Michael Blood, AP | Mar. 25, 2012, 4:14 PM
VICTORVILLE, Calif. (AP) — On a dusty, rock-strewn expanse at the edge of the Mojave Desert, a company linked to Senate Majority Leader Harry Reid wants to build a bullet train that would rocket tourists from the middle of nowhere to the gambling palaces of Las Vegas.
Privately held DesertXpress is on the verge of landing a $4.9 billion loan from the Obama administration to build the 150 mph train, which could be a lifeline for a region devastated by the housing crash or a crap shoot for taxpayers weary of Washington spending.
The vast park-and-ride project hinges on the untested idea that car-loving Californians will drive about 100 miles from the Los Angeles area, pull off busy Interstate 15 and board a train for the final leg to the famous Strip.
Planners imagine that millions of travelers a year will one day flock to a station outside down-on-its-luck Victorville, a small city where shuttered storefronts pock the historic downtown.
An alliance of business and political rainmakers from The Strip to Capitol Hill is backing the project that could become the first high-speed system to break ground under President Barack Obama’s push to modernize the U.S. rail network – and give the Democratic president’s re-election prospects a lift in battleground Nevada.
Transportation Secretary Ray LaHood has publicly blessed the train – it means jobs, he says – and it’s cleared several regulatory hurdles in Washington.
Yet even as the Federal Railroad Administration considers awarding what would be, by far, the largest loan of its type, its own research warns it’s difficult to predict how many people will ride the train, a critical measure of financial survival, an Associated Press review found.
There are other skeptics, as well.
“It’s insanity,” says Thomas Finkbiner of the Intermodal Transportation Institute at the University of Denver. “People won’t drive to a train to go someplace. If you are going to drive, why not drive all the way and leave when you want?”
Construction cost projections have soared to as much as $6.5 billion, not including interest on the loan. Some fear taxpayer subsidies are inevitable.
Reid and other supporters point to research that shows 80,000 new jobs, but FRA documents show virtually all those would be temporary – no more than 722 would be permanent.
Victorville Mayor Ryan McEachron envisions a bustling transportation oasis with a hotel, restaurants, maybe even homes, on the proposed station site. He believes drivers can be enticed out of their cars, even in a region where the notion of rail travel can seem as distant as a New York subway.
The company is “going to have to market and market hard in order to get the ridership they need to support paying back the loan,” the mayor says. “I think you can change the thinking.”
Along with Reid, the president’s most influential Democratic ally in Congress, the plan is being advanced by casino developer and contractor Anthony Marnell II, whose credits include building the Bellagio and Wynn Las Vegas and who heads Marnell Companies, the majority shareholder in DesertXpress; project consultant Sig Rogich, a Republican adviser to two presidential campaigns who founded Nevada’s most influential lobbying and advertising company; and Canadian transportation giant Bombardier, a DesertXpress strategic adviser that wants to supply its rail cars.
A decision on the loan is not expected until mid-year, but the company has spent some $30 million sharpening its plan and refining ridership projections. Rising gas prices and increasing traffic congestion could help ticket sales, and the company is touting reduced air pollution from fewer cars on the road.
“It’s Victorville that makes the project work,” says chief executive Andrew Mack.
Far from being a train from nowhere, company planners see the struggling city of 115,000, once a stop on storied Route 66, as a collection point for millions of drivers heading north to Las Vegas. Bringing the line deeper into the populous Los Angeles area would raise formidable challenges, Mack said, from crossing numerous freeways to finding space for track.
The lot now stippled with spindly creosote bushes has room for 15,000 parking spaces. Bags would be checked through to hotel rooms. At peak hours, trains would depart every 20 minutes. Mack says an average round-trip fare could be as low as $75, though documents estimate $100.
Mack says the train will deliver convenience – and for a price, luxury – that studies show passengers want.
DesertXpress officials once boasted they would build the line with private dollars, but they now plan to rely on FRA financing to cover the bulk of the cost. Mack didn’t directly answer if the company turned to the FRA because private investors were unwilling to take the risk, but said the loan terms are attractive.
“When somebody comes and tells me I will build a system that pays for itself, I’m suspicious,” said Hasan Ikhrata, executive director of the Southern California Association of Governments, which questioned ridership potential in a report last year. “There is no high-speed rail system in the world that operates without subsidies.”
The company is still arranging as much as $1.6 billion needed to cover its share of the construction bill for the roughly 200-mile line. Investments could hinge on the loan approval, which requires the company to convince the FRA that taxpayers won’t get stiffed. In a worst-case scenario, the train would become government property if the company fails.
