In the Monday post, I mentioned that Republican Senator George Voinovich was likely to support the plan. He might, but he doesn’t like the proposed funding mechanism – cutting oil and gas subsidies, as Congressman John Garamendi described to me at Netroots Nation – and instead prefers a gas tax:

Sen. George Voinovich (R-Ohio), a longtime supporter of improving the country’s infrastructure, called on President Obama to pay for his $50 billion infrastructure proposal by increasing the gas tax, which has not risen since 1993.

“If President Obama were to honestly consider the gas tax … he would find support where he least expects it,” the senator said in prepared remarks. “Today, groups that don’t traditionally back tax increases — among them the U.S. Chamber of Commerce, the National Association of Manufacturers and the American Trucking Association — have come out in support of a gas tax increase because of this reauthorization bill’s ability to put Americans back to work.”

Obama is expected to pay for the initiative by rescinding tax breaks used by the oil and gas industry. Voinovich argues that approach is not as transparent as a tax on gas that end-users know they are paying.

I agree with Voinovich on this, actually – the gas tax is indeed the better policy tool, since it’s important to start lowering our dependence on oil and a higher gas tax is an excellent way to begin that process, while providing a stable funding source for at least the rest of the decade for the mass transit projects.

Of course, there is no way that 60 votes can be found in the Senate to increase the gas tax right now. In fact, I doubt you could even get to 50. And I would be surprised if you could get a majority in the House. Democrats have no desire to approve a gas tax as they head into the November election, or even ahead of the 2012 election.

In fact, it may be difficult to get all Democrats on board with the president’s proposal. Colorado Senator Michael Bennet, appointed last year when Senator Ken Salazar was picked as the Secretary of the Interior, has come out against the plan – unless it is paid for out of “unused” stimulus funds, whatever those might be:

Bennet, who was endorsed by the president in Colorado but is facing a tough reelection fight, rejected the $50 billion public works program proposed by Obama earlier this week.

“I will not support additional spending in a second stimulus package,” Bennet said in a statement.

And people wonder why Democrats are going to get their clocks cleaned in November.

Senator Voinovich aside, other Republicans are lining up to attack the president’s plans. Part of this is their political calculation that opposing everything Obama wants is good for Republican electoral fortunes (which is probably correct), and part of it is their growing ideological hostility to government spending. Florida Republican Representative John Mica, who has been a strong supporter of high speed rail, trashed the president’s plan. According to the LA Times, they’re also attacking the National Infrastructure Bank by saying “the bank could expose taxpayers to heavy risks.”

The sad reality is that right now, Congress does not appear interested in providing economic recovery or in helping provide long-term infrastructure solutions for the country. That is partly the product of the campaign season – by the end of the year, or in 2011, enough support could be cobbled together in Congress to get something done, especially if a double-dip recession happens. Or, Republicans could continue their “support nothing” policy in hopes of beating Obama in 2012 and reclaiming the White House.

The only reaction is to continue letting our members of Congress know we expect them to vote for infrastructure spending, however it’s funded, and that high speed rail has to be at its center. These frustrating times won’t last forever.

As Politico explains:

According to the president’s plan, high speed rail funding would be integrated into the surface transportation bill for the first time. The bill also calls for the creation of an infrastructure “bank” that would leverage private and government funding for infrastructure projects. And it includes a “Race to the Top” style program that would inject competition into the process of allocating money for nearly 100 different “boutique” projects across the country. The Education Department’s Race to the Top program involves having states compete for funding by producing specific plans about how they would spend the money.

California’s HSR project has already proved its success at these kind of competitive grant processes and would be well positioned to earn a significant amount of money from that bank. In addition, the White House is now committed to funding HSR in a surface transportation bill, although that bill’s prospects remain as uncertain as ever. From the White House’s fact sheet:

The long-term framework includes meaningful reforms:

• The establishment of an Infrastructure Bank to leverage federal dollars and focus on investments of national and regional significance that often fall through the cracks in the current siloed transportation programs;

• The integration of high-speed rail on an equal footing into the surface transportation program to ensure a sustained and effective commitment to a national high speed rail system over the next generation

It is good to see that the Infrastructure Bank is finally going to get the full support of the White House, as is permanent HSR funding through the Transportation Bill. How that gets funded is still unclear, although the New York Times reports that the White House is looking at “cutting oil and gas subsidies,” which sounds like the proposal Congressman John Garamendi told me about at Netroots Nation in July.

The bigger question, of course, is whether the White House can round up enough votes for this proposal. Not only do they need to get one Republican in the Senate (presumably retiring Ohio Senator George Voinovich would be that Republican vote for the Transportation Bill) but they’ll also need to win over Blue Dog Democrats who have already shown they’re willing to risk their own seats and their party’s chances of holding Congress by refusing to support strong economic recovery measures.

