by the so-called “internal Stability Compact”, an austerity measure implemented after the 2011 debt crisis, which strongly limits the capacity of local governments to borrow money for infrastructure projects. It was suspended in 2016.

Note that contra the plan to build the system without public debt, the PPP does in fact include borrowing. It’s opaque, but the payment per rider is a form of borrowing. Driverless metro operating costs are lower than €1.09 per unlinked trip. The Expo and Millennium Lines cost C$1.55, which in PPP terms is about €0.90, and feature much longer trips, as the Expo Line is 36 km long and one-tailed, which means many people ride end-to-end, whereas Milan M4 is to be 15 km and two-tailed, which means few trips are longer than half the total. In effect, this is high-interest borrowing, kept off the books in an atmosphere of strict budgetary austerity

Don’t do this

PPP-built lines do not have to have high construction costs. The Canada Line was cheap to build – it was Canada’s last reasonable-cost subway, and since then costs have exploded around the country. M4 in Milan is inexpensive as well, around €110 million per kilometer at current estimates even while going underneath older subways in city center. The current annual ridership projection of M4, 87 million, means that the current projected cost per weekday trip is €6,000, which represents an enormous social surplus in a region that builds up to around €30,000-40,000 before even pro-transit activists demand cancellation.

But in those cases, the structure of the contract keeps the operating costs artificially high, privatizing what should be public-sector profit from building a very inexpensive-to-operate system. This is especially bad if it is bundled into construction costs as an up-front payment, as in Maryland. In Maryland, the extra operating costs raised the construction cost well above the maximum level that is acceptable to the public transportation community over here, and in the United States too, such lines tend to be under threat of cancellation from fiscally conservative governors if they are not portrayed as pro-market PPPs. But those PPPs then have higher costs and, through poor risk allocation, lead to the worst of both worlds: the private concessionaire increases costs in order to deal with the risk of escalation, but if the risk exceeds prior estimates, then the state remains on the hook.

Don’t do this. One can to some extent understand why Italy was forced into this position at the bottom of the financial crisis. This isn’t such a situation – all countries in Europe are engaging in large discretionary deficit spending nowadays, as the market appears to believe that not only will corona pass, but also the new vaccines developed will help prevent the common cold and the flu in the near future, increasing future health outcomes and improving productivity through less lost sick time. In the United States, a $2 trillion stimulus is sold as just the first of two steps, because there’s fiscal room. You, even as a state or local government, can find money in the budget for more spending – raise taxes or sell bonds, and do so transparently. Don’t take opaque high-interest loans just to tell the public that you haven’t borrowed on the open market. It’s not worth it.

Streets Before Trust

There’s an emerging mentality among left-wing urban planners in the US called “trust before streets.” It’s a terrible idea that should disappear, a culmination of about 50 or 60 years of learned helplessness in the American public sector. Too many people who I otherwise respect adhere to this idea, so I’m dedicating a post to meme-weeding it. The correct way forward is to think in terms of state capacity first, and in particular about using the state to enact tangible change, which includes providing better public transportation and remaking streets to be safer to people who are not driving. Trust follows – in fact, among low-trust people, seeing the state provide meaningful tangible change is what can create trust, and not endless public meetings in which an untrusted state professes its commitment to social justice.

What is trust before streets?

The trust before streets mentality, as currently used, means that the state has to first of all establish buy-in before doing anything. Concretely, if the goal is to make the streets safer for pedestrians, the state must not just build a pop-up bike lane or a pedestrian plaza overnight, the way Janette Sadik-Khan did in New York, because that is insensitive to area residents. Instead, it must conduct extensive public outreach to meet people where they’re at, which involves selling the idea to intermediaries first.

