Taking a $4 Billion Train to Nowhere

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For two decades, such political leaders as former Gov. Gray Davis and Gov. Arnold Schwarzenegger have promoted high-speed rail as a key to California’s economic growth. Conceptually, they probably would be correct – if high-speed rail could be built relatively quickly at minimal expense and would have the traffic necessary to make it sustainable.

Today, however, the fiscal crisis in California (estimated to be $100 billion over the next five years) leads to the conclusion that high-speed rail is unlikely to get any further state subsidies, and if any are available, they will come at the expense of the greater needs of highway maintenance and mass transit. This includes L.A.’s ambitious but economically feasible mass transit plan supported by Mayor Antonio Villaraigosa.

Recently, the governors of Ohio and Wisconsin turned down $1.2 billion in federal subsidies for high-speed rail in their states. They stated that accepting the money would come at the expense of more necessary and immediate needs and would be a long-term drain on strained state budgets because all the operating losses would have to be borne by their states.

Schwarzenegger, in one of his last acts as governor, has approved the first 54-mile leg of the high-speed rail from Borden to Cochran, two small towns in the San Joaquin Valley. This alone will cost up to $4.3 billion. Increasingly it is clear that should this section from nowhere to nowhere be built, it will never be connected to Los Angeles or San Francisco.

The reasons are numerous. First, the cost overruns and delays attributable to environmental and community opposition, including from very affluent Silicon Valley, will more than double the projected costs of $45 billion to $90 billion. And according to the Wall Street Journal, it might go as high as $213 billion. Over 95 percent of this will have to be paid for from state funds. But that is just the beginning of the state’s obligation and does not include annual operating losses.

Second, the estimated costs for a round-trip passenger from Los Angeles to San Francisco will be between $400 to $500 (presently a low-speed Amtrak express train ticket costs $450 for half that distance, between New York and Washington, D.C.). This is more than three times the cost of an average Southwest Airlines flight. Thus, only a few affluent sightseeing tourists are likely to be passengers.

Third, this is not, as Schwarzenegger promised, an economic stimulus and job creator. It is unlikely, even if fully funded, that this project could be completed before 2030. This may be why Republican Rep. Jerry Lewis, Democratic Rep. Dennis Cardoza, as well as state Sen. Alan Lowenthal, D-Long Beach, for a variety of fiscally sound reasons, are opposing this $90 billion “white elephant.”

Fourth, given what the new Congress has already achieved in derailing President Obama’s proposed tax increases on the wealthy, it seems unlikely that either Obama or Congress will fight to give California any additional money.

Fifth, when Schwarzenegger first promoted the high-speed rail, he projected 94 million passengers a year. As the Wall Street Journal recently demonstrated, California will be lucky to get 5 million riders a year. This will therefore impose annual multibillion dollar operating losses that the state would have to pay.

Incoming Gov. Jerry Brown, who is fiscally conservative, has an opportunity to reject the Davis/Schwarzenegger approach and embrace that of Gov. Chris Christie of New Jersey. Christie recently turned down a major federal tunnel subsidy connecting New Jersey to New York on the grounds that the state would be forced to cover the big annual operational deficits.

What Gov. Brown should do is:

• Order an immediate halt to any spending on high-speed rail.

• Investigate appropriate methods of seeking alternative uses for the $10 billion state bond issue approved at Schwarzenegger’s urging; and

• Examine mass transit uses, including joining with the governors of New Jersey, Ohio and Wisconsin in requesting that the federal government allow high-speed rail funds to be deployed for alternative mass transit. This could assist the multibillion Los Angeles mass transit plan that Mayor Villaraigosa has been promoting as essential to L.A.’s future.

If Brown fails to take these actions, California may have to add $5 billion annually in additional debt to cover the annual operational losses as well as having to seek voter approval for an $80 billion bond initiative.

Jorge C. Corralejo is chairman and chief executive of the Latino Business Chamber of Greater Los Angeles.

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