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Some fear California's high-speed rail won't deliver on early promises

There's concern that local, state or federal subsidies would be needed as projected ticket prices between L.A. and San Francisco have almost doubled. And building costs for the first phase have grown

February 28, 2010|By Rich Connell and Dan Weikel
  • The city of Buena Park has learned that part of a transit-oriented residential project tied into its 3-year-old Metrolink station may have to be ripped out for the bullet train. Planners are reexamining the issue.
The city of Buena Park has learned that part of a transit-oriented residential… (Mark Boster / Los Angeles…)

Despite a new $2.25-billion infusion of federal economic stimulus funding, there are intensifying concerns -- even among some high-speed rail supporters -- that California's proposed bullet train may not deliver on the financial and ridership promises made to win voter backing in 2008.

Estimates of ticket prices between Los Angeles and San Francisco have nearly doubled in the project's latest business plan, pushing ridership projections down sharply and prompting new skepticism about data underpinning the entire project.

"This just smells funny," said state Sen. Alan Lowenthal (D-Long Beach), a supporter of high-speed rail and chairman of the Senate Transportation and Housing Committee.

New inflation-adjusted construction figures show that outlays needed to build the first 520-mile phase of the system have climbed more than 25%, from $33.6 billion to $42.6 billion.

And some government watchdogs are concerned that a linchpin commitment to taxpayers in the bullet train's financing measure -- that no local, state or federal subsidies would be required to keep the trains operating -- may be giving way.

High-speed rail planners recently advised state lawmakers that attracting billions in crucial private financing will probably require government backing of future cash flow. "Without some form of revenue guarantee from the public sector, it is unlikely that private investment will occur at [the planned] level until demand for California high-speed rail is proven," project planners wrote in December.

That is feeding fears that a larger state commitment, beyond the $9 billion in construction bonds approved by voters, could be sought to complete the 800-mile project. "To now put in that we have to [give] some kind of revenue guarantee . . . is totally unacceptable," Lowenthal said. "That's not what we agreed to."

Financial risks and planning adjustments are inevitable in such a massive project, say officials with the California High-Speed Rail Authority. They insist that significant progress is being made, that there is cause for optimism and that they are keeping their commitments to voters. Opportunities for capturing more federal dollars are greater than ever, they say, because President Obama supports high-speed rail.

"The project is moving forward, very much," said Mehdi Morshed, the agency's executive director.

Gov. Arnold Schwarzenegger and a coalition of business, labor and political leaders argue that the project is ahead of others in the United States and will provide enormous benefits in job creation, congestion relief and environmental improvements.

Tying San Diego, Los Angeles, Sacramento and San Francisco together with European-style 200-mph trains has been a long-stalled dream for many. The prospect that construction could actually begin has intensified scrutiny of financial, ridership and route issues.

"I think the numbers should be scrubbed," said authority board member Richard Katz, adding that doing so could help the project.

Jeff Barker, the agency's deputy director, said the latest business plan fueled confusion about a revenue guarantee.

"We didn't do a good job of explaining that," he said. The system is being designed to operate without a taxpayer subsidy, and that will be clarified in a new, as-yet unavailable report, he said.

But Morshed, who is stepping down next month, reiterated that some guarantee, probably from the federal government, may be needed to ensure that cash flow can repay front-end construction investments by private parties. That is not uncommon in federally backed projects, he said, and would not violate the state's ban on taxpayer operating subsidies.

Current plans call for up to $12 billion from private-sector investors, about $18 billion from the federal government and up to $5 billion from local agencies. New forecasts show an operating surplus topping $1 billion a few years after service begins.

But some analysts point out that almost all U.S. rail systems -- and a number of foreign operations -- have required large government loans or cash infusions to keep running.

Under the new scenario, one-way fares between L.A. and San Francisco rise from $55 to $105, closer to the cost of an airline ticket. The change shows healthier surplus revenue, which may appeal to private investors. But estimated ridership falls by about one-third, to about 40 million annual boarders in 2030.

Some transit advocates say predictions of private participation aren't realistic. "A lot of it's still magical thinking," said Bart Reed, executive director of the Transit Coalition.

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