It’s not just kids who say the darnedest things.
Facing the prospect of all future federal funds for high-speed rail being cut off, Undersecretary of Transportation Roy W. Kienitz was quoted in the Los Angeles Times declaring:
“I can’t think of any mega-project like this that had all of the funding in place before it began.” [Note 1]
Not to be out-done in the silly remarks category, Roelof van Ark, California’s High-Speed Rail CEO, was quoted in the same LA Times article exclaiming:
…and if money runs out and the system is only partially built, it would leave in place a cornerstone that “my children or my grandchildren can continue to build to San Francisco or in a southerly direction into L.A.” [Note 2]
Readers can decide which statement is dumb and which one is dumber, but first the facts.
Every major infrastructure project across this nation from the Brooklyn Bridge to the Golden Gate, from the first spike of the Transcontinental Railroad to the last mile of the Interstate Highway System, has had a sound funding program in place before construction commenced.
The Great Bridge
The Brooklyn Bridge was built by the New York Bridge Company. A bill passed by the New York state legislature on April 16, 1867 granted this private corporation “the power to purchase any real estate needed for the bridge and its approaches and to fix tolls. The legislation fixed the capital stock at five million dollars, with power to increase it, and gave the cities of Brooklyn and New York authority to subscribe to as much of the stock as determined by their respective Common Councils.” [Note 3] Like most mega-projects, construction costs were higher than originally anticipated and the bridge cost $15 million when finally completed in 1883. However, the additional funding was never a problem as this was to be a toll bridge and minimum ridership was known… all the traffic then taking ferry boats across the East River. More than 30 million persons per year were paying to use the bridge shortly after its completion. [Note 4] Other bridges across the East River soon followed with the construction of the Williamsburg, Manhattan, and Queensboro Bridges by 1910. More would follow.
The Golden Gate
California’s iconic bridge, the Golden Gate, was funded with a $35 million local bond issue approved by the voters in the newly formed Golden Gate Bridge and Highway District on November 4, 1930 by a vote of 146,000 to 47,000. [Note 5] Construction costs in fact turned out to be $35 million and the bridge opened in June of 1937. [Note 6]
The Transcontinental Railroad
On August 13, 1859 a railroad attorney visiting Council Bluffs, Iowa to give a political speech was informed that a very knowledgeable young railroad engineer was in the audience. In the chance meeting that ensued, Abraham Lincoln asked, “(Grenville) Dodge, what’s the best route for a Pacific railroad to the West?” Dodge answered, “From here out along the Platte Valley.”[Note 7]
Three years later with Lincoln then President and Dodge a General building and repairing railroads for the Union Army, Congress passed and Lincoln signed the Pacific Railroad Act which authorized the creation of the Union Pacific Railroad. A year later and only days before the Battle of Gettysburg, Dodge and Lincoln meet to discuss the location of the eastern terminus of the Transcontinental Railroad. Dodge once again “reiterated his belief in the Platte Valley route with Omaha (across the Missouri River from Council Bluffs) as the best terminus.” Lincoln agreed. Dodge pushed for the railroad to be built by the government, but Lincoln interjected that the government would give aid and support, but could not build the road. As Dodge remembered Lincoln’s words, Lincoln said, “the government had all it could possibly handle in the conflict now going on, [but it] would make any change in the law or give any reasonable aid to insure the building of the road by private enterprise”. [Note 8]
The Pacific Railroad Act was modified in 1864 putting in place the final funding plan. In essence, the Union Pacific and Central Pacific ,charted as a private corporation in 1861 by California’s “Big Four”, ( Leland Stanford, Collis P. Huntington, Mark Hopkins, and Charles Crocker) would build from the east and west respectively. The corporations would build a short segment of track and then could sell government bonds to recoup their investment. With this cash they could build the next section of track and so on. Alternating parcels of land along the completed track were granted to the railroad companies with the government maintaining its ownership of the remaining parcels. The railroads made money off the land grants, but so did the government as the railroad turned both sets of land from nearly worthless into lands of considerable value. [Note 9]
The government bonds that were issued to pay for the railroad were not a gift. “They were loans to be paid back in thirty years or less. This requirement was met. In the final settlement with the railroads, in 1898 and 1899, the government collected $63,032,512 of principle plus $104,722,978 in interest, making a total payment of $167,746,490 on an initial loan of $64,623,512.” [Note 10]
The Interstate Highway System
“Under the leadership of President Eisenhower, the question of how to fund the Interstate System was resolved with enactment of the Federal-Aid Highway Act of 1956. It served as a catalyst for the System’s development and, ultimately, its completion.
