California’s High Speed Trains Go Off the Rails

The news and evolution of California’s troubled high speed rail project continues to get worse and worse.  It is helpful to look at the project in perspective, and also to understand the not just one or two but six areas of – let’s put this politely – ambiguity which obscure an accurate understanding of the project.

1.  Cost

The cost is of course a very central part of the challenge, although as with anything you ever buy, the overall issue isn’t just what you’re paying, but also what you’re getting in return.

But let’s start with a look at the cost alone and see how that has shape-shifted over the years.

In 2008 – a long twelve years after the California High Speed Rail Authority (HSRA) was first established, their findings culminated in a voter approved proposition (1A) authorizing $9 billion in bonds to pay towards the project, which, voters were assured, would cost $33 billion in total.  The complete scheme was an 800 mile high speed rail network from San Diego, through Los Angeles, and splitting just south of Merced to go up to San Francisco on one side of SF Bay, and Sacramento on the other side.  The centerpiece would be train service between Los Angeles and San Francisco, a 432 mile route taking no more than 2 hrs 40 minutes each way, station to station.

In 2009, the HSRA updated its costings.  What was sold to the voters as a $33 billion project barely a year earlier, would now cost $43 billion for the ‘first phase’ – a line between Anaheim and somewhere around the San Francisco area.

In 2010, independent analysis suggested the cost would be more like $65 billion.

In 2011, most people – except the HSRA – agreed that the true cost would be around $100 billion.  This is a trebling of costs in three years.

In 2012, the HSRA finally conceded that the project would indeed be a $98 billion expenditure, but made changes to their plans, which they tell us would reduce the cost down to $68.5 billion – a very accurate seeming number but in reality, probably little more than a Wild A–ed Guess (like all their other ‘estimates’).

So the cost has more than doubled, and probably trebled, and the overall project now will provide less than originally promised, too.

2.  Funding

At present, California has landed $3.3 billion in funding from the Federal Government, and has its voter approval for $9 billion in bonds.  That’s a total of $12.3 billion.

Even if the California High Speed Rail Authority’s estimate of a revised total cost of about $70 billion is accurate, where will the other $47.7 billion come from?  California is broke to the point that cities are declaring bankruptcy and the state is wrestling variously with cuts in school hours and/or still more taxes.  Yes, California can no longer afford to educate the state’s children to the minimum standard, but it still wishes to proceed with its high speed rail project.

There are no clearly identified additional federal funds available.  There has been talk of ‘public private partnerships’ whereby private investors might be cajoled into investing into the project, but that is perhaps the worst thing that could be done – private investors would seek realistic rates of return on their investments, and it seems unlikely that the completed rail service would be capable of paying suitable levels of profit to the private investors.

If fares were raised high enough to make the route sufficiently profitable, ridership would drop (people would switch to planes or simply drive – or even take a bus) and then fares would have to be raised higher to compensate, making for even fewer riders, and so on.

So there’s a huge funding hole that currently no-one admits to knowing how to fill.  In round figures, the cost of the project represents almost $3,000 for every man, woman and child in California, whether they be taxpayers or not (and whether they be lawfully resident there or illegal immigrants).  If you’re reading this as a Californian resident, are you ready to send in your $3000 per family member?

3.  The Project Route and Scope

There have been so many changes to where the route will go, what stations will be established, how far the line will go, and when it will get there, that it is extremely difficult to say with any certainty exactly what the cost of the project (whatever that too will be) will buy in terms of completed, operating, high speed train service.

We do know that the mad rush to spend the federal funds before they expire is resulting in a $6 billion ‘line to nowhere’ – a short stretch of track in the middle of the desert between just north of Bakersfield and just north of Fresno.  This track will not be electrified, and will not operate high speed trains, but it will at least solve the state’s ‘problem’ of needing to urgently spend $6 billion.

