Members of California’s legislative assembly praised the state’s High Speed Rail Authority for submitting a more complete business plan for their ambitious 800-mile high-speed rail network, even as the project’s total cost escalated by about $10 billion.
“It’s clear from the Legislature’s earlier admonitions for a more complete plan that… I think that the plan is much improved,” Mike Eng, chair of the assembly’s Transportation Committee, said at an 11 January hearing on the plan, according to a quote sheet compiled by the High Speed Rail Authority.
California High Speed Rail:
“In general, it is a much more refined business plan, which is why the leaders are more comfortable with it,” said Sasha Page, vice president at Bethesda, Maryland-based Infrastructure Management Group and the head of the financial advisory team for the authority.
The authority’s 2008 business plan estimated building out the entire high speed rail system would cost $33.6 billion – nearly $9 billion less. Page ascribes a portion of the increase to a change from inflation-adjusted to nominal dollars. But certain segments have also gotten more expensive to deliver due to changes in engineering and the train’s intended route, or alignment.
Even as the cost of the project escalates, though, Calfornia seems more confident in its ability to attract federal and private capital to the project. The 2008 business plan estimated the federal government would fund between $12 billion and $16 billion of the cost of the project; the 2009 business plan factors in about $17 billion to $19 billion in federal funding. Estimated private sector capital jumped from a range of $6.5 billion to $7.5 billion to $10 billion to $12 billion in the 2009 business plan.
Page ascribes the increase in federal funding to the Obama administration’s plans to devote more money to the sector. “We had no [high speed rail] programme a year ago and now we have a programme that could promise up to $13.5 billion over five years,” he said.
The increased share of private sector capital is due to “higher revenues from the project,” Page said. Previously, based on a fare cost that stood at 50 percent of the comparable economy class airline ticket, the Authority estimated 2035 net revenues of $1.2 billion for the project, in 2009 dollars. That figure, based on an 83 percent cost of the comparable economy class airline ticket, stands at $1.8 billion, meaning that there is more money available to pay back potential investors.
“We believe that demonstrates a greater ability to obtain private funding,” Page said.
The authority is next turning its attention to creating a detailed “investment-grade” forecast for the high speed rail project, which will provide investors with more detailed assumptions and figures on which to decide whether the project is bankable. The authority is close to selecting a consulting firm to conduct the forecast, Page said, declining to name the firm.
Additionally, the authority expects to begin the procurement process for the first four segments of the system in the next two years, pending the outcome of its application for federal stimulus funds, which would be used to fund the segments.
The Federal Railroad Administration expects to announce the winners of the federal high speed rail stimulus funds by the end of the first quarter of this year, according to an administration spokesperson.