So, while I was blithely blathering Friday about CalPIRG and their campaign to promote California’s high-speed rail plan, the Sacramento Bee
was getting the real scoop on the future of our improbable love affair with 200+ mph bullet trains:
Democratic lawmakers have agreed to Gov. Arnold Schwarzenegger’s request to include public-private partnerships for a high-speed train that could travel from either San Francisco or Sacramento to Los Angeles in 2 1/2 hours.
Supporters of the high-speed “bullet” train are hoping the changes will ensure that a $10 billion bond measure doesn’t get delayed a third time – which some fear would jeopardize the entire project.
Under a compromise bill, Assembly Bill 3034 would modify a measure already on the November ballot to encourage private investment, whether through regional transportation authorities, Wall Street investment firms, or a combination of both.
I’m still waiting for the stampede of private investors, who don’t seem so anxious when the High-Speed Rail Authority’s own financial consultants are reporting on them. I’m also awaiting the good word on federal funding, which is clearly there, but not in the quantities the story lays out, which is basically, $10 billion from November’s bond measure, $9 billion from private investors and $9 billion from the feds.
And with the story’s new estimate of $42 million for the cost of the system (sometimes at authority board meetings, I hear $30 billion, other times $40), that would leave some money left to raise.
Nonetheless, it would appear that worries about the budget and the state’s indebtedness have faded enough to let the voters decide. And maybe the governor will even promote the thing and really help its chances
Two Novembers ago, I wrote that the approval of $42 billion worth of new infrastructure bonds that month raised the question of whether voters would want to add another $10 billion to the state’s debt load for more esoteric infrastructure projects.
For those who would suggest that I’m just a pathological bullet train naysayer, I would remind people of where that story took those doubts:
California already carries $45 billion in infrastructure-related bond debt, $37 billion of that in general obligation bonds which must be paid back out of the annual state budget. Even before Election Day, there were another $30 billion in state general obligation and revenue bonds slated for sale.
In the 2005-06 fiscal year, the state’s estimated debt-service payments were $3.9 billion, and were, before the 2006 bond measures were contemplated, projected to rise to a peak of $8.4 billion in fiscal year 2009-10.
Ok, so far so bad. But don’t discount the Golden State’s borrowing capacity:
Even so, California’s large tax base is still capable of supporting the new debt, said Brad Williams, director of budget overview and fiscal forecasting for the state’s nonpartisan Legislative Analyst’s Office.
Budget experts look at debt service as a percentage of personal income as the best measure of how deep a state should go when borrowing money against its annual budget. That debt-service ratio peaked in the mid-1990s between 5 and 6 percent, and has since dropped below 3 percent.
The new bonds would cause that ratio to flirt with 6 percent, but that’s no cause for alarm, Williams said.
“There are other states that have higher debt load than that and have higher bond ratings as well,” Williams said. “High-speed rail would bump it up some more,” but “would probably be hitting the market after our debt service had peaked,” so the effect would be more of an extension of the high ratio rather than an increase.
So there you go. In November 2006, it was perfectly ok to run up such debts. Is that still true in March 2008?
I’m not the Fed chairman, but I’d venture that the answer is still yes. There’s a lot of money out there that needs a home, and housing and the stock market don’t look nearly as good as they once did, so the demand for government bonds will probably be pretty strong.
On the other hand, I still think we could substantially improve regular rail service at a fraction of the price of the high-speed network, and that’s something it would seem California voters could more easily accept.
There is something about those bullet trains, however. I remember how mesmerized I was as a kid going through the train station in Germany, seeing the lovely tablecloths and silver set out in the first-class diner. They make money that helps subsidize regular rail service in France, I’ve been told.
Back then, we didn’t much think about how such services would help curb air pollution, let alone global warming, or worry about there being too many cheap passenger jet flights covering relatively short distances.
But now it’s 2008, and we do worry about our carbon footprints, about $4-a-gallon gasoline in our cars and fuel surcharges on our plane tickets. It’s also just March, and there are eight months for high-speed backers to spread the gospel, for the governor to come around and try to be the new Pat Brown, albeit on a limited budget.
Photo of Japanese Shinkansen bullet train from www.accessjapan.co.uk.