Lots of Private Interest in California High Speed Rail

Mar 18th, 2011 | Posted by

Yesterday the California High Speed Rail Authority announced the results of its Request for Expressions of Interest – and it should be no surprise that the private sector responded strongly:

More than 1,100 expressions of interest flooded into the California High-Speed Rail Authority’s offices in Sacramento prior to a Wednesday deadline – from businesses ranging from self-employed entrepreneurs and small businesses to multinational corporations and large construction firms. The submissions were in response to a “Request for Expressions of Interest” issued by the Authority in February, asking that the private sector put in writing their desire to help develop California’s high-speed rail project.

In the responses, companies addressed the design, construction, operation and funding aspects of both the initial construction segment in California’s Central Valley and the overall first phase of the statewide project stretching from the Los Angeles basin to the Bay Area. The responses will help guide the next stages of the formal procurement process and the packaging of future bids.

Here we have very clear evidence of private sector interest in this project. It’s not just businesses looking for contracts, but funders looking for an opportunity to partner with the Authority to help build the system – because they know it will generate a lot of riders and a lot of revenues.

The Authority’s press release included some quotes from the private sector and other partners:

“We look forward to being a participant in and working with the California High-Speed Rail Authority in making this project the first very high-speed success story in the US.”

-Guillaume Mehlman, President, ALSTOM Transportation Inc.

“We are prepared to immediately partner with the Authority in developing an implementation approach that builds on current passenger rail transportation successes such as the Capital Corridor and San Joaquin services, just to name a few.”

-Albrecht P. Engel, Amtrak

“This prospect is tremendously exciting in that it links the major cities of California in a visionary and market changing way. This is an opportunity to which VRG is prepared to commit substantial resources to, in order to assist the Authority in achieving its objectives. We believe that California is a market very well suited to High Speed Rail.”

-Virgin Rail Group

“We are excited for the opportunity to participate on such a monumental project.”

-Bill Trombley, Director of Preconstruction Services, Skanska USA Civil West California District

Some of those quotes are more specific than others, obviously, but I thought the comments from Virgin Rail Group were particularly interesting. They are saying, quite clearly, that they can bring money to the table. That’s not new – Richard Branson expressed interest in our project over two years ago and reiterated that commitment in 2010.

Certainly the details matter – and we don’t really have those yet. But that will get fleshed out in time. What this response shows is that the private sector is very interested in – and confident in – the HSR project here in California. That won’t stop right-wingers from attacking the project, just as it didn’t stop Florida Governor Rick Scott from killing their HSR project even though the private sector was willing to help fund the project and pay any cost overruns. But it should remind us of the truth, that HSR is popular in the private sector, just as it is with the voters of California.

  1. D. P. Lubic
    Mar 18th, 2011 at 21:41
    #1
  2. Jack
    Mar 19th, 2011 at 00:10
    #2

    Morris et al I just have to say.

    Ha! Ha!

    Where is your no private company will invest in CAHSR argument going to go from here? 1100 wow, no one in their right mind would put money in this Boondoggle right???

    CAARD can’t even refute this evidence.

    Now if we could just convince our own government….

    YesonHSR Reply:

    Morris is like the Titanic.. desperate and sinking and throwing chairs over. Arrogant and soon to wake up..

    VBobier Reply:

    It would be nice if this could Torpedo His argument on this, Or maybe It will be His Iceberg?

    joe Reply:

    NorCal Peninsula NIMBYs need to wake up.
    Assume each household has 2 drivers a car per adult.

    San Mateo County Planned mega projects
    Saltworks, Redwood City 8,000-12,000 UNits
    Baylands, Brisbane 4,434 UNits
    Bay Meadows, San Mateo 1,171 UNits

    This misses this construction in his locality:
    Menlo Park PENDING PROJECTS:

    26 residential units on 1.23 acres between College Avenue and Partridge Avenue on El Camino Real.
    108 condo units and 24,925 square feet of commercial space near downtown and the Menlo Park Caltrain station. (Duh!)
    56 new residential units. This project is under construction.

