Monday, November 14, 2011

Trebling Down on Stupid - California's Mismanagement

Back on November 5th, I did a post about California's Bullet Train Folly which highlighted the trebling of the costs, over just 3 years, and the 10 year longer than originally projected completion date for the planned High Speed Rail Network to connect Los Angeles with San Francisco.  When voters first a 2006 proposition authorizing a bond issue to help fund this initiative, the total cost for the program was projected to be $33B.  Now, the cost is projected to be $98.5B, and that doesn't include a nearly $20B contingency that is desired for potential additional cost increases.  All of this for a project that to many has no viable business model and estimates of passenger use that defy common sense.

My conclusion, "That's why this project, if permitted to continue, will become one of the biggest and most expensive flops in the history of the US and California."

Last Thursday, California Governor Jerry Brown said he would formally request the State Legislature to approve billions of dollars for the construction of the High Speed Rail Network

In addition to the billions that the State will have to fund, this project is also dependent on nearly $50B to come from the Federal Government in addition to billions needed to come from private investors....investors who have thus far expressed no real interest in the program. 

The irresponsibility of this decision is astounding.  Both the Federal Government and California have major fiscal challenges related to excessive spending.  The Feds now run regular annual deficits of over $1 trillion - adding over $4 trillion to the national debt in just 3 years of the Obama Administration.  Our national debt is almost equal to our annual GDP and the country is facing another credit downgrade because it cannot cut $1.2 trillion from the next 10 years of expenditures.  California is in the same bad shape.  Revenues coming into the state this year are running $1.5 billion short of forecasts while the state's spending is $1.7 billion above projected levels.  The current year's budget shortfall for California is $25 billion dollars and we're projected to run deficits of more than $20 billion through 2016 at least.  None of these state numbers include any of the costs associated with the rail network.

Governor Brown says that these costs are 'manageable' because they are across a 23 year construction period for the full project.  Costs trebled in just 3 years, so we're to expect that costs would not continue to escalate across the full 23 years of the project - or that it would only take 23 years to do the project?  We're also being asked to believe that by 2030, tiny Merced California will be loading more passengers onto this network per day than Amtrak does per day today through it's busiest station - Penn Station in New York City? 

If I get on and check airfares for a Friday departure from Los Angeles to San Francisco next month, I can get airfares as low as $49 one way....with most web fares in the $89 range. I can drive from my home to San Francisco in about 6 hours and it would cost me about $50 for gas. 

Compare these to the $81 fare (today's dollars) for the fare of the high speed train. An hour and third by air versus three and a half or so by rail. Where's my incentive to go by rail? California's millions are supposed to force me to go by rail because roads and airports will be so crowded and overloaded?!  How many more millions of Californians are expected in the next decade - a state that is starting to lose population because of it's business climate?

Brown said, "Lincoln built the transcontinental railroad during the Civil War, and we built the Golden Gate Bridge during the Great Depression" as a justification for undertaking this initiative. 

President Obama has also used a similar statement as a justification for certain projects.  Both are taking liberties with history to promote their agenda.  The transcontinental railroad, constructed between 1863 and 1869 was primarily done by two private companies.  The main Federal Government assistance to the project were land grants of government owned land along with some funding. The establishment of the railroad meant that the latest and fastest technology solution (for it's time) would link the West Coast to the Midwest.  No longer was the only way to get to California via clipper ship around the Horn or by horse / wagon - journey's measured in weeks / months.  This project is neither a comparison or a justification for California's High Speed Rail initiative.

Brown also expressed his contempt for those, like me, who oppose this project...."It is part of the reason we can't get anything done in the state.  You don't make an omelet unless you break the egg" referencing to those who say the project will destroy businesses, farms, and displace homes.  But left unsaid were addressing the concerns of those who oppose the price tag and the unrealistic business plan.

Even the liberal editorial board of the Washington Post sees the stupidity of spending about $100 billion on this transportation project - particularly when neither the Feds or the State have the money to pay for it.

This isn't about creating jobs.  The project has no private investor interest because it is not a viable plan or approach to solve something that isn't even a real problem facing Californians.  It's not even about breaking eggs, Mr. Governor.  This is about breaking the bank and spending money we don't have for a project we don't need while we ignore the real fiscal problems in the State.

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