Transportation Secretary Ray LaHood has announced that Amtrak will spend $450 million to upgrade tracks and power systems in New Jersey that will enable the Acela trains to cruise along at 160 mph, which would be the fastest a passenger train can go in the United States. A total of $745 million will be spent by Amtrak nationally to upgrade services.
Critics are already deriding the spending on the high speed rail segment as costing $4.5 million per second improvement on speed in New Jersey, but they're ignoring the real issue here. These improvements are all about the power and rail reliability improvement. Speed is a secondary benefit. Critics are seizing upon the cost versus speed to claim that the project isn't worth it, but they ignore the costs of having an unreliable passenger rail/commuter rail system that is the most heavily used in the nation.
Power issues regularly cause massive delays along the entire Northeast Corridor (NEC) and spillover delays affect the LIRR and NJ Transit services. Power problems occur all too frequently and cost commuters billions of dollars over the years in lost opportunity costs and wasted time due to the problems.
Fixing the power issues will resolve a longstanding bottleneck along the NEC and will improve the reliability of Amtrak and NJ Transit.
The next step will be to replace the Portal Bridge, which everyone concedes requires replacement, but which has lacked funding because everyone tries to tie that bridge project together with the Hudson River tunnel projects (the cancelled ARC or the proposed Gateway). The Portal Bridge replacement would further improve reliability (just yesterday trains were delayed 15-20 minutes through the morning commute due to the bridge being opened for river traffic). The replacement bridge would allow higher speed through that segment of the NEC, but it would be a far more reliable component of the NEC than at present.
Showing posts with label Ray LaHood. Show all posts
Showing posts with label Ray LaHood. Show all posts
Tuesday, August 23, 2011
Thursday, October 28, 2010
Gov. Christie Pulls Plug On ARC Tunnel Means Amtrak Tunnel May Proceed
Gov. Chris Christie slammed the door on the ill-conceived ARC tunnel and the federal government chose not to resuscitate the project by stepping in to cover cost overruns. This is actually more good news than ARC tunnel adherents would care to admit. The ARC tunnel, a $8.7 billion project that was more likely going to cost $9.7 billion to $13+ billion depending on the cost overruns (all of which would have been borne by New Jersey taxpayers), was a tunnel project that would never have delivered on its promised additional capacity because it would have delivered passengers to a wholly new terminal separate from existing Amtrak and NJ Transit facilities and which NJ Transit lacks the operating funds to actually operate.
It speaks volumes about the true intentions of the federal government, and Transportation Secretary Ray LaHood and the Obama Administration that they chose not to pick up the tab on any cost overruns. They've been preaching high speed rail and mass transit infrastructure expenditures and this was as "shovel-ready" a project as one could imagine, and yet the feds didn't step up with the promise to pick up those overruns.
Why would they do such a thing?
It would have been a win-win for the Obama Administration to see the project restarted since it would provide jobs, build improved infrastructure, and even undercut Gov. Christie (who was a winner politically regardless of the outcome since he actually stood up for New Jersey taxpayers in a project that had more interstate commerce connections than any other on the table and to which New York was not contributing a dime of its own money).
The feds, if they truly thought this was a worthy project, should have come up with the guarantees to cover any cost overruns. That way, if the project came in on budget, they would have not incurred additional costs, and everyone could claim that they managed to bring the project in on budget.
What this says is that the Amtrak-proposed tunnel project is the preferable one - and one that will do what the ARC tunnel proponents claimed (and for which the tunnel was originally proposed).
Those claiming that this was a short-sighted approach to mass transit ignore that there was no reason to go ahead with a project that would not deliver on its goals of reducing congestion into Penn Station (when the problems with any one track would still result in massive delays on the Northeast Corridor). The project did not truly add capacity on the Northeast Corridor, and infrastructure deficiencies would remain - including ongoing problems with Amtrak power systems and the Portal Bridge bottleneck. Those need to be addressed in a substantive way in order to truly increase capacity and reliability on the Northeast Corridor. A new NJ Transit terminus in Manhattan would not get that job done and the trains would still be beholden to the power infrastructure that causes repeated and incessant delays on the Northeast Corridor.