This is always sold as a racial justice or social justice measure, and thus the idea of trust centers low-income areas and majority-minority neighborhoods (and in big American cities they’re usually the same – usually). Thus, the idea of trust before streets is that it is racist to just build a pedestrian plaza or bus lanes – it may not be an improvement, and if it is, it may induce gentrification. I’ve seen people in Boston say trust before streets to caution against the electrification of the Fairmount Line just because of one article asserting there are complaints about gentrification in Dorchester, the low-income diverse neighborhood the line passes through (in reality, the white population share of Dorchester is flat, which is not the case in genuinely gentrifying American neighborhoods like Bushwick).

I’ve equally seen people use the expression generational trauma. In this way, the trust before streets mentality is oppositional to investments in state capacity. The state in a white-majority nation is itself white-majority, and people who think in terms of neighborhood autonomy find it unsettling.

Low trust and tangible results

The reality of low-trust politics is about the opposite of what educated Americans think it is. It is incredibly concrete. Abstract ideas like social justice, rights, democracy, and free speech do not exist in that reality, to the point that authoritarian populists have exploited low-trust societies like those of Eastern Europe to produce democratic backsliding. A Swede or a German may care about the value of their institutions and punish parties that run against them, but an Israeli or a Hungarian or a Pole does not.

In Israel, this is visible in the corona crisis: Netanyahu’s popularity, as expressed in election polls, has recently risen and fallen based on how Israel compares with the Western world when it comes to handling corona. In March, there was a rally-around-the-flag effect in Israel as elsewhere, giving Netanyahu cover to refuse to concede even though parties that pledged to replace him as prime minister with Benny Gantz got 62 out of 120 seats, and giving Gantz cover not to respond to hardball with hardball and instead join as a minister in Netanyahu’s government. Then in April and May, as Israel suppressed the first wave and had far better outcomes than nearly every European country, let alone the US, Netanyahu’s popularity surged while that of Gantz and the opposition cratered. The means did not matter – the entire package including voluntary quarantine hotels, Shin Bet surveillance for contact tracing, and a tight lockdown that Netanyahu, President Rivlin, and several ministers violated nonchalantly, was seen to produce results.

In the summer, this went in reverse. The second wave hit Israel earlier than elsewhere, and by late summer, its infection rate per capita was in the global top ten, and Israel had the largest population among those top ten countries. In late September it reached around 6,000 cases a day, around 650 per million people. The popularity of Netanyahu’s coalition was accordingly shot; Gantz himself is being nearly wiped out in the polls, but the opposition was holding steady, and Yamina, a party to the right of Likud led by Naftali Bennett that is not currently in the coalition and is perceived as more competent, Bennett himself having done a lot to moderate the party’s line, surged from its tradition 5-6 seats to 16.

Today the situation is unclear – Israelis have seen the state fight the second wave but it was not nearly as successful as in the spring, and right now there is a lot of chaos with vaccination. On the other hand, Israel is also the world’s vaccination capital, and eventually people will notice that by March Israel is (most likely) fully vaccinated while Germany is less than 10% vaccinated. Low-trust people notice results. If they’re disaffected with Netanyahu’s conduct, which most people are, they can then vote for a right-wing-light satellite party like New Hope, just as many voted Kulanu in 2015, which advertised itself as center, became kingmaker after the results were announced, and immediately joined under Netanyahu without trying to seriously negotiate.

Streets lead to trust

The story of corona in Israel does not exist in isolation. Low trust in many cases exists because people perceive the state to be hostile to their interests, which happens when it does not provide tangible goods. Many years ago, talking about his own history immigrating from the Soviet Union in the 1970s, Shalom Boguslavsky credited the welfare state for his integration, saying that if he’d immigrated in the 1990s he’d probably have ended up in a housing project in Ashdod and voted for Avigdor Lieberman, who at the time was running on Russian resentment more than anything.

In Northern Europe, perhaps trust is high precisely because the state provides things. My total mistrust of the German state in general and Berlin in particular is tempered by the fact that, at queer meetups, people remind me that Berlin’s center-left coalition has passed universal daycare, on a sliding scale ranging from 0 for poor parents to about €100/month for wealthy ones. This more than anything reminds me and others that the state is good for things other than dithering on corona and negatively stereotyping immigrant neighborhoods.

