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For High-Speed Rail It Looks Like the End of the Line

Posted by Ken Orski on Monday, October 3rd, 2011
Innovation NewsBriefs Vol. 22 No. 27 With its vote on September 21, the Senate Appropriations Committee ended the rail boosters’ hopes of getting a meaningful appropriation for high-speed rail in the new (FY 2012) fiscal year. It probably also dealt a decisive death blow to President Obama’s loopy goal of “giving 80 percent of Americans access to high-speed rail.” By including only a token $100 million for high-speed rail as a “placeholder” in their FY 2012 budget recommendations (a sum that is likely to be further cut in the House-Senate negotiations on the FY 2012 appropriations), Senate appropriators have done more than merely declare a temporary slowdown in the high-speed rail program. They have effectively given a vote of “no confidence” to President Obama’s signature infrastructure initiative. Along with their House counterparts who had denied the program any new money, the Senate lawmakers have sent a bipartisan signal that Congress has no appetite for pouring more money into a venture that many lawmakers have come to view as a poster child for wasteful government spending. Their posture is understandable. After committing $8 billion in stimulus money and an additional $2.5 billion in regular appropriations, the Administration has little to show for in terms of concrete results or accomplishments. Aside from an ongoing project to upgrade track between Chicago and St. Louis (a $1.1 billion venture that promises to offer a mere 48 minute reduction in travel time between those two cities), no significant construction has begun on any of the authorized rail projects. In the meantime, the Department of Transportation has rushed to distribute the balance of the authorized HSR dollars, lest Congress decides to rescind any funds that remain unobligated. Continuing its practice of scattering money far and wide rather than focusing it on one or two worthwhile projects, the Federal Railroad Administration approved in September over $ 480 million worth of planning, engineering and construction grants “to improve high-speed and intercity passenger rail service” in 11 states. The beneficiaries are New York, Texas, New England (Maine, Vermont, Rhode Island, Connecticut), North Carolina, Virginia, Washington State, Oregon and Pennsylvania. The awards range from $149 million to New York State to as little as $13 million to the state of Oregon, and they average under $40 million per individual grant. It remains to be seen how quickly the recipient states will put these funds to work— and what kind of service improvements these grants will bring about. From an examination of the grant announcements it becomes clear that none of the grants will help to bring true “high-speed” rail service to America. At best, they will permit modest incremental improvements in speed and frequency of existing Amtrak services by helping to upgrade railway tracks of Class One railroads on which Amtrak runs its trains. The U.S. Department of Transportation (DOT) has implicitly acknowledged to have revised its program objective.  It has dropped its earlier rhetoric that high-speed rail “is just around the corner” (Secretary LaHood’s words) or that “80 percent of Americans will have access to high-speed rail.” (repeated assertions by LaHood and DOT press releases.) Instead, the DOT (through its Federal Railroad Administration) is trying to lower the expectations by stating that “the true potential of high-speed rail will not be achieved or realized overnight.” (FRA’s “vision statement”) It’s a welcome sign that the Department has abandoned its quixotic goal of revolutionizing rail travel overnight. It may also signal the Administration’s realization that it cannot unilaterally force its vision upon a fiscally conservative Congress, a largely indifferent public and a skeptical, risk-averse investment community. If high-speed rail is eventually to find its place in America, it will be because market conditions will create a favorable climate for its development and acceptance— not because Washington in its wisdom has decided that the country needs it — and needs it now! California’s Bullet Train beset by mounting political and financial problems Meanwhile, the one true U.S. high-speed rail project–  California’s LA-to-San Francisco bullet train— is beset by mounting political and financial problems.  