Moreover, the idea of a one-seat ride from North Jersey makes no sense when NJ Transit lacks the operating funds to add additional trains and actually reduced service while increasing fares earlier this year. NJ Transit can barely operate at its existing level of service - it can't expect to add trains (and therefore capacity) anytime soon.
What we see is that NJ Transit lost out on a pet project that would have increased its own infrastructure footprint but without providing significant improvements for commuters who would have been given a tunnel to Herald Square for more than $9 billion.
UPDATE:
Op ed pages are weighing in on the decision with some not quite expected positions. The NY Times op ed notes that Christie was right to be fiscally prudent and notes that New York wasn't asked to participate, but then says that Christie should have used a gas tax increase to cover the costs. That ignores the fact that NJ taxpayers are already among the most heavily burdened taxpayers in the nation, and that the gas tax is the one low-tax bright spot for taxpayers. The idea isn't to further increase the tax burden on NJ taxpayers.
The NY Post applauds the decision. It notes that the feds were basically asking New Jersey to take on more debt, even though the feds weren't going to commit to covering the cost overruns.
The Record's Charles Stile thinks that this decision burnishes Christie's political star and will fuel his (and GOP) political ambitions. It will certainly improve Christie's political standing among fiscal conservatives, but Stile ignores that it also highlights the fact that the Obama Administration did nothing to actually move the project forward except to propose that New Jersey take on more debt without getting New York to pony up money for an interstate project or for the federal government to cover cost overruns so as to keep to Obama's own promise of improving mass transit infrastructure. This decision blows a huge hole in Obama's own political rhetoric about spending money on infrastructure. That point was made in the paper's editorial.
Now, Amtrak and NJ Transit can focus on building a proper tunnel to Penn Station that will do what the ARC tunnel was supposed to have done - truly increase capacity and reliability in a cost-effective manner.
UPDATE:
And like clockwork, the Northeast Corridor is hit by still more power problems causing delays. Nothing in the ARC tunnel project would address that longstanding problem.
It speaks volumes about the true intentions of the federal government, and Transportation Secretary Ray LaHood and the Obama Administration that they chose not to pick up the tab on any cost overruns. They've been preaching high speed rail and mass transit infrastructure expenditures and this was as "shovel-ready" a project as one could imagine, and yet the feds didn't step up with the promise to pick up those overruns.
Why would they do such a thing?
It would have been a win-win for the Obama Administration to see the project restarted since it would provide jobs, build improved infrastructure, and even undercut Gov. Christie (who was a winner politically regardless of the outcome since he actually stood up for New Jersey taxpayers in a project that had more interstate commerce connections than any other on the table and to which New York was not contributing a dime of its own money).
The feds, if they truly thought this was a worthy project, should have come up with the guarantees to cover any cost overruns. That way, if the project came in on budget, they would have not incurred additional costs, and everyone could claim that they managed to bring the project in on budget.
What this says is that the Amtrak-proposed tunnel project is the preferable one - and one that will do what the ARC tunnel proponents claimed (and for which the tunnel was originally proposed).
Those claiming that this was a short-sighted approach to mass transit ignore that there was no reason to go ahead with a project that would not deliver on its goals of reducing congestion into Penn Station (when the problems with any one track would still result in massive delays on the Northeast Corridor). The project did not truly add capacity on the Northeast Corridor, and infrastructure deficiencies would remain - including ongoing problems with Amtrak power systems and the Portal Bridge bottleneck. Those need to be addressed in a substantive way in order to truly increase capacity and reliability on the Northeast Corridor. A new NJ Transit terminus in Manhattan would not get that job done and the trains would still be beholden to the power infrastructure that causes repeated and incessant delays on the Northeast Corridor.
Moreover, the idea of a one-seat ride from North Jersey makes no sense when NJ Transit lacks the operating funds to add additional trains and actually reduced service while increasing fares earlier this year. NJ Transit can barely operate at its existing level of service - it can't expect to add trains (and therefore capacity) anytime soon.
What we see is that NJ Transit lost out on a pet project that would have increased its own infrastructure footprint but without providing significant improvements for commuters who would have been given a tunnel to Herald Square for more than $9 billion.
