TX HSR Update

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Posted by charlie hebdo on Monday, November 4, 2019 9:46 PM

Connection at some junction point with a cross platform transfer was what I had in mind.  The SA corridor doesn't need as high a speed, but better than 125.

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Posted by Overmod on Monday, November 4, 2019 10:11 PM

charlie hebdo
The SA corridor doesn't need as high a speed, but better than 125.

The only thing is that it's a hell of a huge and expensive step to go from 125 to 150.  Note that this is the technical difference between the original British HSTs, which were wildly successful, and the APT-E or P, which can't really be said in any sense to have been.

All the vast amount of design and construction in PRIIA and modern passenger locomotives here is 'obligate' 125mph; you can't stretch the designs safely for the higher operating speed.  Therefore, it's important to look at the percentage of actual operation in that expensive 'window' above 125mph to see if the time gains from providing it are meaningful enough to spend all the additional money -- the likely alternative being full HSR between the more major cities or pairs, and "slower" (but still 125mph-capable) regional rail feeding the others.

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Posted by blue streak 1 on Monday, November 4, 2019 10:16 PM

I have a concern that the Japan type signaling system will have no ability to be compatible with the US PTC .  Will the FRA even have the ability to properly vet the Japaneese type signaling and compatibility ?  Now I admit that at present there are no plans to operate on present US RRs.  However certainly connecting tracks will be installed.  The station at Houston seems to be quite a way from Hobby airport.  Will that siphon off persons that now have Hobby who will have originations / destinations near TX HSR station ? Probably.  

Now if TX HSR determines that there are many O & Ds near downtown HOS then extending to say HOS Amtrak station ( or  another location downtown ) might be in order.  Now if that happens  there is the PTC problem operatingon on present US RRs.  

Next would expect TX HSR to desire entrance in the FTW - SAS market.  That route would certainly have TX HSR desiring to connect DAL - FTW.  So it either builds dedicated ROW that would be very difficult due to the high density population use of that route.  Or it uses diesel or a cab car to run the DAL FTW route.  Electrifiction of that portion may not be possible with other agencys already using some other type current ?

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Posted by CMStPnP on Tuesday, November 5, 2019 6:06 PM

Overmod
Texans can comment on this far better than I can, but my understanding was that the San Antonio 'corridor' was dense enough that it could be effectively served with 125mph 'diesel' service at far less capital cost and only a few minutes' additional trip time net of all the required "regional" stops.  Something like Brightline, perhaps; PRIIA-compliant stuff with by-now-well-proven reliability (and potential resale value if the service 'fails to thrive' for some reason) Add

Here is the brief history on that effort.    State offered to purchase outright the UP lines between Austin and San Antonio for both Commutter Rail and for lower speed HSR as you indicate.    States plan was pretty cool they would pay for a brand new UP line around the metropolis' so they could increase the speed limits of their trains significantly to San Antonio.   Skipping by Austin and burbs in-between and go direct to San Antonio in as straight a line as they could reasonably engineer through the topography.   New line would be engineered much better than current for higher speed freight.    UP was definitely interested.   

After about 5-10 years of talking and no action I think UP recently pulled out of the agreement with a comment that could only be interpreted as "get your crap together then call us back to the table".   If the plan ever goes through UP will definitely be the winner as it should shave significant time off it's freight service and have brand new infrastructure engineered with todays technology.    No convincing of UP will need to happen.    Taxpayers are another issue because Texas is basically buying an old century ago engineered line for top dollar and giving UP a newly engineered replacement as part of the deal.    Pretty sure arguing over that and how much each community would contribute bogged the discussions down.

 One thing I will say about Texas due to its revenues from sale of oil.   When it finds a large project it likes it finds the money to burn on it and gets it done on time or earlier.    No other state I have been a resident of operates like Texas does.   Incredible to watch.   When I was a former IT consultant traveling the country I would come back to Dallas after a mere three weeks and they would have new roads and Freeway interchanges opened........one time I got lost driving home from DFW airport and I had been living here for 10-12 years.    It is amazing to watch how fast they build freeways as well.    Like night and day compared to the Midwest which stretches the projects over several years instead of the months or weeks they should take.    Flying back to Wisconsin I see projects taking 2-5 years that would be done in less than 6 months in Dallas.

