So Jerry Brown won–the California legislature voted to approved $4.7 billion in bond sales to start high speed rail construction. I’m worried, because Brown has played a fairly big budgetary gambit to win this thing: a state budget based on the voters approving tax measures I doubt they will pass, a bunch of federal pork for transit to pay off Democrats around the state.
I have to say, it’s not often I agree with the National Review, but this time I do, as this project is a big expense. Here’s John Fund:
It was wrenching to watch the California state legislature — for which I worked in the 1980s — as it led California over a fiscal cliff. The high-speed-rail line that was approved on Friday is a train to nowhere. And it’s offering Californians a nonstop ticket to their future as residents of a homegrown version of Greece.
A bit overstated, perhaps, but still.
However, there are reasons to take solace. The most recent business plan isn’t the steaming pile of poop that previous ones have been. They’ve been forced to tell people the truth about how much the project is going to cost, so bond buyers know what they are getting into, as do California voters in the fall. If Obama wins in the fall, there will be more money because he loves the trains, so there may be more billions from Washington. And it will be an experiment in Keynesianism, that nice billion-dollar-spit-in-the-ocean idea that, when the state is in recession, the state should stimulate demand by handing billions to Parsons Brinckerhoff.
New CalHSRA director to make $365,000 year to help the TEA Party illustrate the back scratchy life of technocrats
Brilliant Sol Price MPP alum Teddy Minch sent this little gem along today from the Modesto Bee: California high-speed rail director to earn $365,000.
Because, you know, Californians don’t hate this project or agency enough yet, we have to make it even more hated by making sure the director of the train wreck makes about 4.5 times the median family income. The CalHSR Director needs to make $1,000 a day to explain to you why this massively expensive project will benefit unemployed Californians by eating up the state’s debt limit while its schools experience cut after cut after cut after cut. If I were him, I’d demand quite a salary, too, because that much spinning every day takes a toll on a guy.
So let’s deconstruct this sock in the eye blow by blow.
First off, I respect and like Jeff Morales. He was, I believe, the Director of Caltrans when I was in grad school at UCLA. I remember being pretty impressed by his self-promotional and agency-promotional way of presenting to the public “the New Caltrans”, which wasn’t some tired, old highway department, but instead, a new and improved public agency that was going support our new dreams of urban trolleys and whatnot. He has a fine ability to make a photo op out of just about everything. He’d drunk the New Urbanist Kool-Aid in a major way, and why not, really, since no other ready-made models of urban development have been able to make peace between the developers and the environmentalists the way New Urbanism and all its variants have. The guy had a job to do in a public agency, and this model offered a way out of anti-growth politics when anti-growth politics was still relevant (i.e. before the crash).
Here’s where the TEA Party folks find grist for their mill.
It’s a truth universally acknowledged that the smart types like Jeff Morales, who are good at retail politics (part of their job as agency heads, after all) figure out who all the money people are–that’s why they get the jobs they do. Once they leave public agencies like Caltrans, they are super, super valuable to the consulting firms like Parsons Brinckerhoff, where Morales went, because it becomes what we in the business rather vulgarly call ‘the sugar t*t connection.’ It’s a money pipeline. You get to play insider baseball because you know everybody in the agency awarding the consulting contracts by their first names. You were an awesome boss back in the day, right? When he’s angling for contracts, half the people making decisions about those contract owe him their jobs. So, of course, PB gets the nod. Guys like Morales are pure gold to consultants.
Now, Morales is going to jump back to head another agency. This move is fooling precisely nobody:
“An outside observer could be excused for thinking the CEO’s job is to grease payments for Parsons Brinckerhoff,” Tolmach said. “As capable as Mr. Morales is, this is just another negative reflection on the project of inside dealing.”
The argument for Morales is that he knows how to get stuff done in California. Which isn’t easy. They’re right. But $365,000?
An Op-Ed in the San Jose Mercury News got rather pointed:
The latest end-run tactic by the train’s chief engineer, Gov.
