Financial analysis shows state-funded rail could cost $203 billion, extra $6.5 billion in annual debt payments

Today, California Common Sense (CACS) released a four-page financial analysis of the pending California High-Speed Rail (CA HSR) project. The article explains how the State – under the auspices of the California High Speed Rail Authority (CHSRA) employing project management firm Parsons Brinckerhoff – has strayed from this original plan, and the consequences this will have for the California state budget.

CACS estimated a revised construction cost figure for the high speed rail, taking into account the cost inflation that typically occurs in large transportation infrastructure projects – 45% on average. Applying this 45% inflation factor to the CHSRA’s April 2012 budget of $68 billion, CACS arrived at a realistic potential total cost of $99 billion for the blended HSR project.

Given the already secured financing, CACS modeled two scenarios in which the $82 billion in unsecured funding is either 1) split evenly between California and the federal government, or 2) is covered by the state entirely. In either scenario, to fund the CA HSR project, California must sell additional bonds beyond those approved by Proposition 1A. This is contrary to CHSRA’s reiteration in every released budget that federal grants will cover the bulk of the construction cost and that no further state funding will be necessary.

By 2028, the second scenario predicts annual debt payments of up to $6.5 billion on top of existing debt payments, for a total financing cost of as much as $203 billion from 2013 to 2058. This is funding that could potentially go to other local and regional transportation projects that address the same goals.

Finally, the analysis showed that CHSRA’s proposed cheapest ticket price for San Francisco to Los Angeles is less than half the average cheapest international HSR ticket on a passenger-mile basis. Furthermore, the CHSRA’s ridership projections are significantly lower than those of the international systems. As operating subsidies are prohibited for CA HSR, these findings raise the question of how CHSRA could operate profitably with lower ticket prices and lower ridership than existing systems.

You can see the full study here.