Come November, Californians will have to decide whether a high-speed rail system – one that could travel from Los Angeles to San Francisco in just over two and half hours – is worth $10 billion in state funds.
If passed, Proposition 1A, which will be on the ballot this November, would allow the state to issue $10 billion in bonds towards a $40 billion infrastructure project that would see a high speed rail system built up and down California. The tracks would stretch from Los Angeles to Sacramento, with service to San Francisco.
The train would not pass through Santa Barbara, however, as plans have it taking the central route through Bakersfield and Fresno instead.
Environmental groups have hailed the project as a step forward, but economists, including professors here at UCSB, have warned against the possible consequences of issuing bonds of that amount – especially when the state is suffering from a deficit and the country’s financial markets are facing the possibility of a recession.
Governor Schwarzenegger – who announced his strong endorsement of the legislation after delaying its appearance on the ballot in both 2004 and 2006 – signed the bill last month, ensuring that it will be put to a vote in November.
According to California High Speed Rail Authority reports, the new bullet trains would be capable of a maximum speed of 220 miles per hour. The Authority advertises that the train will have an expected trip time from San Francisco to Los Angeles of 2 hours and 40 minutes and expects it to carry some 100 million passengers per year by 2030.
In the Sierra Club’s statement of endorsement for the bill, authored by Stuart Cohen of the Transportation and Land Use Coalition, the group cited various environmental and economic potential benefits for the plan.
“Building HSR in California will reinforce our cities as the hubs of our economies, promote sustainable land use, significantly reduce global warming pollution and get commuters off congested roads and out of crowded airports,” the statement read.
While few critics of the plan contest the need for infrastructure improvements in the state, many argue that the bill will swamp an already struggling state budget with too much additional debt.
According to Kirk Lash, a real estate economist and member of UCSB’s Economic Forecast Project, such a large loan may be a risky move for the state, particularly in light of the uncertainty in the banking sectors brought on by the slew of recent major bank foreclosures.
“This is a $10 billion bond measure, but the railway authority says it will cost $40 billion to construct,” Lash said. “That means three-fourths of the funding has to come from the federal government and from private investors. With that said and with the current financial situation, it could be difficult to sell those bonds.”
According to Lash, this may force the state to sell its bonds at a higher interest rate, saddling taxpayers with more debt that the bill currently predicts.
“Essentially, we’re going to loan $10 billion, and the taxpayers are going to have to pay back $19.5 billion,” he said. “But with the current financial markets, those interest rates could very well be higher.”
The bill faces especially strong criticism in light of a recent 200-page Due Diligence Report issued by the Reason Foundation, a nonpartisan public policy research group. The report, which studied California demographics, transportation statistics and comparable high speed rail systems in Europe and Japan, challenged the plan’s projected ridership, costs, safety standards and convenience, and found vast discrepencies between its own projections and those asserted by the High Speed Rail Authority.
In a press release accompanying the report, Adriance Moore, Ph.D, vice president of the Reason Foundation, said that the projections put forth by the HSRA were infeasable and would likely lead to additional financial liabilities for the state.
“The current high speed rail plan is a fairy tale,” Moore said. “The proposal suggests these high speed trains will be the fastest ever; the most-ridden ever; the cheapest ever; and will convince millions of Californians they no longer need to drive or fly. Offering up a best-case scenario is one thing, but actually depending on all of these miracles to happen simultaneously is irresponsible public policy.”
Proponents of the bill have responded to the findings of the Due Diligence report with skepticism. Greg Larson, spokesperson for Yes On 1A, maintained that the authority’s projections were based on solid empirical data and challenged that the Reason Foundation was biased in its interpretations of the data.
In response to concerns about issuing such large bonds in a time of heightened financial insecurity, Larson said that voters should consider the long-term benefits of the infrastructure project.
“This is a long term investment – much like California invested in its network of universities, that have made it a leader in science and education, and its extensive waterways and aqueduct systems that bring water to the verdant central valley,” he said. “All the things that have made California a powerful state have required large, long-term investments.”