Questions & Answers

Financing/Costs

What will it cost to build the California high-speed train system?

The most current estimated cost to build the 800-mile system is about $45 billion. Once built, the system will not require operating subsidies and will generate over $1 billion in annual profits.

The longer California waits to implement a high-speed train system, the more it will cost to construct. Every year that California waits to implement the high-speed train system, inflation causes the cost to construct the system to escalate. Development and other encroachments on potential high-speed train right-of-way also increase the expected costs.

In Europe and Asia, high-speed train systems do not have a history of cost overruns. While the Chunnel in Europe did experience considerable cost overruns, this project was one of the most unique and complex construction projects in the history of mankind and among high-speed train projects. The cost and ridership projections for most of the high-speed train projects in Europe and Asia have been reasonably accurate.

The capital costs developed by the Authority are representative of all aspects of implementation of the proposed HST system, including construction, right-of-way, environmental mitigation, and design and management services. The construction costs include procurement and installation of line infrastructure (e.g., tracks, bridges, tunnels, grade separations, and power distribution); facilities (e.g., passenger stations and storage and maintenance facilities); systems (e.g., communications and train control); and removal or relocation of existing infrastructure (e.g., utilities and rail tracks). The right-of-way costs include the estimated costs to acquire properties needed for construction of the HST infrastructure. Agency costs associated with administration of the program (e.g., design, environmental review, and management) are estimated in terms of add-on percentages to construction costs, and a contingency is added based on the total construction and right-of-way costs. The unit costs for implementing high-speed trains are well known based on foreign experience and from other major construction projects in California – and have been extensively peer reviewed.

Will the system require public financing?

Yes, without state support for construction, the system will not be built. However, unlike other forms of transportation, once the system is constructed, it will not continue to be a burden to taxpayers. Users of the system will cover the operations and maintenance of the system with their fares. Moreover, the significant revenue surplus (greater revenues than operating costs) will attract the private sector to pay for part of the capital costs, and the direct benefits of the system will greatly outweigh the costs (by at least 2 times as much). The California High-Speed Train Project is an exceptionally commercially viable project.

Where will the financing come from?

The Authority awarded a Financial Planning contract in late 2006 to a team of financial experts. In May 2007, the Authority published the “High-Speed Train Preliminary Funding Strategy and Financing Plan”. This plan concluded that the project’s funding will likely comprise of private and public sources; however, support from local, state and federal sources will be particularly important in early development. It also concluded that the State can issue the $9.95 billion in GO debt scheduled on the November 2008 ballot, without exceeding the Administration’s current debt capacity guidelines.

The California High-Speed Rail Authority is actively pursuing a multi-track financing strategy for the planning, design and construction phases of the project, including three tiers: state and local funding, federal funding and “P3”- public-private partnerships.

State and Local Funding: $9.95 billion general obligation bond (Proposition 1A) is set on California’s November 2008 ballot, asking voters to make California the first state in the nation with intercity high-speed train travel. This bond measure is within the Administration’s current debt capacity guidelines and would fund the state’s portion of the construction cost of the project from Anaheim/Los Angeles through the Central Valley to San Francisco. The bond will also infuse local transportation agencies with nearly $1 billion for improvements to local and regional passenger rail projects that complement and connect with the high-speed train system. Local funds are anticipated where the high-speed train system shares corridors with existing services (such as Caltrain between San Francisco and San Jose and Metrolink between Los Angeles and Anaheim), and to help finance high-speed train station areas.

Federal Funding: Federal matching funds are expected to finance a significant portion of the construction cost. The targeted federal funding would come in part from existing program funding sources, but would also require the creation of new grant allocation programs designed specifically for high-speed trains. On October 30, 2007, the United States Senate passed the Passenger Rail Investment and Improvement Act of 2007, a multi-year piece of legislation that provides increased funding for the nation's rail system. This bill (H.R. 2095) was signed by President Bush on October 16, 2008 and creates a framework to provide a direct means of funding high-speed trains that had not existed at the federal level.

High-speed trains are strongly supported by many of California’s Congressional Delegation. Congressman Jim Costa (20th District) is taking a leadership role in securing federal support for the California High-Speed Train Project. In June 2007, a bipartisan letter was sent to Governor Schwarzenegger signed by two thirds of the California Congressional delegation urging the Governor to support the statewide high-speed train proposal and pledging to work with the Governor at the federal level for financial support of the project. Senators Diane Feinstein and Barbara Boxer are strong supporters of high-speed trains for California as is the Speaker of the House, Congresswoman Nancy Pelosi.