Such provisions of tangible goods cannot happen in a trust before streets environment. This works when the state takes action, and endless public meetings in which every objection must be taken seriously are the death of the state. It says a lot that in contrast with Northern Europe, in the United States even in wealthy left-wing cities it is unthinkable that the municipality can just raise taxes to pay teachers and social workers better. Low trust is downstream of low state capacity. Build the streets and trust will follow.

Costs Matter: Some Examples

A bunch of Americans who should know better tell me that nobody really cares about construction costs – what matters is getting projects built. This post is dedicated to them; if you already believe that efficiency and social return on investment matter then you may find these examples interesting but you probably are not looking for the main argument.

Exhibit 1: North America

Vancouver

I wrote a post focusing on some North American West Coast examples 5 years ago, but costs have since run over and this matters from the point of view of building more in the future. In the 2000s and 10s, Vancouver had the lowest construction costs in North America. The cost estimate for the Broadway subway in the 2010s was C$250 million per kilometer, which is below world median; subsequently, after I wrote the original post, an overrun by a factor of about two was announced, in line with real increases in costs throughout Canada in the same period.

Metro Vancouver has always had to contend with small, finite amounts of money, especially with obligatory political waste. The Broadway subway serves the two largest non-CBD job centers in the region, the City Hall/Central Broadway area and the UBC, but in regional politics it is viewed as a Vancouver project that must be balanced with a suburban project, namely the lower-performing Surrey light rail. Thus, the amount of money that was ever made available was about in line with the original budget, which is currently only enough to build half the line. Owing to the geography of the West Side, half a line is a lot less than half as good as the full line, so Vancouver’s inability to control costs has led to worse public transportation investment.

Toronto

Like Vancouver, Toronto has gone from having pretty good cost control 20 years ago to having terrible cost control today. Toronto’s situation is in fact worse – its urban rail program today is a contender for the second most expensive per kilometer in the world, next to New York. The question of whether it beats Singapore, Hong Kong, London, Melbourne, Manila, Qatar, and Los Angeles depends on project details, essentially on scoring which of these is geologically and geographically the hardest to build in assuming competent leadership, which is in short supply in all of these cities. I am even tempted to specifically blame the most recent political interference for the rising costs, just as the adoption of design-build in the 2000s as an in-vogue reform must be blamed for the beginning of the cost blowouts.

The result is that Toronto is building less stuff. It’s been planning a U-shaped Downtown Relief Line for decades, since only the Yonge-University-Spadina (“YUS”) line serves downtown proper and is therefore overcrowded. However, it’s not really able to afford the full line, and hence it keeps downgrading it with various iterations, right now to an inverted L for the Ontario Line project.

Los Angeles

Los Angeles’s costs, uniquely in the United States, seemed reasonable 15 years ago, and no longer are. This, as in Canada, can be seen in building less stuff. High-ranking officials at Los Angeles Metro explained to me and Eric that the money for capital expansion is bound by formulas decided by referendum; there is a schedule for how to spend the money as far as 2060, which means that anything that is not in the current plan is not planned to be built in the next 40 years. Shifting priorities is not really possible, not with how Metro has to buy off every regional interest group to ensure the tax increases win referendums by the required 2/3 supermajority. And even then, the taxes imposed are rising to become a noticeable fraction of consumer spending – even if California went to majority vote, its tax capacity would remain very finite.

New York

The history of Second Avenue Subway screams “we would have built more had costs been lower.” People with deeper historic grounding than I do have written at length about the problems of the Independent Subway System (“IND”) built in the 1920s and 30s; in short, construction costs were in today’s terms around $140 million per km, which at the time was a lot (London and Paris were building subways for $30-35 million/km), and this doomed the Second System. But the same impact of high costs, scaled to the modern economy, is seen for the current SAS project.

