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high-speed rail – `separate’ from financial crisis?

By enelson
Wednesday, May 21st, 2008 at 12:14 pm in Funding, global warming, high-speed rail, Misc. Transportation, rail.

budget-protest.gif

Because there aren’t many people around who oppose high-speed rail, I’m finding myself cast in the disagreeable position of honorary naysayer for the program. Most people, myself included, think it would do the state some good to have a way to get from north to south on whatever energy source we’ve developed over the next two decades.

But most people also understand that there are limits to all the good things we can buy or build. I’d really benefit (as would the climate) from buying a house in Orinda, and lousy market notwithstanding, I can’t afford it to the point that I’m sure even Countrywide wouldn’t extend me credit for such a dwelling.

I’m not saying California can’t afford to borrow the money for high-speed rail. The experts say the state can at least take on the $10 billion worth of debt voters will be asked to approve on November’s ballot.

I was moved by something I read this morning from one of my favorite commenters on this blog, Robert Cruickshank. He has become the biggest acolyte for the 700-mile, 200-mph-plus rail network not in the employ of the California High-Speed Rail Authority or Parsons-Brinckerhoff that I can think of. He does a blog singing the praises of the enterprise and slamming the arguments of people he calls “deniers.” I won’t get into the problem with that last bit, but I’m sure anyone who reads this blog can figure it out.

Under the heading, “The Budget Deficit and High Speed Rail in California Are Totally Separate,” he uses a letter-to-the-editor published in the Ventura County Star as a foil for his argument:

Such an understanding of the real origins of our budget crisis shows us that this isn’t a zero-sum game. HSR funding – which California’s portion is $9 billion, not the $33 billion Ruiz claims – doesn’t come from the same pot of money as education funding. They are not just separate, but completely unrelated. And it’s not “regulation” that is the issue here, but the basic method of government. California needs more tax revenue to pay for its schools. That is a completely separate issue from how we finance high speed rail.

I’m not going to tackle Cruickshank’s belief that the Bullet Train Fairy is going to make the federal government cough up $20 billion for this project, but I will take issue with this idea that bond issues are, like, free money.

Sure, there’s a long-running problem with money in Sacramento and we need to find better ways of raising money for education and other needs the letter writer was complaining about. But the issues are not “unrelated” at all. When the state borrows money, it has to pay it back, with interest. Cruickshank believes that revenues from high-speed rail will more than cover that after its projected 2020 launch, but I don’t blame voters if they are skeptical about when and if such profits would actually materialize. France’s TGV bullet train does, I’ll stipulate, help pay for other rail service. Will that happen here? I don’t know, and neither does anyone else.

Budget protest photo from californiaprogressreport.com.

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16 Responses to “high-speed rail – `separate’ from financial crisis?”

  1. david vartanoff Says:

    In earlier eras, the king/pharoah decreed and the laborers showed up to build the showpiece infrastructure projects. Occasionally low alloy coinage had to be minted or neighboring states w/mines conquered but the projects got built. Now that we can “invent” nonexistant money by the stroke of a pen we seem unable to commit. Of course the estimates/projections are false. It will be much more expensive, it will run late, and by the time the full system is built out the first segments will need rehab exactly as happened w/ the Interstates. BUT, we will have massive convenience and even more inmigration from flyover country and we will all use the system.

  2. Aaron Priven Says:

    HSR is expensive. So are the alternatives: more freeways and bigger airports. Those are the relevant comparisons.

  3. South Bay Resident Says:

    California’s budget crisis isn’t caused by excessive infrastructure spending. It is caused by run-away spending on prisons and health-care for the poor. Unless these two problems are solved, the state will keep lurching from crisis to crisis. The real question about HSR is will it be cheaper than expanding roads and airports. If you think it will be then vote for it. The timing isn’t that important as the big spending will probably start at about the same time as the current recession ends. This being said, it seems that a good way to finance HSR would with an airport tax. Currently, there are about 100,000,000 annual air passengers in California. A $15 dollar tax on every passenger flying out of California would more than pay for the construction costs of the system and be fairly painless.