UPDATE:
Op ed pages are weighing in on the decision with some not quite expected positions. The NY Times op ed notes that Christie was right to be fiscally prudent and notes that New York wasn't asked to participate, but then says that Christie should have used a gas tax increase to cover the costs. That ignores the fact that NJ taxpayers are already among the most heavily burdened taxpayers in the nation, and that the gas tax is the one low-tax bright spot for taxpayers. The idea isn't to further increase the tax burden on NJ taxpayers.
The NY Post applauds the decision. It notes that the feds were basically asking New Jersey to take on more debt, even though the feds weren't going to commit to covering the cost overruns.
The Record's Charles Stile thinks that this decision burnishes Christie's political star and will fuel his (and GOP) political ambitions. It will certainly improve Christie's political standing among fiscal conservatives, but Stile ignores that it also highlights the fact that the Obama Administration did nothing to actually move the project forward except to propose that New Jersey take on more debt without getting New York to pony up money for an interstate project or for the federal government to cover cost overruns so as to keep to Obama's own promise of improving mass transit infrastructure. This decision blows a huge hole in Obama's own political rhetoric about spending money on infrastructure. That point was made in the paper's editorial.
Much has been said about the loss of $3 billion in federal transportation funds. The loss is noted, but not enough has been said about why the Obama administration, which is touting large public works projects, did not pony up more funding. Rather than criticize Christie for showing fiscal restraint, supporters of ARC should be criticizing federal officials for not stepping up and funding the project.This is something that ARC tunnel proponents simply cannot explain. Christie exposed the Obama Administration's infrastructure program as nothing more than hot air and in the process protected New Jersey taxpayers from endless cost overruns on a project that would have had dubious merits.
Amtrak also needs new trans-Hudson tunnels and more track capacity in New York Penn Station. These are national priorities. And ARC did nothing to address them.
Christie's administration, as well as the state's congressional delegation, should press federal officials to commit to building new trans-Hudson tunnels. Additionally, state officials should address the substandard mass transit options within New Jersey.
It is often said that if you want to get out of a hole, stop digging. On Wednesday, Christie took away the shovels.
Now, Amtrak and NJ Transit can focus on building a proper tunnel to Penn Station that will do what the ARC tunnel was supposed to have done - truly increase capacity and reliability in a cost-effective manner.
UPDATE:
And like clockwork, the Northeast Corridor is hit by still more power problems causing delays. Nothing in the ARC tunnel project would address that longstanding problem.
Friday, October 22, 2010
More Misinformation About ARC Tunnel Costs Emerge
It appears that Gov. Christ Christie has again delayed his decision to can the ARC tunnel project.
That comes on the heels of a Star Ledger report that claims Christie has conflated the Portal Bridge project with the ARC tunnel in coming up with a combined budget of $11 to $13 billion - cost overruns that total more than $3 to $5 billion and that the cost overruns for the ARC Tunnel are really about $1 billion. The headline is that the federal estimate is lower than what Christie continues stating.
Except that isn't what Transportation Secretary Ray LaHood has said. He gave a range of cost overruns for the ARC Tunnel starting at $1 billion - an amount that New Jersey still can't absorb. No figure was given for the high estimate.
Moreover, the Portal Bridge is facing cost overruns from the $750 million as originally proposed; the latest figures show $1.34 billion for the bridge replacement project. Both projects are necessary to eliminate choke points on the Northeast Corridor, but the ARC tunnel creates a different set of problems since the tunnel doesn't lead to space sufficient to handle the traffic flow expected down the road.
So, it doesn't matter whether Christie combined the two projects or not. The cost overruns are still there and they're still substantial enough to give the Governor pause on going forward with a project where New Jersey lacks the ability to absorb the cost overruns.
Then, the Star Ledger misstates the length of the tunnel. It claims that the tunnel is going to be nine miles long. That is a mischaracterization of the length. The physical length of the tunnel will be 3.5 miles including separate tunnels under North Bergen and then under the Hudson River into its terminus. By counting each tunnel boring separately, you get 9 miles (but by that estimate - the $10 billion Gotthard tunnel would be 70 miles in length; 35 miles multiplied by 2 tracks).