Jerry Brown, would have California’s Legislature suspend its
tough environmental laws so the state could put this pet
project on the — pardon the pun — fast track.
Never mind that every independent analysis has been highly
critical of it.
Never mind that the High-Speed Rail Authority’s own peer
review group said it was terribly flawed.
Never mind that the nonpartisan Legislative Analyst’s Office
said even the new, new, new and improved incarnation still is
not nearly “strong enough” and relies on “highly speculative”
funding sources. That is bureaucratese for “not a snowball’s
chance in hell of finding the money to pay for it.”
Never mind that the state’s projected budget shortfall is now
greater than the total budget of 39 states and that the debt
service on the sale of these rail bonds would create another
fiscal chasm to be filled by another cockamamie budget
Never mind that the new, new, new plan bears so little
resemblance to the one voters approved that going ahead with
it now borders on ballot fraud.
Never mind that poll after poll — including a USC
Dornsife/Los Angeles Times poll released June 2 — has shown
that a strong and growing majority of voters does not want the
state to proceed with the project.
Nope, none of that matters. Casey Jones is at the controls of
his legacy project, so reason and fiscal prudence have been
abandoned on the far side of the turnstile.
We say all this despite having supported high-speed rail when
it was on the ballot in 2008. Rail is important to America’s
future, and we know the first steps toward any visionary plan
face hurdles and may require leaps of faith.
But back then nobody foresaw the economic plunge that still
leaves California mired in budget deficits. We lost faith in
the original board and its planning and construction team.
Then last year, an updated plan with wildly higher costs for a
smaller system sent us leaping to the sidetrack. (Oopsie, did
we say $45 billion? We meant $98 billion. No, no, wait, $68
billion. Well, you know, around there. Did we say San Diego
and Sacramento would be included? Um, our bad, they’re not.)
How can anyone believe a word of what comes from the
High-Speed Rail Authority now?
HT to Ken Orski
Here is the story from USC News.
Overall, 55 percent of California voters said they want another chance to weigh in on whether the state should borrow money for high-speed rail, agreeing with the statement that “the plan for the project has changed, the total costs have increased and there are doubts that high-speed rail can actually turn a profit.”
In contrast, 36 percent of voters said they should not be asked to go back to the ballot box, agreeing with the statement that “a new vote could halt any planned construction, and even though the plan has changed, the intent is the same, voters have already committed funding and the project will finish earlier than projected.”
I don’t know how you fix this mess. There are people in the state who really believe in the project and think the money will be found somewhere, and cost escalations don’t mean much to them. They don’t want to vote again because they got their way–barely–on the first vote.
But the first vote was based on a set of straight up lies to voters about how much the project was going to cost. The ballot box initiative claimed Californians were getting 520 km of high speed rail and the $10 billion was going to be a quarter or a third of the amount needed to get there. Read more…
This post is a quickie from economist Mary Parry, and I’m not sure if I am being fair to what he is actually saying here, but this is what he says:
Megabus is a great example of a competitive, flexible, low-cost (sometimes free), consumer-driven, market-based solution to inter-city transportation that has thrived without any government subsidies, tax breaks or taxpayer funding. Contrast that alternative to government transportation options like Amtrak and high-speed rail proposals that are the opposite: non-competitive, inflexible, high-cost, politician-driven, and not market-based, requiring massive amounts of taxpayer funding and subsidies.
He starts out with talking about Megabus’s free ticket promotions, and says that Amtrak has never given away tickets. Not sure if they have, but regional metro agencies do so routinely as a matter of promoting their service. I’m not sure that matters all that much.
The real question is whether Perry is right in that MegaBus would be a good alternative to building billions of HSR in California.
If you look at the information in the CAHSRA business plan (pdf link), despite all the ballyhoo about “taking cars off the road”, most of the market capture of other high speed rail companies comes from airline travel:
Yes, the car mode share shrinks, but the air mode share really shrinks. It would be really interesting to if there were Megabus type services in parallel with European HSR and what happened to those businesses when the HSR got built.