This is lunacy.  If I said to you ‘I’ll give you $3300, but to get it, you have to add $2700 of your own money to it, and then spend the entire project to build an additional garage at the far end of your property, even though you have enough garaging for your cars already and no road or pathway down to the bottom of your property’ would you take the money and do that?  This is what California is doing – in its greedy eagerness to get $3.3 billion of ‘free’ money from the government, it is spending another $2.7 billion of its own money, and ending up with something of almost no value.

4.  Lead Times to Completion

Voters, in 2008, were sold on the promise of high speed rail, with the core route being Los Angeles to San Francisco in 2 hrs 40 minutes.  So when will that occur (assuming the money comes from somewhere as needed)?

The good news – such as it is – is that work must start on the project within the next month (ie by October 2012) to qualify for the federal funds.  So, four years after the project was initially authorized by the voters, the first shovel will finally turn the first sod.

We’re currently being promised that the first trains (on the ‘line to nowhere’) will commence service a massive nine years later – in 2021.  China can build an 819 mile high speed rail line between Shanghai and Beijing, completely from start to finish, in three years, including building both the longest and second longest rail bridges in the world (plus 242 other bridges of varying length and 22 tunnels).  But California will take nine years to build 130 miles of track in the middle of nowhere.

Fast single train service between Los Angeles and San Francisco won’t commence until 2029 – 17 years from now.  As for the extensions to Sacramento and San Diego, those have fallen off the radar so much that their due dates are now referred to as ‘unknown’.

5.  Travel Time

The people who wrote Proposition 1A which authorized the $9 billion in bond funding were smart enough to make the funding conditional upon the travel time meeting the initially promised 2 hr 40 minute maximum between Los Angeles and San Francisco.

So, naturally, all the changes in track routes, stops, and so on seem to never have any impact on travel time, which is officially estimated at being 2 hrs 38 minutes.  Oh – how is that estimate arrived at?  The HSRA conceded that it was an ‘optimistic guess’.  A $9 billion bond is being authorized on the basis of an ‘optimistic guess’?

It is clear to all but the most resolutely determined not to see, that the trains will no way do the journey in the promised/committed/guaranteed time.  And even if they did, the economic feasibility of the line has been sacrificed – even the ‘optimistic guess’ has had to be updated so that the trains will make no stops between Los Angeles and San Francisco.

While of course planes do the route non-stop, it is ridiculous that trains should also travel non-stop.  They could double their ridership by adding a couple of ‘collector’ stops as they travel through the Bay area – indeed, a stop by the airport would be good, and a stop in San Jose would seem close to essential.  Similarly, a couple of stops as the train makes it way through the massive metroplex that is Los Angeles would make it more practical for people to get to/from the train (where is the space in downtown Los Angeles for the huge parking lots that would be needed?).

There’s another thing that sabotages this very optimistic travel time estimate.  As part of trimming the project’s cost from $100 billion back down to a claimed ‘only’ $70 billion (but still twice the amount originally promised to voters) the last 50 miles of track in to San Francisco will now be shared with Caltrain commuter trains.  That’s a bit like allowing trucks merging on and off the freeway to do so via the fast lane, and makes it difficult/dangerous for the fast trains to remain at fast speeds, and for the slow trains to avoid them.  The universal expectation is this will add at least 20 minutes to the travel time, but HSRA is sticking to its 2 hr 40 minute promise, without which the bond funding would dry up.

6.  Ridership

We have touched on several elements of ridership concern already – ridership is very much dependent on the time it takes by train compared to other forms of transportation, and to the overall convenience for the entire travel transaction (ie, all the travel from leaving home to arriving at your meeting/hotel/whatever and vice versa, including getting to stations/airports, parking, taxis, rental cars, check-in times, security screening, delays, luggage, and whatever else).

It is also clearly dependent on there being train stations/stops close to where you want your journey to start and end, on the frequency of trains scheduled, and – oh yes, let’s not forget about the price of the fare, too.

