Wednesday, November 27, 2013

Electric Vehicles Are Coming

A Shell Oil Company report predicts the virtual extinction of internal combustion engine motor vehicles by the year 2070.  The slide towards alternative fueled vehicles, especially electric vehicles known as EVs, is in its infancy, but has begun.  EVs could reach a critical mass by 2030.  Within a generation, the poor and truck drivers will drive a majority of the gasoline-powered engines remaining on our roads.  Yes, one day even you will drive an EV or other alternative-fueled vehicle.  

My new car, the Nissan LEAF, is the first mass market EV.  It is a technological marvel, offering immediate torque when pressing the "gas" pedal, initially surpassing that of a sports car.

The LEAF regenerates electricity in the battery when coasting and braking.  The LEAF drives and feels like a conventional, very quiet automobile, but without spark plugs, muffler, transmission, tailpipe, or a gasoline engine. It's simpler design could avoid many costly repairs--at least until the battery needs replacing in about a decade.  Consumer Reports recommends the LEAF, predicts excellent reliability based on three years of data, and notes very high owner satisfaction.

The LEAF is a joy to drive with a low center of gravity, created by its battery placement in the floor.  A former race car driver was exuberant with the LEAF's first iteration three years ago:

A Nissan commercial lampooned gas-powered cars, implicitly it's own cars, and explicitly, the Chevy Volt (electric range 38 miles with gas back-up motor):

At the higher end of the cost spectrum, Consumer Reports gave the Tesla Model S (MSRP of $70,000 before a $7,500.00 tax credit) its highest performance rating ever--a 99 out of 100.  In 2014, Tesla expects to release the Model X, an electric SUV with three rows of seats and futuristic doors that open upward. 

Other vehicles will soon compete with Tesla. In the next couple of years, Infiniti will sell the gorgeous LE, built on the LEAF platform. We will also see introduction of the funky-looking BMWi3 (not my taste). A Cadillac EV, expected to arrive in 2014, will carry a jaw-dropping $74,000 MSRP.  Tesla, meanwhile, is making plans for a$35,000 EV to compete with the LEAF in a few years. 

For now, a $7,500 Federal income tax credit--which can reduce even the alternative minimum tax--is encouraging EV sales.  Critics, some of whom rarely criticize tax breaks, contend that the EV market cannot sustain itself without such "government subsidies."  That is true in the short-run while production ramps-up to achieve economies of scale to bring prices down to those of conventional automobiles.  

Critics--especially at Forbes magazine--contend that "America’s energy and automotive futures should be left to the free market."  This assertion ignores the far larger, albeit indirect subsidies that prop-up gasoline-powered motorcars.  The United States spent $145 billion at the height of the Iraq War in 2008.  Would we have invaded and occupied Iraq for years if the Middle East was not supplying us with the majority of the oil we consume?  One observer from the James Baker Institute estimated, "At $20 billion a year in military expenditure to protect the flow of oil, the US taxpayer is spending roughly an extra hidden $4 to $5 a barrel for the crude oil beyond its market price."

In addition, the Internal Revenue Code allows oil companies to immediately deduct the cost of preparing oil fields, instead of capitalizing costs over time like many other capital investments. 

Congress has not raised gasoline taxes from 1993 levels and, each year, raids general revenues to pay for the nation's federally-funded highways.

In contrast to the tens of billions spent subsidizing the oil industry, $7,500 in tax credits for 200,000 Nissan Leafs (the number of production vehicles that will trigger the phase-out of subsidies), will amount to a mere $150 million. 

Not a bad investment to start seriously cutting air pollution.

Not a bad investment after watching oil spurt uncontrollably from the bottom of the Gulf of Mexico, fouling once-pristine beaches from Florida to Louisiana, with incalculable economic repercussions. 

