A lesson for Auckland on rail, from California

Politicians, mostly of the left, love train sets. They must have been deprived as children with their parents refusing them Thomas the Tank?Engine toys.

In California the state has been funding a massive boondoggle, a high-speed train between San Francisco and Los Angeles.

California’s high-speed rail project increasingly looks like an expensive social science experiment to test just how long interest groups can keep money flowing to a doomed endeavor before elected officials finally decide to cancel it. What combination of sweet-sounding scenarios, streamlined mockups, ever-changing and mind-numbing technical detail, and audacious spin will keep the dream alive?

Sold to the public in 2008 as a visionary plan to whisk riders along at 220 miles an hour, making the trip from San Francisco to Los Angeles in a little over two and a half hours, the project promised to attract most of the necessary billions from private investors, to operate without ongoing subsidies and to charge fares low enough to make it competitive with cheap flights. With those assurances, 53.7 percent of?voters said yes to a $9.95 billion bond referendum to get the project started. But the assurances were at best wishful thinking, at worst an elaborate con.

Like all train proposals it is a massive con. ?

The total construction cost estimate has now more than doubled to $68 billion from the original $33 billion, despite trims in the routes planned. The first, easiest-to-build, segment of the system — the ?train to nowhere? through a relatively empty stretch of the Central Valley — is running at least four years behind schedule and still hasn?t acquired all the needed land. Predicted ticket prices to travel from LA to the Bay have shot from $50 to more than $80. State funding is running short. Last month?s cap-and-trade auction for greenhouse gases, expected to provide $150 million for the train, yielded a mere $2.5 million. And no investors are lining up to fill the $43 billion construction-budget gap.

Just like the rail-loop in Auckland. It was a marginal idea at the original cost; now it is a bat-shit crazy idea at more than double.

Now, courtesy of Los Angeles Times reporter Ralph Vartabedian, comes yet another damning revelation: When the Spanish construction company Ferrovial submitted its winning bid for a 22-mile segment, the proposal included a clear and inconvenient warning: ?More than likely, the California high speed rail will require large government subsidies for years to come.? Ferrovial reviewed 111 similar systems around the world and found only three that cover their operating costs.

This research should surprise no one who pays attention. Even advocates acknowledge that almost all high-speed rail systems need ongoing subsidies.

As will the train system in Auckland. Even Wellington’s train system is massively subsidised.

The high-speed rail project is a classic example of how concentrated benefits and diffused costs shape public policy, even when the general public has a direct say. Back in 2008, the bond referendum faced no organized opposition. Voters might have preferred that the money go to schools, parks, roads, social services or even local trains, but those alternatives weren?t on the ballot. It was an up-down vote on whether to let a tiny bit of tax money per person go to fund a really cool train — and all the companies that would work on building it. Voters looked at the streamlined concept images and thought, Wouldn?t that be great? Whoosh!

But a closer look even back then would have made it clear that, barring a miracle, the rail project wouldn?t keep its promises. To do so, it would have to be the fastest, most popular bullet train in the world, with many more riders per mile and a much greater percentage of seats occupied than the French and Japanese systems — a highly unlikely prospect. Yet only the most determined wonk would have discovered these comparisons.

Some of those who knew better still succumbed to the glamour of the idea. ?There’s something undeniably alluring about a bullet train — the technology is so powerful, the speed so breathtaking, it makes quotidian trips seem exotic,? opined the Times’s editorial board in October 2008. Admitting that ?it seems close to a lead-pipe cinch that the California High-Speed Rail Authority will ask for many billions more in the coming decades, and the Legislature will have to scrape up many millions of dollars in operating subsidies,? it nonetheless concluded that ?we still think voters should give in to the measure’s gleaming promise.? Give in they did.

Like many large projects promoted by the body that has to pay for it, the assumptions and business cases are decidedly dodgy. Ultimately, it is the ratepayers and taxpayers who have to pay, and pay, and pay….long after the idiots who promoted the scheme disappear.

Eight years later, the legislature is getting antsy. Last month, the state assembly unanimously passed a bill?requiring that the authority provide clearer statements of route changes and projected expenses, including borrowing costs. The state senate will hold a hearing on the bill Tuesday.

The measure sounds like basic democratic hygiene. But it?s a big deal. “It is the awakening of the magnitude of the issue in front of us,? the bill?s sponsor Jim Patterson, a Republican from Fresno, told the Times. “The project has moved from spotty opposition in the legislature to growing concern.?

Lieutenant Governor Gavin Newsom, the first announced candidate for governor in 2018, has said that barring something ?really significant,? he can?t see taking the money from other infrastructure projects. The officials who have to make the budget tradeoffs that weren?t on the ballot in 2008 are finally pushing back. The question now is when they?ll have the guts to pull the plug.

Sometimes you have to deliver a political brick-in-the-face to these politicians before they will take notice…or you end up with a Brexit situation.


– Bloomberg