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.

Metcalfe’s Law for High-Speed Rail, Redux

Americans are in big infrastructure spending mood, and my post from February using Metcalfe’s law to argue in favor of expansive high-speed rail in the eastern half of the United States has been attracting renewed attention. That post looked at how Metcalfe’s law that the value of a network rises in proportion to the square of the number of nodes implied that once a strong HSR corridor existed, for example the Northeast Corridor, extensions would be strong as well even if they connected much smaller cities. People have been asking me to extend that analysis to more lines that do not touch the Northeast Corridor, so here goes.

As a reminder, I’m using a simple gravity model, of the following level of sophistication:

He doesn’t put his axe down when standing on a crowded train, either. Credit: Anaterate.

The model is that the annual ridership in millions between two metropolitan areas A and B, with populations in the millions, is,

75,000\cdot\mbox{Pop}_{A}^{0.8}\cdot\mbox{Pop}_{B}^{0.8}/\max\{500 \mbox{ km}, d\}^{2}.

The theoretical reason for the 0.8 exponents is diseconomies of scale: the average person in Tokyo is farther from Tokyo Station than the average person in a small city is from their respective intercity rail station. Empirically, the best fit exponent for observed data in Japan and Europe is 0.8 – see sources in my previous post and in this post (sourced to since-rotted links) for France. The 500 km minimum is an artifact of the impact of station access time and the option of driving instead of taking the train.

Fares are set at typical Continental European levels rather than Japanese ones. As in the previous post, this means $0.135 per passenger-km, which breaks down as $0.07/p-km in operating expenses including rolling stock but excluding infrastructure and $0.065/p-km in profit, up to a total profit of $50/passenger. Beyond $50 in profit, which normally occurs at 770 km, fares only rise with operating expenses, to be more competitive with airlines. The goal is to find lines that have annual profits of more than 2-3% of construction costs.

A note of caution on the model

There are arguments to be made to refine the gravity model above in either direction. Ridership estimates in Britain are well above what the model predicts. High Speed 2 projects 3 trains per hour between London and Birmingham, running nonstop between the two cities so that no other city pairs can be added. The model gives an annual ridership equal to,

75,000\cdot 14^{0.8}\cdot 3^{0.8}/500^{2} = 5.97,

which fills around 1 train per hour in each direction to 50% of seated capacity. It’s possible the model does give higher ridership figures for very close-by cities – London and Birmingham are only 180 km apart – or it’s possible some unknown factor exists. Or HS2’s traffic estimates could be completely off.

In the case of the US, it’s likely any HSR will run faster than legacy 1960s Shinkansen. However, there’s a serious malus coming from higher car ownership, lower car traffic levels, and much weaker city centers. This is unlikely to be a problem for traffic to New York, but the last post dealt with that, whereas today we’re looking mostly at lines that aren’t about New York. Even Chicago is extremely auto-oriented by the standards of London or Paris, let alone Tokyo.

Metcalfe’s law for HSR in the Midwest: the initial line

The Midwest benefits from two things: it is flat, which reduces construction costs to $20-25 million per km if European norms are followed, and it has near-megacity Chicago in the middle. Unfortunately, Chicago is big but not big enough, and while the secondary cities are pretty big, there aren’t additional medium-size cities nearby the way Lyon has Saint-Etienne, Marseille has Toulon, etc. HSR can succeed, but the return on investment is for the most part marginal. The one exception is lines that can leverage the Northeastern network, including eventually not just the Northeast Corridor but also tie-ins to Pittsburgh and Cleveland, both of which are at reasonable HSR distance from New York.

By itself, the core Midwestern network would connect Chicago (10 million people) with Toledo (0.8, a distance of 370 km) and thence split toward Detroit (5 million, 100 km from Toledo) and Cleveland (3 million, 180 km). This leads to the following O&D ridership matrix, in millions:

City W\City EToledoDetroitCleveland
Chicago1.586.863.77
Toledo—0.910.6
Detroit——2.62

And in annual operating profits, in millions of dollars:

City W\City EToledoDetroitCleveland
Chicago38.08209.56134.68
Toledo—5.917.07
Detroit——47.65

This is not a lot of ROI. It’s $443 million a year, for a 650 km system, which should cost maybe $15 billion. It’s 3% by itself, which isn’t horrible, but compares poorly with Northeastern lines even though it connects the Midwest’s numbers 1, 2, and 4 metro regions.

In contrast, suppose a Northeastern system preexists, or perhaps is built at the same time, including a Pittsburgh-Cleveland connection. What then? Well, the question is really what the ROI is on connections from west of Cleveland to east of Cleveland. There are four metro areas east of Cleveland on the way to New York: Pittsburgh (2.5 million, 200 km from Cleveland), Harrisburg (0.7, 280 km from Pittsburgh), Philadelphia (7 million, 170 km from Harrisburg), New York (22 million, 140 km from Philadelphia). Washington has 10 million people and is 220 km from Philadelphia, but because a Washington-Philadelphia-Harrisburg route is circuitous, trains can only charge for 220 km, which is $29.70, and then earn the usual rate of $0.135/km farther west up to a maximum of $50 in profit, which is reached 730 km west of Harrisburg, or somewhat west of Toledo. With this in mind, we use the same pair of tables as above for the new city pairs, first ridership and then operating income:

City W\City EPittsburghHarrisburgPhiladelphiaNew YorkWashington
Chicago1.750.341.563.121.48
Toledo0.520.110.430.790.36
Detroit2.260.351.492.811.3
City W\City EPittsburghHarrisburgPhiladelphiaNew YorkWashington
Chicago85.3616.7777.94156.2374.03
Toledo12.94.6421.639.5317.95
Detroit70.617.4774.53140.7364.84

The total operating income is $875 million a year, which combines with our internal $443 million to produce an 8.8% ROI. This relies on estimating HSR ridership at hefty distances – New York-Chicago is 1,340 km and around 5 hours, New York-Detroit is 1,070 km and around 4 hours. But we do have ridership estimates for city pairs of that magnitude in both Europe and Japan and they’re fine, except for airline-dominated Tokyo-Fukuoka. If anything, this is more robust than making assumptions on how many people are willing to travel by train between two cities without public transportation like Cleveland and Detroit.

Metcalfe’s law for the Midwest: further lines

Past plans for a Chicago-centered Midwestern HSR network called for four spokes: east toward Cleveland and Detroit, northwest toward Milwaukee and Minneapolis, southeast toward Indianapolis and Cincinnati, and southwest toward St. Louis and perhaps Kansas City. These spokes do pan out financially, but the ROI is not great. Even a line that doesn’t touch Chicago can work, namely HSR between Cleveland, Columbus, and Cincinnati – those three cities are too small and weak-centered to produce internal ridership, but New York-Columbus is in similar shape to New York-Detroit.

Milwaukee (2 million, 140 km from Chicago)

Milwaukee’s metro area touches Chicago’s. HSR between the two cities alone is not worth it, since at this distance, top speed isn’t as relevant as station access time. However, the addition of other cities makes this worthwhile. Since Milwaukee is just on city, we put ridership and operating income in the same table:

CityRidershipOperating income
Chicago3.329.99
Toledo0.4213.92
Detroit1.2750.42
Cleveland0.6629.62
Pittsburgh0.3417.16
Harrisburg0.073.59
Philadelphia0.3417.25
New York0.7135.34
Washington0.3316.3

The ROI within the Midwest alone on what should be about $3 billion in construction is around 4% – higher than the bare Chicago-Cleveland/Detroit system. With Northeastern tie-ins, this rises to 7%, if one is confident in second-order but noticeable extra revenue from trains from New York, which would necessarily be a two-seat ride and take almost 6 hours with transfer time.