Water tunnel #3, linking New York City with upstate reservoirs is more than 60 miles long and costs $6 billion when it is completed in 2020. That project, which includes multiple tunnel boring machines, carving out huge connecting valve galleries to permit shutoff and maintenance of the first two tunnels with upstate reservoirs build early last century.
This project is poorly conceived, particularly on the Manhattan side, where the rail tunnel terminates under Herald Square and there is no place for trains to go once they have disembarked their passengers except back into New Jersey. There is no surplus storage, and the site is hemmed in by that water tunnel. The better route would have been to connect directly into Penn Station, where disembarked trains can then travel into Sunnyside Queens or utilize the space on the West Side.
Moreover, those citing the lower cost projections themselves caution that estimates are imprecise and are subject to revision. It never seems that those projections go down - only up. The Record indicates that the ARC tunnel was on budget through August 31, but notes that NJ Transit and the Federal Transportation Authority were both indicating a range for the completed project above the $8.7 billion.
That's why Gov. Christie is doing what he can to make sure that New Jersey taxpayers and commuters aren't on the hook for the higher costs.
Indeed, why is it that so many proponents of the project are pooh-poohing the $1 billion cost overage as though that is nothing to sneeze at. The New Jersey budget is roughly $32 billion, and will cost the state hundreds of millions in debt costs every year until it gets paid off (if ever - considering that all too frequently the debt gets refinanced to lower the immediate payment but lengthens the term of repayment considerably). Cost overruns need to be addressed, and proponents have not done a sufficient job of explaining why they are occurring here.
And it's curious why Assembly Transportation Chairman John Wisniewski (D-Middlesex) wants to compare the inability to build this tunnel with the Gotthard base tunnel project, when the costs per mile favor the Swiss project by a considerable margin. In fact, no one can explain why the costs for the ARC tunnel are so much higher per mile even when factoring in acquisition costs for real estate to carry out the project in Manhattan and New Jersey.
That comes on the heels of a Star Ledger report that claims Christie has conflated the Portal Bridge project with the ARC tunnel in coming up with a combined budget of $11 to $13 billion - cost overruns that total more than $3 to $5 billion and that the cost overruns for the ARC Tunnel are really about $1 billion. The headline is that the federal estimate is lower than what Christie continues stating.
Except that isn't what Transportation Secretary Ray LaHood has said. He gave a range of cost overruns for the ARC Tunnel starting at $1 billion - an amount that New Jersey still can't absorb. No figure was given for the high estimate.
Moreover, the Portal Bridge is facing cost overruns from the $750 million as originally proposed; the latest figures show $1.34 billion for the bridge replacement project. Both projects are necessary to eliminate choke points on the Northeast Corridor, but the ARC tunnel creates a different set of problems since the tunnel doesn't lead to space sufficient to handle the traffic flow expected down the road.
So, it doesn't matter whether Christie combined the two projects or not. The cost overruns are still there and they're still substantial enough to give the Governor pause on going forward with a project where New Jersey lacks the ability to absorb the cost overruns.
Then, the Star Ledger misstates the length of the tunnel. It claims that the tunnel is going to be nine miles long. That is a mischaracterization of the length. The physical length of the tunnel will be 3.5 miles including separate tunnels under North Bergen and then under the Hudson River into its terminus. By counting each tunnel boring separately, you get 9 miles (but by that estimate - the $10 billion Gotthard tunnel would be 70 miles in length; 35 miles multiplied by 2 tracks).
Water tunnel #3, linking New York City with upstate reservoirs is more than 60 miles long and costs $6 billion when it is completed in 2020. That project, which includes multiple tunnel boring machines, carving out huge connecting valve galleries to permit shutoff and maintenance of the first two tunnels with upstate reservoirs build early last century.
This project is poorly conceived, particularly on the Manhattan side, where the rail tunnel terminates under Herald Square and there is no place for trains to go once they have disembarked their passengers except back into New Jersey. There is no surplus storage, and the site is hemmed in by that water tunnel. The better route would have been to connect directly into Penn Station, where disembarked trains can then travel into Sunnyside Queens or utilize the space on the West Side.