The low-interest loan would be about three times the combined amount the FRA loaned 32 other projects through the Railroad Rehabilitation & Improvement Financing program since its inception in 2002.
If successful, the train could be a forerunner in a national high-speed rail network, while bringing a rich return for investors and delivering visitors to Vegas. It would also give Nevada residents an option to Southern California, albeit many miles from tourist hotspots like Hollywood or the beaches.
The company is seeking funds at a time when a proposed high-speed train running from San Francisco to Southern California has been questioned because of ballooning costs and fear it will sap taxpayer dollars.
Early company research projected the train would lure away nearly one in four car, bus and airline travelers, initially about 4 million people annually. The company now pegs first-year ridership at about 3 million, but that projection was trimmed to 2.5 million by government analysts who urged more study.
The risks are summarized in a 2007 study commissioned by ACS Infrastructure North America, a division of a global construction company that DesertXpress says is seeking a role in the project, that found most travelers were “broadly happy” going to Las Vegas by car or airline. While most travelers would be open to riding a train, the report warned the company would need to lure riders with pampering.
On clear roads, the 270-mile drive from downtown Los Angeles to Las Vegas takes about four hours. Planners say the train ride from Victorville to Las Vegas would take about 80 minutes, but it’s debatable how much time would be saved after parking, boarding the train and reaching a Las Vegas hotel.
Round-trip flights from Los Angeles to Las Vegas can be booked for under $100.
The dream of uniting Southern California and Las Vegas by high-speed rail has been discussed for decades. In the mid-1980s, Las Vegas officials predicted a line would be running by 2000. DesertXpress, which would roughly parallel Interstate-15 on a pair of new tracks, has predicted for several years that it would soon break ground.
Reid initially backed a rival project that planned to use magnetic power to reach Orange County, but he jumped trains shortly after Rogich became co-chair of Republicans for Reid, a Nevada group with ties to the gambling industry that helped Reid win re-election in 2010.
The senator’s office disputes any connection between his flip and Rogich’s involvement in the campaign. Spokeswoman Kristen Orthman says Reid’s decision was based on the viability of DesertXpress, while the magnetically powered project languished.
Marnell, another member of Republicans for Reid, is president of one of several companies under the DesertXpress corporate banner. He and his son, M Resort, Spa and Casino President Anthony Marnell III, are also investors.
Federal records show the elder Marnell has donated at least $15,000 to political committees connected to Reid since 2010, including a $5,000 donation in May to the senator’s Searchlight Leadership Fund.
According to federal records, the company has spent at least $270,000 since 2006 lobbying at the House, Senate and federal offices.
Other investors include North Dakota businessman Gary Tharaldson, who donated $10,000 to a Reid committee in March, and transportation expert Tom Stone, who organized DesertXpress with partner Mack in 2005.
Nevada records show DesertXpress HRS Corp., headed by the elder Marnell with his son as a director, was authorized to issue 25,000 shares of stock. DesertXpress declined to say who held those shares, if issued, and in what amounts.
Not everyone in the high desert is on board with the project.
Thirty miles northeast of Victorville on I-15, officials in Barstow fear they’ll lose 2,300 jobs. The impact will be “unsustainable,” Mayor Joe Gomez wrote to LaHood in October 2010, according to a letter released under a public records request.
To appease those concerns, McEachron said the station’s proposed location was moved about halfway to Barstow. The patch of vacant land is so remote the city would have to annex it.
U.S. Department of Transportation – Countdown to DesertXpress begins
- Now Obama Wants To Build A $5 Billion Bullet Train From Las Vegas To Nowhere (businessinsider.com)
- Last stop Sin City: Plans for $4.9 billion California bullet train straight into heart of Las Vegas (dailymail.co.uk)
- AP Enterprise: Vegas rail: a gamble or good thing? (sfgate.com)
- Amanda Carpenter destroys Harry Reid’s “Rail Solyndra” – in 140 character chunks (erickbrockway.com)
Infrastructure investment is a state responsibility
By Keith Yost
Last week, President Obama unveiled a $447 billion spending plan. Notice I say “spending plan,” rather than “stimulus plan” or “jobs plan,” because there is a difference. None of the plan’s components, which consist of roughly $250 billion in payroll tax cuts, $60 billion in unemployment insurance, and $140 billion to fund infrastructure (most of it going to a national infrastructure investment bank), can be considered significantly stimulative, and without stimulus, we’re unlikely to see many new jobs.