Critics contend further that EVs merely offload their emissions onto the power grid. That is true. However, Florida's coal power generators are operating at day and night and releasing emissions whether or not people are plugging-in their vehicles.  Other Floridians are charging their EVs from a grid powered partly by nuclear energy, which emits no greenhouse gases.  

The LEAF gets the equivalent of 129 miles per gallon in city driving. The Toyota Prius "only" gets 50.  My old 2002 Lexus ES 300 only got 17.  The environmental benefits of an EV are blatantly obvious. 

Speaking of the popular Prius, Toyota is making a deliberately slow evolution to electric vehicles, offering only 11 miles of range on a Prius plug-in. Toyota is wringing as much profit it can out of its investment in gas-electric hybrid technology.  I don't blame Toyota, which is selling as many Priuses each month as Nissan is selling LEAFs in a year. 

However, Toyota risks getting left behind if it does not increase the range on the Prius plug-in and offer it for sale nationwide. Currently, Toyota sells it in only 14 states--and Florida isn't one of them.  

In my judgment, the LEAF is more fun to drive than the Prius, which has an annoying bar across the rear window and, oddly, no instrument panel through the steering wheel.

Toyota expects to introduce hydrogen fuel cell vehicle late next year as a 2015 model with range on par with gasoline-powered vehicles and requiring only three minutes to fill-up.  However, virtually no hydrogen fuel cell infrastructure exists yet in the United States.  Images of the 1937 Hindenburg explosion could make consumers wary.  An expected price of around $50,000 will assuredly keep Toyota's vehicle (like Tesla's Model S) out of range for most people.  Despite no harmful emissions (only water vapor), hydrogen fuel could be as expensive as gasoline. 

The most significant factor holding back widespread adoption of electric cars is their range. For the 2013 model, Nissan increased the range of the LEAF from 75 to, in my experience, 84 miles on an 80% charge in ECO mode. The Tesla Model S has a whopping 265 miles of range, but needs a very large--and expensive--battery. 

As battery technology improves, range will increase, and more people will view electric vehicles as a viable option.  At present, the LEAF is suitable for normal-range commuting, such as my 10 mile round-trip commute to work.  Nissan says most people drive 29 miles a day and the LEAF's range exceeds that by two and one-half times. My family will still need our gas-combustion minivan for long trips and I will need it when I must attend a court hearing in Jacksonville, Tampa, or Miami.  Charging stations are becoming more prevalent, but it is not practical to plan on 20-30 minute charging sessions every 75-80 miles.   Once mass market EVs reliably hit 150 miles of range (two and one half hours of highway driving), they will become quite popular.

While many wait for the technology to improve, I will drive around Winter Park enjoying the equivalent of 129 miles to the gallon--without a tail pipe. 

Wednesday, November 20, 2013

David Mann, please save the Cincinnati Streetcar

Why can't Cincinnati figure out why their kids move away?   I was one of many in my graduating class at Walnut Hills High School who left Cincinnati more than two decades ago.  Many young people followed after me.  Sadly, just as the City began investing in a streetcar system--proven to attract young people and families in other cities--a new Mayor-elect, "Tea Party Democrat" John Cranley, is attempting to kill the project.  If he succeeds, he will mire Cincinnati in mediocrity, lawsuits, and continued population decline. 

I take great interest in, and remain fond of Cincinnati, where I grew-up and where my parents still live.  I cheer for the Reds and Bengals like I did as a kid.  I have fond memories of Mount Adams, the historic Camp Washington Chili parlor, eating Zip burgers at Mount Lookout Square, and visiting my Dad's downtown office, high in what was then called the Central Trust Tower.  Many of these memories, not coincidentally, are of the City's neat urban environments. 

The decision facing the Cincinnati City Council in early December is far different from the decision that faced Florida Governor Rick Scott when he killed high-speed rail when newly elected.  In Florida, not one rail was laid.  The State had not yet put the project out for bid. 

