What Do Project Price Hikes Say About How Federal Infrastructure Dollars Will Be Spent?

What Do Project Price Hikes Say About How Federal Infrastructure Dollars Will Be Spent?

The price tags for two major California transportation infrastructure projects are going up again.

A few weeks back, the California High-Speed Rail Authority released its updated business plan, projecting that costs have gone up another $5 billion.  It will now cost $105 billion to finish construction of the rail project between San Francisco and Los Angeles.

According to the Associated Press, the project cost increases “are partly due to commitments aimed at minimizing community disruption.”

Assembly Republicans argue the cost is even higher, noting in a letter to the High-Speed Rail Authority that the “cost estimates assume an inflation rate of 2.25%, not the current 7.5%.”

As PRI’s Kerry Jackson has documented over the years, expect project costs to continue to go up.

“California’s high-speed rail is a perfect example of modern-day government projects, which are dragged down by waste; fraud; political agendas that choose winners and losers . . . top-down planning . . . and blind determination to raise monuments when there’s no need to build them,” he recently wrote.

Not to be outdone, the Federal Transit Administration last week released what the San Jose Mercury News termed “a scathing 145-page report” on the BART San Jose extension project.  According to their report, the project cost “could rise to $9.1 billion – $4.4 billion over the (Valley Transit Authority’s) initial cost estimate and $2.2 billion over the agency’s most recent projection.

Despite the report, the FTA is committed to providing $2.3 billion in federal funds to finish the BART expansion project, yet local transit officials may have to go to voters again to ask for a tax increase to get the funds to finish project construction.

These two latest examples of massive cost overruns for state transportation infrastructure projects beg the question – is California capable of getting our biggest bang for our buck when spending limited infrastructure dollars?

Unless we reform things, the answer is probably not.

The question takes on more significance when you consider the tens of billions slated to come to California from Washington under the federal Bipartisan Infrastructure Law.

As PRI noted last summer, California will receive at least $39.4 billion under the federal Bipartisan Infrastructure Law, including more than $25 billion for highway project, $4.2 billion for bridges, and more than $9.4 billion for public transit projects.

But as Reason’s Adrian Moore notes in PRI’s Saving California book, “the money is there; it is being used poorly.  Fix that, and the state’s infrastructure will improve.”

Among the reforms that Moore recommends are prioritizing state projects based on their impact and benefits.

“Pet projects, flavors of the day, political imperatives all trump actual benefit for users when it comes to allocating resources,” he writes.  Case in point is the high-speed rail project that should have been scrapped long ago given its massive cost overruns and lack of demand.

Instead of spending more money on the status quo, Moore argues that “the Legislature should determine the budget for various infrastructure categories and set policy goals that make clear what criteria agencies should use when determining which projects to do.”

By embracing a performance-based infrastructure capital budget, he writes, we can “allocate the available budget . . . (to projects that would realize) the largest net gain of positive and negative impacts.”

Even though Congress has approved the money, it will still take some time before shovels start to turn on federally-funded transportation projects from the Bipartisan Infrastructure Law.  State policymakers still have an opportunity to enact reforms to ensure every dollar is spent to its fullest –to ease traffic gridlock, modernize current transit systems, and also create jobs and boost local economies.

Let’s hope maximizing our investment in California’s transportation future drives the day in Sacramento, rather than the traditional politician view of big check presentations and ribbon cuttings promoting politically-driven projects.

Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.

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