Charlie Arlinghaus

January 14, 2014

As originally published in the New Hampshire Union Leader

Public policy is not about bright shiny objects. Too often politicians are so distracted by the shininess of an idea that they forget what their policy goal is. The classic example of this is the glassy eyed fascination so many people have with the romance surrounding trains. People think trains are really cool so let’s get one. It doesn’t really matter why. The excitement around the vehicle obscures the policy goal and the possible solutions.

Trains are and have always been very romantic. The mystique surrounding clouds of steam rolling across the platform of a train shed under Eiffel Tower like girders exerts a hold on our imagination that Greyhound was never able to capture. We all feel like Cary Grant in North by Northwest when he says to Eva Marie Saint, “Beats flying, doesn’t it?” Our attraction for the mode distracts us from the specific problem and economic considerations.

Regular passenger and commuter rail service to central New Hampshire ended in 1967. In an election year gift, the federal government paid for a year of commuter rail all the way to Concord in 1980. The election cut the money and the trains stopped.

According to the census bureau, about 85,000 New Hampshire residents commute to work somewhere in Massachusetts. A train along the I-93 or Everett Turnpike corridor would enable those who live in that corridor, live near a station, and work in Boston itself to commute to work.

Although some tout allowing Bostonians to commute to jobs in Manchester, very few people commute in reverse and the expense doesn’t justify the tiny number it would help. The real policy goal is to help people commute to Boston – or at least that area of Boston convenient to North Station – this doesn’t help much if you work in Woburn or Burlington or Framingham.

The major obstacle is price. Extending MBTA commuter rail to Manchester – the current preferred option – would require significant subsidies and an enormous capital investment which would never be recovered.

The capital cost of the program has been lowered to $250 million. To put that in perspective, the state borrows just less than $125 million every two years. So if we did no other borrowing whatsoever – for buildings, major projects, and other capital expenses that are generally funded at less than half of what agencies request – if we did none of that for four years, we could build a train.

At that point, we’re ready to start losing money hand over fist. One of the most successful train projects in the recent history of the United States has been the train from Portland to Boston known as the Downeaster.  Geographically and in its commuter focus it’s quite similar to the project advocates hope to build along I-93 instead of I-95.

The Downeaster carries 530,000 passengers in a year and needs $8.4 million from the State of Maine to cover its losses. And that’s the most successful passenger rail model in recent history.

If our goal is to move commuters to Boston efficiently, we already have a program. The Boston Express bus also moves more than a half million passengers a year (550,000 in the comparable time period) but does it at less than a tenth of the cost — $750,000 instead of $8.4 million.

If the policy goal is to operate a commuter service to Boston to satisfy the federal government mitigation requirements in a highway corridor, we already have one and it operates at a tiny fraction of the cost. But then Cary Grant rode the train and not the bus.

It is important to understand, however, that every policy choice displaces other choices. An additional $250 million in capital costs in a state that saw its debt explode by 40% from 2007-2011 is simply not available. The $8 million or more a year would have to come by cutting something else.

One plan is to use federal grants including the funds referred to as CMAQ. Some advocates don’t even count that as state money. Of course, that’s nonsense. Money being used today for needs identified in the state’s ten-year transportation plan would be displaced and their funds taken away.

 

The governor’s speech last week made a train the centerpiece of her economic development plan. Between now and her budget address next month we can only hope she might explain what will be cut to pay for this boondoggle.

 

 

 

Charlie Arlinghaus

September 11, 2013

As originally published in the New Hampshire Union Leader

New Hampshire’s Ten-Year Transportation Plan includes a deficit of $955 million. Ten years of projects that cost $3.5 billion are proposed while there is only $2.5 billion of funding available. Is this any way to run a railroad? Actually, it’s a pretty good way.

In 1985, then-governor John Sununu created a planning process called the ten-year highway plan by executive order. Now a state-law, the ten year plan is a roadmap of all of the projects the state’s plans to undertake over the next ten years and the funding available to pay for them. This again is an area where sensible government prevails in New Hampshire over a Washingtonian model (here as in most places you should read Washington as a synonym for indefensible lunacy).