Still, given the fact that Republicans are now within striking distance of taking both houses of Congress from the Democrats, it would seem that Dems would want to unite behind these proposals and ensure their passage.

Now would also be a good time for those HSR critics, especially on the Palo Alto City Council, who have been frustrated by the California High Speed Rail Authority’s desire to hold down costs and build HSR tracks in a way these city officials may not want. If people like Palo Alto’s Larry Klein want a trench through their city, they need to stop trying to attack and undermine the project and instead spend their time lobbying Congress to approve the president’s plans so that there can be reliable federal funding that in turn might make it possible for Palo Alto get more of what it wants.

But opponents of investment in clean energy never let the facts get in the way of their argument, and comments from the Howard Jarvis Taxpayers Association (the same group that led the gutting public education funding in the state, with predictable results) showed this time would be no exception.

“The fare box revenue won’t cover a fraction of the operating costs,” executive director John Coupal told California Watch, a nonprofit website of investigative journalism.

So we shouldn’t have clean transportation because the public might have to pay for some of it, is what he’s saying. This reasoning is typical of so-called conservatives’ arguments against investment in public transportation and renewable energy: It’s a dishonest accounting. The economic benefits of projects like the California high-speed rail network don’t end at the bottom line of the projects themselves….

In this instance, the benefits of the rail network don’t all go to it per se in the form of Mr. Coupal’s all-important fare box revenue. They’re felt, too, by thousands of kids who won’t get asthma thanks to the auto traffic the trains will displace; by the dirt farmers in the Sudan who won’t be quite as screwed by drought as they would be if the rail passengers were driving or flying instead; and by the economy of California and the US, which will be more productive and generate higher tax revenues.

Of course, as we know Coupal is making this stuff up; he has no actual evidence that shows the CA HSR system will fail to cover its operating costs, and we know that HSR systems around the world do indeed cover their costs. Once again, HSR deniers have to pretend the rest of the world doesn’t exist in order for them to even have a chance of making people believe HSR won’t succeed here.

But as Tullis points out, even if one were to assume Coupal were right about farebox revenues, that’s still an inaccurate accounting of the costs and benefits of the high speed rail system. If a system saves money by helping reduce the number of people with asthma in the San Joaquin Valley – a problem that was identified as the key to the Valley’s future on a post at this blog two years ago.

In fact, a 2006 Fresno Bee article explained that lung problems have soared among residents in recent years, and the San Joaquin Valley Air Pollution Control District estimated that to counter this trend, the region needed to eliminate 400 tons of pollution per day by 2011. High speed rail would help accomplish that task.

HSR helps save money by providing a cheaper method of handling travel needs. The Caltrans has estimated it would cost about $25 billion to widen the Highway 99 corridor, but high speed rail can help handle those travel needs for a fraction of the cost.

And of course, the thousands of jobs that HSR creates in both its construction and operations, as well as the jobs that are in turn created by the new, faster, sustainable transportation option, will generate tax revenues for state government.

All in addition to the environmental points that Tullis made in his article.

Yet we’re supposed to believe that HSR has to be treated as if it existed separate from all of those other factors. We’re told the cost is too high, but not allowed (by HSR deniers) to demonstrate that when HSR is placed in context, it will not only pay for its own operations (as it will from farebox revenues) but help offset its construction costs as well through the broader economic benefits to health, the environment, jobs and tax revenues.

Of course, it’s government’s job to provide infrastructure to spur economic growth, even if that infrastructure is costly and doesn’t immediately repay its construction costs. Right-wingers like Jon Coupal, who are motivated by an ideological opposition to government spending, will never accept that fact. And they won’t even accept it when presented with a mass transit system whose success has been proven all over the world and that will not require ongoing subsidies, which cannot be said of airports or freeways.

Still, as the polls show, Californians understand this and still support HSR as a result. The voters of this state understand the true accounting of HSR costs. And that’s what has had the HSR deniers so worked up and angry over these last two years.

The system cost estimates have nearly doubled: The California High Speed Rail Authority estimated in 2006 that the total cost to develop and construct the entire system – San Francisco to San Diego – would be about $45 billion. By December 2009, the estimate was $42.6 billion for just the San Francisco to Los Angeles to Anaheim segment. And the $50 fare more than doubled to $104.75.

