Via Bloomberg View:
California’s high-speed rail project increasingly looks like an expensive social science experiment to test just how long interest groups can keep money flowing to a doomed endeavor before elected officials finally decide to cancel it. What combination of sweet-sounding scenarios, streamlined mockups, ever-changing and mind-numbing technical detail, and audacious spin will keep the dream alive?
Sold to the public in 2008 as a visionary plan to whisk riders along at 220 miles an hour, making the trip from San Francisco to Los Angeles in a little over two and a half hours, the project promised to attract most of the necessary billions from private investors, to operate without ongoing subsidies and to charge fares low enough to make it competitive with cheap flights. With those assurances, 53.7 percent of voters said yes to a $9.95 billion bond referendum to get the project started. But the assurances were at best wishful thinking, at worst an elaborate con.
The total construction cost estimate has now more than doubled to $68 billion from the original $33 billion, despite trims in the routes planned. The first, easiest-to-build, segment of the system — the “train to nowhere” through a relatively empty stretch of the Central Valley — is running at least four years behind schedule and still hasn’t acquired all the needed land. Predicted ticket prices to travel from LA to the Bay have shot from $50 to more than $80. State funding is running short. Last month’s cap-and-trade auction for greenhouse gases, expected to provide $150 million for the train, yielded a mere $2.5 million. And no investors are lining up to fill the $43 billion construction-budget gap.
Now, courtesy of Los Angeles Times reporter Ralph Vartabedian, comes yet another damning revelation: When the Spanish construction company Ferrovial submitted its winning bid for a 22-mile segment, the proposal included a clear and inconvenient warning: “More than likely, the California high speed rail will require large government subsidies for years to come.” Ferrovial reviewed 111 similar systems around the world and found only three that cover their operating costs.
Although the bond initiative predated Governor Moonbeam’s second tour as governor of the Golden State, it’s since become his Precious. Even when it looks like he is going to take a stab at being fiscally responsible on one issue, he reflexively brings up the high speed rail, the support of which is the antithesis of fiscal responsibility.
I’m sure you were all as shocked as I was to find that the costs of a government project are far (double is far, right?) exceeding initial projections.
It’s gotten so untenable that even some of California’s big-spending Democrats are nervous:
Eight years later, the legislature is getting antsy. Last month, the state assembly unanimously passed a bill requiring that the authority provide clearer statements of route changes and projected expenses, including borrowing costs. The state senate will hold a hearing on the bill Tuesday.
The measure sounds like basic democratic hygiene. But it’s a big deal. “It is the awakening of the magnitude of the issue in front of us,” the bill’s sponsor Jim Patterson, a Republican from Fresno, told the Times. “The project has moved from spotty opposition in the legislature to growing concern.”
Lieutenant Governor Gavin Newsom, the first announced candidate for governor in 2018, has said that barring something “really significant,” he can’t see taking the money from other infrastructure projects. The officials who have to make the budget tradeoffs that weren’t on the ballot in 2008 are finally pushing back. The question now is when they’ll have the guts to pull the plug.
The way government is handling high speed rail is giving high speed rail a bad reputation it doesn’t deserve. It may one day prove to be a very palatable alternative to flying. Let the market, not the state, figure that out.