St. Louis (3 million, 460 km from Chicago) and Kansas City (2.5 million, 400 km from St. Louis)

The Chicago-St. Louis line has received some investments in the last 10 years that the state of Illinois pretends are high-speed rail. Those are expensive – there’s extensive surplus extraction by actors including politicians and the freight railroads – and perform exactly as one should expect trains that are slower than the legacy trains that the TGV replaced 40 years ago. However, this says nothing about whether trains that Europeans and East Asians would recognize as fast could succeed on that corridor. Could they?

A reasonable estimate for the Chicago-St. Louis construction cost is $10 billion; St. Louis-Kansas City would be another $10 billion, perhaps slightly costlier per km because Missouri’s terrain isn’t quite so flat as Illinois’s. Ignoring transfer penalties, we get the following ridership and operating income out of it:

City N\City SWSt. LouisKansas City
Cleveland0.430.19
Toledo0.220.09
Detroit0.760.32
Chicago4.561.33
Milwaukee0.870.27
St. Louis—1.5
City N\City SWSt. LouisKansas City
Cleveland21.329.45
Toledo10.974.32
Detroit37.8415.99
Chicago136.366.59
Milwaukee34.0713.59
St. Louis—39.1

St. Louis generates 6.84 million riders and $240 million in operating profit, which is above our 2% minimum but not by much. Moreover, 6.84 million riders means a train every hour, at which point there are real frequency artifacts for a service that shouldn’t take much longer than an hour and a half to Chicago. So it’s marginal, though still plausible. But if this is plausible, Kansas City isn’t: it generates $150 million. There are small intermediate stop locations like Springfield and Columbia, but they’re too small to make a difference.

The Ohio Hub

The four largest metro areas of Ohio are roughly collinear. Going southwest of Cleveland, one has Columbus (2.5 million, 220 km), then Dayton (1 million, 110 km), and finally Cincinnati (2.3 million, 90 km). Construction costs are likely to be low because of the terrain – only around Cincinnati are there significant hills. 420 km for $10 billion is plausible. What is the ridership, and what is the revenue?

City E\City WColumbusDaytonCincinnati
New York1.810.711.18
Philadelphia0.980.370.6
Washington0.830.10.55
Harrisburg0.240.090.14
Pittsburgh1.30.560.79
Cleveland1.50.721.41
Columbus—0.621.22
Dayton——0.58
City E\City WColumbusDaytonCincinnati
New York90.7135.4459.13
Philadelphia48.9118.5230.25
Washington39.794.9327.68
Harrisburg10.94.36.78
Pittsburgh35.4819.1431.87
Cleveland21.515.538.4
Columbus—4.4615.81
Dayton——3.42

The total operating income is $563 million a year, which is 5.6% ROI. The biggest cells – New York-Columbus, New York-Cincinnati, Philadelphia-Columbus, Washington-Columbus – are reasonably certain. The internal Midwestern numbers are more suspect, as are the numbers involving Pittsburgh – these are cities where car ownership approaches 100% and the remainder are carless out of poverty, and the destinations are fairly decentralized.

Indianapolis and points south

Indianapolis (2.5 million, 280 km from Chicago) is an attractive-looking target. By itself it’s not much, just like slightly-bigger St. Louis, but unlike St. Louis, it has cities behind it in Cincinnati (170 km) and Louisville (1.5 million, 180 km) that are not as far from everything as Kansas City is. Moreover, Indianapolis-Cincinnati also unlocks travel to Columbus, probably with a transfer because the bluffs around Cincinnati force trains from both Indianapolis and Columbus to enter from the north, without through-service.

South of Louisville, it’s attractive to go south to Nashville (2 million, 270 km from Louisville), Chattanooga (1 million, 200 km), and finally Atlanta (7 million, 180 km). But unlike the New York-Atlanta and the New York-Chicago legs of the triangle, the Chicago-Atlanta leg is decent but not amazing, since it omits the largest city.

City S\City NMilwaukeeChicagoIndianapolisLouisvilleNashvilleChattanooga
Indianapolis1.093.94————
Cincinnati0.733.691.22———
Dayton0.281.620.62———
Columbus0.442.331.3———
Louisville0.52.620.86———
Nashville0.31.551.090.72——
Chattanooga0.110.550.370.410.52—
Atlanta0.41.821.071.162.481.42
City S\City NMilwaukeeChicagoIndianapolisLouisvilleNashvilleChattanooga
Indianapolis29.6871.7————
Cincinnati28.01107.813.43———
Dayton12.4856.9610.55———
Columbus21.7798.4932.1———
Louisville19.5778.2810.1———
Nashville1573.3631.812.68——
Chattanooga5.727.3615.6112.686.79—
Atlanta19.8291.153.7449.2161.216.65

Reasonable construction costs are $6 billion to Indianapolis, $4 billion to each of Cincinnati and Louisville, $7 billion to Nashville, $6 billion to Chattanooga, and $5 billion to Atlanta. Indianapolis itself doesn’t generate sufficient ROI, but with the addition of Cincinnati it is pretty strong, the combined system generating $483 million, or 4.8% ROI. Then Louisville generates $108 million, or 2.7%; Nashville generates $133 million, or 1.9%; and Chattanooga and Atlanta together generate $360 million, or 3.3%. Note that the last segment generates the highest ROI, and moreover it is not really possible to start from Atlanta and move north, since Chattanooga alone doesn’t generate significant ridership to cities northeast of Atlanta, as those cities are either small (Greenville, Charlotte) or far (Washington).

Update 12-21: Madison (0.9 million, 120 km from Milwaukee) and Minneapolis (4 million, 400 km from Madison)

The above calculations are for expansions from the first Midwestern core line connecting metro regions #1, 2, and 4 to on another. But what about the #3 region, Minneapolis? Minneapolis has a metro area of 4 million, and is by far the largest Midwestern region with population growth, having grown 9% between 2010 and 2019, whereas Chicago, Detroit, and St. Louis were flat and Cleveland declined.

It should not surprise that Chicago-Minneapolis traffic alone is insufficient to justify HSR, given that Chicago-Detroit alone is not and that line requires service to Cleveland as well as points east. Fortunately, Minneapolis’s location is such that through-service from much of the rest of the Midwest is plausible. Distances are long – this isn’t the Northeast or Western Europe – but trips between Minneapolis and secondary cities like Cleveland, Detroit, Cincinnati, and Indianapolis become much faster by rail than by car. Even St. Louis-Minneapolis is feasible, even though nowadays there’s a mostly direct all-freeway route that’s 900 km long vs. 1,120 by HSR. Midwestern travel today is dominated by the car and not the plane, since car ownership is universal and flying between two secondary cities is not necessarily convenient or cheap.

