Fox & Hounds: California’s High-Speed Rail Project A Major Affront To Taxpayers

 

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California’s High-Speed Rail Project Is Shaping Up To Be A Major Affront To California Taxpayers

Marc Steinorth

 

If completed at anywhere remotely near current cost figures, it will be one of the most expensive public works projects in U.S. history. Put simply, it is the definition of a boondoggle; its final cost estimate, now totaling $68.4 billion, is up over 100 percent from its $33.6 billion total cost estimate in 2008. And despite a November 2013 ruling by a Sacramento Superior Court judge that, among other things, halted the sale of over $8 billion in High-Speed Rail bonds because the California High-Speed Rail Authority (CHSRA) had failed to fulfill its promises to voters under Proposition 1A, the CHSRA is assuring Californians that project construction will begin in the coming months.

Beyond the obvious—how the CHSRA will proceed with no meaningful short- or long-term financial plan and no borrowing ability—many other serious issues loom large over the entire High-Speed Rail project if ground is broken and construction begins.

A 2011 publication by the Citizens for California High Speed Rail Accountability (CCHSRA)—a grassroots, non-profit formed by Kings County residents—titled “Financial Aspects of California’s Proposed High-Speed Rail System” shines a spotlight on several of the significant issues faced by State’s High-Speed Rail project and subsequently the State’s taxpayers.

For starters, although the CHSRA has adopted a policy supposedly aimed at controlling construction costs, the precedent for cost overruns on transport megaprojects is undeniable and calls into question any overall cost projections made by the CHSRA. Take, as just one recent example, the eastern span of the San Francisco-Oakland Bay Bridge, which was only just completed in the fall of 2013. Its final construction costs were five times greater than originally estimated, at $6.4 billion, and construction time totaled 11 years, instead of the estimated four. With a project as massive and complex as the High-Speed Rail, problems encountered can easily compound and result in high unexpected costs and lengthy delays.

And without even laying a single mile of track for the High-Speed Rail, to date its construction costs, as previously mentioned, have already grown over 100 percent in just 5 years, to $68.4 billion. It is naïve to think the High-Speed Rail project’s future estimated costs would be free from past megaproject precedent.

The Sacramento Superior Court’s ruling aside, if the CHSRA did have access to the total authorized bond amount, combined with federal stimulus funds, it is only about 1/5 of all the funds needed to complete High-Speed Rail construction as planned; that is an incredibly large and likely insurmountable funding gap to fill banking on capital from private investment or additional voter-approved bonds.

Suppose, however, that the High-Speed Rail project pans out as expected and blended systems are completed 15 years from now, in 2029. Even then, costs associated with running it are likely to be well above current estimated costs, according to the CCHSRA’s 2011 publication which compared both anticipated operating costs and revenues collected from ticket sales for the California High-Speed Rail to that of similar European and Japanese rail systems.

Moreover, according to a Reason Foundation 2013 report (“California High Speed Rail: An Updated Due Diligence Report”), rail ticket pricing per passenger mile needed to make the service cost effective and competitive for mass use would require hundreds of millions of dollars in subsidies—money the State cannot and should not pay out. These subsidies would be in addition to ongoing costs associated with servicing any debt incurred during the construction of California’s High-Speed Rail. Furthermore, in conjunction with ticket pricing dictated by operating costs, because of reduced rail speeds and longer travel times due to the revised blended system, the expected high ridership levels are all but uncertain.

Californians deserve better than such lingering uncertainty.

Given the mounting legal setbacks, the unanswered questions regarding both construction and operating costs, speculative ridership levels and the inability for the California High-Speed Rail’s pricing and travel time to truly be competitive to other forms of transportation like auto and air, Congress and the California State Legislature must refrain from entering into additional, open-ended financial commitments with the CHSRA—in the interest of taxpayers—and work tirelessly to prevent the State from entangling itself in a debt-ridden future to pay for a ride on a train to nowhere. California’s High-Speed boondoggle must be stopped.

Marc Steinorth is a Taxpayer Advocate and businessman from Rancho Cucamonga.