Moreover, those citing the lower cost projections themselves caution that estimates are imprecise and are subject to revision. It never seems that those projections go down - only up. The Record indicates that the ARC tunnel was on budget through August 31, but notes that NJ Transit and the Federal Transportation Authority were both indicating a range for the completed project above the $8.7 billion.
That's why Gov. Christie is doing what he can to make sure that New Jersey taxpayers and commuters aren't on the hook for the higher costs.
Indeed, why is it that so many proponents of the project are pooh-poohing the $1 billion cost overage as though that is nothing to sneeze at. The New Jersey budget is roughly $32 billion, and will cost the state hundreds of millions in debt costs every year until it gets paid off (if ever - considering that all too frequently the debt gets refinanced to lower the immediate payment but lengthens the term of repayment considerably). Cost overruns need to be addressed, and proponents have not done a sufficient job of explaining why they are occurring here.
And it's curious why Assembly Transportation Chairman John Wisniewski (D-Middlesex) wants to compare the inability to build this tunnel with the Gotthard base tunnel project, when the costs per mile favor the Swiss project by a considerable margin. In fact, no one can explain why the costs for the ARC tunnel are so much higher per mile even when factoring in acquisition costs for real estate to carry out the project in Manhattan and New Jersey.
Saturday, October 09, 2010
A Reprieve In Works For ARC Tunnel
As I expected yesterday, Transportation Secretary Ray LaHood and New Jersey Governor Chris Christie are attempting to work out a deal to salvage the $8.7 billion ARC Tunnel between New Jersey and New York City.
The two sides have given a 2-week hiatus to work out some kind of a deal. Christie had called for shelving the project because the state had no way to pay for cost overruns beyond the $8.7 billion and the state would have been on the hook for all the overruns on the project. My expectation is that the feds will end up shouldering the cost overruns or at a minimum, split the share of overruns between the state, the federal government and the Port Authority.
The two sides have given a 2-week hiatus to work out some kind of a deal. Christie had called for shelving the project because the state had no way to pay for cost overruns beyond the $8.7 billion and the state would have been on the hook for all the overruns on the project. My expectation is that the feds will end up shouldering the cost overruns or at a minimum, split the share of overruns between the state, the federal government and the Port Authority.
Friday, October 08, 2010
Fallout From Christie's Decision To Kill ARC Tunnel Project
Many of the reports that are critical of Gov. Chris Christie's decision to kill the ARC Tunnel project focus on the fact that this was a project decades in the making.
That's not quite accurate. It's been on the wish list for transportation planners for decades and studies had been carried out from time to time. Funding for the project began in earnest last year when the Corzine Administration was hoping for a reelection bump. Construction began last year with great fanfare even though there were serious questions about funding and the alignment of the project.
Christie killed the project because the state of New Jersey cannot afford the project. The state is putting up about 1/3 of the cost of the project, with the federal government and Port Authority putting in the rest.
The costs have gone from $5 billion when proposed to more than $8.7 billion today. Cost overruns are expected to push the cost to $10 billion. It's the cost overruns that drove Christie to kill the project since New Jersey has no way to pay for the project.
With that in mind it's not surprising that Christie is meeting with Transportation Secretary Ray LaHood today, and one can expect that the federal government may end up taking up the issue and covering the cost overruns, rather than the state of New Jersey.
The politics of the situation are quite interesting. Christie wants to show fiscal responsibility, but needs to show job creation - and killing the project would kill jobs for construction workers. The Obama Administration needs to have job growth, and could use Christie's decision to embarrass him and to get the infrastructure project done to fulfill the government's goal of improving infrastructure. In other words, both sides need to get this done - so the terms of the deal will likely be revisited and reworked so that New Jersey doesn't have to shoulder the burden.
It's a bargaining tactic, and one that may end up benefiting New Jersey taxpayers because they wont need to cover the cost overruns that may end up being quite substantial. New York can't be expected to contribute either because they're in even worse fiscal shape and haven't contributed a dime to the project. The Port Authority and NJ Transit have already maxed out their contribution, so the only party that has the ability to fund the project is the federal government.
Still, I hope that the project ends up being reorganized to realign the terminus with Penn Station rather than Herald Square because the separate terminal is an additional cost that is unnecessary and ignores the fact that Amtrak is interested in doubling its own tracks into Penn Station (something that NJ Transit says wasn't feasible). This may actually cost more to do than the alignment to Herald Square, but eliminating the duplication would end up saving taxpayers and commuters even more.
