The Train to Nowhere: Three More Critical Perspectives

Posted by Ken Orski on Monday, December 13th, 2010

Innovation NewsBriefs
Vol. 21, No. 31

Our recent commentaries, “California’s Train to Nowhere,” (December 6, 2010) and “The Unraveling of the High-Speed Rail Program: A News Analysis” (December 2) have been echoed recently by a rash of  other critical columns about the Administration’s limping high-speed rail program. We reproduce three of them below.

The Wall Street Journal
December 11, 2010

Subsidy Trains to Nowhere

Lest you think Washington has begun a new era of fiscal self-restraint, consider this week’s act of political retribution by Transportation Secretary Ray  LaHood. Newly elected GOP Governors in Ohio and Wisconsin wanted to kill high-speed rail projects in their states and instead use the money to fix their battered roads. Sorry, guys. Mr. LaHood reclaimed the $1.2 billion and handed it to 13 other states that still want to build these high-speed trains to nowhere.

Both Wisconsin’s Scott Walker and Ohio’s John Kasich had campaigned against the trains, and rightly so given passenger rail’s financial, er, track record. But the Obama Administration is bent on building mass transit whether the masses like it or not. Thanks to Mr. LaHood, Wisconsin and Ohio taxpayers will still
have the privilege of paying for the new train projects even if they’re built somewhere else. Ah, federalism.

Messrs. Walker and Kasich are right on the merits, and we’re confident they’ll save their taxpayers money over time. Consider the case of California, which is one of the states getting cash for trains that the Midwesterners didn’t want. Earlier this month its high-speed rail authority approved construction on the first 65-mile segment of a 500-mile bullet train. The first miles will connect the small towns of Borden and Corcoran in the Central Valley for a mere $4.15 billion. Yes, that’s billion.

One other detail: The segment won’t even begin operating until more of the line is completed, which on present trend could be never. Read on and weep. In the mid-1990s, California created a high-speed rail authority to prepare a plan for an economically viable rail system. It took a decade for the authority to get legislative approval to ask voters to approve a $9.95 billion bond ballot measure to partly fund the $40 billion project. The authority said that, for a one-way $55 ticket, the system would serve 94 million passengers between Los Angeles and San Francisco and create hundreds of thousands of “sustainable” jobs. It assured taxpayers the railway would operate at a surplus and without subsidies.

Such auspicious projections earned it the support of a majority of voters in a 2008 referendum. The problem is that high-speed rail systems almost always run over budget and end up heavily subsidized. Only two segments of two such railways in the world, in France and Japan, have broken even, and they are in
high-density areas—not running across sprawling California. The Golden State rail authority’s failure to disclose the project’s significant risks are troubling. Five months before the initiative passed, the consulting firm Infrastructure Management Group told the authority that companies wouldn’t operate the ailway without a revenue guarantee—a subsidy—because the ridership projections were too risky. The authority failed to produce an investment-grade business plan before the initiative was put to voters, and it still hasn’t produced a credible economic plan. Maybe they don’t have one.

The authority has presented plenty of forecasts, one shakier than the next. It now projects that ridership will reach 39 million passengers a year by its 10th year, down from that projection two years ago of 94 million. The experience of  other high-speed rail systems suggests they’ll be lucky if they get a quarter of
that, and five million riders is more likely.

The authority estimates a project cost of $42.6 billion, but a more realistic price tag would put the cost between $62 billion and $213 billion. It also predicts that one-way tickets for the two and a half hour ride from L.A. to San Francisco would cost $105 (up from $55), but the cost-per-mile in Europe and Japan suggests a ticket price closer to $190. Many would choose to fly. The authority also predicted 450,000 permanent jobs; that’s twice the size of the state government’s active work force. Did they hire Joe Biden as their stimulus consultant?

Stanford economist Alain Enthoven, former World Bank analyst William Grindley and financial consultant William Warren document all of this in a study that’s been reviewed and endorsed by more than 70 business leaders. Their conclusion: Unless the federal government provides $19 billion in seed money, the railway will never achieve a positive cash flow. State taxpayers will end up subsidizing a fantastic boondoggle, even though the authorizing legislation prohibits subsidies.

