From the OC Register: Dan Walters - High-speed train way off track

By DAN WALTERS

Sacramento Bee columnist
dwalters@sacbee.com
 
"California's high-speed rail project leaders tell us it's on track and that the state's residents can confidently look forward to a future of super fast bullet trains whisking them from one end of the state to the other at airline-like speeds.

However, the state auditor's office is saying officially what outside analysts already had concluded – the bullet train isn't ready to roll, lacking the tens of billions of dollars in federal and private financing the project will require.

California voters have approved a $9.95 billion bond issue, but it's supposed to pay for no more than 50 percent of construction costs. With total estimates running beyond $40 billion, the bond would be good only for a quarter at most.

The High-Speed Rail Authority is hoping for a big wad of federal funds – about half the total – but so far has received just a fraction, with no commitments for any more.

However, the biggest unknown, as state auditor Elaine Howe points out in a report issued Thursday, is whether private investors would be willing to commit at least $10 billion.

The enabling legislation says the bullet train will not have any state operating subsidies, but the authority's own documents say that private investors need "revenue guarantees" to protect their investments. That raises the specter of operating subsidies, as another recent report by the Legislature's budget analyst also points out.

"To plan adequately for private investment, the authority should further specify the potential cost of revenue guarantees and who would pay for them," the auditor's report recommends.

An indication that something's amiss is found in the defensive reaction of Curt Pringle, the authority's chairman, to the auditor's report, calling its title "inflammatory" and "overly aggressive" and promising that the questions will be answered as the business plan is revised.

There is a fundamental conflict between voters being told that if they approved the bonds the bullet train would be self-supporting, without operating subsidies, and the apparent requirement for "revenue guarantees," which probably could come only from tapping a state budget that's already awash in red ink and/or imposing some new special tax.

The auditor's report, coming just weeks after the legislative analyst's report and a critique by the Senate Transportation Committee staff, indicates that specific route planning, now under way throughout the state, should be placed on hold until the financial kinks are worked out – if, indeed, they can be.

The danger – and perhaps the hope of bullet train advocates – is that the authority will make so many commitments that the state will be politically compelled to pony up more money for construction and operation, regardless of financial viability.

Big public projects often become financial sinkholes via that process."