Every two –years, New Hampshire debates a comprehensive list of state priorities in transportation – a list of bridges to be repaired or replaced, roads to be repaved, giant wasteful overhead tolling projects to be undertaken. The list is meant to be an actual plan not a wish list. We had trouble a few years ago when the sum total of the projects took 30 years of funding to pay for ten years of construction. Today, the list is realistic.

The Washington model, by contrast, is to funnel money as political favors to states and projects favored by the most powerful politicians whether their state has that as a priority or not. Washington spending is built on politics not priorities. Our ten year plan removes personal politics from the process almost completely.

At the beginning of the process, the state Department of Transportation creates a draft plan to serve as the basis of discussion in public hearings. That plan turns into a recommendation from the governor and amendment and adoption by the legislature this coming June.

The draft plan has a $955 million deficit. Ordinarily, I’d be critical of a planned deficit but in this case a deficit is a critical part of the planning process and counter-intuitively serves the cause of transparency.

First, the deficit is exaggerated. Funding for airports is limited to funds raised and grants received. There are $200 million of projects with no funding that will happen if federal air money comes and won’t happen if it doesn’t.

The other two deficits are a potential turnpike capital program and the ongoing highway shortfall. The small portion of roads we call turnpikes are self-funded by tolls and bonds and the bond payments themselves are also funded by tolls. The state proposed a series of projects that can only happen if tolls go up enough to fund increased debt payments. In this case, the deficit is essentially a proposal for $500 million of turnpike spending.

The administrators are not asking for more money in general. They have proposed projects and we are being asked whether those specific projects are important enough to us that we will pay for them. We support the projects, we have to support the tolls. Our choice.

This is good government. All too often, politicians tell us in vague terms that “more revenues are needed” or “to balance all spending, we need a general infusion.” The problem with this overly-general approach is that we don’t have any specific idea what government looks like if we say no and what the incremental funding would specifically support. Instead, to try and get us to support more money, they imply that that one specific project everyone loves and would be funded anyway is the one on the bubble.

The transportation approach is more honest. The money we have will pay for this. We would fund these additional things if given the chance but the money isn’t there. Then you and I get to decide whether or not it’s worth it.

The highway fund portion of the transportation budget (paid with proceeds from federal gas taxes, state gas taxes, and other vehicle fees), is actually another $237 million short. This is no surprise. Our gas tax was set 23 years ago at 18 cents and revenues don’t come close to keeping up with inflation. Each year, we must fix fewer bridges and pave fewer miles of roads. Rather than foregoing new projects, the highway fund side must find things we do today that we won’t do in the future. That gap over ten years is about $237 million.

The current phase of the ten year plan is about making choices. At this level of funding, only these priorities are funded for the next ten years. No politician can pretend that money is needed for an already funded project or pretend that he supports a project even without funding.

The House Finance Committee’s budget increases the diversion of Highway Fund away from the Department of Transportation to other state agencies to $28.5 million.

Under the House’s proposed budget, 67.3% of Highway Funds, net of block grants to the cities and towns, will go to Transportation, 31.7% to Safety, and 1.1% for other. These ratios represent an additional $500,000 over the biennium being diverted away from the Department of Transportation over the Governor’s budget.

RSA 9:9-a, which set the ratios of Highway Fund spending, would have required a minimum of 73% of the funds raised to go to the Department of Transportation, with caps of 26% to the Department of Safety and 1% for other agencies. The law, which was passed with broad bipartisan support several years ago, will be suspended as part of the language in both the Governor’s and House’s Budgets.

Updated Click here for a comprehensive spreadsheet

March 2013

By Joshua Elliott-Traficante

As detailed in an earlier piece on the Highway Fund diversion[1], the Department of Safety receives a sizeable portion of the revenue raised by the state Highway Fund. Historically the Department has received roughly between 24% and 32% of the amount collected, net of block grants to the municipalities.

This diversion, however, is completely constitutional. In 1938, the New Hampshire Constitution was amended, requiring all taxes and fees related to roads, fuel, and motor vehicles be dedicated to highway construction and maintenance. It was passed after attempts were made in the previous session to divert highway taxes to other purposes. While the purpose of the amendment was to “prohibit the use of motor vehicle taxes and gasoline taxes being used for any purpose but for highways,” the language specifically allows funds to be spent for “the supervision of traffic thereon.” That carve out authorizes funds, now segregated in the dedicated Highway Fund, to pay for things such as the state troopers who patrol the highways.

