Saturday, December 14, 2019

More on free transit, Houston densifying, CA vs TX, hard economics for TX HSR, Bastrop city plan, and more

Large backlog of items this week:
"Even if Texas Central could manage to attract 6 million passengers a year, the annual payment on a $20 billion loan at 3 percent interest over 30 years is just over $1 billion. That means it would have to collect nearly $170 per passenger above its operating costs in order to repay loans or give funders a return on their investments. Since airfares are already far lower than that, I don’t see any way for this to ever happen."
“1,545 people per day settled in Texas last year, with Harris County seeing the greatest influx from out of state than any other region,” according to Yardi Systems."
"The new code is very lean—based on the rural-to-urban Transect, it does not regulate uses, only nuisances. The thinking is that if the use creates no problem, why regulate it? There are no minimum lot dimensions or parking requirements. Shared parking is encouraged. Every lot is automatically allowed to have two accessory units. So, rather than the continuing the single-family zoning that is fiscally unsustainable as a dominant pattern, every lot can have three units. "
Finally, I'll end with a little good humor piece: Texas Luring Jobs Away From California With Promises Of Electricity:
"California Governor Gavin Newsom was dismissive of Texas's claims, though. “They’re making false claims of being able to deliver electricity 24/7,” Newsom said, “but it just can’t be done.” Newsom was also dismissive of the Lone Star State's other claims, such as affordable housing, plenty of water, cheap gas, plastic straws, and not constantly being on fire. "

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At 10:51 AM, December 15, 2019, Blogger George Rogers said...

The Babylon Bee article was great.

At 5:47 PM, December 16, 2019, Blogger Jardinero1 said...

The Anti_planner does not understand private sector bonds. There is no principal repayment until maturity, at which point the bonds are redeemed, and the issue is paid off. The now severely deflated payoff can come via operating cash, by the issuance of more bonds, or with the issuance of preferred stock or even common. Thus, in his example, the annualized debt service is merely the three percent, or $600,000,000. That may seem like a big lump in the first few years of service, but as demand and fares rise, it becomes progressively less onerous. Also, remember that if the company cannot service its debt, the bondholders are first in line to snatch the equity. This means that in the event of insolvency the bondholders could potentially take over the company's common shares.

At 6:06 PM, December 16, 2019, Blogger Tory Gattis said...

That does make the economics less onerous, but only marginally. It's one thing if it declares bankruptcy to wipe out debt and restructures with fares that cover operating costs, but it's another if fares can't even cover the operating costs. Then they'll go to the taxpayers for a bailout and subsidy, which is very problematic. And I suspect they'll get it just as a point of pride in Texas to not have a set of ghost tracks across the state.

Also consider that he compares them to airfares, but what about to bus services like MegaBus and Vonlane? Those can be super cheap. Will people really pay $200 one way on a nice fast train that saves a couple hours vs. $30-50 on a bus? Not sure.

At 3:10 PM, December 17, 2019, Blogger Jardinero1 said...

Why does everyone think Texas Central will request a bailout? Businesses, even very large ones, fail all the time and there is no bailout. In the USA, only three types of private businesses obtain bailouts: banks, auto manufacturers and aircraft manufacturers. Railroad companies don't get bailouts because as long as the rolling stock and the tracks are intact, insolvent companies can always be handed over to the bondholders.

At 3:19 PM, December 17, 2019, Blogger Tory Gattis said...

I completely agree I don't see a bailout of the construction debt - they will just default. The question is whether they can still sell enough tickets at high enough prices to cover operating costs. If they can't, the private market will shut them down. But the State of Texas certainly doesn't want a dead high-speed rail line sitting in the middle of the state. It's embarrassing. So some sort of subsidy would probably get negotiated, similar to the tax subsidy for transit agencies.

At 8:34 AM, December 18, 2019, Blogger Jeff said...

I think you're missing the big picture with TCR. It's a multi-use development project that has trains connecting the three locations. They're trying to replicate JR using the same rolling stock and having terminals that can be developed into destinations. This is why they chose terminal locations that can be redone to meet their needs instead of using existing rail terminals.

Ticket pricing doesn't matter for some businesses and some prefer you fly. My girlfriend has a job based out of Dallas but she works remote in Houston. They fly her to Dallas once a month for meetings. For her the train would be the best option as the on time performance would be better than air travel, she could work the duration of the train ride(no putting away devices), and she could be home in a reasonable time. Currently she usually flies there the day before because flying there and back same day is exhausting.

Also with the way the country is going there will probably be an even bigger push to use 'green' transportation. There will probably be government incentives to use the train and some companies might even sign contracts to use train travel to tout their green initiatives.

At 9:30 AM, December 18, 2019, Blogger Jardinero1 said...

Jeff makes several valid points. The market for this is likely to be business travelers. Time, convenience and reliability are more important than price for this type of traveler. Also, the station near Bryan/College Station will be a junction for a spur line to Austin and San Antonio(for those who keep asking why they put a stop there).

At 9:43 AM, December 18, 2019, Blogger Tory Gattis said...

Fair points, and I do hope you're right about that level of demand. I knew about the stop to get TAMU passengers, but did not know about the spur junction, which is excellent to hear! Would like to see them build that extension one day, which could really increase the passenger count. Something that I think works in TCR's favor is that SWA is legally gate-limited at Love Field and at capacity, so they probably would be happy to switch a lot of the DAL-HOU shuttle flights to new more profitable destinations (like on the east or west coast). But I still think there will be plenty of DAL-HOU flights, if only because SWA connects a lot of passengers from elsewhere through DAL to HOU, and even some through HOU to DAL (like the Latin America international flights to HOU).

At 7:09 PM, December 20, 2019, Blogger George McKee said...

The red flag that an article is arguing in bad faith is when they mention eminent domain. Any fool ought to be able to realize that as soon as TCR lays the first 100 yeards of steel on land that it already owns, all those pseudo-legalistic arguments about its current status become moot, and the eminent domain proceedings launch. In fact, if they really were pressed for time, TCR has enough cash on hand to outright buy any number of near-abandoned short line railroads in the state and become a subsidiary of an existing railroad, via a "reverse merger", and pick up unquestioned eminent domain rights in the process.

At 7:13 PM, December 20, 2019, Blogger Tory Gattis said...

Completely agree. I've thought the same thing.


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