As part of a measure to consolidate state agencies and departments, Brown proposed creating a Transportation Agency, including the Rail Authority, the Highway Patrol and the departments of Transportation and Motor Vehicles, among others.

Tom Umberg, chairman of the Rail Authority board, said in a prepared statement this afternoon, “We embrace the reorganization proposal as it provides additional support and the necessary resources to support this project.”

The new Transportation Agency would also include the California Transportation Commission, which plays a key role in deciding which projects get state funding. From what I can tell, the new agency would not necessarily compromise the current powers of the Authority. It would create a new reporting relationship, but Governor Brown has already put his stamp on the Authority board with his new appointments. It’s entirely possible that the CHSRA could benefit from staff assistance in other parts of the proposed Transportation Agency, but that’s entirely speculative and depends on what an org chart would look like.

As a concept, this seems perfectly fine and workable. It’s hard to say more without knowing the details, and those will surely be fleshed out in the weeks and months to come.

The legislature has had its own ideas for how to move the CHSRA around in recent years, but this is part of a much more sweeping reorganization of state government and not driven by the high speed rail project alone. At this point it’s much too early to tell what the legislature thinks of this plan, and reports are that most legislators are not in any hurry to work on this budget.

They typical state budget process, for those of you who either don’t know or got sidetracked by the years of late budgets under Arnold Schwarzenegger, is that the governor proposes his budget in January. It gets discussed, debated, studied and analyzed. There is then a “May Revise” that comes out in early May, based on newer estimates of state tax revenues, that is much closer to the final document that the legislature is to then approve by June 15. The legislature could always delay approving the budget as they did in 2007, 2009, 2009 and 2010, but in 2011 they learned they would lose their paychecks (under Prop 25, passed in 2010) and so they passed an on-time budget. I would assume they will do so again in 2012.

In short…we’ll see what happens to this Transportation Agency proposal. There’s a long way to go between now and June 15.

While discussing his budget today, Gov. Brown also commented on the recent Peer Review Report that suggested the state delay the project. From the Sac Bee article linked above:

Brown told reporters today that some of the objections raised by the group “were not that well founded.”

“I’m of the view that this is a time for big ideas, not shrinking back and looking for a hole to climb into,” he said. “I think we’ve got to move forward.”

That’s a good assessment of where things stand. On that note, take a look at Peter Calthorpe’s excellent op-ed in the San Francisco Chronicle explaining the reasons why California needs high speed rail to meet the economic and environmental challenges of the 21st century.

On the other hand, the NYT post does a pretty good job of pointing out what too few articles do: the cost of doing nothing is not zero:

Melissa Lafsky, who edits the blog Infrastructurist.com, said the rancor captures the national mood….

Lafsky agrees with the California High-Speed Rail Authority’s argument: that $45 billion is a lot, but the alternative — expanding highways and airports as the state population grows — would cost almost double.

“Unless they invent flying carpets or beaming, that’s what we’ve got,” she said. So the question is, who pays for it? “And the ‘Who pays for it’ has really been the downfall of Obama’s high-speed rail plan,” she added.

I wouldn’t say it’s the downfall of Obama’s plan so much as it is a good example of the crisis facing American politics. We are a nation that has apparently forgotten the value of the concept of “investment” – by spending some money up front, you save a lot of money over time and in fact generate new profits and returns because you laid out some costs up front.

HSR opponents consistently ignore the cost of not building the system. They assume the cost of doing nothing is zero, that the status quo works just fine. It doesn’t. California wastes billions each year on driving and on oil consumption. And HSR can generate new economic activity, as a 2010 US Conference of Mayors report indicated:

In Los Angeles, [HSR would generate] as much as $7.6 billion a year in new business sales, producing up to 55,000 new jobs and $3 billion in new wages.

Depending on the tax rates, that new economic activity in LA alone would be enough to pay off the entire $10 billion Prop 1A bond within about ten years. By the time the SF-LA HSR route opens around 2020, the massive expansion of LA’s Metro Rail system should be complete, with its hub at Union Station – likely increasing the ridership and therefore the success and economic benefits of HSR in the LA area.

Considering that the $10 billion or so in annual HSR dividend in the study was just for the LA area alone, one could envision maybe $25 to $30 billion a year once the system is built out (including Phase II to Sacramento and San Diego). That would more than pay for the costs of construction and operation of HSR.

These benefits would appear in the form of new tax revenue as well as new jobs and new businesses. It’s the same thing California learned when it built dams, freeways and bridges during the 1930s, 1940s and 1950s: spend money on infrastructure up front and you generate immediate stimulus and long-term value.

Unfortunately, we are dealing with the legacy of the 1970s, when Californians decided they didn’t have to build anything new and could simply live off the investments that had just been made. Being cheap rather than being smart was the financial order of the day: low costs were the highest priority, even if it meant increasing inequality, decaying infrastructure, and a crippling dependence on oil as a result of our refusal to build more sustainable transportation options.

The result is the worst recession in 60 years. We aren’t in a recession because we spent too much, we are in a recession because we spent too little. Until we can build new infrastructure that enables a new, sustainable economy, we’re going to be dependent on the old failing status quo, and will suffer prolonged economic weakness as a result.

It’s not just the California HSR project that suffers from this bizarre and irrational aversion to new spending. Innovative infrastructure proposals across the state are getting hit with this. And even some transit advocates, like TransForm CA, have fallen prey to the “we don’t have a lot of money” argument, accepting anti-spending arguments rather than rejecting them out of hand.

California HSR is just a microcosm of the larger debates happening across the country, between those who are stuck with an obsolete mindset still believing that spending money is somehow bad, and those who realize that we have to embrace new infrastructure, new innovation, and who realize that spending now creates more wealth, more savings, and more value in the years to come.

The HSR project won’t live or die on its own merits. It will live or die based on who wins the bigger argument about America’s future. If we decide that actually building a future is a bad idea because it forces us to spend money, we’ll lose a lot more than HSR – we’ll lose our chance for building a better society.

Let’s take a look at the article.

For California, the lure of its new ride — a bullet train system capable of whisking passengers between the Bay Area and Los Angeles — has proved so enticing that the state jumped at the deal, even though it has only a quarter of the money needed.

That’s leading some critics to ask whether the state’s largest project ever could also prove to be its most financially disastrous.

California voters jumped not at a “deal” but at an opportunity to provide for fast, sustainable passenger rail to connect their major cities, in a year when the cost of oil dependence was brought home to voters in a powerful way. HSR shouldn’t be framed as a business proposition, but as a lasting piece of infrastructure that will provide economic growth and meet the state’s travel needs for decades to come.

I don’t fault Rosenberg and Richards alone for approaching HSR as if it were a business proposition. They’re merely reflecting the reality that in the early 21st century, American policymakers no longer think of infrastructure as a public good that should be built because it serves a need, but as an enterprise that ought to fund itself. Still, as we’ll see, even under the latter view, HSR makes sense for California.

It has the potential to create jobs while offering a cheaper, greener and faster form of travel. It could also be another nail in the state’s financial coffin.

As we know, critics have made the latter point quite often. But it’s not a point that makes sense. There’s no possible way that HSR would be “another nail in the state’s financial coffin.” The annual debt service that the $10 billion bond adds to the state budget is about $600 million. Our current budget deficit is about $20 billion. As we know, HSR will generate significant economic benefit to the state, including increased tax revenues. Will it be enough to offset the cost of the debt service? Maybe, maybe not. But it’s hard to see how the HSR bonds are at all risky to the state budget.

