High Speed Rail-Private Investment

In their present form, high-speed rail services have not developed a level of self-sufficiency or cost-effectiveness to attract private capital or investment beyond design, planning and construction phases of their development. Private contractors, paid out of design and development funds provided by federal and state contributions to high-speed rail projects, define the limits of private participation in development of systems that will never generate revenue sufficient to pay for construction or maintenance of high-speed rail systems or services. Once completed and put into service, high-speed rail systems may very well fall short of fare income sufficient to support daily operation and maintenance, let alone any construction debt service.

Outside of New England-Washington-New York corridors, high-speed passenger services will be hard pressed to attract ridership sufficient to financially support their respective ongoing operations. It is not likely that numbers of riders, and sufficient fares capable of supporting a multi-billion dollar high-speed rail service between Sacramento and Los Angeles can be generated from the limited constituency of patrons who would chose to travel the 400 miles between Central and Southern California by means of high-speed rail. Therefore, the proposed high-speed rail system should be assumed to be a heavily and perpetually subsidized enterprise, with limited potential to reduce traffic congestion, make effective use of private funds or attract investment or venture capital. Furthermore, any new transportation system and service dependant on the virtual elimination of its primary competition for its own success, in this case, the inter-city and regional airline industry, is a risky and unattractive investment opportunity. Indeed, the privately owned and operated short-haul airline service industry has suffered reductions in multiple aspects of their business; with average length of flights increasing from 502 miles in 1990, to 763 miles in 2009, while the percentage of short-haul passengers dropped from 59% in 1990, to 35% in 2009, and short-haul flights as a percentage of overall US flights has dropped from 34% to 27% between 1990 and 2009. These developments, and other economic factors should lead high-speed rail planners and promoters to reevaluate the market and realistic demand for such inter-city rail services before proceeding with any aspect of their high-speed rail development plans.

The California High-Speed Rail Initiative should be subjected to the cost-effectiveness and cost benefit criteria to which any private investment or development would be subjected, in order to achieve a realistic perspective on the potential success of this proposed campaign, and the implications of such a publicly-supported enterprise to the taxpayers of California. Rigorous analysis may well conclude that construction, maintenance and operational costs of high-speed rail services would have to be reduced significantly to be viable, cost-effective forms of transportation, capable of sustaining operations over decades of future service. Any cost reductions that may be achieved in the manufacturing or maintenance of high-speed trains are unlikely to alter profit ratios that consistently produce greater profits on maintenance and repair of rail equipment than on the sale of new rail cars.

Plans for the joint purchase of Los Angeles Union Station, and 34 acres of land on which it is built, by the California High-Speed Rail Authority and the Los Angeles County Metropolitan Transit Authority to secure property for development of a high-speed rail terminal appear to be of questionable strategic value to the high-speed rail project in general, and the High-Speed Rail Authority in particular. Notwithstanding the fact that the national- and state-registered architectural and historic monument status that protects Union Station from any form of alteration or degradation, high-speed rail planners have not identified the historic property as the preferred, or optimal location for a new high-speed rail station; yet the two authorities plan to transfer Union Station from private to public ownership. Indeed, the California High-Speed Rail Authority has failed to demonstrate any ability to fund or implement an extension of high-speed rail facilities or service to Los Angeles at any time in the future; which would make the purchase of Union Station all the more unnecessary.

Substantial investment in, and profit from the manufacturing and ongoing maintenance of rolling stock, equipment and rail infrastructure of the new high-speed rail system are likely to be concentrated in foreign  corporations and state sponsored transportation entities that  dominate world-wide high-speed technology and system development. Domestic rail industry will play a minor role in developing US high-speed rail.

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