Bulk of high-speed rail costs could fall to state
As California prepares to commit tens of billions of dollars to an ambitious high-speed rail line from San Francisco to Southern California, Congress’ political will to provide the bulk of the funding is disappearing, leaving the possibility that the state could end up stuck with a crushing financial burden.
State voters have agreed to issue more than $9 billion in bonds to build the system, but that’s a fraction of the $43 billion projected tab for the initial phase. And those costs could swell to $65 billion or more, by some estimates.
Should federal funds dry up after the scheduled start of construction next year, the state could be left with no more than an unfulfilled dream and some tracks in the Central Valley.
“If the federal government and private investors are not going to provide funds, and California is broke, why would it take on an enormous new commitment?” asked Martin Wachs, a Rand Corp. transportation expert and former director of UC Berkeley’s Institute of Transportation Studies.
In coming months, Gov. Jerry Brown will decide whether to issue the bonds to launch the project — at a time when the nation and state are attempting to control mounting public debt that has already damaged both their credit ratings.
The bullet train hinges on a huge investment of federal dollars when Washington is intent on cutting the nation’s budget. Republicans who control the House of Representatives have already declared new rail construction their “lowest priority.”
Under the deficit reduction agreement, the House and Senate appropriations committees must cut the nation’s overall transportation spending, and they will start deciding how to do that as early as Thursday. At the same time, the Obama administration is asking for an $8-billion increase for rail programs.
Rep. Kevin McCarthy (R-Bakersfield), the majority whip whose district would be served by the rail line, said he doubted that any spending measure that contains funding for high-speed rail in California or anywhere else would pass the House.
“I don’t know how anybody can come to the conclusion that the California high-speed rail is a good investment in the financial times we are in,” McCarthy said. “When California has the deficit problem it has now, how can it envision finishing this?”
Rep. Jerry Lewis (R-Redlands), California’s senior representative on the House Appropriations Committee, added, “I frankly don’t see it. The pressure is on to reduce spending, not increase spending.”
Lewis said he does not believe the rail project even ranks as a high priority in the Senate, where a Democratic majority provides a friendlier venue.
Democratic backers of bullet trains see them as promoting future economic growth, creating jobs and improving the environment.
Sen. Patty Murray (D-Wash.), chairwoman of the Senate panel that funds transportation, lashed out at cuts to high-speed rail proposed by House Republicans at a hearing earlier this year.
“We are at a pivotal moment in our national transportation policy,” Murray said. “But the recent focus in Congress on budget cuts has created a race to the bottom that makes it difficult to continue those investments.”
The upcoming decisions on the high-speed rail system represent one of the ultimate philosophical clashes in public spending. The sheer size and scope of the rail system makes it one of the most ambitious programs ever undertaken by a state known for gutsy projects.
The system would connect the two centers of gravity in California by a 100-foot-wide ribbon of land where bullet trains would shoot by at 220 mph as often as every five minutes, and move people from Los Angeles to San Francisco in less time than a typical baseball game.
In scope and cost, it would eclipse any of the state’s dams, office buildings, canals, highways or other government structures, including the Golden Gate Bridge.
Even if there are no cost overruns, it would be twice as expensive as the State Water Project, the 1960s-era system that transports northern Sierra water to Southern California. A study this year estimated the current cost to replace that system of dams and canals at $18 billion.
And the plan would require some ambitious engineering. Tunnels would stretch miles. Trains would soar over cities atop viaducts six stories tall. Three mountain ranges would be crossed. The zigzagging route would gobble up homes, businesses and farmland.
The project’s first phase would take the rail from downtown San Francisco to Anaheim for an estimated $43 billion, but outside groups put the cost at $65 billion or higher. The nonpartisan Legislative Analyst’s Office said it could hit $67 billion. (A second phase would extend lines to Sacramento, Riverside and San Diego.)
The state now has the lowest bond rating in the nation, according to state Treasurer Bill Lockyer, a Democrat who remains concerned about the rail investment. “I have some worries about the business plan, the cost of construction and operating expenses,” Lockyer said. “A lot of those questions haven’t been adequately answered.”
Proponents are arguing for the state to not worry about future funding and launch the rail program with $6.3 billion the authority can immediately use, $3.5 billion of it from prior federal grants and $2.8 billion from the state bonds approved in 2008. That’s enough money to start construction next year on an initial 140-mile segment from south of Chowchilla to north of Bakersfield. California is required to spend the federal money by 2017, meaning construction would have to start in 2012.
The decision facing Brown is whether to issue some of the bonds and start building the system, knowing that the current Republican-controlled House will block future appropriations necessary to complete the project. Powerful people are pushing Brown to forge ahead.
U.S. Transportation Secretary Ray LaHood, a Republican in the Obama administration, has talked with Brown three times in recent months and urged him to stick with the project, part of a $53-billion administration proposal for passenger rail.
The California High Speed Rail Authority argues the project will never get built if the state expects to have a guaranteed source of funding for the entire system before construction begins.
“Building a project of this magnitude will always carry risk,” said Roelof van Ark, the authority’s chief executive, who noted that high-speed rail systems around the world were built without a front-end guarantee.
“If you don’t get money for one or two years that is not the end of the world,” Van Ark said. And if money runs out and the system is only partially built, it would leave in place a cornerstone that “my children or my grandchildren can continue to build to San Francisco or in a southerly direction into L.A.”
Such a vision may be farsighted, but it doesn’t quite fit into modern political reality. Brown recently appointed two financial experts to the rail authority’s board and charged them with conducting a fresh examination.
A Brown advisor, speaking on condition that he not be identified, said a “steep erosion in confidence” in the authority has led to concerns about the project. The authority had planned to issue a new business plan in October to support the upcoming bond issue, but that plan may be delayed by Brown’s review, he said.
To accelerate the network’s development, the Brown administration might seek to tie high-speed service into existing urban rail systems.
Even then, the state could run out of money.
“I can’t think of any mega-project like this that had all of the funding in place before it began,” said Roy W. Kienitz, undersecretary of the U.S. Department of Transportation. “If you have the ambition to do something big like this, you have to live with the fact that there is going to be uncertainty in the future.”