Contrary to popular belief, it does not all go to the State Police, which accounts for just under half of the Highway Fund money spent at the Department. Rather, the diversion funds pay for a number of activities, which can be broken up into three categories: Administrative, Motor Vehicles and the Division of State Police.

Administrative: $21.26 Million

The largest single expense under the Administrative grouping is the transfer to the Department of Information Technology (DOIT). DOIT is unique in that rather than receiving appropriations directly, it is funded nearly entirely through transfers from other state agencies. The Department of Safety transferred $8.79 million in FY13 in Highway Funds to DOIT, which accounted for nearly 87% of the Department of Safety’s total transfer.

There are a number of back office functions performed by the Department of Safety that are paid for by the Highway Fund such as the Road Toll Collection and Audit and the Office of Policy and Planning among nearly a dozen others. Combined they total $7.83 million.

General Personnel Costs account for $4.2 million in Highway Funds, which goes largely to retiree health insurance and pension costs.

Motor Vehicles: $18.89 million

At $16.65 million, the largest piece of this category is the Division of Motor Vehicles itself, which handles automobile titles and registrations as well as driver licensing. Roughly 98% of the DMV’s total budget came from the Highway Fund. The Bureau of Hearings, which hears license suspension cases and appeals accounts for the remaining $2.2 million spent in this category.

State Police: $36.74

At $27.4 million, the vast majority of the Division of State Police’s portion of the Highway Fund revenue goes to pay for the Traffic Bureau which is tasked with policing the state’s highways and roads. An additional $5.11 million pays for Enforcement.

However, not all of the money spent at the Division of State Police pays for troopers on the road. Both the Forensic and Toxicology Labs receive 100% of their funding from the Highway Fund, at a cost of $3.45 million. Rounding out State Police is Administrative Expenses, coming in at $780,000.

Click here for a pdf version of this paper

[1] http://www.jbartlett.org/charting-the-highway-fund-diversion

Charlie Arlinghaus

March 6, 2013

As originally published in the New Hampshire Union Leader

New Hampshire’s gas tax and highway fund are little understood even as the legislature votes today on doubling the state’s gas tax. The state’s highways are paid for with user fees and only with user fees, revenues are stagnant even if costs aren’t, the Department of Transportation is one of the more efficient branches of government, but many gimmicks still surround highway funds and the diversion of resources.

New Hampshire’s constitution dedicates all taxes and fees associated with roads and motor vehicles specifically to construction, maintenance, and supervision of traffic on highways (think state police). But from time immemorial legislators have seen fit to divert some of what seemed like a flush pot of money to other uses.

Roads at the state level are funded by two main buckets: (1)the turnpike fund which receives all the money from tolls for a dedicated fraction of the state’s roads and (2)everything else lumped in the highway fund. The turnpike fund is paid for only with tolls and is flush with money. The highway fund’s major revenue source is the gas tax and is struggling to keep up especially as those funds are diverted to other sources.

In New Hampshire, all highway spending of any sort is paid for with user fees – gas taxes, tolls, motor vehicle registration fees, and a few smaller fees. These fees support all state spending and a large grant to municipalities for local roads. In addition, almost a third of these revenues are sent to other departments – largely to pay for state troopers.

The gas tax was set at eighteen cents per gallon in 1991. Revenues don’t rise with inflation or price and lessen as we get better gas mileage. Between 2002 and 2012, inflation was 27.6% but gas tax receipts rose by only 1%. Motor vehicle fees, a minority share of road money, kept up with inflation.

This has placed both good pressure and bad pressure on lawmakers and administrators. The gap between 1% growth in the gas tax and 27% inflation led to the Great Highway Robbery of 2009. To try to get at some of the turnpike money (flush from toll increases), then-Gov. Lynch concocted the scheme of selling a $1.6 mile stretch of I-95 to ourselves. It was moved from the highway fund to the turnpike fund. For the privilege of maintaining it, the turnpike agreed to transfer $120 million to the highway fund supposedly over 20 years. Payment for the first two years was $50 million.

