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Public infrastructure funding models

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Zagros View Drop Down
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    Posted: 21 Dec 2010 at 04:33
I am specifically thinking rail.  What are workable funding options and what are their strengths and benefits, weaknesses and costs relative to the actors involved - government, rail authorities/regulators, investors, private operators and first and foremost passengers and taxpayers?


Edited by Zagros - 21 Dec 2010 at 04:33
"There was glory in pissing, Corabb decided as he watched the stream curve out and make that familiar but unique sound as it hit the ground." So true.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Zagros Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 04:34
I am wondering how within the space of 50 years you can go from having one of the most envied rail networks to having probably the most embarrassing ***and expensive*** in the developed world.

Edited by Zagros - 21 Dec 2010 at 04:35
"There was glory in pissing, Corabb decided as he watched the stream curve out and make that familiar but unique sound as it hit the ground." So true.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 05:11
Originally posted by Zagros Zagros wrote:

I am wondering how within the space of 50 years you can go from having one of the most envied rail networks to having probably the most embarrassing ***and expensive*** in the developed world.
 
Nationalise it, that was what the Brits did.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gcle2003 Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 05:24
Originally posted by Al Jassas Al Jassas wrote:

Originally posted by Zagros Zagros wrote:

I am wondering how within the space of 50 years you can go from having one of the most envied rail networks to having probably the most embarrassing ***and expensive*** in the developed world.
 
Nationalise it, that was what the Brits did.
 
Al-Jassas
You forget that the railways in Britain were nationalised in 1914 and only partly privatised, having been deliberately amalgamated into four divisions in order to save many of the existing companies from bankruptcy by the conservative government in 1923. British Railways as a single unit was established under completely public ownership by the Attlee government just post-ww2 and remained efficient and reliable for some while, until a few things happened, one of them being the retirement of an earlier generation of railway workers, anothe rof course being the building of the motorways and the generally wider car ownership of the late fifties and sixties.
 
Thewhole thing has become the present over-expensive, over-crowded, unreliable and over expensive mess it currently is since it was privatised under the Thatcher government.
 
Meanwhile the natioanlised railways of Germany, France, and yes Luxembourg as well as other European countries remain paragons of efficiency and cheap.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 05:29

From what I read it seems that for certain countries nationalisation always dooms the sector instead of improving it or at least keep it as it was Britain and Saudi Arabia are one of them.

 
Is this a general case you think?
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gcle2003 Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 05:33
No. What actually ruined the railways was the refusal in some countries to realise that they needed heavy subsidies to survive in a free market in the second half of the 20th century (except on a few specialised routes).
 
Privatised or not no-one was going to make any money out of them in that period, so you either had to nationalise them and be ready to subsidise freight rates and fares, or let private companies run them into the ground seeking to cut costs. Or of course to do without them, the point the US almost reached.
 
Whether the oil crisis when we get there will make a difference to the economics, I don't know. But the railways won't come back into profitability until the internal combustion engine fades out.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote drgonzaga Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 06:22
Originally posted by gcle2003 gcle2003 wrote:

No. What actually ruined the railways was the refusal in some countries to realise that they needed heavy subsidies to survive in a free market in the second half of the 20th century (except on a few specialised routes).
 
Privatised or not no-one was going to make any money out of them in that period, so you either had to nationalise them and be ready to subsidise freight rates and fares, or let private companies run them into the ground seeking to cut costs. Or of course to do without them, the point the US almost reached.
 
Whether the oil crisis when we get there will make a difference to the economics, I don't know. But the railways won't come back into profitability until the internal combustion engine fades out.
 
Whoa there Gcle, US rails are glorying in profits since the advent of deregulation! Close to 40% of US domestic freight travels by rail. Between 1975 and 2005 freight-ton miles more than doubled going from 750 billion to over 1.5 trillion ftm. Back in 1950 Europe moved about the same percentage of its freight by rail as did the US; however, today, while the figure cited above is the US percentage, the percentage of freight traveling by rail in Europe has dropped to only some 8%! Now if we wish to consider passenger rail traffic...well that is another story entirely.
 
Here is some food for thought:
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Guests Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 09:46
Originally posted by drgonzaga drgonzaga wrote:

Originally posted by gcle2003 gcle2003 wrote:

No. What actually ruined the railways was the refusal in some countries to realise that they needed heavy subsidies to survive in a free market in the second half of the 20th century (except on a few specialised routes).
 