Rosenberg and Richards deserve credit for properly explaining why the HSR project’s cost estimate rose in 2009:

The Rail Authority’s estimate has risen mostly because when the measure went on the ballot, it didn’t account for inflation, which is expected to total 19 percent over five years of construction.

Keep in mind that’s merely an estimate. In fact, inflation right now is extremely low, and many rail projects have had initial bids come in well under budget as labor and materials costs have declined during the recession. While there’s an epic debate among economists about whether we’re going to see deflation or inflation over the next several years, the overall forces appear to favor at best cost stability, if not outright deflation, as high unemployment and low consumer spending will combine to make inflation unlikely.

The central piece of their article is an assessment of the project’s cost estimate, currently pegged at $42.6 billion:

A Bay Area News Group analysis of high-speed systems around the globe suggests that the project could cost less than the current estimate, as little as $38 billion. But it is most likely to cost more — up to $73 billion, even if built on time.

That analysis is based on the per-mile capital costs of high-speed rail systems built in Europe and Asia in the past decade, as outlined in a World Bank report released last month. The report said costs varied widely depending on terrain, the complexity of engineering work required, how many rail cars were needed and the extent to which routes passed through urban areas.

Unfortunately, the article does not explain the reasoning behind the figure of $73 billion. As such, it has to be considered a mere assertion, a figure that we should not take seriously until we see some explanatory detail.

The World Bank report that was cited in the article estimated that costs for HSR outside China “range from USD 35-70 million/km.” Considering that San Francisco to Anaheim is 748km according to the California High Speed Rail Authority, that produces a low end estimate of $26 billion and a high end estimate of $52 billion. I’m still not quite sure where the reporters’ $73 billion estimate comes from, so for now I don’t think we should treat it seriously, at least not without further explanation. (And it’s worth noting that the World Bank’s report doesn’t explain the cost range they provided either.)

The question of possible cost increases is important, though it has to be considered in context. I’ve always said that it’s possible, maybe even likely that the final price tag will be higher than $42.6 billion. I don’t think it’ll be very much higher, but it might well be. That wouldn’t represent a “boondoggle” because we still have to ask whether HSR is a better deal than the alternatives. As we’ll see, I firmly believe the answer is “yes.”

One of the primary reasons why costs rise is that the design changes thanks to political pressure. Here’s an example from the article:

Costs along some parts of the rail line zoomed up earlier this year, including one five-mile stretch on the Peninsula where estimates soared $135 million. The reason? Engineers had estimated the cost of building two tracks there when they actually needed four.

Of course, technically engineers originally thought they would indeed be building just two HSR-specific tracks. Then it was decided to instead build four tracks that would be shared with Caltrain. That’s a fundamental shift in HSR design. It’s also the right move, and well worth the extra $135 million (which isn’t a “soaring” estimate when you’re looking at a $42.6 billion project).

There is a growing tendency, however, to see megaproject cost increases as somehow being inevitable, as if they were a force of nature. And sure enough, as with any discussion of cost increases, the article trots out good old Bent Flyvberg to make that very point:

A research team led by Oxford University professor Bent Flyvbjerg has studied the estimates and final price tags of 258 megaprojects across 20 countries, including bridges, rail systems, tunnels and freeways.

What they found was astonishing: Nine out of every 10 projects finished over budget, and the average urban rail system ended up costing 45 percent more than projected.

Flyvbjerg says projects in California haven’t bucked the trend. Taxpayer-funded initiatives such as the Bay Bridge rebuild, BART’s extension to San Francisco International Airport and the Los Angeles Metro rail system all failed to meet estimates.

Of course, this excludes those projects that have met estimates, such as the Metro Gold Line Eastside Extension or the Seattle Central Link project – the latter of which was cut by 1/3 in 2001 when costs spiraled out of control.

As to the Bay Bridge, that project shows that a combination of design changes and unexpected inflation pressures can drive project costs higher (as can happen on any project, public or private). Mayors Willie Brown and Jerry Brown both demanded and won a “signature span” for the East Span replacement project, pushing back the timeline and driving up the cost. By the time bids were solicited in 2004, the global economic boom, especially in China, drove the cost of steel through the roof. Had the original plan proposed by Governor Pete Wilson been adhered to, the cost of the design change could have been avoided, but the cost of the steel price inflation might not have.

Flyvberg’s theory is familiar to many of us by now:

The researchers noticed two problems over and again: “optimism bias,” the tendency to focus on an idea’s potential while downplaying pitfalls; and “strategic misrepresentation,” which means officials lowballing costs to make a project look more attractive.

This is because projects aren’t proposed by accountants and engineers, but by politicians, who operate in an environment where taxes are seen as verboten and every cost is closely scrutinized, unless it’s for something that’s seen as politically mainstream like wars or freeways, in which case the sky’s the limit. In other words, the problem Flyvberg identifies isn’t with megaprojects, but with politics. And as I noted above, it doesn’t necessarily mean it is impossible to bring in a project on-budget.

Further, it’s interesting to see what is and isn’t considered a boondoggle. Here’s Wikipedia on the costs of the Interstate 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.

That’s a rather stunning boondoggle – costs were over 4 times what was expected and it took almost three times as long to complete as was planned. But how many people, aside from some of us hardcore transit bloggers, would call the Interstates a boondoggle?

The point is that Americans have come to believe that Interstates were necessary and the costs justified. That was a political choice, just as were the numerous political choices in cities and states across the country that resulted in the higher costs and longer construction times.

As the article acknowledged, it is plausible that the HSR project could be brought in for the projected cost. But it is possible that political choices will be made to increase the cost. For example, the PCC might well prevail in their desire to have the tracks tunneled. That would represent a significant cost increase, but the political leadership could decide that’s justified. The point is that a choice would be made to increase the HSR project cost. It’s not inevitable, and a choice could be made that a tunnel won’t happen. And a choice could also be made that the Peninsula will themselves fund a tunnel, or that a federal earmark will be won, or that the Chinese will pay for it.

If those are the desired choices, than a higher project cost shouldn’t be seen as some example of a flawed project, but of a belief that it is worth spending more money. Too often, it’s argued that keeping project costs low is the overriding imperative for any project, and in a democratic political process, that’s not always the case. People might decide something else is more important.

These points notwithstanding, the current practice of the HSR project would seem to undermine the notion that Flyvberg’s theory applies to it. The CHSRA did not hide the fact that accounting for projected inflation would add nearly $10 billion to the project cost. They made this public as soon as they learned of it. And the Authority has been up front about the financial consequences of various design alternatives. They’ve been trying to keep the line on project costs, rejecting a tunnel for much of the Peninsula precisely because of the costs, to the outrage of some on the Peninsula.

As we know, this is an academic discussion if the CHSRA cannot fund the project as currently budgeted. The State Auditor noticed that not all of the project cost has been accounted for and thought it was a scandal, despite the fact that most infrastructure projects have to finish their planning before they get funded. The Mercury News article explored this:

The authority has $9 billion in state bond money and a $2.25 billion federal stimulus grant committed. It says the remaining three-fourths of the construction costs will come from government and private investors.

