High-Speed Rail's Fiscal Cliff

December 18, 2012

A high-speed rail line has been proposed in California that would run from Anaheim to San Francisco. However, a report released by the Government Accountability Office cited a failure to conduct risk and uncertainty analyses with respect to cost estimates, and failure to document substantial cost elements, such as stations and operating costs, says Wendell Cox, an adjunct scholar with the National Center for Policy Analysis.

  • The California High Speed Rail Authority has spent about $600 million.
  • However, all this money has been spent without laying a single railroad tie or buying any property.
  • On average, high-speed rail construction costs 45 percent more than promised by consultants and authorities.
  • The costs as envisioned in 2008 increased by 90 percent to 115 percent to about $98 billion and $117 billion.
  • Now, the California High Speed Rail Authority is between $55 billion and $65 billion short of the necessary funding.

The reason these costs became inflated is because the initial projections included very optimistic numbers so that the project could be approved. But the California High Speed Rail Authority scaled back the project and opted to make a blended system that would upgrade commuter rail lines instead.

  • Under the blended plan, trains won't run as fast.
  • But it was unlikely that the high-speed rail would deliver its promised 2:40 travel time between Los Angeles and San Francisco, anyway.

On top of exaggerating the low-cost of the project, consultants and other authorities often claim high ridership projections, sometimes overestimating ridership by 40 percent. This is important because riders end up paying for a lot of the costs associated with project costs and maintenance.

California lawmakers have turned to calling the high-speed rail project an emissions reduction strategy so that it can use the cap-and-trade revenues that are set aside for greenhouse gas reduction strategies. However, because of the low fuel economy standard of high speed rail it is likely that the emissions reductions estimate was overstated by 130 percent to 190 percent.

California High Speed Rail Authority assumes it can obtain $40 billion or more from the federal government. However, that is unlikely considering the current concern over federal spending. For example, for the federal government to pay for its share of high-speed rail it would be equivalent to two years of savings from lowering Social Security cost-of-living increases, which is being debated in the fiscal cliff negotiations.

Source: Wendell Cox, "High-Speed Rail's Fiscal Cliff," Orange County Register, December 10, 2012.

 

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