The plan’s unemployment benefits and tax cuts are largely extensions of existing measures — our economic situation would be much worse if the cuts and benefits were allowed to expire, but these half-measures are not going to push us out of our current, miserable trajectory. And the infrastructure bank promises very little spending in the short term; it’s not an institution tasked with finding shovel-ready, stimulative projects, even if such things existed. This is quite plainly a spending plan in which Obama has tied a pet project that he thinks deserves money (the infrastructure bank) to something that Republicans find fairly unobjectionable.
As a political matter, the future of the plan seems pretty straightforward: Republicans will strip out the infrastructure bits and pass the rest, judging (correctly) that the American public isn’t going to assign blame for the whole economy to the GOP just because they blocked one of Obama’s minor economic proposals. The president probably even prefers it this way because an actual infrastructure bank wouldn’t do much in the short term to help Obama keep his job, but the idea of an infrastructure bank could prove useful on the campaign trail.
That leaves just one question: who is right here? Is an infrastructure bank an idea whose time has come, or is it a dud?
At first glance, a national campaign to invest in infrastructure isn’t a bad proposition. The returns to investment on infrastructure aren’t very impressive, but with the government able to borrow money at two percent interest, and with labor and materials costs at extreme lows, it doesn’t take a very high return to justify infrastructure spending.
On deeper inspection however, a national infrastructure bank is a fatally flawed idea, for one simple reason: forcing the citizens of Texas to pay for a high speed rail line from San Diego to Sacramento is bad government. It invites corruption, pork barrel politics, and misallocation of our society’s resources.
The citizens of, say, Ohio are and will always be in a better position to decide whether it is worth the money to repair a bridge or school in their state. Offering to let them pay for their projects with someone else’s money is not going to lead to better decision-making— instead, it will lead states to cut their own infrastructure spending and turn their beggars cup to the federal government. It will incentive states to represent their infrastructure as worse than it actually is, and pretend that solutions are cheaper than they actually are. And because it isn’t their money at stake, states will have even less inclination than usual to make sure that the projects are managed correctly. The real key to a state’s economic success won’t be the wise decision-making of its leaders, it will be its ability to lobby the federal government for special treatment and trade favors with the party in power.
Perhaps in a few instances, investment in infrastructure at the national level makes sense. Air traffic control, or an interstate network make sense as matters for the national government to manage. But bridges, schools, high speed rail lines, and the vast majority of the projects Obama touts as within the purview of his national infrastructure campaign are best managed at the state or local level. It’s a conclusion so obvious that the idea of national control raises immediate suspicion. Does Obama plan to use the bank to bestow patronage on his supporters (particularly labor unions)? Or did he really manage to forget that state governments already have the power to levy taxes and make repairs?
Democratic activists are thrilled with Obama’s supposedly new “toughness.” But getting tough is only a good strategy if you’ve got an idea that’s actually worth fighting for. Two weeks from now, every leading Republican is going to have worked out the obvious counter-argument to a national infrastructure bank, and two weeks after that they’re going to have integrated the bank into their stump speeches as yet another example of intellectually bankrupt federal overreach.
- Is Obama’s National Infrastructure Bank the Answer on Jobs? (usnews.com)
- No national infrastructure investment bank (tech.mit.edu)
April 24, 2011
By Ed Lasky
For years, China‘s high-speed rail and green energy programs have been portrayed as miracles that America must follow to remain “in the game.” During the last two years and counting, American taxpayers have been put on the hook for tens of billions of dollars as Barack Obama and Democrats in Congress promote agendas that would supposedly emulate China and lead us to Nirvana. What is the trouble with this picture? It has been one giant mirage.
The Washington Post runs a column by one of their finest journalists, Charles Lane, that honestly portrays the Chinese high-speed train project as being a high-speed boondoggle mired in financial and other problems:
For the past eight years, Liu Zhijun was one of the most influential people in China. As minister of railways, Liu ran China’s $300 billion high-speed rail project. U.S., European and Japanese contractors jostled for a piece of the business while foreign journalists gushed over China’s latest high-tech marvel.
Today, Liu Zhijun is ruined, and his high-speed rail project is in trouble. On Feb. 25, he was fired for “severe violations of discipline” – code for embezzling tens of millions of dollars. Seems his ministry has run up $271 billion in debt – roughly five times the level that bankrupted General Motors. But ticket sales can’t cover debt service that will total $27.7 billion in 2011 alone. Safety concerns also are cropping up.