The state is banking on at least $15 billion more from Washington, D.C., by 2016 and has applied for up to $1 billion from this year’s federal budget. Even if it gets the full amount this year, the authority would need at least $2.3 billion each subsequent year from Uncle Sam, a plan the state’s nonpartisan legislative analyst recently characterized as “highly uncertain.”

The U.S. government’s entire high-speed rail budget this year was $2.3 billion, and that was its biggest such layout ever; the feds have tentatively sliced next year’s amount to $1.4 billion. California has the largest and most advanced project in the nation but must compete for the grants with 13 high-speed rail corridors across 31 states.

Rail officials argue that the competition actually increases the odds Congress will keep money flowing across the country.

“We’re not going it alone in D.C.,” said Barker of the Rail Authority. “It’s something we’re confident the federal government wants to do.”

It would have been useful had the article included mention of the $50 billion for HSR that is planned to be included in the upcoming Transportation Bill reauthorization, which would have suggested that the plans for federal funding aren’t far-fetched at all.

Of course, if no federal funds materialize, then the whole system doesn’t get built. That’s why the Prop 1A bond and the federal HSR stimulus require whatever money we do spend in the interim to have “independent utility” so that if we never do finish the project, the infrastructure that does get built can actually be used.

The authority plans to ask local cities, transportation agencies and developers to foot another $4 billion to $5 billion. The final $10 billion to $12 billion would come from foreign countries, companies and other investors. Specific plans for those two pots of funding have yet to be established.

San Jose Mayor Chuck Reed, for one, thinks the Rail Authority is dreaming. “I don’t think there is any hope local governments can come up with that kind of money,” he said. “I’m looking at my city’s own finances and resources, and we don’t have money to spare.”

One might ask the city of San José, then, whether they will insist on a “signature span” for the HSR viaduct just south of Diridon Station, given this concern. And in any case, the CHSRA does not appear to be expecting cities to spend money out of their general fund, but to find ways to leverage revenues from things like TOD and redevelopment districts.

The article then examines the question of operations, and here they would definitely have benefited from a comparison with other countries’ HSR experience, rather than relying on Flyvberg’s study:

Still another financial challenge for the authority is operating the line once it’s built. That, too, already looks harder than initial indications.

The high-speed rail line’s revenues depend on two factors: how many people ride it, and how much they pay.

The state predicts the line will carry 41 million passengers annually by 2035. UC Berkeley experts hired to validate those ridership numbers recently reported them to be unreliable.

And in the dozens of urban rail projects studied by Flyvbjerg’s team, the average train system produced half the number of riders that planners expected.

As we know, the UC Berkeley ITS report did not deem the ridership numbers to be unreliable. They instead said they disagreed with some of the methodological choices used by Cambridge Systematics in the HSR ridership study, and concluded that the ridership numbers could be correct – or they could not be.

Further, we have plenty of evidence from around the world that HSR projects – which is what the California HSR project ought to be compared to, not the nebulous “average train system” Flyvberg describes – that HSR is a clear success with riders. The Taiwan HSR system, which was plagued with financial problems relating to construction, has had dramatic success at gaining riders and recently began generating a profit. The Acela has over 50% of the travel market on the US Northeast Corridor. The Madrid-Barcelona AVE high speed train has been a dramatic success in just two years.

Of course, there are examples from the US of non-HSR systems that have had ridership success, such as Phoenix’s light rail project, which has exceeded expectations and the Seattle light rail project is on track to meet theirs – and both are projects that opened in the last two years.

The article also took a shot at the proposed higher fare:

Meanwhile, the authority has nearly doubled the estimated price of traveling from San Francisco to Los Angeles to $105, as measured in today’s dollars. The original number was based on the notion that a bullet train ticket would be half the price of a comparable air ticket; the authority changed that to 83 percent in hopes of generating more profit.

But the Rail Authority concedes pricier tickets will cost them millions of riders.

Two things here: The CHSRA has not “changed” the price of a ticket. They instead offered a second scenario where prices might be higher than originally planned. No final decisions have been made yet.

And that leads to the second point: even if pricier tickets will cost them millions of riders, the system is expected to make even more money, over $2 billion a year in free cash flow within a few years of operation. The whole point of the second scenario, with ticket prices set at 85% of airline prices is to show how the system could be priced to maximize profitability instead of maximizing ridership. Show me an interstate or airport that creates over $2 billion a year in free cash flow and we can talk about the comparable profitability of road or air versus high speed rail.

The article closes with a litany of examples of HSR projects that didn’t cover their construction costs, and a welcome acknowledgement that “most lines cover their operational costs.” As we know, the HSR project isn’t necessarily intended to cover its own construction cost – that goes back to the point I made at the outset about infrastructure being a public good, not necessarily something that pays back its construction cost.

But even the examples they give all had specific reasons for their problems:

When Italy first planned to run high-speed trains between Rome and Florence in 1977, officials estimated 60 percent of the $3 billion project would come from the private sector. But costs more than doubled and no private investor participated, leaving Italy to issue bonds to shoulder the entire burden.

Of course, there was a major global recession in the late 1970s and early 1980s, along with massive inflation, both of which explained that outcome. And Italy solved the problem, floating bonds to pay for the cost – another example of a political choice that HSR was worth paying for.

After tracks were extended to Milan in 1991, though, private companies enticed by ridership figures joined in and helped raise more than half the cash needed for extensions to other cities.

Meanwhile, France saw high-speed rail ridership soar from 12.5 million in 1980 to nearly 23 million in 1992; it’s now a moneymaker.

Rosenberg and Richards deserve credit for including these examples; too many other journalists would not have offered this evidence that proves HSR can attract riders and private investors.

But in Japan, where government funded the entire system, there were problems when some cities demanded more stations be built. The result was a $200 billion debt in 1987. To spare taxpayers that crushing burden, the government had to sell part of the system to private groups.

Here again, we see that higher costs were driven by political demands, not by any inherent flaw in the project. Further, Japan had a national debt crisis far beyond HSR by 1990, which it is still dealing with 20 years later. Privatizing the HSR system is one of the few success stories in Japan in that long era of economic difficulty.

Still, the overall point is that if HSR costs do rise, it will likely be because a political choice was made that they should go up because of a belief that what was being bought was worth the extra price. If that’s the decision that Californians come to, then that’s the choice they make, and it shouldn’t be seen as flawed – nor should it be seen as flawed if Californians make another choice, to hold down project costs and resist calls for more expensive HSR design alternatives.

More importantly, we must always consider the cost of doing nothing. It isn’t zero. The cost of widening Highway 99 alone in the San Joaquin Valley has been pegged at $25 billion – but HSR could help serve those transportation needs and those of other parts of the state for not that much more. The CHSRA has estimated the cost of expanding freeways and airports to meet the demand that HSR can handle to be between $80 and $150 billion – which makes HSR a savings even under the worst-case scenario.

The impact of rising oil prices, global warming, and the ongoing recession are all further costs that can be lowered with high speed rail. Those costs need to be included in the discussion. If there is a risk that the HSR project will go over the projected $42.6 billion budget, there’s a bigger risk that California will suffer significant costs by NOT building it.

In conclusion, any discussion of HSR costs has to include the context – that includes the cost of doing nothing, accurate comparisons to other countries’ experiences, and the political decisions that societies make all the time. I believe we can and should build HSR for the current projected price. I’m also willing to pay a bit more if it’s justified and if the additional costs are funded. We can be cost-effective and provide Californians the system they want.