Here, as with their whole op-ed, important information is omitted in order to cast the HSR project in the worst possible light and present a distorted view of the truth to the public. The estimate in 2006 was in 2006 dollars. That estimate is still $45 billion for the whole system. In December 2009, however, as a result of federal mandates, a new estimate for SF-LA-Anaheim of $42.6 billion was reached because the dollars were changed to “year of expenditure” dollars. The estimate takes into account expected inflation, although given that we are currently experiencing price stagnation, or even weak deflation, it is possible that the final costs will come in well below $42.6 billion.

The key point is that the cost did NOT suddenly soar. Instead the costs were adjusted to reflect different accounting assumptions. And it’s still a far sight cheaper than expanding freeways or airports, estimated to cost at least $80 billion, to handle the passengers that HSR will carry.

Besides, what would you rather have – an agency that is honest about cost projections or an agency that hides them? The CHSRA has always been open about its cost projections.

As to the fare, the $55 cost and the $104 cost are possibilities. They are not guarantees. It depends on whether fares are kept low to encourage high ridership, or whether fares are higher in order to pay private investors – even though the system will break even under either fare scenario. If people want a lower fare, they are free to demand it. Nothing has been decided, although the op-ed misleadingly claims it has.

The ridership estimates are preposterous: By 2009, the 70 million passengers advertised on the 2008 ballot measure had shrunk to 39.3 million riders by 2035, the train’s 15th operating year. The Boston-New York-Washington corridor is, by far, America’s most favorable site for high-speed rail. In 2008, eight years after inception, the combined ridership on all segments of the high-speed Acela train route was 3.4 million, about 6 percent of the population of the states it serves. If the California rail project were to achieve in 15 years what Acela attracted in eight, it might draw 6 percent of all California’s residents – about 3 million riders.

This is the “nobody rides trains” argument dressed up in numbers. What’s left out is the key fact that the Acela is a quasi-high speed train that must share tracks and has a top speed that is a fraction of what California’s will be. The California HSR system will be building, for the most part, dedicated tracks that are capable of much greater speeds, meaning more trains can be put into service. That makes it plausible that the system can operationally support these ridership estimates, as do other HSR systems around the world.

Of course, as is standard practice with HSR deniers like these guys, other HSR systems around the world are assumed to not exist. So we never hear about them, and never hear that California’s ridership stacks up well against those systems.

Nor do they mention rising oil prices, which will be another factor pushing riders to HSR systems. In countries where HSR has been built recently, such as Spain, riders have flocked to the trains, moving away from cars and planes. This factor, like the others, is studiously ignored by the op-ed authors.

California taxpayers will have to subsidize operations: If high-speed rail did even twice as well as the Acela train, it still would not repay investors a cent. Taxpayer subsidies would violate the authorizing law and the promise not to raise taxes.

As you can see, this is something they just assert, without any actual evidence. The CHSRA’s projections indicate the system will be self-sustaining, as are HSR systems around the world. There’s nothing wrong at all with subsidizing operations, it’s a good thing to do for transportation, and we in fact already do it for every other form of transportation out there. But it’s not necessary for California’s HSR system, and as we know it’s illegal under Prop 1A. Still, if someone wants to question the claim that HSR won’t require subsidies, they need to actually bring some evidence. You can’t just assert something without evidence and expect us to take it seriously.

Adequate funding is improbable: Voter-approved Proposition 1A requires that, before the bond proceeds are spent, the California bond funds must be matched by other public and private sources. The authority’s 2009 business plan offers the following funding sources: Prop. 1A bonds $9 billion; federal grants, $17 billion to $19 billion; local government $4 billion to $5 billion; private funding $10 billion to $12 billion, for a total of $42.6 billion. With rising national anxiety over soaring debt, it is practically inconceivable that the federal government will provide anything near the $18 billion the authority needs. Virtually every local government in California is struggling and is seriously threatened by the estimated $475 billion shortfall in state public employee pension funds. There is also danger that the authority will start building without enough money to finish the project.

This is partly misleading, and partly a lie.

Misleading: It is entirely conceivable that the federal government will provide the $18 billion we need. That’s $1.8 billion a year over 10 years, and that is within the range of possibility for an annual federal appropriation. If the new Transportation Bill includes $50 billion for HSR, then California will easily get what it needs from the feds.

Sure, deficit trolls might succeed in gutting federal spending over the coming years, but there is no widespread public demand for austerity. The public has embraced the stimulus, and still prefers deficit spending in order to create jobs. A coalition of Blue Dog Democrats and Republicans have blocked this in Congress, which is a serious political problem, but it’s not as if the public has no appetite for this kind of spending.

As to the lie, the authors are making it sound like the Authority would just leave things half-finished if they ran out of money. They cannot do that. Any money spent on the HSR project must go to something with “independent utility” – meaning it can still be used even if the rest of the system isn’t built out yet. There aren’t going to be tracks that dead-end in the middle of nowhere. Californians will get improved rail service from this no matter what happens.