Title I of the 1956 Act increased the System’s proposed length to 41,000 miles. It also called for nationwide standards for design of the System, authorized an accelerated program, established a new method for apportioning funds among the States, changed the name to the National System of Interstate and Defense Highways, and set the Federal Government’s share of project cost at 90 percent.
Title II of the Act – entitled the Highway Revenue Act of 1956 – created the Highway Trust Fund as a dedicated source for the Interstate System.
Revenue from the Federal gas and other motor-vehicle user taxes was credited to the Highway Trust Fund to pay the Federal share of Interstate and all other Federal-aid highway projects. In this way, the Act guaranteed construction of all segments on a “pay-as-you-go” basis, thus satisfying one of President Eisenhower’s primary requirements, namely that the program be self-financing without contributing to the Federal budget deficit.” [Note 11]
Dumb and Dumber
Certainly Undersecretary Kienitz’s lack of awareness of any prior mega-projects having funding plans in place from their onset seems rather dumb. Now let’s examine Mr. van Ark’s statement about building in the Central Valley and leaving it to our children or grandchildren to continue the construction either north to San Francisco or south to Los Angeles.
It appears that Mr. Van Ark has no problem with the concept of spending $6 billion dollars on an isolated piece of infrastructure that would have no immediate utility. Nor does he have a problem sitting on $6 billion of capital while financing costs on this “investment” compound over 20 years to equal another $9 billion (at 5% interest). Over 40 years the compounded interest would equal a staggering $36 billion. Surely Mr. van Ark can think of a better legacy for his (and our) children and grandchildren. Then again, Mr. van Ark is a citizen of South Africa and it is likely that his children and his grandchildren are, or will be, citizens of South Africa as well. Living half a world away from the Central Valley, they would escape Mr. van Ark’s legacy of debt. Would your children or grandchildren be so fortunate?
Undersecretary Kienitz’s statement of unawareness of any mega-projects funded from their inception is certainly dumb. However, this blogger’s vote for the dumber statement goes to Mr. van Ark. But if Mr. Kienitz would like to step forward and dispute me on this point, then I’ve got a bridge I’d like to sell to him.
Statements made in this article are supported by footnotes shown below. Original source documents can be obtained by clicking on the highlighted notes imbedded in the article.
Note 1 Los Angeles Time article, Bulk of high-speed rail costs could fall to state
by Ralph Vartabedian, September 8, 2011
Note 2 Los Angeles Time article, Bulk of high-speed rail costs could fall to state
by Ralph Vartabedian, September 8, 2011
Note 3 The Great Bridge, by David McCullough, published by Simon and Schuster Paperbacks, copyright 1972, page 119
Note 4 The Great Bridge, by David McCullough, published by Simon and Schuster Paperbacks, copyright 1972, page 545
Note 5 The Virtual Museum of the City of San Francisco website
Note 6 Golden Gate Bridge Highway and Transportation District website
Note 7 Nothing Like It In The World, by Stephen E. Ambrose, published by Simon and Schuster,
copyright 2000, page 23
Note 8 Nothing Like It In The World, by Stephen E. Ambrose, published by Simon and Schuster, copyright 2000, page 87
Note 9 Nothing Like It In The World, by Stephen E. Ambrose, published by Simon and Schuster,
copyright 2000, page 377
Note 10 Nothing Like It In The World, by Stephen E. Ambrose, published by Simon and Schuster, copyright 2000, page 377
Note 11 Dwight D. Eisenhower National System of Interstate and Defense Highways, US Department of Transportation – Federal Highway Administration website