Today’s announcement of the application process for $2.3 billion in additional federal support for high-speed rail projects confirms the President’s commitment to this important transportation infrastructure. The High-Speed Rail Authority and California will compete aggressively for our share of these funds to supplement the federal stimulus funds we have already been awarded and the state funds committed to the project by the people of California. We will continue to move forward with building the nation’s first high-speed rail system because we know it will create jobs, economic opportunity for Californians, and improved mobility for our state.

My understand is that this is money from the FY 2010 budget, achieved through the efforts of the FourBillion.com coalition in 2009. California would be very competitive for a large portion of these funds, especially as the FRA and USDOT are likely to want to concentrate the money to be useful in actually getting some HSR projects done, instead of being spread so thinly that it accomplishes little that is useful.

Some might say that another billion or two from the feds isn’t enough. Overall, it’s not. But all we need is about $1.4 billion or so each year from the feds to fulfill their projected contribution. The rest comes from the private sector, which will be defined broadly. For example, Japan’s public bank is now authorized to make low interest loans to the US for high speed rail projects. Considering that China has shown similar interest in investing in California HSR, this would all seem to indicate that while having Congress fully fund a long-term HSR program, we might be able to cobble together the funding for SF-LA-Anaheim with one-off federal appropriations for the rest of the decade.

Obviously that would be a very inferior solution. But it does indicate that the doom-and-gloom peddled by HSR opponents about the system’s financing is overstated at best.

Taiwan’s HSR system has been faced with financial problems since it opened in 2007, requiring a costly government bailout of the private investors who fronted the system’s operating costs. These problems, an artifact of a flawed overreliance on private funding, were frequently cited by HSR critics as proof the California system isn’t financially viable.

But if Taiwan can turn an operating profit even with these bigger financial problems, it validates the basic concept that HSR does indeed attract significant levels of ridership that can cover the trains’ operating costs – as is mandated here in California by Prop 1A.

First, let’s take a refresher course on Taiwan HSR. As Yonah Freemark points out at The Transport Politic, private funding brings considerable risks to the public:

In both Taiwan and the United Kingdom, private infrastructure firms managing the construction of new high-speed lines have gone broke because of their reliance on loans taken out at high rates, leaving the taxpayer to foot the bill on both line construction and loan back-payments. All the “creativity” in the world bulging from the minds of entrepreneurs didn’t save the people of either of those countries any money compared to what they would have gotten from a fully public operation. In each of those cases, the “risk” supposedly assumed by private corporations was dumped back onto the public sector because you don’t put billions of dollars in a high-speed rail program and then simply throw it away when private funds evaporate.

At least you shouldn’t.

It could be argued that governmental entities can manage infrastructure funding more effectively because they’re able to take out loans at much lower interest rates. This power could be expanded if the U.S. Congress establishes a national infrastructure bank, as has been recently suggested. A fully public operation would allow taxpayers to get some of their investment back through operational revenues; by contracting out a PPP, those profits will all go into the hands of corporations and their shareholders.

Taiwan’s HSR system met its ridership projections, though it took a year or two to get there. In his seminal Puente AVE article, DoDo explained why Taiwan’s successful HSR system did not translate into a successful PPP project:

For the THSR, cost overruns were largely the consequence of a switch to Japanese suppliers after planning based on European high-speed technology was already well-advanced. The decision was widely rumoured to have been political (and led to an epic political, media and court battle ending in damage payments to Eurotrain), and the overseeing company THSRC did not go with the actual Japanese offer, but stuck to its guns on specifications. Thus f.e. a German maker had to be contracted to supply fixed-track high-speed switches (no need for those on Shinkansen lines with their strictly single-direction tracks).

Likewise, both lines were opened half-finished: one-third of the Seoul-Busan KTX line was delayed (until 2011, now thanks to those sleepers maybe even further), THSRC started with a reduced schedule, both started with some stations unfinished (for the THSR, including both downtown terminuses!) or without urban transit connections. Also, both lines started with hefty ticket prices that had to be reduced later.

And yet Taiwan HSR overcame these problems:

The failure to meet expectations after the start was widely discussed as a national scandal in both countries. However, you can also see on the graphs that there was steady growth thereafter. And that at the expense of other modes of transport.

The modal shift was particularly spectacular in Taiwan. In just 20 months, all but one single daily flight between the cities served by THSRC was eliminated (last December, THSRC’s share of the air/rail market was 99.95%…), leaving the highway as only competition. Total domestic air passenger transport fell almost by half(!). The steady uninterrupted annual growth of highway traffic was not only stopped but turned back.

In short, Taiwan HSR is a successful project in terms of ridership and achieving many of its goals of shifting transportation modes. The problem with Taiwan HSR is largely with the method used to finance it – heavy private sector borrowing. The 80% private funding method left Taiwan HSR financially vulnerable to poor construction decisions, cost overruns, and the global recession.

And now Taiwan HSR is a successful project in terms of generating an operating profit:

Taiwan’s high-speed rail system operator, Taiwan High Speed Rail Corp. (THSRC) , posted its first ever net operating profit in 2009 but net income was still in the red, weighed down by high interest costs and depreciation.

At its annual shareholders meeting on Wednesday, the company reported operating revenues of NT$23.32 billion (US$728.76 million) and net operating income of NT$5.56 billion, its first positive result since beginning commercial operations in 2007.

THSRC said operating revenues rose by NT$270 million, or 1.2 percent, in 2009 while operating costs, excluding depreciation and amortization, fell by NT$770 million, or 7.5 percent.

The company said its bottom line was helped by higher passenger traffic, lower interest costs after its syndicated loans were renegotiated, and the change from a straight line depreciation method to one based on transport volume.

But high interest costs and depreciation and amortization still left THSRC with a net loss of NT$4.79 billion, or a loss per share of NT$1.03.

In other words, the Taiwan HSR system would be a very financially strong system were it not for the flawed method used to build it – which has left the system with debt issues, even though they have been significantly eased by the government bailout. Aside from that, however, the system does not require ongoing operating subsidies thanks to very high ridership. Remember back to the stats given by DoDo in the excerpt from his post – the modal shift toward rail in Taiwan was rapid and significant.

Had the Taiwanese government simply funded the HSR system itself as a piece of public infrastructure, without eventually having to bailout the private investors, then the system would almost certainly be completely in the black. Having 80% of the construction costs coming from the private sector was a disastrous move, but the Taiwan HSR system has overcome those issues.

What does this mean for us in California? Two things:

1. There is indeed every reason to believe that California’s HSR system will generate an operating profit. In fact, the case is so overwhelming given the other global HSR systems that the burden should be on those who deny the system will cover its costs to prove that it won’t.

2. We need to ensure that private funding is kept to a minimum. Both the state and federal government can afford to fund up to 75% of the construction costs; having private investors (defined broadly; it could include CalPERS) contribute 25% of the cost – with a clear recognition they are taking a risk and should not expect guarantees or bailouts – seems appropriate.

It’s unfortunate that we live in an era where a common sentiment, although one not yet shared by the majority, is that we should never invest in or build anything new, that we can extract wealth from and live off past investments and previously-built infrastructure forever, and that the status quo is just fine and is not threatened, or threatening.

But as the facts become known – that HSR is a smart, sensible, affordable investment in 21st economic prosperity – political leaders will come to realize that California voters knew perfectly well what they were doing in November 2008 when they voted to spend $10 billion of their own money (more when interest costs are added in) to start building the high speed rail project. Taiwan shows that HSR will not only be profitable – but that it will be of great use and value to California. Let’s not delay in bringing the global HSR success here to California.

