Time to Face Reality on the California High-Speed Rail Project

Cost estimates keep soaring but Gov. Brown keeps pushing the rail system

Several recent events have thrown some cold water on the dreamers who seem to view the California high-speed rail project as the solution to all of the state’s problems. Unfortunately, this has not dissuaded them from pushing for the project to go full speed ahead.

The cracks in the high-speed rail project continue to grow into deep chasms. California High-Speed Rail Authority (CHSRA) CEO Roelof van Ark recently announced he is going to resign, although he said he may then stay on the project and profit as a consultant, of course. A December 2011 Field Poll revealed that, by a two-to-one margin, voters oppose the California high-speed rail project and would like to re-vote on it. There was a pair of recent state and federal legislative hearings that were highly critical of the project. And there is the matter of the revised high-speed rail business plan, which now projects costs of $98.5 billion to $117.6 billion-compared to the $40 billion to $45 billion estimate issued less than two years ago.

To supporters of high-speed rail, the soaring cost estimates and other problems may be a rude awakening but California must acknowledge reality if it is to tackle its monstrous budget problems and return to any semblance of fiscal responsibility.

The state is running a $9.2 billion budget deficit (not to mention a $10 billion unemployment fund deficit and a projected unfunded pension liability in the range of $400 billion to $500 billion). Gov. Jerry Brown has proposed a $35 billion tax increase ($7 billion a year for five years) to plug the gap and stave off deeper cuts to education and welfare, among other things, and yet the governor persists in pushing a high-speed rail plan that numerous agencies, government officials, and groups-from the Legislative Analyst’s Office (see here, here, and here), to the Bureau of State Audits, to the California High-Speed Rail Peer Review Group, to the UC Berkeley Institute of Transportation Studies, to Treasurer Bill Lockyer, to influential Democratic state Senators Alan Lowenthal, Joe Simitian, and Mark DeSaulnier, to organizations such as Reason Foundation, Howard Jarvis Taxpayers Association, Citizens Against Government Waste, Community Coalition on High-Speed Rail, Californians Advocating Responsible Rail Design, and California Rail Foundation-have criticized for its lack of a realistic financing or business plan; overoptimistic assumptions regarding costs, benefits, and ridership (to name but a few); poor planning and management; and route and engineering/design decisions.

Even under optimistic scenarios, the CHSRA has identified only about 15 percent of the funding necessary to build the project. The other $85 billion or so is supposed to somehow come like manna from heaven, primarily from the federal government, which is engulfed in an even greater fiscal crisis than California (not to mention the fact that Congress has repeatedly indicated it is not going to support any additional high-speed rail funding any time soon-see here, here, and here). The CHSRA also claims some of the funding will from the private sector, which has shown no interest in investing in a project with poor prospects, an unrealistic business plan and massively inflated ridership predictions.

Earlier this month, the California High-Speed Rail Authority’s own Peer Review Group even recommended that the legislature not approve bond sales for the project, concluding, “We cannot overemphasize the fact that moving ahead on the HSR project without credible sources of adequate funding, without a definitive business model, without a strategy to maximize the independent utility and value to the State, and without the appropriate management resources, represents an immense financial risk on the part of the State of California.”

Nevertheless, “We’re pushing forward,” Gov. Brown said recently of the administration’s plans for the high-speed rail system. Added Brown, “We’re going to build, we’re going to invest, and California is going to stay among the great states and the great political jurisdictions of the world.”

Not if we keep spending money we don’t have on boondoggle projects, we won’t, Gov. Brown. He then reiterated his support for the project in his 2012 State of the State address and called on the legislature to approve the appropriation of bond proceeds for the first segment of the project.

This is like your neighbor, who let’s say is an average Joe struggling to get by during the ongoing economic malaise, announcing that he is going to buy an expensive Tesla Roadster (gotta support “green jobs” and all that), even though he already has a car and is having trouble paying the rent and utility bills as it is. Complicating matters are the facts that he does not know just how high the price of the car will be (it has already more than doubled since last year) and he probably won’t be using it very much anyway. Oh, and you and a whole bunch of other people who haven’t agreed to it yet will be paying for almost all of it. This is the insanity of the California high-speed rail project.

The California high-speed rail project has laid bare, in a way more obvious than usual, just how stark are the lies and how empty the promises that politicians and special interests make in order to separate taxpayers from their hard-earned money.

Agency after agency, expert after expert, has criticized everything about the California high-speed rail project – from its lack of a feasible financing/business plan to its cost and ridership estimates, which even the CHSRA has begrudgingly admitted are off by orders of magnitude. Undaunted by reality, high-speed rail advocates obstinately cling to their claims, whether out of unquestioning faith in the utopian ideal of high-speed rail or out of selfish interest in partaking in the gravy train, so to speak, that the project will bestow upon them. The CHSRA and its supporters have been wrong about everything about the project thus far, yet they continue to make false promises about the boon that, they claim, high-speed rail will surely bring to the state. Why should taxpayers trust them?

California’s budget situation is dire enough as it is. It cannot afford for Sacramento to fiddle with this fiscal black hole of a high-speed rail project while California is buried in debt. The high-speed rail project plug should be pulled as soon as possible before the state wastes even more money it does not have.

Adam B. Summers is a senior policy analyst at the Reason Foundation.