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Re: [NewMobilityCafe] Metro Rails: where's the money? Where's the property?

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  • Lee Schipper
    Thats an even better way of putting it, people trying to bring the decentralized world with them into the city. I should say I cycle 7.5 km each way to work at
    Message 1 of 5 , Aug 9, 2006
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      Thats an even better way of putting it, people trying to bring the
      decentralized world with them into the city.
      I should say I cycle 7.5 km each way to work at WRI and learnd fro 6
      1/2 years of cyclign to work in Paris how to be a nice urban cycle
      guerilla and gorilla at the same time.

      I made the ch oice of paying more to be close willingly, but I believe
      many of the suburbanites dont think about how they value their time
      commuting..so when you add the NIMBY there simply are not enough
      multiple units for people. Washington is particularly brutal to renters
      who want 3 bedrooms in a apartment. WE foudn none before we finally
      bought a house.. Having the mortgage interest tax deduction really
      slants the system to buying houses, buying large houses, and moving to
      the suburbs.

      So the changes I think we agree need to take place require far more than
      my 7.5 km each way to work!

      Lee Schipper
      Director of Research
      EMBARQ, the WRI Center
      for Sustainable Transport
      Washington DC
      +1202 729 7735
      www.embarq.wri.org
      >>> Richard Layman <rlaymandc@...> 08/09/06 9:33 AM >>>
      The problem with DC nimbys vis-a-vis appropriate density that is transit
      oriented are legion.

      My response is that the dominant planning and development paradigm in
      the United States is suburban--segregated use, deconcentrated and low
      scale, connected by the automobile.

      Then, these same people, not recognizing that they are imprinted with
      this paradigm, move to the city and apply it to urban questions. They
      don't understand or accept that they are imprinted with this paradigm,
      and they don't accept that it is inappropriately applied in cities.

      Hence, a perhaps unintended but aggressive suburbanization of the urban
      form.

      2. Real estate is about location, location, location. It may well be
      worth paying that premium to avoid spending $800/month+ on a car in
      perpetuity, when you figure the cost of purchase, financing,
      maintenance, use, and replacement.

      It is for me.

      I ride a bike, use transit, and occasionally rent cars (now am joining
      Flexcar as a supplement).

      However, the bike is an encumbrance as far as dating is concerned.

      3. Some day, I hope to get to South America and visit places like
      Curitiba and Bogota (well, maybe, Colombia still seems scary) and see
      how these places work. Obviously, I have great respect for Jaime Lerner
      and Enrique Penalosa, and wish we had more mayors like them but in the
      United States.

      Richard Layman
      Lee Schipper <schipper@...> wrote: There is ample evidence of the
      same kind of value gain along the Trans
      Milenio corridor in Bogota. There is no REAL BRT in the US (perhaps
      parts of Los Angeles not withstanding) to compare with this kind of
      improvement. The beautiful apartments along the main line in Curitiba,
      some there before the line went in years ago, some built afterwards, are
      also evidence that ANY reliable fast transport stimulates growth in
      housing, etc., particualarly if the density is high. Los Angeles has
      been talking to developers for a long time to beef up the nodes around
      the Wilshire and VAlley BRT lines.

      Contrast with my real home town in Beserkeley CA, who made it clear
      over the last 30 plus years that there would be ABSOLUTELY no
      development of property around the N. Berkeley BART site, something we
      call a parking lot with rails. Since dozens of homes were removed to
      create the BART station and parking lot, the net "gain" to the
      relatively low-density, single family home community near the stop was
      probably negative. Berkeley is still fighting over whether to develop
      around the s. Berkeley BART station, and El Cerrito Plaza, one stop
      north of n. Berkeley, almost died over the decades of neglect before
      finally being rebuilt, with (chuckle) Trader Joes as the centerpiece.
      Other parts of the BART system are equally outrageous, with virtually no
      development on top of or close by stations, but lots of parking for
      lucky and wealthy suburban commuters. Some stations in DC are like
      that, notably Vienna Va (you emerge and ask "Where's Vienna" and no one
      knows" and many other outlying stations.

      In other words, its all a matter of luck, planning, and many other
      factors whether there is sizeable development, who gains, or who
      opposes.

