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Old July 27th, 2009, 01:55 PM   #1
asolspunk
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MISC | Financing of High speed tracks

Do anyone know how High speed tracks where financed around the world.

I have tried to find examples of the financing of HS tracks to get and idea of weather or not it would make sense to build HS in my country.

Case studies, links ect. will be appreciated ;-)
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Old July 27th, 2009, 09:21 PM   #2
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In Switzerland are financed with a tax on trucks, an 0.1% increase on the VAT tax, and by part of the taxes on combustibles.
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Old July 27th, 2009, 10:17 PM   #3
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I believe in the US we are planning to use either American Express or VISA.
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Old July 27th, 2009, 10:22 PM   #4
davsot
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LMAO!!!

Yes, very interesting thread I would also like to know how countries around the world have done it.
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Old July 27th, 2009, 10:54 PM   #5
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The HSL Zuid in the Netherlands is financed via an public-private partnership (PPP).

The government build the track foundation and all the tunnels and bridges etc. And a consortium called Infraspeed (consisting of American builder Fluor, Dutch builder BAM, Siemens Netherlands and two institutional investors Innisfree and HSBC) has build the tracks, the overhead wires, the ERMTS system and the communication system. Infraspeed is responsible for design, construction, financing and maintenance until 2030.
http://www.hslzuid.nl/hsl/uk/hslzuid/index.jsp
http://www.infraspeed.nl/

And now the money part.

The total cost of the line is 7,195,000,000 Euro.

Parts of the financing that is not done directly by the government:
FES-fund (natural gas revenues): 1,710,000,000 Euro (Paid by the government, just not with tax money)
private: 940,000,000 Euro
EU revenues: 193,000,000 Euro
3rd party revenues: 101,000,000 Euro
Risk Reserve: 482,000,000 Euro (reserved tax money)
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Old July 27th, 2009, 11:00 PM   #6
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Quote:
Originally Posted by asolspunk View Post
Do anyone know how High speed tracks where financed around the world.

I have tried to find examples of the financing of HS tracks to get and idea of weather or not it would make sense to build HS in my country.

Case studies, links ect. will be appreciated ;-)
Financing of french high speed line / east part (TGV Est) : http://fr.wikipedia.org/wiki/LGV_Est...ement_original

It is in french...
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Old July 28th, 2009, 06:44 AM   #7
davsot
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can you just explain it over the top? can't read French
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Old July 28th, 2009, 08:39 AM   #8
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I believe in the US we are planning to use either American Express or VISA.
...both of which have the Bank of China logo on them.
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Old July 28th, 2009, 11:47 AM   #9
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In two words:

The local authorities partly financed the LGV Est, proportionally to the gain of time between Paris and their region. Alsace had to pay 300 millions. This system will probably be used also for the second phase. The financement is divides as follows:

Central gouvernement : 1 220 M€ (39 %)
European Union : 320 M€ (10 %)
Grand-Duché de Luxembourg : 117 M€ (3,75 %)
RFF : 682 M€ (21,8 %) (infrastrucutre manager of French State Railways)
SNCF : 49 M€ (1,5 %) (transport subdivision of French State Railways)
Regions, departements and cities : 736 M€ (23,5 %)
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Old July 28th, 2009, 11:55 AM   #10
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Originally Posted by davsot View Post
can you just explain it over the top? can't read French
It's not so complicated. The French state: 39%; European Union: 10%; The track operating company (RFF): 21.8%; the railway company (SNCF): 1.5%; Luxembourg: 3.75%; regional and municipal authorities: 23.5%.

I'd say, though, that they're mixing pears and apples. The EU contribution is a soft loan, which has to be repayed even if not exactly on market terms. The money from RFF and SNCF is likewise a "commercial investment" that they are expected to amortise through the subsequent HS operations. The "public money" are pretty much grants, though the French state as owner of SNCF and RFF could still hope to see some payback.

This is the first time in French history that the sub-national levels of government were asked to contribute. This was done because, unlike Paris-Marseille and Paris-Lille-London there were not a couple of mega-cities of national interest to link up. Merely a smattering of medium-sized cities in the east of the country. - Plus the tiny nation Luxembourg.

