As part of my continuing intermittent series of posts publicly worrying about California lighting its money on fire with a high-speed rail construction project, I offer yet another post publicly worrying about California lighting its money on fire with a high-speed rail construction project. And again I want to impress the viewer with the nuance that I want to have high-speed rail here — I’m just convinced that the state is botching the job.
Only now, it’s not just me who has that impression. You may now count the Federal General Accountability Office as among that number, advising that the state will need another fifty-two billion dollars to complete the project, three-quarters of it Federal:
The project’s funding, which relies on both public and private sources, faces uncertainty, especially in a tight federal and state budget environment. Obtaining $38.7 billion in federal funding over the construction period is one of the biggest challenges to completing this project. In the latter stages, the Authority will also rely on $13.1 billion in private-sector financing, but will require more reliable operating cost estimates and revenue forecasts to determine whether, or the extent to which, the system will be profitable. The Authority’s plan recognizes the uncertainty of the current funding environment and is building the project in phases. The Authority has also identified an alternative funding source. However, that funding source is also uncertain.
That’s right, taxpayers. [Switch to bad Dr. Evil impersonation] We’re going to need another fifty-two billion dollars to finish this project. Ooh. That’s a nice high-speed rail construction project you’ve got going there. Ten billions dollars of white-collar graft and corruption invested in. It’d be a shame if you ran out of money to finish it and had nothing to show for all those bonds. [Pout, exit mad Dr. Evil impersonation mode.]
Seriously, is there anyone reasonable out there, not suffering from some kind of unfortunately diminished mental capacity, who didn’t see this coming?
It’s no wonder that the GAO has some questions about the accounting controls on the project. The original project was supposed to have a bottom line of thirty-three billion dollars, which would include ten billion in matching funds from the Feds, which was why the state was in such a hurry to pass that bond measure back in 2008 and the rest to come from private fundraising. Endpoint-to-endpoint service, we were told, would be delivered by 2020.
Har-de-har-har. Private fundraising. I’m not a financial planner or a hedge fund manager or anything like that. But even an economics neophyte like me can see that if I were thrust into such a role, the appropriate reaction to the opportunity to invest in this Cal Rail project is to scoff. Yes, I said “scoff.” You go to your investors and tell them you went all in on a project that would offer transportation fares well above the competition, with a twenty-year lead time between an actual investment of triple the prospectus cost, and even beginning to recoup the initial investment costs for twenty years. We’ll just buy some nice Southwest Airlines common stock instead and avoid the breach of fiduciary duty lawsuits. And if in 2040, Cal Rail is raking in the bucks hand over fist and your investors are nominating you for the Cornelius Vanderbilt Visionary Empire Builder Award, you are gonna look so smart! Then you can scoff at me, and we’ll be even.
But let’s get back to that GAO report. More than thirty-eight billion dollars has to come from Congress. You remember, those same guys who locked themselves in to sequestration just this week. What reaction does Cal Rail think it’s going to get from Congress? “Oh, hey, yeah, we just got a rate reduction on our cable bill. So here’s your thirty-eight billion dollars right here. Pay us back when you can!”
It’s not going to happen. California needs to figure out how to do this itself. And if it’s going to be done in any fashion that makes any kind of economic sense, it needs to be done as ruthlessly as the United States’ original railroads were built back in the nineteenth century. Which means, among other things:
- Condemning a lot of land, whether people like it or not, right now, and mandating that Cal Rail starts to lay the goddamned track already.
- Grant blanket variances on environmental impact and mitigation measures. Stop spending money on consultants and lawyers and accountants, and start spending it on engineering and construction crews.
- Permit the Governor to sit directly on the board so he can flex some political muscle and require Cal Rail to stop making penny-wise and pound-foolish shortcuts like conforming to existing urban rail lines which will produce substantial speed reductions in the end product.
- Retract the waiver of sovereign immunity in the state tort claims act so that every county, city, and private landowner affected by the project can’t file a lawsuit against the project. If that’s going too far, then have the Attorney General consolidate all of the litigation into a single complex case, and pass a law requiring all suits against Cal Rail be presented in that complex case before the same judge or special master.
- You want help from Congress? Ask Congress to pass variances easing Federal environmental impact reporting and set up a special fast-track condemnation valuation Court with a special grant of jurisdiction over the whole project, so that landowners can have a meaningful and fair forum to present their Fifth Amendment claims and get paid and get them out of the picture.
Are wild critters going to die and is farmland going to get gobbled up by the right-of-way? You bet. Will the condemnation of existing development have an economic impact disproportionately borne by individuals who won’t actually be fully compensated by the condemnation purchase funds? Yes.
But an ambitious infrastructure project comes at a cost, a cost measured in things other than just dollars. If we aren’t willing to pay that cost, then we aren’t actually willing to have high-speed rail at all. So Cal Rail, salvage this. Condemn the land, pay off the landowners, tear down whatever’s on the land, and frickin’ get on with it, the way you should have started doing about three years ago.