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Is California’s high-speed rail doomed?

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When we last checked in with California’s high-speed rail project, the costs were slowly creeping up, but analysts were still holding out hope that the project could prove viable. Those hopes got cloudier this week after the rail authority released its newest business plan, pegging the cost of the system at $98 billion. A good chunk of that is due to inflation, but even adjusting for that, the project’s now estimated to cost twice as much as the original $33 billion estimate that was sold to voters in 2008.

What gives? Alon Levy has a nice breakdown of the cost overruns. Interestingly, the system’s initial segment, between Fresno and Bakersfield, is still under budget, suggesting that the engineers can figure out how to control costs when they have to. Part of the increase in costs for other segments can be chalked up to delays as the state scrapes together funding — as Levy notes, it’s proving “expensive for an agency to have no money and drag construction over decades, in many segments.” But much of the increase comes from the addition of extra viaducts and tunnels that are often being demanded by local communities and aren’t always strictly necessary.

Is it possible that the pricetag could sink back down? In theory, yes, writes Levy, especially if the federal government were to kick in more money and demand more accountability. “But optimistic and certain are not the same, and it’s an outrage that such a project could cost $65 billion,” Levy adds. “The tunnel-heavy Shin-Aomori extension of the Tohoku Shinkansen [in Japan] cost $4.6 billion for 82 km, a little more than half the proposed per-km cost of the new business plan — and Japan is a high-construction cost country.”

As Matt Steinglass has detailed, cost overruns are an enduring feature of huge infrastructure projects, but even by those standards, California’s rail project seems to be struggling. When I was reporting this earlier story on the project, several critics blamed the proliferation of private contractors and the fact that the rail authority in charge was relatively inexperienced, compared with operators in Europe. As Levy’s Japan example suggests, high-speed rail is usually pricey, but it doesn’t have to be this pricey. (Levy also adds skepticism that the rail system will ultimately be “profitable,” as many news sources have hinted.)

For a more optimistic take, however, see Yonah Freemark, who argues that California’s high-speed rail pricetag isn’t all that unreasonable when placed in context. The United States, as a whole, invested nearly 3 percent of its GDP on public infrastructure between the 1950s and the 1990s. California’s rail project, by contrast, will cost less than 0.2 percent of California’s (stagnant) economy over the next 20 years. And, all told, California is projected to spend about $300 billion on highway infrastructure over the next 20 years.

So California’s voters and politicians will have to decide if that investment is worth it. A big question to consider, after all, is what that money would be spent on instead. The rail authority is arguing that, if the high-speed rail system isn’t built, the state will need to spend an additional $170 billion on new freeways and airport construction to accommodate the travelers who would’ve gone by train. So even if the plug got pulled, California would face plenty of difficult infrastructure choices in the years ahead.

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