California’s High Speed Rail Fiasco

The question posed by the unfolding California high-speed rail cataclysm is why the reaction to it should be a partisan or ideological issue at all. Are human beings capable of managing bias and learning hard truths from new information, or aren’t they?

High speed rail was promoted in California  as a green and virtuous way to propel commuters  from San Francisco to Los Angeles along at 220 miles an hour, completing the trip in a about  two and a half hours. It was going to involve minimal tax-payer cash,  with  billions arriving from private investors. It would be profitable, not requires state subsidies and be much less expensive than flying. Thus enthused and enlightened,  53.7 percent of approved the plan and a $9.95 billion bond.

It was a scam, a hustle, and a pack of lies.  Virginia Postrel writes at Bloomberg…

“California’s high-speed rail project increasingly looks like an expensive social science experiment to test just how long interest groups can keep money flowing to a doomed endeavor before elected officials finally decide to cancel it. What combination of sweet-sounding scenarios, streamlined mockups, ever-changing and mind-numbing technical detail, and audacious spin will keep the dream alive?”

Well said. I would add, “And will anyone learn from this fiasco?” Specifically, will anyone learn that ideologically-driven officials will always press policies in defiance of reality, if the public lets them, or more precisely, trusts them.

The Los Angeles Times published a stunning report on how corrupt this enterprise has been from the start. Here’s sample:

When a Spanish firm submitted a bid last year to help build the California bullet train, it cautioned that taxpayer money probably would be needed to keep the system operating.Having reviewed data on 111 high-speed train lines around the world, construction giant Ferrovial said, it found that all but three could not make ends meet.

“More than likely, the California high speed rail will require large government subsidies for years to come,” the proposal said.

That warning, however, was expunged from the version of Ferrovial’s proposal posted on the state’s website. The only record of it was on a data disk provided to The Times and others under a public records act request.

The state rail authority repeatedly has asserted that it will not need a subsidy and that every high-speed system in the world operates without taxpayer assistance — despite significant evidence to the contrary. A number of projects around the world have failed financially, others require direct operating subsidies and many more benefit from government taxes and regulations on competing airline and highway systems, according to audits, studies and interviews. But in asking taxpayers to help build the Los Angeles-to-San Francisco line, officials assured the state would be able to pay the operating costs purely from the system’s revenues — and thus not sap money needed for social services, education or other projects.

That’s right: the state, which was and is in dire financial straits,  wanted to plunge ahead with an expensive project requiring ongoing subsidies, but knew that the public wouldn’t support it if the truth were known. So it redacted the facts the public wouldn’t like. Then, the paper reminds its readers, just last April  rail authority Chairman Dan Richard assured skeptical legislators during a hearing that all the numbers were sound. When one assemblyman asked Richard, “Do you know of any high-speed rail operations around the world that make substantial profit?”, the answer was “Actually all of them, virtually all of them, make operating profit.”  Well, that was almost right. In fact, virtually none of them make a profit. Moreover…

“A study of international high speed rail systems by four Silicon Valley financial experts — including Stanford University emeritus professor Alain Enthoven and former World Bank executive William Grindley — found that California’s system could be among the worst performing in the world. Its prospective fares would be the lowest on a per-mile basis, driven by a need to compete with the state’s cutthroat airline market. The California bullet train could only be profitable if it also had the world’s lowest per-mile costs, roughly one-fourth the typical European system, the report said. But given the costs of doing business in California, that is not likely, Grindley said.”

Now the total construction cost estimate for this likely-to-stink-under-the-most-optimistic-projections rail system has more than doubled to $68 billion from the original $33 billion estimate, while the extent of the project has been cut: double the money for less rail. The first and least expensive segment of the system through a relatively empty stretch of the Central Valley  is now four years behind schedule. The estimated cost of tickets  to travel by rail from L.A. to the San Francisco have increased 60%, to more than $80.

It’s ironic that the Times is now slamming the project, as the Times was an ally of the duplicity, writing in an editorial  in 2008,

“There’s something undeniably alluring about a bullet train—the technology is so powerful, the speed so breathtaking, it makes quotidian trips seem exotic…Proponents of Proposition 1a, which would authorize $9.95 billion in bonds for a high-speed rail line connecting Northern and Southern California, think it would be wildly successful. They predict the line could draw 117 million riders a year by 2030, compared with 3 million now taking the high-speed Amtrak train in the densely populated Boston-Washington corridor. And they say it will turn a billion-dollar profit by then even as it keeps ticket prices remarkably low. The projections by the measure’s opponents, led by the libertarian Reason Foundation in Los Angeles, are much less sanguine and more persuasive…we still think voters should give in to the measure’s gleaming promise.”

In other words, don’t confuse us with facts, our mind’s made up-–the motto of the ideologically driven. Those minds, or many of them, just never change, either, no matter how clear the signs are. Three years later, as the complete fraud of the projects promotion to the public was becoming clear, the Times editors  refused to admit that the project was a mistake,  editorializing:

“Yes, the price tag has tripled and its completion date is 13 years later. But it’s still a gamble worth taking.”

Why is it worth taking? Because wouldn’t it be great it it worked, even though all evidence says it won’t and can’t!

In other words, “Imagine.”

26 thoughts on “California’s High Speed Rail Fiasco

  1. “Actually all of them, virtually all of them, make operating profit.”

    I take it that this was supposed to be sleight of hand – that they make a profit if you completely ignore all costs of construction and financing?

    In Washington a few years ago, the Virginia politicians were blocking Metro extension to Dulles airport because of lack of controls on costs, and the mantra against them was that DC needed the line to be a “world class city.” The new line is now open halfway to the airport,and the old line that it connects to reach the city is in such a maintenance meltdown that people are basically being urged to work from home for weeks at a time to help the system cope with delays.

    • The argument was operating profit. And in truth, no mass transit system in the US makes an operating profit (well, the cable cars in SF do), though they were sold that way. The operating profit lie is always based on unsustainable use statistics.

      • “The operating profit lie is always based on unsustainable use statistics.”

        And based on the silly notion that Americans will be content to be trapped to pedestrian options or perpetually paying for taxis upon arrival at wherever they are going.

        Nerp.

  2. I remember voting against this. A lot of the popular hype surrounding it boiled down to “progressive European and Asian countries have them, so we should too.” And the information presented at the voting booth (where most Californians probably made up their minds and possibly where they learned about it for the first time) presented it as if it were a guaranteed not to cost a single taxpayer dime.

  3. This is Governor Moonbeam’s baby. Politics played a large part in the choice of route which is Fresno to Bakersfield. To think what Brown’s Daddy created in comparison: For one, a once great university system.

    • Governor Moonbeam – there you go, a perfect new, Crazy Uncle to be VP for Hillary, just like Uncle Joe has been for bam-O.

    • Passenger rail, with the exception of some early commuter corridors, has never been profitable. Ever. Freight rail was where the money was, and freight operations subsidized passenger rail operations as a condition of public regulations. (In Boone, NC, the original Tweetsy Railroad did not even charge passengers who wished ride the freight train into the city, the market was de minimus!). Starting in the 1930’s, railroads were permitted to shed their lowest performing passenger operations. By the 50’s and 60’s, local and state governments were providing emergency subsidies to keep vital passenger corridors active. In the 1970’s, the Federal Government nationalized the remaining intercity passenger rail services under Amtrak, in a desperate move maintain a barebones public network of any sort. Commuter operations became exclusively a publicly subsided commodity.

      Any rail project must be approached from an honest economic perspective. The entire transportation industry, however, is cluttered to the high heavens with hidden subsidies and unfunded mandates. The system as a whole requires a trillion dollars or more of work over the next decade; millions of original 1950’s and 60’s highway bridges have reached the end of their service lives. Parts of the national rail network date to the 1850’s! The transportation network itself, all rail, air, and highway modes, however, facilitates 10’s of trillions of economic activity. Highways and airports are supported by local property taxes, state and federal income taxes, etc. Gas taxes and tolls pay for only a fraction of the cost of maintenance and operation. Freight rail networks, however, are expected to be self-sustaining, and generally are in most cases. They receive rents from Amtrak, or they pay rents to use Amtrak and state or local tracks.

      Passenger service is incorrectly looked at as a failure, because it can never be self sustaining like its freight counter-part. This is the incorrect perspective. It must be evaluated in light of subsidized costs of competing passenger modes. Sometimes it will be a value, sometimes not. When MetroNorth in New Haven shuts down, millions, maybe billions are lost, because high value businesses in New York City are impacted by delayed or cancelled commutes along a gridlocked Interstate 95. The California project has been so polluted by lies, that it is almost impossible to evaluate it fairly against competing modes. It’s very premise, that it could possibly be subsidized is absurd. It might conceivably still be a value in light of the severe congestion in Los Angeles and other west coast cities, but all trust is shattered.

