Bullet train's $98-billion cost could be its biggest obstacle

Source: http://www.latimes.com/news/local/la-me-1102-bullet-train-20111102,0,4649590,full.story

By Ralph Vartabedian, Dan Weikel and Richard Simon, Los Angeles Times

November 2, 2011
The ambitious plan to connect Anaheim and San Francisco with high-speed trains has encountered plenty of obstacles, including intensifying resistance from wealthy and poor communities lying in the track's path.

But the bullet train's biggest threat could be its ballooning price tag, which this week doubled to an estimated $98 billion.

Backers on Tuesday announced a major strategy shift, unveiling a reworked blueprint for the first leg that would delay completion 13 years to 2033.

Proponents of the project say the higher cost of their proposal represents a more realistic outlook, adding billions of dollars for future contingencies and time for potential delays.

In addition, the new plan initially would blend bullet train service with the existing Metrolink network in Southern California and the Caltrain system in Northern California, stretching out the need for financial outlays and better using existing rail systems.

"This is not a train to nowhere," said California High-Speed Rail Authority board member Dan Richards, a finance expert appointed to the rail agency's board this summer by Gov. Jerry Brown. "It will be a train to where trains are waiting. That is the new strategy."

The extended construction scheme still would begin next year with a controversial spine of track in the Central Valley, leading to initial operation of 220-mph trains to either San Jose or the San Fernando Valley in roughly a decade, officials said.

However, the new construction schedule would lead to dramatically higher costs at a time when California's heavy debt load already has yielded one of the lowest credit ratings in the nation.

Opponents warned Tuesday that the system had become even more objectionable, and they vowed to redouble their efforts to kill the idea.

"The new projected cost to build California's high-speed rail project is astronomical," said Rep. Kevin McCarthy (R-Bakersfield), the House majority whip, whose district would be served by the rail. "But whether $43 billion or $100 billion, questions persist about the viability of the project." McCarthy is pushing legislation to freeze federal funding until auditors examine the project's feasibility.

The rail project had counted on Congress to provide the bulk of funding, but both the House and Senate in the last month have staunched the flow of money. About $3 billion in federal grants from the economic stimulus legislation is in hand, along with $9 billion

in funding from a bond measure passed by voters in 2008.

On Thursday, the authority is supposed to unveil a separate funding plan that would show how it would pay for the rest of the system.

The lack of certainty about the funding is likely to come under close scrutiny in the next 60 days as Brown and the Legislature weigh whether to appropriate the money to start construction next year.

Brown reiterated his support for the rail proposal on Tuesday, saying, "California's high-speed rail project will create hundreds of thousands of jobs.... The High-Speed Rail Authority's business plan is solid and lays the foundation for a 21st century transportation system."

The rail authority said the new plan's business assumptions were far more conservative than in the past. It includes projections that future inflation will run at 3% annually and includes $16 billion in reserves for contingencies. The plan also calls for having the needed funds in hand before starting each segment of the system.

In an effort to demonstrate deep political backing, the authority put out supporting statements from key political and labor leaders statewide, including the mayors of the largest cities to be served by the rail.

Still, a significant number of Democratic critics, who have said they support a high-speed rail in concept, withheld their support.

In the critical Silicon Valley section, Democrats have been outraged by the rail authority's plan to run trains on elevated viaducts through some of the wealthiest neighborhoods in the nation.

Specific route plans have long triggered local resistance to the high-speed rail project. Although the new proposal addresses some of them, the price tag could be prohibitive.



The shift to blending service with existing commuter rail systems unveiled Tuesday was in large measure a response to that opposition.

The drawback to that approach is that for many years, riders would have to transfer to trains at stations on the edges of either Los Angeles or San Francisco.

Sen. Joe Simitian (D-Palo Alto) said he supports the blended service approach because it will help relieve effects in his Bay Area district. But he isn't convinced that money will be available to finish the project.

"Ninety-eight billion dollars is a hard number to swallow, but it's a particularly hard number when nobody else is going to pay for it," he said.

The new plan projects the cost of a one-way fare from L.A. to San Francisco at between $52 and $123.

The plan claims that the system would be immediately profitable when it begins partial operations.

By 2040, the net operating profit for the San Francisco-to-Anaheim line is projected to range between $2.3 billion and $3.7 billion annually, depending on ridership. That is despite sharply lower passenger projections in the new plan.

Earlier ridership estimates — some predicting up to 117 million riders a year by 2030 — were heavily criticized by researchers at UC Berkeley.

According to the new projections, the 520-mile line between San Francisco and Anaheim will carry between 29.6 million and 43.9 million passengers annually by 2040.

A segment between San Jose and the San Fernando Valley is expected to handle between 16.1 million and

23.7 million passengers a year.

Those estimates underpin a claim by rail proponents that California would have to spend $170 billion on new highways and airport facilities to accommodate growth if the bullet train is not built.

"California needs a way to move people quickly throughout our state and provide relief to our overcrowded roads and busy airports,'' said U.S. Sen. Barbara Boxer (D-Calif.).

But calls for such a massive investment in rail bump up against an unpleasant reality facing many politicians: Money is short for other critical needs.

"To start a hole for a shiny new toy with only a few percent of the needed money doesn't make sense to me," said Assemblywoman Diane Harkey, (R-Dana Point), who led an unsuccessful effort to defund the project. "I don't know where we are going to get the money."

ralph.vartabedian@latimes.com

dan.weikel@latimes.com

richard.simon@latimes.com

Times staff writer Patrick McGreevy contributed to this report.