It will cost how much?

The San Jose Mercury News published an article this past weekend that says the first phase of the high speed rail system from San Francisco to Anaheim will cost more than $73 billion dollars to complete. The authority currently estimates it will cost only $42 billion; a 57% difference. The line between L.A. and San Diego that would potentially go through Alhambra is part of Phase 2 and is not even part of that $73 billion price tag.

via Who will pay for California’s high-speed rail system? – San Jose Mercury News

[I]f the Rail Authority meets its new projected target ($42.6 billion), California’s 520-mile system would actually be cheap compared with the per-mile cost of high-speed rail in other parts of the world.

In fact, it would be one of the cheapest such lines in history.

A Bay Area News Group analysis of high-speed systems around the globe suggests that the project could cost less than the current estimate, as little as $38 billion. But it is most likely to cost more — up to $73 billion, even if built on time.

That analysis is based on the per-mile capital costs of high-speed rail systems built in Europe and Asia in the past decade, as outlined in a World Bank report released last month. The report said costs varied widely depending on terrain, the complexity of engineering work required, how many rail cars were needed and the extent to which routes passed through urban areas.

The newspapers’ estimate also factors in the Rail Authority’s expected inflation and the estimated $3.4 billion in noncapital expenses — like public outreach and salaries for authority staffers — included in the official price tag….

Referring to the project’s official $42.6 billion price, he said, “a lot more went into it than just taking the per-mile cost and multiplying it out.”

But World Bank officials said the per-mile price of a California system would likely fall within the cost range of their report…

It could be worse.

A research team led by Oxford University professor Bent Flyvbjerg has studied the estimates and final price tags of 258 megaprojects across 20 countries, including bridges, rail systems, tunnels and freeways.

What they found was astonishing: Nine out of every 10 projects finished over budget, and the average urban rail system ended up costing 45 percent more than projected….

And in the dozens of urban rail projects studied by Flyvbjerg’s team, the average train system produced half the number of riders that planners expected.

The article is long. I recommend reading the whole thing.

If the price tag does turn out to be $73 billion, there is little doubt that the state cannot the first phase of the project from San Francisco to Anaheim at this time or in the near future. In which case, the Authority will need to rely even more on private parties for funding. The state is facing another $20 billion budget shortfall, the budget is late again, and there is little relief in sight. In addition, the ratio of annual General Fund debt–service costs to annual General Fund revenues and transfers (debt service ratio) is at historical highs. Wall Street and other bond buyers rely on the debt service ration as one factor in determining the risks to issue bonds, the cost to the state, as well as whether to even issue such bonds. It helps them decide whether California can pay back its debts.

See: California Nonpartisan Legislative Analyst’s Office, The 2010-11 Budget: California’s Fiscal Outlook. The last section, at the very bottom is titled “Debt Service on Infrastructure Bonds,” and contains information about debt service.

Needless to say, if that first phase of the high speed rail is not built then the L.A. to San Diego segment will not be built.

By the way, be wary about budget troubles killing off the project. Do not celebrate that the Authority will run out of money before building the line from L.A. to San Diego. Money to finish building the 710 disappeared but the project was only put on the shelf, only to be dusted off once every decade. Speaking of the 710: lady who does not live in our community but who insists on hijacking our community meetings to discuss the high speed rail proposal, we too live with the nightmare that is the 710, so get off your high horse (it is not about just you).

Bottom line: The Authority’s money troubles are likely worse than it lets on. If we are not careful, the high speed rail line will turn out to be another 710 debacle that drags on for 40+ years with no resolution and hold our communities hostage.

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