Privatised or not no-one was going to make any money out of them in that period, so you either had to nationalise them and be ready to subsidise freight rates and fares, or let private companies run them into the ground seeking to cut costs. Or of course to do without them, the point the US almost reached.
 
Whether the oil crisis when we get there will make a difference to the economics, I don't know. But the railways won't come back into profitability until the internal combustion engine fades out.
 
Whoa there Gcle, US rails are glorying in profits since the advent of deregulation! Close to 40% of US domestic freight travels by rail. Between 1975 and 2005 freight-ton miles more than doubled going from 750 billion to over 1.5 trillion ftm. Back in 1950 Europe moved about the same percentage of its freight by rail as did the US; however, today, while the figure cited above is the US percentage, the percentage of freight traveling by rail in Europe has dropped to only some 8%! Now if we wish to consider passenger rail traffic...well that is another story entirely.
 
Here is some food for thought:
 


Could this perhaps be because an even cheaper method of freighting (shipping) is practical from the standpoint of European geography but not for much of the US?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote drgonzaga Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 10:30
Yes, distances are more formidable in the North American environment. But from the perspective of history there is another factor. Rail construction in Europe followed political rather than economic realities. If you take a rail map you will discover that the principal hubs are all capital cities! It was much more so in the 19th century but such remains today even in the projections for rapid rail.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gcle2003 Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 22:03
Originally posted by drgonzaga drgonzaga wrote:

Whoa there Gcle, US rails are glorying in profits since the advent of deregulation! Close to 40% of US domestic freight travels by rail. Between 1975 and 2005 freight-ton miles more than doubled going from 750 billion to over 1.5 trillion ftm. Back in 1950 Europe moved about the same percentage of its freight by rail as did the US; however, today, while the figure cited above is the US percentage, the percentage of freight traveling by rail in Europe has dropped to only some 8%! Now if we wish to consider passenger rail traffic...well that is another story entirely.
 
Here is some food for thought:
 
I accept I had passenger traffic in mind.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gcle2003 Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 22:05
As a matter of interest, in the current weather conditions, Luxembourg is have to bring in supplies of salt and grit from Germany by barge up the Moselle.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Zagros Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 22:09
Originally posted by gcle2003 gcle2003 wrote:

Originally posted by drgonzaga drgonzaga wrote:

Whoa there Gcle, US rails are glorying in profits since the advent of deregulation! Close to 40% of US domestic freight travels by rail. Between 1975 and 2005 freight-ton miles more than doubled going from 750 billion to over 1.5 trillion ftm. Back in 1950 Europe moved about the same percentage of its freight by rail as did the US; however, today, while the figure cited above is the US percentage, the percentage of freight traveling by rail in Europe has dropped to only some 8%! Now if we wish to consider passenger rail traffic...well that is another story entirely.
 
Here is some food for thought:
 
I accept I had passenger traffic in mind.


A return ticket from Boston to NY was $300 or so 18 months ago, that's even worse than here for the equivalent distance.  Actually there may now be parity with that.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Zagros Quote  Post ReplyReply Direct Link To This Post Posted: 21 Dec 2010 at 22:10
Originally posted by drgonzaga drgonzaga wrote:

Yes, distances are more formidable in the North American environment. But from the perspective of history there is another factor. Rail construction in Europe followed political rather than economic realities. If you take a rail map you will discover that the principal hubs are all capital cities! It was much more so in the 19th century but such remains today even in the projections for rapid rail.
 


Also, troop mobilisation was aof prime concern then too.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 22 Dec 2010 at 00:12
By the way who said you can't run a passanger railroad without being profitable. TGV network is the goose that lays 1 billion euros for the SNCF. Deutche bahn also makes a good profit too.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Seko- Quote  Post ReplyReply Direct Link To This Post Posted: 22 Dec 2010 at 00:23
Originally posted by gcle2003 gcle2003 wrote:

No. What actually ruined the railways was the refusal in some countries to realise that they needed heavy subsidies to survive in a free market in the second half of the 20th century (except on a few specialised routes).
 
Privatised or not no-one was going to make any money out of them in that period, so you either had to nationalise them and be ready to subsidise freight rates and fares, or let private companies run them into the ground seeking to cut costs. Or of course to do without them, the point the US almost reached.
 
Whether the oil crisis when we get there will make a difference to the economics, I don't know. But the railways won't come back into profitability until the internal combustion engine fades out.


