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Tuesday, December 15, 2009

Reality hits California high-speed rail

Today, the Merc reports more up-to-date figures on the California High-Speed Rail project, based on the 2009 “business plan” released Monday by the California High-Speed Rail Authority.

The price of the system has gone up from $33.6 to $34.9 billion in 2008 dollars. However, the stated price tag is now $42.9 billion: for the first time, the authority is reporting the cost in nominal rather than real dollars.

Rail activist (Chairman of Californians for High Speed Rail, author of the California High Speed Rail Blog) Robert Cruickshank writes that the nominal dollar figure is misleading because it’s based on inflation estimates, but the actual cost could still go up:
Inflation could be much higher. Or deflation could continue and the final cost could be much lower.

What we do know is that this cost estimate is a more credible estimate. Assuming key elements of the project don’t change, such as route, there’s no reason to assume the final cost would be higher than $42.9 billion. That is, unless the Peninsula NIMBYs get their way and a tunnel is built from South San Francisco to Mountain View, in which case the cost would soar.
There is certainly an irony that the most concerted NIMBY efforts against CHSR is here in the progressive Bay Area, although this Peninsula stretch is also the most expensive real estate on the entire route.

More serious are the fare increases for the system. Here is a summary of the 2008 fare plan, taken from p. 64 of the report:
At the very beginning, a preliminary operations plan was drawn up with stations in major cities and trains running as often as in overseas systems serving similarly sized cities. Train fares were assumed to be somewhere between the cost of driving and of taking an airplane or train. Parking costs at stations were set at prevailing levels, and transit services that could connect at the stations were identified. Running times between stations were calculated from the specifics of the rail line grades and curves, the power, weight of the train, and top speeds of 220 miles-per- hour where the track is straight enough.
The new plan changes the basis of fares from 50% of "air fares" to 83% of "air fares", increasing revenue per rider but decreasing the number of riders. This is more realistic (or conservative), but even this figure seems based on some questionable assumptions.

Below are the new fares as compared to the old formula:
MilesTrain (new)Train (old)AirAuto
The problem is, today a discounted Southwest ticket from LA to SF is $135 r/t, or about $68 one way. Southwest raised fares about 15% earlier this year, or the numbers would be even worse. Yes, these are advance purchase discounted fares, but these are the reference price for leisure travelers.

Yes, the bullet train wins riders in Japan — because plane tickets are so expensive. But in Europe, with easyJet and Ryanair, the bullet trains are not cost-effective for any route with discount airline competition.

Interestingly, the data on page 72 suggested that perhaps a major thrust is avoiding direct airline competition. Of the projected 2035 annual revenues of $2.9 billion (in 2009 dollars) only 44% of the revenues is between the four major metropolitan areas served by Southwest and other airlines: Sacramento, SF-SJ, LA and San Diego.

Proponents hope that the $43 billion system will begin revenue service by 2020. Still, high speed rail — like so many other infrastructure projects — has a huge financial burden: most or all of the whole system before realizing revenues. The bulk of the projected revenues (73%) are on the LA-SF corridor — including intermediate stops — which requires building 400+ miles of track before most of that business is available.

I’ve been a rail fan for 30+ years, but this is a lot of capital at risk when the state’s budget and economy are in the tank. It’s hard to see how the original (or revised) forecast will hold up unless California can quickly fix its budget deficit and unemployment problem. Given the unresolved mess in Sacramento, the state’s credit rating is going to get worse before it gets better.

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