Another Day, Another HSR Business Plan: First Impressions

Another Day, Another HSR Business Plan: First Impressions

04/02/12 Filed in:

Yes, the High-Speed Rail Authority did listen to comments on the last Plan, and yes, they actually did add several desirable elements to the Plan, but in the end, it is still a bad joke: “The key initial operating segment from the Central Valley to the Los Angeles Basis is fully funded.” (p. 7-25) This seemingly good news is new since the last Business Plan. But the punchline is that the newly identified fund source is $20.2 billion from the feds! How fully funded is that, given the current Congress?

The Governor claims he can use cap and trade revenues as a backstop, when the hoped-for funds don’t arrive. Good luck fighting off all the other interest groups trying to keep their programs alive in this time of budget austerity! Doesn’t sound to me like the IOS is funded…

A nastier joke is the commitment to using blended systems–sharing tracks with commuter railroads in the Los Angeles area and the Bay Area. This is commonsense policy–one which TRANSDEF fully supports, once the Authority has demonstrated that a train can travel from Los Angeles to San Francisco within the statutory 2 hours 40 minutes with a blended system. Perhaps this is a formality, but the validity of the Business Plan rests on it.

The major problem with the blended approach is that the ridership estimate assumes 9 trains per peak hour (p. ES-13) or the internally inconsistent 6 trains per peak hour (p. 5-12). The 9 trains/hour greatly exceeds the HSR capacity of Caltrain in blended mode and may be a typo, while Metrolink’s HSR capacity in blended mode is unknown. In other words, ridership and revenue, which are the foundation of a viable Business Plan, may be overstated, casting doubt on the claim that all ridership scenarios result in a positive cash flow (p. 7-5), so that no ridership subsidy is needed.

One of the more irritating parts of the Business Plan is the insistence that building a track in the Central Valley will provide a public benefit by offering a faster route for the one million passengers per year on the San Joaquin train, which is operated by Amtrak. Amongst the problems with this lame justification for the project, Amtrak will lose a large number of passengers by bypassing the stations of Madera, Hanford, Corcoran and Wasco: “We’re improving service by cutting service to communities that really use it.” How much extra will this temporary dubious “benefit” add to construction costs? It is at least four times more expensive to build viaducts strong enough to support an Amtrak locomotive, because they weigh so much more than a high-speed train. The only possible purpose for spending that money would be to make the Central Valley project seem like a useful project in the near term.

Perhaps the greatest irony of all is the statement that “disciplined management through a private-sector operator leads to stronger financial  performance, even in the face of changing circumstances.” (p. ES-15.) The Authority’s problems all result from the lack of both disciplined management and a private-sector operator. Politics has driven the Authority to select a route that is such a money-loser that no private operator would ever choose it, resulting in the private sector’s refusal to undertake the project without State ridership guarantees. That, of course, is impermissible under Proposition 1A, the Bond Act.

So the Business Plan proposes that the State undertake all the risk of building the Initial Operating Section, and hope that it generates enough of an operating profit to entice $10.1 billion of private investment. (p. 7-18.) This irresponsibility to the State’s finances is fundamentally unacceptable. TRANSDEF is convinced that private operators would bid on investing in the initial operating segment if they were allowed to select a profitable route. What does it say that they were never publicly asked, through a Request for Proposals?


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