      • The competition to a high speed rail line between Los Angeles and the Bay Area is, of course, airlines and buses. The only advantage high speed rail could offer in comparison to a flight is a lower price. High speed rail would take maybe four hours, while an airline would take only an hour.

        • Comparing mere actual moving time is not a fair comparison. Through flight may end up over all less tjme, the *entire* process must be considered.

          Not just flight versus track time. One must consider ticket searching and purchase + getting to the station / airport + security + idle time + boarding + other idle time.

          I’d submit there’s a lot of unseen time additions in flight travel than in rail travel. Though I’d also submit that flight would end up still faster but for small trips? It may not be that much faster or might even break even.

    • Michael, Five private companies make up Japan Rail’s shinkansen (“bullet train”) system, covering over 2,000 miles of track, operating at 200-250 mph on the longer commuter routes. A sixth high-speed system to Hokkaido is currently under construction. And, yes, all routes pay for themselves and upkeep via passenger tickets though, granted, the initial start-up costs were c.1964.

      • To be fair, Japan is hardly a good comparison. Japanese cultural attachment to rail is remarkable. Apparently during the 1800s rush to modernize Japan, the technology trend of the day was rail, and the *government* pushed rail everywhere, already gearing Japanese society that direction. Post ww2 Japan had an aversion to airports and air travel in an effort to avoid the appearance of rearmament. Competition-less was further ingrained in society. Even then it wasn’t until the 80s that the government owned rail system was finally broken up into private companies because of the debt and corruption of the government system.

        The private companies benefit from a nice little boost in terms of its ownership of swathes of land along all the rail lines that it rents out to shops, apartment builders and other commerce. Effectively owning commerce along the routes that people ride daily must be a nice boost.

        Try that in America. Let’s see how the trust busters feel then…

        • Real estate was the other major factor in American railroad profitability. While passenger rail itself either just broke even, or operated at a loss, railroads invested in land near their tracks and stations (or were granted large tracts out west), and use passenger rail to promote development, which created new markets for freight rail, as well as real estate leasing and sales income.

          Rail is an infrastructure investment that supports development and investment in adjoining lands. Some jurisdictions are investigating some form of special tax districts near rail stations to capture some of the value added to the neighborhood by publicly-operated rail. Other areas are simply encouraging new development within walking distance to support local government through property tax, and state and federal government with new income tax.

          Japanese rail benefits from extremely dense, clustered development, allowing a handful of stations and rail lines to serve millions of people and businesses within walking distance. Japan has one third the population of the United States packed into a nation the size of California. Its passenger rail markets are simply not comparable to the US. Europe is a better comparison, but even they have an average density twice that the United States. Another factor in Japan is higher costs of automobile ownership and operation. Expressways are almost universally tolled to fiance their construction debt and continued operations. Parking is also expensive, as it must compete with other land uses in dense Japanese cities. A different critical mass exists in Japan, and general statements made regarding mostly US rail operations won’t necessarily apply.

          • It was a major factor. But those land purchases were from the federal government meaning at some point it was a legally sanctioned auction (which history will show was incredibly corrupted). Past that it also created gigantic monolithic corporations that tended to become anathema to American free enterprise, did they not?

  4. Up here in Seattle we had the monorail fiasco. Pretty much same story, but at least it was cheaper and canceled early on. The Simpson’s episode is not fiction, it’s a documentary.

  5. Well, somebody has obviously taken their profits from the project for as far as it has gone (and not gone), collected their political campaign slush funds as far as they can be taken, so – time to cancel it.

  6. Here in Houston, there is a constant litany of ideas about what to do with the Astrodome, it being one of the man-made wonders of the world (until the King Dome left it in the dust). The Dome was moth-balled when Reliant Stadium (now NRG Stadium) was built about 11 years ago, after the Astros got their own facility in Downtown Houston (thank you, taxpayers), and the Dynamo got their own facility (thank you, taxpayers), and the Houston Texans got NRG Stadium (again, thank you, taxpayers). The Rockets never played there, but they have a new stadium, too (thank you a fourth time, taxpayers), so they are not to blame. The Houston Livestock Show and Rodeo doesn’t use the facility either, because they use NRG for their events (the parking stinks, though, as big-ass crowds of people have to take limited numbers of buses and light rail [which only goes to downtown, thank you a fifth time, taxpayers] to outlying parking venues).