A realistic concern is that the state will have to terminate the project after completing the first segment because the feds and private investors won’t pay to finish it. California doesn’t need a high-speed train it can’t afford, and we hope Republicans on Capitol Hill will pull the plug on this and other trains to
insolvency next year.

St. Petersburg Times
December 11, 2010
A note of skepticism about high-speed rail
By Howard Troxler, Times Columnist

Early last year, the president of the United States came to Florida and gave us $1.25 billion for a high-speed rail line between Tampa and Orlando.

Then in October, the feds said to Florida, “Hey, are you guys still there?” and gave us another $800 million.

Finally, just last week the feds said, “All right already, quit twisting our arms!” and gave our state yet another $324 million. So the train is now “paid for.”

I figure that if we hold out a little longer, they’ll come back and give every Floridian an extra $100 and a free puppy.

Interestingly, this latest bounty from the feds was made possible only because two other states, Wisconsin and Ohio, actually said “no thanks” to the dough.

Also interestingly, our own governor-elect, Rick Scott, did not immediately fall to his knees in gratitude to the Great Federal ATM for this “free” money, although lots of other politicians in Florida are eager to take it.

Instead, Scott’s reply was more or less: “Yeah, thanks, we’ll think about it and get back to you.”

Which is actually kind of impressive.

Look. Everything about me is supposed to be in favor of this train. I am a tree-huggin’, urban-plannin’, save-the-planet, transit-lovin’ guy.

And yet, the idea of blowing $2.6 billion on an 85-mile “high-speed” train between two cities located 90 minutes apart by car (and even less from Tampa to Disney) …

Along with the usual claims that the thing will “pay for itself” with all the thousands of people who will ride it each day, at up to $30 a pop …

Along with our current Plan B that involves dumping the Tampa-bound passengers to catch a bus for wherever, especially now that Hillsborough has rejected a light-rail tax …

Along with the fact it’s just too darned inconvenient to connect the thing to Tampa International Airport, while Orlando’s airport is connected on the other end …

It’s making me a little itchy, is all.

December 10, 2010

Building the Train to Nowhere
by Wendel Cox

The California High Speed Rail Authority has approved building its first 54 miles in the San Joaquin Valley. A somewhat longer route, 65 miles, has been indicated in a number of press reports, but Authority documents indicate that only 54 miles of high speed rail track will be built. The route would start in Corcoran, and go through Fresno to Borden, a small, unincorporated community south of Madera. All of this would cost $4.15 billion. The route would include two stations, in Fresno and Hanford/Visalia.

The segment was adopted under pressure by the United States Department of Transportation, which was interested in ensuring that the line would be usable (have “independent utility”) by Amtrak should the high speed rail project be cancelled due to lack of funds. The first section of the California high speed rail line would instead be a somewhat incongruously high-tech Corcoran to Borden spur, or perhaps more accurately stub to the region’s rather sparse conventional rail services.

There are appear to have been concerns that growing opposition movements in the San Francisco and Los Angeles areas could have delayed construction, which could have put the federal money at risk. The Sacramento Bee’s Dan Walters, perhaps the leading political columnist in the state implied an ulterior motive:

“You’d have to be terminally naive not to believe that the splashy announcement, made personally by an Obama administration official in Fresno, was to help an embattled local congressman, Democrat Jim Costa, stave off a very stiff Republican challenge.”

Officials representing communities – many of them with high levels of unemployment – on the segment itself were elated, as any would be at the prospect of a rush of new construction jobs, regardless of what was being built. But, most everywhere else the reaction to the selection largely has been negative. Walters labeled it the “train to nowhere” in a November 29 commentary. State Senator Alan Lowenthal, who chairs the legislative committee overseeing the high speed rail project said that the Authority “could be creating an ‘orphan’ stretch of track, that will never be used by high-speed trains.”

