CA auditor warns bullet train project financing “increasingly risky”

posted at 3:05 pm on January 25, 2012 by Ed Morrissey

Few people probably noticed the absence of “high-speed rail” from Barack Obama’s State of the Union speech last night.  The issue took a prominent position in SOTU speeches in 2011, when Obama dedicated five paragraphs to pushing it, and in 2010, when Obama promoted the high-speed rail project in Florida that Governor Rick Scott killed.  Last night’s mentions: zero.

Perhaps the White House didn’t have a good answer as to why their pet rail project in California has become so expensive and bloated that the state auditor issued a warning hours before the SOTU began about its financing becoming so “increasingly risky” that state lawmakers should consider whether to proceed (via Andrew Malcolm):

In the latest in a series of cautionary reports by outside agencies and groups, the auditor’s report finds that the California High-Speed Rail Authority has made some progress in addressing planning and fiscal concerns but still has important work to do to ensure that the project can be built as promised.

“The program’s overall financial situation has become increasingly risky, in part because the authority has not provided viable funding alternatives in the event its planned funding does not materialize,” the auditor’s report says.

The authority has secured $12.5 billion for the first leg — from Los Angeles to San Francisco — of what is planned to be an 80-mile network, according to the report says. But it notes the projected cost of that phase has risen to between $98.1 billion and $117.6 billion.

The auditor warns that the state has no clear way to raise the $105 billion in funding necessary to complete the project, but that’s just half of the problem:

“The success or failure of the program” depends on obtaining up to $105 billion in additional funding, which has not been identified, the report says. It also finds that cost estimates for the initial phase do not include operating or maintenance outlays, which the auditor estimates could total $97 billion between 2025 and 2060.

Supposedly, this will get recouped by fare sales, since the project’s legal foundation requires it to cover its costs without subsidies.  The project estimates 40 million riders a year by 2030, which would mean 1.4 billion boardings during that 35-year stretch.  That’s almost certainly a fantasy; Richard White points out in the link above that BART only achieved 25% of its estimated ridership.

Let’s take that ridership assumption at face value.  That would make the cost of a boarding $70 just to cover ongoing operating and maintenance costs, with the bonds for construction still outstanding and adding interest costs to the state’s commitment.  The principal of $105 billion in bonds would add another $75 per boarding cost to the ticket, bring us — without the interest — to $145 per boarding, or about $290 per round ticket, which is far above what it costs for an airline ticket to make the same trip in less time with more departure and arrival choices.  Even if these riders are assumed to be round-trip fares in the state’s cost analysis (usually that’s expressed as “boardings” and not round trips), the base cost without interest of $145 per round trip is about the cost of airline tickets between the two population centers, which Travelocity prices out at around $149 … without putting taxpayers at risk.

The California high-speed rail project isn’t “increasingly risky.”  It’s increasingly insane.  Small wonder it has disappeared from Obama’s wish list.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

FIRST!

Decoski on January 25, 2012 at 3:09 PM

This thing needs to be put down in its entirety now! I will bet that the money grubbing pigs already have liens on the lands they plan to steal for this route.

bbz123 on January 25, 2012 at 3:12 PM

I’ll bet Solyndra will help with the funding….oh wait, nevermind.

search4truth on January 25, 2012 at 3:13 PM

FIRST!

Decoski on January 25, 2012 at 3:09 PM

BANNED!

fiatboomer on January 25, 2012 at 3:14 PM

I remember when the Light Rail project was under dicussion in Southern California,,, “Oh it will be so safe”….

jake-the-goose on January 25, 2012 at 3:16 PM

Thank God! This pipe dream must end NOW!

captn2fat on January 25, 2012 at 3:16 PM

Next month Italy’s first completely private high-speed railway will begin operations, competing against Trenitalia, the former government railway.

Pretty sad when a socialist (and famously bureaucratic) European country is ahead of the US in the private railway industry.

fiatboomer on January 25, 2012 at 3:17 PM

Californians are now against it 2:1 after having approved it in the first place. Interesting prospect of an anti-bullet train proposition on the same ballot as Obama this November. Going to be a lot of cognitive dissonance going down in the voting booths if that happens.

de rigueur on January 25, 2012 at 3:18 PM

I’m currently on track to leave CA this summer for a better world (AZ). As a resident of CA, I consider this project to be a complete boondoggle and I would never even consider taking a train from LA to SF….it’s a total pipe dream…

Good job, California liberals!! Good job hiring that moron Jerry “moonbeam” Brown!!

powerpickle on January 25, 2012 at 3:19 PM

Texas is looking into this now and talking about a high speed rail train from Dallas to San Antonio.

