This is being written while I'm listening to the California State Senate Hearing now underway with their discussion of the most recent business plan of the California High-Speed Rail Authority. Members of that rail authority Board are having to respond to a number of critical State Senators regarding the many major questions and contradictions about which we can read in all our daily papers. Superficially, it sounds like it's going well, but it really isn't. There are no substantive answers to most questions and the same issues remain unresolved.
In sum, the Senate is highly challenging to the CHSRA Board whose members are waffling around each and every answer. What the Board members are actually doing is defending the existing funding, hoping to receive it and spend it as soon as possible, whether there's ever more funding or not. That agenda drives all their answers. They have no Plan B.
Below is a blog quoting at length from an article. See, I'm not the only one that does this. The blog is called "Calwhine" and the article, which I've also added here, is an article by Daniel Borenstein of the Contra Costa Times.
As the MSM (mainstream media) begin to understand and thereby turn against this monstrous high-speed rail project in California, it will become ever more difficult for Governor Jerry Brown and the Democratic Legislature to sustain their firm commitment to support this project. That support can now be explained only one way, and that way has nothing to do with transit or transportation in this state. It has to do with the "free" $3.3 billion from Washington.
In the short term, that will look good on paper and in campaign speeches. 'Look how we, your representatives, helped boost the suffering state economy,' they will say. What they don't tell you is what this free money will actually cost the state. Figure at least a billion or more a year, forever.
Why? Several reasons. The first is the cost of the bond issue funds. California loves to borrow money since politicians can spend it to show how much good they're doing for the state. And, they don't have to be around in the future when those funds have to be repaid, two dollars for every dollar borrowed. Figure that to be around $750 million annually.
Then there's the fact that capital development costs are already projected to be way over $100 billion, even over $200 billion. Where will that come from? Do you seriously believe that California will commit no more than $9 billion in borrowed dollars to this project? Puhleez!
And, finally, there are those elusive operating funds to run the most expensive-to-operate trains there are. The rail authority, which has already promised the sun, the moon and the stars, also promises profitability; that is, this train is going to generate billions of surplus revenue annually. What have they been smoking? Which is to say, California will be on the hook for annual operating funds so that rich people can ride this luxury train without paying even more for their tickets. We're going to help them pay with our tax-dollars. Well, that seems fair!
Yes, as Daniel Borenstein says, the Legislature can cut their water off. But, I'm not holding my breath for that. Instead, I'm looking to the Republican House in Washington to put a halt to this insanity. And what that means is the rail authority will take their $3.3 billion and blow it all in the Central Valley, disrupting as much of it as they can, and then grind to a halt, with only about 100 miles of regular track for Amtrak to show for it.
Neat, eh?
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The establishment slowly turns against bullet-train boondoggle
Posted on December 4, 2011
Is media sanity suddenly emerging in response to the California High-Speed Rail Authority’s determination to build the biggest public-works boondoggle in world history? It feels that way. The editorial pages of the L.A. Times and Sac Bee may still be playing let’s pretend about the transcendent glories of the project, ignoring its immense flaws.
But the reporting in recent months by the Times, California Watch, the San Jose Mercury-News and the San Francisco Chronicle suggests that journos have finally figured out the whole thing is a stinking sham. Now one more respected state journalist — Contra Costa Times editorial writer and columnist Daniel Borenstein — has jumped in with a whupping that focuses on the costs of borrowing the $9.95 billion that voters approved for the project.
Payments on the high-speed rail bonds would eventually add as much as $750 million a year [to general fund costs].
Yet the bonds would cover just a small fraction of the project. Voters approved borrowing $9 billion for high-speed rail. Total cost for a system stretching from Sacramento to San Diego was estimated at $45 billion. The rest of the money was to come from the federal government and private investment. But the project voters approved is not the one on the table today. The cost estimate increased to $98.5 billion to $118 billion for a system linking just San Francisco and Anaheim.
Only $3 billion of outside money, mostly from one-time federal stimulus funds, has been secured. Beyond that, backers desperately argue that private investors and the federal government will eventually come through if taxpayers pony up first.
It’s not only fantasy, it’s insulting — reminiscent of mortgage brokers at the peak of the housing bubble who issued loans promising unrealistic future dividends without regard to the consequences to the borrowers. …
The 2008 ballot measure provided a safety valve: The rail bonds require legislators’ approval. They should reject them for two reasons. First, the current plan is not what voters approved. Second, we can’t afford it.
