It isn’t your imagination: cost estimates for the California High-Speed Rail have varied widely but generally have skyrocketed. The $9.95 billion that California voters authorized to borrow for the High-Speed Rail by selling bonds (through Proposition 1A in November 2008) isn’t going to get the job done, even if the Federal Railroad Administration does end up sending $38 billion to California. (Federal debt as of January 18, 2013 is $16,432,619,424,703.06 – $16.4 trillion.)
And don’t forget that money borrowed through bond sales has to be paid back, with interest and financial transaction fees. For the privilege of selling $9.95 billion in bonds, add another $19.4 billion to $23.2 billion for the cost of debt service, and hope that interest rates remain low and California stays out of bankruptcy.
While some experts blame inflation for the increase in the cost estimates, note that $16.5 billion in 1996 dollars should equal $24.1 billion in 2012 dollars, according to the Consumer Price Index (CPI) Inflation Calculator on the U.S. Bureau of Labor Statistics web site. In addition, the sharp decline in the prosperity of the California construction industry from 2007 to 2012 should have modified the market cost of construction services and labor. (Note that state-mandated wage rates – so-called “prevailing wages” – are determined for construction trades and certain professional services based on multi-year union collective bargaining agreements, and not wage surveys or statistics from the California Economic Development Department that might reflect actual market conditions.)Cost Estimates for California High-Speed Rail 1996-2012 (if a range is given, the higher number is cited)