Job creation is of the wrong kind: The authority claims the project would create 160,000 construction-related jobs and 450,000 permanent jobs. The skilled high-paying jobs to make the trains and rails will be in Asia or Europe, not in California. The California jobs will be low-tech earth moving.

This is also not true. Siemens plans to build HSR trainsets right here in California, at their Sacramento plant, if they won the contract. China has indicated a willingness to build HSR trainsets in Fremont at the old NUMMI plant. Alstom has a facility on Mare Island near Vallejo, and Talgo is setting up shop in Wisconsin.

Of course, low-tech earth moving jobs are needed too; notice how the op-ed authors condescendingly believe those jobs are simply irrelevant and of no value.

California doesn’t need high-speed rail between San Francisco and Los Angeles: With 10 airports and six competing airlines, we don’t have to worry about one strike or terrorist shutting down the whole system. The improved public transportation we do need is within metropolitan areas to speed the commute to and from work.

Of course, this ignores the fact that as I mentioned above, travelers prefer trains to planes when given the choice. It also ignores the threat of rising fuel costs. It also ignores the fact that the airlines themselves want HSR so they can get out of the short-haul shuttle business and open up airport slots for the more profitable medium-haul routes. Just ask JetBlue.

Overall this is a stunning bit of HSR denial to appear in the SF Chronicle, as it is so lacking in basic facts, credible evidence, and sensible arguments. But what is more concerning is how easily these kinds of lies can become seen as commonly accepted facts, especially when they’re not being rebutted.

Which, as you all know, is the job of this blog.

In the end, HSR is an essential element of California’s 21st economic prosperity. Whether it’s HSR deniers like Enthoven and Grindley, NIMBYs on the Peninsula, or those who actively seek to deny others the opportunity to have prosperity by shackling them to a failed 20th century oil-dependent transportation model, it’s obvious that some Californians don’t want us to have economic prosperity in the 21st century.

So far, it hasn’t become a major issue. I expect that to change, but it won’t play out the way it has in Wisconsin or Ohio. In those states, right-wing candidates have been portraying HSR as an unnecessary and wasteful project that diverts funds from freeways and other 20th century legacy projects.

Here in California, right-wing Republican candidate for governor Meg Whitman has indicated she thinks HSR funding should be delayed – but so far has not yet come out in opposition to the project itself:

Meg Whitman, the Republican gubernatorial candidate and former eBay CEO, said through a spokeswoman that she “believes the state cannot afford the costs associated with high-speed rail due to our current fiscal crisis.” She lives in the wealthy Peninsula town of Atherton, which is ground zero for the anti-bullet-train movement because of concerns about the tracks that would run through the community.

Whitman’s framing here is significant. She isn’t attacking the concept of high speed rail, isn’t saying it will be a flop or a boondoggle, and isn’t saying California doesn’t need it. Instead she claims that due to the fiscal crisis, we simply can’t afford even the $10 billion that voters already approved (the rest of the construction cost doesn’t come out of state funds).

She’s wrong there too – California not only can afford to pay it’s share of HSR, a view voters shared in November 2008 even after the recession had begun and after two successive years of budget deficit, but we cannot afford to NOT build it, unless we’d rather pay a lot more than $10 billion in higher fuel costs, lost jobs and income due to those costs, and tens of billions in freeway and airport expansion costs.

Whitman’s view is colored by her belief that state government is too large, even though the overall budget is at the lowest point in at least 15 years. She pledges to conduct mass layoffs of state workers and pursue privatization of other state services. Maybe that’s a good move and maybe it’s not, but it indicates Whitman is inherently hostile to public spending, not that she sees any particular problem with HSR.

That’s not to downplay the threat she might pose to the project if elected. Whitman would direct her Department of Finance to obstruct the bond sale, just as Arnold Schwarzenegger’s DOF obstructed the release of Prop 1B funds to buy new trainsets for Amtrak California.

What it does suggest is that Whitman, unlike her counterparts in Wisconsin and Ohio, is hesitant to attack HSR itself. Perhaps in the Midwest, sustainable mass transit technology is more easily demagogued as being unnecessary. Not here in California.

In fact, Californians pride themselves on innovation and leading the implementation of new technologies – or in this case, the successful application of existing technology to the California landscape.

Whitman is wary of getting on the wrong side of that belief. That’s why she is hedging on Prop 23, the initiative that would suspend the state’s global warming and carbon reduction law. Whitman supports the principle of suspending the law, but claims she is against Prop 23. That’s a hypocritical position, since her plan would have the same effect as Prop 23 and undermine the growing clean tech industry here in California. But Whitman is hedging precisely because she can read polls, and the polls show Californians like green, sustainable technology.