Faced with a financial and public relations disaster, China put the brakes on Liu’s program. On April 13, the government cut bullet-train speeds 30 mph to improve safety, energy efficiency and affordability. The Railway Ministry’s tangled finances are being audited. Construction plans, too, are being reviewed.
Liu’s legacy, in short, is a system that could drain China’s economic resources for years. So much for the grand project that Thomas Friedman of the New York Times likened to a “moon shot” and that President Obama held up as a model for the United States.
In China, as in the US, high speed rail is expensive. Huge amounts of money have to be laid out for construction, tracts, and equipment, and getting ticket revenue sufficient to cover costs is problematic. Bullet train lines in Japan, China, and Taiwan all needed bailouts. All but one of France’s bullet train lines loses money.
While Barack Obama has been promoting high-speed rail projects for years (perhaps to give Vice-President Joe Biden something to do with his time, since he was scheduled to be put in charge of this effort), the rise of the Republicans and the resultant budget deal with Barack Obama derailed his dream project. Governors (among them was newly elected Rick Scott of Florida) opposed the projects because, while federal seed money would start the projects, state taxpayers would be saddled with all the resultant problems from operating the money drains. The administration, acting in typical fashion, then threatened transportation funding for obstreperous Governors and indicated it would send the federal money to other states more willing to fall in line with the Obama agenda.
China has also been hailed as a role model of green energy development. Again, Americans were told by Barack Obama and his acolytes that we would fall behind the curve of history if we did not plunge rapidly into the green energy movement-the technology for the next century. To further these efforts billions were spent as part of the stimulus program, and billions of additional taxpayer money (via grants, loans, loan guarantees, mandated purchase requirements, etc) flowed to promoters of renewable energy projects.
In reality, many of these “projects” were wasteful green schemes that all too often enriched “friends and family” (and donors) of Democratic powers-that-be (including Barack Obama). At the same time, to further these efforts, the Obama team has been busy trying to choke off the exploration and development of our vast resources of oil, coal, and gas. They have used suspect means to cut Gulf of Mexico oil and gas production, imposed a de facto drilling permit slowdown that has been so Machiavellian that a federal judge was compelled to hold the Obama administration in contempt, slashed the leasing of federal lands for energy exploration, proposed the slashing of subsidies that have promoted the production of energy at relatively little costs, proposed a vast array of regulations (such as the EPA’s assault on American business and energy consumers) that would crimp development of our own domestic — and to a great extent — land based carbon wealth.
There are good reasons George Soros — sugar daddy of the Democratic Party — has been investing in green schemes. He has tilted the playing field in his direction via his leverage over the Democratic Party.
Our own fact-based energy revolution is endangered by Obama and Democrat policies. Vast new fields of readily tapped shale gas have already dramatically brought down the price of natural gas, saving consumers billions of dollars, revitalizing communities that lie above these reserves, creating jobs and revenue for city and state governments across America. These shale gas pockets are massive pockets indeed and are ideally, if not providentially, located near where most Americans live. Additionally, the land footprints of these operations are tiny.
This proximity to end consumers would make transport quite cheap and easy compared to the need to use in-the-middle of nowhere locations of solar and wind farms (that occupy vast swaths of land) to provide negligible amounts of very expensive and unreliable power. The goal, evidently, it to push us into “the green future” (and into the hands of green energy “profiteers”) and trump China’s green energy industry.
But the China model is cracking at the seams, as it is in Spain and other nations that have rushed to embrace green energy. The problem is that it is a dream and not based on facts, as Bjorn Lomborg reminds us in a Washington Post column. He notes that China has been held up by Western elites as the model “green energy”giant:
New York Times columnist Thomas Friedman described China’s “green leap forward” as “the most important thing to happen” at the end of the first decade of the 21st century.
But the facts do not support this “green” success story.
China indeed invests more than any other nation in environmentally friendly energy production: $34 billion in 2009, or twice as much as the United States. Almost all of its investment, however, is spent producing green energy for Western nations that pay heavy subsidies for consumers to use solar panels and wind turbines.
China was responsible for half of the world’s production of solar panels in 2010, but only 1 percent was installed there. Just as China produces everything from trinkets to supertankers, it is exporting green technology — which makes it a giant of manufacturing, not of environmental friendliness. (snip)
A 2008 Citigroup analysis found that about one-third of China’s wind power assets were not in use. Many turbines are not connected to the transmission grid. Chinese power companies built wind turbines that they didn’t use as the cheapest way of satisfying — on paper — government requirements to boost renewable energy capacity….