That's not quite accurate. It's been on the wish list for transportation planners for decades and studies had been carried out from time to time. Funding for the project began in earnest last year when the Corzine Administration was hoping for a reelection bump. Construction began last year with great fanfare even though there were serious questions about funding and the alignment of the project.
Christie killed the project because the state of New Jersey cannot afford the project. The state is putting up about 1/3 of the cost of the project, with the federal government and Port Authority putting in the rest.
The costs have gone from $5 billion when proposed to more than $8.7 billion today. Cost overruns are expected to push the cost to $10 billion. It's the cost overruns that drove Christie to kill the project since New Jersey has no way to pay for the project.
With that in mind it's not surprising that Christie is meeting with Transportation Secretary Ray LaHood today, and one can expect that the federal government may end up taking up the issue and covering the cost overruns, rather than the state of New Jersey.
The politics of the situation are quite interesting. Christie wants to show fiscal responsibility, but needs to show job creation - and killing the project would kill jobs for construction workers. The Obama Administration needs to have job growth, and could use Christie's decision to embarrass him and to get the infrastructure project done to fulfill the government's goal of improving infrastructure. In other words, both sides need to get this done - so the terms of the deal will likely be revisited and reworked so that New Jersey doesn't have to shoulder the burden.
It's a bargaining tactic, and one that may end up benefiting New Jersey taxpayers because they wont need to cover the cost overruns that may end up being quite substantial. New York can't be expected to contribute either because they're in even worse fiscal shape and haven't contributed a dime to the project. The Port Authority and NJ Transit have already maxed out their contribution, so the only party that has the ability to fund the project is the federal government.
Still, I hope that the project ends up being reorganized to realign the terminus with Penn Station rather than Herald Square because the separate terminal is an additional cost that is unnecessary and ignores the fact that Amtrak is interested in doubling its own tracks into Penn Station (something that NJ Transit says wasn't feasible). This may actually cost more to do than the alignment to Herald Square, but eliminating the duplication would end up saving taxpayers and commuters even more.
Thursday, August 20, 2009
Administration Set To Wind Down Cash For Clunkers: UPDATE: Monday
According to reports, the Obama Administration is looking at winding down the cash for clunkers program.
Dealers across the country are struggling to deal with fronting the money - in some cases, dealers are owed millions of dollars and in the current credit-strapped markets.
That General Motors is fronting the money to dealers isn't a good sign either. It's not like the company is in great financial shape to begin with, having just emerged from its own bankruptcy. However, the alternative of watching its dealer network go under is an even worse situation. It's the best of a bad situation.
Instead of fronting the money, many dealers are simply quitting the program because they can't afford to incur additional costs. Half the dealers in Pennsylvania and New York have already quit the program and are no longer offering rebates under the program.
One dealer submitted 30 claims, and has been reimbursed for two. That means he's out more than $100,000 waiting for reimbursement, which means the dealer is limited in buying additional vehicles, parts, or paying salaries with that money. Other dealers are out even larger sums.
Maryland dealers estimate that $36 million in claims were submitted, but has been reimbursed for only 2% - $720,000.
As for those people who think that the dealers are complaining because they aren't getting reimbursed in a timely fashion, I'd suggest putting yourself in their shoes. How would you like being out tens of thousands of dollars or more, waiting for payment to come in at a time when you need every penny. You can't simply say that these dealers screwed up the paperwork, because the Department of Transportation has already admitted that they didn't have the manpower available to process the rebates. It goes to the incompetence of the Administration because they were the ones who were hoping for a spike in sales, and when that spike materialized, there was no plan in place. Only later did they realize they had to bring in additional people to process the claims. The cash for clunkers rebate site crashed repeated, and dealers threw their hand up in frustration.
Meanwhile, reports claiming that the cash for clunkers has brought increased demand and requires automakers to bring workers back on must be tempered with the fact that the automakers typically restart assembly lines after taking breaks during the summer because of slack demand. This year, the time that those lines were silenced was even longer because of the bankruptcies and lackluster demand that pushed inventories to record levels.