Some people, when confronted with challenges and costs, prefer to shrink back and lower their horizons, to undermine the things that would make a project successful merely because they are unable or unwilling to countenance paying what is required to invest in our future, or because they are so conflict-averse that they would fatally weaken a good proposal merely to buy someone’s silence.

California political columnist Tom Elias clearly falls into that category. Although he is no expert on high speed rail, and appears to not be all that familiar with the project, he heard that there was some controversy about the cost and about the route, so his solution is to naturally just scale everything down, even though doing so would destroy the project’s effectiveness and financial viability.

Elias doesn’t mention any of the serious long-term problems and costs that HSR is designed to avoid, from rising oil prices to the need to build HSR as a centerpiece of new economic geographies. But he appears stuck in a late 20th century mentality, one that says “when you face a problem or a cost, simply do something less effectively and hope you can fight another day.” Our current recession is a product of that thinking, and below I’ll explain why it is totally inappropriate to apply it to HSR.

Here’s what Elias has to say:

Here’s a question for the California High-Speed Rail Authority: How about cutting out the most expensive parts of your current plan — which also happen to be the most controversial — while leaving its essence intact?

That’s a question no one on the board making the plans for this putative system has answered, or even been asked.

This is entirely untrue and betrays a lack of familiarity with the project. The CHSRA board has been asked several times to cut out parts of its plan, including the San Francisco to San José segment. They refused, for the following perfectly valid reasons:

1. HSR would be far less effective in meeting the state’s transportation needs if it did not go to SF.

2. HSR would have serious trouble meeting its ridership projections and making the operating profit it is required to produce if it were slowed or stopped short of key destinations and population centers.

3. California voters were sold a true bullet train system connecting downtown LA to downtown SF, and to change that now would violate the will of the voters.

Elias starts from a position of obvious ignorance, but plows ahead anyway:

As it now stands, the estimated cost of this project is $43 billion, but state voters have approved “only” $9.95 billion in bonds, while the federal government has committed another $2.25 billion. It’s anybody’s guess where the rest of the money might come from.

No it’s not. The rest of the money comes from the federal government and the private sector. If those funds do not materialize, then we don’t build. It’s not really that difficult to understand, unless you are employed as a State Auditor.

Plus, anyone who thinks building a 238 mph rail system stretching from San Diego through Los Angeles to Sacramento and San Francisco will come in at or under budget is probably hallucinating.

Elias is playing a dishonest trick on his readers here, arguing that “of course this can’t be done on-budget” even though construction costs are quite low these days, and even though many rail projects have indeed been brought in on-budget. He’s just making an assumption, treating it as proven fact, and treating anyone who disagrees as being deluded.

That, at least, is implied in a report by state Auditor Elaine M. Howle, who told the governor and the Legislature that “The High- Speed Rail Authority has not adequately planned for the future development of the program the program risks significant delays without more well-developed plans for obtaining funds.”

And as we know, Elaine Howle wrote a deeply flawed and error-prone report that also suggests she does not really understand this project. Unsurprisingly, we again see the damage that flawed report has done. Incredibly, the State Auditor’s office has so far failed to make amends for this inaccurate report.

This, of course, didn’t keep the authority from hiring a French/South African executive with experience running high-speed rail systems in Europe as its chief executive at $375,000 per year, plus a housing allowance.

Right, because when you’re building a $40 billion project, you want to hire someone on the cheap and lacking experience.

The auditor’s report, scathing as it was, did not even take up the question of local opposition to the current plan, currently strongest on the San Francisco Peninsula but rising in the Anaheim-Los Angeles corridor.

Why should it? “Local opposition” is overstated, as the loud NIMBYs are unrepresentative of their communities, having commandeered a flawed local process to dominate and distort the conversation. The State Auditor made a rare good move in refusing to take such small-time opposition seriously.

Why not do a little reassessing, especially in light of the High- Speed Rail Authority’s own report of last winter, which amounted to a bait and switch on the voters who approved the state bonds for this project by a 52-48 percent margin two years ago? That report raised the estimated year-2035 fare for the San Francisco-Los Angeles run from the $55 projected in ballot materials two years ago to $105. Nearly doubling the fare would cut the pool of likely riders by about one-third.

This was not a bait-and-switch. The $55 projected fare is still a projected fare. The $105 projected fare is merely another option. Further, Elias doesn’t compare those fares to the cost of driving or flying, which in ten years’ time will be much higher than it is right now. Elias also misleads his readers in not telling them that the projected fare of $105 is set at roughly 80% of comparable airfares.

And yet, those eliminated riders, plus taxpayers in parts of the state far from the high-speed trains, are still on the hook for repaying the bonds, if and when they are sold.

The Prop 1A is a general obligation bond, so the bond repayments are not contingent on ridership. But the HSR project will add $10 billion a year to the state’s economy (considering just the LA area alone), which would make it much easier to repay the bonds.

In fact, this is a common error made by those who remain locked in a late 20th century mindset – that any government spending or project merely takes away from the economy, instead of adding to it. As we know from the projects undertaken in the 1930s, 1940s, and 1950s, the opposite is true. California would be a much poorer place were it not for big government projects like Boulder Dam, Shasta Dam, the interstate freeways, the State Water Project, and the like.

Elias refuses to include the economic stimulus benefit from HSR, therefore distorting his assessment of the project’s costs and value.

Given this dicey picture for the future of California high-speed rail project, maybe it’s time to redesign the system’s planned map to eliminate its most expensive portions while keeping the fundamentals intact.

This is what we call a “false economy.” An effort intended to save money actually costs money. The “most expensive portions” of the project are those that create the greatest value and generate the most economic activity in the state – and that are the most essential to the HSR project’s financial and practical viability. Elias is either being hypocritical here, or simply doesn’t care that his concept is designed to weaken the project instead of improve it.

Here’s how to do that: Run high-speed trains on existing track in densely-populated areas even if that means running them at ordinary train speeds. Tie them in with existing transit systems. So Southern California trains, for example, might run full-out from Carlsbad north to about Tustin and then slow down as they use ordinary, existing track between Anaheim and Los Angeles. It might add a few minutes to the trip, but would cost billions less.

This is simply ignorant, betraying an almost total lack of understanding of rail operations on the corridor – and that’s even before we talk about the cost in lost ridership. First, the CHSRA is already talking about track-sharing, even though Elias apparently missed that rather key detail.

Second, you can’t run “full-out” between Carlsbad and Tustin given the state of the tracks there and the other trains on the corridor. Current service runs as fast as it can given the available track – which, in the San Clemente area, isn’t much, and there’s no room to widen it. Elias is condemning the LA-SD run to be nothing more than is currently offered by the Pacific Surfliner, which negates the purpose of HSR – to provide faster, reliable service that improves transportation in California.

It’s going to add more than “a few minutes” to the trip and will not save a dime. It will instead cost a lot more money, since the HSR project will generate neither the ridership nor the economic value to justify the expenditure.

Of course, if Elias is suggesting upgrades to tracks between Carlsbad and Tustin (which will come at an astronomical cost) so trains can go 220mph and then slower from LA-Anaheim…well, that is essentially already what is being proposed (except that to serve SD, the trains head east from LA and south to SD in Riverside/San Bernardino). Elias comes off as simply not knowing what he is talking about.