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Posted by JPS1 on Friday, November 8, 2019 3:58 PM
“Texas Central is an investor-funded company …… The Railroad will not seek grants from the US Government or the State of Texas, nor any operational subsidy once operation begins. The project will be financed with a blend of debt and equity.
 
As for federal loans, the project will explore all forms of capital available to private companies to finance debt for the project, including federal loan programs like RRIF and TIFIA. These programs are specifically designed to promote private investment to improve and innovate US infrastructure.”  Texas Central Website, November 4, 2019.
 
No details regarding how the project will be finance have been released to the public.  Clearly, the project managers intend to look seriously at various federal programs to help fund it.  
 
Every high-speed railroad, as far as I can determine, has required significant amounts of government monies to build the infrastructure.  Using RRIF loans to build out some or all of Texas Central is using government monies as leverage to get a better rate than what could be had in the capital markets.
 
If the project borrowed $5 billion under the RRIF Program, as an example, the probable composite interest for 35 years, which is the longest period under the RRIF Program, would be approximately $1,036 million.  If Texas Central had to borrow the same amount of money in the competitive capital market, assuming a triple BBB rating on the bonds, which would be problematic, the interest would be approximately $4,564 million or a difference of $3,528 million. 
 
I suspect most people that look at Texas Central’s public statements hear the words in the first paragraph and assume that the project will not get any help from the taxpayers.  However, assuming the promoters lock down government backed loans; they will be getting indirect support from the taxpayers.  And as the aforementioned examples show, the amount of help could be significant. 
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Posted by charlie hebdo on Friday, November 8, 2019 5:10 PM

No subsidy, no government grants is what they said.  Getting a government-backed loan through RRIF does not cost Federal taxpayers a cent. The only way the tanpayers would be on the hook would be if TX Central defaulted.

You seem to have a problem with programs that benefit society at no cost to taxpayers.  Perhaps if the route were to San Antonio you'd be gung ho?

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Posted by JPS1 on Friday, November 8, 2019 8:29 PM
The major issue is not risk to the taxpayers if Texas Central leverages off of public monies to obtain some of the funds required to build the railway.  
 
Relying on public money to get a lower rate than what Texas Central could get in the competitive capital market is a key point. 
 
If Texas Central uses the RRIF Program, it would not be taking any direct grants, but it would be using the the U.S. Treasury's credit standing to get a better deal than what it could get otherwise.  And that is riding on the backs of Uncle Sam.  
 
The U.S. Treasury borrows money for the RRIF Program, thereby increasing the national debt.  Doing so has a deleterious impact on the country’s balance sheet and international payments. 
 
Assuming the same ratio of incremental debt holders as those holding the current debt, approximately 40 percent of the interest payments would flow to overseas investors, e.g. Japan, China, etc.
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Posted by MidlandMike on Friday, November 8, 2019 9:39 PM

Is the interest charged in the RRIF loans comparable to Treasury bond yields?

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Posted by JPS1 on Friday, November 8, 2019 10:13 PM

MidlandMike
 Is the interest charged in the RRIF loans comparable to Treasury bond yields? 

According to the RRIF website, loans maturing as far out as 35 years can be used to fund up to 100% of a railroad project at interest rates equal to the cost of borrowing to the federal government. 

For illustration purposes I assumed an average rate from the quoted 10, 20, and 30 years bonds since the project probably would be financed in steps.  Exactly how it will be financed, however, is largely unknown. 

If Texas Central can borrow money at the U.S. Treasury rate(s), thereby leveraging off the U.S. Treasury, it will save a considerable amount of interest compared to what it would have to pay in the competitive capital markets.  

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Posted by CMStPnP on Monday, November 11, 2019 1:23 PM

JPS1
The U.S. Treasury borrows money for the RRIF Program, thereby increasing the national debt.  Doing so has a deleterious impact on the country’s balance sheet and international payments.   

Thats a point of view that "all leverage or debt is bad".   Which I do not agree with.   If the return on investment for the borrowing exceeds the borrowing costs and the debt is paid back.   It is better to borrow and take the investment now then to push the investment back into the future when you have cash.   Investing in such a way speeds growth in areas such as personal income, GDP, and most of all tax revenue.

If the HSR project has an economic impact to the state and the country that is greater than the costs of the money borrowed.   Then borrowing the money was a good idea and the right thing to do as it results in a larger economy with more incomming tax revenue sooner rather than later.

