Why California's High Speed Rail May Never Get Finished | Marc Joffe

High-speed rail, that was originally supposed to cost us $33 billion to get from San Francisco down to Los Angeles and Anaheim, and the latest budget is $113 billion, and that will probably continue to go up. How long do you think it will take for us to have this train track? Best case is going to get delivered in 2029 and realistically isn't going to get delivered for many, many, many years after that, right? What's going on that we can't deliver a project on time? It's just very bureaucratized, and there are allegations of corruption. New York Times recently reported that a French operator was originally interested in working on California high-speed rail, and then they walked away from the project because they thought it would be easier to work with Morocco to put in a high-speed rail system. So that's sort of embarrassing. We're a first world country. We should be able to do it better. In California, we are investing billions of dollars into building train projects that unfortunately may never get finished, and we may never use. Mark Jaffe is a public policy analyst that's been studying train projects for the past seven years. Today he's going to share with us his insider perspective on what's going on with these projects and watch the show till the end to hear the winners of the giveaway. I'm Tiamat Khorrami. Welcome to California Insider. Thanks for having me. We want to talk to you about trains in California. There is a lot of cities that are proposing to build more trains, and we are building a train that goes from LA to San Francisco. Is there going to be a day for us in California that all of us will get on the train to go to work, to go to the office, or use the trains on a regular weekly basis, daily basis? Well, you know, trains in theory are good. They reduce traffic congestion, and potentially they can reduce climate change. But the way we do trains in California generally, and there are some exceptions, but generally it costs a lot of money to build them, and it takes forever to complete the projects. And then the ridership turns out to be disappointing. So when you look at it in cost-benefit space, actually it usually doesn't add up. You mentioned California's approach is problematic. What is problematic about it when dealing with trains? So California has really turned against the private individual vehicle. They really want to get people out of cars and into trains or, you know, using biking or walking. And California mostly is not laid out to really accommodate that because most people live in sprawling areas and single-family houses. So there's a problem with the fit. The other problem is just with the execution, is it just costs so much money and it takes so much time to build trains that the community benefits don't really seem to materialize. Now some people might argue that this is an investment. So when we build a train, you know, it'll last us a long time. And sometimes these trains are a lot faster and cheaper. Well, you know, normally we look at investments in terms of like a discounted cash flow. You know, how much did we spend and then how much do we get back? So, you know, with high-speed rail, that was originally supposed to cost us $33 billion to get from San Francisco down to Los Angeles and Anaheim. And the latest budget is $113 billion and that will probably continue to go up. You know, my congressman in Northern California projected $250 billion as the ultimate cost. So you have to really have a lot of people riding that train over many, many, many years to pay that back. And I think there's reason to think that the ridership that the high-speed rail authority is projecting won't materialize. And why does it cost a lot more? That seems to be a problem with public infrastructure projects in the United States generally. And it is really more in the United States than in other countries. And it's not even all projects in the United States. But, you know, we have a lot of issues around, I don't know, scope creep might be the term. Everything seems to just take longer than originally projected. We have, you know, a unionized workforce that benefits from prevailing wage laws. So the cost of people is a lot higher in the United States than in other countries. Yeah, and I think we just have a lot of regulations like, for example, CEQA that make it more difficult to build large infrastructure projects. So one of the things that's interesting about high-speed rail, which was originally supposed to be finished in 2020, the whole system was originally supposed to be finished in 2020, we're still building out the first part in the Central Valley. And even in the first 119 miles, all the properties have not been acquired yet. So there are actually still properties that are in the line of the right-of-way for high-speed rail that still have not been delivered to the state. And so the process of just acquiring property turns out to be much more complicated here than maybe in a lot of other countries. Is the rising inflation at odds with your goals of securing your savings and retirement? Don't let your savings and retirements be impacted by government policies and decisions. For over 5,000 years, gold has withstood inflation, geopolitical turmoil, stock market crashes, and here's the great news. You can get it. You can still get it. In fact, you can own gold and silver in a tax shelter retirement account. Visit birchgold.com slash California to claim your free info kit on gold. With almost 20 years of experience converting IRAs and 401ks into press metal IRAs, Birchgold can help you. Protect yourself with gold today by visiting birchgold.com and secure your future with gold. Start today with a free info kit. Just visit birchgold.com slash California. Now, how long does it take for this to end? Like how long do you think it will take for us to have this train track? So right now, the authority is projecting that the first 171 miles, so that's the 119 miles currently under construction, plus 52 miles added at the north and south end that'll connect Merced to Bakersfield. That's