Throughout this week, the Washington Examiner’s Restoring America project will feature its latest series, “Reforming the Deep State: Reining in the Federal Bureaucracy.” We invited some of the best policy minds in the conservative movement to speak to the issues of what waste, fraud, abuse, and unaccountability exist throughout the federal government and what still needs to be done. To read more from this series, click here.

Transportation Secretary Sean Duffy announced that the federal government will terminate $4 billion in unspent federal funding for California‘s troubled high-speed rail project. This is welcome news. The project has become a poster child for everything wrong with U.S. infrastructure mega-projects.

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California HSR is now spectacularly over budget and greatly delayed. The original cost estimate in 2008 was $33 billion, but recent estimates suggest an increase of over four times, to $135 billion. Assuming an average airfare of $140, that’s enough money to buy every resident of both San Francisco and Los Angeles 200 round-trip flights.

Despite consistent scale-backs, the project has been characterized by long delays. California originally envisioned a two-phase system that would have run 776 miles. Phase 1 of the project was planned to be about 500 miles, from San Francisco to Los Angeles and Anaheim via California’s Central Valley.

The current scaled-down plan is to run 170 miles from Bakersfield to Merced. That line is not expected to open to the public (or generate revenue) until 2031 at the earliest. Although the Los Angeles-San Francisco connection was promised by 2020, those cities are not even close to being connected. A key 2024 deadline to procure trains was also passed.  

An objective assessment before the project started should have revealed problems. The project’s main route from Los Angeles to San Francisco was too long, given California’s well-developed surface and air travel network. Passenger rail is most viable for distances of about 150 and 400 miles between major population centers. That range is called the passenger rail’s “Goldilocks Zone” because it’s too long for a comfortable drive but too short to make air travel the most efficient option. Much of Amtrak’s Northeast Corridor between Washington, D.C., and Boston, which includes about 51 million people or 17% of the U.S. population, with older, dense urban centers — unlike much of California’s sprawl — fulfills those conditions.

RICHARD NIXON ENABLED THE ADMINISTRATIVE STATE

Although the Bakersfield-Merced route is in the Goldilocks Zone for distance, the combined population of those cities is only about 500,000. Given those cities’ dispersed populations, it is unlikely that there will be sufficient ridership to even cover that line’s operational costs, much less its capital cost.

Considering the high stakes involved, one might wonder how such a massive project could go so wrong. Academic research suggests an answer. Many megaprojects, but particularly passenger rail, suffer from a strong “cheerleading effect.” Research by Oxford professor Bent Flyvbjerg revealed two dimensions to this effect. The first is optimism bias, which is the tendency for project planners to be overly positive about the project’s success. This leads to an underestimation of costs and risks and an overestimation of benefits. 

The second is “strategic misrepresentation,” which involves deliberately distorting information, such as exaggerating benefits or understating costs, to make the project appear more appealing for approval and funding. Data bears this out. Flyvbjerg and his colleagues found that projected ridership on passenger rail projects is significantly inflated, averaging 65% above actual patronage.

An objective assessment would also include how to achieve the same transport goals by better utilizing existing resources. If California were starting a “greenfield” transportation system from scratch, passenger rail might have made sense. However, California’s well-developed highway system suggests that lower-cost alternatives were feasible. Instead of the massive amounts of concrete — a major contributor to carbon emissions — needed to construct high-speed rail, California could have focused on improving high-speed bus service using dedicated lanes on existing roads. Extending bus rapid transit with dedicated, high-speed lanes and adjustable routes could have been done at a fraction of the cost of HSR.

The lack of participation by private investors in California’s HSR was another warning sign. Both Brightline East in Florida (from Miami to Orlando) and Brightline West (from Los Angeles to Las Vegas) were envisioned as privately owned and operated intercity railroads from the start.

In contrast, in what appears to be a last-ditch attempt to keep California’s HSR on life support, California’s High-Speed Rail Authority announced that it will monetize virtually everything to make ends meet, stating that it will “drive creative solutions” to operate the project “more efficiently while commercializing assets – such as trainsets, station facilities, track access, fiber, and real estate – at the earliest viable opportunity. Additional opportunities include transit-oriented development, express cargo and parcels movement, and the leasing of assets to the private sector.”

Selling the kitchen sink in desperation when taxpayer money runs out is a terrible way to partner with the private sector. If this project were a net positive, it could have been structured as a public-private partnership from the beginning. The willingness of private investors to assume project risk is a key market signal of project viability. If private investors refuse to put risk capital into a project, then why should taxpayers be forced to do so?

CLICK HERE TO READ MORE FROM THE ‘REFORMING THE DEEP STATE’ SERIES

California’s HSR project is unlikely to ever generate the promised social benefits and will instead be a drain on California taxpayers for decades, the proverbial “white elephant.” It does, however, teach important lessons for the future of U.S. intercity passenger rail.

Future projects should only be undertaken where the distances and stops fit sensibly into the existing surface and rail transportation system, where project proposals don’t suffer from a “cheerleader effect,” and where the private sector is willing to assume some of the project’s risks. Otherwise, solid public policy suggests achieving the desired goal by more efficiently using America’s existing well-developed transportation network.

R. Richard Geddes is a nonresident senior fellow at the American Enterprise Institute, a professor at Cornell University’s Jeb E. Brooks School of Public Policy, and the Founding Director of the Cornell Program in Infrastructure Policy. He is the author of The Road to Renewal: Private Investment in U.S. Transportation Infrastructure, AEI Press, 2011.