Bullet Train From SF to LA Doesn’t Cost $33.6 Billion Anymore… Try $100 Billion!

Ok, so that headline may sound like Dr Evil from the Austin Powers movies.  How many of you actually read it in the Dr Evil voice?  But even though it wasn’t Dr Evil speaking the headline, it sure feels like he is controlling the budget for high-speed rail project in California.

The high-speed rail project was approved to build a bullet train, very similar to those in Europe and parts of Asia, to connect San Francisco and Los Angeles.  It would cut the traveling time between the two cities from 5-6 hours (by car) down to 2 Hours 40 Minutes.  When it was passed 3 years ago, the estimated cost was $33.6 Billion broken down as follows:

• $15 Billion – Federal Government
• $5 Billion – Local Government
• $10 Billion – Private Investors
• Remainder – California

But in the last 3 years, the California High-Speed Rail authority has had problems raising money from private investors.  Surprise?  Not only has the project had trouble finding investors, the estimated date of completion of 2020 has been pushed back to 2033.  This delay in time has caused the majority of the cost increases and estimated costs are now expected at $100 Billion.  FYI: the entire California state budget is only $86 Billion.

So today state legislators will begin reviewing the project and will eventually decide to begin the project or kill the project.  If California approves the project and begins construction before the deadline for the Federal grant money, the state will obtain over $2 Billion in federal grant money.  But this also means that California would have to spend approximately $4 Billion to begin construction and obtain the federal grant.  The problem here is that $6 Billion can only build tracks that cannot be used by high-speed rail bullet trains.

So why even consider spending the money to build the tracks that cannot be used?  If the state fails to begin construction by the deadline, they risk losing the entire $15 Billion in federal grants.  So is it realistic, or even logical, to start a project to gain $15 Billion in federal grant when you will have to raise another $66 Billion in private money, but can’t even raise $10 Billion?

What are your thoughts?  Leave a comment below.