PennDesign: Making the Case for HSR

The following post continues a review of the PennDesign proposal for high-speed rail in the Northeast Corridor. An earlier post examined the proposal's vision for HSR, while the post below examines their argument for why HSR must be built in the NEC. To learn more about the proposal, see our first post here or visit the PennDesign HSR Studio website.

>>A 2011 proposal by the PennDesign High-Speed Rail Studio argues that HSR is essential for the economic growth of the Northeast Megaregion.

penn_hsr_cover250.jpgThe team from PennDesign takes an exciting approach to making the case for why we need high-speed rail in the Northeast. Like most proposals, the report explains how our existing transportation system will be unable to meet future demand and performs a traditional benefit-cost analysis that illuminates that positive benefits of a true HSR system.

But unlike other proposals, the students at Penn go much further. The proposal offers examples in Europe and Asia to explain that HSR has the potential to transform the economic geography of the Northeast Megaregion. Our existing urban hubs can grow stronger, our smaller urban cities can regenerate, and our overall regional economy can achieve greater productivity and stronger growth. This transformation is what makes HSR so exciting and important for the Northeast Megaregion.

The Need

The PennDesign team argues that HSR is essential to the continued economic growth of the Northeast. They assert that the Megaregion is projected to grow by 20 million people by 2050 (though more recent projections suggest that growth will be closer to 18 million). In order to ensure that all Northeast residents can reach their jobs, the Megaregion will need to invest in additional transportation capacity.

Our existing transportation system already cannot meet current demand, imposing a high cost to the Megaregional economy. The Northeast contains four of America's top-ten most congested metropolitan areas (New York, Philadelphia, Washington, DC, and Boston) and is home to the most congested highway corridor in the country: I-95 in the Bronx. As for air travel, the top four most delay-prone airports in the country are also found in the Northeast. The team estimates, that highway congestion and air travel delays together cost the Northeast $30 billion a year in lost productivity. This means that every three and a half years, the Northeast is paying the same in costs associated with metropolitan area congestion as it would take to build a true, HSR system in the NEC. That is worth repeating: the Northeast could build a true, HSR system in the NEC every three and a half years for the same price as the productivity that the region loses over the same time period due to congestion!

As we plan to expand our transportation system to meet the growing demand, the team argues that HSR is the most cost effective means of creating capacity in the densely developed metropolitan areas of the Northeast. With respect to highways, they cite a report by the I-95 Corridor Coalition, which states that the Northeast will need to spend $25 billion annually on highways through 2035 to meet growing demand under current population and transportation trends. The proposal also recognizes that the construction of multi-lane highways would be highly disruptive for Northeast residents and likely to encounter significant opposition. Likewise, airport expansions are expensive and require high amounts of land. The recent expansion of Denver airport, for example, required 53 square miles. It is estimated that a $5 billion expansion of the Philadelphia airport will only meet demand projected through 2035.

While the PennDesign team recognizes that roads and air will remain important, the introduction of HSR will create a more balanced transportation system for the Northeast. Right now, the problem is that Northeast's transportation system relies to heavily on some modes and not enough on others. Under ideal conditions, the most economically efficient mode would be used for each trip. When time and travel costs are considered, HSR is the most economically efficient mode for trips between 100 and 500 miles:

By capturing the majority of trips within that range, HSR could take some of the pressure off of the highways and rail, enabling all modes to accommodate the growing travel market in the Northeast.

The Benefits

The team completed a traditional benefit-cost analysis to demonstrate the positive economic value of the project. To calculate the total benefits, they considered a number of critical benefits, including the green-house gases that will be saved by diverting drivers from the roads to rails, the time saved by travelers no long suffering congested roadways and air delays, the number of lives saved by travelers switching from more dangerous modes of travel, like driving, the avoided cost of road maintenance (made unnecessary by HSR), and billions of dollars of saved gasoline.

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The report finds that the benefits to society would far outweigh the costs. In total, the team estimated $468 billion in benefits and costs of approximately $102 billion. Following the standards set by the U.S. DOT, these costs and benefits were each discounted by 7% over a 53 year period, resulting in $71 billion in benefits and $52 billion in cost, for positive benefit-cost ratio of 1.38 - signaling high economic value for the Northeast.

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A New Economic Geography

It's no secret, however, that traditional cost-benefit analyses do not take into account all of the economic impacts of improved transportation capacity. The proposal argues that high-speed rail will transform the economic geography of the Northeast by drastically reducing the travel time between cities. Here the proposal is a bit confusing, but only because while this phenomenon is real, it is difficult to measure and entails a number of overlapping and related phenomena.