On the other hand, if the HSR project is poorly engineered, managed, or fails to achieve a rate of return which is superior to the subsidized and true cost of the loan and incurring the debt and the debt is never paid off.   Then it wasn't a very smart idea to borrow the money and the taxpayers will be holding the bag in the end.

I remember back when I worked for EDS, they at one time told managers at the Account level only to accept new projects with clients that had a 23% IRR or higher.   While that looks good on paper, a good portion of the managers were too stupid to know what exactly that directive meant outside of what an automatron would interpret the directive.    Consequently, it caused a lot of issues.  What they of course meant to say was overall your project portfolio should be above a specific IRR in order for the company to be profitable.   Some projects will lose money, some will be excessively profitable and others break even.   Thats how it should have been interpreted because otherwise your going to pizz off the client if you insist on financial rape for each project they want done.   That directive was misapplied and ticked off General Motors so bad that GM restarted their own IT Department and started to bring EDS work in house again, which became an increasing drain on EDS revenue more than there would have been if they never sent out the communication in the first place.     Anyways, off on a tangent but a short lesson in how not to communicate to a larger organization.

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Posted by charlie hebdo on Monday, November 11, 2019 2:06 PM

The RRIF operates at no cost to the Treasury and does not receive an appropriation.

https://www.everycrsreport.com/reports/R44028.html

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Posted by JPS1 on Monday, November 11, 2019 3:52 PM

I did not say that debt is ill advised.  Using debt, as long as it can be serviced, can generate a positive outcome.  Every corporation that I worked for used borrow money to leverage a better outcome.

If Texas Central borrows money under the RRIF Program, it will be using the public purse as leverage to get a better outcome than what it could get if it had to borrow money in the capital markets.  That is stretching the claim that it will not rely on public monies to build out the project.

The U.S. Treasury is the source of funds for the RRIF Program.  But it does not have any loose cash sitting around.  So, it has to borrow the money for the RRIF Program by issuing additional public debt.  And that increases the amount of leverage on the U.S. Government's Balance Sheet.  Moreover, approximately 40 percent of the interest on public debt flows overseas.

At the close of business on Friday, November 8, 2019, the average yield on the 30-year U.S. Treasury bond was 2.42%.  The average yield on a AAA municipal bond for the same period was 3.02%; the average yield on the AA municipal bond was 3.14%.  The average yield on a AAA corporate bond was 3.57% while the average yield on a AA corporate was 4.74%. 

If Texas Central were able to secure an RRIF loan, it would get a better rate than what it could get if it could issue municipal bonds and significantly better than what it could get if it had to issue corporate bonds.   

Whether the promoters of Texas Central apply for an RRIF remains to be seen.  As I said, they are just considering it.  

There is a cost to the U.S. Treasury when it issues public debt.  It is the spread.  In addition, the Treasury incurs a cost in setting up and administering the debt.  It is a small amount in relation to the total, but there is no such thing as issuing debt and servicing it w/o cost. 

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Posted by Erik_Mag on Monday, November 11, 2019 10:15 PM

CMStPnP

On the other hand, if the HSR project is poorly engineered, managed, or fails to achieve a rate of return which is superior to the subsidized and true cost of the loan and incurring the debt and the debt is never paid off.   Then it wasn't a very smart idea to borrow the money and the taxpayers will be holding the bag in the end.

Sadly that seems to be an apt description of the California HSR project. OTOH, maybe the Cal HSR team can convince the likes of Apple, Facebook, Google and others to kick in the funds to complete the line from Merced to San Mateo county to give their employees access to cheaper housing.

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Posted by CMStPnP on Monday, November 11, 2019 10:27 PM

JPS1
The U.S. Treasury is the source of funds for the RRIF Program.  But it does not have any loose cash sitting around. 

Actually, Treasury has several tens of billions lying around that do not appear in the annual budget before Congress.   They funded the CFPB with part of that money pool.    Constitutionally, it should be returned to the Treasury to be budgeted  and appropriated.   Instead it is now part of the skim and diverted before it gets back to Treasury.   In my opinion, not a good precendent to set.

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Posted by charlie hebdo on Monday, November 11, 2019 10:30 PM

Obviously you didn't read the article linked because you don't like to.  Unfortunately,  you miss opportunities to learn. 

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Posted by JPS1 on Tuesday, November 12, 2019 8:55 AM

charlie hebdo
 Obviously you didn't read the article linked because you don't like to.  Unfortunately,  you miss opportunities to learn. 