Jerry Brown can read polls too. And he is coming out strongly in favor of high speed rail, as seen in his jobs plan:

Accelerate planning and construction of high-speed rail in California

Like Whitman, Brown doesn’t go into detail here, but the implications are clear: Brown sees HSR as a key element of California’s economic recovery, and will not only refuse to delay HSR, but intends to accelerate its construction. How he’ll do that isn’t yet clear. But his commitment to HSR goes back 30 years, to his first stint as governor of California, when he created a high speed rail project for the state. The plan wasn’t nearly as advanced as is the current one, and it quickly fell apart after he left office, when a hostile state legislature killed it. But we can expect Brown to continue to fight for HSR, unlike Whitman.

This blog is not going to endorse a candidate for governor, and won’t tell you how to vote. I doubt any of you are single-issue voters anyway. But it is clear that Brown would be much better for HSR than Whitman. More importantly, it’s also clear that Whitman doesn’t want to make a big deal of her opposition to funding the project – after all, 76% of Californians and 77% of those surveyed in her own Assembly district still want HSR to happen.

As I explained it in the Mike Rosenberg article on the candidates and HSR, Brown has more to gain from HSR becoming a campaign issue than Whitman:

Robert Cruickshank, Californians for High-Speed Rail chairman, noted that former Palo Alto Mayor Yoriko Kishimoto, the most vocal bullet-train critic in the southern Peninsula’s 21st Assembly District race, lost to two candidates in the June Democratic primary who were more tempered on high-speed rail.

“If I’m Jerry Brown, I would strongly embrace high-speed rail in the Peninsula and the Bay Area. There’s still reason to believe that most voters there strongly support it,” Cruickshank said. “I would go up to Meg Whitman’s turf in Silicon Valley and say, ‘This is how we’re going to get California back to work.’ “

We’ll see if Brown does that. If he makes green jobs – including HSR – a campaign issue, he would likely benefit from it at Whitman’s expense.

But as we know, some right-wing Republicans instinctively react against passenger rail projects whenever they see them. Convinced that all rail projects are “boondoggles,” they’ve fought against them at every turn, whether it was calling the idea of high speed rail to Vegas a “casino train” or whether it’s John Stossel inviting Randall O’Toole and Glenn Beck to bash trains on Stossel’s Fox Business TV show.

Now we’re seeing some right-wingers ramp up their criticism of passenger rail, and of high speed rail in particular. In Wisconsin, Republican gubernatorial candidate Scott Walker has made opposition to HSR a centerpiece of his campaign. Walker put up a microsite attacking the project, NoTrain.com, with a misleading logo featuring a heavy Amtrak-style train and a video where Walker pledges to fight HSR, even returning federal stimulus money Wisconsin won.

Walker’s argument is familiar: HSR won’t pay for itself, won’t create jobs, and sucks money away from repairing roads and bridges. None of this is true, but Walker comes from a wing of the Republican Party that has become deeply hostile to investment in 21st century infrastructure. They’re betting America’s future prosperity on prolonging a failed status quo as long as they can, despite widespread evidence that relying on automobiles and oil is an economic loser for this country.

In Wisconsin, the opposition to HSR is particularly crazy – construction is set to begin later this year on HSR from Milwaukee to Madison, with over $800 million in federal stimulus funds and some state money as well. Wisconsin governor Jim Doyle already was able to get Talgo to agree to build a factory in the state in exchange for Talgo receiving orders for trainsets on the HSR project. Right-wing opponents believe that Wisconsin apparently doesn’t need jobs or federal money, and have been egging on NIMBY opponents of the project in cities along the proposed route.

In Ohio, former Republican Congressman John Kasich is running for governor and criticizing high speed rail as well, in terms similar to those of Scott Walker.

Over at the Huffington Post, Bill Scher surveys the right-wing mobilization against HSR and offers some valuable thoughts to HSR supporters:

That tension within the political middle of the electorate — between wanting bold public investment and worrying about wasteful government spending — is a perennial obstacle to progressive reform.

Fortunately, the desire to create jobs and revitalize American manufacturing is broadly shared by the electorate.

The widely reported poll by The Mellman Group on behalf the Alliance for American Manufacturing showed huge support, 86% for “invest[ing] in our infrastructure–using American made materials–to integrate new smart electrical grid technology, generate power by building wind turbines, and create a modern network of high-speed passenger railways.”

But the Mellman Group cautioned that “strong” support for “new” infrastructure — including high-speed rail — only reaches 47%, whereas strong support for “old” infrastructure such as roads and bridges hits 58%.

