PERSPECTIVE-A recent Los Angeles Times article warned that the California High Speed Rail system’s cost, already double its original estimate, is expected to increase by 31% to a total of $41 billion in its first leg from Merced to Burbank. The overall project cost is expected to rise 5% to over $71 billion, but engineers acknowledge the cost of drilling through many miles of fault-permeated mountains to connect the San Joaquin Valley to the San Gabriel and San Fernando Valleys is a high-stakes gamble.
HSR officials and proponents were crying high-speed tears over the disclosures referenced in the Times story.
But no one is talking about what is really missing in the dueling assertions about the financial, practical and operational considerations of this controversial public works program – mainly, capital budgeting.
One of the premises of capital budgeting is the assumption that money does not grow on trees. Any organization, whether government or private business, does not have unlimited resources There are always investment alternatives to consider as well. The object is to select the projects with the greatest return or value with a realistic assumption regarding risks.
The CA HSR system was approved by the voters in 2008 when it was packaged as Proposition 1A.
Propositions are the antithesis of capital budgeting. Voters are not presented with competing alternatives, only the political whims of interest groups.
What would the investment alternatives be to HSR?
Any water project would come to mind, but that’s apples and oranges. Water is an economic life or death issue for the state and cities. Projects to increase storage and reclamation need to be compared to comparable, vital improvements.
HSR is not vital. There are already working modes of transportation to move people between north and south. Most inter-regional trips are discretionary. However, there are intra-regional transportation challenges that affect our average, everyday lives. Let’s say, commuting between the Valley and the Westside or mid-Wilshire; the South Bay and points north, and other cross-metro routes.
Los Angeles is not unique in this regard. Every large urban region has a need to efficiently move millions of people every day who would otherwise continue to crawl along at less than 20 mph, as compared to less than 100,000 the California High Speed Rail Authority claims its trains would carry through the San Joaquin Valley when (or if) the system is built out by 2040.
The cost of reducing the strain and stress of wasted hours commuting locally will be high statewide, but $68 billion, which is the system’s optimistic cost projection the California High Speed Rail Authority clings to, could get us down the road considerably. The benefits in terms of less gas consumption and pollution will be far greater than any HSR will generate, assuming there are measurable improvements. Cities cannot afford the cost alone. State funding will be necessary, not to mention federal funding. Of course, local governments could levy even more sales taxes on the residents far in excess of what is currently under consideration for Los Angeles alone.
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Regardless of the source of funds, no one has a bottomless check book.
The voters were not given a choice in 2008. Far better if we had had options on the types of transportation systems. I don’t think anyone would stand for a presidential election if there were just one candidate. But 1A was the equivalent of a North Korean plebiscite.
Even the initial $9.5 billion in general obligation bonds authorized under 1A could help get a subway through the Sepulveda Pass.
As it is, there will not be enough money to complete HSR beyond a critical mass. The Madera to Bakersfield corridor might end up with the most expensive commuter rail system in the world on a per capita basis.
And the rest of us will still be stuck on the 10, the 101, the 405 and the other “the’s.”
(Paul Hatfield is a CPA and serves as President of the Valley Village Homeowners Association. He blogs at Village to Village and contributes to CityWatch. The views presented are those of Mr. Hatfield and his alone. They should not be construed to represent the opinions of the VVHA or the residents of Valley Village, individually or as a group. He can be reached at: [email protected].)
-cw
CityWatch
Vol 13 Issue 90
Pub: Nov 6, 2015
