The short answer to that question is, not a snow-ball's chance in hell. We've discussed this before. Why would any private capital be wasted on this money-losing project?
William makes the case clearly. Inter-city passenger rail Amtrak was created out of the money-losing, willingly relinquished, passenger rail service of all the major freight rail operators. It was the government getting into the inter-city passenger rail business.
They still are in that business, to the tune of over $1 billion per year (of our tax dollars). When was the last time you got on an Amtrak train? How many times each year do you take an inter-cioty train ride?
And that annual $1 billion doesn't include all the other federal funding for Amtrak's upgrades, many of which are being funded now under the convenient veil of "high-speed rail" when they are nothing of the kind. More bait and switch.
Why will making these trains go 150 - 200 mph be any different? They will be far, far more expensive to build and operate. And, they will have to sell far more expensive tickets than any other kind of rail passenger service. Therefore, there will be far fewer, and far more well-to-do passengers riding them.
What does that mean? It means that the Government (our current Administration) is determined to build a hugely expensive high-speed rail system that will continue to cost the Government forever, and take a few rich people and corporate professionals with travel expense accounts for train rides. Why would any private investor in their right minds put even one penny into such quick-sand?
What's missing? Government guarantees for a profitable interest return on investment. And, as we now know, that's not allowed in California. You have to ask, why would our government support private investors with a guarantee, even if they could, for a guaranteed loss of funds operating the project?
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WILL PRIVATE CAPITAL SAVE CALIFORNIA’S HIGH-SPEED TRAIN?
Brief Note #4 – May 25th 2011
From the authors of The Financial Risks Of California’s Proposed High-Speed Rail Project and six Briefing Papers. Available at http://www.cc-hsr.org/
Finding: Private capital will not participate without guarantees.
Background: Because there was no profit to be made, by the close of the 1970s, private sector rail operators had abandoned passenger services for profitable freight services. Amtrak, a supposedly public-private corporation, was founded to fill the passenger rail gap.1 Amtrak’s history has proven the wisdom of the former private passenger carriers; including its unsuccessful 1997-2003 attempt to subsidize passengers with a freight rail business.
Amtrak has consumed over $40Billion in federal operating and capital subsidies since it was created in 1971 – over $1Billion/year.2 Private ‘at-risk’ capital is not interested in investing in passenger rail because there is no profit in it to keep their business a ‘going concern’.
Nor is private capital interested in investing in California’s high-speed rail project without a subsidy or revenue guarantee. The Authority’s Board has known this since June 2008. Five months before Prop 1A their own consultants, the Infrastructure Management Group, told the Board that all the operators and equipment manufacturers, and nine out of ten builders, responding to their Requests for Expressions of Interest (REI) were reluctant to invest unless a large portion of the capital costs were from State and Federal sources: The report says: 3
“Nearly all RFEI respondents noted that they would be
unlikely to commit the resources necessary to participate in a
procurement of this magnitude until after strong financial
backing for the Project was provided by the public sector.”
Conclusions: The project’s capital development and operations costs are
completely dependent on federal or state funding. No ‘at risk’ private money has come or is likely to come to the project without a subsidy or revenue guarantee – forbidden by Section 2704.08 (J) of AB3034.
Any company interested in high-speed rail should be required to sign a statement saying they are willing to take the risks of putting their own resources into the project without a subsidy or revenue guarantee.
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1. Amtrak’s (AMTX) was created by the Rail Passenger Service Act of 1970, and is the National Railroad Passenger
Corporation. The US Government owns all of the preferred stock.
2. A 2004 DOT survey found passenger rail the most subsidized transportation mode. Amtrak subsidies per 1,000
passenger miles were $210; automobiles were $1.79. See: US DOT Bureau of Transportation Statistics, "Federal
Subsidies to Passenger Transportation," December 2004, p. 25
3. See: Report of Responses to the Request for Expressions of Interest For Private Participation in the Development
of A High-Speed Train System in California by the Infrastructure Management Group (IMG) to the California High-
Speed Rail Authority Board Financing Workshop, dated October 2008; page 2 of 17. The presentation was given in
June 2008 “A presentation summarizing the results of the RFEI was made before the Authority Board of Directors on
June 11, 2008 “ but the printed report issued in October 2008.
