Some fear high-speed rail won’t live up to potential
There’s concern that local, state or federal subsidies would be needed as projected ticket prices between L.A. and San Francisco have almost doubled. And building costs for the first phase have grown. Despite a new $2.25-billion infusion of federal economic stimulus funding, there are intensifying concerns — even among some high-speed rail supporters — that California’s proposed bullet train may not deliver on the financial and ridership promises made to win voter backing in 2008.
Estimates of ticket prices between Los Angeles and San Francisco have nearly doubled in the project’s latest business plan, pushing ridership projections down sharply and prompting new skepticism about data underpinning the entire project.
“This just smells funny,” said state Sen. Alan Lowenthal (D-Long Beach), a supporter of high-speed rail and chairman of the Senate Transportation and Housing Committee.
New inflation-adjusted construction figures show that outlays needed to build the first 520-mile phase of the system have climbed more than 25%, from $33.6 billion to $42.6 billion.
And some government watchdogs are concerned that a linchpin commitment to taxpayers in the bullet train’s financing measure — that no local, state or federal subsidies would be required to keep the trains operating — may be giving way.
High-speed rail planners recently advised state lawmakers that attracting billions in crucial private financing will probably require government backing of future cash flow. “Without some form of revenue guarantee from the public sector, it is unlikely that private investment will occur at [the planned] level until demand for California high-speed rail is proven,” project planners wrote in December.
That is feeding fears that a larger state commitment, beyond the $9 billion in construction bonds approved by voters, could be sought to complete the 800-mile project. “To now put in that we have to [give] some kind of revenue guarantee . . . is totally unacceptable,” Lowenthal said. “That’s not what we agreed to.”
Financial risks and planning adjustments are inevitable in such a massive project, say officials with the California High-Speed Rail Authority. They insist that significant progress is being made, that there is cause for optimism and that they are keeping their commitments to voters. Opportunities for capturing more federal dollars are greater than ever, they say, because President Obama supports high-speed rail.
“The project is moving forward, very much,” said Mehdi Morshed, the agency’s executive director.
Gov. Arnold Schwarzenegger and a coalition of business, labor and political leaders argue that the project is ahead of others in the United States and will provide enormous benefits in job creation, congestion relief and environmental improvements.
Tying San Diego, Los Angeles, Sacramento and San Francisco together with European-style 200-mph trains has been a long-stalled dream for many. The prospect that construction could actually begin has intensified scrutiny of financial, ridership and route issues.
“I think the numbers should be scrubbed,” said authority board member Richard Katz, adding that doing so could help the project.
Jeff Barker, the agency’s deputy director, said the latest business plan fueled confusion about a revenue guarantee.
“We didn’t do a good job of explaining that,” he said. The system is being designed to operate without a taxpayer subsidy, and that will be clarified in a new, as-yet unavailable report, he said.
But Morshed, who is stepping down next month, reiterated that some guarantee, probably from the federal government, may be needed to ensure that cash flow can repay front-end construction investments by private parties. That is not uncommon in federally backed projects, he said, and would not violate the state’s ban on taxpayer operating subsidies.
Current plans call for up to $12 billion from private-sector investors, about $18 billion from the federal government and up to $5 billion from local agencies. New forecasts show an operating surplus topping $1 billion a few years after service begins.
But some analysts point out that almost all U.S. rail systems — and a number of foreign operations — have required large government loans or cash infusions to keep running.
Under the new scenario, one-way fares between L.A. and San Francisco rise from $55 to $105, closer to the cost of an airline ticket. The change shows healthier surplus revenue, which may appeal to private investors. But estimated ridership falls by about one-third, to about 40 million annual boarders in 2030.
Some transit advocates say predictions of private participation aren’t realistic. “A lot of it’s still magical thinking,” said Bart Reed, executive director of the Transit Coalition.
Fare, ridership and financing projections should be viewed as fluid and subject to revision based on changing conditions and assumptions, high-speed rail officials say. But revised ridership estimates have heightened suspicions about the projections’ reliability. Some smaller cities, like Gilroy, Merced and Bakersfield, show numbers of nonlocal trips equal to or greater than Los Angeles. “We’ve never understood their models,” said Lowenthal, whose panel is delving deeper into the projections.
A recent federal Government Accountability Office study found that rail cost and patronage projections around the world, including on some high-speed lines, tended to be overly optimistic, making it difficult to gauge the financial viability of projects. Limited federal money may be available for several competing projects, the report adds.
Such warnings underscore what some see as the mixed blessing of the recent windfall of federal dollars. To help create jobs, California is supposed to break ground in two years.
The goal is to start Los Angeles, Bay Area and Central Valley segments about the same time. But the backhoes would be digging before officials know how much future federal and private funding will be available to connect the system, officials say.
Conflicts are brewing in Southern California as planners step up efforts to squeeze trenches, viaducts and extra tracks into a crowded rail corridor cutting across the region. Problems remain over how the bullet train will pass through Los Angeles’ Union Station transportation complex. Existing buildings, freeways, rail lines and overpasses around the station make it an extremely tight fit.
In Buena Park, city officials recently learned that part of a new award-winning transit-oriented residential project tied into the city’s 3-year-old Metrolink station may have to be ripped out.
A high-speed rail representative told local officials, “We either take the condominiums or we take your station,” recalled Councilman Art Brown, who has generally supported the bullet train. Planners are reexamining the issue, but it remains unresolved.
Katz, who also serves as a Los Angeles County transit official, wants a review to ensure that the L.A.-to-Anaheim leg, which has nearly doubled in cost, is based on actual demand and is efficiently designed to avoid duplication with existing rail services. “I think there are a number of legitimate questions that need to be raised,” he said.
Communication with cities is being improved, said Barker, the rail agency’s deputy director. “We’re playing catch-up,” he said. Overall, his quasi-independent agency, with a small staff and mostly contract planners, has produced results, he said.
But lawmakers are likely to overhaul the high-speed rail agency and move it more directly into state government, Lowenthal said. “It’s not going to be out there on its own,” he said.