California Went Backwards On High Speed Rail

California HSR will only become a reality once it controls costs, installs value capture, and embraces incrementalism.

Ethan Finlan | February 18, 2019 | |
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Governor Gavin Newsom shocked Californians and transportation pundits last week with his announcement that Sacramento might delay completing the state’s troubled high-speed rail line (HSR). The announcement does not delay the entire project; the segment underway in the Central Valley will still be completed. It’s the priciest undertakings that are in doubt: extension of high-speed trains to San Jose and San Francisco, and a rail connection between Bakersfield and Los Angeles.

Newsom made the right call. The high-speed rail line, once thought to be revolutionary, was saddled with burdens from the beginning. One recent estimate projected a jaw-dropping final cost of $100 billion.

But Newsom’s announcement needn’t doom future rail expansion in the Golden State. Policymakers should seize the opportunity to reform transit construction. To that end, I offer this three-point plan to improve California’s approach to transit.

Control Construction Costs

Without getting a handle on construction costs, not much new infrastructure can be built. Improving existing transit is crucial to the viability of high-speed rail, because without it the impacts on traffic will be minimal. As such, local improvements need to be made cheaper.

This is a nationwide problem; identifying the reasons behind US cost bloat might be difficult for one state to achieve. However, Seattle has dug tunnels beneath its downtown for as low as $300 million per mile. While still high by international standards, progress can be made.

Consultants must be held to strict standards. Contracts should be assigned based on a comparative analysis of how high the provider’s costs have historically been, including in other countries. It may also be desirable to select contractors who will play a role in operating and maintaining the system, so concessionaires have incentive to deliver on time and at or under budget.

Implement Value Capture

Value capture – allowing private developers to build near transportation infrastructure in exchange for a financial contribution to the project – relieves the taxpayer burden. It also provides market feedback (as do other private financing measures) for the viability of a given project. If developers are willing to invest in a road or rail line, they’ll likely be willing to develop in the catchment area.

The pioneers of this method are in East Asia: Japan’s mostly privatized intercity railroads own the land near train stations and lines, and Hong Kong’s transit agency is partially owned by private shareholders who build large retail and housing developments at new stations.

Value capture in the United States is daunting. As market urbanist Stephen Smith points out, while government ownership of land in Hong Kong enables concurrent development with new extensions, mature cities like New York are already largely built out. If handled improperly, the investment scheme can lend itself to corruption. Yet with high speed rail, the intermediate segments tend to have minimal development. The closer-in suburbs of the East Bay and Inland Empire have increasingly high populations, but disperse development. Building near potential stations won’t cover the full costs of the project, but they could provide substantial added revenue. The recent decision to let BART preempt local zoning around its stations provides a framework for this approach.

Build High-Speed Rail Incrementally

The first segment of the upcoming HSR will be of limited use further south, because of the lack of a connection to Los Angeles. But it will improve existing train service from Bakersfield to Oakland. A similar incremental approach can be deployed on one of the urbanized segments – for example from Los Angles to San Diego.

The existing LA-San Diego line can be upgraded to allow for faster speeds. This can be achieved by electrifying the line and running modern, efficient equipment (which FRA regulatory reform will allow.) It would bring fast connections between California’s two largest cities far sooner than the high-speed rail plan proposed, on a route that, at 124 miles, is far shorter.

Such an incremental strategy won’t bring bullet trains to California soon, but it would greatly improve intercity passenger transit, while giving the state an ability to test whether there’s even a market for HSR

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In summary, California’s HSR strategy should be judicious. The state needs to adopt policies that control for costs, deregulate around the line, and test the concept incrementally. HSR should not arbitrarily be deemed acceptable at all costs.    

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