Sometimes, you just need to pull the plug. The only thing worse than a failed infrastructure project is a failed infrastructure project that has already started pouring concrete, a scar on the land without anything to show. Thankfully, amid competing priorities at public agencies, plugs sometimes get pulled before much damage is done. This happened recently with California’s now-truncated high-speed rail project that hoped to connect Los Angeles and the Bay Area, when the Trump administration pulled almost $1 billion in federal funding.
The California project has struggled to get moving for a decade. Initially presented to voters as a $9 billion project in 2008, cost estimates have since inflated to a staggering $77 billion today. As years passed and the price tag crept up, the initial value put before voters became less and less realistic until Gov. Newsom decided that it would never reach either city. He hoped to keep the project going in some form, but those prospects dimmed when the federal government decided it wanted no part in subsidizing fast trains to connect the smaller cities of the Central Valley.
The California project is a case study in mismanagement of an infrastructure megaproject. It’s normal for costs to exceed expectations when building massive structures and miles of track, especially in places at risk of natural disaster or urban areas with expensive and fractured land ownership. And building passenger railways in America has long been more expensive than in other developed nations. But the California project is unique in how far it exceeded proposed costs and how unsuccessful it was at reining them in once overruns were apparent.
The most comparable ongoing megaproject to California’s high-speed rail proposal is the UK’s “High Speed 2” project, which hopes to connect London to Birmingham and the north of England. High Speed 2 currently faces calls for cancellation as its costs rise to prohibitive levels. What was once a £56 billion (about $70 billion) venture is likely to blow its full budget on just half of the initially proposed line. In late March, ministers decided to delay their decision to fund the first half of the line’s major construction until the fall, amid concerns that it would never be economical to complete.
What ties the two projects together is the deep involvement of political managers in decisions about the operations of transportation projects. These managers do not face real consequences for their actions. Rather, they are accountable to political constituencies, legislators and interest groups. With no accountability to anyone with money on the line, the door opens for mismanagement, like California’s over-reliance on consultants and the UK’s massive archaeology bill. Mismanagement was rife on both sides of the pond, to the point that spendthrift groups and politicians like Gov. Newsom soured on their respective projects.
Funding transportation projects with private capital tends to give managers a better reason to watch costs and avoid project management pitfalls. Shareholders and bondholders lose money when it takes years to acquire land on which to build, when construction starts in the wrong place or requires repeated changes to plans, or when plans fail to account for variables that can increase costs.
Without the backstop of investor discipline, these two publicly funded high-speed rail projects have been doomed by flawed management models. It’s sad to see what were once promising transportation projects take the slow train to the grave, but it might be for the best. When the same problems arise with private infrastructure projects, investors lose, but the public can still wind up with an asset to use. Now, taxpayers in Britain and California look like all they’ll be left with is a bill, to be paid off over the coming generation with nothing to show.