The Perils of Proposition 1A

by Tony Chavira

Being a huge advocate for riding the light rail lines around L.A., I hate having to say this, but I feel very unnerved by Proposition 1A, the proposal for a “Safe, High-Speed Passenger Train Bond Act” (note the very deliberate emphasis on the word Safe).  To be blunt, after reading through the rail’s costs and proposed sources of income, I find this bill incredibly short-sighted. The press release for how this rail is funded points out three sources of income: state funds (which you’re voting for), federal funds (via the Passenger Rail Investment and Improvement Act of 2007), and private investment.

Now, I’d love to have a high-speed rail line that flew up and down the coast of California; and I don’t mean to be a wet blanket, because I think that California is long overdue for a heavy rail system that connected the major cities of our state. If we can get the full amount of funds, I would expect that it would create a ton of jobs and generally provide greater access for workers statewide. But reading the summary for how the bill proposes to attain funds leaves an ominous sense of Bent Flyvbjerg-style underfunded transportation project déjà vu, made scarier still by the quote on page one from a Lehman Brothers representative.

Japanese bullet trains
Japanese bullet trains

The hard part about projects with this size and scope is that you need two entities to commit cash before the third will agree to jump on the bandwagon. The federal government’s put money aside for projects like this through the Improvement Act (which passed the Senate this summer), so they’re probably waiting to see if Californians are really serious about it. But we’ve already hit a roadblock: the Improvement Act only provides $35 per person for heavy rail projects throughout the USA, with a stronger emphasis on Amtrak than on independent projects. The Feds will more than likely spread that $10.5 billion total pretty thin over the course of 10 years. Even if we receive the entire amount of money (which is very unlikely), we’ll only really be matching the amount that we as a state are promising to put in the pot. In short, the state expects that the Feds will match our investment, and it just doesn’t look like they’ll be able to do that.

The first entity to commit money (according to 1A) should be the state of California, and this project is made or broken by how we vote. My second point of apprehension comes from the fact that this proposed $9.95 billion will be appropriated in general obligation bonds, and therefore the money could be allocated to any number of transportation (or other) projects throughout the state of California, in hopes of being able to be repaid one way or another. Thus we would be investors making a choice between light rail and heavy rail: the money could provide a third of the price tag for this heavy rail system, or go to roughly twenty Blue Line-sized projects throughout California. As an investor, 1A is an especially tough pill to swallow when you know that the government just signed legislation that will encourage development of offices and housing closer to light rail transit (therefore trying to subtly encourage us to live closer to work). Does the high-speed rail seem counterproductive to that goal? Maybe a little, yes. Not a good foundation for investment in these trying times.

For those who’ve skimmed up until this point, here’s a quick summary of the three sources of investment:

  1. State Funds—$9.95 billion that legislators want to commit from our budget for projects throughout the state, sold in general obligation bonds that could provide money to basically do anything, but must be repaid to the investor (which will add another $9 billion in interest).
  2. Federal Funds—Money that was just passed through the House and has yet to be implemented into a project other than to assist Amtrak, only providing $35 per person in all of America over the course of 10 years (that’s about $1 billion a year for all projects in the country).
  3. Private Investment—From companies will Lehman Brothers. To be fair, some of this investment will be local, for things like engineering and planning, but it still needs to come from somewhere. As a private investor, does this seem like a wise investment to you?

Never mind the fact that, once this train is built, operating costs will likely be $1 billion annually. Amtrak is currently running at close to capacity, but does that mean that people are willing to pay a premium on top of the taxpayer-allocated amount? Is it fair to ask us to pay for trips out of pocket to cover some of the costs of maintenance when only a small percentage of the population will be using this transit system regularly? How often does the small business owner in Southern California travel north?

And never mind the fact that there are already right-of-way issues with the Union Pacific, who owns the land and tracks that this rail will supposedly use. They can sue the state for a few billion dollars more once it’s built, I’m sure. Oh right ... also, never mind the fact that we’re in an economic crisis.

I would love for this to be a viable option, and I’d love to know that I could zip up to San Francisco in two hours, from L.A. to Irvine in half an hour. But this is an affordability website: is it really a smart financial move for California right now? Does it really maximize its value to middle-class taxpayers? Or would you rather see the same money go to three to five local rail lines in Southern California? Heck, just give us a billion dollars (12% of the proposed 1A funds from the state alone) and we’ll tunnel the Red Line right to Santa Monica! I’m sure Metro wouldn’t say no to the money.

But I’m neither a transportation planner nor a legislator. I recommend that you read the bill and meticulously search for how they plan to pay for this project (and pay off the multi-billion dollar debt that it will incur). Nothing is as clear as the fine print:

The authority estimated in 2006 that the total cost to develop and construct the entire high-speed train system would be about $45 billion. While the authority plans to fund the construction of the proposed system with a combination of federal, private, local, and state monies, no funding has yet been provided.

Tony Chavira is the President of FourStory, a nonprofit organization that promotes fairness and social justice through strong writing and storytelling. He is also the Program Developer at RACAIA Architecture, writes and posts comics at Minefield Wonderland, and teaches Business Report Writing at California State Polytechnic University, Pomona.
tony@fourstory.org

Comments

See what George Skelton at the L.A. Times has to say about the bullet train at http://www.latimes.com/news/local/la-me-cap27-2008oct27,0,1000087.column

2008-10-27 by Nathan Walpow

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