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Will the $45 billion California bullet train come in under budget?
A review of recent international highway, rail and airport megaprojects doesn’t inspire confidence.
“Megaproject histories show costs were substantially underestimated,” three Bay Area financial experts write in “The Financial Risks of California’s Proposed High-Speed Rail Project,” a work that is being distributed [PDF] by the Community Coalition on High Speed Rail.
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The coalition is among the activist groups that have lined up against California’s proposed, ambitious 800-mile high-speed rail project. It cites cost and environmental concerns.
The experts’ study makes clear that when it comes to big-ticket transportation construction projects, cost estimates are just that – estimates.
In general, U.S. rail projects tend to exceed initial cost estimates by about 60 percent, the experts write, citing U.S. Department of Transportation data.
If that holds true with the bullet train, its final cost would be not $45 billion, but about $72 billion.
But if the bullet train performs as badly as the problem-plagued new San Francisco-Oakland Bay Bridge project, the final price tag would be more than five times present cost estimates – somewhere around $247 billion.
The experts who compiled those numbers are former World Bank executive William Grindley, Stanford University management professor Alain Enthoven and Silicon Valley financier William Warren.
“Hard evidence illustrates how much a high-speed rail system’s estimated costs can go askew,” they write.
For example, the English Channel Tunnel project – aka the Chunnel, the undersea rail link between Britain and continental Europe – ran up an 80 percent cost overrun before it was completed. It was privately financed, they note.
The overruns were almost the same on Germany’s Inter-City Express, a bullet train between Cologne and Frankfurt. It, too, was built with private capital.
Bigger overruns occurred on publicly funded projects in the U.S.
The Bay Bridge, estimated at $1.3 billion, and now at $6.4 billion and counting, is the worst.
But Boston’s Big Dig – a massive airport highway project – tripled in cost, from a $4 billion estimate to a final cost of $14.5 billion. The Big Dig was managed by Parsons Brinckerhoff, the same firm retained to manage the California bullet train. Overruns were almost triple the pre-construction estimate on Denver’s big new exurban international airport – from a $1.7 billion estimate to $5 billion actually spent.
In public statements, the California High-Speed Rail Authority has said it is confident it will find sufficient funds to build the bullet train. Its construction estimates are expressed in “year of expenditure dollars;” present estimates reflect spending in 2009 dollars, the authority says on its website. Proponents insist that rail is the most cost-effective way of providing transportation infrastructure for California’s booming population.
Jeff Barker, a rail authority deputy executive director, acknowledged to California Watch and the Orange County Register recently that putting a price tag on the project isn’t easy.
“If you think in 2035 gas is going to be a dollar a gallon and people are going to be fleeing the state, then we probably shouldn’t be building high-speed rail,” he said.
Russ Peterson, a board member for the the anti-rail coalition, said talking points based on the experts’ study are being readied for lawmakers, who by next year will have to decide whether to break ground on the project.
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