      Unfortunately there is another side to this value gain. I live 2 blocks
      from the Cleveland Park Metro in DC. Comparing house prices close (i.e.,
      within four blocks) and farther way showed a huge gradient. Its one
      thing if you already own the house (or you own lots of undeveloped
      property, such as all those real estate magnates who want billions of
      OPM ("other peoples' money) to be spent for rail to the Dulles airport
      so they can cash in) --- but what if you are one buying in and find you
      have to pay the $200K extra. Do a present value on that extra cost
      against the time and/or fuel saved. Is it worth it or would it be
      cheaper to live father away and use a car? My lovely CP neighbors have
      fought much densification here and at other stations -- even worse, were
      not allowed to build up on the existing 50 year old strip mall (the very
      first in the US) that is astride the Metro Station. Contrast that with
      Bethesda (six stops northwest) or Silver Spring (15 stops in the other
      direction, NE DC just in Maryland) where huge apartment developments
      really make these two town-lets good examples of transit metropolis that
      Bob Cervero has written about.

      In other words, its all a matter of luck, planning and who opposes...



      Lee Schipper
      Director of Research
      EMBARQ, the WRI Center
      for Sustainable Transport
      Washington DC
      +1202 729 7735
      www.embarq.wri.org

      >>> rlaymandc@... 08/09/06 7:23 AM >>>
      This was my original reaction to the article as well. In large part,
      public investment, especially in transit, is to spur additional private
      investment. In North America anyway, I think it's unlikely that BRT
      will do so, while there is no question that rail-based projects do.

      In my neighborhood for example, which is maybe 1/6 of the area impacted
      by the new "infill" station, the New York Avenue red line subway station
      in Washington, DC:

      1. Houses rose a minimum of $200,000 in value between the time of the
      announcement and opening of the station. That's a rise of $350 million
      in property value.
      2. Construction projects for between 2,000 and 2,800 units of
      condominiums are in process now also. (Some were announced beforehand,
      but for years and years had gone nowhere.) Arguably, separating out
      previously announced projects, this is worth $1 billion.

      And this is but 1/6 of the total geography impacted by this station.
      And the station cost $120 million to build. Granted the red line had
      already been built, costing billions.

      (Other examples include the construction along the Hiawatha Line in
      Minnesota, and the experience of Houston and Dallas. There is a chapter
      in the new edition of _Geography of Urban Transportation_ on this topic,
      although I do not yet have this book.)

      And speaking of depreciation. Buses wear out and need to be replaced.
      While it is true that train cars wear out too, they are usually
      refurbished, and last for decades.

      Where U.S. transit systems have "problems," is that most of the value
      captured from transit investment connotes to private investors. Unlike
      HKT and the Japanese Railway system, U.S. transit systems aren't active
      property-portfolio developers, and therefore lose additional revenue
      streams that could be used to "subsidize" transit, just like transit was
      often developed to spur housing development in the 1800s and 1900s.

      Richard Layman
      Washington, DC

      Roland Sapsford wrote:
      Yes - I find the argument about property development unusual as
      well.
      Most motorways projects have aided sprawl in part because the
      motorways
      have been provided gratis as access to greenfields spaces. I agree
      with
      Erics logic below in relation to property development. However I
      don't
      know the circumstances of the specific case that started this debate -

      it may well be that, for example, low-income accomodation or heritage
      is
      being destroyed.

      Best wishes
      Roland Sapsford

      Eric Bruun wrote:
      > Boy, I don't agree with this article at all.
      >
      > First of all, much of rapid transit investment has no depreciation.
      Most
      > tunnels that were built 100+ years ago are more valuable today than
      they were then. This is an example
      > of sustainable development, even if initially costly.
      >
      > Second, what is wrong with using real estate funds to pay back the
      rail investment? It is the rail investment
      > that added value to the property in the first place. Why should
      there be a windfall to external developers?
      > Hong Kong's Metro and Japanese railways have always been real estate
      developers. In fact that is how most
      > of the original streetcar lines got started -- as means to open up
      real estate.
      >
      > Eric Bruun
      >
      >
      > -----Original Message-----
      >
      >> From: Lee Schipper
      >> Sent: Aug 8, 2006 5:45 AM
      >> To: eric.britton@..., GlobalSouth@yahoogroups.com,
      NewMobilityCafe@yahoogroups.com
      >> Cc: Sustran-discuss@...
      >> Subject: [sustran] Re: [NewMobilityCafe] Metro Rails: where's the
      money?
      >>
      >> Nice example of what can be done with OPM -- Other Peoples' Money!
      >>
      >>
      >>>>> eric.britton@... 08/08/06 12:53 AM >>>
      >>>>>
      >> Metro Rails: where's the money?
      >>
      >>
      >>
      >>
      >>
      >> Bus Rapid Transit makes more
      >>