  4. Robert Cruickshank Says:

    Where did I ever say bonds are free money?

    My point was that California’s budget deficit is not related to HSR, as HSR would not make that deficit worse. The deficit is the result of reckless tax cuts, especially those made in the dot-com boom, that have left the state short of the funds necessary to provide for basic services.

    As I pointed out, bond money should never be used to fund those kinds of services. Bonds are best used for long term infrastructure projects exactly like HSR.

    The concern that we won’t have enough riders to cover the bond costs is flatly absurd, and that will be the subject of tonight’s blog post. Really – we see $4 gas now and folks are already flocking to passenger rail. Who here believes that gas prices won’t be higher than $4 in ten years’ time?

    As Aaron Priven says, and as I explained earlier this week, the cost of not building HSR isn’t zero – the alternatives are FAR more expensive. CA’s budget deficit will merely grow when jobs and companies flee California because we failed to provide a non-oil based transportation system, and folks couldn’t afford the high costs that resulted from it.

    Of course, the notion that HSR absolutely MUST cover its costs at the farebox is another case of trains being held to standards that freeways and airlines aren’t. Freeways don’t recover their own costs, we subsidize the hell out of them. We gave the US airline industry a $15 billion bailout in 2001 and nobody batted an eye – and they likely won’t when we do another bailout in the next 24 months.

    btw, Erik, I wrote the “The Cost of Doing Nothing Isn’t Zero” especially for you, in the hopes you’d start seeing this project in its proper context. Your colleagues at the Fresno Bee understand that point…

  5. Rafael Says:

    @ South Bay Resident -

    California currently consumes 15.6 billion gallons of gasoline each year. Rising prices are already having an effect, demand is down a little from 2005.

    http://www.greencarcongress.com/2008/04/california-gaso.html

    Raising state taxes on gasoline (and diesel) by just $0.10 per gallon and, adjusting them for inflation over the next 30 years, would generate an additional $40+ billion in 2008 dollars over that period. That would be more than enough to fund California’s share of the entire HSR system plus upgrades for freight and commuter rail plus proper maintenance of the existing freeways and highways.

    Taxing airlines tickets would be effective as well but much harder to implement. High oil prices are hitting airlines’ bottom lines very hard, a surtax could push some to the brink of bankruptcy, resulting in service cutbacks and job losses. It would not be painless at all.

    Of course, Gov. Schwarzenegger doesn’t want to raise any taxes at all to pay for infrastructure projects, so the state will take on more debt instead. That’s not unreasonable, given that construction projects are one-offs, but the cost of deferring the pain is interest payments.

  6. South Bay Resident Says:

    Rafel, Airline tickets already are taxed, so there’s no problem with collection. It’s really just a matter of which tax you want to raise. I think that a $15 surcharge on an airplane ticket sounds less painful to most people than another $0.10 at the pump. It also seems more relevant to the project since the HSR system is primarily designed for transportation between regions, while driving is mostly within one region.

  7. Capricious Commuter Says:

    Robert, I know the cost of not building HSR isn’t zero. Southern California is now paying dearly in time, lives and treasure for deciding back in the 1950s and 1960s that it would cast its lot with freeways and ignore rapid transit, while the Bay Area chose to build BART. I’m just saying that in this country, that’s the rule. We put these things off until things reach a crisis. Luckily for the HSR enterprise, we seem to be flirting with that transportation crisis right now. Still, it’s a big chunk of change and even if you think it will save money in the long run (and I do), it’s tough to commit to paying that money up front.

  8. Capricious Commuter Says:

    Rafael, the funny thing about the whole taxation to cover infrastructure question is that idealogues from the right and left are pushing for tolls on highways and even urban areas as the solution for both revenue shortages and congestion. In some ways, I almost think our problems will eventually be solve by pricing people off the roads. Those people will then demand better public transit, but of course it will take a long time to properly meet those needs. In the meantime, look for carpooling — especially the casual variety — to rule the day.

