Monday, April 9, 2012

Funding High-Speed Rail's "Unfunded Mandate"

There is nothing Joe Guzzardi has to say about the California High-Speed Rail project that I object to, except to disagree that "it's a gamble." No, it's no longer a gamble, if indeed it ever was.  It's a guaranteed loser.  

Regardless of what the actual cost forecasts are, whether $33 billion or $133 billion beyond the currently available $6 billion, the rest of the money is not now available from any source, local, regional, state or federal, and certainly not private.  No money, no train. 

The rail authority and all the writing promoters keep comparing the project with other massive mega-infrastructure projects, such as the Panama Canal, the Transcontinental Railroad, the Interstate Highway System, and so forth. Well, there's one flaw in all these ostensible prototypes; they had the money or the source of money initially identified.  This rail project does not.

The US government, in initiating the high-speed rail program, had no idea how it would be funded.  At the last minute, at the end of 2008, the Obama Administration stuffed an additional $8 billion in the ARRA Stimulus Fund legislation. It was earmarked for high-speed rail.  That money was awarded around the country, mostly to Amtrak upgrades which were labelled "high-speed rail" in order to qualify.

Some of the money was rejected by three Republican Governors who did not want their state saddled with infinite debts for this project. California, on the other hand, clutched for all the funds it could get.  And now, the Governor continues that obsessive pursuit of the awarded ARRA $3.5 billion.

What the federal government did, in initiating this program, was not to provide anything like the funding required.  It was, in Washington jargon, an "unfunded mandate." The government wanted a hugely expensive program but was unwilling to pay for it. What the Department of Transportation/Federal Railroad Administration did hand out, or award, was earmarked political pork. It was a drop in the high-speed rail bucket.

Meanwhile the California rail authority had put together a bundle of lies to qualify for the federal funds, claiming not only state bond funds to match, but also private and local funding. And, most important, low-balling the cost projection.

The cost forecast has now fluctuated wildly and no numbers have any credibility.  The rail authority, despite all its pretensions, still hasn't a clue to where the many billions will come from. Shouldn't that stop them from starting? 

Yes it should.  But, there is that dangling promise of the $3.5 billion from the ARRA funds.  And that Pinata, full of federal dollars, will keep our Governor swatting at it with every trick available, the most recent being his promise to secure cap-and-trade dollars to pay for the train. That approach has many more questions than answers attached, including the question of legality.

Train or no train, clearly the state government isn't letting the truth stand in the way of scrambling for those dollars. What a waste of precious resources.


Joe Guzzardi: High-speed trip to disaster
Joe Guzzardi
2012-04-08 18:41:31

The chaos engulfing California's proposed bullet train may have reached an intensity that will doom the project before it starts.

In yet another revision of cost estimates and planning, the California High-Speed Rail Authority recently announced a cost reduction from $98 to $68 billion that would be achieved by connecting the train's route to existing lines on the outskirts of Los Angeles and the Bay Area. The first segment would be expanded to 300 miles connecting Merced in the San Joaquin Valley to the San Fernando Valley within 10 years. The original 2008 plan included a 130-mile portion from Madera to Bakersfield with a total cost calculated at $33 billion. The widely fluctuating cost estimates, in $30 billion multiples, alarm some legislators who are already nervous about the project's magnitude. Gov. Jerry Brown is expected to ask the Legislature to appropriate funding before the June 15 budget deadline.

Californians, doubtful about the rail's feasibility and those who would have to absorb the fiscal brunt of failure, view Brown's last-minute cost reductions skeptically. Critics are working hard to force a new vote on the train which polls indicate would be handily defeated.

One reason that voters have so little confidence is that rail advocates would have to pull off a masterpiece of intricate planning to make the bullet train successful. There's a big difference between the drawing board and reality. In theory, job growth and other economic benefits logically follow an integrated transportation system. But success would require a well-designed combination of station location, links to other transportation systems and supportive land-use and zoning policies to make rail stations a catalyst for economic stimulus.

The High-Speed Rail Peer Review Group has called the train "an immense financial risk" and refused to recommend that the state legislature sell the initial $2.7 billion in bonds. If construction doesn't start by Sept. 30, California will lose $3.3 billion in federal funding.

Even with the lower cost estimate, the total funding remains a wild card. California voters approved a $9.95 billion bond for the proposed system when they passed Proposition 1A in 2008.

Where will the balance come from? The current plan is contingent on receiving billions more from a doubtful Congress, fees from an untested cap-and-trade system that is central to California's effort to reduce greenhouse gas emissions and unnamed private investors supposedly eager to jump aboard and risk their own money once construction begins.

California's distressed state budget will have to allot more than $700 million each year to repay billions of dollars that officials plan to borrow to build the first phase of the proposed bullet train, according to the non-partisan California State Legislative Analyst's office.

The repayment projection includes principal and interest on the already approved $9.95 billion. Because of higher borrowing rates, the interest total is higher than earlier and doesn't include millions already being paid annually on $500 million in debt incurred during the initial planning process.

Whatever the final cost will be, the rail is the largest capitol project in California's history. California is flat broke and suffers from chronic deficits, looming tax increases and relentless social services cuts and is in no position to roll the dice on the bullet train. The rail would also have devastating, irreversible effects on the state's environment, encourage further unsustainable population growth and have no guarantee of ridership.

The decentralized cities located throughout California's car-addicted society makes the bullet train a high risk gamble the state can't afford to take.

Joe Guzzardi is a Californians for Population Stabilization senior writing fellow. 
Contact Guzzardi at
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