      >> financial
      >> sense as an urban transport system
      >>
      >>
      >>
      >>
      >>
      >> RAMESH
      >> RAMANATHAN
      >>
      >>
      >> Posted online: Tuesday, August 08, 2006 at 0000 hours IST
      >>
      >> http://www.financialexpress.com/fe_full_story.php?content_id=136535

      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >>
      >> E Sreedharan, the driving force behind the Delhi Metro, is a
      living
      >> legend-a
      >> remarkable engineer. He delivered the Delhi Metro on time, within
      cost,
      >> and as a
      >> example of how public infrastructure ought to be built. In a
      country
      >> parched for
      >> projects that move from conception to delivery with no glitches, he
      is
      >> a shining
      >> example of how to do it right.
      >>
      >> Unfortunately, Sreedharan is not a magician. No matter what he
      does, he
      >> can't
      >> make the Delhi Metro's financials work, because the numbers don't
      add
      >> up.
      >>
      >>
      >>
      >>
      >> Phase 1 cost Rs 10,000 crore for 64 km - a whopping Rs 150
      crore/km.
      >> With 66%
      >> debt financing, interest cost at 8% works out to Rs 550 crore p.a.
      And
      >> principal
      >> repayment would be Rs 500-600 crore p.a., assuming a 10-15 year
      >> repayment
      >> period.
      >>
      >> Where are the revenues coming from? Last year, the Metro had
      operating
      >> revenues
      >> (i.e. from passengers) of Rs 113 crore. Operating expenditures were
      Rs
      >> 102
      >> crore, leaving barely Rs 10 crore as surplus before interest. And
      one
      >> other
      >> painful item: depreciation. When you build a Rs 10,000crore asset,
      >> depreciation
      >> can really start hurting. This was Rs 200 crore last year, but
      will
      >> balloon .
      >> Which means that the Metro is suffering massive losses, even
      before
      >> interest
      >> expenses, forget principal repayment. There is no way the Delhi
      Metro
      >> can
      >> generate surpluses. Ever.
      >>
      >> The only solution to this fiscal problem is to find alternative
      sources
      >> of
      >>

      >> financing,
      >> which is what Delhi Metro has done. They are now developing real
      >> estate-a
      >> six-hectare property at Shastri Park, 93 acre at Khyber Pass, etc.
      Last
      >> year,
      >> one-time income from real estate came to Rs 300 crore, almost
      three
      >> times that
      >> which the Delhi Metro was originally set up for, mass transit. The
      >> reality:
      >> Metro Rail projects are financial white elephants.
      >>
      >> Who is
      >>

