Big controversy over high-speed rail here in California.  It's not really a BAD idea but the proponents grossly understate how much it will cost to build, not to mention the fact that it will never pay its own way...

To:  AV Press

Date: 12/2007

Re:  Hi-speed Rail

The proposed high speed rail system may or may not be "worth the money", but I do feel much of the rah-rah intentionally understates how much money we are really talking about.

Proponents "estimate" that it will cost 40 billion dollars. No public project of this magnitude has ever, EVER come in at the initial estimated cost; typically the final cost ends up somewhere between double and five times the original estimate. Final cost of Boston’s recently finished "Big Dig" project, initially estimated at $2.5 billion, was $14.9 billion. Let us be generous and stipulate that for our rail system the actual construction cost will be only $80 billion in today’s dollars.

Since we plan to issue bonds (borrow the money), there is the little matter of interest to consider. I don’t pretend to be an authority on the true net cost of a typical California bond issue but let us be generous again and assume it is equivalent to borrowing at 5% APR with a 20 year repayment. The best-case actual cost of the $80B rail system will thus be around $127 billion, or $3,800 for every man, woman and child in the state. That’s a good chunk of change, even for California.

It is also helpful to remember that all major passenger rail operations in this hemisphere (Amtrak, Ferromex, Canada rail, etc.) must be heavily subsidized in order to make riding them affordable even though freight operations pay for the underlying rail infrastructure and the trains themselves are low cost old technology. Now imagine the total operational cost of hi-tech trains running on a dedicated all-passenger rail line. Keeping it all alive would constitute a significant on-going cost to current & future taxpayers.

So, even considering the true cost would having this alternative third transportation system be worth it? Would California’s investment somehow become the genesis of a rail renaissance that would benefit future generations? Important but imponderable questions. Maybe we should just flip a coin.

 Addendum, November 2008:  Well, we're gonna find out.  The initial bond issue, $19.4 billion including interest, was voted in. Based on the current cost estimate of $82 billion (note the estimates have already doubled), the actual final cost will be right at $160 billion, making it about $4,400 for each man, woman & child in California.