High-Speed Rail releases Project Update

The California High-Speed Rail Authority (CHSRA) just released its 2019 Project Update Report. This $20 billion plan would provide HSR service between Bakersfield and Merced. That’s $15 billion more than the $5 billion that have already been spent. These numbers goes so far beyond the world of ordinary transportation projects as to verge on self-parody or an extremely elaborate hoax. TRANSDEF does not consider the Project Update Report to be a credible transportation plan. No rail professional in Europe or Asia would ever present a proposal so over the top. Here are TRANSDEF’s observations after a quick read of the Update:

  • The plan rests on the fundamental premise that this service will serve as “a building block” for a statewide HSR system. In fact, CHSRA has never had a realistic plan to fund the building of a statewide HSR system. As a result, there simply won’t be a statewide system, despite the intense flurry of consultant work to put together plans for one.
  • CHSRA was once offered a funded plan, but rejected it. The French National Railways proposed to build an HSR line from Los Angeles to San Francisco, with funding from an investment bank. By keeping the offer secret, CHSRA indicated that it had something to hide. CHSRA rejected the offer and instead launched construction with the State taking on 100% of the risk.
  • In the absence of a realistic funding plan involving the private sector, the HSR project is only a standalone Bakersfield-to-Merced line.
  • No one outside of California would seriously propose to commit $20 billion to a standalone project like this. That amount of money for this project is ridiculous, when its benefits are so modest. For less than 5% of that amount, Central Valley rail service could be made much faster.
  • Transportation projects are judged on their cost/benefit ratio. Because the new plan flunks that test, it is shocking the amount of professional resources that went into proposing it. There is no common sense at CHSRA. They have no commitment to deliver value for the vast amounts of public money they expend.
  • It’s unclear whether the primary purpose of the Project Update is to keep the consultant gravy train in motion, or to avoid having to give back billions of dollars to the feds. What is clear is that this is not a project being proposed on the basis of its merits.
  • Brian Kelly, CEO of CHSRA, stated that, “Once [the project’s] done,” he said, “it will unlock financing to tunnel beneath Pacheco Pass to reach San Jose’s Diridon Station…” Kelly’s assertion that a money-losing service will attract the $14+ billion in private investment needed to connect the Central Valley to San Jose is unsupportable.
  • There is no assurance that the private sector would have any interest in investing in California HSR, if this project were ever completed. Before spending another $15 billion on this Central Valley project, it would be prudent to invite the private sector to indicate what it would be interested in investing in.
  • CHSRA has been actively promoting the concept that HSR is part of the solution to Northern California’s housing crisis. The 2018 CHSRA Business Plan states that one Fresno to San Jose round trip ticket would cost $132. (HSR’s primary patrons have always been expected to be business people.) Even with a monthly discount, these HSR tickets would be far too expensive for daily commuting. Any benefit of lower housing costs would be wiped out by much higher commuting costs.
  • The Project Update acknowledges that the HSR service will not earn its operating costs. That violates an explicit provision of the 2008 HSR Bond measure, which promised voters that no bond funds could be used to build HSR tracks whose operations would require subsidies. While the Update suggests that leasing out the line would get around the bond measure prohibition, it is unclear who would be motivated to lease a money-losing operation.
  • TRANSDEF sued the Air Resources Board over its claim that the HSR project would reduce greenhouse gases (GHGs). That case was lost on a technicality. Now that the HSR project has been downsized to only the Central Valley, there is no legitimacy that the project can produce meaningful GHG reductions. As a result, CHSRA should no longer be eligible for Cap and Trade money. Without that money, CHSRA would have to concede it cannot build this project.
  • The Ridership projections are based on 19 HSR trains per day, per direction. However, only 4 of those trains could connect to trains to Silicon Valley, and 5 more to the northern Bay Area. That makes the ridership projections dubious, with fine-print assumptions hidden away in appendixes. Currently, ACE, the Altamont Commuter Express, can only offer a maximum of 4 round-trips a day and the San Joaquins another 5. If every HSR train were to connect to a train to the Bay Area, that would require the expenditure of many more billions, which have not been included in the HSR cost estimates.
  • The transfer from HSR to ACE will be slow, because of the need to accommodate wheelchairs and luggage.
  • Ridership is highly dependent on passengers arriving by bus from Southern California.
  • Ridership for the Valley HSR line is based on Amtrak-level fares. Every other HSR system in the world charges premium fares. The obvious implication of this assumption is that the ridership was tested using the fares proposed in the CHSRA 2018 Business Plan. Those ridership projections must have been so dismal that they were unusable. Using Amtrak fares for Valley HSR is a tacit admission that the ability to travel at high speeds is not valued by the Central Valley travel market.

TRANSDEF is now, and has always been a strong supporter of HSR in California. Since 2004, however, we have objected to the direction this project has taken. We know that the private sector wants to invest in passenger rail in California, but have been blocked by politicians for whom delivering rail service to the public is a low priority.

TRANSDEF believes the time has come to put this project to sleep. It serves no valid public purpose. We have done what we could to prevent the $5 billion of waste: We have been in litigation with CHSRA for the past 11 years, trying to stop the project. An appeal of an adverse court decision in our constitutional challenge is currently underway.

One of the great challenges in project management is the sunk cost fallacy. Once money has been spent with disappointing results, it is foolish to spend more money to make the initial decision to spend look reasonable. It is far better to cut one’s losses.

As an absolute minimum, the public deserves a “mistakes were made” acknowledgement by someone responsible. In a just society, such people would be held accountable for their actions.

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