supposed to go into operation in late 2029. Personally, I'm very skeptical of that. I would think that we won't see that until the late 2030s. And then the rest of it, which is connecting to Los Angeles, Anaheim, and then to San Francisco in the north, those have very severe engineering challenges. You'll need some kind of tunneling both to get from the Central Valley over to San Jose and then over the Tehachapis to get to Southern California from Bakersfield. So that could be another 20 or 30 years, if ever. So that part that is easy, it's going to take until 2030 to get done? Yeah, that's what I think. Obviously, no one has a crystal ball, but betting against what the authority projects in terms of a time frame has worked pretty well. But the authorities are saying by 2029 they'll get all of it done? Is that the hope? 2029 would be the first 171 miles from Bakersfield to Merced. The date that I've seen for the larger system is 2033, which is really unbelievable. What kind of thought leadership is it when you have a project that was authorized in 2008, was supposed to be delivered in 2020, and now best case is going to get delivered in 2029 and realistically isn't going to get delivered for many, many, many years after that, right? And then it's going to cost already, you know, three and a half times what it was initially budgeted for and probably is going to cost much, much more than that. So it's not a good example, right? We haven't created a good example of how high-speed rail can contribute to a solution. Why can't we do it? We have all the entrepreneurs here. We have all the tech companies. Is it something that has changed with us? What's going on that we can't deliver a project on time? It's just very, very bureaucratized and, you know, there are allegations of corruption. So the New York Times recently reported that a, I think it was a French operator, was originally interested in working on California high-speed rail and then they walked away from the project because they thought it would be easier to work with Morocco to put in a high-speed rail system. So that's sort of embarrassing. We're a first world country. We should be able to do it better. And one of the things that turned them away was the idea of not building along I-5 because that was the more efficient solution. So we have a lot of political inputs into the decision-making process that don't yield the best outcome. So it's easier for this contractor to build in Morocco than California. How do you think California leaders feel about this? I mean, I haven't really seen a definitive answer to that. But I think there's an increasing view that we really don't need the private sector. We've got to really build state capacity to be able to handle all the decision-making processes that are required. But that's really hard to get to because right now, all the construction is being done by private companies. The problem is those private companies don't have the correct incentives. They don't own the system. So as a result, they're basically working on a cost-plus basis. So their incentives are wrong because they get paid for generating costs. So the more rework that they have to do, the more money that they can make. And so the longer the whole project takes, the more money they can make. So do they get a percentage of the job? I mean, they bill a fixed amount, but that amount that they bill is going to be based on their cost of doing it in terms of labor materials plus some markup. If instead we had something like a build, operate, and transfer system where the private company that's building it has to operate it for some period of time and then transfer it over to the government, then the private company's incentives gets aligned with the consumer because the private company has an incentive to complete the project as quickly as possible so that they can start earning revenue from operating the system. But we don't work that way in California. We just pay private companies to build things, and then we rely on the state to manage everything and make sure that we get some kind of return on what's being constructed. And that hasn't really happened so far. So private companies are benefiting from the fact that the budget went from $30 billion to $100 billion? Yeah, they're going to capture most of that, absolutely. And if it goes from $113 billion to $150 billion, that's theirs? Yes, yes. To have no incentive to actually... Exactly, exactly. Their incentives just don't align with what's good for the public. Why are we doing this? Well, I think we would need an attitude change, which I think is very difficult in the current political context, which is to get more comfortable with relying on the private sector to take ownership of important projects. I think the prevailing ideology in Sacramento is really against the private sector. So they create systems that seem like they're not good for the private sector, but ultimately the private sector figures out some way to benefit from them. So the idea of doing these projects is great, but just the way we're doing them, it's not getting us there. Yeah, and there are exceptions. I think LA Metro has done some projects where they've been able to stay on budget. I know that San Diego did one where it stayed on budget. So it is possible, but I think more often than not, you have these huge over-budget situations. The Second Avenue subway in New York, which definitely has a much stronger argument than anything in California, because New York is a very transit-oriented city, but still it was very, very expensive to build just three stations, four or five billion dollars to do that. Honolulu is having a horrible time. They got money under the stimulus bill in 2008 to build an overhead light rail system in the Honolulu area. And even now at the end of 2022, nothing has opened. And it's years and years late and way over budget. I think it's something like 12 billion dollars now to build 20 miles of service. So in a lot of the country, we just can't seem to get this done. And I think one aspect of it that I think a lot of transit advocates should consider is the bespoke nature