Richard Tolmach, president of the California Rail Foundation, an intercity rail advocacy organization, told Authority members ” It’s a crazy idea. He went on to say that “You guys are gonna be a laughingstock in Congress.”

Already, problems are building in the now more decidedly more conservative Congress. California Republican Congressman Jerry Lewis and 27 colleagues have introduced the “American Recovery and Reinvestment Rescission Act,” which would apply unspent stimulus money to the deficit, including $2 billion that has been promised to the California high speed rail line.

Batteries (and Trains) Not Included: Even after the $4.15 billion has been spent, the Corcoran to Borden rail stub will be incomplete. The Authority’s plan includes only the building of the rail bed and the necessary viaducts. There is no money for trains. There is no money for the electrical infrastructure necessary to power the trains. Trains and electricity infrastructure would add at least 15 percent to the bill, based upon previous California High Speed Rail reports. Thus, when and if completed, the trains and electrification would lift the cost of the Corcoran to Borden high speed rail stub to at least $4.8 billion.

Bare Bones Stations: The plan calls for building only “basic” stations, with two tracks (one in each direction). That is fine if the line is serving Amtrak and there are only a few trains per day. But the high speed rail plan assumes frequent trains, including some that stop at all stations, some express trains that skip some stations and some express trains running non-stop from the Transbay Terminal in San Francisco to Union Station in Los Angeles. The only place that an express train can pass a slower train is at a station. That means that passing tracks must be built at virtually all stations. The passing tracks (two interior tracks in addition to the two tracks for stopped trains) required in stations are illustrated in this California High Speed Rail illustration (also above).

The full system, or (perhaps the more likely outcome) a truncated San Jose to Palmdale line (with slower running lines over the commuter rail tracks into San Francisco and Los Angeles), would require passing tracks at the Fresno and Hanford/Visalia stations. Rebuilding these stations would increase the cost above the $4.8 billion, and that’s before the seemingly inevitable cost escalation.

Indeed, the Corcoran to Borden stub entails a potentially large cost increase compared to previous California High Speed Rail Authority documents. After making all of the necessary adjustments to update the last available segment costs to the cost accounting method (“year of expenditure” dollars), the cost of the Corcoran to Borden stub could be at least 30 percent higher than would have been expected in the present $43 billion San Francisco to Anaheim cost.

Applied to the entire line, a 30 percent cost escalation could take the price of the San Francisco to Anaheim line to more than $55 billion. Based upon cost ratios released by the Authority in 2008, the later extensions to Sacramento and San Diego would lift the bill to more than staggering $80 billion. Even that does not pay the entire bill, because promises have been made in state legislation for improvements across Altamont pass from Stockton to the East Bay and Oakland.

Not that coming up with any of this money will be easy, particularly with a more deficit conscious Congress. Congressman John Mica of Florida, who will likely lead the House of Representatives Transportation and Infrastructure Committee has promised a review of all federal high speed rail grants. The Authority expects to obtain funding from local governments in California, a number of which are teetering toward financial insolvency.
The Authority expects between $10 and $12 billion from private investors. These potential investors will all be aware of the fact that virtually every dollar of private investment in new high-speed rail lines has been lost or required a government bailout. They will not participate without subsidies, which are prohibited by California law. Finally, all these elements of the financing plan will be made even more problematic if the first phase of the project continues to rise from $43 billion to $55 billion.

Washington analyst C. Kenneth Orski noted that the Corcoran to Borden stub could “become a huge embarrassment for the Administration” and that  its train to nowhere ”casts doubt on the soundness of the entire federal high-speed rail program and its decision-making process.”

Even if California gets to keep the federal money, there are still formidable financial barriers. A likely result is high speed rail in Amtrak mode which probably won’t make much difference to passengers riding the infrequent San Joaquin service. After the Authority action, Bill Bronte, who heads the rail division of the California Department of Transportation said that “The improvements in performance might be less than one would expect.” But that might not bother contractors and consultants who can feast on what might prove to be the most expensive conventional intercity train project in history.

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

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 21st year of publication.

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