CHSRA Releases Draft 2014 Business Plan
Today the California High Speed Rail Authority released its draft 2014 Business Plan. Overall it is a very positive document showing that the cost estimates are largely the same (actually a bit smaller, but not by much) while ridership estimates are higher. It also quantifies the economic benefits of the system, which are an important yet often overlooked part of the discussion.
• The overall cost for the San Francisco to Los Angeles system is now estimated at $67.6 billion. That’s below the $68.4 billion projected in the 2012 business plan.
• 25% higher ridership than previously projected (for the medium scenario)
• 12% economic rate of return
• More than a 3 to 1 return in GDP for the state on their funds for the first construction segment near Fresno
The Authority also found that ridership may be higher for shorter segments, which might actually reduce revenues somewhat. The Low scenario includes a $50 million operating loss for the very first year of operation of the Initial Operating Segment, but that goes away in the second year, typical of rail routes which have a five year curve of fast growing ridership before reaching a plateau. The Medium and High scenarios both have an immediate profit for the IOS.
Of course, profit should be a curiosity, not a core element of analysis. The purpose of building HSR is not to turn a profit, but to carry passengers. The ridership estimates are clear that this train will attract a LOT of people to it.
And if you note, HSR opponents have been silent on ridership for a couple years now. From about 2009 to 2011 that was their go-to attack on the HSR project, that it would fail to attract riders. You don’t hear that anymore, a reflection that even opponents now agree that HSR will of course be widely popular with the traveling public in California just as it is everywhere else it exists.
The business plan did not break much new ground on the question of funding the HSR system. A new financing plan is due later this spring. The draft business plan does indicate the following about using cap-and-trade funds for HSR:
First, combined with the remaining Proposition 1A bond funds, it will allow the Authority to proceed without delay and continue construction past the initial Madera to Bakersfield segment – to tunnel through the Tehachapis to create the first dedicated passenger rail connection between Northern and Southern California. Connecting to the multi-modal transit center in Palmdale, connecting rail service will be available throughout Southern California initially via the Metrolink com- muter rail system.
Second, a committed, long-term source of funding will allow
the Authority to leverage both public and private financing and, depending on the level of commitment, potentially finance the completion of the IOS.
Third, establishment of a committed revenue stream will allow the Authority to immediately engage the private sec- tor in the delivery of the system, bringing both investment and significant cost savings. Other international high speed projects have proven that significant cost savings can come from having long term strategic partners with investment
in the project, that are responsible for designing the most cost effective solutions and responsible to build, install and operate major portions of the system.
Those are some significant, specific benefits of using the cap-and-trade funds for HSR, along with the larger purpose of keeping this important project alive.
I’m still reading through the document and will share more insights and notes in the comments and, if it’s really significant, in an update to the post. Feel free to do the same in the comments.