We get the following matrix of ridership:

City S\City NMadisonMinneapolis
Cleveland0.250.37
Toledo0.150.18
Detroit0.470.65
Columbus0.170.28
Dayton0.110.16
Cincinnati0.270.36
Louisville0.180.25
Indianapolis0.490.54
St. Louis0.320.44
Chicago1.743.29
Milwaukee0.481.46
Madison—0.84

And here is the matrix of operating income:

City S\City NMadisonMinneapolis
Cleveland12.6518.7
Toledo5.958.96
Detroit22.2432.26
Columbus8.6613.79
Dayton5.397.89
Cincinnati12.2917.96
Louisville8.6112.53
Indianapolis17.2726.78
St. Louis14.9921.82
Chicago29.4141.28
Milwaukee3.7449.48
Madison—21.73

A reasonable construction cost for Milwaukee-Minneapolis is around $13 billion. Overall operating income is $514 million a year, so 4% ROI; one can even scratch a few fractions of 1% by including extra ridership from connections from points east of Cleveland, but I’m comfortable rounding New York-Minneapolis ridership over 2,000 km and a probably-untimed transfer in Chicago from 0.67 million to zero. At most, including East Coast-Minneapolis rail ridership provides cushion against unresolved questions such as whether people would take a 4.5-hour train between Detroit and Minneapolis or continue driving for 10 hours plus rest stops.

Metcalfe’s law in California

In California, the definition of a metro area is dicey. The combined statistical area for the Bay Area has 9.7 million people, but that includes Merced, Modesto, and Stockton, all of which are geographically in the Central Valley and would get dedicated HSR stations, some on a different branch from that going toward the Bay proper. In fact, we have 9.7^0.8 = 6.16, but if we sum each individual MSA component and raise its population to the 0.8th power, even omitting ones without planned HSR stations like Santa Cruz and Napa, we get a total of about 7. So we should use the higher figure. Likewise, in Los Angeles, taking the CSA population yields 18.7^0.8 = 10.41 whereas summing the constituent metro areas separately yields 11.3, and summing the counties, all of which are supposed to have stations, yields 12.8. We use the higher figure, 12.

Together we get 25 million intercity riders, before applying the distance penalty. The distance depends on which pair of stations we look at, since we’re summing over many different stations; it also depends on alignment choices, which don’t all have the same average speed, which means that trip time, whence the distance malus, is not perfectly congruent to distance. To simplify, we assume that LA-SF is 2:45, which at Shinkansen speed is 650 km; this is shorter than the actual LA-SF distance under most alignments, though not by much, and it’s longer than actual distances to subsidiary Northern California destinations.

With this in mind, our formula spits out 14.79 million intercity rail trips. This is a lot lower than California HSR estimates. Those estimates also include San Diego (3 million, 190 km from LA), Bakersfield (0.9 million, 180 km), Fresno (1.3 million, 170 km from Bakersfield), and Sacramento (2.6 million, 270 km from Fresno, 230 km from SF). None of these adds a lot, though. The reasons for the discrepancy include,

  • California HSR assumed heavy HSR commuter traffic – Palmdale-Los Angeles was one of the top city pairs.
  • California HSR assumed somewhat lower fares than the European norm, standing at $79 for LA-SF.
  • California was projecting population into the future, and may have assumed less NIMBYism than the state presently has.
  • The California HSR model may have had flaws; one such flaw was overestimating the impact of frequency at the LA-SF range, to the point that pruning branches such as to San Jose was said to increase ridership by improving frequency to the remaining destinations.

Not that the numbers coming out of my model are bad. The LA-SF numbers alone are worth $625 million in operating profits a year, and with Bakersfield and Fresno this grows to $875 million. The cost of the project without San Diego and Sacramento tie-ins should be on the order of $25-30 billion, in today’s money. Sacramento is maybe 90 extra km and $2 billion depending on alignment, and generates another $260 million or so; Metcalfe’s law is practically a free gift when you have a 90 km spur in flat geography. San Diego is probably something like $6 billion, the higher cost coming from the constrained urban environment and the need for some viaducts and one short tunnel, and adds around $240 million in operating profits.

I am of course aware that at no point was the cost of California HSR $25 billion in 2020 terms. In 2008 the state promised $33 billion in 2008 dollars. The discrepancy comes from some catastrophically bad decisions regarding scope at every stage of the planning phase and bad procurement. But if one looks at what the project needed rather than what has been built in the Central Valley and plugs in standardized costs, the answer is around $25 billion.

What Suburban Poverty? Redux

Earlier this week, I wrote about the incomes of commuters, looking at the incomes of people who commute to the central business districts of six American cities by distance from the center. Contrary to the story of drive-until-you-qualify, in which incomes drop as one moves farther out, in fact incomes tend to rise with commute distance. I was asked by many people in comments and on Twitter, what about the general public, and not just commuters?

The answer is that the answer changes but not by much. The model remains that of the poverty donut, in which people within a certain distance from city center, between 5 and 20 km depending on city size, are poorer than people in both the innermost radius and people who live in the suburbs farther out.

As before, we use data from OnTheMap, which slices jobs by income brackets, of which the highest is $40,000 or more per year in wages. This does not take unemployment or non-wage income into account, but usually these amplify existing inequalities in wages.

Here’s the same table as in the last post, with counts of employed residents and the share of $40,000+ workers within the same radii from the same point as before, without the restriction that people work in the CBD:

CityNew YorkLos AngelesChicagoWashingtonSan FranciscoBoston
PointGrand Central7th/Metro CenterMadison/StateFarragutMarket/2ndDTX
0-5 km680,133203,820176,979177,312222,134219,045
40k+ %67.6%33%68.6%66.4%69.2%58.7%
5-10 km1,123,426506,084342,255297,723239,994379,292
40k+ %50.1%34.7%48%53%57.6%53.5%
10-15 km1,335,294627,797468,107342,649261,568274,212
40k+ %41.5%40.7%39.3%50.6%57.3%58.8%
15-20 km1,114,743736,561368,022306,101248,715223,600
40k+ %45.5%44.3%44.4%51.8%55.8%57.9%
20-30 km1,289,3641,220,414539,332485,355367,591384,671
40k+ %51.8%44.2%47.6%56.6%58.4%57.9%
30-40 km905,2541,020,080630,250551,093469,556387,372
40k+ %57.1%44.9%49.3%53.7%60.3%54.8%
40-50 km753,040754,717633,381478,307377,010377,544
40k+ %55.8%45.9%51.1%56.3%63.7%53.9%
50-60 km623,786632,476554,520435,857405,328421,248
40k+ %55.7%49.6%47.4%47.2%62.5%51.8%
60-70 km535,991405,516399,769410,554498,840434,048
40k+ %55.6%50.2%49.8%48.8%58.8%45.8%
70-80 km484,356518,270189,540232,985410,047402,805
40k+ %54.9%46.5%48.7%51.2%54.4%47.9%

Notes

A few valuable footnotes to the table above:

  1. In Boston, the innermost 3 km radius, comprising such neighborhoods as Back Bay, there are 98,691 residents of whom 66.4% earn at least $40,000 a year, but the 5 km level of granularity doesn’t quite see that because the city is smaller than the others. So the swoosh model seen in New York and Washington still holds.
  2. The 50-60 km and 60-70 km annuli around Washington include most of Baltimore, so they are poor once we strip the requirement that people work in the District. They do not show suburban poverty, but urban poverty in a city that, far from getting the transportation investment Massachusetts is putting into the Gateway Cities, had a subway line canceled by a popular moderate Republican governor for what’s almost certainly racist reasons.
  3. The situation in the Bay Area is the reverse of that of Washington. The 40-50 km and 50-60km annuli are wealthy because they happen to include wealthy communities on the Peninsula whose suburban status is awkward, having been both wealthy commuter suburbs of San Francisco and more recently Silicon Valley edge cities with many tech jobs.

