Commentary:
NOV. 3, 2011
By JOHN SEILER
So what’s going to happen with the California High-Speed Rail project? The new business plan of the California High-Speed Rail Authority increases the estimated cost from $40 billion to $99 billion.
Just the number shows it’s really about politics: The $99 billion figure has two digits, instead of three if it were $100 billion. It’s like the sale at a store is $9.99 instead of $10.00. So these are Government Numbers, not real numbers.
And behind the politics is the money. That’s why they really should call it the High-Speed Gravy Train.
It’s clear now that the choo-choo will get, at most, only $13 billion: about $3 billion from the federal government and $9.9 billion from Proposition 1A, which misled voters passed in 2008, before they realized their economy was collapsing into a pile of guacamole on the I-5 freeway during a 100-degree summer day.
There’s no way voters will approve any more bond money. And with Republicans in charge of the U.S. House of Representatives, there’s no way the feds will send any more money out to California. Republicans also well could take over the U.S. Senate and the White House next year.
So, the question resolves to: How to make sure they can slurp up that $13 billion for the High-Speed Gravy Train?
Four-Steps
The first step was to involve someone who knows how to make sure the federal gravy is delivered in a freight car. That’s why Gov. Jerry Brown got his Jobs Czar, Michael Rossi, involved in the project.
As I reported when Rossi was given the Jobs Czar post, his background mainly has been as a Bailout King, for example for General Motors. The guy knows how to get the federal taxpayers’ cash flowing to projects.
The second step was to pump out a more realistic business plan. The $40 billion price tag touted in 2008 was as outdated as the breathless rhetoric of top High-Speed Rail booster Arnold Schwarzenegger. So yesterday’s plan was just what was needed. It basically says: Yes, it’s going to cost a bit more and have a bit less ridership, but it’s still a great idea. And it’ll create 100,000 jobs!
As Authority member Dan Richard said, “This is us telling it like it is to the public — no sugar-coating, no baloney.” But it tastes like sugar dumped on baloney.
The third step now is to get the federal money flowing out to the early parts of the project. Rossi should help there.
The fourth step will be to float that $9.9 billion in bond money. That’s a tough one, but not impossible. In October, Treasurer Bill Lockyer irresponsibly floated another $4.2 billion in bonds (for non-High-Speed rail projects), which will cost taxpayers twice that to pay back, $8.4 billion.
That means the state’s yearly bond payments from the general fund rose from 3.4 percent of general-fund spending in fiscal year 2003-04, to 7.8 percent for 2011-12. Bond advisers say only up to 5 percent is prudent.
The cost, about $7 billion a year from the general fund, is the lion’s share of the $10 billion in tax increases that Gov. Jerry Brown failed to get this year, but still is seeking. Put another way, without the bond payments, there would be plenty of money to go around, and Brown wouldn’t have to ask to squeeze taxpayers more. This again proves my maxim, “Bonds are delayed tax increses.”
Taxes
So, getting that $9.9 billion will depend on the state’s economy recovering, which everybody always expects. A recovering economy would mean more general-fund money. But what if there is no recovery?
A tax increases also would mean more general-fund money. That is, if the tax increases didn’t make the business climate so much worse that even more companies leave the state, and the anticipated revenues with them.
But it should be possible to get, say, $2 billion a year in new bond funding for five years. That would keep the High-Speed Gravy Train flowing.
They probably could do it with all their fantasy talk about creating 100,000 more jobs while creating a California green Ecotopia.
The Dream
Here’s the first three paragraph of the Authority’s press release:
SACRAMENTO, Calif. – The California High-Speed Rail Authority today released a new business plan that lays the foundation for an economically viable high speed rail system that will create 100,000 jobs in the next five years, and is expected to generate another 1 million jobs moving forward. California’s high speed rail system, the first in the nation, is also expected to reduce carbon emissions by 3 million tons annually.
The new business plan describes a phased approach to construction that will allow the Authority to adapt to changing financial conditions as it moves forward, segment by segment. The plan also updates cost estimates, ridership figures and funding expectations to reflect current economic realities. The result is a fiscally sound project that will attract and drive private investment, generate strong revenues and operate without any public subsidies, just as other high speed rail networks do throughout the world.