      >> lending to Metro projects? The biggest - and, possibly, only -
      lender
      >> so far has
      >> been the Japan Bank for International Cooperation (JBIC). They
      financed
      >> Delhi
      >> Metro over Rs 4,000 crore, and have completed due diligence on
      phase 2
      >> - debt of
      >> another Rs 4,000 crore. There is no public data available on
      JBIC's
      >> rationale
      >> for lending to Metro projects.
      >>
      >> Strangely, just as the financial hole of Delhi Metro is increasing,
      the
      >> Metro
      >> bandwagon is moving across the country. Bangalore has just launched
      its
      >> Metro
      >> project, Mumbai followed suit a month later, Hyderabad and Chennai
      are
      >> busy
      >> preparing detailed project reports. If the numbers are so bad, why
      are
      >> cities
      >> interested in these projects?
      >>
      >> Actually, it is not the city governments that get to decide (topic
      for
      >> another
      >> debate) but their state governments. There are a number of
      reasons.
      >> Urban
      >> testosterone for one; metros have become a status symbol. But there
      are
      >> many
      >> other factors at play, which make the Metro lobby a force to
      reckon
      >> with. A
      >> World Bank report on urban transport in India states that our
      urban
      >> transport
      >> approach is "supply-oriented, and traffic growth-biased. It
      conflicts
      >> with the
      >> principles outlined in the government urban transport policy
      statement
      >> in a
      >> number of ways.
      >>
      >> In the short term, it neglects the mobility of low-income and poor
      >> travelers,
      >> especially the non-motorised one..(and) ..favors the most
      >> capital-intensive
      >> public transport modes (metros and other urban railways) which may
      not
      >> be
      >> warranted by either traffic density and passengers' ability to pay,
      or
      >> their
      >> budget capacity to pay subsidies in perpetuity."
      >>
      >>
      >> Quick Take
      >>
      >>
      >> . Delhi Metro is suffering huge losses. And no way can it generate
      >> surpluses
      >> . The only solution is to look for alternative sources
      >> of financing
      >> . A Bus Rapid Transit system is possibly a more viable transport
      >> alternative
      >>
      >> What is preventing urban transport alternatives from emerging in
      India?
      >> One key
      >> reason, indeed the first reason, the World Bank report suggests is
      that
      >> these
      >> alternative proposals run counter to "the formidable urban rail
      lobby",
      >> among
      >> others.
      >>
      >> But are there alternatives? Clearly, we need mass transport systems
      in
      >> our
      >> cities - private cars and two-wheelers are already choking the
      streets,
      >> and
      >> barely provide 20% of the total travel needs even today. One
      possible
      >> alternative is Bus-Rapid-Transit (BRT). Across the world, there is
      >> increasing
      >> support for BRTs. Remarkable scaled up solutions have emerged,
      none
      >> better than
      >> in Bogota and Curitiba in South America.
      >>
      >> A report prepared by Seema Parekh ,et al for 'India Urban Space',
      a
      >> conference
      >> on challenges in urban India, states: "Bogota today boasts of a
      >> world-class Bus
      >> Rapid Transit system of dedicated bus lanes called TransMilenio;
      Latin
      >> America's
      >> largest network of bicycle ways called ciclo-rutas 150 miles long;
      >> world's
      >> longest pedestrian-only street spanning 10.2 miles, hundreds of
      miles
      >> of
      >> sidewalks many through the city's poorest neighborhoods; and the
      >> world's biggest
      >> Car-Free Day (dia sin carro), during which private vehicles are
      not
      >> allowed to
      >> enter the entire city of 135 square miles."
      >>
      >> Importantly, from a financial standpoint, the infrastructure was
      built
      >> at a cost
      >> of about $5.3 million per km (Rs 20 crore, or one-sixth of Delhi
      >> Metro). As a
      >> result, "TransMilenio requires no operating subsidies and earns
      >> substantial
      >> profits for its operators."
      >>
      >> BRT systems make more financial sense than Metros. Ahmedabad seems
      to
      >> think so -
      >> it is the first Indian city to go for BRT. Jaipur, Indore and
      others
      >> are also
      >> moving in this direction. An alternative is emerging.
      >>
      >> Beyond finances, any urban transport system fundamentally defines
      the
      >> destiny of
      >> a city for decades, just by virtue of its impact. It is critical,
      >> therefore,
      >> that these decisions be integrated into an overall plan.
      >>
      >> Swati Ramanathan of Janaagraha says: "Introducing any rapid
      transit
      >> system
      >> without developing a Master Plan with integrated transport as a
      >> component is
      >> like putting the cart before the horse."
      >>
      >> Most public policy decisions are like icebergs. Urban transport
      choices
      >> are no
      >> different. For those who want to improve the quality of the public
      >> debate on
      >> this issue, the Achilles heel of Metro Rail systems is their
      finances.
      >> Sorry, Mr
      >> Sreedharan--I still think you are great engineer.
      >>
      >> -The writer is founder of Janaagraha,which aims at reforms in
      urban
      >> governance
      >>
      >>
      >>
      >>
      >>
      >> ================================================================
      >> SUSTRAN-DISCUSS is a forum devoted to discussion of people-centred,
      equitable and sustainable transport with a focus on developing countries
      (the 'Global South'). Because of the history of the list, the main focus
      is on urban transport policy in Asia.
      >>
      >
      >
      >
      >
      >
      > Check in here via the homepage at http://www.newmobility.org
      > To post message to group: NewMobilityCafe@yahoogroups.com
      > Please think twice before posting to the group as a whole
      > (It might be that your note is best sent to one person?)
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    • scott@pedalsong.net
      This argument relies on the questionable assumption that the NIMBY folks are moving into the neighborhood. In my experience, the NIMBY reaction is much more
      Message 2 of 5 , Aug 9, 2006
      • 0 Attachment
        This argument relies on the questionable assumption that the NIMBY
        folks are moving into the neighborhood. In my experience, the NIMBY
        reaction is much more likely to come from long-term residents who
        oppose change that they feel is being forced on them from outside and
        not from suburbanites moving into urban settings.

        It is also possible that this situation results from suburbs that are
        consumed by expanding urbanization, possibly resulting from transit
        line expansion. They often oppose bringing in transit for fear of the
        density impact it will have on their neighborhood. In order to
        alleviate that fear, they adjust their zoning or vote in council
        members to oppose increased density.

