High-Speed Rail Proving Costly in California

Published August 29, 2011

A California high-speed rail proposal approved by voters in 2008 has strayed so far above original cost estimates and so far under ridership estimates that one key transportation analyst is calling it the greatest scam to hit the state—ever.

“The California high-speed rail project is on track to be the biggest boondoggle in the state’s history, and for California, that is saying something,” said Adam Summers, a policy analyst with the Reason Foundation. “The project’s planning and viability have been dubious from the beginning.”

Warning Signs Ignored

The train plan was originally presented as a $43 billion venture that would provide service for 117 million riders annually by 2030 and ultimately bring billions of dollars into state coffers each year. But a recent study from the California High Speed Rail Authority says those numbers are wrong, that ridership estimates should be brought down and construction costs raised.

It’s not as if plenty of transportation watchers hadn’t warned of this months ago. In July 2010 researchers with the University of California at Berkeley reported the models used to determine ridership information were skewed, and the skewing, in turn, brought about inaccurate financial predictions. Even before that, the project had been labeled a money waster.

“A couple months before the November 2008 election, … Reason Foundation released a report by a couple of rail experts which analyzed the project and the assumptions,” Summers said.

“[We] concluded that the assumptions were wildly optimistic and unreasonable, to say the least. Since then, numerous other reports by various independent agencies—including the Legislative Analyst’s Office, Bureau of State Audits, University of California, Berkeley’s Institute of Transportation Studies, and the California High Speed Rail Authority’s own peer review group—have criticized the project for everything from its lack of a real business plan, to understated cost estimates, to inflated ridership estimates, to the CHSRA’s poor planning and management.”

Oxford Scholars: Supporters Lied

Did train supporters lie to the public in their initial assertions? That’s how one group of Oxford scholars who studied the issue saw it. “They called it ‘strategic misrepresentation,'” said Wendell Cox, an expert in urban policy and transportation and the principal of Wendell Cox Consultancy. “They also called it lying.”

In 2008, Reason Foundation estimated the rail project would cost between $65 billion and $81 billion, significantly higher than the $43 billion sold to the public. In 2009, Reason estimated the first leg of the project, providing rail service between Merced and Bakersfield, would cost $7.1 billion. Now, that cost is coming in 40 percent to 100 percent higher, reaching the $10 billion to $13.9 billion mark. 

States Taking Different Course

Future state government operating subsidies for the high-speed services will have to be so high that states such Florida, Wisconsin, and Ohio are refusing to accept federal government handouts for rail development, Summers noted.

“California would be wise to do likewise,” Summers said. “Californians are realizing that they were sold a bill of goods during the 2008 election. Prior to the election, they were told that 117 million passengers a year would ride the trains and that a ticket between Los Angeles and San Francisco would cost $55. After the election, it was revealed that the ridership numbers were ridiculously inflated. They are now advertised around 50 million.”

That same trip between Los Angeles and San Francisco would also now cost $105, Summers said.

Private Investors Know Better

“This is liable to be one very big drag on California taxpayers,” Cox said. “There is no indication of private investment that’s forthcoming. Well, there is, but they all say they need a revenue guarantee—and that means subsidies.”

That’s just par for the course with high-speed train projects, Cox says.

“Every private dollar that’s been put into high-speed rail around the world has been lost,” he said. “It’s not a good idea. It’s just terribly expensive.”

Summers cites a study by Danish researcher Bent Flyvbjerg analyzing 258 rail, bridge, and road projects worldwide, which found 90 percent of them went over budget. “The vast majority, significantly so,” Summers said.

Cheryl Chumley, [email protected], writes from Northern Virginia.