Forecasting ridership numbers is something that most public transportation bodies seem to always get wrong – and, by some very strange circumstance, their forecasts invariably end up being extraordinarily optimistic compared to the actual realities of riders who turn up.  So anything we’re told needs to be taken with a grain of salt.

But perhaps eager to justify their huge fees, ($185 million this year alone for consultants to do ‘project management’ and ‘public outreach’ – this last being in large part propaganda to try and win back the support of the Californian public), consultants contracted by the California High Speed Rail Authority have come up with apparently detailed multi-page models of what they think ridership might be.

But there are some problems to these models.  The major ridership projection model was done back in August 2006 – six years ago.  A further model released in April 2007 was widely challenged as being inaccurate, but has underpinned all ridership claims made subsequently.

The model’s logic is complex, but it embodies some interesting assumptions – for example, when considering how many people would switch from driving their car to taking the train, the model recognized that the higher the cost of gas (and assuming train fares didn’t rise proportional to gas costs) then the greater the likelihood that some car passengers would switch to train travel, simply to save money.

A key part of this however is what the projected cost of gas would be that the model used to make a guess as to the percentage of people switching from cars to trains.  Now, I know what you’re thinking – gas was cheap back in 2006 and 2007, so maybe they lowballed the cost of gas compared to the $4 and up prices we have to pay in California now.

Actually, quite the opposite.  The model uses a complex calculation, but in some scenarios, it is using an effective assumption that the cost of gas would be $40/gallon!  For sure, people will rush to take trains if gas is $40/gallon.  But does that strike you as a fair or reasonable assumption to base a $100 billion project on?

The claimed number of riders on the system is vague and imprecise.  Are we talking only about people traveling between SF and LA?  How do we count someone who only travels half the way (mind you, that would be difficult on a train that makes no stops en route!)?  And so on.

At one time there was a claim by the HSRA that the line would attract 66-97 million riders a year (other analysts suggested perhaps 23-31 million, about a third as many).  The 44 million riders was from the study that used the impact of $40/gallon gas to help boost its projected numbers.  A current claim is for 14-24 million riders.

Whatever the actual number may be, we can be certain that taking out stops and lengthening the total travel time will definitely reduce the actual ridership.

And what about the cost of a ticket?  That too clearly has a major impact on the number of people choosing to travel by train.  The probable costs of traveling on the train are unclear, which leads to the next point.

7.  Ticket Prices and Project Profitability

At one stage, it was suggested that for ‘best results’ (we’re not sure if this means the maximum profit, or the most riders at operational breakeven, or what) fares should be pegged to 85% of the comparable airfare.

We certainly agree that there needs to be some linkage between the cost of a train ticket and an airfare, and for the purpose of this very broad look at the subject, maybe we can even accept that the 85% relativity makes sense (with the apparent typical cost of an airfare being around $200 at present, implying about $170 for train).

But, in every country, everywhere in the world, whenever a high speed train service has opened up in competition with existing air service, what do the airlines immediately do?  Yes, they cut their fares, and sometimes by as much as 50%.

Suddenly we go from $200 airfares and $170 train fares (15% lower) to $100 airfares and $170 train fares (70% higher).  That’s not going to work.

So of course, the train fares have to drop to.  Now – here’s an interesting point.  Is the relevant differential the 15% difference between $200 and $170, or the $30 of absolute difference?  Our guess is that people don’t think ‘It is worth saving 15% to accept the train instead of plane’ – we feel that people are more likely to think ‘If I can save $30, I’ll take the train’.  In other words, if the airfare drops to $100, maybe the train fare needs to drop to $70 (preserving the $30 difference) rather than to $85 (preserving the 15% differential).

There is a silver lining to this cloud – if the travel costs between the two cities halved, a lot more people would travel each way, each day, and with probably lower variable costs per passenger, that would benefit the trains more than the airlines.  But let’s leave that to one side for now and keep it up our sleeve as a trump card to offset some of the Joker cards not yet played in terms of cost over-runs, schedule slowdowns, and so on.