What’s going on in Los Angeles?

All other cities on the table have poverty donuts, poorer than both the city core and the suburbs. But in Los Angeles, the $40,000+ share grows nearly monotonically as distance from the CBD increases. The 5 km radius from the center, which in New York comprises the Upper East and West Sides and in Chicago comprises the North Side and the gentrifying parts of the Near South Side, is the poorest group in Los Angeles. It consists of neighborhoods that are not particularly wealthy, like Boyle Heights, Filipinotown, and Koreatown.

The broader question is, how come those neighborhoods have not gentrified the way their counterparts in other American cities did?

The answer to this question has to be that Los Angeles is very weak-centered. The other five cities all have strong CBDs, which means the middle class is willing to pay extra to live near their centers. In Los Angeles, employment in the CBD is weaker, so fewer people of means try to concentrate there.

Place-based policy for commuters

Despite the fact that people who live 50 km from city center are noticeably poorer than people who live 50 km and work at city center, there’s an impulse to focus on rush-hour commuter transportation at this range. This can include highway widening, or commuter rail that is so peak-focused it’s essentially a highway widening, interfacing with the suburban road and parking network but not with any urban public transportation.

Even though the people such policy helps are better-off than most, governments still sell it as a social justice measure that would promote equity. The error here is that while people in (say) New Bedford are poorer than average, the local notables who decide what the New Bedford agenda is are richer than average, and they want to be able to say that they steered spending to the area in order to feel more important.

It’s an awkward situation in which money is wasted on grounds of both efficiency and equality. The local notables are on the wealthy side, like the CBD-bound commuters, but they’re a distinct group with mostly local ties, so they understand the needs of regional rail even worse than 9-to-5 commuters as as class do. So the money is wasted, and it’s wasted in a way that increases inequality rather than decreasing it.

Job access for the working class

The best place for job access for the working class remains city center. In Los Angeles, this is direct from the data: for all the talk about drive-until-you-qualify exurbs in the Inland Empire, incomes there remain higher than in East LA or South Central. But this is true even in the other cities, for two distinct reasons.

In some cities, like Chicago, there is notable directionality – that is, there is a favored quarter (the North Side) and an ill-favored one (the South Side). Job suburbanization generally goes in the direction of the favored quarter because that is where corporate management lives. In Washington, Amazon decided to build HQ2 in the direction of the favored quarter, in Virginia, and offered the ill-favored quarter, the lower middle-class Prince George’s County, a lower-end warehousing job center. This situation seems universal or nearly so: in Paris most job suburbanization goes to the western favored quarter, in Tel Aviv it goes to the northern favored quarter, and so on.

But not all cities have much directionality. New York doesn’t – go in any direction outside the Manhattan core and you’ll find poverty, whether it’s in Harlem, Corona, Bed-Stuy, Jersey City, or Bergen Hill, and go further and you’ll find reasonable levels of comfort.

That said, in New York, off-center jobs are awfully inaccessible. Creating more jobs in Harlem would be great for working-class black and Hispanic job seekers in the area, but would not be very accessible from Brooklyn or Hudson County. Even access from the Bronx may be compromised by East Side vs. West Side divisions: how much access does the South Bronx get to Uptown Manhattan’s biggest job center, Columbia?

What’s more, plans for decentralizing jobs in the New York region don’t focus on Harlem or Jersey City, just as plans in Washington go to Fairfax County and not PG County. The PennDesign plan for high-speed rail, dubbed North Atlantic Rail, calls for a job center on Long Island called Nassau Center, in a homogeneously comfortable part of the region.

So in all cases, keeping jobs as concentrated in city center as possible, and allowing the CBD to organically expand into nearby areas, ensures the best job access for everyone, but this is disproportionately helpful for lower-income workers. There just isn’t enough suburban poverty writ large to justify any deurbanization of job geography on equity grounds.

Boston Construction Cost Webinar Tomorrow

Who: me, Eric Goldwyn, and Elif Ensari as the panelists, and Matt Yglesias as the moderator

What: a webinar in which we release our construction cost report on the Green Line Extension in Boston, which is the first of our six cases. We will also discuss our construction cost database, but the primary topic will bee why the construction costs of GLX were so high.

Where: online, click on the RSVP button in this link to register. And we’re already mildly overbooked, with a capacity of 500 against 600 online registrants – usually the yield for such events, like Modernizing Rail, is only 1/2-2/3, so I’m not too worried, but please show up on time.

When: tomorrow, 2020-12-09, at 17:00 Central Europe Time, or 11:00 Eastern Standard Time.

Why: because we’d like to promote our preliminary findings. This should be interesting to people interested in public transportation, state capacity, and project management.

Update 12-11: here is the video. And no, I am not sick, my sniffling was pretty random.

What Suburban Poverty?

Myth: American cities have undergone inversion, in which poorer people are more suburban than richer people.

Reality: at least on the level of people commuting to city center, wages generally rise with commute distance. In particular, the phenomenon of supercommuters – people traveling very long distances to work – is a middle- and high-income experience more than a low-income one. This is true even in Los Angeles, a Sunbelt city with more of a drive-until-you-qualify history than the Northeastern cities. The only exception among the largest US cities is San Francisco, and there too, the poorest distance is 5-10 km out of the Financial District.

All data in this post comes from OnTheMap and is as of 2017, the latest year for which there is data. The methodology is to define a central business district, generally a looser one than in past post but still much smaller than the entirety of the city, and look at people who work in it and live within annuli of increasing radius from a specific central point within the CBD. OnTheMap puts jobs into three income buckets, the boundary points being $1,250 and $3,333 per month; we look at the proportion of jobs in the highest category.

I report the annuli in kilometers, but technically they’re in multiples of 3.11 miles, which is very close to 5 km.

