Thursday, June 23, 2011

Introduction to California High-Speed Rail: The Due Diligence Report, by Cox and Vranich

Yesterday we presented an Executive Summary of the 185 page long Reason Foundation Report by Cox and Vranich:  California High-Speed Rail: The Due Diligence Report.

Today we'll reprint the Introduction. As before, we have omitted the graphs which can be found on the web-site for the entire document.

As you read this, I remind you that it was written in 2008, three years ago. While a lot has happened since then; the bond measure passed and the FRA awarded the CHSRA with $3 billion for HSR construction to begin in the Central Valley, and the CHSRA has inflated many of its numbers, (the current cost estimates range from the upper $60s to well into the $100 billion range), the pattern of truth-avoidance continues with the Board and the Staff. 

The Authority has an ambitious plan to link major metropolitan areas with a high-speed rail
system to reduce congestion at airports and on highways. There is a need for a due diligence
examination of these plans.

High-speed rail systems have been operating in Japan since 1964, in France since 1981, and on
some lines elsewhere in Europe and Asia. (See Part 3, International Experience.) Such service has
generated interest in the United States and has been proposed as a strategy to relieve highway and
airport congestion in markets of under 500 miles. This, proponents claim, would reduce the
necessity for highway and air system expansion. Advocates also claim that significant reductions in
greenhouse gas emissions would result as high-speed rail captures a substantial portion of the
intercity travel market from automobiles and airlines. The California High-Speed Rail Authority
(CHSRA or Authority) has been planning such a system to link major population centers, a system
that it states can operate at a profit.

Description of California High-Speed Rail Plan

For travelers, the idea of taking quick train trips between California urban areas can be attractive. It
is time to examine the significant differences between the idea of and the multiple realities of
financing the capital costs for construction, paying for its continued operation, and operating the
HSR system in a commercial and geographical environment that is quite unlike circumstances
found overseas.

The CHSRA described its planned system as follows in March of this year:
The HST [high-speed train] will provide for state-of-the-art, statewide, high performance
passenger rail service comprising over 800 route miles for the full system. The Authority has
proposed high-speed train service between the major metropolitan centers of the San
Francisco Bay Area, Sacramento in the north, through the Central Valley, to Los Angeles,
Orange County, the Inland Empire and San Diego in the south. The proposed HRS system is
projected to carry between 93 million and 117 million passengers annually by the year 2030.1

Legislative Requirements

State legislation maintains “that a high-speed passenger train network as described in the High-
Speed Rail Authority’s Business Plan is essential for the transportation needs of the growing
population and economic activity of this state.”2

Senate Bill 1856, enacted in the 2002 session of the legislature places significant routing and
performance requirements on the HSR system, including “maximum nonstop service travel times”
for the following corridors:3

􀂃 San Francisco–Los Angeles Union Station: 2 hours, 42 minutes.
􀂃 Oakland–Los Angeles Union Station: 2 hours, 42 minutes.
􀂃 San Francisco–San Jose: 31 minutes.
􀂃 San Jose–Los Angeles: 2 hours, 14 minutes.
􀂃 San Diego–Los Angeles: 1 hour.
􀂃 Sacramento–Los Angeles: 2 hours, 22 minutes.
􀂃 Sacramento–San Jose: 1 hour, 12 minutes.
􀂃 Inland Empire–Los Angeles: 29 minutes.

SB 1856 requires that the trains be capable of operating at sustained speeds of at least 200 milesper-
hour (mph), or 322 kilometers-per-hour (kph). In fact, the CHSRA’s plans are for the “bullet
trains” to operate at up to 220 mph (354 kph). Non-express or “local” trains are required to serve
all intermediate stations, and the system is required to have a maximum of 24 stations.4

Assembly Bill 3034 was still under consideration when this report went to press. If approved by
the governor, AB 3034 would allow bond funding to be expended on the Altamont Corridor
connecting the Central Valley to the East Bay and from Anaheim to Irvine, in addition to Phase I,
Phase II and the Missing Phase.

State Financial Estimates

The 1999 Business Plan estimated that the entire system would be built for $30.3 billion ($25
billion in 1999$). The 2005 Final Environmental Impact Statement/Environmental Impact Report
(EIS/EIR) raised the estimate to $40.5 billion. By 2008, documents prepared for a meeting for
potential investors indicated that the costs had risen to $45.4 billion. This figure included $30.7
billion for Phase I (Anaheim–San Francisco) and $14.7 billion for Phase II (Sacramento and San
Diego extensions).5

The Authority adds that “the service provided by the system is expected to yield annual operating
surpluses in excess of $300 million” (in 1999$).6 The most recent declaration was in March 2008
when the CHSRA represented to Governor Arnold Schwarzenegger that “California’s proposed
system will bring a $1 billion annual profit or surplus, once built.”7

The CHSRA planners indicate that construction of Phase I would be financed primarily with public
funding. Phase I assumes a $9.95 billion general obligation bond that will be put before the voters
in the November, 2008 election. Of that amount, $9 billion would be directed to the high-speed
system while the other $950 million would be available elsewhere in the state for “feeder systems”
such as Amtrak, commuter rail, and local transit agencies with which the HSR system would
eventually connect. Proponents have expressed the hope to obtain another $9 billion in federal
funds to match the money from the bonds; additional financing would be obtained from private

investors for completion of the system.

Virtually none of this funding is in place. This broad outline of a financing program has been
rendered irrelevant as a result of the huge increases in project costs. At the moment, the CHSRA
has no detailed funding plan for the entire system. The CHSRA is also interested in obtaining
additional funding from local units of government, such as counties, municipalities and regional
transit agencies. Again, none of this funding is in place and in the difficult funding environment
that has characterized local governments in California, any material local funding level could be
challenging to obtain.

The CHSRA has projected opening the San Francisco–Los Angeles–Anaheim line via San Jose and
Fresno in about 2020. A second phase designed to link Los Angeles–San Diego via Riverside, and
to connect Sacramento to the system in or near Merced is expected by the CHSRA to begin five to
ten years after the initial phase.8 In some instances, the planned HSR routes would be longer than
highway distances and, of course, are longer than air distances.


The Authority has an ambitious plan to link major metropolitan areas with a high-speed rail system
to reduce congestion at airports and on highways. Funding sources for HSR are expected to include
riders, state taxpayers, the federal government, private investors and local governments. Some
public officials and policy leaders recognize the significant challenges in financing and building
the system.

No comments: