China Still Interested in CA HSR – But So Are Others
A few weeks back, a group of political and business leaders from the East Bay traveled to China for economic development meetings. One common topic was the NUMMI auto manufacturing plant in Fremont that closed last month – which relates to another of the topics discussed, high speed rail:
China has expressed great enthusiasm for being part of the project, with offers of technology, expertise and money. Where better could some of those resources be employed than, say, at the Nummi plant?
“It’s entirely possible,” said David Crane, Gov. Arnold Schwarzenegger’s special adviser for jobs and economic growth. “For example, it’s highly likely the railcars will be built in California,” he said, noting that General Electric Co. and China’s Ministry of Railways have a joint railcar venture aimed at the U.S. high-speed rail market.
But China is not the only game in town. Six other countries in addition to China have signed memorandums of understanding with California to explore the full range of opportunities. No matter who provides them, “we want manufacturing, services and capital brought to California,” said Crane, including the $12 billion in outside financing the California High Speed Rail Authority is looking for.
He didn’t have to say which of those seven countries is the most flush with cash these days.
Crane is also a member of the CHSRA board, so his words do carry extra weight. And this is perhaps the clearest statement that not only is China planning to bring some money to the table, but that other countries are as well. In fact, the “private financing” may no longer be the accurate term to describe the third source of money (in addition to state and federal contributions) – the term “outside funding” is appearing and would be more fitting if other countries are looking at directly contributing funds to the project.
In one sense, it’s sort of ridiculous that we’re even looking to other countries for funding. The US is still the wealthiest nation on earth and can easily afford the $40 billion plus cost of the California HSR system. But we’re not willing to go get that money because policymakers in Sacramento and Washington, DC are more afraid of anti-tax sentiment than they are interested in developing a domestic HSR network and industry.
So we’re left to look for funding from other countries, who can hopefully help fund part of the capital cost in exchange for some unspecified revenues. That doesn’t mean the private sector is out, far from it – I expect that private funding will still be a part of whatever “outside funding” model is eventually selected.
But the use of funds from foreign countries does open a very interesting possibility. Although a revenue guarantee isn’t necessary for private investors, and although it seems pretty clearly ruled out by Prop 1A, there remain arguments that a revenue guarantee is still necessary. If a foreign country is going to help provide some funding, then it would seem that the federal government has an interest in making sure the investment isn’t lost. The feds, then, could provide the revenue guarantee, ensuring the provisions of Prop 1A are upheld (no state funds would be going to the guarantee) as well as any possible needs of a private investor.
To be clear, I’m not saying that would be a good idea, or even that it would be necessary. But it’s one possible option for dealing with this.
Ultimately the significance here is that while there is some doubt out there about whether HSR is going to happen, indications remain that both the needed federal funding and the “outside” funding will materialize.
Note: I’m writing this from Seattle, where I’ll be spending the next few days catching up with old friends. That shouldn’t impact the posting frequency, but if there’s a day without a post, now you know why.