Japan suggests loan for California high-speed rail

CA Governor rides bullet

Jon Boyd, Sep 16, 10.

On Monday, Japanese Transportation Minister, Sieji Maehara announced that his government is prepared to extend loans to the State of California for its high-speed rail projects, reports Bloomberg News(via California High Speed Rail Blog). However, the Bloomberg article gave differing accounts of the loan. The headline reads, “Japan Offers California Loan for $40 Billion High-Speed Train.” The lede says, “California Governor Arnold Schwarzenegger rode one of Japan’s fastest trains today after the nation’s transport minister offered loans to support the state’s more than $40 billion high-speed rail project.” However, the article also said that Maehara, “declined to comment on the amount of the possible loan.”

Japan is considering the loan in order to promote Japanese companies, according to the Bloomberg article:

Japan earlier this year made it possible for JBIC [state-owned Japan Bank for International Cooperation] to provide financing for US high-speed train lines to help the sales push.

“They have to get money from some place,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion in assets. “Japanese trains are going to cost more, but they’re going to last.”

Schwarzenegger also met with Japan Prime Minister Naoto Kan, Maehara said, without elaborating.

“By exporting Japanese technology we can strengthen ties with another country and help Japanese companies,” Maehara said.

California won $2.3 billion of federal funds to help build the high-speed train network, the biggest award in Obama’s funding program. The state also approved in 2008 a $10 billion bond sale to help pay for the line, which is scheduled to start services in 2020.

China is also competing for California’s high-speed rail business, says Bloomberg:

California expects bids from about 10 trainmakers for the project, and construction may start as early as the first half of 2012, the California High Speed Rail Authority said earlier this year. The railroad would eventually be extended to San Diego.

China’s Ministry of Rail yesterday signed a memorandum of understanding with the Bay Area Council, an advocacy group for businesses in the San Francisco region, to help it find partners in California for a bid on high-speed rail work, John Grubb, the council’s vice president for external affairs, said in an e-mail today. While the agreement isn’t exclusive, China is the only country and potential bidder that has asked, Grubb said.

Robert Cruikshank of California High Speed Rail Blog offers his analysis:

It might seem flattering to be the subject of all this attention. And if China or Japan are willing to help provide the “private” funding needed to finish the construction cost for the SF to Anaheim system, I’m not going to argue.

At the same time, it’s ridiculous that California has to look to Japan and China to fund this HSR project. California voters already put up $10 billion to get HSR under way. But it’s hard to get a majority of Congress to follow suit – even to charter a National Infrastructure Bank, which is similar to the method by which Japan proposes to loan us the money to build HSR. And the long-term HSR funding that we’ll need is tied up in the Transportation Bill, which was to have been reauthorized last year, and may not get reauthorized until 2013.

So because Congress is under the thumb of politicians who refuse to spend public money to create jobs, California HSR loans could be repaid to a bank in Japan or China instead of back into the US Treasury. If that’s what it takes to secure California’s future prosperity and get HSR built, I’ll support it. But it’s an absurd situation that shows the lost opportunities that result from our nation’s lack of an industrial or an infrastructure policy, and our preference to let Wall Street act as pirates, treating our economy as the Spanish Main.

In the 20th century, the state and federal governments paid for the entire cost of building the world’s most extensive superhighway network, the Interstates. Here in the 21st century, when the US is even richer than we were in 1956 when the Interstate Highway Act was passed, it’s just not credible to believe those who say we cannot afford to fund and build a high speed rail system ourselves.

(Photo credit: Gavin Anderson)