The vast bulk of Chinese energy (87%) is provided by burning coal. Much of the rest comes from biomass and water power. The widely heralded green program of China is a Big Lie reminiscent of the 5 Year Plans, Great Leaps Forward, and other communist slogans that broadcast the agitprop that communist regimes will leave us in the dust. The only green thing about the Chinese Green Miracle is the number of American dollars enriching that nation at our expense.
Meanwhile, China is embarking on an ambitious program of the one type of green energy that makes sense (despite the Japanese disaster): nuclear power. Once these nuclear power plants are running, China will be blessed with clean and cheap energy. Meanwhile, President Obama may talk about nuclear power but has effectively shut it down by closing down Yucca as our depository for nuclear waste-after billions of dollars have been spent to prepare this isolated location in Nevada to accept and store spent fuel. Senator Harry Reid may be pleased that he was blessed with this “favor”; the rest of America should not be.
There are certainly reasons people like Barack Obama favor big dreamy projects such as high-speed rail and renewable energy programs. Perhaps it is the narcissism that drives so much of the Obama agenda — his desire to “fundamentally transform” America and leave permanent landmarks to his own presidency. There is no space left on Mount Rushmore but plenty of space for rail tracks and solar and wind farms.
Some people throughout the twentieth century been gullible gulpers of the propaganda that communist dictatorships are utopian role models worthy of being emulated (Paul Kengor’s superb book, Dupes: How America’s Adversaries Have Manipulated Progressives for a Century, charts this sorry history). Lincoln Steffens was one of the leading journalists of the first quarter of the twentieth-century and what he said of Soviet Communism after a Potemkin-like tour there has echoes that have persisted into the twenty-first century: “I have been over into the future, and it works.” Well, given the benefit of hindsight, we have seen how well that view reflected reality.
Perhaps, Barack Obama truly believes his mission is a God-like one: to stop the rise of the oceans and heal the planets. He and other cosseted academics with little real-world experience are inclined to adopt the view that elites should be social engineers and be given vast powers to impose their will on the American people.
We have certainly seen this movie before: our health care, the auto industry, the world of finance, the environment, the octopus that his Consumer Protection Agency will likely become. Americans should not be trusted — bitter clingers or not. But elites stride above the common folk and should be endowed with massive powers to control society and determine our future. This seems to be the mindset of Tom Friedman and Barack Obama: one regularly holds up China as a role model and the other wishes he were the leader of China. Many of us may agree with the latter idea.
But their dreams are just that — fantasies concocted by them that bear little relation to reality. If they are successful in promoting their grand ambitions, their dreams will become our nightmares.
Ed Lasky is news editor of American Thinker.
States and regions across the country are working tirelessly to realize President Obama’s vision for American high-speed rail. And on Friday, I had the pleasure of joining Nevada Senator Harry Reid to announce that construction on the DesertXpress corridor between Las Vegas and Southern California will soon get underway.
DesertXpress promises travel times of 85 minutes between Victorville, California, and Las Vegas, Nevada. This cuts the existing drive–three hours under the best conditions and nearly twice as long in traffic–in half. Sitting in congestion for four, five and even six hours along I-15 is especially brutal for travelers paying sky high gas prices.
But high-speed rail means much more than a shorter trip from California to Las Vegas. It means jobs, and it means reinvigorated American manufacturing.
Already, 30 rail companies from around the world have pledged that, if they’re selected for high-speed rail contracts, they will hire American workers and expand their bases of operations in the United States. And the administration’s 100 percent “Buy America” requirement will generate a powerful ripple effect throughout the supply chain.
Just think about the possibility. Factory workers building electric-powered trains. Engineers laying new track. Conductors, operators and ticket-takers helping passengers speed to their destinations. Americans of every trade advancing down the track to a better future.
And those are just the direct ripple-effects. High-speed rail also means economic development. As Nevada Senator Harry Reid said:
“This announcement brings us one small step away from tens of thousands of new jobs not only through the project’s construction, but by boosting our tourism. This line will connect tourists from southern California to our state’s great attractions like the Las Vegas Strip and the Hoover Dam. This announcement is excellent news for our state’s economic recovery.”
DesertXpress will give people a safe, convenient transportation alternative to the notoriously congested I-15. And in a time of enormous economic challenge, it will create quality jobs.
This is the promise high-speed rail offers communities across the country. This is how America wins the future.
- Now Obama Wants To Build A $5 Billion Bullet Train From Las Vegas To Nowhere (businessinsider.com)
- Amanda Carpenter destroys Harry Reid’s “Rail Solyndra” – in 140 character chunks (erickbrockway.com)