Friday, September 23, 2011

How do you spend what you ain't got when you buy a High-Speed train?

Unless you're a parent or grandparent (or both), you may not know the song,"The Wheels on the Bus go Round and Round."  It's a cute, nonsense song for little tots.  

Well, this is HSR situation is neither cute nor nonsense.  The wheels on the high-speed train, figuratively speaking, keep going round even though that train is going to run out of fuel after the initial $6.5 billion are blown on 100 miles of track (or less) in the Central Valley of California.

You then have to ask, so why start?  Isn't $6.5 billion for a 100 miles of track a lot of money?  That's  $65 million per mile. As the article tells us, that's not what it will end up costing, which is now forecast to be around $14 billion.  $6.5 billion is all they have to spend.  

Confused yet?  That's the whole idea. Keep us debating the fact that they can't even complete their first intended sections, while they rush to get the job started. 

And, the rationale of both the US Department of Transportation and the CHSRA is that starting in the Central Valley is a great idea since it is the least costly place to begin. $65 million per mile of track!  And that's without any of the essential technology to make it capable of running high-speed rail.  Wasn't high-speed rail the purpose in the first place?

One can only hope, since this is intended as a jobs project (instead of a necessary or effective transit project), that they use as little construction machinery as possible in order to employ as many people as possible.  Pick and shovel was good enough for the train builders who first crossed the US.  So, it should be good enough for our labor force today.  Right?

Jimmie Bise, Jr., the author of the article below,  says that state leaders might veto this project.  I don't know where he gets that idea.  Jerry Brown has endorsed it enthusiastically and the rest of the Legislative Democratic Majority has been told by Brown to fall in line and not make any trouble.  Their goal is the get those promised $3.5 billion from the Dept. of Transportation.  There should be no reason, like time delays or an expose of corruption, to deter the feds. in Washington for coming up with the funds.

That's why the wheels on the train go spend, spend, spend, as the article headline states.  And here's the most interesting thing of all.  We already know that the rail authority is going to have to come clean on projected costs.  They have, until now, insisted that $43 billion will do the entire job.  (That number has been climbing steadily since the Prop. 1A bond issue passed.) Well, the federal government; that is, the Obama Administration, has no intention of funding this train that they are so insistent on building.

What does that mean?  It means, they have no intention of sending California the $40, $50, or $60 billion necessary to complete the project. Without that, the project is DOA. I might add that these are also low-ball numbers which most likely will rise to over $100 billion as the construction drags on over ten years or more.  

In California, we've been told by rail authority Board members, repeatedly, that our $9.95 billion bond issue is the only funding we will ever have to provide out of our taxes.  There will be no further tax demands OR subsidy costs to operate the train.  That becomes a huge dilemma that the State Democrats persist in ignoring.  Who is going to provide the money to build the train?  There is zero likelihood of private investment since those will all be sunk costs without hope of revenue production to justify such loans. 

The State is on the verge of bankruptcy.  The federal government's financial capacity to pay for this train are also zero. Nonetheless, against all reason, the Democrats persist in pushing for construction.

So, remind me again why this project is continuing.

"Hello, Mr. Rolls-Royce Car Dealer.  I'm here to buy a car but don't have enough money.  I have enough for the hood ornament.  Can I buy that and get the rest of the car later?  Is that going to be a problem?"


Posted by Jimmie Bise Jr | 9:00 am EST August 19th, 2011

I know that we usually focus on national matters here at Ending Spending, but this story on the rampant cost overruns of the California high speed rail project is worth a look. I warn you, you may want to sit down and put your drink down when you see just how much more expensive this boondoggle is likely to be.

For the second time since voters approved California’s massive bullet train project, the state on Tuesday raised the total price tag for the first stretch by several billion dollars — and now the cost for the entire rail line is on pace to skyrocket to an eye-popping $60 billion to $80 billion or even more.

The latest estimates put the cash-strapped state even further behind in bankrolling its biggest, and one of its most polarizing, public works plans ever, as California struggles to secure funds from shy investors and broke governments. Still, project officials are ramping up to spend billions of dollars to break ground on the rail line in the Central Valley next year and hope to find the rest of the money to pay for the system later. It’s a plan state leaders look increasingly likely to veto.

The first section is slated to run between Merced and Bakersfield and was originally projected to cost $6.8 billion. The latest estimate raised the price tag to somewhere between $10 billion and $13.9 billion. The article goes on to say that if the cost of the entire project rises in a similar fashion, what began as a $33 billion price tag could climb to $87 billion, assuming inflation stays where it is.

The taxpayers have already seen one large cost jump, from the original estimate to $44 billion in one year and state officials have no clear idea how much more it will cost or where they’ll get the money to pay for it all. According to the article, the state only had funds for a quarter of the work and with the state’s economy sinking faster than a boat with a screen door bottom there aren’t many places left where officials can get the rest?

So, is there a national story here? Absolutely. The President has fairly demanded that we borrow exorbitant sums of money to fund public works and infrastructure projects. This rail line is the largest public works project in the country, but if he and the spend-happy left get their way, it will not be the only one. You can bet that any project Congress funds will need more and more money as time goes on. That is an unavoidable reality of any government program (acknowledged here by admitted fans of big, expensive government “stimulus” projects) because there are no reasonable checks in place to keep costs reasonable.

That poses a dilemma for all of us. Obviously, we do need to spend money on infrastructure projects like roads and bridges and sewers. But we should be careful about what projects we decide are necessary and which, like national high speed rail lines, are ruinous flights of fancy. We should also be sure that the spending comes from the proper level of government. Ask yourself, does Washington need to send money to the states for highway construction or could the states collect money more efficiently from their own tax bases? Do states need to spend on sewer projects or should counties and municipalities raise that money on an as-needed basis?

California’s growing high speed money sink gives us a chance to take a good, long look at how we handle infrastructure spending. Let’s not pass it up.

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