According to a business plan released by the California High Speed Rail Authority this week, the costs for a high speed rail connection between San Francisco and Los Angeles are more than double previous estimates, and federal taxpayers will be asked to contribute as much as $60 billion to make the project a reality. Full build out of the project wouldn’t be complete until 2032, 12 years later than originally stated.

Last May, TCS highlighted the California Legislative Analysis Office’s (LAO) blistering report calling for a substantial overhaul of the California High Speed Rail Authority — the overseer of the California High Speed Rail Project — due to a number of governance problems, questionable project cost estimates, lack of accountability, and no real business plan which threatened both California and federal taxpayers.

The LAO’s report was largely vindicated by the recent business plan. The findings are not pretty, especially for federal taxpayers:

• Project costs have ballooned from $43 billion in 2008 to over $98.1 billion for a combination of conventional and high speed systems connecting San Francisco and Los Angeles to be completed by 2029 (nine years beyond the original timeline). The system will be fully built out — known as ‘Phase 1’ — by 2033, not 2020.
• The new $98 billion price tag reflects a three percent annual inflation over the projects extended timeline, engineering and design refinements, and higher than expected property relocation costs. According to the authority, “Capital costs will continue to be somewhat variable until completion of the environmental documents for all of the sections,” meaning project costs — and federal taxpayer liabilities — could be higher than $98 billion.
• Although the authority doesn’t expect additional federal funds until after 2015, federal taxpayers have already committed $3.6 billion in Recovery Act money for the authority’s initial segment to start construction in 2012. This segment will be completed in the sparsely-populated Central Valley — without any connection to a major metropolitan center — in 2017.
• After the initial segment opens, the rail authority expects an 80 percent federal contribution for the project’s north and south extensions and a 61 percent federal contribution for later phases into metropolitan areas — roughly $30.3 billion in total federal funds for segments completed by 2026. Beyond 2026, the authority requires another $30 billion in federal grants for complete build out of Phase 1 by 2033.

Expectations for such generous federal taxpayer contributions are fantastically unrealistic and ignore current fiscal realities. Just this week, the U.S. Senate voted to provide only $100 million to the Federal Rail Administration’s high speed rail grant program — far less than the $10.1 billion that had been appropriated since 2008 — in response to the nation’s $14 trillion debt. It appears unlikely that spending on high speed rail will be reinstated at significant levels, even over the long-term. Furthermore, the Authority’s projected costs have more than doubled since the 2008 estimates and are likely to go higher in the future. Taxpayers should not be forced to invest in a project that could balloon in cost again in the future.

In light of these issues, California’s high speed rail project should not be immune from federal cost-cutting or extensive reexamination of the entire project. Unless costs are reduced substantially — which is unlikely — federal lawmakers should rescind the $3.6 billion grant and refuse additional rail appropriations to California.

Background: California’s High Speed Rail Authority was established by the state legislature in 1996 to develop a statewide high speed rail system connecting Los Angeles, San Francisco, San Diego, Sacramento, and points in between with 200 mph+ service. In 2008, California voters approved Proposition 1A, funding the project’s first phase — San Francisco to Los Angeles — with $9.0 billion in state bonds. To date, federal taxpayers have provided $3.6 billion for the project in FRA grants, primarily from the American Reinvestment and Recovery Act.