In Cincinnati, by contrast, contractors are already laying rails.  Duke Energy has relocated underground utilities, and is seeking reimbursement of $15 million from the City, but, according to the City Solicitor, has a poor case for recovery from the City if the streetcar is completed.  (If the streetcar is killed, then Duke is entitled to the $15 million without any defense.) The United States Department of Transportation has agreed to invest over $44 million in the Cincinnati Streetcar. Over $100 million is already spent or committed in contracts signed with those who designed and are building the system.  If the City Council kills the streetcar, lawsuits for the contractors' lost profits will place the city in a legal quagmire for years.  Construction litigation is some of the most expensive.  The City will face huge judgments for breach of contract on an unprecedented scale.

The United States Department of Transportation has already vowed to sue the City for the monies it granted to build the streetcar, if not returned.  DOT will not look kindly on the City's other funding requests, including for additional capacity on the city's congested interstate highways and to re-build the aging Brent Spence Bridge. Cranley reportedly cancelled a meeting with federal officials.  No doubt, he's already feeling cold winds from Washington.

Other cities are clamoring for Federal dollars to build streetcar systems, which are proven, due to their perceived permanence, to generate investment in real estate and business far in excess of the public investment in the system.  That's what happened in Portland where a dilapidated industrial zone became the incredible Pearl District.  Any Cincinnati City Councilman who votes against the Streetcar, and who has not visited Portland to see how these systems work in real life, has committed a disservice to his or her constituents.   UPDATE 12/4/13: It was revealed during a contentious City Council meeting that Council members voting to "pause" construction had never ridden a modern streetcar.  Councilman Wendell Young extended an invitation from the Mayor of Portland to the City Council to visit. 

In contrast to the graph at the top of this blog post, since 1992, Portland's population has increased more than 25%, from 1.6 million to 2.25 million.  Downtown Portland, as a result of investment in light rail and a streetcar system, is thriving, attracting young people and young families.  When I visited the Pearl District over the summer with the Rollins College Master of Planning students, I saw more than two dozen young Moms jogging in a line with their baby strollers.  Has anyone seen that occur in Cincinnati's downtown core?

The Cincinnati Streetcar has already attracted millions in new real estate investment, rejuvenating Over-the-Rhine, which, when I was a kid, was one of the nation's worst examples of urban decay.  

When the new City Council is sworn-in this December, four members will favor continuing streetcar construction, and three, including Cranley, will oppose it.  Whether Cincinnati's downtown core rises to the next level, or whether the City follows Cranley on a self-defeating drive towards mediocrity and fiscally crushing litigation, will likely rest with David Mann, one of the most respected names in Cincinnati politics.  Mann and Councilman Charles Winburn, who pledged to "keep an open mind," are considered the remaining swing votes now that P.G. Satterfeld announced that he would vote to continue the project and Kevin Flynn announced his opposition.

UPDATE 12/4/13: Mann told WKRC-TV he could vote to finish the streetcar pending an independent audit of top streetcar official, John Deatrich's cost estimate for cancellation: "Absolutely. If the cost of completion and the cost of termination are close to each other I'm in."   

David Mann was a constant presence on the City Council, serving as Mayor when I was a teenager and, later, as a United States Congressman.  I've always looked up to him as a thoughtful statesman.

After a long hiatus from public life, Cincinnati voters returned David Mann to the City Council based on promises to exercise fiscal prudence, including scrutiny of the streetcar project, which he thought the City should have cancelled when Ohio Governor Kasich eliminated State funding for it.  David Mann will be 78 years old when his term expires.  He can afford to act beyond politics, conduct an unbiased fiscal analysis, consider the impending cost of litigation (which he grasps as a prominent attorney), and do what's best for the City of Cincinnati.  As a candidate, he spoke in favor of a "detailed look at the contracts that have been executed so that a real and accurate price tag for stopping the project can be calculated.  ... This review must be as thorough and transparent as possible so that the entire community can be informed of all the pertinent information.  A decision can then be made as to whether continuing the project makes sense for our community."  I would look for Councilman-elect Mann, and a majority of the new Council, to initially vote in favor of suspending--but not permanently ending--work on the streetcar while this analysis takes place. UPDATE 11/21/13: The U.S. Department of Transportation would consider a suspension a default and would require payback of several million within 30 days and forfeiture of the remaining grant, according to testimony at a Cincinnati Budget Committee hearing.   Federal funds are ineligible for winding down the project.  A suspension without default would require a negotiated deal with DOT.