    THEN there is this 5 Billion improvement to the adjacent Stanford Hospital.

    The proposed Stanford University Medical Center expansion project, which has been given an estimated price tag of $3.5 billion, would put almost 10,000 additional cars a day on Menlo Park streets during evening rush hours and about 5,000 cars in the morning, according to a traffic impact study prepared for the city by the consulting firm TJKM.

    NIMBYS can try to stop HSR and undermine CALTRAIN, San Mateo County created the CALTRAIN shortfall that cuts service and pushes people into cars.

    There will be grid lock. The sooner Morris accepts the facts, the more likely he’ll want to see better rail service to help maintain property values/quality of life and sanity.

    joe Reply:

    I missed this NIMBY Gem.

    “On July 27, 2010 [Menlo Park] Mayor Richard Cline responded in writing to the Draft of the Final EIR, [Stanford Hospital Expansion] noting that numerous items in the project proposal relied heavily on hospital visitors and employees using Go Passes and other methods of transportation, instead of their personal vehicles. Cline expressed concern that these traffic mitigation measures did not take into consideration the possibility that those methods may not exist if Caltrain becomes defunct.”

    You can see why Peninsula NIMBYs wants to stop rail – forcing car use is a way to use EIRs to halt large projects outside their borders.

    Peninsula cities each approve infill and have pet projects (Facebook comes to Menlo Park) within their tax boundaries. This ad hoc, uncoordinated growth will gradually choke all these cities with cars.

    http://menlopark.patch.com/articles/transportation-commission-skewers-stanford-hospital-environmental-impact-report

  3. YesonHSR
    Mar 19th, 2011 at 00:13
    #3

    Of course every naysayers will spin this as something that is fake.. or that they’re here to steal the voters money.. because it’s not done right it’s not done the way they think.. the will also comment chirping voices that the private sector should pay all of this nevermind the roads and airlines constantly in bankruptcy get government handouts.. or for that matter the oil companies that pay about three cents on the dollar of what they should for the oil leases… stealing from the taxpayer of course.

    joe Reply:

    “Senate approves $15 billion airline bailout” 9/21/2001

    In the wake of last week’s terrorist attacks involving hijacked airplanes, the U.S. Senate passed sweeping legislation Friday to aid the crippled airline industry … the Senate approved $15 billion in financial aid for the airline industry …

    …many Senators raised concerns about bailing out an industry that already had financial problems and questioned why the airlines, not other industries, were receiving taxpayer dollars.”

    http://articles.cnn.com/2001-09-21/us/rec.congress.airline.deal_1_airline-bailout-airline-industry-major-carriers?_s=PM:US

  4. Davide Florez
    Mar 19th, 2011 at 00:42
    #4

    Will someone please tell California Treasurer Bill Lockyer that these Prop. 1A CAHSR bonds can be sold. Apparently Lockyer is responsible for selling them, but he thinks they are worthless junk bonds, that private investors won’t purchase, because CAHSR continues to fail to create a solid business plan for investors. If he can’t sell them, then they are wortheless. Wonder what he knows that the rest of us don’t know…..hmmmm…..worthless junk bonds?

    http://www.nbclosangeles.com/on-air/as-seen-on/NewsConference___California_Treasurer_Bill_Lockyer__Part_3_Los_Angeles-117841823.html

    Peter Reply:

    They’re GO bonds. Investors buying the bonds don’t care what they’re used for, since they’re guaranteed repayment no matter what. I think Lockyer just doesn’t like the project.

    VBobier Reply:

    Yeah I wouldn’t doubt that Lockjaw doesn’t like the project, But then He must have Lead Feet.

