High Speed Rail Around the World Requires Government Subsidies

Morris Brown
Founder of DERAIL, a grassroots effort against the California high-speed rail Project

A bedrock contention of the California High Speed Rail Authority states when the California system is finally up and running, the system will operate with a profit.  Indeed, the Prop 1A bond act approved by the voters in 2008, mandates the system run without any operating subsidy.

The issue keeps popping up, the most recent time being in the hearing of the Assembly Budget Sub-committee #3 on April 6th during a discussion between Assembly Jim Patterson and Authority Chair Dan Richard.

Video of this discussion can be found at here.

At about 12.5 minutes into this video excerpt there is this exchange: (un-official transcript)  

Patterson: Do you know of any. High speed rail operations in the world that make substantial profit 

Richard: Actually. All of them virtually all of them. Make an operating profit. Which means. That once the capital is expended. That they operate without any further subsidy and they throw off excess cash. A couple of them actually throw off enough excess cash to pay back some of their capital cost. We’re not suggesting although we kind of think we might get there but we’re not suggesting that’s the case because of that fact Sir that is why the authors of the bond act put in the requirement that there would be no operating subsidy because they didn’t think there needed to be because they looked at the experience around the world 

Where does Chair Richard get this information?  He and others, from the Authority, often repeat this myth.

There are plenty of studies which show that almost all HSR lines world wide require operating subsidies from their Governments.

Most recently the Authority received a response from the Cintra group replying to the Authority’s request an Expression of Interest.

The response (secured via a Public Records Act request to the Authority) from Cintra can be viewed here.

On Page 15 of this document we read:

Cintra Ferrovial

Farebox/Operating Revenue

Comment: We have reviewed data from the International Union of Railways (Sept. 2014) which analyzed all 111 high speed rail lines in the world. Of the 111 train lines, only 3 make an operating profit and one breaks-even. The remaining 107 high-speed rail lines require large government subsidies from both general taxpayers and drivers. The HSR lines that break-even or turn an operating profit have a different dynamic than CHSR, in that these lines are 30-50 years old and have much higher density of population in the areas that the train would serve. We believe it is highly unlikely that the CHSR will turn on operating profit within the first 10 years of operation. More likely, CHSR will require large government subsidies for years to come. 

2 Make an Operating Profit: France/TGV (Paris Sud), Japan (Shin Osaka), US (Acela Northeast Corridor). Break-even: Japan (Hakata)

The highly respected International Union of Railways (UIC ) issued this report, yet Chair Richard and others from the Authority continue to claim profitability for the California HSR line. The UIC is so highly regarded, that the Authority has itself used its services and knowledge to confirm certain procedures the Authority was planning to implement.

The Authority’s new Draft 2016 Business plan shows the first operation of the High Speed Rail will be a line from North of Bakersfield to San Jose, and the Authority claims this line will run without a subsidy and indeed be profitable.

We are talking about the expenditure of over $20 billion to implement just this corridor, using Prop 1A bond funds, Federal Funds and Cap and Trade funds.  The proposed financing plan would have California residents repaying bond principal and interest through 2050.

The net result seems clear.  If allowed to proceed, California will end up with the train needing a government subsidy to operate. This is illegal under terms of the Voter approved Prop 1A bond act.  The project needs to be stopped now.

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