I testified recently before the US House of Representatives Transportation Committee about California high-speed rail. I began, “As a Californian, I wish I could say we have made progress. We haven’t. The project is extremely delayed, and its original 2008 budget has increased by a factor of four, to $128 billion.”
The purpose of the hearing was to understand the challenges involved in building high-speed rail and to discuss the allocation of federal funding to rail travel. (My five-minute testimony starts around minute 48 of the video; questions from Congress begin around minute 60).
I framed my testimony around four recommendations for evaluating these projects. The first is to recognize the enormous risks and uncertainties that accompany such projects, which will tend to make them much less attractive than advertised by their proponents. The second is to make use of third-party evaluations, because evaluations made by those developing the project tend to be way too optimistic. The third is understanding why US railway construction costs are so much higher than in other countries so we can build more efficiently. The fourth is acknowledging that the private sector is much better positioned to create high-speed rail, because the private sector is incentivized to make a profit.
I then described how California’s high-speed rail project, which is at least 20 years behind schedule, and roughly $100 billion over budget, illustrates what happens when these four recommendations are not followed. A mistake on steroids.
California’s high-speed rail proposal was doomed from its 2008 beginning, because politicians pushed a project onto voters that was nowhere near ready, one that was far too optimistic in its assumptions, and with a business plan that completely punted on the project’s enormous risks.
California’s Legislative Analyst’s Office (LAO), a nonpartisan state agency that advises the legislature on budget policies, found that the project’s 2008 business plan was grossly deficient. The plan was required by law to have been provided to the California Senate before Californians voted on a $9.95 billion bond initiative as seed money for the project, but it was not submitted to the Senate until after ballots were cast.
The LAO identified........