Monday, November 7, 2011

The Jarvis group saw the future of High-Speed Rail in California correctly

John Coupal is the President of the Howard Jarvis Taxpayers Association. As a matter of full disclosure, the Jarvis Group are very conservative supporters of the Proposition 13 effects and its consequences on the economy of California.  We probably disagree on just about everything except this one single issue, the High-Speed Train.  And there, we are in close harmony.  

In a political context, Coupal is not the "outlier."  I am (a Democrat hostile to HSR). The Republicans, with one or two notable exceptions are all opposed to the HSR project in California, and in the United States.  Most, if not all Democrats are supporters.

Jon was a supporter of the writing of the opposing argument which appeared on the 2008 ballot book for the election.  He also supported the writing of the Reason Foundation "white paper" called The Due Diligence Report which was written by Joe Vranich and Wendell Cox.  That paper appeared in September of 2008.  Had it been available long enough to be read by all the California journalists who had been following high-speed rail events, this document would have convinced them that the project was fraudulent, doomed to failure, and they, in turn could have persuaded the California voters to reject the project, as they should have.

It also happens that Jon, who I have met several times, is a very nice, thoughtful guy.  He has written a position statement that spells out what my position is, as well. It is the gist of what I have been trying to say for many years about this project.

The central point here is that the California taxpayers were duped into voting for this project with promises that it would cost no  more than the $9.95 billion from the state (the bond issue), with all other funds coming from the federal, local  and private sectors.  That is obviously not true -- especially when the total costs are $100 billion, not $33 billion --  and the CHSRA now acknowledges that.  We can also state that the voters were intentionally misled, since the rail authority was cognizant of the  real, and far higher construction costs than they then stated.

Jon Coupal, President, Howard Jarvis Taxpayers Association
November 7, 2011

Imagine you see an ad in the newspaper for a very fast, shiny new sports car at a low, low price. Tempted, you grab your wallet and rush to the dealership where you agree to buy this dream car. But as soon as you sign the contract, the sales manager locks the doors and tells you the cost is three times higher than the advertised price and you will not be allowed to leave until you agree to pay. Not only would you feel cheated, you would also be the victim of fraud, robbery, false imprisonment and probably a few more felonies. Well, this is exactly what is happening to California taxpayers, except it’s not a sports car we’re being forced to buy, but a fast train.

In 2008, voters narrowly approved a $10 billion down payment on the construction of a high speed rail network between the Bay Area and Los Angeles that promoters said would cost a total of $33.6 billion. A year later, the High Speed Rail Authority, overseeing the project, said the train would actually cost $42.6 billion. No problem – hey, what’s another $9 billion between friends? Now, they’re reporting it will cost $98.5 billion, three times the original estimate. What’s worse is they’re saying, because we agreed to buy the train at $33.6 billion, we’re obligated to pay the entire $98.5 billion. To put this in perspective, California’s entire 2010-2011 General Fund budget was about $91.5 billion or $7 billion cheaper than the train.

Prior to the 2008 vote, the Reason Foundation and the Howard Jarvis Taxpayers Foundation sponsored “A Due Diligence Study” of the HSR plan which found the high speed train would cost much more than promised, possibly as much as $100 billion or even more One of the study’s authors, Joseph Vranich, who is also one of our nation’s top authorities on high speed rail, also warned the project would be a boondoggle. In fact, he testified before the California State Senate Transportation and Housing Committee that the project was so poorly planned that it was the first high speed rail proposal he would be unable to support.

More recent studies by the University of California and Legislative Analyst’s Office have cast further doubts on the feasibility of the fast choo-choo. The Legislative Analyst’s Office found not just that the costs were understated but also found fault with the High Speed Rail Authority’s structure and its management by consultants and appointees who are not even required to have relevant expertise.

The fact that the Authority management has no clue what they are doing shows. But while they have admitted they drastically underestimated construction costs they still promise the train will turn a profit and – try not to laugh too hard – they even promise the train will create over 1 million permanent jobs just by putting a fast train between Los Angeles and San Francisco.

However, the Reason/Jarvis study that accurately predicted construction costs to be understated also found ridership predictions wildly overstated. High speed rail backers cheerily prognosticated the train would eventually make lots of money by estimating a ridership intensity (a measure of demand for rail service) that is 30 times higher than the high-speed Acela Express, which links business centers in the dense Northeastern corridor. They even estimated higher ridership intensity than in Japan and Europe.

If construction does begin, the most optimistic result will be a stretch of track running from Bakersfield to Fresno, if it even gets that far. High speed rail boosters still think private investors are going to want to pour billions into their poorly planned project, but most investors are not in the habit of flushing their money down the drain. On top of that, there are still expensive right-of-way issues to be resolved.

Many years ago voters in Los Angeles were promised a “subway to the sea” that would stretch to the ocean at one end and across the San Fernando Valley on the other, in return for a sales tax increase. After several decades, and still no subway to the sea, voters were told that this time officials were serious; they really would build that line to the beach, if voters would just agree to another sales tax increase. Sound familiar? That’s right California Taxpayers, you can have a shiny new train if you are willing to commit to paying three times the advertised price. The HSR project, which has yet to break ground, is rapidly moving from bad public policy to outright rip-off. And if the past is any indication, if given a month or two, the Rail Authority will come up with new cost estimates that will make the $98.6 billion look like a pittance.
You can write to Jon Coupal (via the FR) here

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