Wednesday, April 4, 2012

LA to Frisco High Speed Rail Project Flounders

Flounder: several species of fish whose young play dead on their sides on the bottom so long that as adults, both eyes end up on the same side of their heads.

Flounder is an apt description of the condition of the proposed high speed rail line from Los Angeles to San Francisco, initially proposed as one use of the federal stimulus funds appropriated three years ago by Congress for high speed rail construction. In 2008 California voters approved the project as Proposition 1A, including requirements that the first segment of the high speed line to be built must operate high speed trains, that money for each construction segment be in hand before beginning construction, that passengers on the completed project be able to board in Los Angeles and arrive in San Francisco without changing trains, and that the system operate 12 trains per hour between LA and SF without taxpayer operating subsidies. The latest version of the California High Speed Rail Authority business plan for the project, however, adopts a “blended” approach using existing rail lines in the cities at both ends, and cutting service at peak rush hour times to only two trains per hour. California State Senator Doug LaMalfa dubbed the new plans a bait and switch with a $55 billion funding gap.

Monday, April 2, 2012, the Authority issued its latest funding proposal for the project, whose projected cost has ranged from a high of $98.5 billion to a low of $30 billion, to the most recent estimate of $68.4 billion. Proposition 1A approved funding limited to $45 billion. Only $12.5 billion of the money is currently in hand: $3.5 billion in approved federal stimulus funding, and the $9 billion in construction bonds approved by California voters in Proposition 1A.  The balance of the nearly $56 billion the Authority now projects will be required to complete construction is projected to come in the form of an estimated additional $4 billion in federal grants, plus $1 billion a year from California’s auction of emissions credits under the state’s recently approved “cap and trade” air pollution credits. California high Speed Rail Authority Chairman Dan Richard, in announcing the latest version of the business plan for the project, said: “We’re hoping to get a federal commitment over the next ten years of at least $4 billion, and we’re going to do everything we can to develop private sector revenues from station development, right of way leasing and advertising. If that doesn’t close the gap, we’ve got the cap and trade funds as a backstop.”

Richards and the Authority are expected to approve the new estimates April 12, and then send the proposal forward to the legislature for funding of the initial bond issue. The initial federal grant of $3.5 billion, according to its terms, must be spent on construction before the end of 2017. Given the scepticism in Sacramento, mounting efforts to repeal Proposition 1A, and the possibility of missing the 2017 deadline and seeing the federal government’s $3.5 billion contribution “clawed back” under the terms of the stimulus bill’s “shovel ready” provisions, it’s no wonder the maturing version of this ambitious project looks nothing at all like the deal approved by California voters nearly four years ago.

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