Which is almost as ridiculous a train route as Los Angeles to San Francisco.

CorporatePiggy on January 25, 2012 at 3:25 PM

“Mr. President! We have just detected an alien invasion currently positioned just beyond Mars! What should we do?”

“Have we completed our high-speed rail system yet?”

“What?!? Mr. President, I don’t think you understand…”

“I heard you! Aliens invading, probably here to steal our oil. And I say the answer is high-speed rail! There is nothing high-speed rail won’t solve! Have you not listened to my speeches?”

“Mr. President…”

“No excuses! I want to know where we are on the completion of our high-speed rail system and if it will be done in time to stop these oil thieves.”

“Mr. President…”

“Enough! Do you want to be the one to tell the American people we failed to stop these oil thieving aliens because we failed to have the proper hardware and systems in place? Do you?? Now get me the latest report on the progress of our high-speed rail system and let’s get to work!”

“…”

“By the way. Which high-speed rail line discovered the alien invasion?”

NotCoach on January 25, 2012 at 3:25 PM

Now all that flush-him-down-Brown needs to do is to come up with slick commercials for his super stupid voters , with a narrative that the evil stingy rich people don’t want poor people to have the luxury of HSR because they are racists and they eat little puppies …….
and bingo just like magic, he will have public support as well as fed money by Nov.
Maybe he is already planning to do so !

burrata on January 25, 2012 at 3:25 PM

The entire project is a study in how crony capitalists manipulate politicians and those politicians don’t either want to or aren’t smart enough to see through the phony numbers.

The rail authority has relied heavily on New York-based Parsons Brinkerhoff, a contractor that helped fund the political campaign for the $9.9-billion bond measure passed by voters in 2008. In October, Parsons submitted the analysis that came up with the $171 billion, a number Parsons says it would cost to expand road and air infrastructure to handle the increased traffic between LA and San Francisco. That $171 billion initially appeared in the authority’s draft business plan released Nov. 1. In the study, Parsons first estimated how much passenger capacity the system would have at completion in 2033 and then calculated the cost for providing the same airport and highway capacity.

Parsons said the high-speed rail system could carry 116 million passengers a year, based on running trains with 1,000 seats both north and south every five minutes, 19 hours a day and 365 days a year. The study assumes the trains would be 70% full on average.

I doubt even the NY/DC Amtrack runs anywhere near those levels. If this is the level of thinking that went into the entire study, we should expect the cost to come in a three times the current estimate of $117 BILLION!

svar42 on January 25, 2012 at 3:26 PM

Ed, I’ve written this before, but it wouldn’t matter even if high speed rail could be done at a reasonable price–it can’t work in this country. I live in Atlanta, home of the world’s busiest airport. Dozens of flights come in and out every hour. Meanwhile our Amtrak station has two trains going through–one westbound to New Orleans and the same line in reverse going northbound to NYC. That’s quite a decrease from the heyday of passenger rail, but still there is no way a rail system could handle intercity passenger demand at any increase of speed or service. It doesn’t matter how fast the damn trains are; there is still just one track and thus there couldn’t possibly ever be enough trains even to take the place of just the Atlanta to New York air traffic.

radjah shelduck on January 25, 2012 at 3:27 PM

Yeah, but I bet they have some cool videos that make it look real pretty and real fast – full of CGI people.

sdbatboy on January 25, 2012 at 3:30 PM

“Increasingly risky”

I guess to socialist democrats that means it’s a go.

darwin on January 25, 2012 at 3:34 PM

Welcome powerpickle

cmsinaz on January 25, 2012 at 3:35 PM

That is what Californa needs, a land based proprietary high speed transport in earthquake country, pretty much following the fault line

The mistake was not making it solar powered.

“The program’s overall financial situation has become increasingly risky, in part because the authority has not provided viable funding alternatives in the event its planned funding does not materialize,” the auditor’s report says.

So they were planning on the funding materializing?

entagor on January 25, 2012 at 3:37 PM

Small wonder it has disappeared from Obama’s wish list.
No way , nothing ever disappears from Obama’s wish list. He is known to hold grudges from 2 generations past,and act on them. This man doesn’t let go of anything. If he knows it will destroy America, he will do it .It may take him some time , but he will do it.
Please do not underestimate his deviousness.

burrata on January 25, 2012 at 3:37 PM

Small wonder it has disappeared from Obama’s wish list.

No way , nothing ever disappears from Obama’s wish list. He is known to hold grudges from 2 generations past,and act on them. This man doesn’t let go of anything. If he knows it will destroy America, he will do it .It may take him some time , but he will do it.
Please do not underestimate his deviousness.

( sorry I’m still learning )

burrata on January 25, 2012 at 3:38 PM

I voted ‘No’ on this scam when it first appeared on the ballot. I knew then it would never ever even come close to being on budget or ‘possibly less than proposed’ (which was one of the pushing points made in ad’s to get the bond measure passed). I also knew it was a useless project to begin with and that it would never ever be able to recoup costs relying on fares to do so. The operating and maintenance overhead alone after this monumental boondoggle was built would make that impossible on its own accord even if massive numbers of people actually used it.

I don’t know why Californian’s is so keen on these utterly insane and deeply disingenuous liberal Democrat politicians who are hell bent on destroying this State and keep reelecting them… but they are and they do. I can’t explain it. I only drink filtered and bottled water and never straight tap so maybe that’s it. I just don’t know otherwise.

SD Tom on January 25, 2012 at 3:41 PM

Thank heavens I live in San Diego where the moonbats are outnumbered…at least for now…

Strike Hornet on January 25, 2012 at 3:43 PM

I noticed it was missing… that was one of the items on my list for the sotu drinking game.

maineconservative on January 25, 2012 at 3:44 PM

Perhaps the White House didn’t have a good answer as to why their pet rail project in California has become so expensive and bloated

Sure they did. The blame lies where it always has for any and all Leftist policy failure: somewhere else.

Progressive policy can never be the problem. That’s because (in the mind of the Left) Lefties and their cohorts have good intentions. Intentions and self-congratulation are all the matters. Results past stage one are irrelevant at best.

Ever wonder why almost everything the Left gets control of eventually turns to crap? Education, energy, the economy, criminal justice system, etc.

visions on January 25, 2012 at 3:44 PM

The California high-speed rail project isn’t “increasingly risky.” It’s increasingly insane.

So what is it about any of this that would stop them? When the really destructive affects of all the obscene and insatiable overspending start to kick in, the “heroic” big spenders will be safely ensconced in the great beyond so they already know they won’t have to deal with it.

stukinIL4now on January 25, 2012 at 3:46 PM

Let’s see, insane, risky, certain to fail, will lose billions, force taxpayers to subsidize for decades and is not shovel ready. Sounds like an Obama Administration project to me.

Smedley on January 25, 2012 at 3:48 PM

My partners and I are working on a plan for High Speed Rail from the ports of Los Angeles to Albuquerque, with a spur line to Phoenix….

For freight.

Freight delivery from LA to Albuquerque in a little over four hours, where the freight would then be loaded onto conventional means of transportation.

The rail right-of-ways are already in place, with phase II consisting of lines from Albuquerque to Denver, St. Louis, Chicago and Dallas.

Our project will be privately financed and operated.

$

MichaelGabriel on January 25, 2012 at 3:49 PM

“The auditor warns that the state has no clear way to raise the $105 billion in funding necessary to complete the project, but that’s just half of the problem:”

Where’s that damn post where I said the $98B was still low by a third to a half. It’s not been two months and we’re broaching numbers $117B.

I need to revise my comment to $200B before the end of 2012.

Serious, these people have no clue how low they are on the cost.

Dusty on January 25, 2012 at 3:57 PM

Full speed Ahead!!!!!
/current logic.

ted c on January 25, 2012 at 3:57 PM

I think we should bring back the horse and buggy, I like horses.

Cindy Munford on January 25, 2012 at 4:00 PM

I’m currently on track to leave CA this summer for a better world (AZ). As a resident of CA, I consider this project to be a complete boondoggle and I would never even consider taking a train from LA to SF….it’s a total pipe dream…

Good job, California liberals!! Good job hiring that moron Jerry “moonbeam” Brown!!

powerpickle on January 25, 2012 at 3:19 PM

I’m not far behind you. I just haven’t figured out what red state I want to move to yet. It will definitely be a red state, though. I refuse to live in another blue state.

daddysgirl on January 25, 2012 at 4:01 PM

Perhaps the White House didn’t have a good answer as to why their pet rail project in California has become so expensive and bloated

Bush, of course. And/ or the evil do nothing obstructionist Republican Congress.

talkingpoints on January 25, 2012 at 4:04 PM

Train, shmain. I’m expecting Gates and Buffett to send me the share-the-wealth check any day now. I’m looking into a nice view property in Pacific Palisades, knowing that that check is on the way.

Why don’t we just make the billionaires fund the high-speed train?

J.E. Dyer on January 25, 2012 at 4:08 PM

I think the government will just keep sailing along with the idea:
DAMN THE TORPEDO’S!… FULL SPEED AHEAD!