CityNew YorkLos AngelesChicagoWashingtonSan FranciscoBoston
CBD3rd, 60th, 9th, 30thI-10, I-110, riverCongress, I-90, Grand6th, R, river, EBroadway, Van Ness, 101, 16thI-90, water, Arlington
PointGrand Central7th/Metro CenterState/MadisonFarragutMarket/2ndDowntown Crossing
Jobs1,017,175310,111558,379249,707441,104241,775
40k+ %68.7%68.8%70.4%69.8%73.2%71.7%
0-5 km211,91022,55767,34856,57886,84541,912
40k+ %79.8%44.6%84%75.1%76.6%70.5%
5-10 km205,21538,98691,33256,15467,06352,499
40k+ %63.6%53.2%70.1%61.5%68.3%64.3%
10-15 km172,11742,39188,60438,23349,11130,619
40k+ %51.9%65.1%58.8%66.2%73.6%73.3%
15-20 km101,54341,22967,62023,58935,69220,444
40k+ %62%71.3%67.3%69.8%74.5%76.8%
20-30 km92,87153,80968,57127,92140,17029,271
40k+ %74.4%75.6%73.5%75.8%76.9%79%
30-40 km61,23633,05149,37415,56833,39517,511
40k+ %81.1%77.6%76.1%78%80.1%77.8%
40-50 km37,93117,56141,7458,40320,50912,738
40k+ %82.1%81%78.7%82%82.4%78.7%
50-60 km26,74613,85325,8723,34615,9819,321
40k+ %81.3%82.3%74.9%76.7%78.7%76.9%
60-70 km21,8608,56114,9402,59614,6826,101
40k+ %80.3%83.6%74.5%76.9%73.3%71.5%
70-80 km14,0077,7205,4711,4449,1514,757
40k+ %77.8%79.7%72.4%79.3%69.8%74.2%

In all six metro areas above except Los Angeles, the income in the innermost 5-km circle is higher than in the 5-10 km annulus. In Chicago that inner radius is in fact the wealthiest, but in Boston it’s below average, and in New York, Washington, and San Francisco it is poorer than wide swaths of suburbia. There is always a large region of poverty in an urban radius, which is roughly the inner 15 km in Los Angeles, the 5-20 km annulus in New York, the 10-15 km radius in Chicago, and so on.

This of course does not take directionality into account. In Chicago, it is especially important – to the north, there is wealth at all radii, and to the south, there is mostly poverty. In contrast, in New York directionality is less important, and it is in a way the purest example of the poverty donut model, in which the center is rich, the suburbs are rich, and the in-between neighborhoods are poor, without wedges that form favored quarters or wedges that form ill-favored quarters.

The importance of this is that because the inner and outer limits of the poverty donut are slowly moving outward, there is talk of suburbanization of poverty – or, rather, there was in the decade leading up to corona, but I suspect it will return once mass vaccination happens. However, even now, American cities are not Paris or Stockholm, where wealth mostly decreases as distance from the center increases, even though both cities have intense directionality (rich northeast, poor south and west in Stockholm, and the exact opposite in Paris). The poorest place remains the inner city, just beyond the near-downtown zone at what I would call biking range from city center jobs if any American city had even semi-decent biking infrastructure.

This contrasts with various schemes to subsidize suburbs that assume poverty has already suburbanized. Massachusetts, where even in the inner 5 km radius the $40,000+ share is below average, has a concept called Gateway Cities, defined to mean roughly “low- and lower-middle-income cities that aren’t Boston.” Of those, about one, Chelsea, is inner-urban, while the others include Springfield and various ex-industrial cities that are generally no poorer than Boston and lie amidst suburban wealth, like Lowell and Haverhill. Based on the idea that Massachusetts poverty is in the Gateway Cities and not in Boston itself, it justifies vast place-based subsidies that mostly go to people who are decently well-off while Dorchester has to beg for slightly better public transportation to Downtown Boston.

In New York, one likewise hears more about the poverty of Far Rockaway than about that of Harlem. There’s this widespread belief that Harlem is no longer poor, that it’s fully gentrified because there’s one bagel shop on 116th Street that caters to a mostly white middle-class clientele. This is related to the stereotype of the Real New Yorker, weaponized so that the cop or the construction worker who is a third-generation New Yorker and lives at the outermost edge of the city is an inherently more moral person than the Manhattanite or the immigrant and is the very definition of the working class while earning $90,000 a year. This goes double if this Real New Yorker lives on Long Island, usually with some catechism about how the city is too expensive even though the suburbs are about equally costly. The one place-based policy that would benefit the city, having the state integrate its schools with those of the generally better-resourced suburbs, is unthinkable.

It’s notable that this discourse that overrates how poor American suburbia is comes exclusively from people who tend to sympathize with the poor. People with Thatcherist attitudes toward the poor abound in the United States, and tend to correctly believe that the inner city is poorer than the suburbs, and if anything to overrate the extent of urban poverty. In either case, the conclusion groups of Americans reach is that the government must subsidize the suburbs further; all else is just motivated reasoning.

In reality, if one has the Thatcherist or Old Tory moralistic attitude that poverty is a personal failure then, with reservations, one should continue believing the large American city is inherently immoral. But if one has the attitude that poverty is a social failure that is solvable with social programs, then one must realize that there is more of this in central cities than in their suburbs, even faraway suburbs that are called drive-until-you-qualify because they are slightly poorer than some other suburbs, and therefore if anti-poverty programs must be place-based then they should be urban.

When Should Cities Separate Short- and Long-Range Commuter Rail?

There’s a big difference between the various regional rail proposals I’ve made for New York and similar examples in Paris and Berlin: the New York maps go a lot further, and incorporate the entirety of regional rail, whereas the RER and the Berlin S-Bahn both focus on shorter-range, higher-frequency lines, with separate trains for longer-range service, generally without through-running. A number of New York-area rail advocates have asked me why do this, often suggesting shorter-range alternatives. Yonah Freemark made a draft proposal many years ago in which through-running trains went as far as New Brunswick, White Plains, and a few other suburbs at that range, on the model of the RER. But I believe my modification of the system used here and in Paris is correct for New York as well as the other American cities I’ve proposed regional rail in.

The reason boils down to a track shortage making it difficult to properly segregate S-Bahn/RER-type service from RegionalBahn/Transilien-type service. These are two different things in Paris, Berlin, Hamburg, and Munich, and Crossrail in London is likewise planned to run separately from longer-range trains, but in Zurich and on Thameslink in London these blend together. Separate operations require four-track mainlines without any two-track narrows at inconvenient places; otherwise, it’s better to blend. And in New York, there are no usable four-track mainlines. Philadelphia and Chicago have them, but not on any corridor where it’s worth running a separate RegionalBahn, which is fundamentally a short-range intercity train, and not a suburban train.

Scale maps

Here is a map of the Berlin S-Bahn (in black) and U-Bahn (in red) overlaid on the New York metropolitan area.

The reach of the S-Bahn here is about comparable to the size of New York City, not that of the metropolitan area. Even taking into account that Berlin is a smaller city, the scope is different. Service to suburbs that are not directly adjacent to Berlin the way Potsdam is is provided by hourly RegionalBahn trains, which do not form a neat network of a frequent north-south and a frequent east-west line through city center.

Here is the same map with the Paris Métro and RER; a branch of the RER D runs off the map but not much, and the RER E branches going east, still within the map box, go further but only every half hour off-peak.

The Parisian Transilien lines are not shown; they all terminate at the legacy stations, and a few have frequent trunks, generally within the scope of the box, but they don’t form axes like the east-west RER A and north-south RER B.

So what I’m proposing is definitely a difference, since I’ve advocated for through-running everything in New York, including trains going from Trenton to New Haven. Why?

Four-track lines and track segregation

In most of Berlin, the infrastructure exists to keep local and longer-range rail traffic separate. The Stadtbahn has four tracks, two for the S-Bahn and two for all other traffic. The North-South Tunnel has only two tracks, dedicated to S-Bahn service; the construction of Berlin Hauptbahnhof involved building new mainline-only tunnels with four tracks. Generally, when the S-Bahn takes over a longer line going out of Berlin, the line has four tracks, or else it is not needed for intercity service. The most glaring exception is the Berlin-Dresden line – the historic line is two-track and given over to the S-Bahn, requiring intercity trains to go around and waste 20 minutes, hence an ongoing project to four-track the line to allow intercity trains to go directly.

