Shh! Obama Administration Puts Brakes On XpressWest High-Speed Rail Project

Posted on Fri 07/12/2013 by

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Goff_Emily.ashxBy Emily Goff ~

High Speed Rail Authority/ZUMApress/Newscom

High Speed Rail Authority/ZUMApress/Newscom

Let’s call it former Transportation Secretary Ray H. LaHood’s eleventh-hour pardon of federal and California taxpayers.

Once positioned by the Obama Administration as its transportation pièce de résistance, the XpressWest high-speed rail (HSR) line from Victorville, California, to Las Vegas, Nevada, has been derailed.

Today, Senator Jeff Sessions (R–AL) and Representative Paul Ryan (R–WI), the top congressional Republicans on the House and Senate Budget Committees, sent a follow-up letter (full text below) to the Government Accountability Office (GAO) relating information they received from the Department of Transportation (DOT): that the agency sent a letter notifying XpressWest that it is indefinitely suspending consideration of XpressWest’s $5.5 billion loan application. The lawmakers write:

We have been informed that the letter [from the DOT] explains that “serious issues persist” with the XpressWest loan application; that there are “significant uncertainties still surrounding the project”; and that, as a result, [the DOT] has “decided to suspend further consideration” of the XpressWest loan request.

DOT sent the letter to XpressWest on June 28 but has not yet released the letter to Congress or made it public.

Public speculation earlier this year suggested that the Federal Railroad Administration (FRA) would soon release its decision on the XpressWest loan application. The Las Vegas Review-Journal reported in April that Senator Harry Reid (D–NV) “has been the project’s most powerful booster [and] said the [FRA] has agreed to a loan of almost $5 billion.” On May 29, XpressWest urged supporters to watch its Twitter account for updates as it was “eagerly awaiting a federal loan.”

Prior to this speculation, Ryan and Sessions wrote a March 6 letter to the DOT voicing their strong opposition to the loan application:

[W]e are deeply troubled by the prospects of subsidizing another costly, wasteful, and risky high-speed rail project, particularly when our nation is facing a debt crisis that threatens the well-being of the current and future generations of Americans.

At that time, Ryan and Sessions called on the GAO to investigate the XpressWest loan application and the FRA loan program, which the GAO then initiated. Their principal concerns dovetailed with those raised in a taxpayer risk analysis of the project conducted by Wendell Cox for the Reason Foundation:

  1. What would the risk of loss to taxpayers be under such an unprecedentedly large Railroad Rehabilitation and Improvement Financing loan?
  2. Would the nature of the loan preclude the project’s ability to attract private investment?
  3. Were the project’s ridership and revenue projections sound?

As to the third concern, Cox estimated that the train’s actual ridership and revenue would be about two-thirds less than the project supporters projected. Cox wrote on The Foundry in January:

Promoters expect people to drive 50 to 100 miles to get to the station and then get off the freeway, park, and board the train for the final 175 miles to Las Vegas. Nowhere in the world do people drive so far to board a train for such a short trip.

Translation: Default on the loan is likely, which leaves federal taxpayers to pick up the tab.

HSR is one of the more expensive, subsidy-laden, and therefore unviable forms of public transportation. If it were as beneficial and feasible as lawmakers and city planners claimed, the private sector would have embraced it without dependence on costly, taxpayer-funded subsidies from Washington. Congress should abandon any notions of future funding for HSR and pronounce any such proposals from the Administration as dead on arrival.

Ryan-Sessions Letter to GAO (July 11, 2013) – XpressWest

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Emily Goff contributes Posts at the Foundry, and she is a Research Associate, specializing in Economic Policy Studies at  The Heritage Foundation . http://www.heritage.org/

Read more informative articles at Heritage – The Foundry . http://blog.heritage.org/

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