This seemed like a great trick so the legislature of a different party repeated it in 2011, “escalating the payment” to another $52 million in 2012 and 2013. The current governor plans on repeating the trick but the loan is almost paid off so there’s only $29 million left. So the “loan” will be paid in six years instead of the 20 advertised. And that’s the problem with gimmicks. This one worked for two-and-a-half budgets and now there’s a hole.

The good pressure is the pressure to be efficient. Over the last twenty years, most departments saw a big increase in the number of employees then drop in the latest recession. The total number of state full-time positions is the about the same in 2012 as in 1994. But while the rest of state government increased by 2.5%, the number of positions at Transportation declined by 16% (1,959 to 1,650).

Lawmakers need to recognize they are out of gimmicks to shore up the fund. There is a not another $50 million biennial windfall waiting for them. But as a starting point, they can follow the laws they’ve already passed.

No one disputes that some gas tax money can and should be spent on state troopers. But the 2008 law that requires a minimum percentage of the tax (73% in the coming budget) be spent on repairs is reasonable. Even when the last legislature allowed extra money to be spent on troopers, they nonetheless kept the provision requiring a minimum percentage be spent at the department of transportation.

A four cent increase in the gas tax would raise about $27 million each year. Fifteen cents would raise about $100 million per year (current gas tax receipts are $123 million). Merely following the current law to make sure the existing user fees are spent as advertised would add $28 million over two years before charging anyone anything more.

There is a legitimate debate to be had about whether the current highway fund sources can pay for the highway system we currently have. That debate, however, will be difficult if we can’t trust the legislature to start by following the laws they pass.

March 2013

By Joshua Elliott-Traficante

In New Hampshire, not only is spending on highways paid for entirely with user fees like gas taxes and registration fees but the user fees are often diverted to other uses. The largest recipient is the Department of Safety, ostensibly to pay for state troopers but smaller amount of money have been transferred to other departments as varied as Cultural Resources, Health & Human Resources, and the Board of Land & Tax Appeals.

In 2008, legislation was enacted to limit the diversions and ensure a greater share of dedicated revenues remained at the Department of Transportation. However, Governor Hassan’s proposed budget, rather than building on the progress made, reverses the gains made over the last two budget cycles.

 

Figure 1: Spending as budgeted, net of Highway Block Grants to municipalities, not accounting for lapses

The Constitutional Carve Out: “…including the supervision of traffic thereon”

In 1938, the New Hampshire Constitution was amended, requiring all taxes and fees related to roads, fuel, and motor vehicles be dedicated to highway construction and maintenance. It was passed after attempts were made in the previous session to divert highway taxes to other purposes. While the purpose of the amendment was to “prohibit the use of motor vehicle taxes and gasoline taxes being used for any purpose but for highways,” the language specifically allows funds to be spent for “the supervision of traffic thereon.” That carve out authorizes funds, now segregated in the dedicated Highway Fund, to pay for those state troopers who patrol the highways.

Highway Fund Diversion Cap:

When the highway fund seemed flush with money, loose interpretation of the constitutional language permitted larger share of the total highway revenues to be transferred not just to Safety but to as many as a dozen other agencies as well to pay for things loosely related to highways.

In 2008, the Legislature passed HB 1618 to limit diversions and ensure a greater share of the limited revenue went to its primary purpose. Phased in over three budgets, the new law requires 73%of the total revenue to stay at Transportation, caps the amount diverted to Safety at 26% and limits all other uses to 1% of total revenue.

 

Figure 2: Spending as budgeted, net of Highway Block Grants to municipalities, not accounting for lapses

The FY10-11 required at least 68.5% to stay at Transportation, a goal budget writers exceeded. For the FY12-13 budget, the minimum ratcheted up to 70.75% which budget writers met although they suspended the second half of the law to allow Safety to spend slightly more if needed but not at the expense of Transportation. They ended up meeting the goals and rendering the suspension moot.

Looking Forward: The Governor’s Budget and Full Suspension

The Highway Fund Diversion Cap law would require 73% of dedicated revenues stay with the Department of Transportation rather than 69.8% in the Governor’s current proposal. The Governor’s proposal would allow safety to spend 29.1% rather than their 26% statutory limit and would divert 1.1% of revenues to other sources rather than the 1% limit required by law. Though the differences in percentages seem small, the result is a diversion of $28 million away from highways.

