Tuesday, May 14, 2013

Gavin Newsom questions high-speed rail

Newsom in Paris in 2009:
That was then, below is now

Kathy Hamilton reports that Gavin Newsom has turned into a critic of the California high-speed rail project:

T. Boone Pickens and Lieutenant Governor Gavin Newsom made some interesting statements about the California project on May 1, 2013 at the Milken Institute Global Conference...When T. Boone Pickens was asked what he thought of the project he said, “ High-Speed Rail in California? Do it when you have money, not when you don’t have money.” Lt. Governor Gavin Newsom also responded and said, “More and more legitimate questions are being raised. I’m questioning it for obvious reasons. The federal government’s exuberance and support is clearly not going to be there in a sustainable way. And then there are the operating questions, no other high-speed rail in the world operates without a subsidy. I think we have to be sober about this.”

A video of the comments by Pickens and Newsom here.

It's a bad sign when even Democrats are beginning to question it, but other city Democrats continue to support the dumb project, like Scott Wiener and Mayor Lee.

See also The California High-Speed Rail Project: An Updated Due Diligence Report, by Joseph Vranich and Wendell Cox.

The folks at Californians Advocating Responsible Rail Design (CARRD) are having trouble getting documents on the bidding process from the CHSRA.

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6 Comments:

At 1:27 PM, Anonymous Anonymous said...

High Speed Rail isn't optional, it's a necessity. How else can CA move the expected population in 25 years when most N/S road and air corridors are near capacity already? Not to mention meeting the SB-375 legally mandated GHG and PM reduction targets. Furthermore, SFO and OAK may well be underwater in 25 years.

 
At 3:43 PM, Blogger Rob Anderson said...

Wrong about everything. You don't seem to know anything about this particular project, which only seems plausible until you start learning about it. A good place to start is with these Brief Notes.

 
At 11:06 PM, Blogger murphstahoe said...

Pickens is wrong, or at least misleading.

We built the Bay Bridge over the last several years despite the recession. The Doyle Drive, Devil's Slide, and Caldecott Tunnels too.

The State will never be able to just save up and pay for projects like those with cash up front, they have to be bonded. If the state is saving up money into a fund for future projects, all you get is a prop-13 style tax revolt.

The right way to look at it since all projects will be bonded is "do it when borrowing is cheap, not when it's expensive". Interest rates are at record lows. Borrow now and pay back with inflated dollars later.

This holds true regardless of if you think the project sucks. As long as it is going to happen, better to build when you can borrow cheap.

 
At 10:57 AM, Blogger Rob Anderson said...

It's not "going to happen." The federal money has dried up, and there won't be any more. Governor Brown didn't mention raising taxes or new bonds for high-speed rail in his budget message yesterday, so where's the money going to come from?

Interest rates are low but so is inflation, which doesn't make borrowing a lot of money such a great deal. From the 2008 Voter Information Guide on the cost of the $9.50 billion for high-speed rail:

"Fiscal Impact: State costs of $19.4 billion, assuming 30 years to pay both principal and interest costs of the bonds. Payments would average about $647 million per year. When constructed, unknown operation and maintenance costs, probably over $1 billion annually; at least partially, and potentially fully, offset by passenger fares."

$647 million a year in interest every year to service $9 billion in bonds! The $500 million the governor just ripped off from the cap-and-trade program wouldn't cover even a year's interest on the present HSR bonds!

The HSR Authority's numbers on ticket prices, construction costs, and operational expenses lack credibility, which the folks at the Community Coalition on High Speed Rail have pointed out for years now. And Prop. 1A forbids the system from being subsidized by the taxpayers if/when it is built. As Newsom pointed out, every high-speed rail system in the world is subsidized because they don't make enough money to attract investors, which is why Warren Buffett invests in freight rail, not passenger rail.

It's not going to happen, and we should cut our losses and put a stop to it now. This litigation will probably put a stop to it, not the governor or the legislature.

There's no money to build the system---state, federal, local, or private investment. Not likely that the state legislature is going to authorize $50-$100 billion in bonds to build the system, and there will be no more money coming from the Feds, regardless of what President Obama says in his State of the Union speech.

 
At 2:51 PM, Blogger murphstahoe said...

"Interest rates are low but so is inflation, which doesn't make borrowing a lot of money such a great deal."

???

The state isn't going to be floating 2 year notes. 15-30 year notes that the state will write will absolutely be paid back in periods including higher interest rates and inflation.

 
At 2:59 PM, Blogger Rob Anderson said...

$647 million a year on just the $9 billion in bonds state voters okayed in 2008. Still can't see why that's a good deal for state taxpayers, not to mention the idea of floating still more bonds for this dumb project.

 

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