Remember that it is possible for total car usage to go up if aggregate travel demand goes up, even as mode share shrinks. So we might not be taking cars off the road, but putting fewer cars on the road in the future than if we didn’t provide the HSR. Those are somewhat things analytically.
However, Megabus had a West Coast Line they closed in 2008. Here’s why:
When asked for a comment, Dale Moser, president and COO of megabus.com, offered the following statement to Suite101 Budget Travel:
“Due to ridership growth trends, megabus.com no longer serves the West Coast. We take megabus.com to different markets and try to create positive ridership trends and if we can’t we move on to new markets. As megabus.com’s service continues to thrive in the Midwest and the Northeast megabus.com looks forward to the possibility of returning to the West Coast should there be adequate demand.”
So the California Business Plan is predicting a lot of passengers by 2040:
So currently the LA to SF corridor does not have sufficient demand for MegaBus service for the company to keep it rolling. But it does have sufficient demand to make a HSR company $2 billion (am I reading that right?) in revenue in another 30 years.
Proponents will tell me that HSR is so much better than MegaBus that the services are simply not comparable. I’m not sure what to think here.
I was on On Point with Tom Ashbrook talking about High Speed Rail. Go listen.
I heard from Yonah Freemark yesterday and he took me to task for being too sarcastic yesterday, too dismissive with how I represented his writing and arguments, and not reading his points carefully enough.
He’s right. I am often too sarcastic, and I am sorry that I let my incredible frustration with the HSR politics in this state fall on Freemark. He is, in general, a fantastic writer and his blog, the Transport Politic, is a great resource.
I still think he is a) making the wrong argument here and b) being a bit of diplomatic enabler for the pro-HSR world with the points he emphasizes in the piece. And I’m still annoyed by circle graphics. He told me his representation is accurate, and I believe him, of course, but I still hate circle graphics, bubble charts, etc, etc in general.
But I was too bombastic, which means he himself didn’t get a fair read and I made him into a whipping boy for people who just line up behind CalHSR no matter what that agency does. I shouldn’t have done so, and he was right to be annoyed with me.
So let’s see if I can do this without being as grouchy or sarcastic as I was yesterday (it’s going to be hard because I’m grouchy every day.)
1. Freemark’s first point was that $98/74.5 billion is a small fraction of total GDP and a (roughly) third of what we spend on Caltrans.
My point about why this is bad liberal logic: The conservative response to such statements is not “oh, HSR doesn’t really cost that much.” Their response, and perhaps it is the right one, is likely to be “Holy cow, we need to cut Caltrans!”
When liberals bring up relative spending amounts, they are trying to get people to see the priorities implicit in the budget numbers.
SO while Freemark is trying to help people make sense of the sticker shock from the new business plan, there’s a “preaching to the choir” aspect to it. People who have supported this project from the beginning just think it’s worth it. They see it as the future of infrastructure, they see it as trying to build for the next 100 years.
For those of us who do not think this project should be the priority, the relative spending argument falls flat. What we hear in this discussion is: we spend too much on Caltrans, so you want us to go ahead and spend too much on HSR, too. Huh?
(I’m not actually convinced we spend too much on Caltrans, btw. I’d need to think that through more, but it’s what the relative spending arguments translate to.)
And as long as we’re talking about this: imagine what we’d have for public transit if we’d spent what we’ve spent on DARPA all these years. We’d have Wallace and Grommit style transit that picks you out of bed in the morning, dresses you, fixes you a healthy breakfast, props your news reader in front of you, glides you into the bathroom, and whisks you away to your work with nary a stop, transfer, or fare.
But if you value the military and don’t value transit, there’s no problem here, right?
2. Gabriel Rossman points out in the comments: to me the really interesting public choice model of CA HSR is how they’re deliberately building a commitment trap, both in terms of laughably low cost projections just long enough to get the plebiscite through and in terms of how they’re building the easiest (and most useless) leg first.
I didn’t talk about this because I’ve talked about it here before, but Rossman hits the nail on the head with public choice.
