Straight Talk from Al Jacobs

THE BULLET TRAIN IS RIGHT ON TRACK

The most recent report by the California High-Speed Rail Authority on California’s bullet train is the cost of laying the first 119 miles of track between Madera and Wasco, in the Central Valley, has risen from $6 billion to $10.6 billion. For those of you who no longer remember, the sponsors who, in 2008, proposed construction of a high-speed train to transport passengers from Los Angeles to San Francisco in two hours and forty minutes, estimated the project would cost $40 billion. We’re now over $68 billion … and still counting.

For the very first time, criticism of the endeavor is bipartisan. On 1/30/18, a 14-member legislative committee unanimously authorized a thorough probe to determine whether the rail project currently makes sense, if it ever did and what to do if and when the money runs out. Nonetheless, the bullet train’s chief champion, Governor Jerry Brown, is still its ardent supporter.

My belief is an intense investigation is unnecessary. Since approval of the $9.95 billion in general obligation bonds by California voters on 11/4/08, the program has proceeded exactly as its backers anticipated. Over the past years untold sums of money have been paid to favored parties for planning, design, studies, environmental reports, acquisitions and the myriad of other boondoggles inherent when government funds flow. Despite a onetime report verifying “... billions of dollars short on funding, with no dedicated revenue stream to support it,” government approval never waivered. In addition, earlier testimony before the California Senate Transportation and Housing Committee was ignored which revealed the rail system would cost substantially more than the $68 billion once envisioned and that if completed, it will likely mirror most other rail systems in the U.S. in that its costs will “. . . eat future generations alive.” Despite its dismal performance, its backers never really displayed much concern.

It’s been clear from the beginning California high-speed rail could never be economically feasible, and all of its supporters, from Governor Brown on down, have known this from the onset. Its promotion will not end because of unfavorable legislative hearings, ominous predictions of disaster, or for any other setback it may experience. As long as there are funds in the till to be passed around, the efforts will continue. Only when all the money is gone will the project end.

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

You may view them on http://www.roadwaytoprosperity.com