Public transportation in the US has a unique history. Not too long ago we had an abundance of street cars/trolleys until the competition put an end to them. Learn about how GM, Standard Oil, Firestone and Mack Truck conspired and monopolized public transportation that doomed the street car.

http://en.wikipedia.org/wiki/Great_American_streetcar_scandal


Edited by Seko - 22 Dec 2010 at 00:23
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gcle2003 Quote  Post ReplyReply Direct Link To This Post Posted: 22 Dec 2010 at 00:56
Originally posted by Al Jassas Al Jassas wrote:

By the way who said you can't run a passanger railroad without being profitable. TGV network is the goose that lays 1 billion euros for the SNCF. Deutche bahn also makes a good profit too.
 
Al-Jassas 
Only because in both countries the rail infrastructure is nationalised and paid for by the government. If the SNCF still had to pay off its initial debts and interest on them, and build its own track it wouldn't be so profitable.
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Al Jassas Quote  Post ReplyReply Direct Link To This Post Posted: 22 Dec 2010 at 01:06
You're confusing me, what part of rail infrastructure are you talking about? Is it the stations, the electricity or the tracks themselves.
 
In my opinions railroads should be dealt with in a similar manner governments deal with airwaves. The government owns the airwaves and charges companies for their use and regulates it. Railways should be treated as such. Tracks are built and owned by the state but leased for major corporations. Governments can afford decaded until the fees pay for the capital invested but it would be successful.
 
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Edited by Al Jassas - 22 Dec 2010 at 01:07
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Zagros Quote  Post ReplyReply Direct Link To This Post Posted: 22 Dec 2010 at 01:21
Originally posted by Al Jassas Al Jassas wrote:

You're confusing me, what part of rail infrastructure are you talking about? Is it the stations, the electricity or the tracks themselves.
 
In my opinions railroads should be dealt with in a similar manner governments deal with airwaves. The government owns the airwaves and charges companies for their use and regulates it. Railways should be treated as such. Tracks are built and owned by the state but leased for major corporations. Governments can afford decaded until the fees pay for the capital invested but it would be successful.
 
Al-Jassas


I agree with that ownership model. At the moment the tracks are also privately held here - but I believe there are contrictive regulatory obligations surrounding everything and too much civil service meddling in hand with that.

In the case of UK, it is stations and tracks in need of upgrade to support more and better trains.
"There was glory in pissing, Corabb decided as he watched the stream curve out and make that familiar but unique sound as it hit the ground." So true.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote gcle2003 Quote  Post ReplyReply Direct Link To This Post Posted: 22 Dec 2010 at 03:57
Originally posted by Al Jassas Al Jassas wrote:

You're confusing me, what part of rail infrastructure are you talking about? Is it the stations, the electricity or the tracks themselves.
IIRC in France I'm talking about the tracks.  Stations there still belong to the SNCF (which itself is still of course nationalised. The splitting of tracks, signals, current providers and so on from the operation of trains is the result of an EU directive prescribing that all member states do that, so that private companies can bid for contracts to operate the trains. It's noteworthy that no private company in France has come forward wanting to do that.
 
The situation is much the same in Germany, but I'm not sure whether the stations belong to the infrastructure company or the operating one (Deutsche Bahn).
 
Mostly it arises from a series of EU directives mainly concerned with opening up the possibility of operating trains in more than one country.
http://en.wikipedia.org/wiki/EU_Directive_91/440 illustrates how confusing the situation currently is and how it is still an ongoing process.
 
The wikipedia article doesn't say so but the chief result of the split with regard to the operating companies is that they don't have to continue paying the debts incurred before the split. Those are now born by the governments.
Quote
 
In my opinions railroads should be dealt with in a similar manner governments deal with airwaves. The government owns the airwaves and charges companies for their use and regulates it. Railways should be treated as such. Tracks are built and owned by the state but leased for major corporations. Governments can afford decaded until the fees pay for the capital invested but it would be successful.
That's possible under the EU directive, but private companies - other than in Britain - are reluctant to come forward. The operating companies tend also to be state or province or municipality owned.
 
The result of the British privatisation has been a complete mess, as the thread started up saying, but the split seems to have worked pretty well elsewhere.
 
With regard to the public-infrastruture private-operating suggestion, how is it just that private companies should be allowed to profit (if there were any profits) on the basis of public subvention?
 
That they pay licences to the infrastructure organisation is no answer, because if they pay commercially calculated fees they would still be operating at a loss.
 


Edited by gcle2003 - 22 Dec 2010 at 04:00
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