California’s $100 Billion Nightmare High-Speed Rail Project | Citizens Against Government Waste

California’s $100 Billion Nightmare High-Speed Rail Project

The WasteWatcher

After 12 years of delays, mismanagement, and political gridlock, the total cost estimate for the California High-Speed Rail Authority (CHSRA) has reached $100 billion.  Initially budgeted at $35 billion, former California Gov. Jerry Brown’s dream of uniting California’s coastal metropolises and parts of the Central Valley has transformed into a disjointed, mismanaged fiscal nightmare with rising costs every single year following its inception. The $100 billion cost is 23 percent greater than the highest estimated cost of $81.4 billion that Citizens Against Government Waste projected in an extensive September 2008 joint report with the Reason Foundation and the Howard Jarvis Taxpayers Foundation.

When California Gov. Gavin Newsom (D) took office in January 2019, he ignored his initial misgivings to shut down the Bakersfield Merced (MB) portion of the project and decided to move full steam ahead with construction, promising to deliver an operational line by 2029.  The MB line’s original projected cost made up one-fifth of the entire high-speed rail’s total cost.  However, a lack of state oversight coupled with ad hoc financing pushed costs for the MB line well past the initial estimates.  Thus far, the only speed record this train has set is the unprecedented rate at which it has burned through state and federal tax dollars.

Originally pitched as an environmentally friendly alternative form of transportation, the CHSRA line is no different than any other pork-barrel project.  It has been especially good at creating jobs for Central Valley construction workers and private contractors.  As of June 2020, 4,000 construction workers, 73 percent of whom are from the Central Valley, were employed at 32 separate active construction sites operating simultaneously along a 117-mile stretch of the MB line.   

More than $4.8 billion in construction contracts were awarded to a myriad of Central Valley private contractors.  The California State Auditor’s (CSA) 2018 report detailed that opportunistic contractors employed as consultants on the MB line took full advantage of CHSRA’s lack of planning. The CSA found that “the only documented source of information regarding the timeliness and status of deliverables came from the contractors themselves.”  The lack of a paper trail left the CSA unable to determine “the quantity and quality of the work for which the Authority paid.”  Many contractors also failed to deliver the items they had promised to the CHRSA.  This grifting of the taxpayers’ money is such a widespread practice that CHRSA is either complacent or completely ignorant.

The number of private firms riding the CHSRA gravy train forced Gov. Newsom to take action. In May 2020, Gov. Newsom announced he was going to axe 88 contractors from the CHSRA, which will save an estimated $16 million annually for the remainder of the project.  While commendable, Gov. Newsom’s intervention is too little too late.     

The continuing increase in costs has caused the legislature to pass numerous stop gap bond measures to keep the project alive.  On June 15, 2020, lawmakers sought an additional $4.2 billion in bond funds for the acquisition of the final land parcels in San Juaquin Valley required to complete the MB line.  If passed, the additional general obligation bond debt will further increase the taxpayers’ burden.  

When the MB line is completed, there is simply no chance that ridership fees alone will be able to cover CHSRA’s operating costs.  When government-funded mass transit projects are unable to sustainably finance themselves, state and local governments are forced to raise taxes to close the fiscal gap.  The Bay Area Rapid Transit (BART)’s budget statements from 2016–2019 offer a glimpse into the future of the CHSRA high-speed rail project and the impact it will have on the taxpayers. 

In 2016, BART’s average weekday ridership (AWR) peaked at 443,000.  Ridership steadily declined each subsequent year, dropping to 404,900 AWRs in 2019.  Despite servicing nearly half a million Bay Area residents every day, BART’s fare recovery rate fell below its operating expenses.  In 2019, operating expenses were $767.8 million, with only 63 percent covered by passenger fares.  The remainder of BART’s operating expenses drew $264.6 million from sales taxes, $46.8 million from property taxes, and $59.9 million in financial assistance from state assistance programs.  BART’s reliance on the taxpayers serves as a cautionary tale for the MB line along with the rest of the high-speed rail project.

When the CHSRA inevitably fails to recover its operating expenses, taxpayers will be called upon to finance the difference.  Higher sales and property taxes are already in the forecast shortly after the rail line begins operating.  Until then, state bonds and federal grants will continue stoking this pork project’s fiscal firebox with the taxpayer’s money.

-- Trevor Lewis

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