Sunday, March 13, 2011

The new poison-pill guidelines for federal funding for HSR

This is not good news. It's from Wendell Cox. Here is his analysis of the Federal program rules for the redistribution of the rejected $2.4 billion from Florida's now aborted high-speed rail project.

And below that is the article by Wendell in that describes the federal program in detail.  Basically, it means that government funding is bait for a huge trap that will ensnare state taxpayers to be on the hook for the financial failures of the projects being funded, even if they are federal dollars.  

What does that mean in California?  Well, let's see. The rail authority promises 39 million riders per year. If the train is built with federal funds and that ridership level is only, let's say, 18 million, the state must  repay the federal government all the funds provided to develop the project.

The problem for us is that this won't stop the CHSRA from going ahead if they can get federal funding. Their attitude is start building it now, get as much money out of the process as possible, and who cares what happens twenty years from now.  

Same for cost overruns.  In fact, this can be their solution for the cost problem.  That is, if the program accepts federal funding (which it has and will) and the construction costs exceed projections (which they certainly will), the state is obligated for all the additional costs. Sky's the limit!  Again, who cares?  Right, Democrats and HSR lovers?

Every voter in California needs to read these federal rules for funding HSR from the Department of Transportation.  The federal funds are a bear-trap that will snap shut on every taxpayer in the state if there are cost overruns; which you can count on.

I don't know about you, but I believe that the sooner California shuts this program down and rejects any further federal funding, the better.
This is from Wendell Cox:

New Program...
Obligations of Grant Recipients (and their taxpayers)
1. Pay cost overrungs
2. Pay operating subsidies
3. Refund federal grant if service levels are not maintained high enough.
The US Department of Transportation has announced a <> competitive grant program to reallocate funding that was refused by Florida for a proposed high speed rail line from Tampa to Orlando. The line was cancelled by Governor Rick Scott because of the prospect for <> billions of dollars of unplanned obligations that could have become the responsibility of the state's taxpayers.
The program would require taxpayers to fund cost overruns, operating subsidies and possible repay the federal grants if service levels are not maintained at a high enough level.

More at: 

United States Department of Transportation: RAIL GRANTS TO OBLIGATE TAXPAYERS

by Wendell Cox 03/13/2011

The US Department of Transportation has announced a competitive grant program to reallocate funding that was refused by Florida for a proposed high speed rail line from Tampa to Orlando. The line was cancelled by Governor Rick Scott because of the prospect for billions of dollars of unplanned obligations that could have become the responsibility of the state's taxpayers.
Eligibility: Eligible applicants are states, groups of states, Amtrak or other government agencies that authorized to "provide intercity or high-speed rail service on behalf of states or a group of states. The grant program requires recipients of grants (read "taxpayers") to provide financial support to intercity and high speed rail passenger rail programs in the event that cost and ridership projections are optimistic (a routine occurrence).
Obligation to Pay for Cost Overruns: As in the program announced in 2009. the state, group of states, government agency will be required to demonstrate its financial capacity (that is, the capacity of their taxpayers) to pay for cost overruns (page 9). This open-ended liability led Governor Chris Christie of New Jersey to cancel a new transit-Hudson River rail tunnel, which had costs that were escalating out of control that would be the obligation of the state's taxpayers. 

Governor Christie and Governor Scott were both aware of the disastrous record of major infrastructure cost overruns, such as in the Boston Big Dig project, the Korean high-speed rail program and the overwhelming majority of passenger rail projects in North America and Europe, according to a team led by Oxford University Professor Bent Flyvbjerg.
Obligation to Pay Operating Costs: Moreover, inaccurate passenger and revenue forecasts have been pervasive in high-speed rail systems, as has been documented by Flybjerg, who found that cost overruns occurred in nine out of ten projects:
... we conclude that the traffic estimates used in decision making for rail infrastructure development are highly, systematically and significantly misleading.
This is illustrated by the fact that even a decade and one-half after the Eurostar London to Paris and London service was opened, ridership remains 60 percent below projection. Ridership on the Taiwan and Korea high speed rail systems has been one-half or more below projections. 

Our analysis of the Tampa to Orlando line revealed exceedingly high ridership projections, which were inexplicably raised even higher in a new report just released. Failure to achieve ridership projections increases the likelihood that a line will need operating subsidies, which would be the ultimate responsibility of taxpayers under the USDOT program.
Federal Grant Repayment Obligation: Moreover, taxpayers of any grant recipient would be required to repay part or all of the federal grant if a sufficient level of service is not maintained for a period of 20 years (page 41). The operation of this provision is illustrated by recent Florida experience. Tri-Rail, the Miami area's commuter rail service only narrowly escaped having to repay $250 million when its service level was deemed to not meet requirements of a federal grant by early in the Obama presidency. Tri-Rail was rescued by a state subsidy of nearly $15 million annually, which restored an artificially high level of service.
Intercity and High Speed Rail Program: The federal intercity and high-speed rail program is largely limited to upgrades of Amtrak-type service. Before Governor Scott's decision, only two of the programs (Florida and California) would have achieved international standard high speed rail speeds.