KOOLAID2 on January 25, 2012 at 4:12 PM

I’m currently on track to leave CA this summer for a better world (AZ). As a resident of CA, I consider this project to be a complete boondoggle and I would never even consider taking a train from LA to SF….it’s a total pipe dream…

Good job, California liberals!! Good job hiring that moron Jerry “moonbeam” Brown!!

powerpickle on January 25, 2012 at 3:19 PM

I’m not far behind you. I just haven’t figured out what red state I want to move to yet. It will definitely be a red state, though. I refuse to live in another blue state.

daddysgirl on January 25, 2012 at 4:01 PM

I escaped from California to East Texas this past fall. I’m loving it.

trigon on January 25, 2012 at 4:13 PM

“How will we ever get people to pay that much to ride a train?”

We’ll ban cars.

Dack Thrombosis on January 25, 2012 at 4:17 PM

Thank heavens I live in San Diego where the moonbats are outnumbered…at least for now…

…until our insane districting comes into play during elections. Take a look at our congressional maps for a good laugh. Especially the 51st District. There’s a reason Republicans don’t get elected here.

Oh, and Brown has already said he doesn’t care that the High Speed Rail Review Board, which he hand-picked says this plan is insane. He is plowing ahead with plans for another ballot measure and desperately hoping for an Obama 2nd-term bailout.

We are sliding toward Greece very quickly out here….

Dave in San Diego on January 25, 2012 at 4:17 PM

MichaelGabriel on January 25, 2012 at 3:49 PM

I wish you all of the success in the world. Now if the company you work for starts seeking government dollars…go to Hell? Does that cover it?

NotCoach on January 25, 2012 at 4:18 PM

I escaped from California to East Texas this past fall. I’m loving it.

trigon on January 25, 2012 at 4:13 PM

Texas is one of the states I am considering. I have family there (Dallas, Austin, Aquilla, and Gholson), which makes it even more attractive to me.

daddysgirl on January 25, 2012 at 4:19 PM

MichaelGabriel on January 25, 2012 at 3:49 PM

LTL, TL, Transportation Manager experience. Mobile web, web programming and more…..

I’m in…need help in any way?

oldroy on January 25, 2012 at 4:22 PM

Yep, I bugged out of my home state just last week, Good Bye Cali, Hello Colorado Springs! No jobs, too many illegals, And a horribly socialist elected body,I couldn’t take it,
Bob

Bobnormal on January 25, 2012 at 4:22 PM

When the state was already broke, California voters approved a spending initiative for this nonsense to the tune of $10 billion dollars. California voters aren’t just the dumbest voters in America; they’re the dumbest voters of any free country on planet Earth.

Django on January 25, 2012 at 4:24 PM

MichaelGabriel on January 25, 2012 at 3:49 PM

Errr…and being from Albuquerque….you’re talking about existing lines to Belen as a hub? Not actually Albuquerque?

oldroy on January 25, 2012 at 4:29 PM

Really! What a surprise. I could have told them that. That is one of the problems with Gov’t, they have NO CLUE!!

rjoco1 on January 25, 2012 at 4:32 PM

Strike Hornet, while you might be technically correct about the moonbats still being the minority in San Diego, I’m not sure it matters. They dominate the state, and through it the counties and cities, on key issues like enviro-fascism, anti-business regulation, etc. – not to mention niche outrages like gun laws and recreational regs.

And don’t forget the most corrosive, pernicious element of the current CA scene (now replicated in many other places) – the destruction of public service, and its replacement by self-dealing, closed-loop coercion and corruption (public sector unionization feeding one party that then gives it anything it wants). The corrosive aspect is most horrifying in the public safety area – it’s very hard to view police, firemen, or paramedics the same way as before when one knows the financial situation and how it got that way.

Strike Hornet did you hear the radio ads a while back by firefighters basically warning the public not to sign petitions to put pension reform on the ballot? Jaw-dropping in so many different ways there’s no time to even outline them here.

If not for this being the nicest place in the continental US, I’d have been gone years ago. “I just live here” is about as far as I can go in caring about what the cretinous coastal clueless have done to this state in just 30 years.

IceCold on January 25, 2012 at 4:33 PM

Train, shmain. I’m expecting Gates and Buffett to send me the share-the-wealth check any day now. I’m looking into a nice view property in Pacific Palisades, knowing that that check is on the way.

Why don’t we just make the billionaires fund the high-speed train?

