Sunday, April 8, 2012

High-Speed Rail: "Beep-beep"

It really comes down to this:  There is a little funding available for a high-speed rail project in California, but not a lot, and certainly nothing like what will be required to actually build this rail system.  And, it doesn't look like there will be more, and again, certainly nothing like what is necessary.

So, what are the rapidly changing rules of the new game? Take the existing money and run.  That is, spend it where the FRA says to spend it, in the Central Valley, and try to squeeze a few more millions to electrify the commuter rail in the Bay Area (Caltrain) and expand Metrolink in the LA Basin.  None of that, of course, creates a high-speed rail system. 

The rail authority now uses the word "foundation." Whatever.  What we're hearing are wimpy rationalizations to keep the project going. Governor Brown is determined to get his hands on the $3.5 billion from the FRA, and will say and do anything he can get away with to make that a reality.

Brown isn't that interested in the train; he's interested in the state's deplorable financial picture and three and half billion dollars sound awfully good right now. And, it's easy; just stick with the project.

Since it looks now like this project will never get finished for lack of funds, the Governor invents a new scheme, using Cap-and-trade funds as the funding source for the train.  He has not more notion of this working than anyone else. Wild promises with little substance. Enough funds? We certainly don't know. Legal? Perhaps not. No matter. The trick is to keep momentum and to keep the FRA willing to fund.

Project cost forecasts have fluctuated wildly, mostly upward. The recent "reduction" -- the Governor says it won't cost anything like the last CHSRA figure of around $100 billion -- comes from simply not wanting to spend $30 billion of the $100 billion. That's not a price reduction. That's merely saying that they want to buy only two thirds of a loaf, not the entire loaf.  And, that's not even true. All cost forecasts are low-ball estimates. Everyone balked at the $100 billion number as far too high, so. . . just lower the number. It doesn't mean anything.

They can, are, and will say anything -- ANYTHING -- to make this porcupine feel like a new puppy.  It's all illusional trickery.

Just based on experience, this project will cost way more than $100 billion if it is ever completed, and since completion looks extremely unlikely, it really only means that they will never have enough funds to build it and find out just how much it will really cost. 

There are so many obvious facts and realities that tell everyone, Republicans and Democrats alike, that this project should be terminated, you have to wonder at the political deafness that keeps the project going.  

It's like the old road-runner cartoons, where Wiley Coyote runs off the cliff, but keeps on running unaware that he is hanging in space.

That's where this project is right now. 


Viewpoints: Rail finance plan has hole as big as a train tunnel
Special to The Bee

Recently the state court system announced that it was abandoning an information technology project in which state taxpayers had invested hundreds of millions of dollars, saying it lacked the hundreds of millions more that would be needed to deploy it.

Days later, the California High-Speed Rail Authority was publicly pitching a revised business plan for the bullet train that seems likely to achieve the same kind of result, albeit on a grander scale. This time, though, billions may be spent before the project screeches to a halt because the tens of billions more needed to complete even an initial operating segment probably won't be there.

This wasn't the deal California voters approved when they passed Proposition 1A in November 2008. The language of the bond issue clearly states that before any part of the train line is built, the source of all of the money needed and exactly when those monies will arrive must be nailed down.

The plan released by the authority Monday asserts that the funding needed to start building the project "is fully identified," but there are holes in the financing plan big enough to drive a train through.

For example, the price tag for construction of the initial operating segment from Merced to the San Fernando Valley is now being estimated by the authority at roughly $31 billion. About $10 billion is in hand to get the trains rolling, but almost all of the $21 billion remainder is assumed to come from the federal government.

The full build-out of the project from the Bay Area to Los Angeles-Anaheim – dubbed "Phase 1 Blended" – relies on even wilder assumptions. The authority spreadsheets say that private investors will pour in more than $13 billion and that the feds will double down by contributing another $18 billion to extend the line.

Alas, there is no current federal authority for a dime of this extra dough. The influx of federal funds assumed in the business plan seems unlikely from a federal government facing $1.2 trillion annual deficits and a looming showdown over huge trigger cuts to core programs. The transportation bill now being crafted in Congress is much more likely to scale back the federal commitment to state transportation projects than to increase it, and so far no money is being earmarked for high-speed rail.

Never fear, say state high-speed rail officials: We can start building now anyway because we have a "backstop" of billions of dollars in revenue from the state's new "cap-and-trade" system that can make up any shortfalls. The money they are talking about would come from the state's auctioning of allowances to emit greenhouse gasses – all part of a plan contained in 2006 state legislation known as AB 32 to help forestall climate change.

Alas, this approach bets the ranch on an untested and likely highly volatile revenue source that will bob up and down with changes in the economy and advances in pollution cleanup technology. If the federal and private funding the authority is counting on for the train is not forthcoming, the backup plan could suck up all of the money, and then some, that the state would receive from cap-and-trade auctions.

Such a large-scale diversion of cap-and-trade revenue to high-speed rail – potentially an average of $4 billion a year, by my rough estimate – has other important implications. It could crowd out other strategies to address the threat of climate change and to help Californians cope with the big increase in energy costs that is going to result from various AB 32 policies. The state could find itself devoting almost all of its cap-and-trade revenue to a single strategy – building a bullet train – to accomplish less than 1 percent of the state's original greenhouse gas emission reduction target. Count on other interested parties to fight for their piece of the cap-and-trade revenue pie.

The risks to this backup plan go up markedly if the authority's new and much-reduced cost estimates for the $68 billion project prove again to have been low-balled. The authority acknowledges that construction could cost $11 billion more than it assumes. If the backup plan is insufficient, the backup to the backup plan to bear these costs would in all probability be the state's general fund.

Under the new high-speed rail business plan, the state could again find itself facing the same kind of agonizing choice that the courts faced with their errant IT system: Would it halt the project when federal money and auction revenue have run out and waste billions of dollars already invested in the rail line, or ante up billions more from the state general fund to bail out the project at the expense of other state programs and priorities?

© Copyright The Sacramento Bee. All rights reserved.

Daniel Carson is a longtime capital journalist and retired deputy state legislative analyst.

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