        I'm not supporting this line of thinking, but I don't agree that the
        NIMBY reaction comes from subrubanites immegrating to the city. I
        think it is more likely that it is a result of urban services
        expanding to the suburbs without some assurance that those outlying
        locations will buy into the increased density required for such
        services to be effective. One might ask why BART chose to build in
        this direction without garnering support for transit-oriented
        development from the communities who would benefit both from the
        transit service and the increased value to their homes.

        On point 2, in my initial research into Location Efficient Mortgages
        (LEM), I've found that they have not been particularly well received.
        While non-drivers do see the financial benefits to not owning a car,
        that does not seem to translate directly into a willingness to invest
        that savings into more expensive housing. Given the access to a
        bigger loan to reflect more available income, car-free home buyers
        continue to choose other mortgage products over LEMs.

        -Scott



        Quoting Richard Layman <rlaymandc@...>:

        > The problem with DC nimbys vis-a-vis appropriate density that is
        > transit oriented are legion.
        >
        > My response is that the dominant planning and development paradigm
        > in the United States is suburban--segregated use, deconcentrated and
        > low scale, connected by the automobile.
        >
        > Then, these same people, not recognizing that they are imprinted
        > with this paradigm, move to the city and apply it to urban
        > questions. They don't understand or accept that they are imprinted
        > with this paradigm, and they don't accept that it is inappropriately
        > applied in cities.
        >
        > Hence, a perhaps unintended but aggressive suburbanization of the urban form.
        >
        > 2. Real estate is about location, location, location. It may well
        > be worth paying that premium to avoid spending $800/month+ on a car
        > in perpetuity, when you figure the cost of purchase, financing,
        > maintenance, use, and replacement.
        >
        > It is for me.
        >
        > I ride a bike, use transit, and occasionally rent cars (now am
        > joining Flexcar as a supplement).
        >
        > However, the bike is an encumbrance as far as dating is concerned.
        >
        > 3. Some day, I hope to get to South America and visit places like
        > Curitiba and Bogota (well, maybe, Colombia still seems scary) and
        > see how these places work. Obviously, I have great respect for
        > Jaime Lerner and Enrique Penalosa, and wish we had more mayors like
        > them but in the United States.
        >
        > Richard Layman
        > Lee Schipper <schipper@...> wrote: There is ample evidence of
        > the same kind of value gain along the Trans
        > Milenio corridor in Bogota. There is no REAL BRT in the US (perhaps
        > parts of Los Angeles not withstanding) to compare with this kind of
        > improvement. The beautiful apartments along the main line in Curitiba,
        > some there before the line went in years ago, some built afterwards, are
        > also evidence that ANY reliable fast transport stimulates growth in
        > housing, etc., particualarly if the density is high. Los Angeles has
        > been talking to developers for a long time to beef up the nodes around
        > the Wilshire and VAlley BRT lines.
        >
        > Contrast with my real home town in Beserkeley CA, who made it clear
        > over the last 30 plus years that there would be ABSOLUTELY no
        > development of property around the N. Berkeley BART site, something we
        > call a parking lot with rails. Since dozens of homes were removed to
        > create the BART station and parking lot, the net "gain" to the
        > relatively low-density, single family home community near the stop was
        > probably negative. Berkeley is still fighting over whether to develop
        > around the s. Berkeley BART station, and El Cerrito Plaza, one stop
        > north of n. Berkeley, almost died over the decades of neglect before
        > finally being rebuilt, with (chuckle) Trader Joes as the centerpiece.
        > Other parts of the BART system are equally outrageous, with virtually no
        > development on top of or close by stations, but lots of parking for
        > lucky and wealthy suburban commuters. Some stations in DC are like
        > that, notably Vienna Va (you emerge and ask "Where's Vienna" and no one
        > knows" and many other outlying stations.
        >
        > In other words, its all a matter of luck, planning, and many other
        > factors whether there is sizeable development, who gains, or who
        > opposes.
        >
        > Unfortunately there is another side to this value gain. I live 2 blocks
        > from the Cleveland Park Metro in DC. Comparing house prices close (i.e.,
        > within four blocks) and farther way showed a huge gradient. Its one
        > thing if you already own the house (or you own lots of undeveloped
