Independent Panel Sees ‘Immense Risk’ in California High-Speed Rail

Independent Panel Sees ‘Immense Risk’ in California High-Speed Rail
January 5, 2012

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

Transportation experts and taxpayer advocates are hailing an independent review panel’s recommendation against borrowing to build a high-speed rail line in California, but the state’s rail authority indicates it plans to keep rolling with its plans.

The California High-Speed Rail Peer Review Group created by the Legislature to analyze the feasibility of the proposed high-speed rail system concluded it “represents immense financial risk” because there is no identifiable source of reliable funding. The recommendation is non-binding.

The state government is mulling borrowing $2.7 billion to start construction of the first leg of the project. Cost estimates for the full project have tripled to $66 billion in current dollars since 2000, with the rail authority itself estimating $98 billion to $118 billion when adjusted for inflation over the expected buildout, which could take 30 years.

‘Starts and Ends Nowhere’

The first segment is proposed to run from just north of Bakersfield to just south of Fresno in California’s Central Valley.

“It starts and ends in the middle of nowhere. That segment alone would eat up the entire bond issue,” said David Wolfe, legislative director of the Howard Jarvis Taxpayers Association, which opposes the project.  “The private money isn’t there. The federal money isn’t there. It’s not an operational segment. It has to be able to exist and have a chance at turning a profit, and that is not possible.”

The California High Speed Rail Authority rejected the Peer Review Group report, calling it “deeply flawed,” “in some areas misleading,” and “unfounded” in its conclusions.

“It is unfortunate that the Peer Review Committee has delivered a report to the Legislature that is deeply flawed in its understanding of the Authority’s program and the experience around the world in successfully developing high speed rail,” said Roelof van Ark, CEO of the High Speed Rail Authority, in a statement. “As someone involved in many of the successful high speed rail programs internationally, I can say that the recommendations of this Committee simply do not reflect a real world view of what it takes to bring such projects to fruition.”

Soaring Costs

State Senator Doug LaMalfa (R-Richvale) said he is about to introduce SB 22, a bill that would allow citizens across the state to vote on whether the project should be funded. Voters in 2008 voted by a 53-47 percent to borrow $10 billion for high-speed rail, but in less than four years official cost estimates have doubled, as have estimated ticket prices, from $55 a ride to $105 a ride. LaMalfa said polls show overwhelming opposition to the project today.

“Even that $105-a-ride estimate is low-balled,” LaMalfa said. “And ticket revenues will do nothing to retire the debt. The entire debt load would be repaid by California taxpayers or the federal government. Californians don’t want high-speed rail, the state can’t afford it, and the costs far exceed any benefit to our state’s transportation infrastructure. All credibility is shot with this rail bunch.”

However, he said opponents still have a tough slog to kill the project, as the state Legislature is dominated by Democrats, and many of the state’s Democratic Party leaders, including Gov. Jerry Brown, support the project. No Democrats have pledged to sponsor his bill to throw the high-speed rail issue back to voters.

Supporters say the project could create one million jobs – a figure LaMalfa scoffs at – and also argue more than $3 billion in federal funding would be lost if the state does not borrow the $2.7 billion to start construction.

Any Amount Too Much?

“One wonders, is there any amount of money that would cause California to pull the plug on this project? It started out as a $20 million project, then became a $40 billion project, and they’re now talking $66 billion,” said transportation expert Wendell Cox, a Heartland Institute Senior Fellow in urban planning, and principal of Wendell Cox Consultancy.

“Beyond that, when you look at the $98 billion figure people are mentioning, which accounts for the passage of time to finish construction, if you read the rail Authority’s business plan, they say $98 billion to $118 billion. I seriously wonder what it would take before the powers that be decide this is too much.”

Tom Schatz, president of Citizens Against Government Waste, said his organization, along with the California-based Reason Foundation and Howard Jarvis Taxpayers Association, issued a report in 2007 predicting the spiraling costs and funding problems.

“At that time, we pointed out the cost estimates were very low,” Schatz said. “We thought the cost would be at least $80 billion, and now they’re saying $98 billion, which I’m sure is still low. Perhaps, with this peer group recommendation, fiscal reality is hitting people square in the face.

“Even in California, where legislators are ready to spend money on anything, maybe they’ll see this as something where they say maybe we can’t afford to do anything more. It’s not surprising there are doubts. Anything that triples in price should cause doubts. The state certainly has other problems they should be addressing.”

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)