Wendell Cox and Joseph Vranich

Study: If the California High-Speed Rail System Is Built, Taxpayers Will Get Stuck With $124-$373 Million In Losses — Every Year

As Gov. Jerry Brown seeks funding for California’s high-speed rail system in China, it is remarkable that the state’s train project is still alive.

California’s past legislatures have continued to fund the California High-Speed Rail Authority in a business-as-usual manner despite the plethora of findings demonstrating the quality of CHSRA’s work is below par, that the high-speed train’s project risks have been under-estimated, and that the statutory requirements of AB3034 and Proposition 1A are being violated.

The CHSRA’s excuses about program flaws are similar to rationalizations used on other similar boondoggles in which costs had been unrealistically minimized and benefits exaggerated, inducing public officials and the electorate to proceed, usually after cancellation is no longer feasible. If realistic, genuine projections had been made from the start, the California train project would likely have been cancelled long ago.

Our new Reason Foundation study concludes that the California High-Speed Rail Authority’s 2012 Business Plan has no more credibility than did CHSRA’s prior reports.

Current plans are now identified as “Phase 1 Blended,” which the CHSRA estimates will cost as much as $63.2 billion in 2011 inflation-adjusted dollars ($78.0 billion in year-of-expenditure dollars) with the only sources of funding being $9 billion in California Proposition 1A general obligation bonds and $3.5 billion in federal grants.

Further funding is highly speculative if not outright non-existent for the remaining capital needed, which may exceed $50 billion. Congress has shown little interest in providing the funding. The CHSRA April 2012 Business Plan is so deficient that it should be inconceivable that policymakers would continue to rely on its assertions to evaluate the rail project.

Our Reason Foundation Due Diligence Update, an update of our 2008 study which flagged most of the rail system’s flaws before it was approved, finds that the system’s 2:40 travel time from San Francisco to Los Angeles, which was promised to voters, is not achievable under the Phase 1 Blended system. In part, that is because the CHSRA trains are slated to operate at peak speeds of 220 mph (354 kph)—speeds that are not attained today anywhere in the world. Not in Spain, not in France, not even in China.

Under the blended system high-speed trains will need to operate more slowly on the “bookends” as they share tracks with commuter trains and, in some locations, freight trains.

Yet, the non-stop average speed between Gilroy and Bakersfield as indicated by CHSRA under the Phase 1 Blended system is supposedly going to be 198 mph, nearly equal to the present peak speed of the fastest high-speed trains in the world (France), at 199 mph.

Such an aggressive average speed seems impossible to achieve, especially because the trains would be routed through Fresno and other urban areas, where the Transportation Research Board estimates speeds of 60-to-100 mph.

Our study finds a more realistic, but still optimistic travel time projection, from Los Angeles to San Francisco, would be 3:50. And the slower speeds would mean fewer riders. The 2035 interregional ridership for a so-called high-speed train that takes nearly four hours to go from Los Angeles to San Francisco would be approximately two-thirds (67%) below CHSRA’s projected levels.

Even if the number of California’s automobile drivers switching to high-speed rail equals the European experience, ridership would still fall nearly 65% short of the CHSRA projection.

When you make more realistic estimates of the costs of driving than the Rail Authority does in its estimates and you make more plausible estimates of ridership from out of the corridor, the 2035 interregional rail ridership would be 77% below the CHRSA forecast.

Based upon the more realistic ridership projections above, the California high-speed rail system will require major operating subsidies to cover its day-to-day financial losses. Reason’s Due Diligence Report Update projects these losses to be between $124 million and $373 million annually. Taxpayers will be stuck with those bills.

The California high-speed rail project cannot be delivered at the costs promised to taxpayers and it is based upon a business plan incapable of delivering on its legal requirements. Taxpayers and the state of California would be best served by its immediate cancellation.

Wendell Cox is principal of Demographia in St. Louis. Joseph Vranich is an Irvine, Calif.-based business consultant who was President/CEO of the High Speed Rail Association in the early 1990s. They are authors of the new Reason Foundation report: California High Speed Rail: An Updated Due Diligence Report.