        > property, such as all those real estate magnates who want billions of
        > OPM ("other peoples' money) to be spent for rail to the Dulles airport
        > so they can cash in) --- but what if you are one buying in and find you
        > have to pay the $200K extra. Do a present value on that extra cost
        > against the time and/or fuel saved. Is it worth it or would it be
        > cheaper to live father away and use a car? My lovely CP neighbors have
        > fought much densification here and at other stations -- even worse, were
        > not allowed to build up on the existing 50 year old strip mall (the very
        > first in the US) that is astride the Metro Station. Contrast that with
        > Bethesda (six stops northwest) or Silver Spring (15 stops in the other
        > direction, NE DC just in Maryland) where huge apartment developments
        > really make these two town-lets good examples of transit metropolis that
        > Bob Cervero has written about.
        >
        > In other words, its all a matter of luck, planning and who opposes...
        >
        >
        >
        > Lee Schipper
        > Director of Research
        > EMBARQ, the WRI Center
        > for Sustainable Transport
        > Washington DC
        > +1202 729 7735
        > www.embarq.wri.org
        >
        >>>> rlaymandc@... 08/09/06 7:23 AM >>>
        > This was my original reaction to the article as well. In large part,
        > public investment, especially in transit, is to spur additional private
        > investment. In North America anyway, I think it's unlikely that BRT
        > will do so, while there is no question that rail-based projects do.
        >
        > In my neighborhood for example, which is maybe 1/6 of the area impacted
        > by the new "infill" station, the New York Avenue red line subway station
        > in Washington, DC:
        >
        > 1. Houses rose a minimum of $200,000 in value between the time of the
        > announcement and opening of the station. That's a rise of $350 million
        > in property value.
        > 2. Construction projects for between 2,000 and 2,800 units of
        > condominiums are in process now also. (Some were announced beforehand,
        > but for years and years had gone nowhere.) Arguably, separating out
        > previously announced projects, this is worth $1 billion.
        >
        > And this is but 1/6 of the total geography impacted by this station.
        > And the station cost $120 million to build. Granted the red line had
        > already been built, costing billions.
        >
        > (Other examples include the construction along the Hiawatha Line in
        > Minnesota, and the experience of Houston and Dallas. There is a chapter
        > in the new edition of _Geography of Urban Transportation_ on this topic,
        > although I do not yet have this book.)
        >
        > And speaking of depreciation. Buses wear out and need to be replaced.
        > While it is true that train cars wear out too, they are usually
        > refurbished, and last for decades.
        >
        > Where U.S. transit systems have "problems," is that most of the value
        > captured from transit investment connotes to private investors. Unlike
        > HKT and the Japanese Railway system, U.S. transit systems aren't active
        > property-portfolio developers, and therefore lose additional revenue
        > streams that could be used to "subsidize" transit, just like transit was
        > often developed to spur housing development in the 1800s and 1900s.
        >
        > Richard Layman
        > Washington, DC
        >
        > Roland Sapsford wrote:
        > Yes - I find the argument about property development unusual as
        > well.
        > Most motorways projects have aided sprawl in part because the
        > motorways
        > have been provided gratis as access to greenfields spaces. I agree
        > with
        > Erics logic below in relation to property development. However I
        > don't
        > know the circumstances of the specific case that started this debate -
        >
        > it may well be that, for example, low-income accomodation or heritage
        > is
        > being destroyed.
        >
        > Best wishes
        > Roland Sapsford
        >
        > Eric Bruun wrote:
        > > Boy, I don't agree with this article at all.
        > >
        > > First of all, much of rapid transit investment has no depreciation.
        > Most
        > > tunnels that were built 100+ years ago are more valuable today than
        > they were then. This is an example
        > > of sustainable development, even if initially costly.
        > >
        > > Second, what is wrong with using real estate funds to pay back the
        > rail investment? It is the rail investment
        > > that added value to the property in the first place. Why should
        > there be a windfall to external developers?
        > > Hong Kong's Metro and Japanese railways have always been real estate
        > developers. In fact that is how most
        > > of the original streetcar lines got started -- as means to open up
        > real estate.
        > >
        > > Eric Bruun
        > >
        > >
        > > -----Original Message-----
