Chinese Cancel Treasure Island Investment as Brown Seeks High Speed Rail Funds

California’s Governor Jerry Brown and an entourage of public officials and corporate executives has spent much of the last week traveling around China trying to drum up business for the state. One of his principal objectives is to entice Chinese investors to take a stake in the California high-speed rail project. From the Governor’s perspective, this makes all sense in the world.

California’s high-speed rail program may be the current holder of the largest projected funding deficit of any infrastructure in the world, at approximately $50 billion. (That’s after shaving $30 billion off the project and losing the support of former California High Speed Rail Authority Chairman, former state Senator Quentin Kopp, who charges that the line is no longer "genuine high speed rail").

As Governor Brown concludes his trip to the Orient, word comes from The San Francisco Chronicle that "A $1.7 billion deal with China Development Corp., the Chinese national railway and Lennar Corp. to construct 12,500 homes on the former Hunters Point Naval Shipyard in San Francisco and a string of high-rises on Treasure Island has collapsed." The project was to be built over up to three decades and would have housed 20,000 people. The deal is said to have fallen apart over not allowing the Chinese investors sufficient control and "unresolved tax issues."

The now defunct deal may have been the largest serious Chinese investment proposal in California.

There are important lessons for proponents of the high-speed rail system, who sometimes fantasize about China as the bailout investor of last resort. The Chinese, like the other investors who have found better things to do with their money are not likely to be swayed by the line’s excessively high cost or its modest ridership potential. Nor will the Chinese bear gifts to California.

These issues are described in detail in the new Reason Foundation Updated Due Diligence report by Joseph Vranich and me.

Comments

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