New High-Speed Rail biz plan crashes into reality
By Katy Grimes
What a train wreck. Barreling down the tracks in one direction, on April 9 a congressional committee launched a probe California’s high-speed rail project over charges of conflicts of interest and questionable spending of federal dollars. Barreling head-on toward it from the other direction, on April 12 the California High-Speed Rail Authority voted to approve its own revised business plan.
The state action leaves only an up-or-down vote from the state Legislature to break ground on a project the CHSRA now pegs at costing $68.4 billion.
The project costs have varied from an original estimate of $33 billion, to an official high estimate of $98.5 billion, and back down to a dubious $68.4 billion. But the Legislative Analyst’s Office said that it is “highly uncertain if funding to complete the high-speed rail system will ever materialize,” and rail experts have estimated the project will cost more than $136 billion.
The next stop for the CHSRA is to convince the Legislature to approve the project in order to move full steam ahead. Right now, the rail authority and supportive Democrats are counting noses in the Legislature to determine where the needed votes will come from.
Reublicans want the plan demolished, and Democrats aren’t talking much at all.
However, Article XVl of the California Constitution authorizes the Legislature to either pull the plug on high-speed rail, or at the very least, reduce the amount of indebtedness, if no debt has been contracted.
There is still plenty of time to stop this runaway train.
What Voters Approved in 2008
California voters approved Proposition 1A in 2008, the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century.” Here are some details:
* $33.5 billion cost. They approved a total cost of $33.5 billion for a high-speed rail system. The $33.5 billion was to be made up of a combination of 1/3 federal funds, 1/3 state funds and 1/3 private funds. Importantly, the investment from California taxpayers was limited to a $9.95 billion bond.
Today, the costs have skyrocketed to $98.5 billion from $33.5 billion, reliance on federal funds has increased by more than six times the original cost and no private funders have materialized to invest in the project.
Assemblywoman Diane Harkey, R-Dana Point, said it’s highly unlikely any private parties will pony up investment money on the project. “There are no private party investments, and no earnest deposits,” Harkey said. “As long as California continues with this plan, we will never attract private capital.
Instead, the state is taking a hugh risk with taxpayer “capital.”
* S.F. to L.A. Voters approved a system connecting San Francisco to Los Angeles, with a trip time of two hours and 40 minutes, at a cost of $55 per ticket. But the plan has veered sharply inland from San Francisco to Los Angeles, over to the Central Valley, with a leg from Fresno to Bakersfield. And the cost of the trip jumped to $105.
* Ridership: 95 million. Even ridership numbers have been toyed with. Voters were told that there would be a ridership of 95 million passengers by 2030. Ridership estimates have decreased nearly three times since 2008, and they are still absurdly inflated. In the new report, they’re estimated to be as high as 36 million passengers by 2060 (page 5-17). That’s about a third of the Prop. 1A promise.
* Bond repayment. Repaying high-speed rail bonds will cost the state’s General Fund $647 million per year for 30 years, or approximately $20 billion for the $9.95 billion bond.
High-Speed Fairy Tale
The High-Speed Rail Authority claims that high-speed rail throughout the world runs profitably. But:
France subsidizes its high-speed rail system by nearly $10 billion annually. Japan subsidizes its rail system with nearly $2 billion annually. And Spain spends nearly $3 billion on high-speed rail subsidies every year.
“Jobs, jobs, jobs” was the campaign rally cry for Jerry Brown during his run for governor, and when he vowed his support for high-speed rail. He supported it so much it’s earned the nickname the “Browndoggle.”
But while Brown continues to blindly support the rail plan, the High-Speed Rail Authority claims that the project will create 20,000 jobs. However, a January report by the Assembly Republican Caucus found that there is evidence to prove that the rail authority overstated job creation by nearly 50 percent. “Even using the HSRA optimistic job creation estimates for Phase l, California investment will be about $1.96 million per job created, or $5.8 million per direct job created,” the caucus report found.
The rail authority must have used the New Math to calculate jobs. The HSRA claims that jobs are calculated in “job-years.” One year of full employment equals a job-year. Therefore, one person employed for 20 years counts as 20 “jobs” using this new math.
The High-Speed Rail Authority has always claimed that the rail plan will dramatically reduce greenhouse gas emissions. But estimates of just how much carbon emissions will be reduced have gone from absurdly high, to only ridiculously high. Now “methods are still being developed” to determine just how much GHG will be reduced.
Even the California Air Resources Board in its AB 32 scoping plan dramatically dropped the estimates of greenhouse gas reductions for high-speed rail by 82 percent of what voters were promised in 2008.
High-Speed Rail 5.0
Sen. Doug LaMalfa, R-Richvale, calls the latest reincarnation of the high-speed rail business plan, “High-Speed Rail 5.0.”
“In plan number one we had the ballot initiative and cost estimates of $33 to $45 billion. Plan number two was up the ticket prices,” La Malfa said. “Plan number three was the $98.5 billion plan. Plan number four was the $68 billion plan, and Orange County was kicked out. Plan number five is the latest business plan approval with Orange County back in.”
Harkey added that the plan is wrought with inconsistencies and violations of the 2008 law. She explained that it’s not high-speed rail if it will be used in crowded urban areas such as Orange County. Nor can high-speed rail be used in moving freight.
What’s Ahead For High-Speed Rail?
The Legislature has until Aug. 31 to authorize the bond sale that would get the project started. While Republicans can’t kill the rail project by themselves, there are many Democrats who are not supportive of it, but appear to be holding out to make deals on local transit projects.
Keep an eye on termed-out legislators, or legislators who don’t have to run again until 2014 for key votes on the plan.
Sen. Joe Simitian, D-Palo Alto, has been somewhat cryptic in his comments about the rail project. Simitian has warned the rail authority several times in committee hearings that it needed to have a more realistic business plan or state funding for the rail project would be cut off, but repeatedly says that he favors high-speed rail “if done right.”
While Simitian has voiced concerns aloud in committee hearings, he has voted to pass rail bills, while simultaneously telling the rail authority and committee members to provide him with amendments addressing his concerns.
Rep. Darrell Issa, R-San Diego, chairman of the U.S. House Committee on Oversight and Government Reform, notified the California High-Speed Rail Authority about the probe earlier this week, and ordered the agency to preserve its documents and records.
Issa’s committee announced earlier this week that it’s questioning whether the $4 billion from the federal government has been spent appropriately, and said they want to investigate possible conflicts of interest between rail officials and contractors.
“California high-speed rail was sold to voters as a grand vision for tomorrow but in practice appears to be no different than countless other pork-barrel projects — driven more by political interests and consultant spending than valid cost-benefit analysis,” Issa said. “Before more taxpayer money is sent to the rail authority, questions must be answered about mismanagement, conflicts of interest, route selection, ridership and other risks.”
While offering her praise last week for Gov. Jerry Brown’s revised approach on California’s high-speed rail, U.S. Sen. Dianne Feinstein still cautioned that the federal funding for the project could depend on final cost projections. But that was last week’s high-speed rail plan. This week the plan is again different.
“If this was a debate, the rail authority would get smoked,” La Malfa added. “This is the most abusive waste of the taxpayers’ money, and one of the biggest frauds since the $600 toilet seats” for military aircraft, a scandal from the past.
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Ali Meyer: Looks like California taxpayers may have one more thing to pay for on their list. State Sen. Alan
John Seiler: I’ve been reading Thomas Sowell for about 35 years now. He’s one of the few economists who can