Opinion by Noel T. Braymer
The impact of the recent court decision on the use of voter approved bonds for High Speed Rail is unknown. This ruling doesn’t stop current construction which for now is being paid with Federal Funds. What the judge ruled is that the California High Speed Rail Authority CHSRA) according to the Prop 1A bond measure must identify what funding is available to build the Initial Operating Segment before the bond money can be released for the project. For this the Authority needs to present a new and detailed funding plan for his approval. This means that the judge expects the Authority to identify the funding sources needed up to 2022, not for the entire project.
As of now the State has committed 4.5 billion of the 9.95 billion dollars available in the Prop 1A bonds. Of this 2.6 billion is the State’s share for construction in the San Joaquin Valley. The other 1.9 billion is for projects that include upgrades to existing railroads that High Speed Trains will share for use in urban areas. Much of this 1.9 billion will also go to help build new rail transit services which will feed passengers to future high speed rail stations.
At the heart of the California High Speed Rail Project is the use of a Public-Private Partnership or PPP. This is a combination of tax money and private financing for construction of infrastructure operated by a private company. This has been done in many places around the world. The advantage of this is less taxpayer money is needed to build expensive infrastructure. Private investors like such projects because they are profitable and that the government covers most of the risk of a project. There was never any expectation that the taxpayers would pay for the entire California High Speed Rail Project or subsidize its operations despite the claims of its critics. The PPP idea has been promoted for years by conservative economists.
Potential investors have said that they are interested in California High Speed Rail. But first they want to see construction of a high speed track connection from the San Joaquin Valley either to San Francisco or the Los Angeles area before they will invest. The CHSRA plan is to build a 300 mile Initial Operating Segment from Merced to Burbank.
The CHSRA plan calls for spending roughly 6 billion dollars for 130 miles of high speed track in the San Joaquin Valley between Madera and Bakersfield. The next section planned is for 85 miles of new high speed track from Bakersfield to Palmdale for an additional 10 billion dollars. At this point with 215 miles of high speed track plus use of 85 miles of upgraded existing railroad the Authority would have a long enough route for an operator to run a profitable high speed rail passenger service with connecting rail service at each terminal. At this point investors would be ready to spend money to create and operate a high speed rail passenger service.
How long will it take to resolve the issues the judge has with CHSRA funding is unknown. The Authority has 3.2 billion dollars to spend now of Federal Funds so it is maybe a year or 2 before the bond money is critical. If an additional 4 billion dollars can be released from the remaining bonds funds in addition to what has been committed, that leaves the Authority 6 billion dollars short of the 10 billion to build the critical Bakersfield-Palmdale segment.
The Authority has for some time been working on finding this last 6 billion dollars. So far it hasn’t announced any firm plans to raise it. So what are some of the options?
The Authority could find some business partners. There is a market for their right of way for joint use for fiber optic cable, electrical power transmission, pipelines or freight. Freight shippers would be interested in an all weather and faster mode of carrying freight from Southern California up the West Coast. A combination of all four is a possibility.
A second option would be a grant or low interest loan from a foreign country. Countries often finance overseas infrastructure projects if companies of that country gets the construction and operating contract of the project.
The third solution would be for the State of California to raise the last 6 billion dollars to finish the track work from Merced to Burbank. In a State economy of over 2 trillion dollars annually, 6 billion dollars spread out over almost 9 years isn’t that big a deal. As long as the governor has the High Speed Rail Project as a high priority of his administration and a friendly legislature this can happen. To make this politically palpable it would likely need to be part of a larger funding bill for other transportation needs.
A combination of all of the above is also a possibility.
When the Prop 1A bond money for California High Speed Rail was approved in 2008 there was a reasonable expectation that this money would be fully matched with Federal Funding. That would have raised about 18 billion dollars total. The Federal High Speed Rail Corridor program has long had bi-partisan support and had been in planning for years all during the Bush Administration and before it. Other State High Speed Rail projects have a long history of bi-partisan support. Wisconsin had the support of former Republican Governor Tommy Thompson and in Florida of then Republican Governor Charlie Crist.
The legislation for the California High Speed Rail Authority had bi-partisan support with Republican Governor Pete Wilson signing the legislation for it in 1996. There was further support by Republican Governor Arnold Schwarzenegger who put the Prop 1A Measure on the ballot in 2008. It was only after the well financed elections of “Tea Party” candidates in 2010 that this changed. From this off year election with low voter turnout came a mania for austerity which seems driven more by partisanship and spite than economics or common sense.