of train systems. So let's say that we need to get people from one place to another. If we can do it with a bus, it's going to be a lot easier to get that to work because buses are mass-produced. They're very standardized. We sort of know how to do that, right? When you get into trains, generally every transit system in North America has like these very specific specifications for what the rolling stock is going to be like. In the case of BART, BART doesn't even use the standard gauge of I think it's four and seven eighths inches. I don't have the exact measurement. But BART uses a wider gauge, so the cars have to be custom built for BART. So there's all this customization. Then you have a lot of problems with the positive control system where the train is supposed to automatically be able to stop without rider intervention. A lot of times the testing and development of that doesn't go smoothly. So you end up with a lot of delays in terms of the system getting started. That was a big problem with BART extensions previously in the Bay Area where the whole thing was done. And then, well, there's a problem with the positive train control system. We've got to spend more time working that out. And then another six or 12 months gets added to the schedule. So if you build buses, even bus rapid transit, you're dealing with rubber tires, asphalt, things that are sort of box standard around the country, it's much more likely, not guaranteed, but it's much more likely that those things are going to be delivered close to on time and close to budget than train systems where a lot of things can go wrong because they're brand new. But some people that are in these communities that also argue that this is really good for them, like people in Merced and Fresno and these rural communities, they're going to be in this train line and they're going to get connected so they can go to LA and they can go to San Francisco faster, right? Well, that's true. But they have to go through the construction phase. And, you know, as Jim Patterson, who's been on the show previously mentioned, Fresno has really been torn up by high speed rail construction. So they really pay this huge price in the 2010s to maybe get something in the 2030s and maybe in the 2040s, they'll get connected to San Francisco and Los Angeles. So a lot of pain now for questionable benefits in the future. And the people that are actually, they really like to have these train projects. They are considering that it's not going to be scalable for everyone to have a car at some point, right? Is that where we're getting to? Or is it also the emissions? The reason that we're going to try to cut down emissions from all fronts in California, right? So, you know, if I want to sort of steel man the other sides of the pro-train side, that's exactly, you know, there's more and more congestion on the roads. Cars generate a lot of CO2 emissions. And if we can get people out of the car and onto California high speed rail or BART or LA Metro, you know, that's going to be good for the environment. It's going to reduce congestion. The one thing that everyone has to realize about climate change policy in California is that California accounts for 1% of all greenhouse gas emissions globally. So there is nothing that we can do in California that is really going to move the dial. For every small reduction that we make in terms of climate change, you know, China builds more and more coal plants and they wipe out any benefit that we derive. So you can think in terms of, well, if we just build this particular project, that's going to solve climate change. It's simply not. And I wish people who are concerned with climate change would, you know, get more into work from home because that is a low cost solution that keeps people off of the roads. But, you know, if you like trains, it's not so good because there's less people to take the train. But ultimately that really is, I think the way forward is the more people can work from home or, you know, walk to an internet cafe or a co-working space and work from there. That's really going to, you know, put a dent into California's contribution to climate or, you know, GHGs. But again, whatever we do, it's not going to make that much of a difference globally. So why China? China has a lot of these high speed rails and why China can do it and we can't do it here in California? Yeah, you know, it's absolutely true that China has built an incredibly large amount of high speed rail infrastructure. And, you know, one of the things you hear from high speed rail advocates is if China can do this, you know, why can't we? Well, you know, China has a couple of quote unquote advantages over us that I don't think we would find particularly attractive. You know, one is there really are no labor rights. So people work in unsafe conditions and receive very low compensation. People could die in this project. People can die. When they were doing the stadium during Olympics, many people died. And, you know, that's how it used to be in the United States when they built the Empire State Building. For example, you know, there were a number of deaths. You can't rule out the possibility even with a lot of labor protections, there still won't be the occasional casualty because it's just necessarily you're doing things with concrete and steel and people are at elevated positions. So there's always a risk associated with it. But, you know, if you put in basic safety protocols, then you can really reduce the chance of people getting injured or dying. And China, you know, doesn't have to bother doing that because it's an authoritarian system. And then the second thing, you know, high speed rail requires taking a lot of property because the tracks have to be very straight. You can't have big curves because that would cause the train to have to slow down to make those curves. So there's pretty much, you know, a right of way and it's pretty fixed and you need to acquire all the property along that right of way. So here in the United States, we have the Fifth Amendment. So the government has to pay you just compensation. You have to go through