In the recently released HB 2, the budget trailer bill, the entire section of the law stipulating the ratchets for the FY14-15 biennium have been suspended.

Result: Less Money for Roads and Bridges

While it is easy to get bogged down in ratios and statutes, the end result is that under the Governor’s proposed budget, more of the state’s Highway Fund, which is entirely funded by user fees, is not being used to fix bridges and repave roads. Instead it is being used for spending on other state agencies.

Though substantially paring down the Department of Safety’s take of Highway Fund revenues would not be enough to cover all of the costs of repairing the state’s infrastructure, it would be a good start.

Click here to download a .pdf version

Charlie Arlinghaus

February 27, 2013

As originally published in the New Hampshire Union Leader

The state’s budget laws are often ignored. The general public knows this and so routinely believes that, no matter what they hear, some wool is being pulled over their eyes. This skepticism is strongest in the area of transportation where we presume diversions and shell games are routine. The details often prove the public right. This year’s budget includes a diversion of $28 million of supposedly dedicated highway fund revenue in violation of a law that is only a few years old and already being ignored.

It is commonly accepted wisdom among the public that dedicated highway funds are routinely diverted to non-highway purposes. The constitution was amended in 1938 to provide that taxes and fees related to motor vehicles be used for no purpose other than building and maintaining highways and supervising traffic thereon.

This ironclad dedication exists with no other tax. But for as long as it has existed, people have believed that gas taxes were being diverted like a slush fund to other purposes. It became commonplace to rail against raiding the highway fund (where the dedicated funds are meant to reside). Nonetheless as much as 40% of funds were diverted under vague rationale – if you try hard enough, almost anything can be described as sort of, tangentially related to taking care of roads.

In 2008, however, legislators acted. Republican Rep. Ken Weyler and Democratic Rep. Marjorie Smith, between them chair of the House Finance Committee for six years, sponsored a highway spending cap. A minimum percentage of total gas tax and other highway fees had to be spent within the department of transportation — phased in until the percentage reached 73%. A maximum of 26% could be spent at Safety (on state troopers to supervise traffic in theory) and just 1% could be spent anywhere else.

It was a sensible law which I described as the best piece of legislation of 2008. I was critical of the 2011 budget for suspending the law temporarily even though legislators came close to the target. I worried that suspending the law would send a message that ignoring it is common practice. Ignoring it once makes it easy for legislators to smile at you as if you’re naïve and say “oh that! No one ever does that.”

Sure enough, a tiny diversion becomes a big one. Rep. Lynne Ober, a member of the finance committee had the legislative budget office check on compliance with the law in the governor’s proposed budget. She found that far from reaching the 73% minimum threshold, the budget misses that target by $28 million over the biennium.

In other words, the budget diverts $28 million of dedicated highway taxes and fees to non-highway purposes. Ober is an opponent of the gas tax and contrasted the diversion with the state’s urgent infrastructure needs: “She [Gov. Hassan] should have obeyed state law and put those needed funds into DOT for roads instead of trying to raise the gas tax.”

Ober’s cynicism about the diversion of funds highlights the struggle lawmakers have to earn people’s trust. Gas tax supporters want to raise an additional $120 million each year in dedicated money. But if the $120 million is desperately needed and absolutely, positively won’t be diverted, why is $28 million being diverted with only Rep. Ober raising the alarm?

Gas tax opponents may want the law observed to limit the need for more revenue. But gas tax supporters should also want the law followed to ensure existing revenues are spent as they are supposed to be and thereby create trust.

This diversion may be the tip of the iceberg. The governor’s budget summary includes a line in a spreadsheet indicating the state will raise $29.5 million for its general fund from “dedicated funds/other initiatives.” Which dedicated funds will be undedicated? What other initiatives? We’re not sure yet.

That explanation will wait for the arrival of what’s called HB2, the appropriation language part of the budget. That language required by law by February 15 hasn’t come and is often many weeks late. The law is routinely ignored because other people ignored it first and so we wait for explanation. Similarly, dedicated funds are not supposed to be undedicated but they routinely are so we’re expected to turn a blind eye.

The highway spending protection law is in its infancy. Whether it will have the force of law or become routinely suspended is probably in the hands of the current legislature.