“We have carefully constructed a business plan that is mindful of the economic and budgetary constraints facing both the state and the nation,” said Authority Board Chairman Thomas J. Umberg. “It will deliver to California and Californians a cost-effective, efficient, and sensible alternative to more highways and increased airport congestion.”
That’s really a work of art. Whoever wrote it is the Hemingway of political propaganda, all understated prose and the promise of adventure.
Not just 100,000 jobs, but 1 million jobs!
It’s “phased,” “segment by segment”! They’re not just going to blow the $99 billion all at once. They’re going to take their time and get it right. They’re making a list and checking it twice!
Their business plan is “carefully constructed”!
The project is “fiscally sound”!
And they’re “mindful of the economic and budgetary constraints”!
Just watch them ladle that $13 billion in gravy out of your kitchen, onto the freight cars and into the mouths of the special interests that will profit.
Tags: California High-Speed Rail Authority, Jerry Brown, Jobs Czar, John Seiler, Michael Rossi, Proposition 1A
The fact that this MONEY PIT has NOT yet been canned is more evidence of how screwed up this state is.
The cost to build this white elephant is so prohibitive that it shows a certain level of either insanity or corruption to continue on with it.
Ditto, Rex.
Perhaps we need to keep this monstrosity around to remind voters of the ingrained foolishness in Sacramento. I can even think up a taxpayer slogan to go with it — something like “If they think California can afford HSR, they don’t need any more tax increases.”
Okay, not catchy, but you get the point. And so would the voters.
And the point is that it turns out that HSR proponents lied about EVERYTHING to sell the voters on the deal — projected ridership (over quadruple today’s somewhat more realistic projections), ticket prices (more than doubled since 2008), travel times (utter science fiction), promised jobs, private co-funding without taxpayer guarantees, earning a profit, the operating costs and, of course, the construction costs. EVERYTHING.
How about: “If we can afford the High-Speed Rail, we don’t need tax increases.”
– John Seiler
John, I defer to the wordsmith in this matter.
It’s like our infamous Charger Ticket Guarantee (an insane part of our SD Charger stadium deal). It was cited more often than the cliche’ “If we can put a man on the moon . . .” as the reason we didn’t need more taxes to fund city services. I figure we taxpayers saved many times the $35 million cost of the guarantee.
Of course, the HSR spending dwarfs that figure, so while we should keep this anvil around the politicians neck for a while longer, we damn sure don’t want to actually BUILD this thing.
“There’s no way voters will approve any more bond money.”
Never say never, John. The voters are pretty stupid when it comes to bonds, be it for schools, lining the pockets of [insert your favorite] district officials, or gravy trains. They can’[t figure out that yes means no and vice versa.
There could be a great benefit here for the State, however since they want to run the initial line between Chowchilla and Atwater, the state could artificially boost numbers by transporting prisoners and guards between facilities. Yup, I smell another step coming….
“Peace” has a point. Unlike local bonds, state bonds have no tax directly attached to them. And unlike local bonds, a simple majority is all that is needed to pass.
I think John is still correct about such bonds failing, but never assume too much in this category. A broad-based TAX increase is all but impossible to pass today, but bonds are a trickier proposition — literally.
Never ever underestimate the stupidity of the California voter. For years they approved school bond measures to educate illegal foreigners and turn school employees into kings and queens while actual educational performance nose dived.
If a bond measure for the train of fools are put on the ballot it’s a coin toss whether they pass. But if the pols increase our taxes the voters will reelect them again just like they did in 2010 after the largest tax increase in US history in Feb-2009. The pols will capitalize on the stupidity of the average Californian to get what they want. Only financial armaggedeon will slow them down. Short of that, I see no solution.
“There’s no way voters will approve any more bond money.”
John, the voters are idiots.
They think bonds are free money.
If Jerky Brown and the Demoncrats wrap this boondoggle in a pretty wrapper you can bet the voters will approve another bond measure.
The vocal supporters of the Gravy Train are the California Federation of Labor, the Teamsters, and the AFL-CIO. All are major contributors to the Democratic Party and Democratic politicians. This is the Gravy Train solely for unions and few big construction companies. As usual, the plan is simply to rape taxpayers. Creating new jobs is simply political propaganda. The Democrats never reveal that all the jobs will be taxpayer subsidized and that it will cost approximately $1.9 million to create each job.