UPDATE 11/28/13:  The City Council could direct that, temporarily, no further rail installation occur beyond where streets were already demolished and further direct the restoration of streets where rails were laid, keeping existing rails intact.  This would pause rail expansion temporarily with the intention of not triggering a default under the City's grant contract while the contract close-out estimate is reviewed.

Mr. Mann must ultimately decide whether to cancel the Cincinnati Streetcar, approved by voters, not once, but twice, with more votes than Mayor-elect Cranley ever received in his election with dismal, 28% turnout. (Unfortunately, the third time wasn't the charm.  Elections do matter.)   Cranley announced he will appoint Mann vice-mayor, a well-deserved role, but which some perceive as an effort by Cranley to sway Mann to vote against  the streetcar.  However, Mann suggested he won't feel beholden to Cranley: "When we disagree, we'll disagree with respect and go forward." 

UPDATE 11/21/13: The cost of canceling the project is about $125 million, only about $8 million less than the direct cost of completing it.  Moreover, cancellation means forgoing tens of millions of increased tax revenues along the route over the coming decades.   A 2007 economic impact study found, in the worst case scenario among cities that built streetcars, a positive economic impact of $2.70 for every $1.00 spent.  If the project is killed, close-out costs will amount to $33.6-$47.2 million.  (That figure, however, assumes amiable settlements with the contractors and suppliers, who would demand their lost profits.  Litigation lasting years, sapping City personnel and resources, would be inevitable.)  The $32.8 million the City will have spent by November 30, 2013 will have been wasted.  The Federal Government announced that it would re-allocate $40 million it granted to Cincinnati to streetcar projects in other cities, rebutting Cranley's assertion that he could get the funds reallocated to highway projects.  (Governor Kasich would have discretion to reallocate only about $5 million of the funds.)

The bottom line is that Cranley wants the City to throw away more than $100 million, not counting increased tax revenues, and blast a hole in the City's operating (as opposed the capital) budget or saddle Cincinnati's kids with debt for nothing in return.  Cranley's position is not fiscally conservative.  It is economically irrational.  It is anti-business. Mr. Mann attended the hearing  at which the project close-out cost estimates were presented.  I have not seen any credible criticism of the estimates in the media by anyone with experience building transit projects of this magnitude.  Even the formerly anti-streetcar Cincinnati Enquire changed its position and now supports completion. 

Due to widespread and intense backlash, Cranley now says he wants a "trolley bus" on rubber tires.  It would cost just as much to operate as a real streetcar as well as cost at least $10 million to implement.  We have a rubber tire trolley on International Drive in Orlando, and frankly, it's lame.  Because a city can cancel or re-route it easily, "bus trolleys" have no demonstrated capacity to attract redevelopment or new business.  Cincinnati deserves better.

I hope that, after the final vote to kill or complete the Cincinnati Streetcar is taken, I will still look up to David Mann as the true statesman I know him to be.  A legacy of a revitalized Over-the-Rhine, spurred by the streetcar, must be more desirable to a political leader of his stature than a legacy of wasting tens of millions, with nothing to show for it.  Polls show that more than 80% of young people want to live in vibrant, urban--not suburban--environments.  Stop driving away your children and grandchildren, Cincinnati.  Please save the streetcar, Mr. Mann. 

UPDATE 12/19/13: Cincinnati City Council voted 6-3 to resume construction of the streetcar, with council members David Mann and Kevin Flynn providing the decisive votes that would override a mayoral veto.