The insane California high-speed rail project 

I have been appalled by the Obama administration’s obstinate insistence on spending $3.6 billion of stimulus on the high-speed rail project in California, and I become more appalled the more I learn about it. The latest report of the state Legislative Analyst’s Office makes clear that this is crazy. California voters approved $9 billion in bonds to pay for the high-speed rail project—hey, sounds cool, who cares if it makes economic sense or not?—but the 2009 estimate of the total cost of the first phase, from Anaheim to San Francisco, is $43 billion. The state’s High-Speed Rail Administration, whose members are appointed by the governor and not subject to legislative confirmation or any further state oversight—has agreed to spend $5.5 billion on a high-speed segment from Borden to Corcoran in the Central Valley—the high-speed train to nowhere—and the feds have resisted spending it elsewhere.


However, as the Legislative Analyst’s Office report makes clear, it is highly dubious that the federal government will pitch in the $17 to $19 billion state planners have projected; the current Republican House won’t pitch in a penny. The LAO report goes on to say


“The 2009 business plan assumes that $14 billion to $17 billion of the project’s construction costs would be paid with funds from local agencies and private partners. The bulk of this funding is expected to come from the private sector when the state enters into some form of public–private partnership (PPP), or contractual agreement with private partners to complete and operate the high–speed rail system. The amount of funding available from these sources will be highly dependent on the business model chosen for the system. . . . The current HRSA business plan does not provide any details about the business model and how, as it now assumes, it will attract substantial funding from local agencies and business partners to build the system.”


In other words, these characters have no idea whatever about how they are going to get the financing they need. And, as you might expect, they have no idea whatever about what the total project will cost. The LAO report:


“Based on our analysis, the high–speed rail project is likely to cost much more than the $43 billion originally estimated by HSRA for the first phase from San Francisco to Anaheim. That estimate was prepared in 2009 based on very preliminary information concerning which alignments would be selected for the track and what the design of the system would look like.

“For example, based on the state’s agreement with FRA, the cost of the initial construction segment between Fresno and Bakersfield alone is now estimated to be $4.5 billion, which is 57 percent greater than was assumed in the original plan. … If the cost of building the entire Phase 1 system were to grow as much as the revised HSRA estimate for the 100–mile segment discussed above, construction would cost about $67 billion.”

$43 billion, $67 billion—what difference does a little small change make among friends?

An earlier Legislative Analyst’s Office report provides an analysis of the HRSA’s 2009 business plan.

Inadequate Discussion of Key Types of Risks. The plan contains no detailed discussions or consideration of even the most significant risks to the project, such as ridership and funding.

Ridership Risk. The plan addresses the risk of incorrectly forecasted ridership with one sentence, stating the risk “would be mitigated by policies that continue to draw people to reside in California and encourage high-speed rail as an alternative mode of transportation.”

Funding Risks. The plan identifies the following types of financial risks, and how these risks would be addressed:

? Credit Approval Risk. To avoid the risk of failing to win credit approval from investors, the authority’s strategy is “to clearly communicate the project and obtain up-to-date feedback.”

? Overall Market Risk. To mitigate the risk that financial markets shut down and stop lending, the authority “has to continually monitor the market and develop strong back-up strategies such as project segmentation.”

Government Funding Risk. The authority plans to avoid the risk that governments are not able to follow through on their commitments “by carefully assessing how each government funding source affects the build-out of each segment.”

This is pathetic. What are those “policies that continue to draw people to reside in California”? There has been net domestic outflow from California to other states for the last twenty years. And what about “to clearly communicate the project”? That’s not even good English and the Legislative Analyst’s Office reports make it clear that “the project” is based on the flimsiest suppositions.

California high-speed rail is a rathole down which the federal government is crazy to put a dime. Any private investor would be crazy to risk a dollar on it. To spend $43 billion or $67 billion or $100 billion or more—who knows how high the cost would run?—on a project to transport business travelers from metro Los Angeles to metro San Francisco when they can already conveniently get from one to the other via one of metro LA’s five major airports and one of metro SF’s three major airports is insane.  

About The Author

Michael Barone

Pin It

More by Michael Barone

Latest in Transportation

© 2018 The San Francisco Examiner

Website powered by Foundation