November 8, 2011 > High-Speed Rail-Ridership
By Juliet Williams, Associated Press
SACRAMENTO, Calif. (AP), Nov 05 - The new business plan for building California's $98 billion high-speed rail project estimates that between 23 million and 34 million passengers will use the system by the time bullet trains traverse the state two decades from now.
If those numbers fail to pan out, taxpayers could be on the hook for hundreds of millions of dollars a year in operating expenses.
Getting the number right is crucial to avoid public subsidies in the future, but predicting ridership is complicated and in some ways a guessing game. It relies on unknowns such as future gas prices and airline taxes, population growth, traffic patterns and even technology that has yet to be invented.
The latest ridership numbers for the voter-approved system already are well below the authority's projections from two years ago. At that time, planners hoped to complete the first full phase from Anaheim to San Francisco by 2020 and draw 41 million riders a year by 2035.
In its latest business plan, released this week, the California High-Speed Rail Authority has given a wide range of ridership predictions, underscoring the difficulty in determining how many people will want to ride what would be the nation's first, true high-speed rail line.
The first projection, for 2025, estimates anywhere from 5.9 million to 10.8 million riders on the first sections of track completed, depending on whether the Central Valley line connects to northern or southern California. The gap between high and low ridership projections for the entire system grows to 11 million by 2035, two years after the first phase would be completed.
The business plan says the rail system would be profitable enough to pay for its own operations even under the lowest ridership projections, with operating revenue ranging from $1.4 billion to $2.1 billion in 2035, according to the report. It pegs operation and maintenance costs by 2035 at $1.4 billion to $2 billion a year.
Planners say they reduced their calculations for population growth, future gas prices and airfare to provide the most conservative ridership estimates, but critics note that they are still relying on a modeling system that has come under heavy scrutiny.
``I don't believe that these estimates are precise enough to say anything with certainty,'' said David Brownstone, an economics professor at the University of California, Irvine who co-authored a 2010 report that criticized the rail authority's previous ridership calculations.
``It is possible the thing would be profitable eventually; it's also possible it could lose a lot of money,'' said Brownstone, who cautioned that he had not thoroughly reviewed the business plan.
The plan now goes to the Legislature, which is expected to start hearings on it in December. Some lawmakers from both parties have questioned whether the system will attract enough riders to be profitable and are questioning whether the state should scrap the project before the bulk of the bond money is spent.
Rail authority board member Michael E. Rossi said the commission added a rigorous peer review by international experts, interviewed 15,000 travelers and scaled back ridership projections in an effort to provide what it believed were reasonable estimates.
Even if the lowest ridership numbers in the report don't materialize, far fewer travelers would be needed to break even, said Rossi, one of two outside experts Gov. Jerry Brown appointed to the rail board last summer to assess the viability of the project.
For example, he said a ridership of 2.2 million would be sufficient on an initial southern leg, fewer than the number of riders who now travel by train in the same area despite hassles such as having to get off and take a bus over the Grapevine section of Interstate 5.
``We have moved to an array of outcomes - high, medium and low, instead of just one,'' said Rossi, a former Bank of America executive who also is the governor's adviser on jobs. ``The single biggest driver of ridership is population. We have taken 9, 13 and 18 percent reductions off the Department of Finance projections.''
Construction costs have more than doubled from previous estimates in the rail authority's new business plan, to $98.5 billion in inflation-adjusted figures.
When voters authorized $9 billion for high-speed rail in 2008, the San Francisco-to-Anaheim route was projected to cost $45 billion and was to be completed by 2020.
Planners hope to start construction of the first phase, from Fresno to Bakersfield, next year and complete it by 2017.
Most of the bond money voters approved in 2008 has not yet been sold, but that money would be swallowed up quickly by construction costs under any scenario, and future funding is uncertain.
One of the most criticized parts of the project is that its first phase would be in the Central Valley, and $3.5 billion in federal grants is contingent on that model. Planners say it makes sense to build where land is cheaper and where true high-speed rail can be tested at speeds up to 220 mph, something not possible in the more densely populated Los Angeles or San Francisco Bay areas.
But critics such as state Sen. Alan Lowenthal question whether the valley can support the ridership needed to net a profit and attract private investment, a key part of the rail authority's business plan. The plan says private investors, including rail operators, are expected to account for up to 20 percent of the cost to build the rail system, but it does not identify them.
``It's all got to be dictated by ridership. These are not decisions that are based upon which city you like more, where's the most political clout,'' said Lowenthal, a Democrat from Long Beach who is chairman of the Senate Transportation and Housing Committee.
The success of the first leg, he said, is ``going to tell the private sector and everyone else that it's working, that the U.S. wants to do this.''
Lowenthal requested a review by the University of California, Berkeley Institute for Transportation Studies on the rail authority's previous ridership plans.
The report, which Brownstone co-authored, was published last year and concluded that the modeling the rail authority used was so inconsistent that it was not possible to predict ``whether the proposed high-speed rail system in California will experience healthy profits or severe revenue shortfalls.''
The state Legislative Analyst's Office also criticized previous ridership estimates, concluding that it was unlikely any ridership forecast ``is going to give a definitive, reliable answer to whether the high-speed rail system can be successfully completed and operated without significant state support.''
In its assessment of the 2008 ballot measure, the LAO predicted that the state would need to provide more than $1 billion a year in operating subsidies to high-speed rail.
The plan released this week has won near-universal praise for its more rigorous modeling and what even critics of the project say is a more honest cost projection. But experts have yet to fully analyze the new ridership numbers.
If the line is built, California would have the first true high-speed rail system in North America, the value of which cannot be calculated in modeling, said Anthony Perl, chairman of the intercity passenger rail committee of the National Research Council's U.S. Transportation Research Board.
``There is a premium that comes with being first. I don't think that's often factored into this,'' said Perl, a professor at Simon Fraser University in British Columbia. ``Of all the places in the U.S. that should understand this, I would think California would understand it.''
Amtrak's Acela line, which links Boston, New York City and Washington, D.C., runs on 20th century technology and cannot hit speeds anywhere near 220 mph, Perl said.
Ridership increased this year on that line to nearly 3.4 million riders, in a densely populated area of the country. But Perl and other experts say that system, which makes frequent stops and travels much more slowly, is not comparable to the line proposed in California, which would shuttle passengers more than 500 miles between Los Angeles and San Francisco in less than three hours.
Amtrak also is proposing a 30-year, $117 billion upgrade to its Northeast Corridor, which would cut travel time to 96 minutes between New York and the nation's capital, a distance of about 230 miles.
Ticket prices for the Northeast Acela train also are higher than those projected for California's system, which would be set around 83 percent of airfare in 2010 dollars.
A trip from San Francisco Los Angeles would range from $52 for a multi-stop train during off-peak hours to $123 for a last-minute purchase on an express train. The average price would be around $81.
The business plan does not say how the financial gap would be filled if ridership levels fall below the number needed to break even.