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Research & Commentary: High-Speed Rail Is a Bad Option for States

October 12, 2017

In this Research & Commentary, Matthew Glans examines California's high-speed rail program, the delays and cost overruns it faces, and why high-speed rail is not as efficient as supporters claim.

The new problems facing California’s high-speed rail project (HSR) between Los Angeles and San Francisco serve as another example of how high-speed rail is unlikely to work in the United States. Nearly everywhere these projects have been attempted in America, they have been expensive and underutilized. Even the one seemingly successful high-speed rail service, the Acela high-speed line serving the Northeast Corridor, is heavily subsidized, like all Amtrak rail services.

After years of delays and rising costs, the California high-speed rail project is now facing an additional $1.7 billion in cost overruns on a 119-mile segment currently under construction through the Central Valley. The overruns have increased the expected cost by 27 percent compared to the original estimate, and they are particularly troubling because the Central Valley is expected to be, from an engineering perspective, one of the less challenging portions of the new rail line’s route.

The biggest barrier to high-speed rail is their massive costs. The recent cost estimate increases related to the California project emerged because project managers have struggled to purchase the land required for the project to progress, there’s been higher-than-expected costs associated with relocating utilities, and negotiating agreements with other railroads has been more difficult and expensive than planners assumed they would be. According to Ralph Vartabedian of the Los Angeles Times, the new projected cost of the Central Valley segment, based on a quarterly report, is $8 billion.

The increased costs in the Central Valley could have a wider effect on the entire project, which is now seven years behind schedule. Vartabedian cautions that if the same problems faced early in the project continue through construction, the cost of the $64-billion system could increase by billions of dollars.

California’s high-speed rail struggles should serve as a cautionary tale for other states considering similar plans. As Randal O’Toole of the Cato Institute explains, “high-speed rail proposals are high-cost, high-risk megaprojects that promise little or no congestion relief, energy savings, or other environmental benefits. Taxpayers and politicians should be wary of any transportation projects that cannot be paid for out of user fees.”

Supporters of high-speed rail claim that in many instances, it is a better form of transportation than automobile or air travel, and they say it is more energy-efficient. However, the evidence shows in most cases, high-speed rail makes little sense. The United States has a very dispersed population compared to parts of the world where rail is successfully utilized, and its major cities are located further away from each other. Automobile or air travel almost always makes more financial sense than traveling by train.

These problems are precisely why conventional rail companies effectively disappeared in the 1970s, when they were replaced by Amtrak, a heavily subsidized national train service that costs taxpayers nearly $50 per passenger to keep afloat. Since 1971, Amtrak has received a total of $45 billion in subsidies.

The beneficial effects on the environment of having millions more people travel by rail, which are often touted as one of the primary advantages of high-speed rail, are also limited. While a new high-speed train line may displace some air and car travel, the construction and use of the train disrupts the environment in other ways. For instance, building a new high-speed rail line demands large amounts of land, and the new trains will create noise and air pollution and require significant amounts of electricity.

High-speed rail is an expensive endeavor with questionable benefits for taxpayers. Instead of subsidizing the construction of new high-speed rail lines, states should focus on maintaining and improving their current highway and air systems, which are well-established, still in-demand, and in dire need of repair.

The following documents examine high-speed rail in greater detail.
 

The California High-Speed Rail Proposal: An Updated Due Diligence Report
https://reason.org/files/california_high_speed_rail_report.pdf
In this Policy Study, the Reason Foundation examines high-speed rail ridership and revenue, demographics, construction costs, operating costs, financing costs, airport and highway alternatives, train speeds, train designs, safety regulations and standards, greenhouse-gas reductions, potential community opposition, and historical experience in the United States. This report updates Reason’s 2008 “Due Diligence Report” and addresses and evaluates the numerous changes to California’s plan to build a high-speed rail (HSR) system between San Francisco and Los Angeles via the San Joaquin Valley.

The Full Cost of High-Speed Rail: An Engineering Approach
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1089088
This paper examines the costs of the California high-speed rail system that will connect Los Angeles and San Francisco in California. The paper concludes “high-speed rail is significantly more costly than expanding existing air service, and marginally more expensive than auto travel. This suggests that high-speed rail is better positioned to serve shorter distance markets where it competes with auto travel than longer distance markets where it substitutes for air.”

California’s High-Speed Rail: Slow, Expensive, and Bound for Cancellation http://www.nationalreview.com/article/444262/california-high-speed-rail-unworkable-money-pit
Chuck DeVore, vice president of national initiatives at the Texas Public Policy Foundation and a former California legislator, argues in this article for National Review California’s high-speed rail program is heading toward cancellation: “California’s high-speed rail was expected to raise a significant amount of private money on its way to operation, but, eight years after being narrowly approved by voters with $10 billion in government bonds sold to start construction, the project is nowhere near completion and has not raised a penny of private money.”

High-Speed Rail Proving Costly in California
https://www.heartland.org/news-opinion/news/high-speed-rail-proving-costly-in-california?source=policybot  
Cheryl Chumley reports in Budget & Tax News about the California high-speed rail proposal approved by voters in 2008, which has strayed so far above original cost estimates and so far under ridership promises that a key transportation analyst called it the greatest scam ever to hit the state.

High-Speed Rail: The Wrong Road for America
https://www.cato.org/publications/policy-analysis/highspeed-rail-wrong-road-america
In this Cato Policy Analysis, Randal O’Toole argues against implementation of high-speed rail: “In short, high-speed rail proposals are high-cost, high-risk megaprojects that promise little or no congestion relief, energy savings, or other environmental benefits. Taxpayers and politicians should be wary of any transportation projects that cannot be paid for out of user fees.”

High-Speed Rail, Budget Buster
http://www.nationalreview.com/articles/258417/high-speed-rail-budget-buster-wendell-cox
Wendell Cox writes in National Review about the massive cost overruns experienced by other countries that have implemented high-speed rail. “Virtually everywhere high-speed rail has been constructed, financial liability has fallen to the taxpayers. In Taiwan and the United Kingdom, taxpayers assumed billions of dollars in private debts for much more modest high-speed-rail systems than Japan’s,” Cox wrote.

The Tampa to Orlando High-Speed Rail Project: Florida Taxpayer Risk Assessment
http://reason.org/files/florida_high_speed_rail_analysis.pdf
In this Reason Foundation Policy Brief, Wendell Cox examines the Tampa to Orlando High-Speed Rail Project. He found the financial risk to Florida taxpayers could ultimately be huge and involve both capital cost overruns and operating subsidies.

Research & Commentary: SunRail Will Produce Few Benefits and Cost Millions
https://www.heartland.org/publications-resources/publications/research--commentary-sunrail-will-produce-few-benefits-and-cost-millions
John Nothdurft, government relations director at The Heartland Institute, discusses the then-proposed Florida SunRail high-speed rail line, arguing it is a poorly planned system that is both unneeded and likely to result in cost overruns. “The availability of federal stimulus funds might make SunRail look like a win-win situation, but that money will eventually dry up, and the system’s operating costs will inevitably exceed revenues. Florida taxpayers will be stuck with the bill,” Nothdurft wrote. 

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR