Thursday, October 19, 2017

Dan Richard: Selling the high-speed rail project

Dan Richard, Chair of the high-speed rail board, argues on behalf of the project with another interviewer who, like the Rolling Stone interviewer of Governor Brown, evidently knows little about the project.


This is not a liberal versus conservative phenomenon. Our friends down in Texas, trying to build the Texas High Speed-Rail Line there, are finding similar resistance on both sides of the spectrum. There’s a sense that people don’t benefit by investing in something that they’re won’t get to cut the ribbon on for a decade or more.

People in Texas were so worried about a future government bail-out of the Texas project, which is supposed to be privately financed, that the state legislature passed legislation guaranteeing that the project won't get any state money. See also Texans Against High-Speed Rail and this skeptical study.

More Richard:

Americans seem to be losing faith in our ability to do big things. That’s why, when Jerry Brown decided in 2011 that he would embrace the high-speed rail program, his statement was along the lines of: “I want to show that America can do big things again.” We’ve built such tremendous things in this country. The Golden Gate Bridge was controversial; there were 2800 lawsuits against it. But we built it, and we’re proud of it.

Americans have grown more skeptical of doing Big Dumb Things after construction fiascos like the Big Dig in Boston.

And the Golden Gate Bridge was built by selling construction bonds and then servicing those bonds with bridge tolls. The high-speed rail project has no such financing, since Proposition 1A in 2008 only authorized $9.95 billion in bonds for the project. Once sold the interest on just those bonds will be $640 million a year paid for from the state's general fund! The latest official estimate for the whole project is $64 billion, which is surely an under-estimate.

The interviewer finally asks Richard where he's going to get the money:

Currently, it’s mostly California investment. However, it’s critical to point out that we would not have gotten off the ground had it not been for federal support. We ran into legal challenges in California that limited our ability to access state bond money, and only federal money allowed us to get construction underway. We’ve had $2.5 billion in federal stimulus act money, and almost $1 billion in additional federal money...On the other hand, there’s no prospect of additional federal money at this moment. But I expect that to change.

If even the liberal Obama administration could only provide $3.5 billion, where would the rest of the money come from? There can be no realistic expectation that will change, whether Democrats or Republicans are in control in Washington.

To show how financially nutty the project has always been, here's the projected sources of money in the 2009 business plan:

Federal Grants: $17-19 billion
State Grants (actually Prop. 1A bonds): $9.95 billion
Local Grants: $4-5 billion
Private Debt or Equity Funding: $10-12 billion

Very little more can be expected from the federal government, and counties and cities are going to chip in $4-$5 billion? Pure fantasy. And of course there's been no private money invested in the project so far, since investors are fussy about getting a return on their investments, like that $640 million a year they will get if they buy the original $9 billion in bonds authorized by Prop. 1A.

More Richard:

The first leg of high-speed rail will connect Central Valley to the north. I know this was a disappointment to some folks in Southern California, but we think that it will ultimately be to their benefit. Why? I firmly believe that, the minute the first high-speed train starts running in California—no matter where it is—everything is immediately going to change. 

Therefore, our business plan was predicated on the notion that the best thing we could do is to get trains up and running as quickly as possible—and that meant starting in Northern California. I believe that that choice will accelerate the extension of the system to Southern California.

Yes, this is the usual tactic of supporters of Big Dumb projects: get the project started based on lies about the number of future passengers and how much it will cost to build and operate the system. Then elected officials have to throw good money after bad to in effect justify the original bad decision.

Why not start in Southern California? Because the route to and from LA requires more than 20 miles of tunnels!

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