Sunday, April 20, 2008

SF Chronicle Kinda, Sorta Gets it on HSR

NOTE: We've moved! Visit us at the California High Speed Rail Blog.

The San Francisco Chronicle weighs in today on the HSR proposal with an editorial that makes some very good points as well as some real headscratchers. Given how important this project is to San Francisco, the Chronicle's support is welcome, but it would be nice if they showed a better grasp of the project.

Legislators were waiting for the perfect storm of budget solvency and economic growth, thinking that this might help the bond pass. Apparently they've realized that California's budget woes aren't going to get better before gas prices and global warming get worse: The bond measure should finally be on the ballot this November.

It's good that the Chronicle agrees the bond measure should be on the ballot, but let's be clear why it wasn't on the ballot in 2004 or 2006 - Arnold Schwarzenegger didn't want it there, as it would have competed with his other bond priorities. If the governor had shown better leadership perhaps HSR bonds could have been enfolded within the 2006 infrastructure bonds - few seem to have batted an eye at $42 billion in bonds then, so what's another $10 billion going to hurt?

Our skepticism about the rail measure remains. It's going to be an extraordinarily expensive project, with costs projected to be at least $40 billion. If it's not done right, it could be both environmentally degrading (it will pass through ecologically sensitive areas) and financially crippling (cost overruns seem inevitable) for the state of California. There have been successful examples of government-run high-speed rail projects (France), but there have been unsuccessful examples too (Japan).

Unfortunately the Chronicle editorial doesn't note the far larger expense of doing nothing. $80 billion in airport and freeway expansion to handle the expected demand isn't exactly a better use of money than a $10 billion bond. The environmental damage from HSR construction is likely overstated (especially if the ROW hews close to Highway 152 in the Los Banos region, by far the most tricky part of the line). And while the Japanese Shinkansen system has gone through some reorganizations, it has been successfully operating HSR for over 40 years. Moreover, there are MANY more government-run HSR success stories - Spain, Germany, and Taiwan all have extremely successful government-run systems.

The high stakes probably account for a great deal of the legislators' hesitation: No one wants to be responsible for a boondoggle. Still, with a troubled national airline system, $4-a-gallon gas, and even President Bush offering goals to combat climate change, the rail system is a risk we can't afford to not take.

All of this is dead-on. While I do not believe HSR is nearly as risky as the Chronicle editors do, they are absolutely right that we cannot afford to not build this system. They do understand that rising gas prices are calling into question our state's reliance on freeways and airlines for intrastate travel - and the airlines are becoming more and more troubled (they're now skimping on fuel). And the Chronicle, unlike nearly every other media outlet that has recently assessed HSR, mentions climate change as a reason to build HSR. I have begun to wonder if HSR's critics even believe in global warming, so it's welcome to see one of the state's leading newspapers making the obvious link between HSR and action on the climate.

The editorial goes on to discuss Cathleen Galgani's bill that would enable more public-private partnerships, something the editorial authors believe is necessary to mitigate high costs:

Forty billion dollars would be a lot to ask from California taxpayers in good times; in a recession it doesn't seem politically feasible.

Except that nobody is asking California taxpayers for $40 billion. Instead the bond plan is for $10 billion, and most of the remaining balance will likely be coming from the federal government, with private investors helping to finish out the overall project cost. Cost overruns are inevitable, especially in this era of rampant inflation and a collapsing dollar - but California voters are only being asked to pony up a quarter of the overall cost. Seems like a good deal to me.

The editorial closes on this excellent note:

And California has already spent enough time hesitating over the rail system - we urge the governor to work with the Legislature to make the current proposal the best that it can be for the environment, the taxpayers, and those who will ride the rail in the future.

I could not agree more strongly. The more we delay, the higher the cost will become, and the longer our state will be shackled to an obsolete and economically ruinous oil-based transportation system.


Anonymous said...

If the project experiences cost overruns, neither Congress nor private investors will volunteer to cover the shortfall. If the total cost rises by 25% - entirely within the realm of possibility - CA voters might well have to approve a second $10 billion bond to cover the shortfall. Add in financing costs and the small fry starts to add up, even if the cost is spread out over 30 years.

Remember that politicians and contractors often collude in underestimating the true cost of infrastructure projects - road, rail, you name it - because once voters are in for a penny, they are in for a pound. If they confess to the true cost of a major project up front, voters may well kill it before ground is broken (cp. maglev in Munich).

If Californians reject the HSR bond, they will be asked to pay for additional runways at remote secondary airports plus additional freeways to get there. And they would surely get bilked by those contractors as well.

