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Reason Foundation

Los Angeles Business Journal

California's High-Speed Rail Plan Is Flawed

Bond measure Proposition 1A's $10 billion won't begin to cover the costs of a proposed high-speed rail line

Adam Summers
October 6, 2008

Californians are being asked to consider a $10 billion bond measure to build a high-speed rail system, but the proposal is critically flawed and should give voters serious pause, especially in the current economic climate.

Proposition 1A would authorize $9.95 billion in general obligation bonds to start building an 800-mile high-speed rail system linking Southern California with the Bay Area and Sacramento, including the backbone Los Angeles-San Francisco segment. There are crucial questions about the financing of the project, however. For starters, where will the rest of the money come from?

The $10 billion bond would cover less than one-quarter of the projected $45 billion project cost. Proponents hope that they will be able to coax one-third of the cost ($15 billion) from the federal government, which has budget problems of its own and is currently struggling with a planned $700 billion bank bailout and a possible $25 billion bailout of the auto industry. The remainder (about $20 billion) is supposed to come from the private sector, and there is similarly no guarantee that this money will ever materialize. Furthermore, a business plan that the California High-Speed Rail Authority (CHSRA) was required by law to submit by September 1 still has not been completed, and, conveniently enough, apparently won't be available until after the election.

The project cost estimates themselves are highly suspect. A recent analysis of the high-speed rail proposal published by Reason Foundation, Howard Jarvis Taxpayers Foundation, and Citizens Against Government Waste estimates that actual costs will be between $65.2 billion and $81.4 billion. This would hardly be unusual for such a large infrastructure project. Boston's notorious "Big Dig" project was announced with great fanfare in 1989 with an estimated cost of less than $4.5 billion, 90 percent of which was to come from the federal government. Nineteen years later, the total cost is estimated at $22 billion, and three-quarters of the amount has had to come from the state, diverting money from numerous other state and local infrastructure projects. Closer to home, Los Angeles's Blue Line light-rail project ended up costing more than three times the original estimates (even after adjusting for inflation).

The CHSRA's ridership projections are also unrealistic. The Authority estimates that as many as 117 million passengers will utilize the high-speed rail system by 2030. To put that in perspective, consider that Amtrak s high-speed Acela service, which serves a larger, denser market consisting of Washington, D.C., New York, and Boston, has an annual ridership of a little over three million. In fact, the entire Amtrak system, which covers over 500 destinations and 46 states, serves only about 26 million passengers a year.

Unfortunately, such examples are the rule, not the exception. Danish professor Bent Flyvbjerg conducted a worldwide study of 258 rail, bridge, and road projects. He found that 90 percent of projects came in over budget, and the vast majority of these suffered drastic cost overruns. Another analysis showed that ridership of the average transit system is less than half that of original projections. Flyvbjerg's conclusion: the difference is due to political pressures to exaggerate the numbers to gain project approval.

Then there is the question of what effect the high-speed rail system would have on existing transportation systems. The fact is, for longer trips between northern and southern California, air travel would be quicker and often cheaper (even assuming the CHSRA's optimistic ticket price assumptions, which are largely affected by the aforementioned ridership projections). For shorter trips, automobile travel is quicker, cheaper, and offers greater mobility since you can go wherever you need to go, rather than having to take a taxi or a bus to and from the few rail stations. In other words, the high-speed rail system will not get Californians to abandon their cars in large numbers or make any significant reduction in highway and airport congestion.

In the current economic climate, where the housing/credit crisis has wrought havoc and lawmakers have performed their best Harry Houdini impersonation to paper over a $15 billion deficit, even the most sound high-speed rail plan should be rejected in the name of fiscal responsibility. The CHSRA's proposal, with its low-balled cost estimates and inflated ridership projections and other benefits, does not even meet this standard.


Adam Summers is Senior Policy Analyst


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