Vegas Bullet Train Bets Big on Taxpayer $$$
Why should all Americans be concerned about a privately built high-speed train shuttling ludomaniacs and dipsomaniacs between Palmdale, California and Las Vegas, Nevada?
The Xpress train project isn't even part of the $5.8 billion bond issue California's state senate narrowly approved last month to pay for a Madera-to-Fresno leg of the Golden State's proposed, troubled high-speed railroad network. So why fear the Xpress?
Because the train's builder and local politicians are trying to get America to lend them the money. XpressWest chief operating officer Andrew Mack intends to borrow $5.5 billion from Uncle Sam to pay for the train, which as I noted a while back is one of three proposals for train service between Sin City and the Antelope Valley. Scott Shackford explained the business plan in more detail in June.
In a new study [pdf] for the Reason Foundation, Wendell Cox estimates the probability that this loan, from a Federal Railway Administration program called Railroad Rehabilitation and Improvement Financing, will go bad:
There appears to be little or no prospect for the Victorville to Las Vegas train to generate sufficient fares and commercial revenues to repay a federal loan of between $5.5 billion and $6.5 billion. The likely default would represent a loss to taxpayers. Moreover, this could lead to further taxpayer losses, at any or all of the federal, state or local levels, as political pressure is placed upon governments to operate (and perhaps even complete construction of) the system at taxpayer expense.
That would be taxpayers all over the U.S.A. – not only in California – who would end up paying for this default.
By contrast, the feds are only on the hook for around $2 billion or $3 billion, so far, on the actual California high speed rail network. This Federal grant will be disbursed despite the California High Speed Rail Authority's having missed its deadline to break ground on an actual train by September 2012. (The first construction package is still out for proposals and construction is now optimistically penciled in for early 2013.)
But at least the official bullet train's exorbitant overall cost and massive burn rate will be in theory borne mostly by Californians. The Victorville/Vegas line on the other hand will involve the largest loan ever provided by the the RRIF program, which up to this point has been mercifully stingy with its $35 billion in lending authority. And for the scheme to work, the federal loan would have to be subordinated to other investor/cronies, as Cox explains:
In light of the financial concerns outlined below, unsubordinated federal debt could be a serious barrier to private investment. At the same time, it may not be possible to subordinate the federal interest, given the negative and intense political reaction to subordination of taxpayer interests in the recent Solyndra failure.
I'm not sanguine that fury over Solyndra would cause more scrupuluosness about putting taxpayers at the back of the line in another deal. In any case, during the bankruptcy the details of these deals always get reworked in smoke-filled rooms, as God intended. Cox again:
International research shows high-speed rail projects have been plagued by optimistic ridership and revenue forecasts, financial losses and capital cost overruns. XpressWest expects to draw significant numbers of riders from throughout the Los Angeles Basin and the Inland Empire. There is no precedent for large numbers of people driving one-third of the way to access a train or air service for the remaining two-thirds of such a short trip (up to 300 miles away). Thus, the very existence of much of the XpressWest market is speculative and the actual ridership could be a mere fraction of the forecast.
The likelihood of the Xpress happening at all seems pretty low, but it does shed some light on Southern California governance. Our old friend Los Angeles County Supervisor Michael Antonovich is all over the plan, as the Long Beach Press Telegram's Christina Villacorte explains:
The idea is ambitious enough, but…Antonovich literally wants to take it farther.
He is envisioning a 50-mile connection from Palmdale to Victorville via a high-speed train, that could be run by Metrolink, XpressWest or other providers, that would link up with existing rail lines throughout Southern California.
"It would have to be a public-private partnership," he said. "The goal is to have a seamless operation."
It would also connect at Palmdale with the state's massive $68 billion California High-Speed Rail network, still in the planning stages, that would link Los Angeles and San Francisco, and eventually include Sacramento and San Diego.
Cox's Reason study got picked up by the Inland Empire Daily Bulletin, where reporter Andrew Edwards explains that XpressWest had no comment because "no one at the Las Vegas-based firm has yet to see the report before its publication."
One other recent High-Speed folly: The "Why not follow The 5?" question got another airing when the L.A. Times reported that the rail authority had rejected an apparently straightforward construction offer from France's SNCF and left its business with New York-based Parsons Brinkerhoff. Among the attractions of SNCF's plan was its simplicity, in following the route already created by Interstate 5, rather than the remote rural obstacle course that is now planned. How the bullet train (which most media still refer to as a proposed train to connect Los Angeles and San Francisco though in fact it does not come near either city) ended up in such a pretzel, with its first leg starting in a place nobody wants it and nobody will ride it, is a tale of woe only local, state and federal cooperation could have produced.
Whether you're taking the Xpress, the X Train or even the Z Train, when you get to Vegas tell 'em Telly sent ya:
