California’s Bullet Train Rolling to Bankruptcy

Published June 18, 2011

For California’s high-speed rail boosters, including their chief cheerleader, U.S. Transportation Secretary Ray LaHood, May must have felt like a month from hell.

First came a scathing report by the California legislature’s fiscal watchdog, the non-partisan Legislative Analyst’s Office (LAO), questioning the rail authority’s unrealistic cost estimates and its decision to build the first $5.5 billion segment in the sparsely populated Central Valley between Borden and Corcoran. That segment, the LAO noted, has no chance of operating without a huge public subsidy, yet the terms of the voter-approved Proposition 1A, explicitly prohibit any operating subsidies.

These concerns were echoed by an eight-member Independent Peer Review Group.

“We believe the Authority is increasingly aware of the challenge of accurate cost estimating,” wrote its chairman, Will Kempton, in a letter to the California High-Speed Rail Authority’s CEO, Roelef van Ark. The Legislative Analyst’s Office had concluded if the cost of building the entire Phase I system were to grow as much as the revised HSRA estimate for the Central Valley segment (an increase of 57 percent), the Phase I system would end up costing not $43 billion as originally estimated, but $67 billion.

Sharp Rebukes
The two reports unleashed a torrent of criticism from the press. In sharply critical editorials, The Wall Street Journal and Los Angeles Times questioned the project’s fiscal viability and the Authority’s poor decision making. The project is “a monument to the ways poor planning, management and political interference can screw up major public works,” opined the Times (“California’s High Speed Train Wreck,” May 16).

“If the state can’t come up with enough money to finish the route, a stand-alone segment in the Central Valley would literally be a train to nowhere and a big drain on taxpayers,” said The Wall Street Journal (“California’s Next Train Wreck,” May 18).

“The legislature needs to kill the train now. Once this boondoggle gets out of the station, the state will be writing checks for decades,” added the Journal in a more recent editorial (“Off the California Rails,” May 30). The San Francisco Examiner and Sacramento Bee also have been critical in their reporting. Governor Jerry Brown (D)  needs to “squarely address the issues raised by the legislative analyst’s report,” a Sacramento Bee editorial urged.

Flagging Lawmaker Support
Even some lawmakers who initially supported high-speed rail have urged the Authority to rethink its direction.

“I don’t want to see an EIR (Environmental Impact Report) completed for a project that will never be built,” State Senator Joe Simitian told Roelef van Ark at a Senate Budget Subcommittee hearing on financing the first rail segment in the Central Valley. Simitian had earlier voiced support for high-speed rail.

At the urging of the Legislative Analyst’s Office, the rail authority asked the U.S. DOT for more flexibility about where and when to build the initial “operable” segment. The LAO recommended considering abandoning the project without more flexibility.

Not only would the Central Valley segment, by itself, have insufficient ridership and revenues to stand on its own, the Legislative Analyst wrote, but “the assumption that construction of the Central Valley segment could move quickly because of a lack of public opposition has already proved to be unfounded.”

The LAO suggested several alternative segments that could be more financially viable and economically beneficial than the Central Valley segment. They included Los Angeles-Anaheim, San Francisco-San Jose and San Jose-Merced.

No Help
But in a remarkable exercise of inflexibility and delusion, the U.S. Department of Transportation turned a deaf ear to the request.

“Once major construction is underway . . . the private sector will have compelling reasons to invest in further construction,” the DOT letter stated with no evidence to support the assertion.

“California is a test case for whether high-speed trains can succeed in the U.S. — and so far, the state is failing the test,” the Los Angeles Times editorial concluded. The federal government’s refusal to reconsider its position has substantially magnified and accelerated the likelihood of that failure.

 C. Kenneth Orski ([email protected]) is editor and publisher of Innovation Briefs. Used with permission.