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Study: Californiaís High-Speed Rail System Will Cost Tens of Billions More Than Estimated

Chris Mitchell
September 17, 2008, 12:57pm

Staring at a $15 billion deficit, Gov. Arnold Schwarzenegger says he'll veto the state budget because "nothing is more important than getting our fiscal house in order." In November, voters will get their own say on budget matters: Will they let the state borrow nearly $10 billion to start a high-speed rail system that will likely add billions more to the state deficit in the years to come? The high-speed rail system will cost tens of billions more than advertised and ridership numbers will be much lower than predicted, according to a new Reason Foundation due diligence report on the California High-Speed Rail Authority's plans. "The current high-speed rail plan is a fairy tale," said Adrian Moore, Ph.D., vice president of research at Reason Foundation and the study's project director. "The proposal suggests these high-speed trains will be the fastest ever; the most-ridden ever; the cheapest ever; and will convince millions of Californians they no longer need to drive or fly. Offering up a best-case scenario is one thing, but actually depending on all of these miracles to happen simultaneously is irresponsible public policy." Proposition 1A would authorize $9.95 billion in bonds for a high-speed passenger train, but taxpayers should beware that this is just a fraction of the system's total price. The Rail Authority claims the first two phases of the system will cost $45 billion. But even that understates the total price. With the high costs of building in California and the history of cost overruns on rail projects, the final price tag for the complete high-speed rail system will actually be $65 to $81 billion, according to the Reason Foundation report. And while the Rail Authority forecasts between 65 and 96 million intercity riders by 2030, the due diligence report finds these projections are dramatically inflated. After compiling numerous ridership studies previously conducted for California rail systems, the study demonstrates the state can expect 23 million to 31 million riders a year in 2030. Any failure to meet the Rail Authority's lofty ridership projections would force ticket-price increases, further cutting ridership, or require taxpayer subsidies to cover the financial shortfall, adding to future budget deficits. The due diligence report finds "the San Francisco–Los Angeles line alone by 2030 would suffer annual financial losses of up to $4.17 billion." Similarly troubling, the report finds that no existing high-speed rail train is currently capable of meeting the speed and safety goals set by the system's advocates. California will have to use heavier, slower trains than the world's other high-speed rail systems because it plans on using the same tracks as freight trains in some sections, instead of specialized tracks. The due diligence report also concludes that the high-speed rail system's supposed impact on CO2 emissions is inconsequential and costly. In fact, a similar reduction could be achieved by improving the fuel efficiency of the state's cars and SUVs by just half a mile per gallon by 2030. "Unfortunately, the California High-Speed Rail Authority hasn't leveled with the public about the high risks and uncertainties this project brings," said Joseph Vranich, who supports high-speed rail, served as president of the High Speed Rail Association in the early 1990s, and is one of the study's co-authors. "History tells us that you'll see construction overruns, higher operating expenses, and a failure to meet ridership projections." The study, prepared by Vranich and Wendell Cox, and published by Reason Foundation, Howard Jarvis Taxpayers Association, and Citizens Against Government Waste, is available here.

Chris Mitchell is Director of Communications/Media Contact


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