We’re as doubtful about any operating profit projections as we are about the upfront capital cost projections, but we would like to ask one question.  If the cost per ticket reduces to less than 50% of the level currently projected, what are the chances of the service ever getting close to operationally profitable?

Our point is simple.  Whatever the numbers for fares, riders, operating costs, and everything else, we predict with an almost certainty that the project will not be and never will be truly profitable – by which we mean providing a return on capital invested, covering all operating costs, depreciation, and ongoing maintenance and development costs.  This should not be a surprise – it is almost the rule, everywhere in the world, that rail services are not truly profitable, and most countries accept that as a social cost/benefit.

So we’re unhorrified at the thought that this project too will probably lose money for ever after.  But that doesn’t seem to be the promise being made to the California taxpayers and voters.

The Truth Will Out

Don’t get us wrong.  If we lived in California, and if we were 100% guaranteed an 800 mile, high speed rail project with journey times between SF and LA of 2 hrs 40 mins or less, and with stops along the way, with a cost to the state of only $9 billion and a total project cost of $33 billion, we’d have enthusiastically voted for it, back when Proposition 1A was voted on in 2008, as well.

That’s a steal of a deal, and a great return.  Who cares if it breaks even or loses money.  It’s a tremendous investment for the future transportation network in California and across the country as a whole.

But, despite the promises made in 2008, that is not what the project is evolving into.  The total project cost has at least doubled and may end up three or more times the initial promised cost.  As for California’s share, rather than being $9 billion it could be $65 billion or more.  No-one really knows (and not many seem to care, either).  And the 800 mile network and fast service between SF and LA – well, the less said about both those claims, the better.

Slowly the general public is coming to realize the growing discrepancy between the initial promises made to buy their votes, and the reality of how the project is now evolving.  A recent LA Times/USC showed that 59% of Californian voters now want to cancel the project.

A recent CA Senate vote had the Senate’s entire high speed rail oversight group, Democrats and Republicans, voting against commencing the project (but overall the measure to authorize the start of work on the ridiculous ‘line to nowhere’ passed by one vote).

The project as it now is, and as it will continue to become, is something the state can’t afford and the people don’t want.  Why is it still going ahead?

For more information supporting the concept, you can turn to the California High Speed Rail Authority’s site, and for a balanced look at the claims, see this website that seeks to rebut some of the more fanciful claims of the HSRA advocates.

And if you’d like a real laugh at the extraordinary disconnect between reality and the fevered visions of high speed rail advocates, go to the US High Speed Rail Association’s website, and have a look at their graphic showing their projected growth in high speed rail track around the country.

By 2015, they predict we’ll have in the order of 5,000 miles of track (that’s pretty impressive seeing as how there is no high speed track currently under development).  Showing the nonsense of this prediction, it includes the entire 800 miles of the Californian project, none of which will be completed by then, and also includes the now completely cancelled rail project in Florida, the equally cancelled high speed rail in Wisconsin and, again, the cancelled high speed rail in Ohio, as well as other projects elsewhere in the country that haven’t been considered at all at this late point in 2012.

By 2030 they are saying we’ll have 17,000 miles of high speed track.  We’re more likely to have shuttle service to Mars than to have 17,000 miles of high speed rail in the US by 2030.

Summary

Most people like trains.  Most people recognize the potential benefits of high speed rail as a new way to travel medium distances (ie at least 100 miles and probably no more than 500 – 750 miles).

But the way to convince the country on the benefits of high speed rail is not to sell them a false bill of goods that will inevitably fail to meet all the key promises initially made.  That leads to disappointment and disillusion, and destroys the nation’s confidence in and support of high speed rail.

Tell us the truth.  Get our support for the reality of high speed rail.  We truly want to join the rest of the world and discover for ourselves the benefits of high speed rail, especially at a time when air travel is getting more and more unpleasant, the roads more crowded, and gas more expensive.  But – tell us the truth.