Conservatives are comfortable making this a false choice between “old” and “new” infrastructure. Walker’s ad argues for taking the federal stimulus funds for high-speed rail and diverting to roads and bridges.

Scher goes on to argue that we need to reject this false choice, and I fully agree. The federal stimulus, which these right-wingers opposed, was a perfect example of how government can fund “old” infrastructure and “new” infrastructure. We should definitely be repaving existing roads and replacing worn bridges while we also build a 21st century transportation infrastructure.

But right-wingers, invested as they are in a politics that sees defense of the status quo and any effort to change the status quo as some kind of massive existential threat to the American Way Of Life, believe they can score points against Democrats by mobilizing an angry, worried, and fearful electorate to oppose anything that is “new” or “different.” Concerns about funding are merely the velvet glove hiding an iron fisted defense of an oil economy whose massive costs played a central role in producing this recession.

Scher goes on to suggest one way to deal with this:

As pollster Stan Greenberg discerned from the poll he executed on behalf of Campaign for America’s Future and other progressive groups, voters are concerned about both job creation and deficit reduction, and see a connection between them.

Therefore, it is possible to make the case that public investment to create jobs and grow the economy will also help reduce the deficit. But it is also possible to spew out misleading numbers to convince a skeptical electorate that a certain public investment project will waste taxpayer money.

Here in California, voters still believe in the concept of using public money for infrastructure and public services. The stimulus is still popular here, and the Tea Party is still a small movement popular only with 25-30% of the electorate.

Scher does warn even people like us in California to not get complacent:

But if we cannot credibly portray an thriving America powered by a revitalized infrastructure, and beat back bogus arguments, to give people a reason to say “Yes,” then we risk a “No Train” conservative populist backlash that could stifle our ability to recover from the recession and compete in the 21st global economy.

Here in California, I don’t think we’re in any serious danger of this happening. The polls statewide and on the Peninsula show just over 75% support for HSR. Still, we need to be robust and persistent in our defense of the HSR project, especially as HSR opponents concerned about the impact of the project on their property seize upon any argument against HSR and spread it around the state as fast as they can.

And what of the gubernatorial candidates here in California? We’ll have more on them tomorrow.

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.

multiyear transportation bill that is paid for would be a real economic stimulus and create immediate jobs. The Transportation Department estimates that for every $1 billion the federal government invests in highways and bridges, 34,800 jobs are created or maintained. Highway projects worth more than $47 billion are ready to go, according to state departments of transportation. …

We do not need to borrow money for the transportation bill. We can pay for it by increasing the gas tax. … The gas tax is a user fee, and just a few cents could help create jobs, improve our infrastructure and better the climate. …

Reagan knew America was in dire straits and fought hard for a gas tax increase once he realized the effect it would have on the economy. It was a tough pill for his conservative colleagues to swallow. But, in the end, Congress passed the much-needed Surface Transportation Assistance Act of 1982, which provided a 5-cent gas tax increase and created hundreds of thousands of jobs. History speaks for itself.

Today, groups that don’t traditionally back tax increases – among them, the U.S. Chamber of Commerce, the National Association of Manufacturers and the American Trucking Association – have come out in support of a gas tax increase because of this reauthorization bill’s ability to put Americans back to work.

I’d like to think this would be a compelling argument to Congressional Republicans, as I’m sure it is compelling to many actual Republican voters across America. However, I doubt it will move very many of them. Congressional Republicans have a different set of conservative values than those espoused by Ronald Reagan. They see any tax as inherently bad, and do not believe any good can come from government spending, on anything, even on transportation – which is essential to our nation’s economy.

While many Republicans around America – including US Secretary of Transportation Ray LaHood – understand the need to get a new Transportation Bill done as soon as possible, Congressional Republicans are instead fighting to block action on reauthorization. The current Transportation Bill has already expired and was temporarily reauthorized through December. That means action on a full renewal will have to be taken this year, likely in the so-called “lame duck” session of Congress that takes place in November and December after the midterm elections. But Congressional Republicans are trying to stop any action from being taken in that “lame duck” session:

House Republicans are going forward with plans to introduce a resolution on Tuesday to prohibit the House of Representatives from assembling during the two-month period following the November elections.

A GOP leadership aide confirmed to the Huffington Post that the resolution, authored by Rep. Tom Price (R-Ga.) for the purposes of preventing Democrats from passing legislative items during the lame-duck session, would be introduced before the House passes additional Medicaid and teacher funding. The aide argued that comments on Sunday by Carol Browner, the White House’s top energy and environmental adviser, suggesting that energy legislation could be considered during the so-called lame duck period, proved that the resolution was pertinent.

