So, the California High-Speed Rail Authority was wrong. The bullet trains from Anaheim and Los Angeles to San Francisco will not cost $34 billion as originally estimated, or
$43 billion as the authority insisted just two years ago, but closer to $100 billion. Critics say the agency's new $98.5-billion estimate is low, and the authority admits it might go as high as $117.6 billion, but for sake of argument call the cost $100 billion.
The authority is offering us less for more. The original system included Sacramento and San Diego. They are not part of this estimate. They will be added in Phase 2, and the authority does not say what Phase 2 will cost. Critics of the plan estimate the total cost at $180 billion.
TIMELINE: California high-speed rail project
This is a lot of money in a state cutting back its higher education system, shortchanging its K-12 system and watching its existing infrastructure decay at an alarming rate. This is roughly five years of funding for the University of California and roughly 2 1/2 times the governor's proposed annual budget for K-12.
But forget about that. The new report from the same old consultants assures us that we don't need to worry about where the $100 billion will come from or who will actually ride this railroad. The new report has new numbers — most assuredly correct numbers, because why shouldn't we trust these people? And they have a plan.
To build a $100-billion system we have $3.3 billion from the federal government for high-speed rail and another $3.25 billion in federal stimulus funds. There is $9 billion in bond money approved by voters in 2008 through Proposition 1a. What we will do is build the first sector from Bakersfield to Merced. Yes, Bakersfield to Merced. Then we will need further federal, state and local aid, which if it comes at
all will have to come at the expense of other far more feasible and necessary transportation projects.
But the plan expects the first segments to turn a profit and attract private investment. Really. The plan says we will build incrementally, not finishing the system until 2030, with it fully operational in 2033. And each completed segment will draw additional private investment. If we are going to build incrementally, why not just wait? The Chinese rush to high-speed rail is not working out as well as it might. It is plagued by technical problems, cost overruns, corruption, low ridership and high fares. New technologies tend to improve with time and grow less expensive. Look at your computer.
Because only two high-speed systems — Tokyo to Osaka and Paris to Lyon, neither of them comparable to the California route — turn a profit, the report resorts to another measure. It assures us that high-speed rail systems throughout the world pay their operating costs and maintenance from fares. But this is not a profit. A profit means you repay the cost of building the system, the interest on the money borrowed to build it and gain something besides. A profit is necessary if you are going attract private capital. This report skirts the issue of capital costs — the costs of investment and interest. If we got a free railroad, we might be able to maintain it from ticket fares alone (although I doubt it), but this railroad will cost more capital than we have. Capital costs money.
But let's imagine the first segment does turn a profit from that assuredly lucrative clientele ready to go back and forth between Bakersfield and Merced. The profit will be the result of public investment. This segment of the line will be a gift from the federal government and California taxpayers. Any ensuing section, however, will entail much higher capital costs because private investors will expect a return. So the first section doesn't really tell us the cost of the ensuing sections.
The report says the private sector will absorb the risk. Really. It won't demand a subsidy or a public guarantee, because Proposition 1a prohibits this. That other public/private partnerships like Freddie Mac and Fannie Mae have not always been examples of financial rectitude and have needed public bailouts shouldn't bother us. God forbid we learn from experience. And the Legislature would never change the rules, even to rescue a white elephant in the San Joaquin Valley. Really.
The California High-Speed Rail Authority has created a set of models and scenarios to answer the objections to its earlier models and scenarios. These will be parsed in much more detail than I can do here, but it is best to note the assumptions. First, its model assumes that the rail passenger fare will always be cheaper than airfare or driving. A ticket from San Francisco to Anaheim will be $72 in 2005 dollars. This is projected out to 2030.