In the past, the unwritten rule has been that the French state acquires the right of way and the railway companies (or company: what was once SNCF has been broken up into RFF and the new SNCF) pay for the construction and the rolling stock. The latter part has normally been subject to reasonably hard-nosed cost-benefit calculus. The investment in tracks and trains should pay itself back in maximum 15-20 years. Conversely, the French have been very lax about the economics of land acquisitions by the state, seemingly thinking that "we'll get it back eventually and, if not, the money is safe enough being invested in land".
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Old July 28th, 2009, 12:20 PM   #11
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Basically large-scale infrastructure projects are paid through PPP schemes or with direct loans (needs to be a financially strong entity which does not have heavy loan burden). And the investment needs to be repaid - mostly on a direct business basis, f.e. direct payments to infrastructure operator.
As the income from direct payments is somewhat risky and private behemoths able to implement large scale PPP's (e.g. above 1 billion EUR) in this world can be counted on fingers of both hands and are much sought after... to lure in these behemoths states (rarely - municipalities) often use some bait. F.e. they say that the risk of income is on public side and introduce some payment scheme elsewhere (tax on trucks crossing the country, city congestion tax etc.). In such case private investor just comes with a big buck of money (scratched together as a loans from lots of banks), builds what he has to build and operates the
thing for long period of time. State (or rarely - municipality) on a regular basis repays the investments to him - it looks like a kind of loan from state perspective. That, of course makse it damn expensive, f.e. the full repayment of 2 billion EUR investment + other liabilities over 30 years can reach even 10 billions. But you get the thing running and, if everything has been well run, the quality is very high.

Before you start dreaming about your new high-speed railway line, give a cold blooded calculation - can it be paid off with ticket sales? Can there be introduced some other taxes and payments to repay it in full? Don't expect that it can be financed with direct payments from state/city budget - that's politically risky (time perspective is 30 years at least and private partners calculate it well). If project seems to be not viable - better do something else and less expensive, otherwise your life will be a nightmare. No serious people will take risky project in these times and in coming 6 - 7 years to come. But if they will, they will find a possibility to squeeze you dry and get theirs.

Hope, this is a kind of answer
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Old July 28th, 2009, 09:58 PM   #12
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Quote:
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I believe in the US we are planning to use either American Express or VISA.



Ba-ZING!!!
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Old July 29th, 2009, 03:11 PM   #13
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Quote:
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Before you start dreaming about your new high-speed railway line, give a cold blooded calculation - can it be paid off with ticket sales? Can there be introduced some other taxes and payments to repay it in full? Don't expect that it can be financed with direct payments from state/city budget - that's politically risky (time perspective is 30 years at least and private partners calculate it well). If project seems to be not viable - better do something else and less expensive, otherwise your life will be a nightmare.
I think you "punk" the PPP concept a bit Gatis. What you have in mind is basically private financing. I would also take issues with your statement about direct payments from state/city budgets. This may apply these days in the Baltic region (for reasons of fiscal crisis) and in some of the large English speaking economies (for a mixture of fiscal and ideological reaons). However, here in France - and in Spain, partly thanks to infusions of EU structural funds - there are plans to spend a lot on railways over the next 5-10 years as direct budgetary outlays.

As for PPPs, the best way to think of them may be in terms of the following numerical example (sorry for pontificating - but I DO hold a doctorate in economics... ): the UK government considers building a HS line between London and Manchester. The total cost will be 10 billion pounds. Hard nosed market analysis shows that the passenger revenues are likely to bring in 6 billion pounds. Hence, you can do it as a PPP if you put in 4 billion pounds public money and thereupon leave the concession in private hands. The whole political discussion should be about whether the hoped-for externalities (benefits to other people than those who use the HS railway) - such as less road congestion and pollution, spare capacity on the commuter rails for other trains, stronger economic development in Manchester and the Midlands - are worth 4 billion pounds. Unfortunately...

...this is rarely where the political discussion takes us. Usually the friends of public transports harp on the many benefits of the new railway and exclaim "how could ANYONE be against this?" The enemies of public transport howl "the investment can't even pay of itself! Therefore there is no need for it!" From a purely economic viewpoint both arguments are imbecile. There ARE societal benefits from infrastructure investment in addition to the direct benefits to passengers. The state SHOULD be willing to pay for these benefits. But the state should take great care NOT to overpay.
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Old July 29th, 2009, 09:42 PM   #14
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However, here in France - and in Spain, partly thanks to infusions of EU structural funds - there are plans to spend a lot on railways over the next 5-10 years as direct budgetary outlays.
Lucky you... here in Latvia it seems that EU only takes and does not give anything for infrastructure (OK, EU now gives loan to us on good conditions). EU funding is so scarce and our needs for infrastructure that high, that EU is seen as miserable 0,x% input (OK, in reality 4%). The only hope is foreign private investment. State investment is beyond wildest dreams here, state barely makes the ends meet.

And, yes, we have here mainly Brittish consultants with their philosophy here. It is interesting to read your viewpoint.

Regarding public discussion and inevitable political fights (they like fat projects, that's good soil for politics)... oh yes, their arguments are far from the real essence of the project. But that's human nature, he fights not with your idea but with his impression of you idea.
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Old July 29th, 2009, 10:36 PM   #15
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That must be your governments fault. In the next 3 years,we will be getting more money than our 1 year budget.
On topic,the Constanta-Bucharest-Budapest HSR is planned to be financed from mainly EU sources. It is currently being planned.
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Old July 30th, 2009, 06:03 AM   #16
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Financing for high speed tracks in the United States will be done through grants from the federal government. This money for high speed rail is mostly borrowed internationally at this point - it's packaged in the federal stimulus bill, ARRA (American Recovery and Reinvestment Act). The grant, in most states, must be given to the state's Department of Transportation (DOT) and must be matched by locally raised funds (which are often from some kind of tax, be it income, sales, gambling, or gas) or bonds sold on a national market by a major bank.

