A Comparison of Draft EIRs to the Authority’s 2009 Report Reveals the Truth
Mark Twain once said, “There are lies, damn lies, and then there are statistics.” Truly, Mr. Twain was correct in recognizing that the use of statistics beats lies and even damn lies when it comes to hiding the truth. The California High-Speed Rail Authority surely recognizes this reality and has fully embraced the statistical use of $2008 Dollars, $2010 Dollars, $YOE Dollars, and the shuffling of electrical costs in and out of their other construction costs to hide the truth. Their efforts seem to be paying off as the mainstream media talks of “Costs perhaps exceeding $60 Billion” [Note 1] for the San Francisco to Los Angeles/Anaheim project. The sad truth is that costs have more than doubled in two years…..before the first rail is set…..before inevitable construction cost overruns materialize…and are certain to exceed $90 Billion.
California’s High-Speed Rail Authority has now released their latest cost estimate to build rail segments from Merced to Fresno and from Fresno to Bakersfield. Costs of $5.1 Billion and $6.7 Billion respectively can be lifted from the Draft Environmental Impact Reports ( Draft EIRs) by simply averaging the costs of the various alternative alignments [Note 2] [Note 3]. Unfortunately, these costs cannot be directly compared to the Authority’s prior estimates of $2.2 Billion and $3.6 Billion reported in their December 2009 Report to the Legislature (2009 Report) [Note 4] for two reasons.
First, the 2009 Report expressed costs in “Year-of-Expenditure Dollars” or “$YOE” (real costs that take into account inflation over the next 6 years as this project is built) and the numbers reported in the Draft EIRs are expressed in “2010 Dollars” or “$2010” (the cost to build this project if prices for labor and material never rise from what they were in 2010).
Second, the 2009 Report separated electrification costs from other constructions costs and did not itemize electrifications costs by segment. Instead, the Authority provided one cost to electrify the entire system from San Francisco to Los Angeles/Anaheim. The Draft EIRs combine the cost to electrify each segment with other construction costs. However, a little arithmetic is all that is needed to make a fair comparison between the costs reported in 2009 and those reported in the recently released Draft EIR’s.
Using $YOE Dollars for Both Cost Estimates
Clearly this is an important and necessary and is easily accomplished using the Authority’s own cost escalation factor of 3.5% per year [Note 5]. In fact, the Authority’s use of this factor accounted for nearly all of the “cost increase” seen between the release of the Authority’s 2008 Business Plan and their December 2009 Report the Legislature. The former’s costs were $33.6 Billion expressed in $2008 Dollars in the 2008 Business Plan AND on the Proposition 1A Ballot while the latters reported costs were $42.6 Billion expressed in $YOE Dollars at the request of the State Legislature. This blogger used this same cost escalation factor of $3.5% per year and assumed that the timing of costs shown in the Draft EIR’s would be similar to those detailed in the 2009 Report (i.e. starting low in 2013 and then ramping up to high values in 2015 and 2016 before falling back to a lower number in 2017 as the project is completed.
This calculation reveals that the total cost will not be $11.8 Billion (5.1 +6.7) but rather $13.5 Billion. To this price tag one still needs to add the cost of at least one Heavy Maintenance Facility shown in the Draft EIRs as costing $.6 Billion in $2010 Dollars [Note 6], but which in $YOE Dollars will cost $.7 Billion. Our price tag is now up to $14.2 Billion,
Eliminating Electrification Costs from the Draft EIR Costs
The price tag of $14.2 Billion does include electrical costs and the comparable 2009 Report numbers do not. Fortunately, the Authority itemized the electrical costs in the Draft EIRs and they are easily subtracted out of our $14.2 Billion price tag. When electrifications costs (construction and associated engineering) of $1.4 Billion (costs shown in Draft EIRs and adjusted to $YOE Dollars) are subtracted from $13.5 Billion we are still left with $12.1 Billion.
This cost, $12.1 Billion, can now be fairly compared to the $5.8 Billion ($2.2 Billion for Merced to Fresno and $3.6 Billion for Fresno to Bakersfield) itemized in the 2009 Report and we see that costs are now known to be more than twice what was reported by the Authority less than two years ago.
To date the Authority has wasted less than $1 Billion on their high-speed train to nowhere. Work to make sure this project really goes nowhere and that your tax dollars are wasted no more. Write to your legislators in Sacramento [Note 7] and Washington [Note 8] and tell them the results are in. California HSR is a bad idea. It needs to be de-funded and all work stopped. Don’t forget to include Paul Ryan (R-WI) [Note 9], Chairman of the House Budget Committee in your correspondence.
Factual statements made in this article are supported by footnotes shown below. Direct links to the source documents are imbedded into this document wherever possible.
Note 1 San Jose Mercury News, August 9, 2011, “High-speed rail price tag soars again, this time on pace to surpass $60 billion”
Note 2 Merced to Fresno Draft EIR
Section 5 Project Costs and Operations, Table 5-1
Note 3 Fresno to Bakersfield Draft EIR
Section 5 Project Costs and Operations, Table 5.2-1
Note 4 December 2009 Report to the Legislature
page 85, Table 1 Capital Cost by Segment
Note 5 December 2009 Report to the Legislature
Page 89, Forecasted Inflation Rates
Note 6 Fresno to Bakersfield Draft EIR
Section 5 Project Costs and Operations, Table 5.2-2
Note 7 Website to contact California Legislative Representatives
Note 8 Website to contact Congressional Representatives
¬Note 9 Website to contact Representative Paul Ryan, Chairman of House Budget Committee