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30 year old TGVs getting remodelled
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<p>Most airport construction, including the enhancement of existing facilities, is funded through the issuance of municipal or tax free bonds by the governing airport authority. In addition, the FAA's airport improvements program makes grants and loans to select airports to help improve their capabilities. In all cases the cost of the improvements are capitalized and paid for by user fees.</p> <p>The ability to finance an airport with municipal bonds as opposed to fully taxable bonds results in a lower interest rate and, therefore, lower construction costs, which in turn means lower user fees. To this extent one can argue that the airports are subsidized by the federal and state governments, although the amount of the subsidy, depending on the spread between tax free and taxable bonds, is relatively small and is recaptured in part through higher income taxes paid by the airlines because of the lower airport user fees.</p> <p>Equally important, the amount of the federal subsidy that flows through to the airlines is arguable. Airlines account for approximately 30 per cent of airport use and approximately 35 per cent of the air traffic control system, which means the bulk of the system is used by general aviation and military aviation operating in civilian airspace. I don't know what percentage of Miami International is used by the various modes of aviation, but it probably is fair to say that the airlines do not use 100 per cent of the existing or planned capacity.</p> <p>Amtrak, which pays no taxes, gets a similar subsidy in that most of the stations that it uses are owned by cities or municipalities that used tax free financing to fund them. As is true for the airports, the municipal owners of Amtrak's stations pay no taxes. Moreover, the major terminals, i.e. Penn Station, 30th Street Station, etc., pay no taxes. </p> <p>Another post notes that no passenger railroad in the world covers its fully allocated costs. This appears to be the case, although the French claim that the Paris to Marseilles TGV recovers its fully allocated costs through the fare box. And the Japanese make the same claim for the Tokyo to Osaka HSR. However, determining the veracity of these claim is difficult. The French and Japanese use the International Accounting Standards Board principles, whereas the U.S. uses General Accepted Accounting Principles. There are important differences between these accounting standards, and they make comparisons difficult.</p> <p>It doesn't matter what they do in other countries. Saying that passenger railroads around the world lose money is akin to saying that a family should go bankrupt because the neighbors are going bankrupt. The United States should craft a solution that meets its needs and not the needs of other countries. Where does passenger rail make sense is the key question? In my mind it is in relatively short, high density corridors where the cost to expand the airways and highways is prohibitive. </p>
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