Regular transit grants are funded by a federal gas tax and also need a match from the local recipient. The match has usually been 80% federal, 20% state/local.

From the state's DOT, the money "goes" to the local authority handling the construction. "Goes" is in quotations because money is never given first. Services are completed after the state authorizes their commencement and then the local authority bills the state.

The federal government is not taking an active or central role in the planning of a high speed tracks (or corridors as their called here). The federal government is not mandating any certain electrification or construction method, speed, or rolling stock specification. This is up to the states and local rail operator. For high speed rail in many states, the "local authority" will most likely be the state DOT, and Amtrak in coordination with local municipalities and the track owners (Union Pacific, CSX, etc...). In California, it will most likely be the California High Speed Rail Authority (CHSRA).

The only role it seems the federal government will play is which states will "win" a share of the $8 billion in high speed rail grants.
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Old July 30th, 2009, 06:16 AM   #17
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Originally Posted by FlyFish View Post
I believe in the US we are planning to use either American Express or VISA.
Just like the Iraq War but that will cost over a TRILLION dollars.
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Old July 30th, 2009, 06:22 AM   #18
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The federal government is not taking an active or central role in the planning of a high speed tracks (or corridors as their called here).
And that is a big problem. Granted, the federal government has established corridors that are eligible for federal funding for high speed rail but the lack of uniformity in design, rolling stock, and track condition (electrified versus non-electrified) is a problem and will lead to a disjointed system. The Interstate highway network was and is so successful because there are strict national standards in shoulder and lane width, and signage, in addition to the requirement that all access be via interchange only.

However, given the federal government's hostility to national rail service and high speed rail, states picked up the slack and made their own plans and alliances, like the Midwest High Speed Rail Authority. Fortunately, the federal government seems to be more supportive of rail now.
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Old July 30th, 2009, 03:13 PM   #19
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Just like the Iraq War but that will cost over a TRILLION dollars.
WOW, good one, never heard that comeback before, LOL.


I'm not for deficit spending in any case except one..............national security and only when it's absolutely necessary. If the US wants to go into ventures like these trains then they have two choices IMO. Raise the money somehow or cut some other spending. Going to the Chinese once a month with your hands out is NOT the way to do business long term. As for raising the money, well, that means ticket prices on the trains, not some tax to get 300 million people to pay for something that maybe 1 million will ever use.


Our Federal Gevernment, regardless of what flavor of idiots is in charge, is an out of control entity running headlong into a mountainside. They cannot maintain thier current size, and many of them know it. But, it seems that staying in power is more important than doing the right thing so instead of shrinking the enterprise they continue to grow it and figure that someone else will someday grow the stones to fix it.


Do you guys realize how much of the federal budget is simply interest payments? In 2008 it was the third largest expense in the budget and amounted to roughly 13.9% of the total (budget was just under $3T with int exp of roughly $415B). How long do you think we can keep this up? Obviously, no one cares because there is never any move to stop it.

Last edited by FlyFish; July 30th, 2009 at 03:48 PM.
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Old July 30th, 2009, 04:25 PM   #20
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As for raising the money, well, that means ticket prices on the trains, not some tax to get 300 million people to pay for something that maybe 1 million will ever use.
Yes and no. It depends of whether a significant portion of the remaining 299 million people benefit from the trains that they don't use. The industrialisation of the rust belt in the 19th century was facilitated by the building of a large number of federally funded railway lines. Millions of people found well-paid jobs, without necessarily ever taking the trains. (They were mostly freight trains anyway... ) In fact, your attitude is even a bit dangerous: one of the underlying factors leading to the civil war was the attitude in the South that it was daylight robbery to use southern taxes to pay for railways in other parts of the country.

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Do you guys realize how much of the federal budget is simply interest payments? In 2008 it was the third largest expense in the budget and amounted to roughly 13.9% of the total (budget was just under $3T with int exp of roughly $415B). How long do you think we can keep this up? Obviously, no one cares because there is never any move to stop it.
Oh, the Chinese and Arabs care very deeply. They are the main beneficiaries of US profligacy. But, excuse me, strictly as an economist allow me to ask what the previous US administation thought it was doing. Since the beginning of humankind governments declaring war (or having war thrust upon them) have had to raise taxes to pay for the war. But "W" took on first Afghanistan, next Iraq, while slashing taxes on his rich friends and to a lesser extent also on middle America. I'm not aware of any other example of this in world history. It's hardly surprising that US of A wakes up and finds itself seriously indebted, is it?
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