  5. Davide Florez
    Mar 19th, 2011 at 00:59
    #5

    Wait, I understand now. Over 1100 individuals, mom and pops, small businesses, etc. have written to CAHSR stating their interest in getting money (contracts) to do work for the CAHSR. Well, duh, there are a lot of unemployed people out there. Where do I sent my letter stating I’d be willing to take a billion or two from them as well.

    What a crock of B.S. from CAHSR’s inept PR company – is it Parson’s Brinkerhoff still, or did the engineers get fired from PR duties, and Olgivie’s got it now? Can’t they do better PR than this?

    This is NOT private industry “INVESTING” in the CAHSR construction project, but 1100 people/companies wanting to “TAKE MONEY FROM” the CAHSR. Come on, can’t they do better than this – particularly the same week the California Treasurer Lockyer says the Prop. 1A (CAHSR) bonds are not selling at all, and are worthless without a half-credible business plan.

    MGimbel Reply:

    I wouldn’t exactly call Alstom and Virgin Rail Group small mom and pop companies.

    joe Reply:

    The best scenario is to have a range of small to large companies interested and competing for business. There could be a challenge to the HSR procurements if they do not engage a range of company types – this is government procurement.

    dave Reply:

    Why don’t you save your bashing for next week when the Authority will publish these requests on their website?

    Elizabeth Reply:

    Do you know if they have plans to do so?

    YesonHSR Reply:

    The press release says couple of weeks for the listings

    morris brown Reply:

    Florez is 100% on target. 1100 somebodies looking for get work, build hardware or whatever, but certainly not to finance the project.

    The old saying is “show me the Bucks”.

    You want to see opposition that overshadows that in the Bay Area or down south, look at the meeting in Merced (5 hours). The Farmers and others there are not going to be (in the words of “Rod Diridon” — over-ridden).

    Link: http://madera.granicus.com/MediaPlayer.php?view_id=16&clip_id=887

    The arrogance of the Authority to just plan to run through Ag land that in cases has been in families for 5, 6 of 7 generations is amazing.

    BruceMcF Reply:

    1,000+ somebodies looking for work
    The numbers of companies willing to bring big slabs of money on the table is much smaller.

    Therefore …

    … huh? We have a combination of over 1,000 companies looking for work, and some private companies willing to bring big slabs of money to put on the table to buy into the project, and that is somehow a BAD thing?

    Eric M Reply:

    They are hypocrites. There was far more AG land given up to home developers than there ever will be for the right-of-way needed through the valley. They complained about the water supply at the meeting, but no mention of them selling MASSIVE amounts of land in the last 10-15 years for homes, WHICH WILL TAKE AWAY FROM THEIR PRECIOUS WATER SUPPLY. Also, those farmers receive massive subsidies.

    Morris Brown said:

    “The arrogance of the Authority to just plan to run through Ag land that in cases has been in families for 5, 6 of 7 generations is amazing.”

    How about all the farm land and orchards that were destroyed to make homes along the peninsula EXACTLY WHERE YOU LIVE, taken away from those multiple generation of farmers?!!

    You are the arrogant one Morris Brown.

    YesonHSR Reply:

    I think I hear Celine Dion singing in the background!!!

  6. joe
    Mar 19th, 2011 at 01:53
    #6

    Florez;

    “This is an opportunity to which VRG is prepared to commit substantial resources to, in order to assist the Authority in achieving its objectives.”

    Maybe VRG should have used the CAPS lock key.

    Globally, there is a large experience base and expertise with HSR technology and construction, it’s been generated with over for 40+ years of operations.

    The more interest in CA, the greater the talent pool, the less likely there will be problems managing the project and unanticipated events which drive up costs.

    Rail isn’t hard or complex engineering. It just looks big because we’re so far behind the rest of the world.

