On the 3rd of January, the California High Speed Rail (HSR) Peer Review Group issued a report that essentially kills HSR in California. In 2008,
Californians authorized $9B bonds for HSR. However, the measure requires that the Peer Review Group sign off on the feasibility and reasonableness of the plan to build the rail system before the state issues the bonds. Thus it appears the report will/should effectively kill the project, which is probably a good thing.
The primary criticism the
Peer Review report has to offer is that the California HSR plan isn't financially feasible, that private sector involvement should be accelerated, that demand forecasts have not been subject to external and public review, and that they "cannot at this time recommend that the Legislature approve the appropriation of bond proceeds for the project."
This carefully footnoted Peer Review report says basically the same thing that Dr. Vranich (Big HSR Advocate and best-selling author of
Supertrains) told the State of California in 2008. Its worth
it to watch his video here.
At that time Dr. Vranich said:
Vranich skewered every aspect of the HSRA’s proposal. He insisted that passenger estimates were wildly inflated—64 percent higher than those developed by the Federal Railroad Administration and by independent studies from the University of California at Berkeley’s Transportation Center, as well as a thorough report by the Reason Foundation...“High speed rail in California may be salvageable after all of this poor work, but someone else must be in charge,” Vranich said. “If the authority is unable to conduct studies that have credibility, how will they ever effectively deliver a mega construction project on time and within budget?” His argument tracks closely with a May 2011 report from the Legislative Analyst’s Office, which also suggests that the High-Speed Rail Authority be dismantled.
If the legislature fails to issue the next $3B in bonds, the California High Speed Rail Authority (HSRA) just may close, and all the directors will lose their cushy jobs.
Roelof-Van-Ark the Chief Executive Officer makes $375,000. So, in their defense, the California HSRA stated that following the recommendations of the peer review means
California loses matching funds from the Feds, and that it is a
"narrow, inaccurate and superficial assessment of the HSR program, it does a disservice to policy-makers who must confront these decisions." (
Emphasis in original.) Basically they said they stand by their numbers, reject the findings of the Peer Review, and that it isn't important to have funding sources for the $75 Billion that isn't funded.
I read the business plan, and I agree with the peer review findings. You can read them both and make your own assessment as well. I'll provide some of my findings here.
NOfP has covered the High Speed Rail (HSR) issue
for the last several years. HSR is a favorite project for politicians, and
especially President Obama. Not only does HSR and other public rail transport projects shift jobs from the public transportation sector to the government, and creating massive government bureaucracies in the process, it allows government to also redistribute wealth from taxpayers to HSR contractors, and to provide subsidies to the middle class and wealthy that ride the trains. In short, HSR and other public transport put more power in the hands of the government, and provide less freedom of choice for the citizen.
High Speed Rail is High Speed Fail:
Though a centerpiece of President Obama's recent stimulus plans, even the WaPo editors label high-speed rail "a lost cause."
Most proposed new passenger rail systems would require massive subsidies. Florida turned back Federal funding for fears of the necessary state spending. Wisconsin rejected high-speed rail funding, asking instead for reduced Federal monies to improve existing train service. California's high-speed rail -- mandated by a 2008 state ballot measure -- will bankrupt the state.
Most recently,
Carl wrote that President Obama’s administration is providing $3B to fund California’s High Speed Rail initiative, even though CA is building the first section of rail not in an urban or even suburban area,
but in the middle of the richest farmland in America -- where nobody actually lives. This, despite the anticipated program cost
tripling in the last three years. As the
LATimes puts it: "The bullet trains from Anaheim and Los Angeles to San Francisco will not cost $34 billion as originally estimated... 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."
In 2008, California voted authority to borrow up to $9 Billion to cover part of the capitalization costs of a high speed rail to connect San Diego, Los Angeles, Sacramento and San Francisco. This initiative was sold to the voters through unsupported claims of costs and ridership made by the the California High Speed Rail Authority (HSRA).
Ridership: At that time, the California HSRA predicted the system would have
ridership in 2030 of 117M passenger trips. The 117M riders of a California rail system was absurd (
and the HSRA knew it). The current annual ridership of the nations intercity rail system --
Amtrak -- is only 28.7M per year, nationwide, and Interstate 5, which stretches from Tijuana to Canada (including San Diego to LA through Sacramento and to Oregon and the main connector between LA and SF)
has an annual passenger count of only 26M. So, does any reasonable person think rail travel between those cities is going to suddenly be a multiple of existing rail or road travel? Let me add that the current
Los Angeles to San Francisco air traffic is only 2.7M passengers per year.
Capital Construction Cost: This year,
the California HRSA changed its plan, creating Phase 1 to serve between LA and SFO, with service to Sacramento and San Diego and extend the lines by 1/3rd would be added later. This smaller system, they admitted, would cost a lot more than the full system, at least $100B, which is more than triple what they forecast only three years ago for a much larger system.
The thing about both ridership and capital construction estimates is they are almost always wrong. In
the most comprehensive study of large scale transportation projects,
a strategic misrepresentation bias underestimates costs by 50-100%, and overestimates ridership (and thus revenue) by 50-100%. The report states:
[F]orecasters and planners deliberately and strategically overestimate benefits and underestimate costs in order to increase the likelihood that it is their projects, and not the competition’s, that gain approval and funding. Strategic misrepresentation can be traced to political and organizational pressures, for instance competition for scarce funds or jockeying for position, and to lack of incentive alignment.
(Hmmm... do you think that $375,000 salary paid the California High Speed Rail Authority CEO is an incentive alignment or misalignment?)
So the costs are probably higher than $100B, and the revenue will not be enough to cover operating expenses. Set that aside for a moment.
Recognize this: For $100B we could fully subsidize air travel between Los Angeles and the Bay Area for the next 300 years. A ticket from LAX to SFO costs about $100. So,
for 100 billion dollars, you could buy one billion Air Fare tickets. At 2.7M passengers a year, that $100B would last over 350 years. Even at 10M passengers a year, it would last 100 years.
How about this -- rather than spend $100B on rail service, lets just spend $27B on subsidized air service for everyone for the next 100 years, and invest the other $63B in bonds. Preferably something conservative and profitable,
like railroad freight bonds. Then we’d still have our $63B plus interest in another hundred years.
By that time, another technology (
like gravity trains) will probably replace road and rail and air travel. With transportation technology roughly doubling speed every generation (horse to rail to auto to propeller to jet...) who can say what technology will be available in 30 years? It does not make sense to me to invest
for 100 billion dollars in an infrastructure that could be obsolete before it is built, with a California HSR Authority that has no credibility. It could be like another bridge to nowhere,
but just in the middle of nowhere.