Price tag swells for high-speed rail

The cost of California’s proposed high-speed-rail system, originally pegged at about $36 billion, has nearly tripled since the project was presented to voters in 2008, according to a business plan that the agency charged with building the new system released Tuesday.

The estimated price tag for the rail line, which would stretch from San Francisco to Los Angeles, now stands at $98.5 billion and could end up as high as $118 billion under the most expensive scenario, the California High Speed Rail Authority (CHSRA) has concluded in a highly anticipated report.

The numbers in the new business plan exceed not only the rail authority’s earlier estimates, but also projections from rail watchdogs and the state Legislative Analyst’s Office, which expected the price tag to exceed $60 billion. The detailed 230-page document supplants the rail authority’s 2009 business plan, which was panned by state legislators and nonpartisan analysts as incomplete and optimistic.

While the rail authority’s new plan continues to make a case for high-speed rail as an economically viable alternative to building new highways and airports, its ridership and revenue projections are more conservative than those in previous analyses. The report also provides more details about the rail authority’s plans to expand the line from its initial Central Valley segment, which would stretch between north of Fresno and north of Bakersfield, to the more populated cities in the state’s northern and southern regions.

But the biggest difference between the current plan and its predecessor is the cost projection. The rail authority argues that the significant cost jump was caused by major changes in California’s landscape since officials first began the project more than a decade ago. The state added almost 5 million people between 2000 and 2010, the plan states, and large expanses of previously vacant land have become “bustling communities, suburbs and roadways.”

The 2009 plan, for example, estimates the cost for building tunnels for the rail line at less than $6 billion. In the new plan, the estimate for tunnels is greater than $15 billion. For aerial viaducts, the cost estimate has climbed from less than $5 billion to more than $13 billion.

“The new development landscape has necessitated adding many miles of elevated structures, tunnels and other infrastructure,” the report states. “The new designs permit access to major downtown population centers with less community impact and disruptions.”

In addition, the timeline for completion of the project was extended by 13 years – to 2033 – which added $27.5 billion in inflation costs and $16 billion in contingencies, the report states.

To justify the rail project’s price tag, however, the authority states that other transportation infrastructure – including 2,300 miles of new highway lanes and various airport improvements that would be needed over the next 20 years – would cost more than $170 billion.

“Providing equivalent new capacity through investment in highways and aviation would cost California almost twice as much as the Phase 1 (San Francisco to Los Angeles) high-speed rail system,” the report states.

The new plan does little, however, to resolve the lingering uncertainties over how to pay for the new rail line — a colossal project for which state voters approved a $9.95 billion bond in 2008 but which has attracted skepticism and heated opposition in the three years since Proposition 1A passed. In Palo Alto, the City Council has taken an official stance of “no confidence” in the project after initially endorsing the 2008 bond measure.

The rail authority’s business plan relies heavily on public financing, particularly for the “initial operating segment,” which would build off of the Central Valley segment either north to San Jose or south to the San Fernando Valley. The rail authority is banking on federal and state funding to pay for this segment in its entirety. Once the trains are running – a point at which the system would be profitable, the authority asserts — it hopes to draw about $11 billion in private investment for the system’s expansion.

After the “initial operating segment” is constructed, effectively establishing the nation’s first high-speed-rail system, the rail authority would focus on the “Bay to Basin” phase, which aims to connect the state’s two megaregions by linking San Jose and San Fernando Valley. Once that’s done, high-speed rail would be stretched further to connect San Francisco to Los Angeles — a link that provided the main justification for Proposition 1A. The authority also hopes to later extend the line to Sacramento and San Diego.

The business plan calls the phased approach, with public investment upfront and private investment later in the process, “the prudent course to build a foundation that allows for greater efficiency in the use or private investment once the initial segments of the system are in place.”

“As additional funding becomes available, operating sections will be added, to create the full statewide system,” the report states, emphasizing that each segment of rail line, from the “initial operating segment” onward, would be financially self-sustaining. “This incremental approach is how most large transportation projects are built, both in the U.S. and around the world. It will accelerate benefits for California and will attract private investment far earlier than if the system were built as a whole.”

For the “initial operating segment,” which is projected to cost about $25 billion, the rail authority expects to draw about 80 percent of the funding from the federal government and the balance from the state. The federal subsidies under the plan’s projections include both grants and tax credits. So far, the authority has received about $3.4 billion in federal grants.

The document acknowledges that federal funding will remain uncertain for years to come, but stresses that the incremental nature of construction would allow the project to proceed even if the plan’s federal-funding projections fall short. Republicans in the U.S. House of Representatives have been particularly vehement in opposing the rail project, which many have characterized as a “boondoggle.”

“There is substantial discussion in Congress related to reducing deficits and the federal government’s role and scope,” the business plan states. “It is clear that continued uncertainties will exist and that prudent planning assumes that funding will be limited in the short term.

“Any congressional initiatives on infrastructure funding and short-term job creation may improve this situation, but the Plan does not rely on such measure.”

The plan also notes the authority would also need about $4 billion in local or “other” contributions to complete the “Bay to Basin” phase.