    David Florez Reply:

    Joe, this State office (named Lockyer) is apparently the California representative responsible for actually selling to private investors the Prop. 1A CAHSR bonds. Apparently, as of March 2011, some 2.5 years after Prop. 1A passed, Mr. Lockyer states that he can’t sell any of these bonds because CAHSR is more a PR machine, devoid of a “solid business plan” or anything resembling a half-baked business plan. Can you please try to tell me how the California Rep. responsible for selling these bonds, and has had discussions trying to sell them to private investors, is somehow wrong or ill-informed?

    http://www.nbclosangeles.com/on-air/as-seen-on/NewsConference___California_Treasurer_Bill_Lockyer__Part_3_Los_Angeles-117841823.html

    Peter Reply:

    Again, they’re GO bonds. It doesn’t matter if they have a business plan or not. Investors will lap them up because they’re guaranteed repayment no matter what.

    joe Reply:

    David; The Treasurer, Lockyer, said he supports HSR. He also said he has sold bonds to finance the planning.

    I think he is right, the HSR Authority has to continue work to refine the total system design and operations. He’s doing his job pushing them to get a plan in place.

    Please do not mistakenly implying HSR needs a business plan that produces a profit for Bond investors.

    “The new debt from 1A, including interest, must be paid from the general fund.”

    The Bonds will NOT bring in investors to fund and profit share off HSR revenue. No operating revenue will go to 1A bind holders.

    The CA HSR project **has** enough funding to build a working segment to demonstrate the viability of the project to taxpayers and possible investors.

    There is interest in bidding on work and private money investing resources to help build/finance the project.

    Davide Reply:

    Joe, I believe the Central Valley expenditure (what is it, $5.5 or 6 or 7 billion now?) will not pay for actual trains, electrification, or anything resembling a rolling stock. I’m not sure how this large expenditure will be a working segment, when no one can ride it?

    adirondacker12800 Reply:

    It’s going to be standard gauge track with a relatively wide loading gauge. You could put almost any standard gauge train on it, unaltered, and run it. Rumor on the foamer boards is that the Comet 1s that just left New Jersey are destined for California. Hitch ‘em to a spare diesel, voila, service.

    joe Reply:

    “The CA HSR project **has** enough funding to build a working segment to demonstrate the viability of the project to taxpayers and possible investors.”
    David, hmmm maybe this is overstating. You are correct that funding isn’t enough for a compete passenger segment – I wouldn’t throw all money into it. Designing and building stations is important. That’s begun now.

    I do think we have funding to make a usable system to demonstrate the viability of the project to CA for an additional Bond measure or to investors.

    The ARRA segment is stand alone by law.

    American Recovery and Reinvestment Act/FRA Requirements (Pass / Fail Criteria)

    a) Construction must be completed by fall of 2017

    b) The project must have “operational independence”

    In the Central Valley the Amtrak’s San Joaquin’s would offer operational independence by connecting the new infrastructure to the existing BNSF network, on which the San Joaquin service presently operates.

    dave Reply:

    “Rail isn’t hard or complex engineering. It just looks big because we’re so far behind the rest of the world.”

    Exactly what I’ve been saying. Cost overruns are a fact of building anything, but HSR is basic train construction, not space rocket science. Since this project is divided into sections and each section has a budget, keep that budget in check for each section and overall cost overuns should be minimal. The only real threat to a higher price tag is the constant change in route options being selected and each having different construction needs i.e. trench, tunnel, aerial, grade. But Overall it’s just TODAY’s basic railraoad technology wich happens to be modern and futuristic looking. Not like the last Century technology you see today for freight railroad infrastructure, wich hasn’t changed in decades and is like staring into the past.

  7. David Florez
    Mar 19th, 2011 at 08:51
    #7

    In case you don’t have time to watch the full 5 minutes, at 58 seconds in California Treasure is asked “so are investors are they saying, we’re interested if you had a business plan, but it doesn’t look like you guys [CAHSR] know what you’re doing” to which Lockyer replies “uh, yeah, that’s what theyre saying”. Lockyer was then asked “what do you think?” and he says “well, I think the same thing.” He also conceded that “we’ve only been able to sell a very small amount of these bonds” because there is no solid business plan. Doesn’t help when Van Ark goes around Senator Simitian, and works backroom deals with Schwarzenegger to kill any requirements that would have mandated a solid business plan. PR, particularly bad PR, won’t sell the bonds. Fail, try again.

