Thursday, March 17, 2011

High-Speed Rail, Left Behind, is an "Unfunded Mandate"

In United States law and politics, unfunded mandates are regulations or conditions for receiving grants that impose costs on state or local governments or private entities for which they are not reimbursed by the federal government.  <>

First example: No Child Left Behind (NCLB), 2001: 

The intention of NCLB was to strengthen the ESEA legislation which provided federal funding for schools struggling with at-risk and under-served populations.  Although the requirements of NCLB were mandatory, the legislation authorized no additional funding for the states to cover the costs for implementing this program. That cost burden fell on the states and school districts throughout the country.  Schools that failed the accountability measures were punished with institutional restructuring, and, in some cases, subsequent funding reductions.

Tragically, after ten years, the results of NCLB are, to put it politely, under-whelming.  One major reason is that this was an "Unfunded Mandate." One might say that this program has been a failure and that is why President Obama, seeking to salvage its good intentions, is now proposing actual funding in the re-authorization of this legislation.  We can expect the Republicans to fight that tooth and nail.

High-Speed Rail, left behind:

High-Speed Rail, the program and vision devised by the Obama Administration, is similarly an Unfunded Mandate.  Well, not exactly, but states are eager to meet "conditions" to receive those DOT HSR grants.
And, those grants, once awarded, impose bottomless costs on those respective states. While it's true that the federal government doesn't impose a requirement to accept those grants, thereby making it a "mandate" and legal obligation, they have gone pretty far down that road, Florida being a great example.

The problem is that the grants are inadequate pump priming that do not cover the vast costs after that.

The HSR program has already been funded with $8 billion of federal ARRA Stimulus pump-priming funds, and President Obama has introduced an additional $53 billion in his budget plan for high-speed rail, to be spent over six years, into the Transportation budget re-authorization language. And even if all that $53 billion were dedicated to the various high-speed rail corridor sites, it would still be far, far too little to complete those projects.  Hence, an unfunded mandate.

These dollars are meant to do no more than launch high-speed rail development and construction, the major funding for which must come from other sources, mostly the states.  That means there are no other funds available, and no future sources identified, to pay for the total cost of this intended program, costs which, aggregated for the eleven corridors, promise to exceed one trillion dollars.

Do you suppose that the new interest in the Northeast Corridor, with HSR costs hovering around $117 billion, will result in the federal government picking up the entire tab?  Of course not. 

In prior blogs we have already discussed the lack of opportunity for private funding or investment due to the predictability of continued subsidy requirements; that is, a non-profitable train.  The only possible private interest in this project is predicated on the possibility of unlimited federal capital development funding (and very generous construction contracts), and government guaranteed subsidies for operations assuring investor returns.  Corporations such as Siemens do not see the need for charity in the development of high-speed rail in the United States. 

That puts the real burden of covering HSR costs on the backs of states, local governments and/or private entities, just as the Wikipedia definition suggests.  What are the chances of a trillion dollars being assembled to build high-speed trains in the US from sources other than the federal government?

California High-Speed Rail, left way behind:

In the context of the California project, there are only sufficient federal funds, when matched with state sponsored Proposition 1A funds, to launch the CHSRA train project in the Central Valley, where construction costs are expected to be the lowest.  However, even that assembled funding pool is insufficient by several billions of dollars in order for that initial section of rail to be actually usable for its intended purpose, high-speed rail. 

The entire California LA to SF project is now projected to cost $66 billion and those numbers are sure to rise considerably.  With the state bond funds matched with federal dollars, construction can commence with about $5.5 billion in hand for a section roughly 120 miles in length.  It's currently being called "The Train to Nowhere."  It connects no cities of any size.  It will not be usable by high-speed trains, rolling-stock for which cannot be purchased due to lack of funds. No electrification, signalling or PTC will be installed, also for lack of funds.  These will be "Useless tracks to nowhere." 

The California HSR project is an Unfunded Mandate.  

Question: Were the California voters told that they were voting for an Unfunded Mandate that would put the major costs burden squarely back on the state taxpayers?