Economic Opportunity

California’s High-Speed Rail Goes Off Track

June 30, 2016

Virginia Postrel, in Bloomberg View, writes that a major high-speed rail project between Los Angeles and San Francisco is far behind schedule and dramatically over budget.

Postrel notes that the project’s original estimated cost has ballooned from $33 billion to $68 billion, and government leaders created unrealistic expectations about the rail’s cost and benefits to gain public support. As she writes:

“the high-speed rail project is a classic example of how concentrated benefits and diffused costs shape public policy, even when the general public has a direct say.”

Estimated ticket prices have also increased 60 percent, and the state’s subsidy from the cap-and-trade auction has not delivered projected revenues needed to fully fund the project.

As Postrel reports, “When the Spanish construction company Ferrovial submitted its winning bid for a 22-mile segment, the proposal included a clear and inconvenient warning: ‘More than likely, the California high speed rail will require large government subsidies for years to come.’”

However, Postrel further notes that the Los Angeles Times discovered that the same subsidy warnings were absent from public postings of the bid.