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Rail News: High-Speed Rail

Report: CHSRA's ridership, revenue models don't add up; CHSRA says report 'findings' are challenges they continue to address


Today, a group of researchers released a report that calls into question the California High Speed Rail Authority’s (CHSRA) business model, including ridership and revenue figures, cost estimates and the ability to secure private financing.

The report, “The Financial Risks of California’s Proposed High-Speed Rail,” was authored by Stanford Graduate School of Business Professor of Public and Private Management Alain Enthoven, former World Bank Analyst William Grindley and Silicon Valley finance and sales consultant William Warren.

Among the findings:
• There is little, if any, chance the system will pay for itself.
• Ridership estimates are “far too optimistic,” the report concludes.
• Estimated Phase I capital costs — which have increased from $33 billion to $42.6 billion since voters passed Proposition 1A in November 2008 — should be significantly higher, based on the history of cost overruns on other “megaprojects.” The cost for Phase 1 could soar to between $62 billion and $213 billion when comparing CHSRA’s estimated costs with real-world outcomes.
• Revenue assumptions too high and operating expenses are too low.
• Complete high-speed rail funding has not materialized, nor is it likely to be forthcoming.
• Discussions with financiers such as China, France, Germany or Japan — or such sovereign financiers in combination with foreign builders, operators and private financiers — could be a “dangerous foray” into using “creative financing” that could result in an “excessively leveraged” system.
• Unless the federal government supplies CHSRA with the complete package of $19 billion in grants toward the capital costs needed, the high-speed system will never have a positive cash flow.

CHSRA spokesperson Rachel Wall didn’t dispute the report, but rather said some of the report “findings” aren’t findings at all, but well-known facts — specifically, the claim that complete funding for the project is not currently available. But the authority is well aware of the challenges facing the project and is working to address them, she says.

“The authority has been saying for more than a year that it's critical we receive $17-19 billion in federal funding; obtaining funding for the project is a known challenge. We will continue to compete for federal funding and advocate for an ongoing federal funding stream for high-speed rail,” Wall said in an email. “The fact that we don't currently have $43 billion isn't a ‘report finding’ but a statement of fact. Unfortunately for this report, it isn't news that we haven't secured financing for the entire project at this phase — that's been well-known and is normal for infrastructure projects that are still in the environmental review phase.”

To download a copy of the full report, visit

Contact Progressive Railroading editorial staff.

More News from 10/12/2010