    So, the Dome just sits there, collecting dust but is right smack dab in the middle of the Reliant/NRG complex, looking quite decrepit and sad, dreaming of its former glory. The inside of the dome suffered some catastrophic structural failures as a result of the Hurricane Katrina, and Rita evacuee debacles, but that is another story, especially after the county sold most of the seats and other niceties.

    The County Judge (which is essentially the mayor’s office for Harris County) has been droning on about plans to update, modernize, refurbish, reuse, remodel, repurpose, the facility for as long as I can remember. A 2014 referendum on the Dome’s future plans failed by some huge margin – something like 69% against the plans, which would have cost a minimum of $250,000,000, considering the problems associated with addressing the the internal structural and contamination problems let alone the bill to recreate the place into a multiple use convention center/family fun place. Apparently, there are asbestos issues and other things that are required just to bring the building up to code.

    Oh, but the intrepid County Judge just will not take no for an answer. Just last week, he proposed a new plan to convert the place into an underground parking facility, which would entail raising the Astrodome’s floor to create an underground two level parking garage that would hold 1,400 spaces (that’s nice).

    Ed Emmett (the County Judge) said creating a large open space would allow the Texans and Livestock Show and Rodeo to again use the Astrodome for special events, From there, Emmett said it would be up to the private sector to come up with an idea and money to turn the Dome into something else. Cool, eh?

    The County Judge said the rest of the plan calls for gutting the inside and leaving the iconic dome intact. “At that point you’ve got 9 acres of air-conditioned, covered space that a lot of groups would like to use,” he said. Emmett asked, “How many of the annual festivals and gatherings that we have in this community would love to schedule and know that they’re not going to be impacted by weather?” I can answer that: None. The citizens voted and the Dome lost.

    While the costs associated with this new gem are not publicly available, it is supposed to be voted on by the commissioner’s court (not the voters, though) in the near future. Best not to present to the citizens because they just don’t know what is best for them.

    jvb

    • I don’t live in Houston, but I drove past the Dome this past weekend. It is just as you say – “looking quite decrepit and sad.” I have my own vivid memories of times I was inside the Dome – seeing a game there the first week it was open, seeing Nolan Ryan’s major league debut. There just doesn’t seem to be any sentimentality – not in Houston, or in Texas, or anywhere – about preserving the first air-conditioned stadium ever built to host spectators for team sports like baseball and American football. If anything, it should be a monument for, and a testament to…wait for it…climate control, the feasibility (and cost) of same, and, yes, the possible and unavoidable unintended consequences of projects on such a scale.

      One would think, in this era, there would be adequate motivation and funding from diverse interests for restoration and preservation of the Dome. Even if only to preserve it as a monument, a site of historically significant, if not unprecedented, architectural and engineering milestones.

      It would also be a tribute to the lack of vision of the good people of Houston, to raze the Dome for yet another mere damned parking lot for cars, trucks and buses. Or, for yet another damned hypercongested, hyper-steeled and -concreted bigcityspace full of “penis buildings.”

      • From a Native Houstonian, who adored the Dome, but lives elsewhere… They waited too long. They said they’d keep it and do something with it, but now it’s too expensive and dangerous for almost ANY plan. I’m seriously waiting for something (dunno what, whether weather or idiot-related) to occur inside/around it where people are hurt and THEN they will finally knock it down. Didn’t a vote to save it happen more than once? And they keep sinking just enough money into that wonderful old building, but it’s just a sinkhole. It’s too late. And I say this as someone who looks wistfully at it every time I’m in Houston, since I’m from the southwest side. I also miss Astroworld, but that’s LONG gone and literally got replaced by a Wal-Mart. Though is it true that Wal-Mart closed, too? That would be amusing…

        • http://www.astrosdaily.com/history/sound/k.html

          This was old Colt Park. I took a tour of it many years ago and most was sold off to a Mexican League team. The Dome was a disaster. First generation park that is now so outdated compared to Minute Maid – one of the very best.

          We owed a condo in Galveston and Houston traffic is a nightmare. The light rail does little to help. There should have been some planning years ago to have a better and more extensive system.

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