UPDATE:
Instapundit notes that the government promised FedEx, but they're delivering the US Postal Service. Indeed.
UPDATE:
The Administration is finally putting this clunker out to pasture Monday. I have no doubt that they consider it a smashing success - pointing to increased sales in July and August (and will fall silent when sales for the quarter and the rest of the year fall short because it shifted sales more than it created new sales). Also, there's no word on how quickly they hope to get all those car dealers reimbursed.
Notably, Transportation of Secretary Ray LaHood is blaming dealers for some of the delays as a result of incomplete paperwork.
Transportation Secretary Ray LaHood said Wednesday the department would announce within 48 hours how it intends to discontinue the program that offers car buyers rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models. Department officials met with car dealer trade groups on Wednesday to discuss how the program will eventually end and respond to complaints over a backlog of rebate payments to dealers.It's probably a good idea too, since the government has been incapable of providing timely reimbursements to car dealers who have to front the rebates - $3,500 to $4,500 depending on what cars are turned in and the differential in gas mileage in the new vehicle.
Through early Wednesday, auto dealers have made deals worth $1.81 billion and are on pace to exhaust the program's $3 billion in funds in early September. The incentives have generated more than 435,000 vehicle sales but dealers want a clear plan on when the rebates will no longer be available so they don't end up on the hook for any of the incentives.
"We want to make sure that dealers know when we're getting close" to running out of the money that was allocated for the program, LaHood told reporters. LaHood said he recognized that "dealers are frustrated. They're going to get their money."
On Thursday, General Motors Co. said it would begin providing cash advances to its dealers to help cover any cash shortfalls related to the program. The automaker said it will provide the advances for up to 30 days for dealers who have already completed a sale and they will be available as long as the program remains in effect.
Dealers across the country are struggling to deal with fronting the money - in some cases, dealers are owed millions of dollars and in the current credit-strapped markets.
That General Motors is fronting the money to dealers isn't a good sign either. It's not like the company is in great financial shape to begin with, having just emerged from its own bankruptcy. However, the alternative of watching its dealer network go under is an even worse situation. It's the best of a bad situation.
Instead of fronting the money, many dealers are simply quitting the program because they can't afford to incur additional costs. Half the dealers in Pennsylvania and New York have already quit the program and are no longer offering rebates under the program.
One dealer submitted 30 claims, and has been reimbursed for two. That means he's out more than $100,000 waiting for reimbursement, which means the dealer is limited in buying additional vehicles, parts, or paying salaries with that money. Other dealers are out even larger sums.
Maryland dealers estimate that $36 million in claims were submitted, but has been reimbursed for only 2% - $720,000.
As for those people who think that the dealers are complaining because they aren't getting reimbursed in a timely fashion, I'd suggest putting yourself in their shoes. How would you like being out tens of thousands of dollars or more, waiting for payment to come in at a time when you need every penny. You can't simply say that these dealers screwed up the paperwork, because the Department of Transportation has already admitted that they didn't have the manpower available to process the rebates. It goes to the incompetence of the Administration because they were the ones who were hoping for a spike in sales, and when that spike materialized, there was no plan in place. Only later did they realize they had to bring in additional people to process the claims. The cash for clunkers rebate site crashed repeated, and dealers threw their hand up in frustration.
Meanwhile, reports claiming that the cash for clunkers has brought increased demand and requires automakers to bring workers back on must be tempered with the fact that the automakers typically restart assembly lines after taking breaks during the summer because of slack demand. This year, the time that those lines were silenced was even longer because of the bankruptcies and lackluster demand that pushed inventories to record levels.
UPDATE:
Instapundit notes that the government promised FedEx, but they're delivering the US Postal Service. Indeed.
UPDATE:
The Administration is finally putting this clunker out to pasture Monday. I have no doubt that they consider it a smashing success - pointing to increased sales in July and August (and will fall silent when sales for the quarter and the rest of the year fall short because it shifted sales more than it created new sales). Also, there's no word on how quickly they hope to get all those car dealers reimbursed.
Notably, Transportation of Secretary Ray LaHood is blaming dealers for some of the delays as a result of incomplete paperwork.
Subscribe to:
Posts (Atom)