By Noel T. Braymer
With large, expensive construction projects often comes critics calling these projects “boondoggles”. According to the book “Since Yesterday” by Fredrick Lewis Allen published in 1940 about the 1930’s; the term “boondoggle” came into common use by the critic’s of President Roosevelt’s construction projects during the Great Depression. Many of these “boondoggles” were for improved infrastructure. It is true that most large scale construction projects are very expensive and often go way over budget. The non-military project which cost the most in history and had the highest cost overruns was the railroad tunnel often called the Chunnel built under the Straits of Dover connecting Britain to France and the rest of Europe. Many would think the cost overruns for the Chunnel was typical poor government management. The only problem with that is the Chunnel was privately built and financed. This came at the insistence of then Conservative British Prime Minister Margaret Thatcher who came to power in 1979. Efforts to build the “Chunnel” had been in the works since 1964 and it was 1985 before a joint French/British organization was formed to build the Chunnel. Tunneling for the Chunnel began in 1988 with operations starting in 1994. When the project was finished final costs were 80% over the original estimates with financing costs 140% higher than originally predicted.
So was the Chunnel a failure? It’s still around and in use. It is earning revenues with tolls from the trains using the Chunnel which are paying off its investors with interest. That’s not to say it has been an easy ride. The company which operates the Chunnel is now called Getlink. It was called Eurotunnel and was and still is a French company. The decision to anglicize their name was a response to the recent British vote to leave the European Common Market. The Chunnel has 3 major markets: rail freight, ferry service for trucks and autos as well as high speed passenger trains. Getlink wants to keep and increase their travel market share even after Britain leaves the Common Market. The Chunnel has additional capacity for more rail service including passenger service. Plans are in the works to soon add direct high speed rail passenger service to London from Amsterdam as well as the existing high speed rail services from Paris and Brussels.
So how is the rail service service to London? Between the Chunnel and London is a fairly new High Speed Rail right of way called HS1 for high speed local British trains, high speed trains to and from the Chunnel and freight trains using the Chunnel. The HS1 line is publicly owned with a privately owned company operating the service at a profit. So how profitable is it to operate HS1? Well the original operator was a company owned by the two largest public employee pension funds in Canada. They were looking for a safe investment with a good rate of return to fund the pensions in their care. So how well did this work? Well last year an investment consortium contacted the franchise holder for HS1 and asked them if they could buy out the contract. The company owned by the two Canadian public employee pension funds made a healthy profit selling their rights to operate HS1 and the new owners were happy to get it.
Much is made by the people who love to call rail service construction a Boondoggle about how these projects will bankrupt the County or State that tries to build them. Yet no names are given of any countries in financial trouble because of the cost of building High Speed Rail. If there was one, no doubt they would bring it up. The California High Speed Rail project is roughly budgeted now at $67 Billion dollars. A hard number for the final cost is difficult to give since many of these number’s are for the final cost adjusted for inflation in the future. Boston’s Big Dig’s price tag which was a large tunnel to move underground an existing freeway in downtown Boston went from $2.6 billion originally to almost $15 billion when finished not counting the costs of paying interest for the project. So let’s look at the economies of this country, the State of California and the rest of the world to see how much impact High Speed Rail construction costs have on economies.
California’s Gross Domestic Product (GDP) was recently measured at around 2.4 trillion dollars. That’s greater than the GDP’s of Russia, Brazil and Spain. This puts California roughly in league with the GDP’s of India, France and Britain. If California was a country it would be in the middle of the top 10 richest countries in terms of GDP. The total GDP of the United States which is still number 1 is around 19.4 trillion dollars as of 2017. Looking at roughly 67 billion dollars spread out mostly over the next 10 years gives the cost to the State of California of roughly $6 to 7 billion dollars a year between now and 2028. A trillion dollars is a thousand, billion dollars. In the context of an economy of $2.4 trillion dollars now, this gives some context of what the impact on the State High Speed Rail construction will have on the economy over the next 10 to 11 years. But these rough numbers are on the high side. At least a third of the construction costs for the California High Speed Rail is expected to be paid by private investment. Much of this will be for development around stations and from income paid for by the operator of the High Speed Rail service. The operator must be profitable to pay to operate High Speed Rail service in California.
So what is a good example of a “real Boondoggle”? How about hosting the Olympics. Most cities which host Olympics have costs go out of control and get stuck with debts that takes many years to pay off. It has become so bad that counties are less and less willing to sponsor future Olympics. The city that will have the 2028 Summer Olympics is the City of Los Angeles. This will be the third Olympics the city has held doing so before in 1932 and 1984. Unlike many cities Los Angeles didn’t go broke holding the Olympics in 1932 or 1984, in fact they made a little money at it. Los Angeles has the advantage that it has plenty of sports facilities available which most host cities had to build to get the Olympics. Often after the Games are over these expensive facilities in other cities end up being white elephants built with borrowed money and producing little or no income.
What Los Angeles is planning to spend money on is for transportation for the 2028 Olympics. They have a plan called “28 transportation projects by the 2028 Olympics”. Now most of these projects were already planned to open before 2028. Projects that are being built earlier than originally planned include new express (toll) lanes on some busy freeways as well as an extension of the Green Light Rail Line to Torrance by 2027 not 2030 as originally planned. Also being planned is the extension east of the Light Rail Gold Line past East Los Angeles by 2028 and not 2035. There are also more plans to build the whole “West Santa Ana Branch” Light Rail Line of over 20 miles between downtown Los Angeles and the City of Artesia near the border with Orange County by 2028 instead of by 2041. These 28 projects are part of a longer scale transportation plan for Los Angeles County called 40 projects in 40 years. The amount budgeted for these 40 projects is $52 billion dollars. These include road construction, new rapid bus services as well as rail transit. At least $2 billion is budgeted to enlarge and improve Los Angeles Union Station. Much of the money for this construction is being paid for by voter approved increases of local taxes.
This is not unique to Los Angeles. Voter approved transportation taxes are the norm in most of the most densely populated counties in California. There is a desire by voters for economical, less congested and less polluting transportation. These same voters also voted in favor in most cases for High Speed Rail in California. When looking at the local share for transportation projects, costs can be much higher on a per mile basis than for High Speed Rail. An example of this is the Crenshaw/LAX Light rail line set to open late next year in Los Angeles. At a price of almost $2 billion dollars for 8.5 miles, this costs around $235 million dollars a mile. Assuming the cost of $67 billion dollars for 520 miles of High Speed Rail the cost per miles is around $129 million dollars a mile.
Eurotunnel renamed Getlink in preparation for post-Brexit era
The Guardian-Nov 20, 2017