California’s High Speed Rail Project Suffers Increased Costs and Delays

This is probably the most unsurprising headline of the week.  California’s planned high speed rail line between San Francisco and Los Angeles (with eventual extensions to San Diego and Sacramento) has never enjoyed a smooth path from planning to operation, and indeed still remains almost completely unfunded, even though money is being spent on a first phase of the project, which involves building a stretch of line more or less in the middle of nowhere (ie 119 miles between Wasco and Madera, places most of us would struggle to find on a map).

The cost and expected completion date of the project have both been rather nebulous targets.  The cost started at $33 billion when voters authorized $9 billion in bonds to get things started in 2008 – the balance was, rather optimistically – hoped to come from the federal government and private investors.  Within a year (ie 2009) the cost estimate had increased to $43 billion; a year later it was being estimated at $65 billion, and in 2011 it was generally viewed as being a $100 billion project, with some estimates going as high as $117 billion.

That is astonishing – although still in the planning stages, but after a formal proposal had been presented and approved, the project cost trebled in three years.

In 2012, the Californian High Speed Rail Authority finally conceded that yes, maybe costs had increased, but said their revised estimate was ‘only’ $98 billion.  They then waved a magic wand at the plans, and said the new cost had become $65 billion, which was only twice the voter approved $33 billion.

I wrote about these various and varying versions of the truth at the time, in 2012, here.

I was always very suspicious of how the HSRA managed to trim costs back ‘down’ to $65 billion, and regularly since then, independent groups have suggested that costs have been going up again.  Two years ago, in 2016, the HSRA was sticking to its guns and claiming the $65 billion figure remained accurate, but now they’ve finally conceded that costs have inched up ever so slightly to a possible $77 billion project cost, and then in a quieter voice said that costs could rise further, back up to $98 billion again (although the revised scheme would now be getting less for the $98 billion now than was the case prior to the scaling back of the project to ostensibly dial the cost down to $65 billion in 2012).

Not only has the public acknowledgement of the possible total cost increased again, but the lead times for getting trains actually operating has also extended.  The new timeline would have the first trains operating on a short segment of track between San Francisco and Bakersfield in 2029 – four years later than earlier promised, and the total system would not be operational until 2033 (a date which has little credibility but much optimism attached to it).

To put that into context, in 2012 the HSRA was promising completion of the entire system by 2029, and in 2014, it was anticipating initial services on a limited stretch of track by 2021.  So, now, six years later, the four-year delay in project completion means that we’ve effectively moved the project two years forward in six years of elapsed time – a rate of progress one-third that anticipated.

How can we get the costs and lead times so enormously wrong?

Keep in mind that many millions of dollars have been paid to high-priced consultants and high-salaried full-time staffers.  Also consider that one of the excuses for the delays and cost overruns is ‘the difficulty in weaving through mountain passes between Silicon Valley and the inland Central Valley’ (see, for example, this article).  But – excuse me – isn’t the route’s topography and the presence of hills and other obstructions something that has always been present and never changed?  How is it only now – ten years after voter approval – that this is being raised as a new issue?

Who has lost their job as a result of these enormous mistakes?

It is also an interesting coincidence that these disclosures are only being made now, a month after the California legislature voted for a comprehensive audit of the project.  There is speculation that when the audit is finally concluded, the result will be an unavoidable conclusion that the entire project should be abandoned.  This would be unfortunate, as would be all the money that has been spent to date which would instantly become a total and complete waste.

So, a project that was first formally investigated back in the 1990s, and of course, first thought of some long time prior to then, and which was given the go-ahead by voters in 2008, looks like it might not be operational until 2033.  And that is assuming that the next 15 years will all see progress adhering to the revised schedule, an assumption that is probably woefully optimistic.

Meanwhile, in China, more new high speed rail track is constructed every year than the entire Californian 800 mile system, with its vague but 25+ year development time.

Oh, the latest projections also avoid a careful study of the current funding shortfalls, and hopefully assumes that $50 billion or more of needed funding will miraculously appear from somewhere.  The earlier desperate hopes for funding from the federal government failed to materialize, even during the eight years of a sympathetic Obama administration, and seem massively less likely during the current Trump administration.

As for private investors, they sense blood in the water, and don’t want it to be their own.  They are only willing to invest into the project if they are guaranteed to make a profit, with zero risk.  Of course, we’d all love zero risk opportunities to make money, but even the most starry-eyed supporters of the high speed rail project can’t help but acknowledge that the business case and profit projections supporting the future operation of the line may turn out to be no more accurate that the capital cost estimates.

Maybe California’s high tech billionaires could help out.  Could California’s favorite son, Elon Musk (who has certainly benefitted from enormous amounts of funding via Californian incentives) be persuaded to stop dreaming of Mars missions and boring tunnels, and instead, put some of his $21.1 billion of estimated net worth into the high speed rail project instead?

Why not convert the project from a standard highish speed rail project to a hyperloop project?  Why is California pressing on with a mature technology that may be about to be obsoleted, instead of showing the world its leadership by adopting the new hyperloop concept?

In the real world, you don’t start spending money on a project that you’ve no vision of how you can afford to complete.  That is not only foolish, but to willfully commit to costs you can’t pay for is criminally fraudulent.  In California, and for public authorities spending taxpayer’s money, apparently different rules apply.

More details here.