In Paris, there are always track paths available. Among the six main intercity terminals, the least amount of infrastructure is four-track approaches, at Gare de Lyon and Gare d’Austerlitz, with two tracks given over to the RER and two to everything else. Of note, the entirety of the Austerlitz network has been given to the RER, as has nearly all of the Lyon network, which is why the lines go so far to the south. The other terminals have more: Saint-Lazare and Nord each have 10 tracks, making segregation very easy. Only subsidiary regional-only stations have two-track approaches, and those are entirely given over to the RER, forming the eastern part of the RER A, the southern part of the RER B, and the western part of the RER C.

New York has a shortage of approach tracks. The reason for this is that historically the mainlines mostly terminated outside Manhattan, so the four-track approaches only went as far as Newark, Jersey City, etc. The LIRR has a four-track mainline into Penn Station from the east, which is why I’ve advocated for some segregation, but even that should eventually involve the express trains via East Side Access through-running to New Jersey; see the second map in this post.

On the New Jersey side there are plans for four tracks with new tunnels across the Hudson, but two tracks have to be shared with intercity trains, and there’s no easy way to neatly separate service into two S-Bahn tracks and two RegionalBahn tracks. In the short run, two of these tracks would have to include trains diverting west to the Morris and Essex Lines, which have a three-track main and therefore cannot segregate their own locals and expresses. In the long run, with the M&E system given its own tunnel across the Hudson, you could theoretically do two local and two express tracks, but that runs into a different issue, which is that east of Penn Station, there are two paths to New Rochelle, both of which have local stops.

The issue of having two paths between the city center station and an important suburban junction, both with local stations, is also a problem in London. North of the Thames, most mainlines are at least four-track, making segregation easy, hence the plans for Crossrail. The only exception is the Lea Valley lines. But in South London, lines are two-track – historically, railways that needed more capacity did not widen one line to four tracks but instead built a parallel two-track lines with its own local stations, often arranging the local stations in a loop. The result is a morass of merging and diverging lines reducing capacity, and London is only slowly disentangling it. In either case, it makes segregation difficult; Thameslink can’t just take over the slow lines the way Crossrail is, and therefore there are Thameslink trains going as far as Bedford and Brighton.

What does this mean?

It’s somewhat unusual for New York to get a regional rail network in which every train, even ones going to distinct cities like New Haven, is part of a central system of through-running. But it’s not unheard of – Thameslink works like this, so does the Zurich S-Bahn, and so does Israel’s national network with its Tel Aviv through-running – and it’s an artifact of a real limitation of the region’s mainline rail system.

But this should not be viewed as a negative. New York really does have suburban sprawl stretching tens of kilometers out. It should have suburban rail accompanying all these suburbs, and wherever possible, it should run on a schedule that is useful to people who are not just 1950s-style 9-to-5 commuters. Moreover, New York lacks either the vast terminals of Paris or the Ringbahn’s mushroom concept, which means trains from outer suburbs have nowhere to go but Manhattan, so they might as well be turned over into a through-running system.

Who Should Bear the Risk in Infrastructure Projects?

The answer to the question is the public sector, always. It’s okay to have private-sector involvement in construction, but the risk must be borne by the public sector, or else the private sector will just want more money to compensate for the extra risk.

The biggest piece of evidence for this is emerging out of our construction costs project, so it will appear in the report and not in a blog post. But for now, I’d like to point out examples from media, the academic literature, and one interview of particular interest.

PPP, Gangnam style

A transportation planner in Korea named Abdirashid Dahir has been giving Eric and me a lot of detailed information about Korean construction costs. We were already aware that Line 9 in Seoul had been built as a PPP, but what we learned was more complicated.

Line 9 is a partnership – the last P in PPP. This means, part of the construction is done by the private sector, and part by the public sector, namely the Seoul Metropolitan Government. The private consortium, led by Hyundai, was responsible for the design and for the construction of the systems, including the tracks, signaling, and rolling stock. SMG was responsible for the civil infrastructure. The total cost of the first phase was 1,167.7 billion won for 25.5 km, split as 492.2 billion in municipal construction and 675.8 billion in private investment.

The importance of this split is that civil infrastructure is the least certain part of underground construction. There are always geotechnical surprises, most small, a few potentially leading to large cost and schedule overruns. These are especially likely during station construction – the tunnels in between tend to be simpler with modern TBMs. Systems, in contrast, are relatively straightforward. Installing rail tracks is the same task regardless of whether it’s in solid rock in an exurban area that has no significant archeology, or through sand that had to be frozen, partly underwater, in the oldest parts of Berlin.

The upshot here is that while low-cost countries do use PPPs, this project keeps the riskiest aspects of construction public and not private. Privatization is fine for less risky, more commoditized situations.

How private bidders respond to risk

Two examples come to mind, both from the United States.

First, in New York, Brian Rosenthal’s seminal New York Times article cited Denise Richardson of the General Contractors’ Association saying that the contractors are barely making any profit and are bidding high because of risks imposed on them by the public sector. I don’t think this is a very high-quality source – it’s extremely biased, for one – but in context, it makes some sense.

Second, we do have more quantifiable data on this, thanks to the work of the Stanford Graduate School of Business economist Shosh Vasserman and Hoover Institute economist Valentin Bolotnyy. They look at highway maintenance contracts in Massachusetts and compare scaling auctions, in which the contracts are itemized, with lump sum auctions, in which they are not. Based on actual differences in price and estimates of contractor risk-aversion, they estimate that itemizing saves 10% of the cost through lower risk.

Supporting structures for public-sector risk assumption

There’s always the problem of moral hazard. Of note, even with this problem, costs are lower with itemized contracts in Massachusetts than with lump-sum contracts. But this does suggest a number of ways to reduce costs through better risk management:

  • Itemized contracts, in enough detail that changes do not need litigation.
  • Fixed profit rates – Spanish contracts are done with a fixed profit rate over the items named in the bid.
  • Public oversight – there needs to be tighter supervision of risky things, which most likely means no PPPs for civil infrastructure.

It is unfortunate that American trends in the last 20 years have been away from those principles and toward greater privatization of the state, and equally unfortunate that American (and British) soft power has led to similar reforms in the wrong direction in the rest of the Anglosphere. But it’s possible to do better and imitate Korean practices to get Korean costs.

Regional Rail for Non-Work Trips

Good public transportation must be useful for all travel needs. This in particular includes trips that are not commutes to work, which are the most typical use case for suburban trains. This is a key difference between American and European public transportation: in some cases the modal split for work trips are similar, for example New York’s split is similar to that of the major German cities, but per capita ridership in the German cities is a lot higher than in New York, because off-peak service is better and people use it more for non-commute trips. In the linked post I went over this as a matter of better off-peak service; in this post I am going to go over the more fundamental question of, what kind of trips can regional public transport provide apart from work trips?

