2013: The Year Austerity’s Costs Became Clear
2012 was a banner year for California high speed rail, as the state legislature approved the release of bond funds. It looked like 2013 would finally be the year that high speed rail got under construction in California, with just a few lawsuits left to resolve.
Unfortunately, in 2013 those lawsuits became the biggest hurdles the California HSR project has had to face. 2013 has to be seen as a year of disappointment, then, in that HSR opponents finally found a way to throw up a significant, but by no means impassable, obstacle to getting construction started.
Judge Michael Kenny’s ruling in August that the HSR project’s financing plan violated Prop 1A was the result not of errors made in California, but of actions taken by the Tea Party in Washington, D.C. Republicans in the House of Representatives have an ideological opposition to government funding for passenger rail, and have a particular hatred of high speed rail. Since taking power in 2011 they have blocked all new funding for high speed rail, jeopardizing the expected future federal contributions to the California HSR project. The 2011 financing plan had counted on federal dollars that look to be unlikely to arrive until the Tea Party is tossed from power.
Judge Kenny’s ruling means that it’s time for California to begin making plans to go it alone in funding high speed rail. That may well be the true legacy of 2013 for the California HSR project – the final dashing of the expectation that much of the project can be built with federal funding. The Tea Party won’t be in control of the House forever and sooner than we think, Democrats may be back in charge and willing to authorize more federal money. But it’s become clear that we can’t wait for that to happen.
One of the bright spots in 2013 was the state’s successful cap-and-trade auctions, which have raised about $1.4 billion in revenue. Throughout 2013 there has been discussion in California about using some of those revenues for high speed rail, and with Judge Kenny’s ruling, it’s time to get serious about cap-and-trade as helping to backfill the planned federal contribution.
2013 wasn’t the easiest year for California HSR. But it wasn’t as bad as its critics had hoped. Support for the project remains strong, and its key institutional backers, from newspaper editorial pages to unions and legislators, remain committed to high speed rail. Democrats are in no danger at all of losing power in Sacramento, although their 2/3 supermajority is at risk thanks to inaction. 2013’s setbacks weren’t severe, and they can be overcome in 2014.
The news for other California HSR projects wasn’t great either. XpressWest learned in July that its federal loan application was suspended amid questions about whether it met federal Buy America rules. Senate Majority Leader Harry Reid has vowed to save the project but so far it’s not clear how that will happen.
And although it’s not a high speed rail project, the X Train appears to be dead – the LA to Vegas party train failed to secure an agreement with Union Pacific and couldn’t raise $1 million that it needed to begin service.
There’s a common theme here: you can’t build new passenger rail in an era of austerity. Some transit advocates delude themselves into thinking they can make austerity work for them, that if they just present a rational business case for a few standout lines, it will become obvious that they should be funded and either government or the private sector will foot the bill.
That’s a naive approach to our current moment. Austerity isn’t a call for more efficiency, it’s an attack on the very idea of government spending money on things, regardless of whether those things are valuable, have a favorable cost-benefit analysis, or are otherwise worthwhile. Those who promote austerity don’t care for your charts, your analysis, your metrics. Nothing you say will convince them to pay for your project and in the end, they’re not really sure they want your project built under any circumstances.
The private sector remains highly leveraged, unable to raise significant amounts of money for new construction in an era of very tight underwriting rules, and is still generally suspicious of the strength of the economy. They’re probably right to be worried. In the past the government has stepped in to provide infrastructure spending and stimulus to make up for the market failure of the private sector. But in an era of austerity, that doesn’t happen, and nothing gets built.
The story of 2013 for California HSR, then, is the final recognition that austerity is the enemy of passenger rail and mass transit. California initially embraced austerity in its budgets in 2008 and 2009, but voters never shared that enthusiasm, and in 2010 they threw out the austerity apostles and handed power to Democrats who pledged a more sensible path. In 2012 they handed billions in new revenue to those Democrats and gave them a 2/3 supermajority in part out of a demand that California be renewed through public investment, not destroyed through austerity.
Several countries have rejected austerity policies. China is a notable example, and in 2013 it fully recovered from the effects of the 2011 Wenzhou crash. Just after the crash, China suspended construction on new HSR lines. That suspension was later lifted and in 2013 several new lines opened, with the most recent being a Shenzhen-Xiamen route that provides a key connection in the Hong Kong to Shanghai corridor.
Spain has unfortunately embraced austerity policies, much to its own suffering. But they have wisely continued ahead with their HSR projects, which will help them rapidly recover once they reject austerity policies. The Perpignan-Figueres tunnel opened earlier this month, linking Paris to Barcelona with a single seat ride.
Unfortunately, high speed rail in 2013 will be remembered in Spain not for the new link to France, but for the Santiago de Compostela disaster that killed 79 people. The train’s operator, Francisco José Garzón Amo, has been blamed and charged with reckless homicide. But there were concerns that the real problem was a lack of positive train control on the segment of track where the speeding train derailed. The investigation continues, as will the legal process to determine responsibility. The tragedy has, correctly, not slowed the construction of new HSR lines in Spain.
On Wednesday we’ll talk more about what 2014 holds for California HSR. But the path forward is clear: California needs to reject austerity in transportation spending, just as it has done with education.