The goal seems to be to derail the energy/climate bill, but it would also have the effect of preventing a reauthorization of the Transportation Bill, unless the current bill is extended yet again before December. It’s not likely that the Republican resolution will succeed; there will almost certainly be a “lame duck” session. And Republicans have in the past used that “lame duck” session to do some rather big things – in 1998, after losing seats in the midterm elections, Republican Speaker Newt Gingrich had the House vote to impeach President Bill Clinton.

But even if there is a “lame duck” session, it seems unlikely that Congressional Republicans would vote for a gas tax increase. With Sen. Voinovich embracing it, that’s technically the 60th vote in the Senate, bypassing the filibuster – assuming all other 59 Senate Democrats supported a gas tax too.

Which is a doubtful prospect too. As I reported from Netroots Nation, the House of Representatives is looking at another solution to fund the Transportation Bill, a fee on each barrel of oil, in order to deal with the fact that even many Democrats are scared of a higher gas tax.

Unfortunately, an unwillingness to embrace a higher gas tax is a bipartisan position on Capitol Hill. This is despite the fact that a phased increase would barely be noticed by most voters and drivers, and would improve our transportation and economy rather than hurt it. Washington State voters approved a 10-cent gas tax increase in 2005, phased in over three years, and most people never saw any negative impact.

Americans feel that cheap gas is a birthright, but in recent years we’ve learned that just isn’t true. Peak oil is either here or very near, as the oil price increases of recent years indicate. Major financial investment firms realize this too, with Deutsche Bank predicting oil will hit $175/bbl by 2017. Even in the midst of the worst recession in 60 years, the price of a gallon of gas is still over $3 across California, a price that was unheard of prior to 2006.

It would therefore make sense for us to get ahead of those further increases by raising the gas tax now, to fund the development of alternative transportation that can provide for our economic and travel needs without being reliant on oil. Or, we could find some other sensible way to fund the Transportation Bill.

But whatever the solution, one needs to be found, and the Transportation Bill – including long-term funding for HSR – needs to pass this year. There’s no time to lose on this.

This meeting is likely to be more eventful than most. Alongside further discussion of the Merced-Fresno and San Francisco-San José alignments, the board is also expected to decide which of the four eligible segments (SF-SJ, Merced-Fresno, Fresno-Bakersfield, LA-Anaheim) it will submit to the FRA for funding. (See update below for more on this.)

There are good arguments for each of the four segments. Californians For High Speed Rail is neutral on which of these should be selected – we’ll be happy with any of them, as it would represent a big step forward in getting the high speed rail project underway. I’m sure there will be discussion of this in the comments, and I look forward to reading those.

UPDATE: The SF-SJ Supplemental Alternatives Analysis is now posted on the CHSRA website. Looking at the documents, they’ve ruled out a stacked tunnel and deep-bore tunnel due to the community’s desire to have a narrow ROW footprint. What will be carried forward are elevated, at-grade, or a trench.

In other words, the Peninsula had to decide what’s more important to them: keeping the project within the current ROW so as to avoid eminent domain uses on houses, or tunnelling the tracks and consequently needing a wider ROW at the transitions, thus requiring more eminent domain takes. Based on the feedback the CHSRA has received, the narrow ROW seemed the greater priority. That strikes me as being very sensible.

UPDATE 2: It doesn’t appear that the CHSRA will actually be choosing one of the segments today, but will be developing plans for each, as Elizabeth accurately explained in the comments.

To those not as familiar with the HSR project, Bill Lockyer’s comments last month that Wall Street wasn’t sold on the HSR project might have seemed like another in the onslaught of attacks on the project. So E.J. Schultz, one of the best reporters in California politics, decided to look further. Some of it he gets right, and some of it he doesn’t:

But the government’s gamble won’t pay off unless private investors jump on board the $40-plus billion project — and so far no one has pledged a dime.

If the money doesn’t come, the state and federal governments risk sinking billions of dollars into a rail line that never gets finished.

This isn’t correct. The government isn’t gambling on anything. If private funding never shows up, then the whole system isn’t finished. But because of the “independent utility” rules attached to HSR funding, which have been the subject of extensive discussion in the comments to Saturday’s post as a result of this memo, there’s no danger at all of the “government” building a half-finished project.

Schultz is incorrect to call this a “gamble.” There’s no risk at all. If funding doesn’t materialize to build the whole plan, the whole plan doesn’t get built. If another dime never materialized for HSR in California, the San Joaquins might get a new track between Fresno and Bakersfield, or the Surfliners would get sped up between LA and Anaheim, and that’s it. Those would be useful projects, and that’d be that.

