News

Funding questions loom over high-speed rail's new plan

California High-Speed Rail Authority's new business plan struggles to find funding sources for first usable stretch of $68-billion line

Seeking to comply with a legislative requirement, the agency charged with building California's high-speed-rail system on Monday released an updated business plan that offers upgraded ridership projections, revised construction plans and very few answers on the critical question of how the system will be funded.

The business plan, which was a requirement of the appropriation bill the state legislature passed in 2012, serves as an upgrade to a plan that the rail authority submitted two years ago. Though the 2012 plan alleviated some concerns in Palo Alto and along the Peninsula by scrapping the highly contentious proposal for a four-track system (with Caltrain on the outside tracks and high-speed rail inside) in favor of a more palatable two-track one (in which the two agencies share the same tracks on the Peninsula), the document was criticized by local officials, watchdogs and one Sacramento County judge for failing to disclose how the California High-Speed Rail Authority plans to pay for the first usable stretch of the $68-billion line. Known as the "initial operating section," this portion of the line would stretch from Merced to San Fernando Valley and would cost about $31 billion, according to the rail authority's new estimate.

The new plan, like prior ones, leaves this question of how to pay for the segment largely open. Though it keeps the price estimate for the full line at $68 billion -- same as in the 2012 plan -- and introduces a new funding mechanism supported by Gov. Jerry Brown, it fails to account for more than $20 billion in funding that the first segment needs and doesn't yet have.

So far, the rail authority has roughly $6 billion committed to constructing the first portion of the line, a 29-mile stretch between Madera and Fresno that would not have any actual trains. The agency's failure to identify funding sources for the usable segment prompted Judge Michael Kenny to conclude in November that the rail authority acted in violation of Proposition 1A, the $9.95 billion bond voters approved for the rail system in 2008. Kenny ordered that the rail authority rescind its business plan. In a separate ruling, he also denied the rail authority's request to validate $8 billion in bond expenditures, saying in his ruling that he was not convinced by the process in which state officials vetted the rail authority's request for funding.

The rail authority's business plan is unlikely to satisfy Kenny's concern. Though it includes upgraded methodology for calculating ridership and revenue projections and remains optimistic about the rail line's financial viability, it provides only the faintest indication of where the $20 billion would come from. The agency, which in late January appealed Kenny's ruling, is preparing to use $3.3 billion in committed federal funds and about $7 billion in Proposing 1A funds, of which $4.2 million has already been allocated. This leaves a $21-billion budget hole that the rail authority hopes to fill with private investments that have yet to materialize and proceeds from the state's cap-and-trade program, which are included in Brown's proposed budget but have yet to be approved by the legislature.

Even if the cap-and-trade proceeds are ultimately allocated for the rail project, the $250 million that Brown proposed to dedicate to high-speed rail would come nowhere near filling the chasm between the how much the project has for the first segment and how much it would need. Yet the new business plan argues that the ongoing commitment of these funds is "important in several key respects, both for enhanced transportation and the reduction of greenhouse gas emissions through electrified train service."

The rail authority also expects this new funding source to bring in private investment, a key component of all prior business plans. The new plan states that the commitment of state funding will "allow the Authority to leverage both public and private financing and, depending on the level of commitment, potentially finance the completion of the IOS."

The 2014 business plan also includes an expanded section on risk and new methodology for calculating risk through a simulation tool called the Monte Carlo risk analysis. The technique used in the 2014 plan, is "fundamentally different from that used in 2012, and represents a much more comprehensive methodology." The result, however, is pretty much the same. Once again, the plan argues that the system will be financially viable and "will not require an operating subsidy, consistent with other systems around the world."

The ridership forecast estimates that 10.4 million passengers will ride the rail system in 2025 under the "medium" scenario and that the number will gradually increase over the years, reaching 38.5 million riders in 2060. The business plan notes that the updated numbers how a higher ridership than previously projected, "on average, approximately 25 percent higher in the Medium scenario."

Projected farebox revenues follow a similarly upward track, gradually rising from $801 million in 2025 to $7.9 billion in 2050. Overall revenues are lower in this plan than in the 2012 version largely because riders are expected to take shorter trips than was previously projected. Even so, the plan predicts that the system would be financially feasible.

In a statement, rail authority CEO Jeff Morales said the new plan maintains the "core elements" of the 2012 version -- "a better, faster and cheaper high-speed rail that forms the backbone of a statewide rail modernization program."

"The updated forecasts and analyses continue to show that, as the system develops over time, it will generate financial value through positive net operating cash flow and attract private investment," Morales said.

The plan is still in draft form. Anyone wishing to comment on the document can fill out an online form on the business plan website or email 2014businessplancomments@hsr.ca.gov.

Comments

Posted by WTH, a resident of Monta Loma
on Feb 11, 2014 at 3:01 pm

What the he**, our schools are in disarray, our cities are going bankrupt and our roads are not being maintained the way they should be and here is the Gov. forking barrels and barrels of taxpayer money into this boondongle.

Unbelievable, where is the logic?

Why are not the taxpayers fuming over this?