Some data from Germany

Germany periodically conducts surveys of transportation usage, called Mobilität in Deutschland, or MiD. The most recent was in 2017, and the one before it was in 2008. In Berlin, the data I have is from 2008, from the city’s transportation plan for 2030. On PDF-p. 30, it produces the following modal splits by trip type:

  • Work: 39% transit, 40% car
  • School: 31% transit, 31% car
  • Shopping: 19% transit, 30% car
  • Pleasure: 21% transit, 32% car
  • Going back home: 27% transit, 31% car
  • Other, including business: 25% transit, 67% car

Here is Hamburg, also as of 2008 and not 2017, on p. 7, with the city and suburbs listed separately:

  • Work: 33%/48% city, 16%/65% suburbs
  • School: 32%/13% city, 34%/30% suburbs
  • Shopping: 11%/41% city, 4%/65% suburbs
  • Errands: 21%/37% city, 4%/71% suburbs
  • Pleasure: 17%/40% city, 5%/55% suburbs

The Hamburg S-Bahn barely extends past city limits, even less so than the Berlin S-Bahn, so the low suburban modal splits cannot be viewed as a failure of S-Bahn service to be useful for non-work trips. But it’s worth pointing out that in both Berlin and Hamburg (city, not suburbs), work is the activity with the highest modal split for public transport, followed by school.

Long and short trips

In a few posts over the years, I talked about a dichotomy of long and short trips. Long trips include the primary commute but also extraordinary trips such as to the airport; short trips are routine errands, including shopping and short-distance leisure trips.

In most transit cities, short trips are not done on transit but on foot. I usually bring up Asian examples because they concentrate development near the train station, so one walks to the train station either to shop at the department store within the station or to get on an actual train to get to work in city center. But this is equally true of Germany, even with vastly lower extents of transit-oriented development. The intersection points of the Ringbahn with U- and S-Bahn lines are replete with shopping centers.

The upshot is that if people don’t take regional trains to go shopping, because if the system works, then they can walk to retail. This is true even when retail is at big box scale – those Ringbahn stations have Kaufland and Real hypermarkets.

Sporadic long trips

If regional rail is not for short trips, then what non-work trips is it for? The answer cannot be none, because ridership on S-Bahn trains in Berlin and Hamburg is too high compared with the work modal split. The answer can’t just be school either, because there aren’t vast numbers of school commuters.

Rather, it’s better to think in terms of sporadic and usual long trips. When I go play board games, it’s a long trip and not a short trip, because the community is citywide, and people come from Friedrichshain, from Charlottenburg, from far western suburbs, from Lichtenberg, from Pankow, from Schöneberg. The same is true of queer meetups – even when I lived in Neukölln and some of these meetups were walking distance to me, they were not walking distance to most attendees, who would take the U- or S-Bahn.

All of this falls under the rubric of sporadic long trips: long because they are not normally in-neighborhood, and sporadic because they are not one’s usual commute to work or school. But they often involve several roundtrips a week, producing healthy ridership at all hours of day.

Meetups are an example of using the train for socialization at a scale that’s expressly citywide or even regionwide. In that sense, a large city with a good regional transportation network is good for social connections, because it encourages communities to be more specialized to people’s interests. In a city the size of Berlin, even with Germany’s shocking lack of diversity, one can find enough queers for an English-language meetup. In a larger city like New York, without the same language load, one can even find ever more specialized communities – there is no one gaming community but many, and they intersect, for example one can look for queer gamers, or for a Harlem-based group with predominantly black demographics, and so on. This isn’t really any different from the economic advantages of large cities, which offer more division of labor.

The upshot is that even if the sort of travel one can do by regional rail that is not for work does not seem to exist in a city with poor off-peak public transportation service, this does not mean improving off-peak transit is pointless. On the contrary: over time, the existence of such service will let communities form at convenient locations based on the shape of the network. It will make the city bigger in a sense, and this is a good thing economically and socially.

Building Depth and Window Space

How much window space does an apartment need, relative to its area, and how does this affect building style? A fascinating post from about a year ago on Urban Kchoze makes the argument that modern North American buildings are too deep – Simon calls them obese. Simon contrasts the typical building style in major cities in Europe and Asia with modern North American imitators and argues that the North American versions have too much ratio of floor area to exterior window width, which only works with loft-style apartments, which are not fit for families.

Is Simon correct? Not really. There’s an important feature of the block style in Europe that he’s missing. And this leads to an interesting observation by itself about area-to-window-width ratios.

The issue of building depth

Simon shows a bunch of satellite photos of buildings in a style called the euroblock. Here’s one example from Stockholm, in Södermalm:

The block has a width that looks like 14.6 meters. Midblock buildings have front windows overlooking the street and back windows overlooking a central courtyard; corner buildings overlook two streets. Either way, the area-to-frontage ratio is 7.3 meters. In general, buildings in Central Stockholm, urban Berlin, and Paris in average a depth of 13-14 meters, so the above typology would generate a ratio of 6.5-7 meters.

Simon contrasts this with American buildings. The euroblock typology is very uncommon in the US – New York’s typology is much less neat and liberally uses windows that overlook very narrow spaces. But it does exist, generally in higher-end recent developments. For example, here’s the Avalon East Norwalk, a condo project wedged between I-95 and the Northeast Corridor.

It has essentially the same built form as the euroblock. Its development history is of course different: there are no streets on the exterior, only parking lots, and it is a single project surrounding a big plaza with a swimming pool rather than many small buildings that together enclose a courtyard that comprises several separate gardens. But in terms of how the building looks from space, it’s similar. The width is 20 meters, for an area-to-frontage ratio of 10 meters, well above 6.5-7 meters.

However…

Euroblocks are complicated

The above Stockholm pic is a pretty simple building, conceptually: a linear building outlining the edge of a rectangle. This is not the typical euroblock; I had to look around Central Stockholm to find a fitting example. I could equally well use Hamburg or another such city of the same size class.

But in Paris, this form is almost unheard of, and in Berlin it is uncommon, I think mostly denoting postwar reconstruction. Paris and Berlin are larger cities, especially historically – in the Belle Epoque/Wilhelmine era, when this typology flourished, they were two of the largest few cities in the world, Berlin stagnating after World War Two and Paris growing exclusively in the suburbs. So they’d build up more of each lot and leave less unbuilt space between buildings. Instead, here is what a traditional Berlin block looks like, in this case in Neukölln:

These buildings enclose a central courtyard, as in Stockholm, but there the similarity ends. The courtyard is small, and there are several to a block. All these wings have internal corners with limited window space. Moreover, the wings that do not make it all the way to enclosing the courtyard, like the ones on the buildings north of Laubestrasse, have blank walls facing northeast, because they were built expecting the wing of another building to directly abut them. The wing of the building at the Laubestrasse/Elbestrasse eastern corner likewise has blank northeast-facing walls, and from space looks awkward, like a half-building. All of this was designed for more buildings, but some were never built or were knocked down.

If the euroblock has one big courtyard for the entire block as in the Stockholm and Norwalk examples, then the area-to-frontage ratio equals exactly half the building depth. But as soon as there are multiple courtyards, the ratio grows. The dimensions of the C-shaped building on Sonnenallee (one block south of Laubestrasse) just west of the corner building with which it shares the courtyard are 18 meters of street frontage by 38 of lot depth minus a half-courtyard of 11.5*12. This works out to 546 m^2/71 m, for a total ratio of 7.7 m, even though technically the building is never deeper than 13 m.