From Los Angeles, the trains could run at ordinary speeds into the San Fernando Valley and then go full-out through the Central Valley. Rather than running over the Pacheco Pass to Gilroy and San Jose roughly along Highways 152 and 101, the train could be rerouted over the Altamont Pass into the East Bay suburbs of San Francisco, where passengers could switch to special Bay Area Rapid Transit trains for a nonstop run into San Francisco on existing track. The Sacramento spur, to be added later under current plans, would remain pretty much as it now stands.

This is a nihilistic approach, destroying the train’s viability by causing it to hemorrhage riders. Abandoning San José, the state’s third-largest city and major economic hub, makes no sense. Forcing riders to transfer from an intercity train to a metro rail to complete their trip to SF is nonsensical – it could add as much as 30 minutes to the trip and, coupled with the lack of amenities, would cause ridership numbers to crash well below the levels needed to make HSR self-sufficient in terms of operating costs.

That eliminates the need for the most expensive rights of way.

No it doesn’t. The ROW is already owned by public rail agencies, especially on the Peninsula where very little ROW acquisition will be needed.

It satisfies Peninsula cities and environmentalists who have demanded a tunneled system that would add billions of dollars to the project cost.

Environmentalists support the current project; those who criticize the current project are doing the work of the oil and pollution industry, whether they acknowledge it or not. Peninsula cities cannot block this project, so we should not destroy the system to appease them.

It might add as much as 45 minutes to the entire ride, but would still leave passengers to enjoy hundreds of miles of travel at very high speeds.

He’s being conservative here; it’s likely to add at least an hour. His “save money and avoid controversy at all costs” approach ignores the fact that there are some concerns among Central Valley folks, from farmers to Bakersfield High School alums, about the routes chosen there as well. What happens when they make a fuss? Will Elias say “gee, maybe we just shouldn’t have high speed rail at all, and remain wastefully and expensively dependent on oil just because it’s too hard to build HSR?”

It would take high-speed rail trains away from areas that are now resisting it most strongly and leave the plan intact in areas that are welcoming it. And it would cost billions of dollars less, probably coming in at close to the state’s existing means.

The HSR trains need to go to these areas – which aren’t “strongly resisting it” – remember that the critics and opponents do not represent, and have generally succeeded in shouting down, the much more numerous HSR supporters in their communities.

It would not save billions of dollars, it would cost billions of dollars in dependence on oil, traffic congestion, lost jobs, wages, and tax revenues. And the state’s existing means are considerable – California is a very wealthy state that could quite easily pay for the entire HSR project ourselves, were we not politically committed to letting the rich and the large corporations escape their tax burdens.

There is precedent for all this, too. Amtrak currently runs successful trains that link to buses between Union Station in Los Angeles and Bakersfield and from Emeryville on the eastern side of San Francisco Bay into the city itself.

Those bus services aren’t successful in the sense that they fail to meet the state’s transportation needs. They are absolutely NOT a model to be emulated – the HSR project is intended to move above and beyond those stopgap measures that throttle ridership. Elias basically seems to be saying we shouldn’t improve on current passenger rail services at all – probably because he does not understand or chooses to ignore the reasons why that service must be dramatically improved.

Do this and if the mass of Californians still want more when the project is up and running, more could be added. But build a sensible, economical system first.

We’ve already done that. California created the current intercity passenger rail network in the late 20th century and voters already demanded more in November 2008. They want a sensible and economical system and know that the current plan provides it. Elias’s proposal is not sensible at all, given how it would destroy the project’s effectiveness and cause ridership to crash – and as a result it is not at all economical.

Too many people came out of the 20th century with a belief that being cheap is being economical. It’s not. Sometimes the economical and fiscally responsible thing to do is to spend a LOT of money, especially when the alternative is to spend even more money on a failing transportation system in a long-term recession caused by a silly unwillingness to spend.

Elias’s proposals for HSR are absurd. But they need to be pushed back against, in case California political leaders, many of whom are still in the grip of the same failed late 20th century thinking, start to agree with Elias’s flawed ideas.

The state has until September 2011 to complete an environmental review of the line intended to zip riders between the Bay Area and Los Angeles in less than three hours, Quentin Kopp, a California High-Speed Rail Authority board member, told Bloomberg on Friday.

Bids, likely from about 10 train manufacturers, will then be reviewed, Kopp told the news agency.

“Allow four months for the conclusion of proposals and bids, and I estimate conservatively that construction will begin by the first part of 2012,” Kopp told Bloomberg.

“I do expect many” bids from international companies, said Kopp, who was attending the U.S. High-Speed Rail Association conference in Los Angeles. “We have no examples within the United States, no models to follow,” he told Bloomberg.

This will be a extremely important part of the overall project, and you can expect this blog and CA4HSR will be watching this very closely to ensure the bidding works out in the best interests of Californians and future HSR riders.

Given the ongoing global recession, this schedule needs to be kept. We saw significant inflation in construction costs in the last decade, which was one reason the East Span of the SF-Oakland Bay Bridge project ran into its own financial difficulties in 2004. Here in 2010, however, many infrastructure bids are coming in well below estimates. It’s the right time to start building, and those who suggest we wait are implicitly saying we should be willing to spend more money when we have no need to do so.

Of course, that will raise the question of where the rest of the money comes from. We still expect the federal government will provide its share, once this temporary, silly fit of Hooverism is over. So what about the remaining $10 billion or so?

In the past, I’ve suggested that public pension funds like CalPERS should consider making an investment in HSR as a source of stable, long-term revenue that can help smooth out the boom-and-bust cycle of stock market investments. CalPERS is apparently already looking at investing in transportation infrastructure, as evidenced by their recent purchase of a stake in London’s Gatwick Airport:

Calpers, the biggest U.S. public pension fund, said on Friday it had committed up to roughly $155 million to Global Infrastructure Partners for a 12.7 percent equity stake in London’s Gatwick Airport.

The commitment marks the first direct infrastructure investment foray by Calpers, the $200 billion California Public Employees’ Retirement System.

It covers the equity purchase price and provisions for bridge costs and future administrative expenses, Calpers said in a statement.

“We are looking for opportunities to invest directly in high-quality infrastructure assets. We see it as a good fit for our burgeoning infrastructure program,” said George Diehr, chairman of Calpers’ investment committee.

CalPERS has about $180 billion in assets. Could they spare $10 billion or so to invest in high speed rail? That would be a significant expenditure for CalPERS; perhaps they could take a smaller share and split with other public pension funds around the country, such as CalSTRS and funds from other states.

But it would be a sensible solution to some of the questions about how to fund HSR. Instead of embracing the high risk that comes with private sector funding, public sector funds could be used to build a public sector project. HSR would be a safe, stable, long-term investment for CalPERS and other funds, and they could continue to augment that rate of return with their other investments.

It certainly sounds like the wheels may be turning at CalPERS on this. That would be a good thing for HSR, for people invested in the CalPERS system (like my wife), and for the state of California.