This is the major reason why there was so much heat in my tone yesterday. I am very annoyed, even with well-intended writers I genuinely respect like Freemark, and with the train advocacy world in general, given their response to the new business plan.
The California HSR political machine doesn’t deserve their fidelity at this point. The politics have been deeply cynical and self-serving. CalHSR advocates may say that this project is “for all of us,” but that agency’s leadership has schilled the project for years with a deliberately low price-tag. They pooh-pooh’d critics who pointed out there’s no way that such a large project is going to cost less than $90 billion, only to turn around and finally admit it—but, of course, those critics were only right because not enough money has fallen from the sky for us to get started faster. People who are generally supportive of transit and rail investment like Freemark have spent years in good faith discussing the project as a clear public good based on diddled cost estimates. They should have had chance to make a case for the project on solid ground from the beginning instead of constantly having to do backflips and contortion acts with every new dodge and sleight-of-hand from the agency.
This is one reason why I think all of us–even those of us who might support such a project–should be furious at this point. They have undermined our ability to thoughtfully and ethically deliberate the role we want for HSR–if any–in our state. They have behaved exactly the way critics of government predict government agents behave when they serve themselves rather than us. And I don’t buy the excuse that the public can’t handle the truth or has to be gulled into doing what’s right.
Watching CalHSR over the years, and their diplomatic enablers in the blogosphere, has been galling to me because it’s been like watching a comedy skit where there is a person dancing to the music and then the musicians start playing faster and faster and faster and while the dancer tries heroically hard to keep up. At some point, it’s obvious to everybody, the dancer should mutiny. The dancer tried to do his job; he tried to participate in the activity in good faith, and the musicians made his job impossible through their bad behavior.
Here’s the reality.
A) There will be no private investors willing to put money into the project until the taxpayers have eaten most of the construction costs. The private sector would love to help us build it (construction contracts, yay!) and they would love to run it once it’s built. That’s the private sector interest. Funding it? Not so much.
B) Building anything in California is expensive. It may be relatively less expensive to build in the Central Valley than along the coast, but it is still not cheap, not compared to places like Iowa where a Federal dollar goes a long way.
C) The Feds are not going to fund a significant portion of this project unless something radically changes. That means Californians are going to pay for almost all of the construction costs.
D) The price tag for construction is somewhere between $90 to $105 billion.
E) If we want it, Californians will have to forego $100 billion of other things. We could cut $100 billion out of highway funding. Or $100 billion out of education. Or $100 billion out of social programs. But that’s the price tag, and Californians have to face up to it. We could ask taxpayers to go without $100 billion of their own purchasing power and propose a new tax to pay for it. All of the above are possibilities, real possibilities, and that’s where the discussion should be.
There’s the choice. No sugar-coating. No contortions. No obfuscating. Do we want it enough or not? It’s not “oh, we can have this and private sector/the Feds will give it to us.” Nope. It’s just Californians, having to decide what they want. Do we want it or not?
(It’s still reasonable to say “yes” if I say “no.” But let’s give people the ability to say yes or no in an ethical deliberative process.)
Public choice is in the air, a little like fall for me.
Yesterday in planning theory class, one of my brilliant students brought up public choice economics, without calling it that, because it’s not something that makes its way into much undergraduate education (I think he went to Princeton, where such things do come up in undergraduate education).
My brilliant colleague, Peter Gordon, notes Tyler Cowen’s remarks about how about public choice economics is neglected in today’s macroeconomic debates.
Why such a neglected field? I’m not sure, other than things go in and out style in economics just like everything else. Back in the day when I was studying, urban economics and labor economics were unpopular fields, in favor of game theory and econometrics. Now at least urban economics has come back, along with public finance, as a sexy field.
Perhaps it is time for James Buchanan Renaissance, as certainly the ideas are very relevant to those who currently suspect government workers from enriching themselves at the expense of the public.
Anyhow, the basics for public choice are laid out actually pretty well in Wikipedia. I love how people have made Wikipedia better and better over the years.
So here are James Buchanan’s two brilliant books, which many students no longer read due to how old the books are. It’s a pity.