Author’s Note [February 2015]: With the Capitol Corridor Study released, this paper is now out of date.

To read the updated version of this piece that incorporates the study’s findings, please click here or copy and paste the following link into your browser:

http://www.jbartlett.org/updated-commuter-rail-in-new-hampshire

February 2013

Josh Elliott-Traficante

This week, the New Hampshire Executive Council is taking up a contract for a study looking at bringing commuter rail to the state.

There is a common misconception that the state has not studied this idea recently; however two lengthy studies have been completed in the past six years. A 43 page study was done in 2007 by the Passenger Rail Taskforce which looked at service to Manchester and another of similar length was done in 2010 by TranSystems for the NH Rail Authority, NHDOT and the Nashua Rail Planning Commission which looked at the entire corridor to Concord. While neither study recommends for or against introducing commuter rail, they provide a wealth of information as to how much the route would cost.

From the studies it is clear that constructing the route in its entirety to Concord would cost roughly $300 million and require subsidies of $11 million a year to operate.

Since there has been discussion of extending rail either just into Nashua, or just as far north as Manchester with service to Nashua, cost estimates for these, calculated from data in the studies, have been included as well.

 

Q: What is the Capital Corridor Project?

A: It is a proposal to extend commuter rail service north from Lowell, MA to Concord, NH, with intermediate stops in Nashua, Manchester Boston-Regional Airport and downtown Manchester. Trains would run into North Station in Boston.

 

Q: How Much Would it Cost to Build?

A: Costs are highly dependent on the scope of the improvements, such as single or double tracking the line or how far the line would run. (i.e. just to Nashua or Manchester or all the way up to Concord.) NHDOT in the 2013-2022 Ten Year plan estimates the capital costs the cost at roughly $265 million[1] if the Corridor were completed in its entirety, while the most recent study puts the cost at closer $330 million in 2013 dollars.[2]

Lowell to Nashua: $53-$66 million

Lowell to Manchester with service to Nashua: $159-$200 million

Lowell to Concord with service Nashua and Manchester: $265-$330 million

 

Q: Won’t Massachusetts Pay for the Upgrades for the Section of Track from Lowell to the State Line?

A: Probably not. According to the Joint Statement of Principles Concerning Proposed New Hampshire Capital Corridor Service[3], signed between Massachusetts and New Hampshire in 2001, the state of New Hampshire is responsible for all capital improvements required, including those needed in Massachusetts. Furthering the point, Governor Deval Patrick’s recently released transportation proposal does not include the extension of commuter rail service north of Lowell, indicating a lack of interest in Boston for expansion on that line.[4]

 

Q: How Much Would it Cost to Run?

A: Once built, there are two different kinds of costs: operating expenses and ongoing capital expenses. Operating expenses are the day to day costs, such as salaries for employees and fuel for the locomotives. A number of factors that go into projecting operating expenses, such as the number of trains in service and how many runs a day they are completing. TranSystems[5]based their study on 5 round trips per day and the Passenger Rail Taskforce Study[6] with 4 round trips per day.

Lowell to Nashua: $2.7 million per year

Lowell to Manchester with service to Nashua: $8 million per year

Lowell to Concord with service to Nashua and Manchester: $13.25 million per year

In addition to operating expenses, there are also ongoing capital expenses beyond just building the railroad. Track needs to be replaced, locomotives breakdown, coaches need to be refurbished and so forth.

Lowell to Nashua: $600,000 per year

Lowell to Manchester with service to Nashua: $1.8 million per year

Lowell to Concord with service to Nashua and Manchester: $3 million per year

 

Q: Would the State Need to Subsidize Commuter Rail?

A: Yes. Both the TranSystems[7]study and the Passenger Rail Taskforce Study[8] highlight the need for ongoing subsidies to keep the train from going bankrupt. These two studies estimate that passenger fares will cover between 30% and 50% of operating costs. In addition, there are ongoing capital costs that need to be paid for as well. Taking those into account, estimates of total subsidies needed every year are as follows:

Lowell to Nashua:  $1.9 – $2.6 million per year

Lowell to Manchester with service to Nashua: $5.8 – $7.5 million per year

Lowell to Concord with service to Nashua and Manchester: $9.25 – $12.25 million per year

 

Q: Where Would the State get the Money to Pay for It?

