Management professor says high-speed rail not smart investment

Nov. 4, 2010, 3:04 a.m.

California’s proposed high-speed rail system would likely cost taxpayers money even in the long term, according to Stanford management professor Alain Enthoven.

His Oct. 12 report entitled “The Financial Risks of California’s Proposed High-Speed Rail Project”–co-authored by William Grindley, a former World Bank analyst, and William Warren, a Silicon Valley finance consultant–concludes “that there is little if any chance the system will pay for itself.”

The proposed California high-speed rail, which would run 800 miles from Los Angeles to downtown San Francisco, has an estimated cost of $43 billion. The state has thus far received more than $3 billion in federal aid for the project, and state voters approved more than $9 billion in funds with Prop 1A, passed in 2008.

Enthoven, however, says the project has been “sold to the voters on false premises” and points to widespread diminished returns on high-speed transit systems.

“The whole history of high-speed rail projects is one of financial failure and big cost overruns,” Enthoven said.

The report, independently financed by the three primary authors and published online by the Community Coalition on High-Speed Rail, cites research by the Congressional Research Service that counts every high-speed rail system as a money loser, with two exceptions: a Paris-to-Lyon line in France and an Osaka-to-Tokyo line in Japan. These systems break even, says Enthoven, in large part because of their cultural context.

“These are large metro areas with good public transportation,” Enthoven said. “These are cultures in which people don’t own their own cars.”

Enthoven dismisses the California High Speed Rail Authority’s (CHSRA) proposed ridership figure of 39 million by 2030 as “pure fantasy.” For comparison, he points to the Northeast Corridor’s Acela train, which runs from Boston to Washington, D.C. and served only 3 million passengers in 2009. Enthoven predicts ridership for the California system would be “one tenth to one twentieth” of the CHSRA figures, in large part because the high-speed rail will not serve a primarily metropolitan area.

“I think congestion relief and air quality are legitimate reasons to expand in metropolitan areas,” Enthoven said. “But I-5 is completely empty. It’s not the place to put resources if you want to improve congestion.”

Enthoven further questions the environmental implications of the project, pointing out that the construction alone will damage property and release large amounts of carbon into the air. Rather than building an entire high-speed rail system, Enthoven believes California legislators should direct funds toward the expansion of current public transportation in the state’s large cities.

“We ought to use that money to subsidize public transportation within metro areas,” Enthoven said. “[We should] put resources into improving Caltrain and [funding] buses to help people get to Caltrain. We ought to continue to expand BART, improve parking at stations, add another airport or two.”

The CHSRA could not be reached for comment. Robert Cruickshank, chairman of the advocacy group Californians for High Speed Rail, said Enthoven may have a personal stake in the proposed plan.

“He says quite openly he is a homeowner near the tracks and he’s worried about his property value, so I think that needs to be kept in mind when assessing that report,” Cruickshank said in an Oct. 30 Peninsula Press article.

Enthoven responds that he is, in fact, adverse to the idea of the high-speed rail near his residence.

“I’ll admit, I don’t want it in my backyard,” he said. “I don’t want it in Stanford’s front yard, either.”

The project is even less tolerable, he says, because of its unlikely returns to the state.

“The high-speed rail will do huge damages to properties in Palo Alto, Mountain View, some of Stanford,” he said. “If you’re going to do all that damage, you better have a powerful economic and social justification.”

Contact Samantha McGirr at [email protected].

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