a judicial process if you don't want to give up your property. So the government has to sort of prove to a court that this is something that needs to happen. And then they have to prove that they've given you or offered you appropriate compensation before you have to turn over the property. In China, you know, none of those protections exist. If they want your property, they're just going to start bulldozing your house maybe with you in it. And so that's not something, you know, that I don't think we'd want to replicate here. So that's a serious constraint that we have as a Western democracy with individual rights that China doesn't have. So do you think the public transportation here, the way we are doing it, do you think there is a future for it, for people to use it? I think that in highly densely populated areas like San Francisco, trains, you know, light rail or other kinds of, you know, track-based systems make a lot of sense. I don't think, you know, when you get into the suburbs and certainly not the more rural areas, that it's really a good fit because you just don't generate the ridership to justify all of the startup and operating costs associated with these things. So I think until and unless transit planners and transportation planners generally in California get more comfortable with bus alternatives, I don't think the future is very good. And what about the train that we're building from LA to San Francisco? What do you think we should do with that? We spent $10 billion already. I think it's very hard to say, okay, let's just down tools and sort of leave it there and, you know, whatever happens to it happens to it. It looks like something is going to have to be delivered. To me, the lowest cost solution from where we are right now to where we could be is to just build the 119 miles that's currently under construction, connected to existing Amtrak tracks that serve the San Joaquin Valley and then run diesel trains at 125 miles per hour along that line. And that's horrifying to people who are concerned with climate change because, oh my God, it's a polluting diesel train. But there are going to be so few trains running along that, it's really not going to make much of a difference. So that would be the lowest cost way that we could build some kind of rail-based solution that would honor what's already been spent and stop the bleeding in terms of- And also those communities you mentioned, Fresno, those communities that have been impacted- They get something. They at least get something, right? Yeah. So I think that's the way forward, but, you know, that's not the way we're currently going. So the next step would be probably stop at the 171 miles an hour, the full 171 miles from Bakersfield to Merced, electrified, potentially running up to 220 miles. Stop it at that point and don't build the connections to LA and San Francisco. That might be another solution. You know, the problem, I think, with that one from an advocate point of view is it's not going to attract a lot of ridership. And if the idea is to sort of seed the country with high-speed rail projects, it's not a great example of what we can do with high-speed rail. But if I put on my advocate hat for a second, I think there's a much better solution from that point of view, which is Brightline, which is a system that started in Florida, private company that's been building quasi high-speed rail. It's going to be up to 125 miles per hour. It's proposing, or it's planning, I should say, to build a system from Los Angeles to outside, sorry, from the Los Angeles area, starting in Victorville to Las Vegas. And most of that is going to run in the median of I-15. So that's going to be a lot cheaper to build a private entity. So I think a lot of the efficiencies that come from private development will come there. And so we could potentially see in the next several years a successful example of high-speed rail that at least, you know, between, on the weekends when people want to, you know, go from LA to Vegas and gamble or see shows or whatever, that that could get very high ridership. And so it could actually, you know, pencil out. So I think that might be something that we could sort of put our hopes in in terms of an example of a successful high-speed rail. But I don't see how California high-speed rail can really get there from here given all of the political and just engineering challenges that it has. Mark, do you have any other thoughts for our audience? Yeah, so just to elaborate on that whole, you know, remote work thing I talked about a little earlier, California is a leader in terms of technology. So if we can build technology that makes remote work more efficient and easier in terms of, for example, you know, using virtual reality to make it feel like you're at a conference room with other people as opposed to the Zoom experience we have right now, which sometimes gives people a headache. If we can build those kinds of things, I think we could really do a lot to reduce the amount of transportation that people need and thus reduce the amount of greenhouse gas emissions. But I think just focusing on building more and more trains, it's really not working out for us. Mark Jaffe, Policy Analyst with Cato Institute, it was great to have you on California Insider. Thanks. We would like to congratulate the three winners of the California Insider giveaway. These three winners will receive a free subscription to the Epoch Times where they have unlimited access to all of our Epoch Times programs like the Larry Elder Show, American Thought Leaders, Crossroads, Facts Matter, and many more. They will also receive a weekly newspaper of the Epoch Times delivered to their door. We would like to thank all who participated in this year's holiday giveaway. To sign up for our California Insider newsletter, go to InsiderCA.com. We hope your holidays were filled with joy and we wish you a wonderful 2023. Thank you for watching. Please click the icon on the left to subscribe to our channel. We bring you the most pressing issues California is facing with straightforward and in-depth interviews. See you in the next video.