J.E. Dyer on January 25, 2012 at 4:08 PM

There you go. Make the slob Buffett build the high-speed rail with all the filthy excess profits he is accumulating from hauling oil from Canada.

slickwillie2001 on January 25, 2012 at 4:45 PM

I wish you all of the success in the world. Now if the company you work for starts seeking government dollars…go to Hell? Does that cover it?

NotCoach on January 25, 2012 at 4:18 PM

We would rather see it fail than accept a dime from the Looters.

LTL, TL, Transportation Manager experience. Mobile web, web programming and more…..

I’m in…need help in any way?

oldroy on January 25, 2012 at 4:22 PM

Maps. Specifically bridges that will need to be replaced, & com infrastructure.

Estimate cost: $3 billion.
Estimated completion time: 30 months

MichaelGabriel on January 25, 2012 at 4:50 PM

Errr…and being from Albuquerque….you’re talking about existing lines to Belen as a hub? Not actually Albuquerque?

oldroy on January 25, 2012 at 4:29 PM

Yea. Belen sounds good. With the new space port comming on line, it’s a good location for a high tech transportation hub.

http://www.mapsofworld.com/usa/states/new-mexico/new-mexico-railway-map.html

MichaelGabriel on January 25, 2012 at 4:55 PM

Maps. Specifically bridges that will need to be replaced, & com infrastructure.

e…mail…address

Can do. Drop me a line at the mail link above.

oldroy on January 25, 2012 at 4:59 PM

High speed rail, unicorn farts, pixie dust, whatever it’s only other peoples money
/s

D-fusit on January 25, 2012 at 5:00 PM

Mail

MicaelGabriel….Try this one above.

oldroy on January 25, 2012 at 5:14 PM

There’s one problem for Kalifornia, they spent the federal funds on college for illegal immigrants children! So now what do they do? /sarc

angrymike on January 25, 2012 at 5:32 PM

Power pickle
your one of the lucky ones who can get out!

angrymike on January 25, 2012 at 5:34 PM

You can rent a car and drive from LA to SF for cheaper which is what most people will do. There is no way there will be 40 million riders a year by 2030 or ever.

Dollayo on January 25, 2012 at 6:06 PM

I’m currently on track to leave CA this summer for a better world (AZ). As a resident of CA, I consider this project to be a complete boondoggle and I would never even consider taking a train from LA to SF….it’s a total pipe dream…

Good job, California liberals!! Good job hiring that moron Jerry “moonbeam” Brown!!

powerpickle on January 25, 2012 at 3:19 PM

As an Az resident, I say ‘welcome’. It would be nice if Arizona, Nevada, and Utah could assimilate only the conservative taxpaying citizens from California, leaving Liberals to pay for all of their stupid comic-book-plans-on-world-domination.

….

The auditor warns that the state has no clear way to raise the $105 billion in funding necessary to complete the project…

Sure there’s a way: raise taxes 1,000,000,000% on the few remaining rich white non-liberals! They’ve got so much darned extra money, it just ain’t fair!

/sarc

….

.. about $290 per round ticket…

Why else would Present SippyCup kill the Keystone Pipeline & suppress all local energy production? He WANTS $10/gallon to FORCE people to ride his Skittle-pooping Unicorns!

SnarkySam on January 25, 2012 at 6:10 PM

I’m currently on track to leave CA this summer for a better world
SnarkySam on January 25, 2012 at 6:10 PM

I might join you in leaving CA. I love the weather but the liberals here are becoming fanatical about their liberalism. It’s amazing how they think that everyone owes them something. They demand stuff as if it’s their right for others to support them. They are like spoiled teenagers.

Dollayo on January 25, 2012 at 6:29 PM

I am plotting my escape from California. BTW, no one I know will use the new train. We already have AmTrack and only those scared to fly use it. What an extreme waste of time, money and resources.

FireBlogger on January 25, 2012 at 8:13 PM

If it will save $$ off my 20 minute flight to LA or my 75 minute flight to SF…I’m all for it. SD to SF is about $150 RT….I’m sure my great state can improve upon Southwest’s or United’s fare structure and bring a profit to the state treasurer.
Since the airport here is just a couple of miles from the train station (which does not have parking), the local travel distance argument does not hold up. As for TSA…guess we are lucky here, they are pretty mild. Sorta like dealing with the transients sleeping in the train station. Anyway…time is money. Money is profit (sorry Newt). Profit = jobs. I’m flying!

oceansidecon on January 25, 2012 at 9:32 PM

Serious, these people have no clue how low they are on the cost.

Dusty on January 25, 2012 at 3:57 PM

FIFY.

Kenosha Kid on January 25, 2012 at 11:12 PM

High Speed Fail

Dandapani on January 29, 2012 at 6:21 PM