The new plan also incorporates some of the components of a proposal that U.S. Rep Anna Eshoo, D-Palo Alto, state Sen. Joe Simitian, D-Palo Alto, and state Assemblyman Rich Gordon, D-Menlo Park, made earlier this year. The three Peninsula lawmakers proposed a “blended system” in which high-speed rail shares tracks with Caltrain on the Peninsula – rather than building a separate track system for the ultra-fast trains. They also voiced opposition to an earlier proposal by the rail authority to send the new trains over the Peninsula on aerial viaducts.

The business plan calls for integration between high-speed rail and Caltrain. Initially, after the “Bay to Basin” system is completed, ending in San Jose, passengers would hop onto Caltrain to take them to their destinations. After the later “Phase 1” to San Francisco is completed with improvements to the Caltrain tracks, passengers would have a “one-seat ride” and not have to change trains in San Jose. The plan stresses that it “proposes to develop the high-speed rail system in a way that more clearly and effectively integrates it with regional and local rail systems to create a statewide rail network.”

“The commitment to a blended system has been initiated through extensive cooperative planning among state, regional, and local partners,” the plan states.

Dan Richard, one of two people who were recently appointed to the rail authority’s board of directors by Gov. Jerry Brown, said at a Tuesday hearing on the business plan that the new plan “embraces” the blended approach championed by the Peninsula lawmakers.

“The fact of the matter is that we have the opportunity to use existing right of way and existing corridor and existing infrastructure on the San Francisco Peninsula and, as we move to Southland, by Caltrain and Metrolink,” Richard told a state Assembly committee. “We know that we need to now work in partnership with those systems to develop long-term plans for blended service.”

Simitian, who has been one of the Senate’s leading skeptics when it comes to the rail authority’s projections, praised the plan’s adoption of the “blended” approach on the Peninsula. He called it “very different from their earlier proposal.”

“They’ve put aside the notion of a viaduct and the notion of going beyond the existing right-of-way,” Simitian told the Weekly. “They’re talking about a ‘one-seat ride’ where you stay on the same track in the same train in the same seat as you move up and down the Peninsula.”

Eshoo said in a statement the blended-system proposal that she, Simitian and Gordon offered earlier this year “will save taxpayers billions of dollars while being responsive to the many concerns of my constituents” and said she was “pleased to see that the CHSRA draft business plan included many of the blended system provisions.”

But while local legislators praised the rail authority’s new emphasis on a “blended” system, they continued to voice concerns about the system’s ridership projections and cost estimates.

Ridership numbers remain a thorny issue. While the 2009 plan anticipated 41 million annual riders by 2035 and $3 billion in annual revenues, the 2012 plan gives a range of 28.9 million to 42.9 million riders. The plan assumes that the average fare price to ride the new train between San Francisco and Los Angeles would be about $81.

Simitian praised the new plan for being more frank in its cost estimate than previous projections.

“The good news is that we finally have a realistic number on the table,” Simitian said. “The bad news is it’s a very scary number.”

Others shared his concerns. Elizabeth Alexis, co-founder of the Palo Alto-based rail-watchdog group, Californians Advocating Responsible Rail Design (CARRD), said that while the report is better than earlier versions, it still fails to address her group’s criticisms about the rail authority’s ridership numbers. Her group has persistently characterized the authority’s numbers as unrealistic. Other rail experts, including professors from the Institute for Transportation Studies at UC Berkeley, had also found flaws in the methodology the rail authority had used to get its ridership numbers.

“It’s a lot more information; it’s much better written. But they haven’t changed anything really other than making the cost of the system more realistic,” Alexis said of the new business plan. “They’re still using the same ridership model since 2007.”

Alexis, whose group had long maintained that the price tag for the new system would rise significantly, said the new business plan confirms that the rail system would cost “a lot more money than we have in the bank.”

“It’s enough money that if we want the high-speed-rail system, the California taxpayers will be asked to contribute more than they already have,” Alexis told the Weekly.

The rail authority on Tuesday characterized the plan as the foundation for a project that will create 1 million jobs and reduce carbon emissions by 3 million tons annually. Thomas Umberg, chairman of the rail authority’s board of directors, said in a statement Tuesday that the board has “carefully constructed a business plan that is mindful of the economic and budgetary constraints facing both the state and the nation.”

“It will deliver to California and Californians a cost-effective, efficient, and sensible alternative to more highways and increased airport congestion,” Umberg said.

But the business plan, particularly its revised cost estimate, is also expected to add fuel to the criticism from Sacramento lawmakers who have long argued that the project is too expensive and should be scrapped. At Tuesday’s briefing on the business plan, state Assemblywoman Diane Harkey, a leading critic of the project, said the state is already “drowning in debt” and predicted that the system would require government subsidies.

“I think there’s going to be a sticker shock for the people of California,” Harkey, R-Dana Point, said. “The more they know, the less they’ll like it. It shouldn’t be that way with something this important.”

Gordon offered a more measured response, but also said he is concerned about the latest cost estimate for the project. In a statement, Gordon called high-speed rail “a powerful vision and dream” and said he hopes the state will find the means to implement this vision. But he said he was “concerned about the present price tag and the expectation that much of this will be paid for utilizing public funds.”

“California remains in a fiscal crisis,” Gordon said. “We do not have enough revenue to meet our expenses as is.

“Until we address our structural fiscal problems, I do not see how California can afford additional debt from high-speed rail.”