The history of SAS is that it was planned as a single system from 125th Street to Hanover Square. The politician most responsible for funding it, Sheldon Silver, represented the Lower East Side. But spending capacity was limited, and in particular Silver had to trade that horse for East Side Access serving Long Island, which was Governor George Pataki’s base. The package was such that SAS could only get a few billion dollars, whereas at the time the cost estimate for the entire 13-km line was $17 billion. That’s why SAS was chopped into four phases, starting on the Upper East Side. Silver himself signed off on this in the early 2000s even though his district would only be served in phase four: he and the MTA assumed that there would be further statewide infrastructure packages and the entire line would be complete by 2020.

Exhibit 2: Israel

Israel is discussing extending the Tel Aviv Metro. It sounds weird to speak of extensions when the first line is yet to open, but that line, the Red Line, is under construction and close enough to the end that people are believing it will happen; Israelis’ faith that there would ever be a subway in Tel Aviv was until recently comparable to New Yorkers’ faith until the early 2010s that Second Avenue Subway would ever open. The Red Line is a subway-surface Stadtbahn, as is the under-construction Green Line and the planned Purple Line. But metropolitan Tel Aviv keeps growing and is at this point an economic conurbation of about 3-4 million people, with a contiguous urban core of 1.5 million. It needs more. Hence, people keep discussing additions. The Ministry of Finance, having soured on the Stadtbahn idea, bypassed the Ministry of Transport and introduced a complementary three-line underground driverless metro system.

The cost of the system is estimated at 130-150 billion shekels, which is around $39 billion. This is not a sum Israelis are used to seeing for a government project. It’s about two years’ worth of IDF spending, and Israeli is a militarized society. It’s about 10% of annual GDP, which in American or EU-wide terms would be $2 trillion. The state has many competing budget priorities, and there are so many other valid claims on the state coffers. It is therefore likely that the metro project’s construction will stretch over many years, not out of planning latency but out of real resource limits. People in Israel understand that Gush Dan has severe traffic congestion and needs better transportation – this is not a point of political controversy in a society that has many. But this means the public is willing to spend this amount of money over 15-20 years at the shortest. Were costs to double, in line with the costs in most of th Anglosphere, it would take twice as long; were they to fall in half, in line with Mediterranean Europe, it would take half as long.

Exhibit 3: Spain

As the country with the world’s lowest construction costs for infrastructure, Spain builds a lot of it, everywhere. This includes places where nobody else would think to build a metro tunnel or an airport or a high-speed rail line; Spain has the world’s second longest high-speed rail network, behind China. Many of these lines probably don’t even make sense within a Spanish context – RENFE at best operationally breaks even, and the airports were often white elephants built at the peak of the Spanish bubble before the 2008 financial crisis.

One can see this in urban rail length just as in high-speed rail. Madrid Metro is 293 km long, the third longest in Europe behind London and Moscow. This is the result of aggressive expansion in the 1990s and 2000s; new readers are invited to read Manuel Melis Maynar’s writeup of how when he was Madrid Metro’s CEO he built tunnels so cheaply. Expansion slowed down dramatically after the financial crisis, but is starting up again; the Spanish economy is not good, but when one can build subways for €100 million per kilometer, one can build subways that other cities would not. In addition to regular metros, Madrid also has regional rail tunnels – two of them in operation, going north-south, with a third under construction going east-west and a separate mainline rail tunnel for cross-city high-speed rail.

Exhibit 4: Japan

Japan practices economic austerity. It wants to privatize Tokyo Metro, and to get the best price, it needs to keep debt service low. When the Fukutoshin Line opened in 2008, Tokyo Metro said it would be the system’s last line, to limit depreciation and interest costs. The line amounted to around $280 million/km in today’s money, but Tokyo Metro warned that the next line would have to cost $500 million/km, which was too high. The rule in Japan has recently been that the state will fund a subway if it is profitable enough to pay back construction costs within 30 years.

