The Vegas train is crony capitalism

And now, a story that’s sure to become a holiday classic, “Christmas in Crony Capitalism.”

Granted, it will never be as popular as Frosty the Snowman, but it’s going to be a perennial, you can bet on that.

The Biden administration has just awarded $3 billion of your money to a private company owned by a private equity billionaire to build a privately owned and operated high-speed train between Rancho Cucamonga and Las Vegas.

We’re told this project will be completed by 2027, in time for the 2028 Olympics in Los Angeles. If you view that timeline with skepticism after watching the California High-Speed Rail Authority set your money on fire for the last 15 years to build a viaduct in Fresno, be assured that this effort is different. It’s from a “private” company.

In January 2022, Mick Akers of the Las Vegas Review-Journal interviewed Wes Edens, the billionaire owner of Brightline, the private company now cashing your $3 billion check. Edens told Akers that the Southern California to Las Vegas project was “at the 1-yard line” after 10 to 15 fifteen years of effort. He cited the company’s progress in acquiring the right-of-way on I-15 plus extensions that would connect the train to Metrolink in Los Angeles. At the time, the project’s cost was estimated at $8 billion.

On December 8, President Joe Biden visited Las Vegas to announce the $3 billion grant. Surrounded by signs reading “Union Strong,” Biden declared, “It means jobs—union jobs. Jobs, jobs, jobs … Thirty-five thousand jobs during the construction phase; ten thousand union jobs in the building trades—carpenters, electricians, ironworkers, laborers, and more. Jobs, and jobs beyond. In fact, once we complete this train line, it’s going to be operated by union workers. That means a thousand new jobs for track and signal workers, on-board workers, shop craft workers, everyone.”

The project’s cost is now estimated at $12 billion.

Along with the $3 billion federal grant, the governments of Nevada and California previously helped Brightline out by authorizing private activity bonds. These benefit a private company but are tax-free to investors, so the states give up the revenue they’d collect on the interest income if the company sold ordinary bonds instead.

In addition to signing the various project labor agreements touted by the president, Brightline says it plans to power its all-electric trains with energy sourced from solar farms in the desert between L.A. and Las Vegas. Edens said it will be “the ‘greenest’ bullet train in the world.”

What this means is that the company will be paying extra-high costs for construction, electricity and operations. It’s the price of accepting public funds. Politicians start telling you how to run your “private” business.

Don’t be surprised if Brightline West is forced to build its first segment between Reno and Fresno.

Another problem with these “public-private partnerships,” as they’ve been called by people who support this kind of thing, is that the profits are private and the losses are public. If the train to Las Vegas is a success, Brightline West will do very well. If the train loses money, guess who will be ponying up the cash to keep all those union workers employed?

The money will come with strings, of course. Your elected officials don’t just hand billions of dollars to private companies without getting something in return. It’s likely to be yet another requirement that weighs on the profitability of the business. It could be a demand for a new station in an underserved area where local workers need construction jobs or small businesses need contracts. It could be an overpriced power purchase agreement to bail out a failing green-energy company. It might even be cash in an envelope handed over in a Las Vegas bathroom, a time-tested way to connect to downtown L.A.

Governments make political decisions, not business decisions. Businesses that get into bed with the government also make political decisions. Politicians gain fiercely loyal supporters, and taxpayers get shafted.

This much-celebrated high-speed train from Southern California to Las Vegas is not a private project at all. It’s crony capitalism.

Brightline founder and CEO Wes Edens called it “a remarkable project that will serve as the blueprint for how we can repeat this model throughout the country.”

Let’s hope not.

In California, the large public transit systems in San Francisco and Los Angeles, BART and Metro, are in financial death spirals. Ridership and fares are too low to keep things operating, so expect a lot of polling aimed at finding a way to trick voters into approving huge new tax increases. One trick is already set for the November 2024 ballot. Assembly Constitutional Amendment 1 (proposition number to be determined) would lower the vote threshold needed to pass new taxes to bail out transit systems, among other things. Instead of needing a two-thirds vote as they do now, the tax increases would pass with just 55% voter approval.

ACA 1 is a constitutional amendment that changes Proposition 13, and it needs just a simple majority to pass. If it does, you’ll see new local taxes for “infrastructure” and “affordable housing” on every ballot for the rest of time. Some of those taxes will be sales tax increases. Some will be parcel taxes, paid by property owners. Some will be bond measures, also billed to property owners. They’ll all need just 55% of the vote instead of the current two-thirds vote required by Prop. 13 to raise your taxes for these purposes.

Brightline West describes itself on its website as a “private provider” of passenger rail service, but it’s turning into the same old thing: a sinkhole for tax dollars and a pot of gold for government-favored special interest groups.

Taxpayers are already losing their shirts on this trip to Las Vegas. And we didn’t even get a free buffet.

Write Susan@SusanShelley.com and follow her on Twitter @Susan_Shelley