  9. Reedman Says:

    Based on the 15.6 billion gallons of gas number:
    the federal gas excise tax collected is $0.184 x 15.6b = $2.87b. State gas excise tax collected is 0.18 x 15.6b = $2.80b. Sales taxes collected (assume state average of 8%, and $4/gallon gas) 15.6b x 4 x 0.08 = $5.0b. Total is about $10.7b. This is about Caltrans annual budget from what I can tell (let the accountants argue about accrual basis versus cash basis versus Dept of Finance mixed reporting). So, it appears that gasoline taxes pay for all the transportation expenses (freeway and otherwise) in California (no subsidies one way or the other).

  10. david vartanoff Says:

    Not so. Those## do not reflect real estate taxes not accrued on land wasted under asphalt, auto generated pollution driven healthcare costs, local police traffic enforcement, auto congestion engendered delays to transit, and many other costs associated with auto usage but not paid directly by auto users.

  11. Hayden Says:

    Government money spent on roads is a subsidy or payment for a public resource, regardless of whether it was raised through income taxes, sales taxes, gas taxes, etc. We can decide that some portion of Caltrans spending should be related to the amount of gas taxes collected, but this doesn’t eliminate the fact of government subsidy.

  12. NeutronPulsar Says:

    Why are we building high speed rail when we don’t
    have BART around the BAY AREA! WHY DO I SIT IN TRAFFIC
    FOR HOURS EVERY DAY TO GO 10 MILES! Just so people
    200 miles away in a rural area get to commute in
    style. Why once again like so much of our cal trans
    funds going to the traffic problems or rural areas
    like Fresno, Merced instead of the 10 million people
    in the Bay Area or the 20 million in Los Angeles. We
    need to use our money to solve traffic problems of
    the many before buying fancy new things so rural areas
    can commute better.

    The people who benefit are Southern Pacific railroad,
    and the corrupt builders of the new trans-bay center
    but not the Bay Area commuters!

    The high speed rail helps me ZERO, I WILL BE SITTING
    IN TRAFFIC FOR HOURS DAY AFTER DAY AND MY STATE WILL
    BE 10MILLION IN NEW DEBT SO REPUBLICAN
    FRESNO CAN COMMUTE AT WILL.

    Its insane.

  13. Capricious Commuter Says:

    NeutronP, I don’t think you need to worry so much about sitting in traffic, although I can see how you might be worried about borrowing all that money. With $5, $6 or $7-a-gallon gas, you’ll be surprised how the traffic will thin out. I predict carpools and BART and new money for BART to San Jose, BART to Tracy, BART to Vallejo, etc. It will be the golden age of mass transit.

  14. david vartanoff Says:

    BART to Tracy, surely you jest. BART is essentially maxed out under the Bay now. Adding more riders just means crowding out current riders who choose to live closer to where they work.

  15. Capricious Commuter Says:

    I jest not. Regrettably, this blog will be long forgotten after I’ve been proven correct. There are ways of squeezing more riders through the tube, like putting the trains closer together, taking out seats, etc. But I’m thinking there will be more crossings anyway. With gas prices doubling and likely tripling in a few short years, there’s no limit to the assumptions that will be shattered. As for whether BART is the right mode, one needs to consider that against creating an entirely new system capable of moving the same volume of people the Bay Bridge can. Who knows? We might run trains across the bridge again. Lord knows there won’t be many cars on it, unless they’re electric.

  16. Michael Krueger Says:

    BART is completely incompatible with all standard off-the-shelf rail technology. If transbay capacity is to be added, it would make far more sense to add conventional rail capacity, either in new tubes or over existing bridges, or both. Such electrified conventional rail lines could carry local, express, long-distance, and even high-speed trains (at reduced speeds, of course) directly into downtown San Francisco. It would be many times more versatile than BART, and it would not cost nearly as much as BART’s one-of-a-kind white-elephant technology, either.

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