The Demand and Supply of Public Goods, first published in 1968.
Nonetheless, Buchanan is still out there, tearing things up. He recently starting taking his own profession to task over the 2008 crisis and their failures in dealing with it: Economists have no clothes.
If you read Peter’s blog, he’s nonplussed by my reactions to the announcement that HSR is now expected to cost $98 billion. Dear Peter always suspects me of being naive, but I did expect more of a reaction from supporters. Instead, it’s more of the same: the HSR is worth it, worth it, worth it, worth it, no matter what it costs. The Transport Politic embodies the response nicely. It has a supposedly convincing graphic that the state can afford the HSR project because–check it out!–the yellow circle representing the high speed rail project is such a tiny, tiny dot compared to the state’s entire product, and look! at how much bigger that big big big Caltrans dot is! According to this graphic, we’re just dumping money into to the auto-oriented bureaucracy*, so that by comparison, $98 billion for the train project seems absolutely reasonable.
Ok. First off, I hate circle graphics because they almost never accurately reflect proportions right. Does this tell us anything that a straight up pie chart wouldn’t? No it doesn’t.
And then there’s the assumption that a train project, because it costs less than one of the state’s biggest agencies, is actually a pittance, or not that expensive, after all.
Under this logic, we could invest $98 billion of tax money in strippers and call it effective public policy. Yay, us! We poured $98 billion–oh, excuse me $74.5 billion (cough)–into a hole in the ground, but it’s ok because it’s not as much we spend on other things! Wooooo!
Maybe the HSR project is, indeed, worth it worth it worth it worth it, but that graphic–oye–and that logic. Urk. Bad liberal logic in a nutshell.
So what does public choice theory have in it to explain the problem? Well, first, public choice theorists would note that the $286 billion wrapped up in Caltrans represents an ever-expanding bureaucracy where public managers have a strong motivation to expand their roles and powers. I think the average public choice theorist would argue that state departments of transportation have outlived their usefulness now that that interstate highway system has been built (I don’t think that, btw), and yet here they are, hanging on, continuing to gather resources because that is the motivation of the bureaucrat absent the profit motive: more power, more revenue, more things to command.
IOW, public choice theorists argue that with Caltrans, you are looking at the future of the California High Speed Rail Authority, which is already starting off on the “we’ve already taken billions to do very little but produce renderings and marketing plans” foot, with a $98 billion project. So that if it gets the funds to do that, it will simply continue to seek more and more rationales for its continued existence.
For the Cal HSR folks, they have no real choice–they were forced to own up to the reality of the finances at some point, after they spent years dithering, and now they must continue to the carry the banner for the project. Yes, it’s going to be wildly expensive, but look at how wonderful the trains are. Their jobs is to do their job, and their job is to try to get a train built.
*BTW, Caltrans spends a lot of its time and money focusing on transit support.
The California High Speed Rail authority released a business plan that upped the cost of the state’s high speed rail from I believe $42 billion (In my defense, their decoy numbers have jumped around a bit) to $98 billion. The story appears in the Los Angeles Times here.
Take a look at the story; the additional costs are associated in the business plan with extending the construction by another 10 years. Whenever I read a business plan from these folks, the lizard part of my brainsays we are dealing with a lemon market and I become immediately critical of every single claim the seller makes. So what? The admission that the cost is likely to be just shy of $100 billion (my best students estimated it at $105 billion) strikes me as a gambit to try to wring as much money as possible from both Federal and state supporters.
See, for example, exhibit a: this story covering a letter from the California High Speed Rail Authority telling legislators what everybody with any sense already knows: no private money is going to darken the agency’s door until the state and the Feds have eaten all the capital risk. Quelle surprise.
Given the emphasis and increasingly persistent calls for Federal help, I think this “It’s going to to cost us $98 billion if we have to extend construction dates” is a scare tactic. Give us more money to get started sooner and that scary, scary $98 billion price tag goes down! Like magic!