Ergo, cost alone should not deter voters from giving HSR the nod. Ironically, a recession is actually the best time to take out a long-term public works bond. However, everyone is still so focused on whether there should be an HSR system at all that some early warning signs are being ignored.

For example, the CHSRA has quietly entered into an agreement to "share technology" with Alsthom but afaik not with competitors like Siemens, Bombardier or Talgo. HSR systems require much closer integration between rolling stock, track and catenary design than regular speed rail does. Don't be surprised if the formal tender - which cannot take place unless voters approve the bond - will turn out to be a less than level playing field.

Considering the sums in play, voters should insist on formal oversight of CHSRA manages the implementation phase, by a group of highly visible *elected* officials. Their job would not be to make technical or management decisions but rather, to enforce proper project comptrolling. Apparently, Messrs. Kopp and Diridon don't have spotless track records when it comes to financial discipline.

Robert Cruickshank said...

It's not at all clear to me that Congress would refuse to cover the shortfall, although it would not be easy to get them to do it. Rising costs would likely be paid through some mixture of increased private involvement and further bonds or taxes. Of course, Californians didn't bat an eye when bridge tolls in the Bay Area were hiked to $4 to cover the cost increase on the east span of the Bay Bridge.

I don't see any evidence of collusion to hide costs here, and maglev, as a new and mostly unused technology, is far more susceptible to massive cost overruns. The cost overruns we'll experience here will instead be due to soaring inflation and a weakening dollar - and the CHSRA has zero control over either one.

I don't think the CHSRA's decisions have all been good ones, and this blog has been critical of the possibility of building the system in pieces and especially the role of private financing. I'm less familiar with their agreement with Alstom but things like that are definitely to be watched over by folks like us and by state legislators.

Anonymous said...

You know, for all the people who worry about the cost (and time) overruns of this program, they never compare it to another, much larger infrastructure project. It's one ground transportation project many HSR foes think we should continue to rely on exclusively instead of HSR: The Interstate Highway System.

The initial cost estimate for the system was $25 billion over 12 years; it ended up costing $114 billion (adjusted for inflation, $425 billion in 2006 dollars and taking 35 years to complete.

'Nuf said. Not that HSR should strive for this kind of waste, but a project can still be worth doing even with cost and time overruns (you know, like costing 17 times more than estimated and taking 3 times as long!)

Robert Cruickshank said...

davisgrad, those are awesome numbers. Hardly anyone batted an eye at those cost overruns either - it's only rail that isn't allowed to overshoot initial cost projections.

And of course, what of the cost of not building HSR? Even if California taxpayers were on the hook for another $10 billion in overruns (which I don't see as being a likely figure) would that be more expensive than the cost to Californians of having to drive and fly around the state?

Rubber Toe said...

This ties in with the previous commentary you made Saturday. You ask about the cost of not building the HSR. As I see it, that question needs to be one the the primary 4 or 5 selling points, in addition to the ones listed below...

- Congestion relief
- Job creation/economic growth
- System profitability
- Environmental benefits

I can absolutely guarantee you that the cost of the system will be the #1 item hammered away at in the negative ads. We are $18 billion short in the budget coming up this July. People are going to say that we can't afford this at this time. Thats part of the reason why it was pulled the last 2 times.

$40 billion is an astonishing amount of money. As a matter of fact, it is beyond most peoples ability to grasp. Very easy to turn into a negative ad, especially in tough economic time, telling people that they will have to pay higher taxes to pay that debt off.

IMO, the pro-HSR effort has to show the cost with respect to the other options for moving people around. Tell people what expanding the highway system or expanding the airports would cost in comparison.

The commercial writes itself...

"HSR detractors would have you believe that the HSR is a financial boondoggle that is unaffordable and unnecessary for the State of California. What they aren't telling you is that the expanding population of California will require some way to get around in 2030. We can expand the airports (video of smoke belching planes lined up) at a cost of $5-$10 billion each, or we can expand the highways (video of bumper to bumper 405 traffic), but these have proven to be ineffective solutions in the past. Or, we can build a modern, pollution free high speed train system (shots of ICE train or TGV streaking past bumper to bumper cars) like those being rapidly constructed in Europe and China..."

Then go on to hit on several of the original points that you listed while the train video is rolling in the background. The vast majority of people have no idea what HSR is, let along having never ridden on one. The commercial needs to educate people not only about the proposition, but also about the experience versus the planes or cars. You get the idea.


Robert Cruickshank said...

Exactly. Show voters that the cost of not building HSR far outweighs the cost of actual construction. I agree with you that the "affordability" question is indeed going to be the #1 issue for us to deal with and I very much like your recommended approach.