I have read various articles about the RRIF Program.  How do you think I got the information regarding the loans to Amtrak or DART?

There is an administrative cost of putting the loans on the books and administering them.  Who do you think pays that cost?

At any given moment the U.S. Treasury has some cash from a variety of sources.  But at the end of 2018 it had a net cash deficit of $779 billion.  So, at the moment an RRIF loan application is approved, the funds may be available in cash, but if they are taken down, the Treasury has to borrow an equivalent amount from the market.  So, the net effect is to increase the borrowings on the government's balance sheet, which weakens it albeit by a small amount.

Telling someone to read a document when you have no idea whether they have read it is ignorant.  You don’t seem to get it.  I don’t take instructions from you. 

Information regarding the cash position of the U.S. Government can be obtained from the federal government’s consolidated financial statements.   

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Posted by JPS1 on Tuesday, November 12, 2019 9:04 AM

CMStPnP
 JPS1 The U.S. Treasury is the source of funds for the RRIF Program.  But it does not have any loose cash sitting around.  

Actually, Treasury has several tens of billions lying around that do not appear in the annual budget before Congress.   They funded the CFPB with part of that money pool.    Constitutionally, it should be returned to the Treasury to be budgeted  and appropriated.   Instead it is now part of the skim and diverted before it gets back to Treasury.   In my opinion, not a good precendent to set. 

The availability of money for a RRIF loan is a cash flow issue.  The Congress has not adopted a budget for years.  The key issue is authorization and appropriations. 

The formal process consists of two sequential steps: (1) enactment of an authorization measure that may create or continue an agency, program, or activity as well as authorize the subsequent enactment of appropriations; and (2) enactment of appropriations to provide funds for the authorized agency, program, or activity.  

The mechanics of the RRIF or any government loan program aside, if Texas Central takes out a government supported loan for the projrect, it is leveraging a better outcome off the backs of the taxpayers than what it could get in the open capital markets.   

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Posted by charlie hebdo on Tuesday, November 12, 2019 10:12 AM

JPS1

 

 
charlie hebdo
 Obviously you didn't read the article linked because you don't like to.  Unfortunately,  you miss opportunities to learn. 

 

I have read various articles about the RRIF Program.  How do you think I got the information regarding the loans to Amtrak or DART?

There is an administrative cost of putting the loans on the books and administering them.  Who do you think pays that cost?

At any given moment the U.S. Treasury has some cash from a variety of sources.  But at the end of 2018 it had a net cash deficit of $779 billion.  So, at the moment an RRIF loan application is approved, the funds may be available in cash, but if they are taken down, the Treasury has to borrow an equivalent amount from the market.  So, the net effect is to increase the borrowings on the government's balance sheet, which weakens it albeit by a small amount.

Telling someone to read a document when you have no idea whether they have read it is ignorant.  You don’t seem to get it.  I don’t take instructions from you. 

Information regarding the cash position of the U.S. Government can be obtained from the federal government’s consolidated financial statements.   

 

I did not give you an order to read the short, linked explanation of RRIF.   Where did you get that idea?  You can ignore it and remain unknowing of its content, which does not agree with what you proclaim. 

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Posted by charlie hebdo on Thursday, November 21, 2019 5:24 PM
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Posted by Gramp on Friday, November 22, 2019 12:23 AM

Sure hope they can succeed. The pioneer of Japan's original bullet train surmounted enormous opposition to make it a reality there. Look at it now, 50+ years later. 

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Posted by CMStPnP on Sunday, November 24, 2019 3:28 PM

Gramp
Sure hope they can succeed. The pioneer of Japan's original bullet train surmounted enormous opposition to make it a reality there. Look at it now, 50+ years later. 

Given the history in Texas I am kind of skeptical.    You really need grass roots support for transit or rail passenger service to achieve it in Texas.    Thats how we landed the Heartland Flyer and kept the Texas Eagle all these years.    Thats also how Wisconsin was so successful expanding Milwaukee to Chicago service, without the strong business community and grass roots support in Milwaukee for train service to Chicago, there wouldn't be any trains.

   I don't see anyone in the State of Texas at the grass roots level saying that we need HSR service.    All I see is a small handful of special interest groups and this business group called Texas Central.  So time will tell.

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Posted by blue streak 1 on Tuesday, June 2, 2020 10:14 PM

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