The blocks can get even more fractured. Here’s Prenzlauer Berg, in an area wedged between the former Wall and the Ringbahn:

The dimensions of the buildings fronting Korsörer Strasse on the north are pretty consistent. They all have an overall lot depth of about 32 meters, consisting of 14 meters of building, 11 meters of courtyard, and 7 meters of half-building with blank north-facing walls. The side wings are pretty consistently 7 meters deep each as half-buildings. Taking the pair of buildings flanking the second courtyard from the east as an example, they together are 35*32 minus 21*11, for 889 m^2/99 m = 9 m.

In Paris, building forms vary. But here is an example with wings, in the 17th:

The courtyards are smaller than in Berlin. Taking the second building from the west, we get 35*25 – 11*13, or 732 m^2/98 m = 7.5 m. When the courtyard is only about as wide as the building is deep, the above typology, similar to the image from Neukölln, generates a ratio equal to 5/8 the building depth, and not 1/2 as in the Stockholm example. The Prenzlauer Berg typology generates an even higher ratio, a full 2/3 of building depth if the courtyard is a square of side equal to the building depth.

And this matters. Buildings with simpler sides do get deeper in Paris. For example, this building in the 16th, wedged between two streets:

The depth of these buildings is 18 meters, so the area-to-frontage ratio is 9 m.

What does this mean?

My choice of the 16th and 17th in Paris for my examples is not random. Western Paris has been rich from the moment it urbanized – families of means choose to live this way. In general, within the family of euroblocks, the more desirable areas seem to have buildings with a slightly larger depth – the more working-class parts, such as Eastern Paris, have shallower buildings. Rich people would all else being equal prefer more window frontage space, but all else is not equal, and they prefer bigger apartments.

There is a definite limit on how deep buildings can be and how large the ratio of area to window frontage can be, but it is not as low as Simon posits. Ratios in the 8-9 region are not unheard of in old European buildings, and it stands to reason that euroblocks built in an environment of more prosperity, such as that of the early 21st century, could go slightly higher.

Moreover, the Norwalk example of a deeper building without wings is generally preferable to the traditional Berlin and Paris form of shallower buildings with wings. In Berlin, the apartments with street-facing windows are the most desirable. Historically, the wings were for the working class, which had to make do with narrow courtyards – sometimes narrower than today, the original statutory limit being less than 6 m wide due to 19th-century fire regulations. So the evolution of the euroblock is likely to be toward its American condo form.

More on Station Costs

Talking to Marco Chitti about the history of Italian construction always fills me with hope. He’s been gathering data about metro construction in Milan and Rome, and told Elif, Eric, and me about the issue of building through constrained areas. Historic city centers are constrained because tunneling can damage buildings – the first two lines in Milan, built in the 1950s and 60s at abnormally low costs, caused some damage to buildings, since they involved cut-and-cover under streets only 12-15 meters wide. The good news is that tunneling with a tunnel boring machine is fine now. Stations remain an enormous challenge – but the conversation did fill me with optimism about future construction in cities that were not global imperial capitals 2,000 years ago.

TBM technology

Tunnel-boring machines have advanced to the point of being archeology-safe. Italian heritage protection laws from the 2000s forbid any risk to historic buildings and historic sites, but TBM technology at this point allows preserving artifacts. It involves injecting a gel ahead of the cutting edge, which is not supposed to be a cost-raiser.

The result is that tunneling is cheap. This is not a matter of low wages – in fact, Marco cites higher wages for Italian skilled workers who staff TBMs, up to €4,500 a month net, which rises to about €9,000 gross with social contributions. These are based on a nationwide scale that only weakly varies with location, which helps explain why Naples costs are not low despite the region’s low incomes.

Station construction

Station construction costs vary immensely by location. In Rome, on the same project, stations in a suburban part of the city might be €60-70 million. This does not mean construction is trivially easy: Rome’s suburbs still often host historic sites, having been home to patrician villas in Antiquity, and in fact the word suburb dates to that era. However, it’s relatively safe, and I don’t think Line C ran into such sites.

Then in the most constrained parts of the city, things are different. The extension plans for Line C deeper into city center have station costs in the €400-600 million range. This is not what things cost everything within Rome, or even everywhere within the densely-built parts of the city. But the Line C extension passes through the most historic sites. An already-under construction segment will go to the Colosseum, and a planned extension deeper into city center is to go to Piazza Venezia, at the Wedding Cake, and it is that station that is projected to cost €600 million.

The reason for the high cost is that it is not possible to do archeology- and building-safe cut-and-cover. Piazza Venezia doesn’t quite have enough room for a cut-and-cover dig of a full-length station. It is fed by a wide street, the Via Fori Imperali, and I asked Marco why not build cut-and-cover there, but he pointed out that the street goes through the historic Forum. It is in fact elevated over the ruins; any cut-and-cover there would endanger the Forum, and is not acceptable.

Without cut-and-cover, the only alternative is to mine the stations. Rome investigated the option of large-diameter TBMs on the Barcelona L9 model and found it infeasible, since the tunnels are so big they might themselves cause some building damage. Once the stations are mined from a small shaft, their costs explode. Second Avenue Subway built stations using the same method, and had similar per-station construction costs.

The good news

Mined station construction is in practically all cases not necessary. New Yorkers talk about the city’s high built-up density as a reason why costs are high. But in terms of actual stuff in the way of a tunnel, there’s less in New York than in Rome or Istanbul, which has even lower construction costs.

In fact, there is a line in Rome that is rather similar in urban geography to Second Avenue Subway: the Line B1 branch. It runs under a 27 meter wide street flanked by modern buildings that are about 9 stories tall above ground but also have underground parking, Italy having such a car culture that the middle class expects to own cars even in Rome. The cost: €527 million for 3.9 km, in 2010-15.

Moreover, the hard rock in New York should make it easier to build stations while maintaining building safety. Manhattan’s schist is brittle and therefore requires concrete lining, unlike the more uniform gneiss of Stockholm, famously forming natural arches that are pretty to look at from within the tunnels. However, it is still better soil for construction than the sand of Berlin’s U5 extension, to be opened next month, or the alluvial soil of Amsterdam.

The explanation Marco gives concerning station construction is physical and not institutional. This means it should transplant well into another setting – which it does!

In Berlin, the city-center U5 extension, including U55, is in today’s money around €240 million/km. The stations look like cut-and-cover to me, and if they’re not then it comes from severe NIMBYism since the line goes under the very wide Unter den Linden, but one of the stations is basically under the river and another is under U6 and involves moving the U6 station, and the sandy soil is genuinely bad to tunnel through. Suburban extensions in Berlin, with easy cut-and-cover stations, are consistently in the €100-150 million/km range, which is barely higher than the non-Forum Italian range. So Berlin looks fine, and just needs to invest resources into U- and S-Bahn extensions and not into extending the A 100 motorway.

Can New York have what Italy has?

Almost certainly! Second Avenue is not an old or narrow street by Italian standards. Nor are any of the other streets slated for subway construction in New York, such as Nostrand, Utica, and even 125th. Importing construction techniques from Italy and Germany should be feasible. There may be problems with local politics – New Yorkers absolutely hate admitting that another city may be better than theirs in any way, and this makes learning harder. But it is not impossible, and so far there do not seem to be any physical or economic obstacles to doing so.