Now, as a matter of politics, on can and should point out that a 30-year payback, or 3.3% annual interest, is ridiculously high. For one, Japan’s natural interest rate is far lower, and corporations borrow at a fraction of that interest; JR Central is expecting to be paying down Chuo Shinkansen debt until the 2090s, for a project that is slated to open in full in the 2040s. However, if the state changes its rule to something else, say 1% interest, all that will change is the frontier of what it will fund; lines will continue to be built up to a budgetary limit, so that the lower the construction costs, the more stuff can be built.

Conclusion: the frontier of construction

In a functioning state, infrastructure is built as it becomes cost-effective based on economic growth, demographic projections, public need, and advances in technology. There can be political or cultural influences on the decisionmaking process, but they don’t lead to huge swings. What this means is that as time goes by, more infrastructure becomes viable – and infrastructure is generally built shortly after it becomes economically beneficial, so that it looks right on the edge of viability.

This is why megaprojects are so controversial. Taiwan High-Speed Rail and Korea Train Express are both very strong systems nowadays. Total KTX ridership stood at 89 million in 2019 and was rising on the eve of corona, thanks to Korea’s ability to build more and more lines, for example the $69 million/km, 82% underground SRT reverse-branch. THSR, which has financial data on Wikipedia, has 67 million annual riders and is financially profitable, returning about 4% on capital after depreciation, before interest. But when KTX and THSR opened, they both came far below ridership projections, which were made in the 1990s when they had much faster economic convergence before the 1997 crisis. They were viewed as white elephants, and THSR could not pay interest and had to refinance at a lower rate. Taiwan and South Korea could have waited 15 years and only opened HSR now that they have almost fully converged to first-world Western incomes. But why would they? In the 2000s, HSR in both countries was a positive value proposition; why skip on 15 years of good infrastructure just because it was controversially good then and only uncontroversially good now?

In a functioning state, there is always a frontier of technology. The more cost-effective construction is, the further away the frontier is and the more infrastructure can be built. It’s likely that a Japan that can build subways for Korean costs is a Japan that keeps expanding the Tokyo rail network, because Japan is not incompetent, just austerian and somewhat high-cost. The way one gets more stuff built is by ensuring costs look like those of Spain and Korea and not like those of Japan and Israel, let alone those of the United States and Canada.

Governance in Rich Liberal American Cities

Matt Yglesias has a blog post called Make Blue America Great Again, about governance in rich liberal states like New York and California. He talks about various good government issues, and he pays a lot of attention specifically to TransitMatters and our Regional Rail project for the Boston region, so I feel obliged to comment more on this.

The basic point Matt makes is that the quality of governance in rich liberal American states is poor, and as a result, people do not associate them with wealth very consistently. He brings up examples about the quality of schools and health care, but his main focus is land use and transportation: the transportation infrastructure built in New York, California, etc. is expensive and not of high quality, and tight zoning regulations choke housing production.

That said, I think there’s a really important screwup in those states and cities that Matt misses: the problem isn’t (just) high costs, but mostly total unwillingness to do anything. Do-nothing leaders like Charlie Baker, Andrew Cuomo, Gavin Newsom, and Bill de Blasio aren’t particularly interested in optimizing for costs, even the first two, who project an image of moderation and reason.

The Regional Rail proposal’s political obstacles are not exactly a matter of cost. It’s not that this should cost $4 billion (without the North-South Rail Link) but it was estimated at $15 billion and therefore there’s no will to do it. No: the Baker administration seems completely uninterested in governing, and has published two fraudulent studies making up high costs for both the North-South Rail Link and rail electrification, as well as a more recent piece of fraud making up high costs for Boston-Springfield intercity rail. The no comes first, and the high costs come second.