        > >
        > >> From: Lee Schipper
        > >> Sent: Aug 8, 2006 5:45 AM
        > >> To: eric.britton@..., GlobalSouth@yahoogroups.com,
        > NewMobilityCafe@yahoogroups.com
        > >> Cc: Sustran-discuss@...
        > >> Subject: [sustran] Re: [NewMobilityCafe] Metro Rails: where's the
        > money?
        > >>
        > >> Nice example of what can be done with OPM -- Other Peoples' Money!
        > >>
        > >>
        > >>>>> eric.britton@... 08/08/06 12:53 AM >>>
        > >>>>>
        > >> Metro Rails: where's the money?
        > >>
        > >>
        > >>
        > >>
        > >>
        > >> Bus Rapid Transit makes more
        > >>
        >
        > >> financial
        > >> sense as an urban transport system
        > >>
        > >>
        > >>
        > >>
        > >>
        > >> RAMESH
        > >> RAMANATHAN
        > >>
        > >>
        > >> Posted online: Tuesday, August 08, 2006 at 0000 hours IST
        > >>
        > >> http://www.financialexpress.com/fe_full_story.php?content_id=136535
        >
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >>
        > >> E Sreedharan, the driving force behind the Delhi Metro, is a
        > living
        > >> legend-a
        > >> remarkable engineer. He delivered the Delhi Metro on time, within
        > cost,
        > >> and as a
        > >> example of how public infrastructure ought to be built. In a
        > country
        > >> parched for
        > >> projects that move from conception to delivery with no glitches, he
        > is
        > >> a shining
        > >> example of how to do it right.
        > >>
        > >> Unfortunately, Sreedharan is not a magician. No matter what he
        > does, he
        > >> can't
        > >> make the Delhi Metro's financials work, because the numbers don't
        > add
        > >> up.
        > >>
        > >>
        > >>
        > >>
        > >> Phase 1 cost Rs 10,000 crore for 64 km - a whopping Rs 150
        > crore/km.
        > >> With 66%
        > >> debt financing, interest cost at 8% works out to Rs 550 crore p.a.
        > And
        > >> principal
        > >> repayment would be Rs 500-600 crore p.a., assuming a 10-15 year
        > >> repayment
        > >> period.
        > >>
        > >> Where are the revenues coming from? Last year, the Metro had
        > operating
        > >> revenues
        > >> (i.e. from passengers) of Rs 113 crore. Operating expenditures were
        > Rs
        > >> 102
        > >> crore, leaving barely Rs 10 crore as surplus before interest. And
        > one
        > >> other
        > >> painful item: depreciation. When you build a Rs 10,000crore asset,
        > >> depreciation
        > >> can really start hurting. This was Rs 200 crore last year, but
        > will
        > >> balloon .
        > >> Which means that the Metro is suffering massive losses, even
        > before
        > >> interest
        > >> expenses, forget principal repayment. There is no way the Delhi
        > Metro
        > >> can
        > >> generate surpluses. Ever.
        > >>
        > >> The only solution to this fiscal problem is to find alternative
        > sources
        > >> of
        > >>
        >
        > >> financing,
        > >> which is what Delhi Metro has done. They are now developing real
        > >> estate-a
        > >> six-hectare property at Shastri Park, 93 acre at Khyber Pass, etc.
        > Last
        > >> year,
        > >> one-time income from real estate came to Rs 300 crore, almost
        > three
        > >> times that
        > >> which the Delhi Metro was originally set up for, mass transit. The
        > >> reality:
        > >> Metro Rail projects are financial white elephants.
        > >>
        > >> Who is
        > >>
        >
        > >> lending to Metro projects? The biggest - and, possibly, only -
        > lender
        > >> so far has
        > >> been the Japan Bank for International Cooperation (JBIC). They
        > financed
        > >> Delhi
        > >> Metro over Rs 4,000 crore, and have completed due diligence on
        > phase 2
        > >> - debt of
        > >> another Rs 4,000 crore. There is no public data available on
        > JBIC's
        > >> rationale
        > >> for lending to Metro projects.
        > >>
        > >> Strangely, just as the financial hole of Delhi Metro is increasing,
        > the
        > >> Metro
        > >> bandwagon is moving across the country. Bangalore has just launched
        > its
        > >> Metro
        > >> project, Mumbai followed suit a month later, Hyderabad and Chennai
        > are
        > >> busy
        > >> preparing detailed project reports. If the numbers are so bad, why
        > are
        > >> cities
        > >> interested in these projects?
        > >>
        > >> Actually, it is not the city governments that get to decide (topic
        > for
        > >> another
        > >> debate) but their state governments. There are a number of
        > reasons.
        > >> Urban
        > >> testosterone for one; metros have become a status symbol. But there
        > are
        > >> many
        > >> other factors at play, which make the Metro lobby a force to
        > reckon
        > >> with. A
        > >> World Bank report on urban transport in India states that our
