The California High-Speed Rail Authority is banking on billions of private dollars, extensive federal support and riders willing to shell out more than $100 to take the new train between San Francisco and Los Angeles, the agency's new 145-page business plan reveals.
The plan, which the rail authority released this week, lays out the agency's strategy for transitioning from the planning stage of the project to actual implementation. It includes the rail authority's newest estimate of how many people would ride the 800-mile line and its strategies for acquiring funds -- plans that have met with skepticism from its opponents.
California voters approved a $9.95 billion bond for the high speed rail system in November 2008, but many Peninsula residents and city officials have since grown disenchanted with the project. State legislators criticized the agency's previous business plan and mandated a new one before further state funding is issued.
Among the most significant changes detailed in the new business plan are the agency's proposed fares for traveling between Bay Area and Los Angeles. The rail authority had previously projected train fare to be about $55, or half the price of the average airfare between the two regions. The new plan, however, raises the ticket price for the same trip to about $104.75, or 83 percent of an average airline ticket.
The authority acknowledged that raising the fares would lower the number of riders from a previously estimated 58 million passengers in 2035 to 41 million passengers. But because lower ridership would require fewer trains and less maintenance, the higher fares would increase the system's revenues by 13 percent in 2035, when the 800-mile system is scheduled to be completed.
Jeff Barker, the rail authority deputy director for communications, said the new numbers don't signify a policy change but merely present one alternative business model. He also said the rail authority will continue to use the "50 percent of airfare" model in its environmental reviews because this model allows the rail authority to plan for the impact of a higher number trains.
"We are years and years away from setting up the ticket prices and our Board of Directors, legislators and the community will have a chance to discuss it," Barker said. "What we've done is present one scenario under which this is a viable project that doesn't need government subsidy."
The plan also notes that the projected cost of the new rail line has ballooned from $33.8 million to $42.6 million, though 80 percent of that increase was attributed to inflation and the new methodology used to calculate costs.
The new plan highlights the rail authority's efforts to raise the needed funds and to boost its outreach efforts as it transitions from planning to implementing the new line. It also identifies a variety of risks including financial and political that could derail the controversial project.
According to the new business plan, the California High-Speed Rail Authority hopes to acquire more than $17 billion from the federal government for the project, which has attracted waves of skepticism and opposition in the Peninsula. The agency also hopes to get more than $4 billion in local grants and $10 billion to $12 billion in private funding.
Steve Emslie, Palo Alto's deputy city manager who has been working with a coalition of Peninsula cities to track the progress of the controversial project, said the agency's anticipation of private funds is one of the most problematic aspects of the new business plan. Emslie characterized the agency's plans for private investments as "optimistic."
"It really doesn't give a lot of definition of where the private money will come from," Emslie said. "I don't think in the last 100 years there has been a public transportation system that actually made money without a lot of subsidy."
The business plan bases its projections for private contributions on its assumption that the rail system, unlike most transit services, "is expected to generate significant operating surpluses."
The new business plan is the Rail Authority's response to criticism from state officials who characterized its previous business plan as not being rigorous enough. In March, the state Legislative Analyst's Office criticized the agency's existing business strategy and its organization, which relies on a small core staff that delegates most of the work to consultants. The state Senate Budget Subcommittee subsequently required the rail authority to create a new business plan as a condition for future funding.
Sen. Joe Simitian, who was on the Budget Subcommittee that reviewed the rail authority's funding request last spring, said legislators were also concerned about insufficient community engagement by the rail authority. He recalled one committee hearing in which more than 30 Palo Alto residents asked state legislators to require more public outreach by the rail authority.
"There was concern regarding the rigor of the High-Speed Rail Authority's business plan and, more specifically, about its plans for community engagement," Simitian said. "It's not just about listening but also about responding to and considering the concerns that people raised."
In November, the agency approved a multi-million-dollar contract with Ogilvy Public Relations Worldwide.
The new business plan vows to increase and improve its outreach efforts by "refocusing its outreach teams," upgrading its Web-based outreach tools and strengthening its partnerships with legislators and local government agencies. The document also acknowledges the rail authority's acceptance of the "context-sensitive solutions" approach to designing the Peninsula segment of the line.
The approach, which gives stakeholders a greater say in the design process, was accepted after extensive lobbying by the group of concerned Peninsula residents who have since formed the group, Californians Advocating Responsible Rail Design (CAARD).
Simitian said the plan will be carefully reviewed by various legislators and committees in the coming month. Simitian also said he and Sen. Alan Lowenthal (D-Long Beach), who chairs the Senate Transportation Committee, plan to hold a public meeting in Palo Alto on Jan. 21 to discuss the business plan and other high speed rail-related developments with area residents.