This history – no first, then high costs – is also the case for New York’s subway accessibility program. The MTA does not want it; the political system does not care either. Therefore, when disability rights advocates do force some investment, the MTA makes up high costs, often through bundling unnecessary investments that it does want, like rebuilding station interiors, and charging these projects to the accessibility account. A judge can force an agency to build something, but not to build it competently and without siphoning money.

I want to emphasize that this does not cover all cases of high American costs. Second Avenue Subway, for example, is not the result of such a sandbag: everyone wants it built, but the people in charge in New York are not competent enough to build it affordably. This does accord with Matt’s explanation of poor Northeastern and West Coast governance. But not everything does, and it’s important to recognize what’s going on.

The other important point is that these do-nothing leaders are popular. Baker is near-tied for the most popular governor in the United States with another do-nothing Northeastern moderate Republican, Maryland’s Larry Hogan. Andrew Cuomo’s approval rate has soared since he got 43,000 people in the state killed in the corona crisis.

People who live in New York may joke that the city has trash on the street and cockroaches in apartments, but they’re pretty desensitized to it. They politically identify as Democrats, and once corona happened they blamed Trump, as did many people elsewhere in the United States, and forgave Democrats who mismanaged the crisis like Cuomo. Baker and Hogan are of course Republicans, but they perform a not-like-the-other-Republicans persona, complete with open opposition to Trump, and therefore Massachusetts Democrats who have a strong partisan identity in federal elections are still okay with do-nothing Republicans. People who really can’t stand the low quality of public services leave.

Construction cost reform is pretty drastic policy, requiring the destruction of pretty powerful political forces – the system of political appointments, state legislators and mayors with a local rather than national-partisan identity, NIMBYs, politically-connected managers, the building trades, various equity consultants (such as many Los Angeles-area urbanists). They are not legally strong, and a governor with a modicum of courage could disempower them, but to be a moderate in the United States means to be extremely timid and technologically conservative. Matt himself understands that last point, and has pointed this out in connection with moderates who hold the balance of power in the Senate, like Joe Manchin and Susan Collins, but use it only to slightly shrink proposed changes and never to push a positive agenda of their own.

So yes, this is a construction cost crisis, but it’s not purely that. A lot of it is a broader crisis of political cowardice, in which non-leftist forces think government doesn’t work and then get elected and prove it (and leftists think real change comes from bottom-up action and the state is purely for sinecures, courtesy of the New Left). I warned in the spring that corona is not WW2 – the crisis is big enough to get people to close ranks behind leaders, but not to get them to change anything important. These states are rich; comfortable people are not going to agitate for the destruction of just about every local political power structure just to get better infrastructure.

Surplus Extraction

Ever since reading Brooks-Liscow on the growth in American road construction costs since the 1960s, I’ve been interested in the surplus extraction theory of costs. The authors call their main theory citizen voice, in which local groups can use litigation to extract the social surplus generated by infrastructure construction. I’d like to go more deeply into what this theory is and what it implies.

What is surplus?

Normally, a competitive market has no surplus. The owner of a restaurant, the developer of a building in an unconstrained area like suburban Texas, the seller of cloth masks on Etsy, the freelance web developer – none of them is making a killing. People enter the market until profits are driven down to levels low enough to essentially be the owner-manager’s wage. Companies can only make a large profit if they operate at enormous scale, which takes a long time to develop – the profit margins on a single Walmart or Carrefour or Lidl are small, but the profit margins on 10,000 stores add up to a couple billion dollars a year.

Infrastructure is not a competitive market, for a number of different reasons:

  • The construction of transportation infrastructure has strong positive externalities, through enabling agglomeration. In a country with cars, the construction of public transportation also helps mitigate the negative externalities of cars.
  • Infrastructure is not meaningfully competitive. The largest city in the world, Tokyo, has around two competing rail operators per suburban region. In Tokyo, it’s a natural duopoly; in just about every smaller city, it’s a natural monopoly.
  • The barriers to entry are so steep that some kind of price regulation is obligatory. The result is extensive consumer surplus for riders who are not poor.
  • Government involvement means that regulations that make it easier or harder to build infrastructure have large impact, which can create or destroy social surplus.