Too often, people approach HSR as if it’s some kind of start-up business, when in fact it’s no different than a freeway widening proposal or a bridge plan. The plan may be great, but if you can never get full funding, the plan sits on a shelf.

Of course, Alan Lowenthal’s always there to remind Californians of the doom and gloom:

“This could be the greatest thing that ever happens to the state, or a real disaster,” said state Sen. Alan Lowenthal, D-Long Beach, who has taken a lead oversight role.

He doesn’t actually explain how it would be a real disaster. Given the safeguards listed above, it’s not really possible for it to be a disaster. It would be nice of Lowenthal would adopt a more constructive approach.

Schultz goes on to cite Bill Lockyer’s comments to the San Diego Union-Tribune that set off the questions about private financing. Significantly, Schultz reports that Lockyer is backing off those comments to an extent:

In an interview with The Bee, he softened those comments some, saying investors are “skeptical,” but that “these are just preliminary comments” made before anyone has spent time “making a disciplined investment decision.”

Schultz also quotes California High Speed Rail Authority Deputy Director Jeff Barker, who explains how the timeline for private funding would work:

The authority expects it might even have to start construction on some of the segments before investors step up. The estimated phase-one completion date is in the 2019-20 fiscal year.

“We’ve said all along that the private investment in the project is going to come toward the end,” said Jeff Barker, a rail authority spokesman. “Before the private sector is going to put private money into this, they’re going to want to see that it’s real.”

In one potential scenario, construction companies, rail-car makers, train operators and financial institutions could form a consortium. In return for an investment, they would get a cut on profits during a 30-year lease, plus control of the system — including the power to set fares, Barker said.

To longtime readers of this blog, that’s something you’ve known for a while. At the June 2008 CHSRA Board Meeting, a presentation was given explaining what it would take to get private funding:

There was a fascinating presentation from the Infrastructure Management Group and Lehman Bros. They were hired as consultants by the Authority for the issue of bringing private equity investment into HSR. Their presentation to the board was based on the responses they received to their Request for Expression of Interest (RFEI), sort of like a pre-RFQ (request for qualifications). Diverse operators and contractors, including SNCF (the French National Railway), Britain’s Angel Trains, and giants like Alstom, Parsons, and Goldman Sachs responded.

Long story short, there’s lots of interest in it but it would require at least 60% public financing. Probably at least 75%. The good news is that if we get both the bond money and a matching federal amount under veto proof legislation (S.294 and HR 6003) pending in the Congress we are there. $20 billion S.F. to L.A. and beyond to Sacto and San Diego.

In other words, as reported to the board, the private sector isn’t going to step up until they see a considerable federal contribution. It’s not that they have no faith in the California project. It’s that they’re not yet sure Congress is going to properly fund its share. Assuming that the federal government does authorize the $15 to $17 billion that we need from them, then there is every reason to believe the private sector will step up.

For example, as I posted just a few days after reporting on Bill Lockyer’s comments, one of the world’s leading investment banks, UBS, actually sees HSR as a sensible investment. Once they see the federal government stepping up, private funders will too – but not until Congress has made its move.

To his credit, Schultz reported on the expressions of interest from private funders that were listed at the June 2008 board meeting. Since then, we’ve seen interest from others as well, including China. Schultz then goes on to mention the litany of critical reports put out about the HSR project – the flawed LAO study, the flawed State Auditor’s report, the deeply flawed Berkeley ITS ridership report. Unfortunately, Schultz presents these reports as objective criticisms, and not as the flawed documents they really are, but the overall effect is to make it appear like there are warning signs that are causing Wall Street to hold back.

That’s not what’s really happening. In reality, HSR critics are using these flawed studies to try and convince Congress to not fund California HSR, so as to strangle in the crib a project they hate. Without Congressional funding, there is no private funding. That’s the key point here, and I’m very glad Schultz let Barker make it – that elevates his article well above the much more flawed items we have a depressing tendency to see when it comes to HSR reporting.

In short, the ball is still in Congress’s court. When they finally do fully fund HSR (and I do believe it is a matter of “when” and not “if”), then we’ll see the private funders step up and make their contributions.

This whole situation reveals the deeper flaws in treating infrastructure like a business proposition. Nobody demanded to see a business plan before the Interstate Highway System was built – Americans declared it was necessary, and funded its construction through tax revenues, with private funding not playing any role at all. Here in the 2010s, we have a strong need for a new kind of transportation infrastructure. It would be nice if Congress had the guts to simply find a new revenue source and fund the construction of that infrastructure, to create jobs and economic growth now and for decades to come.

But they don’t, and with a California governor who has always been in love with public-private partnerships, we play the hand we’re dealt. Private funding will indeed come for HSR – as long as we get Congress to step up and do its part.