City Journal Summer 2014

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Summer 2014
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California

Pete Peterson
On Further Review . . .
Experts are taking a second look at California’s rail and climate-change programs. Will Jerry Brown?
13 January 2012

Recent reports on two high-profile California projects—a historic piece of climate-change legislation and the proposed construction of a statewide, high-speed rail line—are weakening Californians’ initial support for these measures. The studies have cast doubt on the viability of these multibillion-dollar undertakings, and public opinion is gradually shifting to more qualified support or even outright opposition. The only group unmoved by the new information is California’s clueless political class.

As the Los Angeles Times reported, the California High-Speed Rail Peer Review Group—a state-mandated independent review board—urged state officials to delay issuing more than $2 billion in voter-approved bonds to fund the first phase of construction of a bullet train in the state’s Central Valley. The panel concluded in its January 3 report that the California High Speed Rail Authority’s latest business plan, released in November, “is not feasible,” represented “an immense financial risk,” and required substantial revision. The HSRA plan contained a bevy of bad news and radically altered expectations. Not only did the HSRA push back the project’s completion date 13 years, to 2033; rail officials also more than doubled their estimate of the costs of construction to $98.5 billion. The HSRA claimed that the extended timeline accounted for the enormous cost increase and noted that the inflation rate increased to 3 percent from 2 percent annually. Such backtracking is typical, though, according to Oxford University infrastructure expert Bent Flyvberg, author of Megaprojects and Risk. Studying over a dozen European high-speed rail projects, Flyvberg found that none were built at the promised cost, while overruns typically ranged from 40 to 75 percent.

When Californians went to the polls in 2008 to vote overwhelmingly for President Obama, they also passed Proposition 1A—the “Safe, Reliable High Speed Passenger Train Bond Act for the 21st Century.” Proponents argued that Prop. 1A, which enjoyed backing from several major unions and construction firms, would create jobs while saving the environment. Supporters saw the $9.95 billion in bonds as a down payment on the promised cost of $40 billion. The remainder of the funds, they believed, would come from federal grants and private investment. And in return, Californians would glide along at speeds in excess of 200 miles per hour from Anaheim to San Francisco by 2020. Now all those projections have gone out the window.

Despite those sobering revelations, high-speed rail’s boosters—including Governor Jerry Brown—maintain a seeming blind faith in the project. “Brown’s office signaled that the governor isn’t likely to be swayed by the [peer review] panel’s findings,” the Times reported. “It does not appear to add any arguments that are new or compelling enough to suggest a change in course,” said Gil Duran, Brown’s press secretary. In a matter-of-fact editorial commenting on the HSRA’s November business plan, the Times recalled its original endorsement of Prop. 1A, in which the paper predicted that if voters approved the bond measure, “it seems close to a lead-pipe cinch that the California High Speed Rail Authority will ask for many billions more in the coming decades.” But “many billions” is a far cry from double the original price tag in a mere three years. In fact, most Californians disagree with the Times’s sanguine view. In a mid-November Field Poll, 59 percent of voters said that they would vote against Proposition 1A if it appeared on the ballot today, compared with 31 percent who would still support it. That almost two-thirds of those surveyed would like to revisit the issue has some legislators, including Northern California Republican state senator Doug LaMalfa, working to get a new referendum on the ballot.

Californians had a chance in 2010 to undo—or at least delay—another law, the scope of which is only now becoming a reality: California’s historic AB 32, the “California Global Warming Solutions Act,” passed in 2006. AB 32’s supporters downplayed the economic and social tradeoffs of the law, which goes into effect this year. Belatedly, the media are taking notice of the enormous costs Californians will pay to reach the mandated goal of slashing carbon emissions to 1990 levels by 2020. A page-one investigation by the San Francisco Chronicle revealed that as utilities move to renewable energy sources in the next few years, electricity rates could increase by 15 percent or more. Hard numbers are difficult to come by as new plants—from wind to solar to geothermal—come online (and go bankrupt virtually at the same time). As the result of a mandate to buy one-third of their power from renewable sources, utilities are making decisions based on expediency rather than price. The Chronicle notes that though the state Public Utilities Commission staff had advised decision-makers against buying expensive power from a planned solar plant in the Mojave Desert, “the commission approved the agreement anyway, saying the plant, which had won a $1.2 billion federal loan guarantee, is almost certain to get built and is therefore less speculative than some other projects offering cheaper power prices.” Solyndra, anyone?

Beyond the 2020 targets, California is supposed to reduce greenhouse-gas emissions another 80 percent by 2050. UC Berkeley biogeochemist Margaret Torn used detailed models of power grids to extrapolate the necessary infrastructure changes California would need to make. Her findings, published in the November issue of Science, describe a Golden State few residents would have envisioned when then-governor Arnold Schwarzenegger signed AB 32 in 2006. “We don’t have to assume a miracle,” Torn says, concluding that by then every Californian will be driving an electric car, which would be recharged in homes powered almost exclusively by nuclear power plants. The state merely needs to build 1.5 nuclear plants every year between now and 2050—presumably after the state legislature repeals the law barring such construction. Given the makeup of California’s legislature, that would require an act of divine intervention.

Voters declined the opportunity to postpone AB 32 when they rejected Proposition 23, which would have delayed implementing AB 32’s mandates until statewide unemployment fell below 5.5 percent for a full year. (That was the unemployment rate California enjoyed when Schwarzenegger signed the law.)

In the face of mounting evidence against two of the most sweeping policy initiatives in recent California history, the state’s political class remains steadfast. Another challenge to AB 32 seems remote for the time being. But given the sluggish economy and yet more evidence of the law’s mounting costs—and now, the crippling cost projections for Prop. 1A—Californians may yet decide, like football referees, that “on further review,” they’d like to change their call.

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