The upshot is that at non-New York costs, infrastructure construction in New York generates enormous social surplus. I could break this down by component, but for brevity I won’t, and just cite what looks like the upper limit of what the publics in the United States and Europe are willing to pay for urban and regional rail: around $50,000 per projected weekday trip. Lines teetering on the edge of cancellation, like M18 in Paris, Second Avenue Subway Phase 2 in New York, and Crossrail 2 in London, all cluster around this figure.

If we take $50,000/rider as the lowest possible benefit-cost ratio that gets a project built, around 1.2-1.3 in countries that conduct such analyses, then Second Avenue Subway Phase 2, currently projected around $60,000/rider, is 1. But at the median global cost, which exists in France and Germany, it would cost $700 million, or $7,000/rider, for a benefit-cost ratio of 8.5. At costs that exist in Southern Europe, Scandinavia, Switzerland, and Korea, make it $400 million, or $4,000/rider, for a benefit-cost ratio of 15. That’s a big net profit for New York City Transit (or, it would be if its operating costs were not abnormally high too), and a huge net social surplus for New York. Every group that wants a piece of that surplus then has an incentive to make noise and raise costs.

How can surplus be extracted?

People who wish to seize public resources have a variety of methods with which to do so. Some are net transfers of surplus from society to one special interest, but most are net destruction of value in the sense that the loss of social surplus exceeds the gain to the special interest, usually by a large margin.

The technique for surplus extraction is usually the threat of a lawsuit, but in some cases it can be direct political lobbying. The actual lawsuit is almost never important – in the US and Germany, at least, the state usually wins these suits, and the impact of litigation is to delay and to deny political capital.

However, surplus can also vanish into the ether through poor planning. Consultants who are not under pressure to save money may well propose oversize infrastructure just because that’s what they are used to, or to avoid sharing right-of-way across railroads; this has led to unusual cost premiums in the United States for everything that touches mainline rail, whereas the subway and light rail premiums are, outside New York, bad but less onerous.

The demands made by special interests that extract surplus vary. They include any of the following:

  • Gratuitous tunneling instead of above-ground construction. This is usually a demand made of high-speed rail, but there are some gratuitous tunnels in suburban rail as well, for example Crossrail 2. The surplus here is that NIMBYs do not like to see trains from their houses; the emotional value of their views is naturally a fraction of that of the cost of tunneling.
  • Compromise alignments that either increase costs or reduce benefits. This is usually about avoiding specific places; Brooks-Liscow give an example of a Detroit highway swerving around a Jewish community center. But sometimes it can be the opposite – in fact, early US freeway builders expected that communities would lobby for highways near them, not far from them. Los Angeles County’s advocacy for a high-speed rail detour through Palmdale is one such example.
  • Extortion of community benefits to activists, for example demands for larger stations to act as neighborhood centers. A large degree of the cost explosion of the Green Line Extension in Boston came from the policy of accommodating local demands, leading to oversize stations. But such overbuilding can also occur absent extortion – the surplus can vanish into poor practices, representing incompetence rather than malice, as in the oversize viaducts of California High-Speed Rail.
  • Contracts to favored companies. This led to cost explosion in Italy in the 1970s and 80s, especially in Rome but also Milan; unlike the other items on this list, this is generally illegal, and costs in Italy came down after crackdowns on corruption in the 1990s. However, legal versions exist – sometimes the government is just used to doing business with a company with a poor track record, for example the “the devil we know” attitude in California toward Tutor Perini. The surplus in the latter case vanishes not quite into someone’s pockets but more into the state’s unwillingness to oversee contractors more tightly.
  • Labor demands. If the demands are purely about wages then the surplus is distributed without being destroyed. However, these demands are in all cases I know of also about other things. For example, the sandhogs in New York opposed the use of more efficient tunnel boring instead of more dangerous but more labor-intensive dynamite. Protectionism also leads to inferior equipment in addition to higher costs.