The concept is now being applied to high speed rail, in California and across the nation, in a new study from the US Conference of Mayors (PDF). The vice-president of the US Conference of Mayors is Los Angeles Mayor Antonio Villaraigosa, who clearly understands the concept of the Green Dividend, as he is pushing hard to expand all forms of mass transit in his region through the 30/10 plan. And the US Conference of Mayors report features LA prominently as one of four case study cities (Chicago, Albany NY, and Orlando are the other three). On the 4th page, next to a picture of the LA skyline at twilight, we read under the heading “Key Economic Impact Findings”:

In Los Angeles, as much as $7.6 billion a year in new business sales, producing up to 55,000 new jobs and $3 billion in new wages.

Depending on the tax rates, that new economic activity in LA alone would be enough to pay off the entire $10 billion Prop 1A bond within about ten years. By the time the SF-LA HSR route opens around 2020, the massive expansion of LA’s Metro Rail system should be complete, with its hub at Union Station – likely increasing the ridership and therefore the success and economic benefits of HSR in the LA area.

The report finds five specific ways that HSR will deliver economic growth and a Green Dividend (a term that wasn’t used in the report, but should have been):

1. HSR service can help drive higher-density, mixed-use development at train stations.

2. HSR service can increase business productivity through travel efficiency gains.

3. HSR service can help expand visitor markets and generate additional spending.

4. HSR service can broaden regional labor markets. (Note from Robert: Bakersfield should pay particularly close attention to that point. Kern County residents would be able to get jobs in the LA area, a potential bonanza for a county with an 18.3% unemployment rate.)

5. HSR service can support the growth of technology clusters.

These same things hold true for San Diego, Sacramento, and the Bay Area. And while Fresno and Bakersfield may see themselves initially as bedroom cities on an HSR route, sort of like Ciudad Real on the Spanish AVE between Madrid and Sevilla, those cities could also take some economic growth and job creation for themselves, with HSR enabling skilled workers from the coastal metro areas to seek cheaper office/industrial/housing space inland.

Considering that the $10 billion or so in annual HSR dividend in the study was just for the LA area alone, one could envision maybe $25 to $30 billion a year once the system is built out (including Phase II to Sacramento and San Diego). That would more than pay for the costs of construction and operation of HSR.

Yet there remain those who are being pennywise and pound foolish with the HSR project, preferring to let a temporary budget problem here in 2010 prevent us from creating tens of billions of annual economic value for years to come through building HSR. Given low interest rates and low construction costs, with bids routinely coming in well below budget, this is exactly the right time to get to work building high speed rail for California.

Few Californians bat an eye at the multibillion dollar costs of these freeway projects But when it comes to high speed rail, every dollar is scrutinzed, every projected rider is closely examined, any uncertainty, any problem, any discrepancy is seen as a sign the project is a horrible wasteful boondoggle that will render the Peninsula uninhabitable and destroy California’s budget and economy.

The hypocrisy stems not from any hard numbers or facts, but from a basic bias. Many Californians are trained to see freeways as necessary – so vital that we don’t even need to ask any basic questions about their value.

Well, it’s time we started. There’s a huge freeway widening project being proposed in San Diego County that strikes me as a true boondoggle – a colossal waste of money that will never be recovered, throwing good money after bad on a facility that increases our dependence on oil, while alternatives can be funded for a fraction of the cost.

The project is a massive six-lane widening of Interstate 5 on a nearly 20-mile stretch between Oceanside and La Jolla. Much of this would overlay a major widening project just north of the 5/805 “Merge” that was done about 10 years ago. Here’s the overview:

Interstate 5 would grow by as many as six lanes — including a roadway-within-a-roadway for car pools, buses and toll-paying solo drivers — under a plan crafted by transportation officials.

Four lanes would be built along the middle of the freeway between La Jolla Village Drive and north Oceanside, similar to the express-lane network on Interstate 15. Two conventional lanes could be added to the regular segment of the coastal freeway as well.

Caltrans plans to release an environmental study on the project as soon as late June and then stage a series of public hearings. Cost estimates for the expansion range from $3.3 billion to $4.5 billion.

The size and cost of this project is jaw-dropping. It would resemble the massive reconstruction of Interstate 5 done in Orange County, started in 1989 and is nearing completion over 20 years later in Buena Park near the LA/OC line. Caltrans is confident that the ridership is there:

Daily traffic on the 30-mile stretch between San Diego and Oceanside averages 700,000 vehicles, from short hops to long-distance commutes. Caltrans expects that figure to swell to a million cars by 2030.

Has anyone examined these projections? Has Senator Alan Lowenthal determined whether they pass his smell test? Has Elizabeth Alexis performed her in-depth econometric analysis? Has the State Auditor determined whether there’s enough funding, and if not, when can we expect her breathless “oh my god the sky is falling this project is DOOOOOOMED!!!” report on the San Diego County I-5 boondoggle?

I’m not asking those questions to be snarky. For example, this proposal is not fully funded:

Half the money needed for construction would come from TransNet sales tax revenue. SANDAG wants to secure the rest from state and federal sources.

The exact cost hinges on the number of lanes built and the layout. Caltrans officials say the soon-to-be-released environmental study will lay out four options.

This is very similar to the situation facing HSR. It’s why the State Auditor published her misleading and flawed report saying the HSR project has a funding problem. So either we can expect her to publish a similar report slamming this proposal, or we’re going to have to ask some very tough and uncomfortable questions of the State Auditor about the biases that went into the HSR report.

As for Sen. Lowenthal, if Caltrans is going to ask the state to fund this, surely he would want to ensure that the numbers pan out. After all, he’s demanding the same of the HSR project.

Further, the massive cost is intended to be paid partly through tolls, and that is looking shaky:

Recent U.S. Census figures show that the percentage of commuters in the county who carpool or vanpool has dropped to 13 percent from 15 percent in 2000. SANDAG officials have reported that traffic counts on I-15, including the FasTrak lanes, have dipped during the recession — a trend that other toll road operators have also noted.

The drop in traffic has raised questions about whether toll roads or high-occupancy lanes are worth building, but transportation planners say they will eventually pay off, once the economy fully rebounds.

Whereas we have a huge pile of evidence from around the world showing HSR meets its ridership projects and pays its own operating costs, we also have plenty of evidence from here in California indicating that tolling doesn’t quite work as a method of funding new lanes. In the 1990s a private contractor built toll carpool lanes in the 91 freeway’s most heavily trafficked portion, between the 55 freeway in Anaheim and the 71 freeway in Corona. If you’ve ever been caught in traffic here, you know this is one of the epic traffic jams in all California. But the 91 toll lanes failed to turn a profit, and the Orange County Transportation Authority had to bail them out and take over the system. The other toll roads in Orange County aren’t faring much better.

Surely you’d think those experiences would lead the HSR critics to flock to the I-5 project and run their fine-toothed combs through the project. So far, I’m not seeing that happen. Why not?

The answer ought to be obvious. It’s not about the accuracy of ridership projections, or about finances, or about benefit to the community at all. HSR is being attacked because people cannot bring themselves to accept the fact that California cannot have broadly shared economic prosperity in the 21st century without fast passenger trains. HSR has much, much less impact on its communities than this insane freeway project will have, but HSR is the one getting all the controversy while this wacko boondoggle skates on by.

The difference is that HSR critics see freeways as perfectly normal and legitimate things, and cannot imagine a world where they are not the primary means of travel. They see passenger rail as optional, as a toy, as a gimmick, as something designed by people who, for whatever unknown reason, are bent on destroying their communities.

It’s not about the numbers at all. It’s about an unwillingness to part with preconceived notions.