Nearly three years after the passage of the enabling Proposition 1A and less than a year before construction is scheduled to start on the first line segment in the Central Valley, construction costs have doubled the 2008 estimate. There is no evident source of where the additional funds to complete Phase One (LA-SF) system will come from since the prospect of both further federal money and private risk capital is remote. As one recent report put it, the project is being pursued “in the confident hope of a miracle.” The systems’ first stage – a $10-14 billion 160-mile line segment in the Central Valley from Bakersfield to Merced — has run into determined opposition from local residents and farming interests during the ongoing environmental impact review. The possibility of lengthy court challenges could delay construction, thus increasing costs, eroding political support and putting federal money at risk. At the policy level, the project has been subject recently to several analyses. First came a critical report by California legislature’s fiscal watchdog, the non-partisan Legislative Analysts’s Office (LAO). It questioned the Rail Authority’s cost estimates and its decision to build the first segment in a sparsely populated region where travel demand is not expected to be sufficient to cover operating expenses. The LAO concluded that if the total cost of building the Phase One system were to grow as much as the revised Authority estimate for the Central Valley segment (an increase of 57%), the whole system would cost not $43 billion as originally estimated, but $67 billion. Concern about escalating costs and overly optimistic ridership forecasts were echoed by an independent Peer Review Group and numerous newspaper editorials. Even some of the state former legislative supporters, such as state Senators Joe Simitian, Alan Lowenthal and Mark DeSaulnier, have begun to express reservations and urge the Authority to rethink its direction. (See, “California’s Bullet Train— On the Road to Bankruptcy,” InnoBriefs, May 31, 2011). A more recent challenge to the project’s financial credibility came from a team of respected independent experts, Alain Enthoven, William Grindley and William Warren, who cooperate with a citizen watchdog group, the Community Coalition on High Speed Rail. The team has concluded that without further federal aid (which almost certainly can no longer be counted upon) the project stands no chance of meeting its legislative requirements and the conditions of the enabling bond initiative (Proposition 1A). Nor is reliance on private financial participation a credible option.  In the authors’  judgment, private risk capital hasn’t to date and won’t come in the future without revenue guarantees (aka public subsidy). The authors conclude: “With highly questionable prospects for federal grants or private ‘at risk’ construction funds, but the certainty that costs will continue to increase, the logic for continuing the largest project in California’s history is highly questionable.”  (Alain Enthoven, William Grindley and William Warren, The Financial Risks of California’s Proposed High-Speed Rail Project, September 14, 2011, www.cc-hsr.org ). (Note: The  report’s financial analyses and conclusions have been reviewed in detail and verified by high ranking California State officials, according to reliable sources.) But politically the most damaging blow to the project has come from a just released opinion survey. According to this poll, nearly two-thirds of California’s likely voters (62.4%) would stop the bullet train project from proceeding further. Virtually the same number said they are unlikely to ever travel on the train between Los Angeles and San Francisco, thus casting doubt on the Authority’s optimistic ridership forecasts. What is more, the project came in dead last (at 11%) in a list of voters’ spending priorities, according to the Irvine-based Probolsky Research polling outfit (as reported in The Sacramento Bee, September 29, 2011). With declining public support as evidenced by this poll, and with the State coming to a point where it will have to prioritize future public spending, enthusiasm for the project among politicians in Sacramento could evaporate. Given the possibility of the California bullet train’s demise, the attention and hopes of high-speed train advocates probably will (and should) turn to the Northeast Corridor — the nation’s most likely travel corridor where high-speed rail can eventually succeed and prosper.

C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation NewsBriefs, now in its 22nd year of publication.

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3 Responses to “For High-Speed Rail It Looks Like the End of the Line”

  1. Jack Kinstlinger says:

    Orski has been busy burying the high speed rail program since its inception.
    Just wait until a private eNtity comes along willing to invest significant private funds, especially along the North East Corridor and see everyone jump aboard.

  2. Steve Walter says:

    Really right Jack. I agree with your ideas. High Speed rail program is beneficial for all of us. I like your post here Ken. I love it.

  3. Kirill Mogilev says:

    As a person whose livelihood will be affected by current construction (I live next to San Francisco – San Jose leg of the track) – I fully support the endeavour. HSR is a badly needed project. It will enable unprecedented growth in the state in form of people’s upward mobility, commerce and prestige. I disagree with article author on spending priorities, and willing to have an open debate about benefits of this program.

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