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Plan says California high-speed rail to cost $98B

Standing in front of an old steam locomotive, Tom Unberg, chairman of the California High-Speed Rail Authority displays a copy of the systems new business plan during a news conference at the California Railroad Museum in Sacramento, Calif., Tuesday, Nov. 1, 2011. The plan shows that state rail project could cost nearly $100 billion in inflation-adjusted funding over a 20-year-construction period if the route between San Francisco and Anaheim is completed in 2033 The plans says the system would be profitable even at the lowest ridership estimates and wouldn't require public operation subsidies. Standing in front of an old steam locomotive, Tom Unberg, chairman of the California High-Speed Rail Authority displays a copy of the systems new business plan during a news conference at the California Railroad Museum in Sacramento, Calif., Tuesday, Nov. 1, 2011. The plan shows that state rail project could cost nearly $100 billion in inflation-adjusted funding over a 20-year-construction period if the route between San Francisco and Anaheim is completed in 2033 The plans says the system would be profitable even at the lowest ridership estimates and wouldn't require public operation subsidies. (AP Photo/Rich Pedroncelli)
By Juliet Williams
Associated Press / November 1, 2011

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SACRAMENTO, Calif.—A business plan released Tuesday gives the most detailed look to date at California's ambitious plan to link its major cities by high-speed rail, projecting the cost has ballooned to nearly $100 billion over 20 years, accounting for inflation.

The daunting figure may cause sticker shock even for the most ardent supporters of the project.

The business plan comes after Gov. Jerry Brown appointed two new members to California's high-speed rail commission and asked them to take a hard look at the proposal and assess its viability. They concluded the project is doable, if built in phases, but the cost will be more than double the original projection.

"The good news is the numbers are more realistic; the bad news is they may well be beyond reach," said state Sen. Joe Simitian, D-Palo Alto.

The report shows the estimated cost at $98.5 billion if the route between San Francisco and Anaheim is completed in 2033. The plan assumes private investment will account for roughly 20 percent of the total cost, with much of the rest coming from additional public borrowing.

"This is not a promotional document. This is not a political document. This is a business plan," said Dan Richard, one of Brown's two appointees on the California High-Speed Rail Authority.

The initial estimate to build the system when voters approved bond funding for it in 2008 was $43 billion. In non-adjusted, 2010 dollars, that amount is now $65.4 billion. The plan also says the system would be profitable even at the lowest ridership estimates and would not require public operating subsidies.

It also calls for retaining the most controversial aspect of the proposed rail line -- starting construction in the Central Valley. Critics want to start in more populated areas of Southern or Northern California in case money runs out before the full system is finished, which they worry would create a "train to nowhere."

But $3.5 billion in federal funding is contingent upon the Central Valley route, and construction must begin before October 2012. That does not leave enough time for new engineering proposals and environmental reviews to be conducted elsewhere, the plan says.

The business plan says the system will be built in sections than can operate independently and make money, even if no more track were ever built, Richard said. Planners hope each new section will generate momentum -- and private investment -- to complete subsequent sections.

If the segments are built faster, the cost would decrease, the report said.

At a news conference Tuesday to release the plan, officials with the rail authority stood before steam locomotives at the California State Railroad Museum in Sacramento. They stressed that the new business plan calls for the rail line to be built in phases, which would break the project's costs into manageable pieces -- about $2 billion a year.

"It is clear that we don't have funding yet" for the entire project, said Michael Rossi, Brown's other appointee to the rail board. He said that is not unusual for a project of this size and said officials have enough money already to begin the first phase.

"It will be three years before we need to worry about getting those funds" for the next section, he said.

The business plan also says the high-speed rail system will use existing rail lines to carry passengers on the final legs into San Francisco and the Los Angeles basin. Doing so instead of building new high-speed lines not only saves money but makes the project more politically palatable by reducing neighborhood objections.

The plan is being released at a politically sensitive time for the rail project.

Governors and lawmakers in several other states have been backing away from costly high-speed rail plans because of ongoing state budget deficits caused by the recession. Florida, Wisconsin and Ohio all pulled back on their rail plans, leading the Obama administration to turn over those states' share of federal money to California.

California voters and the Obama administration already have committed nearly $13 billion to the state's high-speed rail project, but the plan has faced increasing scrutiny about whether it will ever become reality.

The new business plan said it offers a more realistic cost estimate based on inflation over 20 years and estimates as much as $20 billion in private financing.

Even under the most conservative ridership projections, the report said the rail system would have a net operating profit.

It pegs ridership at anywhere from 7.4 million to 10.8 million riders by 2025 for an initial southbound phase. Even at low ridership projections, the project would have a net operating profit of $352 million a year, the report said.

The average ticket between San Francisco and Los Angeles would cost $81 in non-adjusted dollars, with express trains completing the trip in less than three hours.

One of California's leading taxpayer advocates disputed the report's finding that the rail line would be profitable and would not require taxpayer money to operate in the future.

"They're in la-la land. No credible study has concluded that," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "They would have to set a fare at about $300 a ticket and assume ridership levels that aren't going to exist to assume a break-even level."

Before voters approved the $9 billion high-speed rail bond in 2008, Coupal predicted the total cost would rise to $90 billion.

"We're in a position of saying `I told you so,'" he said Tuesday. "It is not sustainable and it is not realistic."

Under the revised business plan, initial construction would start with a $5.2 billion "spine" from Fresno to Bakersfield to be completed in 2017. The line would then be extended further north or south -- from Merced to Palmdale, in the Los Angeles basin, or from Bakersfield to San Jose.

The first 130-mile segment would create about 100,000 jobs in the hard-hit Central Valley, according to the report. Building the entire system would generate about 1 million jobs.

The report notes that while the $98.5 billion tab seems high, California's growing population would otherwise require about $170 billion in new infrastructure, such as freeways and airport runways.

Brown said in August that he still supports the plan to link San Francisco with Los Angeles and Anaheim by 2020, but his Department of Finance is expected to review the proposal in detail before he signs off.

In a report issued last July, a peer-review committee created as part of the 2008 ballot measure that approved $9 billion in bonds said later phases of the rail project rely almost entirely on federal, state and local money that might never materialize. That poses a risk that whatever is started will not be finished and might be of little use to most California residents, that review said.

The Legislature, which returns in January, must approve the proposal, along with Brown.

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Associated Press writer Don Thompson contributed to this report.

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