High Speed Rail’s Collision Course: Part One, Funding, Costs and Benefits

Norm King
Norm King is a former city manager of three California cities and of the San Bernardino County transportation commission and has taught part-time at USC and Claremont McKenna College. He also served as past director of the Leonard Transportation Center at CSUSB

This is not exactly a response to David Salaverry’s three part Fox & Hound’s series on California high speed rail (HSR), it is hard to respond to someone who argues three sides of an issue.  Salaverry emphasized the “political” aspects of the issue in all three of his contributions.  My comments will be more focused on the economic and equity policy issues which make HSR the worst investment California taxpayers will ever make.

Part One below highlights issues about funding, costs and benefits of the proposal.  Part Two will focus on commitments and representations previously made about the rail proposal by the California High Speed Rail Authority (CHSRA) which are not achievable under the present plan.

In February 2012 Governor Jerry Brown said this about HSR:

“Spain can build it. China can build it. France can build it.  Germany can build it.  But oh, we can’t build it.  No, we can build more airport runways, more freeways over the next 50 years.  That’s twice as expensive.  So I’m not saying it’s cheap; I’m just saying it’s cheaper than the alternative, and it’s a hell of a lot better.”

Prior to the 2008 vote approving HSR the “half as expensive as the alternative” was the primary argument used by proponents of Proposition 1A.  In spite of several analyses which demonstrate that this statement is false, the political establishment – and editorial boards of many California newspapers – continues to mouth it as gospel.

The CHSRA Overstated the Benefits of High Speed Rail.  Governor Brown’s statement is false because the CHSRA has misrepresented the cost of building the alternative (additional highway lanes and air expansion) in several ways. By claiming that if HSR is constructed that the highway/air capacity alternative expenditures will not be needed or incurred and will thus be a “savings,” CHSRA deceptively skewed the comparison to HSR’s advantage and vastly overstated its benefits.  Virtually all of the additional intercity highway and air capacity will be needed with or without HSR in order to accommodate an increasing number of travelers. The diversion of auto and air passengers to HSR will generate only minute reductions in auto and air capacity requirements.

The CHSRA further tilted the comparison to artificially favor HSR by assuming far more seats and greater train frequency than planned, inflating highway construction costs beyond existing highway construction cost experience, and using cost estimates for HSR construction which are different from and far less than the CHSRA’s present estimates.

A report by Stanford Professor Alain Enthoven concluded that the real cost of the highway/airport alternative is just $35.5 billion which is only about 33% of the CHSRA’s estimate of the cost of the HSR system as originally proposed to the voters. Furthermore, that real the cost of the highway/air alternative is just 21% of the $171 billion which the CHSRA claimed it would cost to build the highway/air alternative.   Investing in HSR and not building the highway lanes will result in greater congestion than building the lanes and not building HRS.

California Is About to Spend More to Get Less.  It doesn’t make sense to build a new system which produces trips which cost more than existing trips.  The only reason CHSRA can claim a train ticket will cost 83% of the cost of intercity airfare is the large public subsidy being made available to HSR.  The actual cost (including capital) will be far greater than the cost of the same trip by air or auto meaning that HSR should be viewed as a massive investment in a project which will yield net loss to society as a whole because intercity trips will be produced at an increasing cost per unit. Translated, this means spending more to get less.

HSR Will Result in Subsidies to Affluent Individual and Business Travelers.  On the other hand air fares paid by air users fund virtually the total cost of the air system, requiring minimal subsidies from tax funds.  Gas taxes paid by auto users fund by far the greatest share of road system costs.  Funding HSR will transfer much of the cost of an intercity trip from people who now pay their own way to taxpayers.  In doing so HRS will provide, at taxpayer expense, a significantly discounted intercity ticket to the most affluent people (individual and business air travelers) in the state.  An irony:  the same people most strongly supporting HSR are the same people who profess to be concerned that the affluent should pay their “fair share.”

Taxes will Replace Costs Now Borne by Users.  The discussion about funding HSR should not be solely based on cost.  It should also focus on the critically different methods by which HSR, highways and air transport are funded.  All of the HSR subsidy will come from taxpayers – not from users of the system.  This subsidy will most certainly equal the entire capital cost of the scaled-back system (now estimated by CHSRA to be $60 billion)  and quite possibly an on-gong operating subsidy will be required – in spite of the legislative mandate to the contrary.

“Everyone is Building it, Why Shouldn’t We?”.  A common argument presented in favor of HSR (see Governor Brown’s statement above) is that everybody else is building HSR so we should too.  This argument ignores California’s distribution of population which does not favor HSR because population densities are skewed to either end of the system and are not highly dense in between.  Only two HSR lines in the world (France and Japan) have recovered both operating and capital costs.  New HSR rail lines in Spain, China, Korea and Germany are not performing as projected and consequently are not able to pay billions of dollars in bond debt.  In all countries which have built HSR the market share of rail versus auto and air has declined since the introduction of HSR to those countries.  The two newest lines in China from Beijing to Shandong and Tianjin to Jinan were suspended in July 2011 as ridership levels were only 20% capacity.  No China lines have been profitable.

A Smaller HSR System than Promised will Cost at Least Twice as Much.  A year or so ago the CHSRA admitted that to build the system promised voters in Proposition 1A in 2008 would cost in excess of $100 billion rather than the $33.5 billion described in the proposition.  Their “solution” has been to scale back the system to a “blended” system which would utilize slower, existing rail tracks at a projected cost of over $60 billion. This system does not include the connections to San Diego and the Inland Empire which were “promised” in Proposition 1A.  Had these connections not been included in the plan presented to voters it is likely that San Diego and the Inland Empire residents would have voted strongly negative to the point of defeating the measure statewide.

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