Posted by Juan Olive, a resident of Old Mountain View
on Feb 11, 2014 at 3:22 pm

They say "The rich get richer and the poor get poorer". Mountain View sadly has so many less fortunate people living right next to some of the wealthiest individuals in the country. Most of the wealthiest are in their 30s and are intelligent and hard working. I don't understand how they don't or won't speak up about this project which most I think would agree, will end up costing them hundreds, if not thousands of their hard earned tax dollars. Which would be better spent on themselves and their families.
All one has to ask themselves is "Who is going to pay for this?" Finding the answer to that one question is all you need.
Good luck because one thing is obvious, not fair, but obvious. Only the working can be taxed to help fund this project.


Posted by Jordan White, a resident of Jackson Park
on Feb 11, 2014 at 4:26 pm

I am sure that in 2029 when the High Speed Rail system is built out, our roads will be gridlocked in car traffic and the rails will provide at least some relief for our commutes here and there plus with cleaner air, we will all breath easier. That is only 15 years away. Let's get on this wild ride and show the rest of the world what progress and teamwork is all about !


Posted by USA, a resident of Old Mountain View
on Feb 11, 2014 at 5:51 pm

USA is a registered user.

"Let's get on this wild ride and show the rest of the world what progress and teamwork is all about"

We are already on the ride: Web Link


Posted by Member, a resident of Cuesta Park
on Feb 11, 2014 at 7:12 pm

I'm sure, if there is a 'wild ride', that it will be only from LA out to the new housing developments in the Central Valley. The in crowd will have bought the land near the stations, and sell it as 'only forty minutes to LA'. That's what move politics in California.


Posted by Member, a resident of Cuesta Park
on Feb 11, 2014 at 7:14 pm

Whoops, that's ...moves politics...


Posted by Jeff, a resident of another community
on Feb 11, 2014 at 8:53 pm

Unfortunately @Member is probably right. When the train lines were first built in California the big four (Huntington, Stanford, Crocker, and Hopkins1) made enough money and at times received enough criticism to be referred to as robber barons rather than railroad barons.

$39B to go from Merced to San Fernando Valley? How many people want to make that trip?


Posted by Rodger, a resident of Sylvan Park
on Feb 13, 2014 at 10:58 am

This project should be stopped before it waists any more of our money. The Courts were correct to stop it since there is no funding plan that makes sense, unless you believe in dreams.

We need to put money into schools at all levels not waste it with fixed train tracks.

If you want to go to LA take an airplane, there are several airlines from San Jose, San Francisco, and Oakland.


Posted by Svsportz, a resident of Willowgate
on Feb 13, 2014 at 2:43 pm

The negative comments are silly. Reality is that many other countries have successful high speed rail systems and have for years. You act as if this is a new invention. Of course we need a high speed rail solution between SF and LA. Get your heads out of the sand and support a solution that's different from getting into your clunker and driving. Or maybe you're only interested in driving to the corner grocery store?


Posted by Juan Olive, a resident of Old Mountain View
on Feb 13, 2014 at 3:13 pm

The negative comments make sense. Again let me reiterate, but in simple terms. Simple math will tell you that we, the public are the ones who will end up funding this project which will end up costing billions. The economy has not recovered from this slow recession and it may or may not. The local news stations yesterday said that according to AAA, gas may go up to 4.00 a gallon for spring and summer. Ouch. But that is nothing compared to what the tax payers will be paying for the next 20 years (Billions) for a project that will need to be fed thru good times and bad. And right now it's bad.
They only need to simply explain how this project will be funded and if there is money to fund it, even I will approve of it.


Posted by tommygee54, a resident of Rex Manor
on Feb 13, 2014 at 5:31 pm

Jordan White and Svsportz have it right on the nose. WE ACTUALLY DO NEED HSR!!!! Look at the gridlock in the LA area, on all the freeways, including 'the five' and 101, the 405, and the other freeways as well. Such near sighted people we have here in the state. The other countries that have HSR, the gridlock is less. So lets get on the bandwagon and stop complaining about our HSR project that needs to move forward.


Posted by Old Ben, a resident of Shoreline West
on Feb 13, 2014 at 11:19 pm

Not one HSR anywhere on Earth pays for itself. They are all government subsidized. Who gains, here?


Posted by MadamPresident, a resident of another community
on Feb 14, 2014 at 11:20 am

Svsportz, a resident of Willowgate is 100% correct


Posted by un_nat, a resident of Cuernavaca
on Feb 16, 2014 at 3:59 pm

Boorah on Gavin Newsom and Congratulations to the California High Speed Rail Authority awarding five contracts for a total $16 million with 1/2 million going to Disabled Veteran Business Enterprises. Not only will this help by creating so many new jobs over the next 4 years, the servicewomen and servicemen deserve this. Let's all join together in helping all those who served our country return to good paying, highly skilled jobs! If you know of other good government or private sector jobs for those who are in need and deserving, please spread the word.

Let's get this thing going Mr. Denham, Mr. Valadao, Mr. Newsom and Mr. Vidal before it is too late and our veterans are out of work. If you're not going to create jobs then restore unemployment benefits! We will fight to the victorius end to keep our jobs for those who served our country regardless of who is elected this November.


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