Only it doesn’t really go away because we’re at the end of 2011, there’s no way that project could be constructed by the 2020s anyway, even if all of us immediately stopped flinging away money on silly things like education and medical care for foster kids in favor of giving it all to the California High Speed Rail Authority.
It’s a pretty good gambit. If they get the federal money faster than they are currently, they can always say that the feds didn’t give them enough to prevent the delays and see? We told you it would cost more if you didn’t fund us up front. They have a built-in rationale for the likely cost over-runs.
There’s part of me that thinks I’m giving them too much credit with the scare tactic. After all, they do politically dumb things all the time, like, say, planning to demolish the school attended by the children of one of the state’s leading Republicans. D’oh! Just to be clear: the goal is to make sure that the project goes close enough to Senator Bedfellow’s constituents that they get to have some of the billions, but not so close that his kids’ school is going to have to rebuild somewhere else.
I’m happier that the closer-to-reality price tag is out there; it at least forces people to wake up. The HSR authority is right that the longer construction and financing period will increase costs, and people should be aware of that. And they should also be aware that most of us who follow this kind of work do not think that this project can be delivered for anything under $90 billion under even happy assumptions. And they should be aware that private investors are not going get themselves leveraged for construction costs; the best we will get is clawbacks in leasing the facility later.
So here are the questions: If this is a gambit, should the feds jump in to give them more cash upfront to try to jumpstart the project and try to curtain the higher costs? If the business plan is not a gambit, is the project worth $98 billion to the state? Proponents say that’s still cheaper than expanding airports and highways, but those generally run $4 to $5 billion a pop, so doing the math might help us. Even if it’s not cheaper than expanding airports and highways, perhaps that price tag is still worth it?
I will leave you with one more story from the LA Times, this one from Sunday, on the predatory subprime lending in used cars in Los Angeles. A woman who has a child with asthma, faces a two-hour bus ride to get to her $27000 a year job at UCLA. So she buys a used car from loan sharks because cars are immensely useful. 1) Nobody who makes $27K can afford to live anywhere near UCLA, so we have an affordable housing problem; 2) the subway to the sea would probably cut down her transit ride time by a lot, but I still think she’d have so many transfers it would be cheaper and faster for her to drive; 3) if she works at UCLA, why can’t her child receive care there for his asthma and 4) if I were going to spend $98 billion on something, it would probably be on 1 through 4.
Yesterday’s LA Times ran a story entitled California bullet train: The high price of speed. The tag line for the Facebook entry was “What HSR Would Destroy in California.”
From the story:
Almost every city and county along the proposed route loses something, but none more than Bakersfield. More than 228 homes and more than a half dozen churches would be taken, many of them in low-income minority communities on the city’s east side. The rail authority’s plans have both homeowners and government agencies confused.
Ok, now we need to quote somebody saying something along the lines “can’t make omelets without breaking a few eggs” right? We’d be right back to Interstate Era planning.
I’m not sure why this story is a surprise to anybody, as this is a huge, new project. There simply isn’t existing right of way for large stretches. And while you can criticize the HSR authority, the story of how Bakerfield boosters originally welcomed the plan only now to have misgivings as it gets more and more real should give us all pause. Are they just a bunch of hypocritical NIMBY folks? I don’t think so. The California High Speed Rail Authority has been pretty strategic in marketing the project early for ballot measures. Their mantra has been: ” The system will be great, don’t worry about the details, or the lines on the map, what’s important is that it’s coming to you.”
Then, with implementation, the lines on the map and promise of a new service accompany the very real sacrifices that come with building such a large project. It’s not what you envisioned. It’s your friends and neighbors being forcibly moved. The abstract jobs jobs jobs! idea constantly pushed comes along with the likely destruction of existing businesses.
It’s a hard, obviously redistributive act of government–and it always is, every time something like this gets built. We try to cloak everything in “win-win” language, but there are few real win-wins in projects like this. The building of the Interstate System was exactly the same.
My students in planning theory had to discuss this idea of how do you create knowledge about the future? It is, as Yoda says, always in motion. Your decisions shape it. What should have been done differently here, if anything?