We needed much more of such sanity in 2008, when voters were swept away by a tsunami of rail-cultist double talk and Green Kool-Aid about the alleged glories of high-speed rail. Let’s hope this tsunami recedes on the bullet train and many other issues as well. California is in bad enough shape without so many self-inflicted policy wounds.
Meanwhile, let’s check in with the Calwhine sports book and see what the latest bullet-train odds are:
--Likelihood Jerry Brown will disavow the project before his first term ends: 3 to 1 that he will
--Chances Calitics‘ Robert Cruickshank dismisses any and all future criticism as have nothing to do with facts and everything to do with the culture war: 100 percent
--Chances Cathleen Galgiani qualifies for Mensa: 100,000 to 1
--Odds full project will ever be completed for under $300 billion: 100,000,000,000,000,000,000,000,000,022 to 1
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Daniel Borenstein: Why California can't afford high-speed rail
Staff columnist
Posted: 12/03/2011 04:00:00 PM PST
Updated: 12/03/2011 07:43:58 PM PST
Building the California high-speed rail system won't be a free ride. It will require spending money that could otherwise fund education and health care.
Perhaps the most misunderstood aspect of bond financing is that it's a loan. It must be paid back. When the state borrows, the repayment usually comes from the general fund. While the legislative analyst warns that balancing the state budget in coming years presents daunting fiscal challenges, high-speed rail advocates want us to take on more obligations.
Think about it: If you were struggling to cover your mortgage, pay bills and feed the family, would you borrow to buy a boat? Or, in this case, to jump-start construction of a highly speculative train system?
Fortunately, when voters in 2008 approved bonds for high-speed rail, they also provided the Legislature the authority to stop it. Any members who approve the borrowing must explain why they support funding a rail plan we now know will likely never be completed rather than our K-12 schools, colleges and universities, or desperately needed care for the poor and elderly. That's the trade-off.
California voters repeatedly are asked to approve borrowing for state projects without raising taxes. They're never asked what they want to give up. That means they don't confront the financial consequences of their decisions.
Special interests line up with campaigns to take advantage of this. In recent years, for example, they have convinced voters to approve borrowing for freeway upgrades, public transit, battered women's shelters, senior housing, school construction, flood control, park acquisition, coastal protection, stem-cell research facilities and high-speed rail. [All of which I approve!]
In the past two decades, California bond borrowing has rapidly increased. The cost of annual payments ate up less than 2 percent of the state general fund until 1990. Today, it's 6 percent and forecast to rise to 7 percent next year. That's currently more than $5 billion annually from the state general fund. Payments on the high-speed rail bonds would eventually add as much as $750 million a year.
Yet the bonds would cover just a small fraction of the project. Voters approved borrowing $9 billion for high-speed rail. Total cost for a system stretching from Sacramento to San Diego was estimated at $45 billion. The rest of the money was to come from the federal government and private investment. But the project voters approved is not the one on the table today. The cost estimate increased to $98.5 billion to $118 billion for a system linking just San Francisco and Anaheim.
Only $3 billion of outside money, mostly from one-time federal stimulus funds, has been secured. Beyond that, backers desperately argue that private investors and the federal government will eventually come through if taxpayers pony up first.
It's not only fantasy, it's insulting -- reminiscent of mortgage brokers at the peak of the housing bubble who issued loans promising unrealistic future dividends without regard to the consequences to the borrowers.
Make no mistake: The state should float bonds to borrow for needed capital projects -- provided it can pay back the money and the projects provide commensurate long-term assets. But the state can't pay its current obligations, much less add more. As for high-speed rail, the chances this project will be completed are slim to none.
To be sure, the state general fund problem stems in part from lack of revenue. California should collect more tax revenue. But lawmakers can't agree on how, and most voters, even though they want bond-funded projects, don't want to pay more taxes. Moreover, even if there were more revenues, highly speculative high-speed rail still would fall way down the list of spending priorities.
Trains would be nice, but we can't even pay for essentials.
The 2008 ballot measure provided a safety valve: The rail bonds require legislators' approval. They should reject them for two reasons. First, the current plan is not what voters approved. Second, we can't afford it.
Daniel Borenstein is a Contra Costa Times columnist and editorial writer. Contact him at 925-943-8248 or dborenstein@bayareanewsgroup.com. Follow him at Twitter.com/borensteindan.
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