Public-Private Partnerships “P3” Funding: The Authority’s finance team anticipates that the commitment of state and federal dollars will attract private sector funding. The Authority’s finance team has identified a broad array of public-private partnership opportunities, including project debt financing, vendor financing, system operations and private ownership.

In March 2008, the Authority announced the release of a Request for Expressions of Interest (REFI) for Private Participation in the Development of a High-Speed Train System in California. Through the responses to the REFI, the Authority gained a better understanding of how the Project and State can benefit from private sector participation while also garnering an appreciation for key considerations that may encourage or dissuade private sector participation, such as phasing, timing and risk. The Authority sought input from respondents as to potential interest in participating in the development aspects of a high-speed train system, including perspectives on project delivery methods and private project financing.

What is the cost of not building the high-speed train system?

The estimated $82 billion ($2003) needed to expand our highways and airports to meet a similar demand expected to be carried by the high-speed train system is a very conservative figure. The analysis behind this conclusion was part of the Authority’s certified Statewide Program EIR/EIS, and was extensively peer reviewed by other agencies, organizations, and the public.

A critical part of the Authority’s and Federal Railroad Administration’s (FRA’s) Statewide Program EIR/EIS document (certified November 2005) was the development of a “Modal Alternative” to compare against the High-Speed Train Alternative and the No Project Alternative. The Modal Alternative consists of hypothetical future expansions of highways and airports serving the same geographic areas as the proposed high-speed train system. The Modal Alternative was developed to provide equivalent capacity to serve the representative demand for intercity travel that was derived from ridership forecasts for the high-speed train system operating in 2020.

Using the representative high-speed train travel demand, rather than the high-speed train capacity for defining the highway and air transportation improvements was a very conservative assumption. The high-speed train alternative would have the capacity to carry at least three to four times the 68 million annual passengers forecasted to use the high-speed train system by 2020. Developing a modal alternative based on a level of capacity similar to the high-speed train system would have resulted in much more extensive highway and airport improvements – so much so that it would have been considered unreasonable.

In developing the Modal Alternative, analyses were conducted to identify the most reasonable, feasible, and practicable highway and air transportation improvements that could best meet the purpose and need and objectives. The improvements considered for each mode are capacity oriented (e.g., additional traffic lanes for highways with associated interchange reconfiguration and ramp improvements; additional gates and runways for airports with associated taxiways, parking, and passenger terminal facilities), and this corresponds to the representative demand for a proposed high-speed train system. All the assumptions towards developing the Modal Alternative are presented in the Statewide Program EIR/EIS (see Chapter 2, and the Appendix for Chapter 2).

The highway component of the Modal Alternative consists of over 2,900 lane-miles of highway capacity added to the No Project highway network. In addition, the air transportation component of the Modal Alternative consists of 5 new runways and 90 new gates added to California’s major existing commercial airports. To limit potential cost and environmental impacts, the capacity improvements focused on expanding existing transportation facilities instead of creating new transportation corridors.

The Final Statewide Program EIR/EIS Document is a legal environmental document that meets all CEQA and NEPA requirements. This state and federal document was certified by the Authority and the FRA without any legal challenge. This document was extensively reviewed by public agencies, organizations, and the public. The document includes the thousands of comments received on the Draft Statewide Program EIR/EIS and detailed responses to each comment. The FRA was the lead federal agency for the Statewide Program EIR/EIS document, and the Federal Highway Administration (FHWA), the U.S. Environmental Protection Agency (USEPA), U.S. Army Corps of Engineers (USACE), Federal Aviation Administration (FAA), Federal Transit Administration (FTA) were all cooperating agencies for this EIR/EIS. These agencies entered into a Memorandum of Understanding (MOU) with the FRA for the Statewide Program EIR/EIS to outline their responsibilities as cooperating agencies. The FHWA and FAA responsibilities included providing input on the development of the Modal Alternative (for the highway and aviation components respectively), and the USEPA and USACE concurred with the project alternatives (high-speed train, Modal Alternative, and No Project) as defined in the EIR/EIS.