Ironically – or perhaps prophetically – the California High Speed Rail Authority's Web site bolsters the economic viability of a proposed statewide bullet train system by quoting an official of Lehman Brothers.
Lehman Brothers was the rail authority's original financing consultant, and the Web site quotes the firm's Barbara Lloyd as saying the California project could "leverage significant private participation."
Lehman Brothers knows a lot about "leverage," having wagered billions of investors' dollars on mortgages – especially those in California – that then blew up, forcing the firm into bankruptcy a year ago and triggering a global financial meltdown.
If nothing else, the fact that the rail authority is still quoting defunct and disgraced Lehman Brothers about financing the bullet train should make us skeptical that the system will materialize during the lifetime of any Californian now breathing, or that it would generate all the economic and social wonderfulness its advocates are claiming.
Such skepticism is especially warranted now that Gov. Arnold Schwarzenegger and other promoters, having persuaded voters to pass a $9.95 billion bond issue that California can ill afford, are asking the Obama administration for half of the federal money set aside for high-speed rail – nearly $5 billion.
Even if the feds come through with that kind of dough, which is highly unlikely, it would be less than half of the federal funds that California needs. It would also fall well short of the $40 billion or more it would take to link San Diego, Los Angeles, San Francisco, Sacramento and points in between with 200-mph trains.
Schwarzenegger et al. are asserting that private investors would put up about half of the total cost. They also contend that the system could operate at a profit without subsidies, based on rosy ridership assumptions.
Then there are the assumed economic benefits that would accrue. Building the system obviously would create some direct design and construction jobs and at least some ongoing jobs for operation. But the rail authority has bootstrapped that direct benefit into upward of a half-million additional jobs that would be created, it's said, simply by the economic activity generated by having a new transportation system in place.
Grandiosely, authority board member Rod Diridon Sr. of San Jose contends that the project "will generate 600,000 construction-related jobs … and another 450,000 transportation-related permanent jobs, providing a long-term stimulus to the California economy."
The claim appears to be way overblown. But even if true, it would represent a tiny portion of California's economy decades hence. There are about 18 million Californians in the work force now. In 2030, when the bullet train is projected to become operational, 450,000 permanent jobs would represent less than 2 percent of needed employment – if, indeed, they ever appear.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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