    BruceMcF Reply:

    “Lockyer was then asked ‘what do you think?’ and he says ‘well, I think the same thing.'”

    I’m shocked ~ SHOCKED ~ that a California politician hears agreement with what he already believes. That is so unusual, for a politician to use “generic important people are telling me” to back up his talking point of the day.

    adirondacker12800 Reply:

    One of the reasons he hasn’t sold many bonds is that they haven’t spent much money. It would be really stupid to sell bonds, sit on cash for years, pay interest on the bonds and then begin construction. It makes much more sense to sell the bonds near the time when you need the money and start the interest payments then.

    joe Reply:

    Amen.

    CA has enough problems meeting the ARRA guidelines for obligating and accuring costs with the CA allotment, and the additional redirected OH and WI money. Maybe FL money soon.

    Lockyer wants a better plan before he can raise more with A1 bonds and that’s a message to the HSR Authority to continue work, not to disparage the project – a project he supports.

    BruceMcF Reply:

    Then why is he harping on the business plan? The key question to work on settling is the business model.

    joe Reply:

    You tell me. It means nothing in terms of the viability of the bonds.

    My guess. In this economic climate, future funding is easiest if CA can attract direct investment and that WILL require a business plan.

    BruceMcF Reply:

    That only makes the business model even more fundamental: until it is known what investors will be investing in, whether operators are going to be bidding for a franchise under mandatory service terms, whether operators are going to be bidding for a service contract with a state authority designing the service, determining ticket prices, whether there will be a separate infrastructure authority and whether it will charge access at cost or to generate net revenue …

    … there’s no basis for determining whether private investment would primarily be a consortium organized behind a bidder as operator or whether private investment would primarily be revenue bonding or some mix of the two.

    Lowenthal-style whining about the business plan when the business model has not yet been decided on is absurd.

    Joe Reply:

    I agree, Lockyer whining does falsey imply a problem and plays to the nuts that insist CA can default on debt. CA cannot, by constitution.

    I do think maturing the business plan is important but not when discussing Bonds.

    Tony D. Reply:

    David,
    You’re wasting your time with all of your sudden hot air “against” HSR. Hate to break it to yah, but Prop. 1A past back in 2008; in laymans terms that means the people of this state WANT high-speed rail…sorry. FWIW, when this project does get the requisite private/federal/foreign funds and all route decisions/EIR’s are complete, THE BONDS WILL BE SOLD LIKE HOTCAKES! (that was easy).

    YesonHSR Reply:

    I don’t understand why he made this comment about the bonds.. as far as I know they’re just general obligation bonds backed by the state of California I doubt they’ll even say high-speed rail project on them.. the buyers of the bonds will be paid no matter what happens .. it was not written into the bond issue that money would be paid back from revenues from the system. The junk-bond comment is general California bonds at this point with our media circus funding budget cycle.

    joe Reply:

    I had the same question and thought “He’s the state treasurer.” He has an obligation to ask “What are citizens buying with these bonds?”

    BTW it is in our state constitution that we must pay our debts. Junk-Bond comments are nonsensical and meant to create a phony crisis to attack the middle class a la WI, MI, PN and OH. Thank God Meg lost.

    BruceMcF Reply:

    If he were truly concerned with what the citizens are buying with these bonds that a majority of the citizens decided to issue, he would be pressing for a business model to be decided on, rather than just playing on the empty business plan talking point and trying convince bond markets that the State of California is a serious default risk.