Who can extract surplus?

Surplus extraction works through informal mechanisms. The purpose of the nuisance lawsuit is not to win, but to extract a settlement. The threat is delay and loss of political favor for the project rather than outright cancellation. The NIMBY lawsuit in Silicon Valley against California High-Speed Rail was right on the technical merit – the Pacheco Pass route, which would pass through the richest suburbs was technically inferior to the Altamont Pass route, which wouldn’t – still lost; Pacheco was favored due to another kind of surplus extraction, namely Rod Diridon’s desire for shorter Los Angeles-San Jose trip times.

Because surplus extraction works through politics and not clear rules, it benefits those with the most political power. In this way, the rise in NIMBYism in the 1960s and 70s, for example the freeway revolts, contrasts with the contemporary free speech movement, which used formal lawsuits with the intent of winning to expand the boundaries of free speech in America.

The free speech movement celebrated protections for communist Berkeley professors and for pornographers; people with normative professions and normative political views were already protected. In contrast, NIMBYism was most powerful in already rich areas, like Jane Jacobs’ Greenwich Village, or Boston’s South End. Baltimore’s racially integrated freeway revolt was exceptional. New York built freeways through working-class neighborhoods easily, and only encountered political obstacles in the Village, which was by the 1950s gentrified (Jacobs was a journalist with some college education, married to an architect, and her father was a doctor), a new development that hadn’t happened in urban history before and thus the city elites had missed it. Moreover, Jacobs’ remedy of creating and empowering community boards has ensured that only powerful people and powerful communities could change city decisions.

Even more recent attempts to create equity have failed. Slowing down the state and empowering community is always bad for equity, because the community is where inegalitarian traditions live. Black leaders now can derail transit plans just as white leaders can; non-leaders have no voice in neighborhood politics, and it’s those non-leaders who work outside the neighborhood who rely on public transit.

Surplus extraction remains the domain of people with political and cultural cachet. One can fight redevelopment in San Francisco on behalf of a mural to Cesar Chavez; fighting it on behalf of pornographers is harder. Similarly, the unions that have been the best at extracting surplus are traditional ones, doing jobs that existed 100 years ago, at productivity levels that remain stuck in that era, mainly the trades.

Conclusion: saying no

Surplus extraction theory does not say it is impossible to reduce costs. Italy’s sharp fall in costs in the 1990s and Turkey’s gentle fall in the 2010s both suggest that cost reduction is possible. What it does say is that the role of the state is to safeguard surplus and keep it socialized, against demands from many special interests, which should be disempowered through legal changes making lawsuits harder and reducing the ability of consultants and unions to drive up costs.

In that sense, the role of the planner is to say no – and moreover, to say no to charismatic groups representing much-romanticized people. No, dear mother with children, we will not build you a noise wall just because you think 140 km/h electric trains will reduce your quality of life. No, dear tradesman much-profiled as a non-college white voter, we will not hire you for $110/hour when there exist people who will do your job better than you can at $35/hour. No, dear third-generation business owner, we will not listen to what you think about traffic as we replace parking spots with bus lanes. No, dear anti-gentrification activist, we will not pay you as an equity consultant, we will just build the subway in the city. No, dear white flight homeowner, we will not build you a tunnel just to avoid taking a few houses through eminent domain. No, dear deindustrialized city leader, we will not require companies to set up factories in your city at high cost when we can get cheaper imports. It’s never going to be no, dear criminal, or no, dear Nazi, because criminals and Nazis are not used to making such requests and having people listen.

It’s optimistic in a sense, because much cost control comes just from knowing that it’s possible and having the nerve to say no to people who are used to hearing yes. The engineering factors that lead to low costs are important, but first of all, it’s necessary to believe that they are feasible, over local objections.