Monday, December 01, 2008
Governments and voters back rail spending
Amid all the coverage of the US Presidential election on November 4, and the victory of Democratic candidate Barack Obama, there has as yet been little focus on the implications for the rail sector. When Americans turned out in record numbers, they also approved most tax increases and bond issues that appeared on local ballots to fund rail and public transport projects, despite the faltering economic conditions.
California led the way, approving four out of five rail-related votes. Biggest by far was the proposal for the state to issue $9·95bn in bonds to help fund the $30bn first phase of the proposed high speed rail network linking the Los Angeles and San Francisco regions. Proposition 1A was supported by a 52% majority. However, before construction can begin, another $10bn must be found by the federal government and a similar sum from the private sector, which may not be easy.
Voters in Los Angeles, West Sacramento, and Marin and Sonoma counties north of San Francisco all backed sales tax increases to fund metro, light rail and commuter rail projects, whilst King, Pierce and Snohomish counties overwhelmingly endorsed further expansion of Seattle’s Sound Transit, including another 55 km of light rail lines. Honolulu residents backed proposals for a $5bn steel-wheeled heavy metro, whilst voters in Rhode Island and Albuquerque approved tax increases to help fund commuter rail.
With such clear signals from voters in a country once notoriously wedded to the private car, we can only hope that rail investment will feature in the stimulation packages which many governments favour to rebuild confidence and revitalise the flagging global economy.
Meeting in Washington DC last month, representatives from the G20 leading nations largely backed the idea of using public sector spending on major infrastructure projects to help get their economies moving again. There have been calls — which we would endorse — for investment to be targeted at building a more sustainable global economy, developing ?renewable energy sources, and investing in ‘green infrastructure’ such as public transport and transit-oriented development.
Last month the Chinese government confirmed that it was stepping up road and rail spending to stimulate its national economy. On October 27 the State Council approved a total of 2 000bn yuan for railway construction over the next 12 years, as envisaged in the Ministry of Railways’ medium and long-term plan prepared in 2004. Some of this is now to be brought forward, with suggestions that the 2020 target of a 120 000 km rail network could be reached as early as 2015.
Chinese railway investment is already running at record levels, as CR races to catch up with an average 8·7% annual increase in freight tonnage between 2003 and 2007. With a total of 1 250bn yuan approved for the 2006-10 plan period, spending is expected to reach 342bn yuan in 2009 and 334bn in 2010, compared with 245bn being spent this year.
In Germany, the federal government announced on November 5 that an extra €1bn per year will be spent in 2009 and 2010 to tackle bottlenecks in the country’s road and rail networks, creating an estimated 40 000 jobs. However funding for other rail projects may be tight, with the postponement of the DB Mobility Logistics flotation reported to have left a €1bn hole in the railway’s budget (p941).
With President-Elect Obama apparently indicating that he would favour a public works approach, US lobby groups are already lining up for federal handouts. The American Short Line & Regional Railroad Association says its members have capital projects worth US$500m ready to start, and the States for Passenger Rail Coalition wants Congress to earmark $250m for inter-city rail improvements. Such schemes surely make more sense than simply propping up the ailing car manufacturers now knocking on President Bush’s door.
Rail industry suppliers continue to report substantial orderbooks, but we are still at an early stage in the recession. Global trade volumes have been hit by the lack of liquidity, and around 80% of respondents to a recent poll on railwaygazette.com believed that the economic crisis will impact on rail traffic volumes. This will hit revenues and profitability, although strategic investment and the longer term demands for modal shift suggest that future prospects remain good.
