How Much is too Much?

By Alec Laube

Source: Wikimedia

Source: Wikimedia

In November 2008, California voters approved a $9.95 billion bond to build a bullet train that would go from San Francisco to Los Angeles. Now, this bond was never going to cover all of the costs that would come with the planning and building of the rail line, but the project’s projected costs were $69 billion. This is double what was originally released by the state as the estimated construction costs in 2008. These new numbers come from a confidential 2013 report by the state’s main project management contractor. A large reason for this increase is that the first phase of construction, from Burbank to Merced, is costing $40 billion which is a 31 percent increase from the 2008 estimates. In addition to that, the report notes that the overall project would cost at least five percent more than these latest estimates.

It is also important to recognize that no specific number is mentioned for what is likely to be the end cost of the project. Jeff Morales, the rail authority chief executive, believes that the project can catch up on any delays and meet the $69 billion budget, but Bent Flyvbjerg, a University of Oxford business professor and a leading expert on megaproject risk, cautions California that more delays and cost increases may be on the way. According to his research, high speed rail projects around the world average a cost increase of 45 percent from original number; however, increases as high as 100 percent have been observed as well. Robert Bea, a member of the National Academy of Engineering and a pioneer in civil engineering risk analysis, is also skeptical that the state can catch up to deadlines and keep costs at original estimates. Mr. Bea notes that, “You can never make up an early cost increase. It just gets worse. I have never seen it go the other way in 60 years.” From Flyvbjerg and Bea’s statements, it’s clear that the costs are likely to keep increasing as the project continues.

The major question is whether or not the benefits outweigh these increased costs. One main argument for construction of the High Speed Rail are the environmental benefits. According to the California High-Speed Rail Authority website, the high-speed rail will reduce dependence on foreign oil by 12.7 million barrels per year and will reduce greenhouse gas emissions by 12 billion pounds per year.   Arizona State University assistant professor Mikhail Chester believes that the environmental investment of emissions from construction will be returned in 20 to 30 years. In 20 to 30 years, the project will start providing a positive environmental impact, assuming that the estimates provided by the rail authority are correct. More than $69 billion is being put into an investment that won’t provide benefits for at least 20 years after the project is completed. With the project already facing delays, money is being put into a project that won’t show benefits for quite some time. This simply isn’t the best use for the state’s money.

Investment in other forms of renewable energy or advancements in more fuel efficient cars would be a greater use for billions of taxpayer dollars. There are too many other areas of need in California for a delayed pet project such as the high speed rail to be draining billions of dollars. With issues in our prison system, schools, and infrastructure, the high speed rail should be a low priority project that ought to be revisited once it is better planned and has a clear plan for construction.

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