Importantly, there is an alternative to this costly I-5 project. And it’s passenger rail:

“Six new freeway lanes?” San Diego Councilman Todd Gloria wrote on Twitter. “No thanks. Prefer $ be used to extend trolley & bike lanes.” …

The San Diego Association of Governments and other agencies are also talking about major improvements to the coastal rail line. Transit officials continue to seek federal funds to complete the construction of a second set of tracks and on related improvements. The estimated cost: $1.3 billion.

Only parts of the route are currently double-tracked — and that severely inhibits operations. Once a second rail line is complete, that opens the door to more Amtrak and Coaster commuter train runs, officials say.

Other local residents understand the need for building light rail and commuter rail instead of spending billions more on yet another I-5 widening project:

That is just amazing. Three years after widening Interstate 5 to be the widest roadway in America we need to do it again? I don’t think so.

Really, with thousands of gallons of oil pouring into the Gulf of Mexico every day, with two wars stemming directly from the “need” for more oil, with nuclear problems in the Mideast because of, yes, oil, with global warming threatening in particular those on the immediate coastline, it’s still “let’s build more roadway for billions of dollars”?

Let’s get off this oil dependency. Come on, people, build a light rail-based system that works to move us, not more cement.

DOUGLAS LAPPI
Del Mar

Another resident, this time in Solana Beach, had a similar take back in January when this project first arose:

It is hard to know where to begin the objections that many of us have to both of these proposed projects, but let me try:

1) You cannot escape gridlock by “pouring more concrete.” Just look at Los Angeles.

2) Residents living near the present freeway are assaulted by noise and air pollution that I believe violates present California and U.S. EPA limits.

3) Jack Hegenauer and the Clean and Green team of Solana Beach have made the assessment that 60 percent of the greenhouse gases generated in our city come from traffic on I-5, which Caltrans wants to expand by 50 percent, in violation of state law AB232.

4) Twenty years of construction in the North County will result in 20 years of gridlock: Is this all for the sake of our descendants?

5) Kevin Costner had it right, “If you build it, they will come!” Every freeway expansion in world history has led to increases of traffic, leaving things no better off.

Please join with me, with members of PLAGUE and all clear-thinking citizens in opposing this grotesque expansion of our freeways. It is time to get smarter about transportation and not rely on thinking from the 1950s.

If $1.3 billion were spent on double-tracking the Coaster, and $1.2 billion spent on extending the SD Trolley to UCSD and University Towne Centre, you’d be able to take a LOT of traffic off of I-5 and provide capacity to handle new growth without having to spend $3 to $4 billion on this freeway widening project.

Most importantly, you’d be spending money on building a transportation system that reduces, not increases, our dependence on oil. A system that can be powered by renewable energy (if you electrified the Coaster track, that is) and reduce pollution and carbon emissions. Finally, if you add in HSR along the I-15 corridor to downtown SD, you provide yet another option for alternative travel on the key north-south corridors in San Diego County.

It’s good to see that these questions are being asked by people in San Diego County. But where are the rest of the transportation critics? Those who are so quick to interrogate the HSR project ought to be right there on Caltrans about this true boondoggle. Or else we might start wondering what’s really driving their unfair and often unwarranted criticism of HSR.

The title of Alan’s post, and its first paragraph, are what interest me today. The post is titled “California high-speed rail soldiers on despite budget deficits, controversies.” Here’s Alan’s first paragraph:

The whole idea of furthering the development of high-speed rail right now, opponents reason, particularly at a time when there is high unemployment and what with the state’s budget woes and all, this is not the time to build an 800-mile fast train system. Proponents, meanwhile, argue that these and other reasons justify HSR’s existence, some fearing that the longer it takes to get the network built, the greater the likelihood costs will soar.

As you can imagine, my view is the latter. The state budget and high unemployment are reasons to ensure high speed rail gets built.

California’s budget deficit, like those of all 50 other states, is due to the economic downturn, the worst in 60 years. In turn, that recession was due to our dependence on oil and sprawl. Rising fuel prices from 2003 onward began to erode wages and ability to service debts. High housing costs in the urban core drove many Californians to the exurbs in search of affordable housing, compounding the problem as they became more vulnerable to rising oil costs.

These problems came together in 2006, when gas prices broke $3 per gallon (a level gas prices are at today). That burst the housing bubble and began the long slide into a deep recession.

There’s only one proven way out of a recession caused by too much debt, and that is to spend money to create jobs that will build infrastructure that helps create lasting economic value. That’s how we dealt with the Great Depression in the 1930s, with projects like Shasta Dam, the bay bridges, Boulder Dam, and others.

It’s especially true of a recession where the trigger was high oil prices and sprawl. High speed rail helps reduce vulnerability to rising oil prices – and as we know, oil prices WILL rise the moment there’s any significant recovery, potentially putting us right back into the economic doldrums.

Unfortunately, Hooverism is making a comeback. HSR critics and opponents appear to believe that the proven recovery method of spending on infrastructure is either a bad idea, or represents too much of a threat to their interests and privileges to let stand. If it were up to them, we’d still be in the Depression, having not built the dams or the bridges that made postwar prosperity possible.

The notion that we should spend less money, not more, when we’re in a budget deficit and a recession was Hoover’s own view, and all it accomplished was deepening the downturn. It looks as if the rest of the world is determined to follow this path, with the G20 calling for more austerity and less stimulus. The US fought this shift all the way, with Treasury Secretary Tim Geithner pointing out, correctly, that all austerity will do is produce higher unemployment and worsen the global recession.

Paul Krugman was deeply alarmed at the news out of the G20 as well:

It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.

But don’t we need to worry about government debt? Yes — but slashing spending while the economy is still deeply depressed is both an extremely costly and quite ineffective way to reduce future debt. Costly, because it depresses the economy further; ineffective, because by depressing the economy, fiscal contraction now reduces tax receipts. A rough estimate right now is that cutting spending by 1 percent of GDP raises the unemployment rate by .75 percent compared with what it would otherwise be, yet reduces future debt by less than 0.5 percent of GDP.

The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.

Krugman has been a strong supporter of high speed rail projects, precisely the kind of new spending that will reduce unemployment and, because of the economic activity and tax revenues that the projects will produce, will reduce the deficit as well.

Instead we have the voices of austerity calling for less spending, and NIMBYs opposing HSR out of a misguided desire to protect their privilege and their aesthetic values. They’re only going to hurt themselves in the end, as a prolonged recession and a “lost decade” will eventually bring down their precious property values, whereas high speed rail would have brought jobs AND a quieter rail corridor, both of which would likely protect their property values.

Let’s hope it doesn’t come to that. With a severe recession still ongoing, California and the federal government both need to work to ensure HSR is built on-time and in a way that meets the needs of the people of this state. It also means we must work to save the existing mass transit systems around the state, from buses to light rail service to Caltrain and Metrolink – if they collapse, our recession will deepen and it will become more difficult to get out of it. The massive environmental and economic disaster in the Gulf of Mexico is yet another spur to develop HSR and other passenger rail alternatives.

High speed rail in California is made more necessary by the budget deficit and unemployment. Let’s make sure the new Hoovers don’t derail us from our goal of a more prosperous, sustainable California.

UPDATE: BruceMcF offers some thoughts along these lines, including a call-out of “Depression Fans” and a proposal for a “Liberty Fund” that could help rescue mass transit like Caltrain, in his Sunday Train post at Daily Kos.