High-Speed Lies

Here’s a rare example of a headline asking a question whose answer is “yes”: “Did bullet train officials ignore warning about need for taxpayer money?” Although the headline would have been more accurate if it had stated, “Bullet train officials cover up warning about need for taxpayer money.”

When the California High-Speed Rail Authority put the 2008 measure on the ballot for the state to build the line from Los Angeles to San Francisco, they claimed that the line would earn more than a billion dollars a year in operating profits (compare tables on pages 21 and 22), and that private investors would gladly invest around $7 billion in the project in order to get a share of those profits (figure 26).

As recently as two months ago, when asked at a legislative hearing if other high-speed rail operations earned “a substantial profit,” rail authority chair Dan Richard replied, “all of them, virtually all of them, make operating profit.” But Richard had to know that was a lie.

A year ago, when the authority was seeking contractors to build the line, a Spanish company named Ferrovial submitted a bid but added a warning that, of 111 known high-speed rail lines in the world, only three earned an operating profit. (Two of those lines are in Japan and the third is probably in France.) So, to the High-Speed Rail Authority, “virtually all of them” means “2.7 percent of them.” Not surprisingly, no private investors have contributed a cent, much less $7 billion, to the project.
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Even more incriminating, when the Authority posted the bids on its web site, it deleted Ferrovial’s warning from the company’s proposal. It came to light only because a citizen watchdog named Morris Brown took the trouble to read all of the original bids and discovered the discrepancy between the written bid and the web posting.

The significance of this lie is that the original legislation authorizing high-speed rail requires that rail lines earn enough fares to cover their operating costs. Thus, in order to build the line, the Authority has to claim that it will cover its operating costs. Once built, of course, the Authority figures that the state isn’t going to walk away from a project that cost scores of billions of dollars even when (not if) the operating costs prove to be greater than the revenues.

The Authority is playing a game of chicken. Governor Jerry Brown, the rail line’s biggest supporter, will leave office in 2019. The most likely contender to take his place, Lieutenant Governor Gavin Newsom, has come out against the project, and even if he doesn’t win, whoever does is also likely to be sensible enough to oppose spending tens of billions of dollars the state doesn’t have.

So the Authority’s goal is to spend enough money building enough miles of rail line by 2019 that politicians won’t dare cancel the project. That won’t happen if state legislators wake up now and realize that the line can’t possibly cover its operating costs. Thus, the Authority keeps on lying.