Tuesday, August 9, 2011

Rising Costs For HSR Spell Sinking Hopes For Building It

We've repeatedly identified the CHSRA and its project as a scam, or as my attorney colleague calls it, "a fraud on the voters." The rail authority has lied to us just about everything.  They "sold" the project to the voters in 2008 by claiming very low construction costs, relatively speaking.  Originally, the rail authority said $32 billion.  That's an enormous amount of money, but the voters nonetheless supported the bond issue for $9 billion as part of the State's down-payment. Right after the election, however, the costs started climbing, until the recent construction expense forecasts rose to $43 billion.

Since then, analysis has suggested $66 billion, using the rail authority's own numbers, but which the rail authority has denied. Others, including an emeritus professor of Economics from Stanford, has suggested a total cost, including the years of interest, at over $200 billion. That rise is in keeping with the notorious Boston Big Dig cost acceleration, which began at under $3 billion and ended up at over $22 billion.

Now the construction start date draws ever closer in the Central Valley (Sept. 2012), for which the rail authority's engineering contractors are doing the detail work, and to their amazement, they discover even greater costs than they had anticipated, or perhaps more correctly, that they had led us to believe.  If they actually were, they are the only ones who are surprised however. We are not.

Any one of us who have read the writings and research of Prof. Bent Flyvbjerg have known that it is a well established pattern among railroad developers world wide to promise very low construction costs and predict very high ridership results.  Both are lies.

One of the realities of this business of building railroads or other massive infrastructure projects is that whatever the cost projections are when the project is on the "drawing boards," changes dramatically when proposals or bids come back from potential construction contractors.  This is exactly what happened initially when the New Bay Bridge Eastern Section went out for bids and immediately, billions were added to the projected costs. 

Public support for this project has seriously diminished over time and now hangs in the balance.  Should the project continue, despite skyrocketing cost forecasts?  How about the obvious likelihood of no further funding from a deficit and debt obsessed Washington?  At what point will reality sink in even for the most passionate Democratic supporters of the train?

State Senator Doug LaMalfa has recently acquired state wide recognition for his opposition to this boondoggle project; perhaps the largest ever proposed in the United States.  His mission?  To convince his fellow state senators that enough is enough; that they are foolishly persisting in supporting a failure of a project that will cost the state far more than anyone expected all the years it had been promoted as a concept or vision.  Now, this fantasy is evolving into a reality that is stunningly costly, and at a time that the federal government is printing money to stay solvent in an economically critical world.

Thank you Senator LaMalfa for your courage to say, publicly, that the Emperor isn't wearing any clothes!

Here's a final thought.  We have been proposing that the times are different.  The movie Greed encapsulated this very well. The State Auditor already has found "irregularities" in the CHSRA book-keeping. Their excuse has been insufficient staff.  I think otherwise.  

I think it is a combination of greed among the contractors and the intoxication of so much money earmarked to be spent relatively quickly. Much of this vast amount of money will fall into the cracks, somewhat as they did in Iraq and are in Afghanistan.  We have seen Wall Street at its greediest worst.  This project, with the many billions of dollars involved, will be no different. The lack of accountability and oversight is evident already.

Keep this money machine going, or shut it down?


Cost estimate for high-speed rail soars
Posted at 09:29 AM on Tuesday, Aug. 09, 2011
By Adam Weintraub / Associated Press

SACRAMENTO, CALIF. Building tracks for the first section of California's proposed high-speed rail line will cost $2.9 billion to $6.8 billion more than originally estimated, raising questions about the affordability of the nation's most ambitious rail project at a time when its planning and finances are under fire.

A 2009 business plan developed for the California High-Speed Authority, the entity overseeing the project, estimated costs at about $7.1 billion for the equivalent stretch of tracks. Officials say those estimates were made before detailed engineering work and feedback from communities along the proposed route.

The latest estimates are contained in two environmental impact studies that were shared with The Associated Press before their public release on Tuesday.

The rail authority's chief executive, Roelof van Ark, said planners anticipated the higher costs as more information about land acquisition and other details related to actual construction became known.

"We've had cost increases, but I believe the costs are now realistic and fair," he said.

Van Ark also said he expects the estimated total cost of the project, originally pegged at $43 billion, to rise.

Construction of the first stretch of tracks - as much as 140 miles from south of Merced to just north of Bakersfield - is scheduled to begin by September 2012 using $3.5 billion in federal money and an estimated $2.8 billion from the sale of state bonds approved by voters.

The higher cost estimates already have been factored into the federally funded construction, van Ark said.

The decision to start the planned 800-mile system in the Central Valley, linking relatively small towns, has generated criticism that the project could become a high-priced "train to nowhere." In a critical report earlier this year, the nonpartisan Legislative Analyst's office said the rail line should start near coastal population centers and recommended moving control of the project from the largely independent rail board to the state Department of Transportation.

The eventual plan is for a system of high-speed trains running from San Francisco to Los Angeles and Anaheim, with stops in the Central Valley.

Critics say the higher cost estimates contained in the environmental reports, the first detailed look at the project, is another warning sign that the rail line should be halted until cost and routing questions can be worked out.

State Sen. Doug La Malfa, R-Willows, said he is preparing legislation that would ask voters to reconsider the project in June 2012. Voters authorized $9 billion in bonds for the project in 2008, although most of those bonds have not yet been sold. "This thing is well on its way to massive cost overruns," La Malfa said.

The documents being released Tuesday lay out specific route alternatives for the 178 miles of planned tracks between Merced and Bakersfield, with an estimated total cost of $10 billion to $13.9 billion, depending on which route is selected. The first portion to be built covers most of that area.

Supporters of the rail project, the nation's most ambitious, said the private sector will be a significant source of funding and that the money will start flowing once work begins.

La Malfa and other critics say the fiscal problems facing the federal and state governments, and the likelihood that Congress will continue to cut federal spending as it tries to reduce the nation's debt could choke off funding.

"The costs are starting to escalate and we need to take a time-out," he said.

Federal transportation officials remain supportive of California's project. The per-mile cost for the Central Valley segment is expected to be less than or in line with international averages for high-speed rail projects, said Roy Kienitz, undersecretary for policy with the U.S. Department of Transportation.

"Our goal is to help the state's decision-makers choose a design that avoids unnecessary costs, and we're pleased the authority has embraced many of the recommendations from the high volume of public response," he said in a statement.

Moving the initial section of tracks from the Central Valley would jeopardize federal money received for construction because it was granted with a strict timetable and requires that the work be done in the valley.

The environmental reports give a range of costs for different route options and contain higher land-acquisition costs based on a survey of specific parcels along the proposed routes. For example, up to $3.8 billion of the increased cost is associated with elevating the train tracks for up to 42 miles.

The rail authority will hold a series of public meetings and accept public comments until Sept. 28, before the board chooses a preferred route.

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