Tuesday, June 21, 2011

The California High Speed Rail Proposal: A Due Diligence Report, by Wendell Cox and Joseph Vranich; Project Director Adrian T. Moore.

On a number of occasions this blog has referred to the Reason Foundation Due Diligence Report, which was issued in September of 2008, several months prior to the November election during which Proposition 1A was passed by the California voters by a margin of 4%.

Recently, the testimony before the State Senate Committee on Transportation given by one of the authors of this Report, Joe Vranich, was circulated, including on this blog, in which Joe gave a highly succinct summary of the Report to Senators Lowenthal and Simitian, the leading Senators conducting oversight over the California high-speed rail project.

Far too few of us have read this report.  I hope to modestly correct that oversight by providing many of its passages here in this blog over the next weeks.  The Report is over 182 pages long.  It's crammed with diagrams, charts, maps, matrices, and other graphically presented information that does not transfer well into this format (or to be brutally honest, I don't know how to do that).  I will select key text passages, all the while encouraging all the readers of this blog to click on the URL at the top of this page and download the entire document.

The major organization responsible for producing this document is the Reason Foundation.  They funded and sought additional funding from other organizations to sponsor this detailed research report.

Indeed, before even one word of the report itself appears here, I intend to identify and give credit to the authors and the sponsoring organizations.  They were prescient.  They knew, well in advance of all the rest of us, that "it would hit the fan" if Proposition 1A passed and what the consequences would be.  Although they may repudiate these blunt terms, they knew what a scam and fraud this project was. 

The authors took all the information made available by the California High-Speed Rail Authority and de-constructed it; they took it apart error by error (I'm using a nice word here).  

I'm convinced that if the voters of California had been fully apprised of the contents of this report, they would not have voted in favor of this Proposition.  Indeed, many in Sacramento anticipated that it would fail at the polls.  Hence they didn't take it as seriously as they might.  They were surprised.  And we were crushed.

Three organizations stand behind this Report, the sponsoring organization being the Reason Foundation.  The other two cooperating and funding organizations include the Howard Jarvis Taxpayers Association and Citizens Against Government Waste.

The introductory parts of this Report will appear in the next blog entry.

Here are the resumes of the two authors, Wendell Cox and Joseph Vranich. While I have never met either gentleman face to face, we have had a great many email and telephone conversations.  I consider myself a lay-person and appreciative student of their efforts.

Wendell Cox is principal of Demographia, a St. Louis region-based public policy firm. He was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley, where he introduced the amendment to Proposition A (1980) that established the local funding set-aside for the Los Angeles light rail and metro lines. He was also appointed to the Amtrak Reform Council by Speaker of the House Newt Gingrich to complete the unexpired term of New Jersey Governor Christine Todd Whitman. There, he was instrumental in forging the final financial self-sufficiency plan that was required by the U.S. Congress.
He has worked on numerous projects in the United States and internationally. Mr. Cox’s professional endeavors on urban and intercity transport have been characterized by the objective of ensuring that riders and taxpayers receive fair value in return for their funding and that scarce public resources are directed to the most beneficial projects and programs.
He was author of the 1997 James Madison Institute evaluation report on the proposed Florida Overland Express high-speed rail system, and authored reports on subsequent Florida high-speed rail proposals. His analysis of the proposed Las Vegas Monorail contained accurate ridership projections, in contrast to the project-sponsored “investment grade” projections that were more than double the eventual ridership. Further, his prediction that the Las Vegas system would ultimately be unable to service its bonded indebtedness has now been repeated by Wall Street analysts. His 2000 commentary in the Apple Daily, Hong Kong’s largest newspaper, argued for vigorous expansion of that urban area’s rail system.
Demographia’s “Public Purpose” website (www.publicpurpose.com) was designated twice by the National Journal as a “Top Transport Internet Site.”
Joseph Vranich has been involved in rail passenger issues for more than thirty-five years. He has advocated building high-speed train systems through public-private partnerships and served as President/CEO of the High Speed Rail Association in the early 1990s, where he won the Distinguished Service Award.
He has testified numerous times before the U.S. Congress on high- speed rail and Amtrak—including support for Amtrak’s high-speed Acela program. Early in his career he served as an Amtrak public affairs spokesman.
He has spoken internationally at the invitation of Japan’s Ministry of Transport, Japan’s Railway Technical Research Institute, European railway suppliers, and addressed a visiting Chinese government delegation in comments that were published in Vital Speeches. Also, he has met with the U.S. Department of Transportation, the Office of Management and Budget, and the U.S. General Accountability Office on rail passenger issues and was a U.S. Senate appointee to the Amtrak Reform Council.
He is the author of Supertrains (St. Martin’s Press, 1991), a significant public policy book advocating construction of HSR systems in the U.S. His second work, Derailed: What Went Wrong and What to do About America’s Passenger Trains (St. Martin’s, 1997), recommended creation of public-private partnerships and competitive franchising. His most recent book, End of the Line: The Failure of Amtrak Reform and the Future of America’s Passenger Trains (AEI Press, 2004), outlined how Amtrak failed to comply with reform laws; it also detailed Amtrak’s development of the Acela trains and examined railway reforms in 55 nations.
He has addressed rail issues on many TV and radio programs, including the CBS Evening News, CNN News, CSPAN and National Public Radio. His work has been featured in The New York Times, Newsweek and Railway Gazette International and his commentaries have appeared in The Wall Street Journal, Washington Post, Chicago Tribune and many other publications.
And, here is the press release for this Report:


Study: California's High-Speed Rail System Will Cost Tens of Billions More Than Estimated, Adding to State Deficit

Report details why high-speed rail won't meet ridership predictions, deliver on promised travel times, or meet emission reduction targets
Los Angeles (September 18, 2008) - 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 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."
About Reason Foundation
Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason Foundation produces respected public policy research on a variety of issues and publishes the critically acclaimed Reason magazine and its website www.reason.com. For more information, please visit www.reason.org.
Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109

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