J and D's Corner

From the Letters Archive

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 even 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.  Plus, of course, the ongoing subsidy to keep it rolling.

Addendum II, mid-2010 Battered by economic downturn, the project is on the back burner, kept warm by expenditures of a few tens of millions here & there on "studies".  I'll try to keep updating, if I live that long...

Addendum III, November 2011:  The rail project could serve as a finished script for a Monty Python skit, saved from being completely hilarious by the fact that real taxpayer dollars are being spent by the tens of millions on studies, debates, etc.  First, in an effort to reduce projected build costs, there is a movement afoot to eliminate the routing dogleg from LA through Lancaster/Palmdale, which would be one of the only segments which might actually someday operate without major subsidy and offers a connection point for a future Las Vegas extension.  Then the "official" estimates of cost have already grown from the initial $40 billion to right at $100 billion and rising, meaning even by my very conservative "double the official estimate" guideline, the true final cost would surely be somewhere north of  $200 billion.  Oh, and to get a foot in the door on construction, there is a push to build a preliminary "segment to nowhere" between the towns of Bakersfield and Fresno in the least expensive Central Valley area.

Addendum IV, Early 2012  Monty Python continues:  With the state ever further down the slide to bankruptcy all but the most ardent supporters are abandoning ship.  Cost estimates are headed for six times the initial $40 billion prediction (note this is almost exactly the same under-estimation as on Boston's "Big Dig" project cited in my original letter), and the initial expected ridership figures are now acknowledged to have been grossly overstated.  So we've spent many tens of millions on essentially nothing and are still exactly nowhere.   I do hear there is a scheme to take advantage of a loophole in the bond language that would allow them to siphon off a few hundred million to "improve" existing tracks, specifically the one used by commuter trains connecting my Antelope Valley with the Los Angeles basin.  Better than nothing, I guess.