First, the good news. The California transit and environmental community is beginning to unite around high speed rail and Proposition 1A. Last week the board of the Transit Coalition, based out of Southern California and usually focused on improving Metrolink and Metro Rail, unanimously voted to endorse Prop 1A. One of the major statewide rail advocacy groups is about to finalize its Yes on 1A endorsement, and tomorrow we expect one of California's leading environmental groups to announce its strong endorsement of 1A as well. Apologies for the lack of specificity on the latter endorsements, but the specifics are embargoed until tomorrow, when you'll see much more detail and analysis from me.
We already knew that the CA Chamber of Commerce opposed Prop 1A, for reasons that are backward and nonsensical - after all, we already used part of the state's bond capacity in 2006 to pay for "other priorities" such as new freeway lanes. Time for passenger rail to get its share, a share that will reduce congestion and promote economic growth.
That was the "bad" endorsement. The stupid, "wow this makes no sense" endorsement against Prop 1A comes from the Media News Group of papers, which includes the Oakland Tribune and the Contra Costa Times. Their arguments are full of the usual HSR denier claims - it's as if they turned the editorial page over to Martin Engel for a day. Nowhere in the editorial is global warming mentioned, nor energy independence, nor the airline crisis. And on many of their points, they are just plain wrong. The Media News Group editorialists clearly don't know the first thing about the project, and should have remained silent instead of speaking out against the project from a position of profound ignorance.
Some of the most egregious examples:
But the costs, now estimated to be at least $43 billion, are excessive and likely to be far higher before the project is completed.
Does anyone who has followed the saga of the Bay Bridge debacle really believe the high-speed rail system will cost less than $60 billion, or $80 billion?
This is the usual argument from the anti-government crowd, that any government infrastructure project will inherently be so far over budget as to be not worth it at all. But here they show their willful ignorance. The Big Dig and the East Span of the Bay Bridge involved first-of-their-kind engineering that caused the costs to soar. Stupid political meddling - the Massachuetts Legislature in the first case, the mayors of San Francisco and Oakland in the second - also helped drive up costs. But the editorial ignored the numerous passenger rail projects around the country that have come in on time and on budget, including urban rail such as LA's Metro Gold Line extension and Seattle's Central Link light rail.
Further, while some cost overruns are inevitable with the declining dollar and rising construction materials costs, these are likely to be on the order of one or two billion. The 50% to 100% cost increase projections that the editorial throws out there are not only lacking evidence, but lacking credibility.
Besides, the timing couldn't be worse. California has many far more pressing needs. The state faces a huge budget shortfall, a weakening economy, a home foreclosure mess, a drought and the need to expand its reservoir system and repair levees.
Moreover, California's highways are among the worst in the nation. A recent study by the Reason Foundation found that California leads the nation in congestion and ranks among the worst on cost-effectiveness in spending on roads.
We are 48th in the condition of urban interstates, 41st in rural highway conditions and 44th in state highway performance and money spent on maintenance.
Wait a minute. I thought the editorialists just got done telling us how bad government infrastructure projects were. Now they want us to give government the green light to build dams and freeways? The editorialists' hypocrisy is laid bare.
As to the economic problems, high speed rail is a solution to those problems. If job losses are the concern, wouldn't the editorialists support a project that will create 160,000 construction jobs and an estimated 450,000 long-term jobs? If finances are their concern why are they ignoring the Green Dividend and leaving billions on the table? I'm all for rebuilding existing freeways, but why don't we stop the construction of new roads and lanes and rechannel that money into rehabbing what we've already got?
High speed rail will also help solve congestion problems in the Bay Area and Southern California by providing fast commuter service. The grade-separated lines will also allow commuter rail services like Caltrain and Metrolink to achieve faster speeds and quicker travel times - further reducing congestion.
Additional money is expected to come from a federal government that simply does not have it. Backers of the train also believe there will be billions in private investment. Really?
This is perhaps the most blatantly ignorant part of the entire editorial. It never ceases to amaze me how newspaper editorial pages believe that the same practices fact-checking and adherence to basic journalistic standards they enforce on every other page don't seem to apply to the editorials. We have strong indications of interest from members of Congress and from one of the presidential candidates. As to private enterprise, at the June CHSRA Board Meeting a group of potential investors explained the results of their survey of private backers, showing strong levels of interest from the private sector.
