Proposition 1A: The real cost of high-speed rail

Investing in California’s transportation infrastructure is something all Californians agree is an important and lofty goal. But Proposition 1A does little for California commuters who suffer among the worst rush hour commutes in the country. This bureaucratic boondoggle will cost taxpayers dearly; an upfront price tag of $20 billion will just be the start. And once approved, there will be no realistic way for taxpayers to extricate themselves from this ill-conceived and poorly designed plan. So what is the real cost of Proposition 1A to taxpayers?

Senator Alan Lowenthal, Chairman of the Senate Housing and Transportation Committee, asked the California High Speed Rail Authority “What assurances can the Authority provide that California taxpayers will not be stuck with a massive bill in the future?”
All indications point to nothing. And increasingly, evidence suggests that California taxpayers will pay a much heftier bill than what is represented by Proposition 1A’s initial $20 billion price tag.

The Authority itself has been re-estimating the cost of Phase I’s San Francisco to Los Angeles route from $30 billion in 1999 to $40 billion in 2005, and this year they revised the cost estimate to $45 billion. It is anyone’s guess what those estimates will look like in 2010 or when construction actually begins. Proposition 1A funds were supposed to cover a third of those costs but now they will only cover about 20%. And the rest of the money is supposed to come from the Federal Government and outside investors.

Finding $9 billion from the federal government might be a challenge considering there is no program to provide grants for these types of projects. Furthermore, $9 billion is approximately the whole mass transit budget for the entire country. The Authority hasn’t been able to secure a commitment for even a penny of this money yet and why would the other 49 states acquiesce in a scheme that gives California all the mass transit dollars allocated for the states?

Private investors would be expected to fund the rest. However, tight credit markets and the Authority’s inability to complete a business plan by the statutory deadline, bring further into question whether it is reasonable to expect this kind of private investment in a bureaucratic, state run train system.

Realistically, based on how cost estimates have risen during the life of the project so far, total capital costs by the end of the project are likely to escalate to as much as $81.4 billion according to a report by the Reason Foundation.

Even if the state were to find the federal and private funds to meet its federal and private fundraising goals this would leave just Phase I, at best, $7.6 billion short and perhaps as much as $33.1 billion short.

The California Budget Project notes that there is no guarantee that private and federal sources will provide sufficient matching funds. What is more problematic is that Proposition 1A fails to address what would happen if these funds are not raised.

No matter how you look at it, the state will be financially stressed by funding 1A. The bond payments alone mean $650 million out of the general fund every year for the next thirty years. That is more than half of what California spends every year on its mass transit budget for the whole state. With a $15 billion deficit, that extra debt shouldn’t be taken lightly.

It doesn’t take too long to figure out that, were Proposition 1A to pass and funding were to run out, taxpayers would be on the hook for much more than they bargained for. The dream of an efficient organized high speed rail system can remain without voters approving Proposition 1A’s ill-conceived, underfunded, bureaucratic boondoggle this November.

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