A: The studies are largely silent on the specific sources of funding for either the capital costs or the operating subsidies, aside from relying on Federal money.

For the roughly $300 million in construction costs, the state would likely have to depend on either Federal grants or borrow the money through a bond issue. The New Hampshire Rail Transit Authority does have the authority to both solicit Federal dollars and issue bonds. Last month however, the State Treasurer urged lawmakers to limit capital bonding to under $125 million, making the latter unlikely.[9]

Money from the Federal CMAQ program (Congestion Mitigation and Air Quality) can be used in the initial startup years to help cover the shortfall in operating costs. However, without special Congressional approval, it can only be used for a few years, not indefinitely. After the CMAQ money runs out, the state would have to find a source of money to cover the entirety of the shortfall itself.

 

Q: Couldn’t the State Use Money from the Gas Tax to Pay for Both Construction and the Subsidy?

A: No. Part II, Article 6-a of the NH Constitution[10]forbids the use of money from the Highway Fund on anything other than highways. In a particularly relevant case, the New Hampshire Supreme Court ruled unanimously in a suit brought by the New Hampshire Motor Transport Association (NHMTA v NHDOT 2004) that the state could not use highway funds to extend commuter rail into Nashua.[11]

 

Q: How Does the Downeaster, which Runs from Brunswick ME, Through the NH Seacoast into Boston, Address These Costs?

A: The capital costs of constructing the rail line were financed by issuing bonds, backed by the State of Maine, which were repaid with tax dollars. Federal CMAQ money is used to cover some of the operating losses. Under normal circumstances, CMAQ money is only allowed for the first several years of service, however, through special Congressional approval, Maine is allowed to use funds long after they would have otherwise been phased out. The remainder of the operating loss is covered by a state tax on rental cars. The Downeaster covers roughly 53% of its operating costs through fares.[12]

 

Links to Past Studies:

Passenger Rail Task Force Study: (2007)

http://www.nashuarpc.org/publications/transportation/rail_proposal_draft.pdf

 

TranSystems: (2010)

http://www.snhpc.org/pdf/NHCCorridorOverview.pdf

 

Click here for a pdf version of Questions and Answers on Commuter Rail in New Hampshire


[1]http://www.nh.gov/dot/org/projectdevelopment/planning/typ/documents/unfundedlist.pdf

[12] http://www.kjonline.com/news/senate-oks-downeaster-subsidy_2012-03-14.html

A Look at the Costs Involved

Josh Elliott-Traficante

Yesterday’s approval by the Capital Budget Overview Committee to use Turnpike Credits to help fund a transportation study of the Capitol Corridor has revived hopes of commuter rail in New Hampshire. The Corridor project, if completed in its entirety, would see passenger rail service run from Concord through Manchester and Nashua, continuing south into North Station in Boston.

The project in terms of costs can divided roughly into four segments, totaling roughly $270 million from various sources:

1)      The Study: $4.4 Million

The study itself, the one moved forward Wednesday, will cost $4.4 million and take roughly a year to complete. Of the money being spent, $1.6 million the funds being used would come from from the state, while the balance would come from federal grants. Usually federal CMAQ grants require a state match but a clause in federal highway legislation allows money raised by tolls to be counted as that state’s match, allowing the state to receive the grants. The toll money, however, is not spent on the project itself and remains in the Turnpike Fund.

2)      Capital Costs, Construction: $250 Million

$250 million is a rough estimate of construction costs for the route by the New Hampshire Department of Transportation, as part of the latest 10 Year Highway Plan. This would include building roughly half a dozen stations along the route, building a second line in most areas, upgrading the existing one, rehabbing and upgrading countless rail crossings as well as reconstructing and expanding several bridges, including two across the Merrimack River. No funding source has been identified.

3)      Capital Costs, Rolling Stock: $15 Million

What good is a railway without locomotives and passenger coaches? This money would presumably come from the Federal CMAQ program. However, since CMAQ funding is a fixed amount based on the total appropriations the state receives every year, every dollar used for this project, would mean other local public transit projects might go unfunded. Under the current federal highway legislation, $15 million would represent roughly 1½ times the state’s annual CMAQ allocation.