Yes, one of those was Lehman Brothers, which just went belly-up. But they weren't the only ones to indicate interest. Companies from SNCF to Alstom to Goldman Sachs all submitted statements of interest. In fact, the current financial crisis actually makes HSR a more attractive investment for capital - instead of being stuck in increasingly precarious financial instruments, or dependent on rapidly fluctuating commodity prices, HSR provides a stable and reliable source of return on investment. Rafael explained this very well in a comment from yesterday's open thread, which deserves to be put on the front page:
paradoxically, institutional investors may now be more - rather than less - interested in the opportunity afforded by California's HSR project.
Since no-one really knows when the US housing market will stabilize, lenders will be reluctant to pump more money into it for quite some time. Meanwhile, falling house prices and a low savings rate mean that US consumers will be keeping their wallets closed, which will depress stocks. On the other hand, US treasury bonds generally feature low yields.
As an investment, HSR should fall in-between these extremes of risk and reward, which makes it an attractive proposition for institutional investors. However, CAHSR still needs to make that case in a prospectus.
Exactly. Back to the editorial:
Making matters worse, Union Pacific Railroad has told the state's High-Speed Rail Authority it won't sell its rights-of-way for the planned 700-mile bullet train network.
The Authority never counted on that ROW. The plan was always to follow the UP route, up to but not over the ROW itself.
Even if the $43 billion were on hand, it would be a colossal mistake to spend it on a high-speed rail system that is likely to cost riders more than airline service and have the same security issues as airports.
More important, the number of potential riders simply does not justify the costs. The money would be far better spent on highways, schools, reservoirs and levees.
The current estimate is that a ticket on HSR from SF to LA will cost around $55. You can't get that cheap a ticket on the airlines unless you buy early and get a really sweet deal. Further, it is highly unlikely that airfares will remain where they're at. The airline crisis is already driving carriers to raise fares and fees, cut back on flights between LA and SF, and in some cases go out of business entirely. As oil prices continue to rise it is likely that airfares will cost MUCH more than an HSR ticket.
As to "number of potential riders" the editorial gives no specifics here, but soaring ridership on California passenger trains should suggest the silliness of that particular argument.
Not content with being in a deep hole, the editorialists keep on digging:
California already has a huge bond debt to pay off and certainly cannot afford to add tens of billions debt on such a questionable project.
The only kind of "good" bond debt is infrastructure bond debt, where money is borrowed to build infrastructure that lasts beyond the life of the bond, creating long-term value and spurring economic growth. HSR certainly fits that model. Should we not have built the bay bridges during the Depression? Should we not have built the State Water Project during a recession? The nonpartisan Legislative Analyst already determined the budget can afford Prop 1A. So what exactly are these editorialists talking about?
One might think by now that the high-speed rail plans for construction, operation and investment have been worked out in great detail with considerable confidence in their success. Even after spending $58 million over a decade in planning, that is decidedly not the case.
Yet voters are being asked to finance the fantasy of duplicating a 200-plus mph rail system like the one in Japan or France through the Central Valley.
But those plans ARE worked out in great detail - or do the editorialists not know how to read an EIR? Their use of "the Central Valley" is a deliberate attempt to mislead readers - the HSR line will run through much of the Bay Area and Southern California as well. There are plenty of low-population rural spaces the French TGV runs through as well, same with the Spanish AVE - California's proposed system compares quite favorably to those successful trains.
Embarking on this rail system would be highly questionable at any time, but it is particularly irresponsible now. California is in financial trouble and is in need of massive investment on a number of far more important projects.
We trust voters will place reality ahead of fantasy and soundly reject Prop. 1A's Boondoggle Express.
California is in financial trouble because we misinvested our money on a deluded and ultimately failed attempt to prolong the 20th century. The surest way to dig our financial hole deeper is to ignore environmental, energy, and economic realities and refuse to invest in the only transportation system that can thrive in 21st century conditions. We need massive investment in passenger rail if our cities and our economy is to thrive.
We trust voters will place reality and facts ahead of ignorant nonsense and soundly reject the Media News Group's stupid editorial. Instead voters will embrace Prop 1A, embrace high speed rail, and embrace the future.