        > urban
        > >> transport
        > >> approach is "supply-oriented, and traffic growth-biased. It
        > conflicts
        > >> with the
        > >> principles outlined in the government urban transport policy
        > statement
        > >> in a
        > >> number of ways.
        > >>
        > >> In the short term, it neglects the mobility of low-income and poor
        > >> travelers,
        > >> especially the non-motorised one..(and) ..favors the most
        > >> capital-intensive
        > >> public transport modes (metros and other urban railways) which may
        > not
        > >> be
        > >> warranted by either traffic density and passengers' ability to pay,
        > or
        > >> their
        > >> budget capacity to pay subsidies in perpetuity."
        > >>
        > >>
        > >> Quick Take
        > >>
        > >>
        > >> . Delhi Metro is suffering huge losses. And no way can it generate
        > >> surpluses
        > >> . The only solution is to look for alternative sources
        > >> of financing
        > >> . A Bus Rapid Transit system is possibly a more viable transport
        > >> alternative
        > >>
        > >> What is preventing urban transport alternatives from emerging in
        > India?
        > >> One key
        > >> reason, indeed the first reason, the World Bank report suggests is
        > that
        > >> these
        > >> alternative proposals run counter to "the formidable urban rail
        > lobby",
        > >> among
        > >> others.
        > >>
        > >> But are there alternatives? Clearly, we need mass transport systems
        > in
        > >> our
        > >> cities - private cars and two-wheelers are already choking the
        > streets,
        > >> and
        > >> barely provide 20% of the total travel needs even today. One
        > possible
        > >> alternative is Bus-Rapid-Transit (BRT). Across the world, there is
        > >> increasing
        > >> support for BRTs. Remarkable scaled up solutions have emerged,
        > none
        > >> better than
        > >> in Bogota and Curitiba in South America.
        > >>
        > >> A report prepared by Seema Parekh ,et al for 'India Urban Space',
        > a
        > >> conference
        > >> on challenges in urban India, states: "Bogota today boasts of a
        > >> world-class Bus
        > >> Rapid Transit system of dedicated bus lanes called TransMilenio;
        > Latin
        > >> America's
        > >> largest network of bicycle ways called ciclo-rutas 150 miles long;
        > >> world's
        > >> longest pedestrian-only street spanning 10.2 miles, hundreds of
        > miles
        > >> of
        > >> sidewalks many through the city's poorest neighborhoods; and the
        > >> world's biggest
        > >> Car-Free Day (dia sin carro), during which private vehicles are
        > not
        > >> allowed to
        > >> enter the entire city of 135 square miles."
        > >>
        > >> Importantly, from a financial standpoint, the infrastructure was
        > built
        > >> at a cost
        > >> of about $5.3 million per km (Rs 20 crore, or one-sixth of Delhi
        > >> Metro). As a
        > >> result, "TransMilenio requires no operating subsidies and earns
        > >> substantial
        > >> profits for its operators."
        > >>
        > >> BRT systems make more financial sense than Metros. Ahmedabad seems
        > to
        > >> think so -
        > >> it is the first Indian city to go for BRT. Jaipur, Indore and
        > others
        > >> are also
        > >> moving in this direction. An alternative is emerging.
        > >>
        > >> Beyond finances, any urban transport system fundamentally defines
        > the
        > >> destiny of
        > >> a city for decades, just by virtue of its impact. It is critical,
        > >> therefore,
        > >> that these decisions be integrated into an overall plan.
        > >>
        > >> Swati Ramanathan of Janaagraha says: "Introducing any rapid
        > transit
        > >> system
        > >> without developing a Master Plan with integrated transport as a
        > >> component is
        > >> like putting the cart before the horse."
        > >>
        > >> Most public policy decisions are like icebergs. Urban transport
        > choices
        > >> are no
        > >> different. For those who want to improve the quality of the public
        > >> debate on
        > >> this issue, the Achilles heel of Metro Rail systems is their
        > finances.
        > >> Sorry, Mr
        > >> Sreedharan--I still think you are great engineer.
        > >>
        > >> -The writer is founder of Janaagraha,which aims at reforms in
        > urban
        > >> governance
        > >>
        > >>
        > >>
        > >>
        > >>
        > >> ================================================================
        > >> SUSTRAN-DISCUSS is a forum devoted to discussion of people-centred,
        > equitable and sustainable transport with a focus on developing countries
        > (the 'Global South'). Because of the history of the list, the main focus
        > is on urban transport policy in Asia.
        > >>
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