The main idea is that HSR will improve productivity in the Northeast by lowering the cost (in time and money) of transporting people and goods. To understand this phenomenon, consider how many millions of additional people that HSR will put within a one-hour travel distance from the major economic hubs of the Northeast:

  • 2.9 million additional people within a one-hour travel time to New York City
  • 1.3 million additional people to Boston
  • 10.5 million additional people to Philadelphia

The result is that firms will have access to a larger labor market, enabling both individuals and firms to specialize at what they do best. In addition, firms will have lower production costs, as HSR facilitates face-to-face meetings and lowers the cost of distributing goods thanks to reduced congestion.


The One-Hour Commuter Shed of Philadelphia, PA
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The gray area above shows the areas within a one-hour travel distance of Phialdelphia, PA, with HSR.

Over time, HSR will encourage an increased clustering of firms near stations. The clustering of competitive and complementary industries in urban centers results in what are referred to as "spatial agglomeration benefits." Agglomeration benefits result in a rise in productivity by encouraging innovation (as firms in close proximity to one another share knowledge) and by lowering costs (thanks to economies of scale, i.e. the lower cost of labor and services thanks to increased specialization). When firms choose to locate close to one another, however, these benefits are often outweighed by the congestion costs associated with locating in a dense, urban environment. For example, it is more expensive to pay workers who must travel long distances or endure traffic delays. HSR will alter those decisions, by lowering the cost of travel to urban centers. More firms will cluster in order to take advantage of the agglomeration benefits found in densely developed central business districts.

As more firms benefit from agglomeration, the overall economy will see an increase in overall productivity. According to the proposal, these effects will be particularly powerful in the Northeast, thanks to the continued importance of innovation- and information-based industries. Unlike industrial production, these industries rely on the face-to-face interaction that HSR will facilitate and benefit from the knowledge sharing that occurs when industries cluster together.

Reigniting Our Struggling Cities

The proposal also argues that HSR could also encourage the economic growth of smaller, struggling cities, by effectively pulling them into the orbit of the larger, more economically successful metropolitan areas. Consider the case of Hartford, CT. Under the PennDesign proposal, the city would be within a one-hour travel time of both NYC and Boston.


Hartford, CT

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Thanks to improved transportation linkages, cities like Hartford, CT can focus on the industries where they excel. Instead of relying solely on the local region for things like marketing and legal services, firms in Hartford will be able rely on firms in Boston and New York, allowing them to focus on what they do best. In addition, firms will be able to draw upon a much larger pool of labor, enabling them to attract talented workers who may wish to continue live in larger and more cosmopolitan cities.

In addition, HSR makes smaller cities much better positioned to participate in the Northeast economy. Thanks to short travel times, firms in large cities can take advantage of the services a smaller city may specialize in. A health services company in Boston, for example, can more easily take advantage of a health insurance firm in Hartford. Similarly, smaller cities can serve as home to large-city workers. A resident of Hartford could be at work in Manhattan in just one hour.

The proposal recognizes that HSR is not the silver bullet to improving our cities. The report provides a detailed overview of StAR (Station Area Redevelopment), a collection of design and policy strategies that cities can use to capture the benefits of HSR. Unlike current expectations for transit-oriented development, the proposal argues that StAR anchored by HSR has the potential to achieve impacts as far as one-hour travel from city centers. The team offers compelling visions of Philadelphia and Hartford, to demonstrate how transportation, design, and development can work together to improve our urban centers.

Final Thoughts

The proposal looks at HSR from two vantage points. First, there is need. Without additional transportation capacity, the Northeast economy will be unable to meet the growing travel demand, which could have serious consequences for our long-term economic growth. Second, there is potential. In other parts of the world, HSR has produced tremendous benefits by significantly altering the transportation patterns of a region. The Northeast has a remarkable amount to gain by making an investment in HSR.

The truth is, however, that global competition makes virtually every benefit of HSR truly necessary. If we wish to compete with megaregions in China, our industries must be as productive as possible and we cannot afford to endure unnecessary costs like environmental degradation and congestion delays caused by our unbalanced, auto-centric transportation system. The PennDesign proposal lays out the facts clearly and makes an excellent case for HSR. But perhaps it could be clearer on one important point: we need HSR now.

Stay tuned for a final post on the PennDesign proposal, examining their plan for implementing HSR in the Northeast.


Images:
High-Speed Rail in the Northeast Megaregion: From Vision to Reality. University of Pennsylvania. 2011. Link.

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