It says something that even struggling California may be willing to lose a $3.3 billion federal bullet-train grant. Maybe it senses some risk. Now how can that be?
The Golden State is not known for its fiscal sobriety, but at least some of its top lawmakers are thinking twice about accepting the Obama administration’s invitation to waste money.
Last week, Transportation Secretary Ray LaHood said a promised $3.3 billion federal grant to start the state’s high-speed rail system is at risk unless the state budgets $2.7 billion from bond funds for it this June.
State Senate leaders, bucking Gov. Jerry Brown as well as LaHood, want to put off a decision until August. LaHood said that’s “too late for us.”
On the contrary, even August is too soon for the state to jump into rail construction.
Never would be better. But the stalling is a good sign, as is the apparent willingness to give up the federal grant rather than be rushed into a rash decision.
It seems the state’s legislative leaders, if not its governor, see trouble ahead. The federal money may be enough to start the work, but it doesn’t ensure a project’s success or solvency. On the contrary, it can be a ticket to fiscal disaster.
What if the federal money dries up after that first $3.3 billion? The state has authority to issue $9 billion in bonds for the high-speed line, plus a bit less than $1 billion for other rail improvements that may or may not link to it. These sources amount to less than 20% of the estimated $68 billion price tag for the proposed system.
Another risk is more subtle, but no less real. Los Angeles Times reporter Ralph Vartabedian notes the timetable for the first leg of the project, a $6 billion stretch of track from Bakersfield to Fresno, is so tight it would require spending $3.5 million a day for the next five years.
Experts consider this “the fastest rate of transportation construction known in U.S. history,” says Vartabedian. They suggest the state might not be able to keep up the pace.
If it falls behind, it will lose at least some of its federal funding. And if it manages to build at such breakneck speed, it risks doing shoddy work that it will have to redo later at its own expense.
The Obama administration may have no trouble throwing money around. But states invited to join in the fun have good reason to mull the long-term consequences — something that Washington never seems to do.
The last thing California needs is a costly new rail system that it will forever have to subsidize — first to build it, then to operate it — since hardly anyone will ride it.
So when the administration tells it to hurry up and spend, it should instead slow down and think.
Copyright 2012 Investor’s Business Daily, Inc.