    Davide Reply:

    Guys, Lockyer is the California State Treasurer, and an experience politician who supports CAHSR. It’s his job to sell these Prop. 1A bonds. It doesn’t make much sense to speculate about why he doesn’t understand GO bonds, vs. other bonds, why he doesn’t think this, or that – you are just grasping. Bottom line, no one sells these bonds other than the Treasurer, he supports the project, but states unequivocally that private investors won’t buy until they see a solid business plan, which doesn’t exist. Why are you trying to spin his words? Have HSR produce a solid business plan instead, or is that not possible because this is just a big PR job by the CAHSR, or way to funnel billions into unions that backed CA Democrats and their “sustainability” Big Green movement?

    adirondacker12800 Reply:

    What was the solid business plan presented to investors the last time California sold highway bonds. Or the time before that? Or the time before the time before going back to when California first sold highway bonds?

    Arthur Dent Reply:

    Uh — crap?

    adirondacker12800 Reply:

    So the state frequently sells transportation bonds without a business plan at all. Why would it be a problem for the transportation bonds sold for HSR?

    Peter Reply:

    How many times are you going to repost essentially the same comment on the same post?

  8. Spokker
    Mar 19th, 2011 at 13:57
    #8

    Haha off topic but saw a hilarious presentation today. Pullman wants to run solid gold trains between LA and Vegas. I can’t stop laughing. Will explain more when I get home.

    adirondacker12800 Reply:

    Considering that Pullman ceased to exist as separate company in 1987, that’s gonna be a neat trick.

    Spokker Reply:

    Haha okay, let me expand on this.

    So the train is tacky gold and they showed a mockup consist. It’s basically a Genesis locomotive with a bunch of Pullman-like cars. They think each train is going to attract 1,200 riders, so unless I heard them wrong, that’s insane, especially at their luxury prices.

    They’ll serve absinthe and have some performers on the train, like musicians and such. They’ll have themed cars, which was kind of whatever until they said that there would be an Asian Dragon themed car designed to attract Asian riders, haha, as if you can only attract Asian travelers with cultural stereotypes.

    Here is the web site: http://pullmancompany.com/choice/

    Why can’t we get some basic, non-gimmicky train service between LA and Vegas? You’ve got X trains and gambling trains and now solid gold trains. It’s ridiculous.

    James M. in Irvine Reply:

    That’s just the “Z” Train, re-branded. I still hope the “X” Train can get going in the short term, at least until D-E can get up and running.
    Jim

  9. Anthony
    Mar 20th, 2011 at 13:46
    #9

    Lockyer wants to see CHSR done, that’s no secret. Where did all this come from? The “business plan” he speaking of is . “We want to build this RIGHT HERE and the people that don’t want it can shove it”. In other words there has been nobody that’s taken this project by the horns and forced it to break ground on time, instead of agreeing to build smaller low-cost segments first.

    Lockyer understands and wants to build it all, all at once and that’s the best way to do it. Piecemeal is not the way anybody else has done HSR, why should we do it? It also shouldn’t be shocking that companies and entire nations want to invest in our HSR, you should be flattered.

    There are at least 5-6 companies and 4-5 countries that want to “help” us build it, lets stop the mindless bickering and work on the people that don’t like change and don’t want to pay for it because they won’t personally use it.

    The rest of us will actually USE it, so let’s make sure they understand that and that its shared responsibility

  10. adirondacker12800
    Mar 20th, 2011 at 18:31
    #10

    piecemeal is not the way anybody else has done HSR

    Except for the Japanese, the French, the Spaniards, the Germans, the Chinese…..

    Useless Reply:

    @ adirondacker12800

    > Except for the Japanese, the French, the Spaniards, the Germans, the Chinese…..

    Not in this case, because of the terms of conditions of foreign government loans required to build the CAHSR system. If California was self-financing the system, then they could pick and mix. But not when it is the foreign government financing it. Then all contracts go to the companies of winning bid’s origin as a package.

    After all, Japan is not offering a $20 billion loan(Which maybe in trouble because of recent quake/tsunami/meltdown) so that California could go buy TGV train sets and Chinese railway constructors.

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