4)      Operating Subsidies for 3 years: $5.25 Million

In addition to the capital costs of constructing the railroad and purchasing rolling stock, passenger rail will need subsidies. Every single regularly scheduled passenger route in the US relies on operating subsidies to run and New Hampshire would be no exception. Under NHDOT estimates, $5.25 Million would be needed over the course of the first three years of operation. Funding for this could also be done with federal CMAQ money.

It should be noted that these estimates do not include future capital expenses as well. While these are projections, they do give a sense of the cost of such a project. In comparison, the amount of money spent on just constructing the route ($250 million), spent elsewhere could fund the rest of the I-93 project from Exit 3 all the way up to Manchester, or it would fund all of the state’s pavement preservation and Red List Bridge needs for the next 10 years.

With more pressing transportation needs facing the state, such the maintenance and replacement of our aging infrastructure, one must ask, is passenger rail the best use of our limited resources?

Charlie Arlinghaus

September 19, 2012

As originally published in the New Hampshire Union Leader

In a few weeks, Maine will finish a $44 million project to extend a money-losing commuter train and lose even more money. Fortunately, retiring Sen. Olympia Snowe got them money in the federal budget to fund their profligacy. Some politicians in New Hampshire want to follow suit and spend money we don’t have in the state budget to restore a commuter train that last operated for parts of 1980 until the federal dole ran out.

Transportation policy both at the state and national level are at a financial crossroads. We have to make difficult decisions about what we can and can’t afford. Huge debts and operating subsidies are the way of the federal government but we can and should avoid them. Trains are a great deal if someone else is paying for them. But if we have to pay for them ourselves, they are inefficient and unaffordable.

There is a distinction between highways and railways. Highways, in large part, pay for themselves through user fees. Commuter trains don’t come anywhere close to paying for themselves and are usually subsidized with highway user fees.

The most successful rail project in recent history is the Downeaster train on the Seacoast. It is also roughly a model for the commuter rail advocates want to build in the central NH corridor to Concord. Yet, the Downeaster exists only through massive capital and operating subsidies.

For the Downeaster, none of the capital costs are supported by user fees. They are entirely subsidized. Nor is the debt service calculated as part of the operating costs. For the central New Hampshire commuter rail project, the capital costs are estimated to be roughly $300 million. According to rail authority chairman Peter Burling, a partial project just going to Nashua would be about $90 million instead. Supporters want the federal government and the state to borrow the money for those costs.

Next even after a 100% subsidy of capital costs, the train won’t support itself. The tremendously successful Downeaster project recovers only about half its operating costs and relies on a government subsidy for about $7 million per year. If the capital corridor were that successful, the state would need to find $5-$10 million per year in its budget.

Keep in mind that ever dollar we spend is a dollar that isn’t available for something else whether behavioral health, hospitals which were cut in the last budget, or the university system looking for more money.

Well, since we subsidize roads, shouldn’t we subsidize trains too? The problem is we don’t subsidize roads. Roads pay for themselves in user fees – tolls, gas taxes, registrations, etc. This is not true in every state but it is true in NH.

For highways, capital costs and operating costs are both supporter by user fees. Federally and in every state, some money is diverted from user fees and some added back in. But in the aggregate, user fees support spending. For total federal and state spending, over the last ten years we’ve raised $1.08 trillion in user fees and spent $1.03 trillion. Because New Hampshire isn’t one of the states that borrows money from the general fund like New York, California, or Illinois our numbers are even better.

In most states, local road costs are less reliable. But in New Hampshire, even local roads are largely supported by user fees. In 2010, towns spend about $230 million in the category “highways and streets” while state block grants and car registration fees totaled around $230 million. Neither the measure of revenue nor spending is as precise as the state data nor are they controlled by a trust fund but you can see the number is close.

Trains are wonderful and romantic but unaffordable. We can’t borrow the money for operating costs and then just write off the debt service. From 2007 through 2011, state debt climbed precipitously from $654 million to $939 million – a 44% increase after having climbed just 8% and 4% in the two previous 4 years cycles. Simply put, we don’t have extra borrowing capacity. This isn’t Europe.

Beyond the huge startup costs, we can’t afford to keep a train running. If we had additional highway user fees would you prefer to diver $5 to $10 million to a little used train or help towns pay for more bridge repair?