California's High-Speed Rail Boondoggle

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Construction on California’s high-speed rail system is supposed to begin in 2012. But even before the ground is broken, ever-increasing cost projections and inept planning are making this megaproject a boondoggle. One question still up in the air: How much of this boondoggle’s cost is going to be foisted onto federal taxpayers. 

The state’s estimated cost for the entire system has jumped from $25 billion in 2000 to $45 billion in 2008. However, an independent analysis by the Reason Foundation concluded that it could cost up to $81 billion. (Reason put together a handy link that lists the numerous problems with California’s plan for high-speed rail.)
 
A new report from the California State Auditor illustrates some of the financial problems facing the state’s High-Speed Rail Authority and problems with the Authority itself:
 
  • The Authority’s estimates that $17 billion to $19 billion in federal funds will be needed. Thus far, the state has only received a federal commitment for $2.25 billion courtesy of the stimulus bill. The Authority apparently expects Uncle Sam to waive a magic wand and “poof” the money will appear. 
  • The Authority expects private investors to contribute $10 to $12 billion, but these investors “will require a minimum revenue guarantee from a public entity.” In other words, a subsidy. The Authority’s details on how much this subsidy will cost or who will pay it are “scant.” 
  • Only five or eight members of the Authority’s oversight board have been appointed. The group has been meeting in private, which is potentially illegal and could result in their work being voided. 
  • The Authority is blowing through its administrative expenses rapidly, which are a fixed amount set in law. Part of the problem is that the Authority can’t even track its expenditures by category.  
  • The Authority’s processes for monitoring the performance and accountability of its contractors, which have accounted of 95 percent of total expenses in the last three years, are “inadequate.” For example, one contractor spent $46,000 of taxpayer money on new furniture, which is a cost that contractors are supposed to bear.   
Thus, California’s high-speed rail agency is not a model of fiscal management, nor as we all know is California’s state government. So how many taxpayers in the other 49 states do you think are eager to pour $17 billion down a high-speed black hole in the no-longer-golden state?      
 
In 2008, California voters approved a $10 billion bond measure to finance high-speed rail. Hey, if they want to fund the total $45 billion themselves, let them. But the beauty of fiscal federalism in that the rest of us shouldn’t have to pay for one state’s fiscal follies.