Californians suffering from a massive case of "sticker shock" over the new $99 billion price tag for the state's bullet train project got some more unsettling details Tuesday: The high-speed trains will attract fewer riders and less revenue than originally promised. And more than half of the money needed to build the rail line would come from federal funding that currently doesn't exist.
Despite the soaring costs and dire projections, Gov. Jerry Brown and some leaders in the Legislature said Tuesday that they still support the ambitious plan. But the new estimates are forcing some Democratic lawmakers to seriously question whether the state can afford to build a bullet train to the future, while Republicans insist it's time to kill the project or send it back to voters.
The bullet train is now expected to cost nearly triple what voters were promised when they approved the plan in 2008 and more than double the 2009 estimate.
"Boy, is it a scary number," said state Sen. Joe Simitian, D-Palo Alto, a key Democrat on the fence on the issue. "I think people are understandably going to experience sticker shock -- and that probably understates the case."
The California High-Speed Rail Authority's new business plan -- the first in two years -- is the last hard look at the project before lawmakers must decide whether to start construction next year.
Some legislators bail
Like Simitian, Sen. Alan Lowenthal, D-Long Beach, chairman of the committee that oversees the project, said he still needs state analysts to endorse the new financing plan and rider projections. In addition, he said, his panel must hold hearings over the next several months before making a decision.
The rail authority hopes the federal government will launch a new tax-credit bond program and create grants that would initially provide $30 billion for the project, matched with $11 billion in existing state and federal funds, to build a stretch of track long enough to start service. Those tracks would stretch from the Central Valley to either San Jose or the San Fernando Valley, with train service beginning in 2022.
From that point on, the state hopes to make a profit, which officials project will spark $11 billion in private investments, an additional $35 billion in federal grants and $10 billion from various sources such as local governments and private companies. That would allow travel between San Francisco and Anaheim to begin in 2034 -- 14 years later than expected.
"There are always challenges, but when you look at funding sources -- tax credits, bonds, additional local and federal resources -- we see a multitude of different tools available," said Michael Rossi, a member of the high-speed rail board.
Still, the price tag jump and the funding plan were enough to prompt some legislative supporters to jump off the bandwagon.
"Until we address our structural fiscal problems, I do not see how California can afford additional debt from high-speed rail," said Assemblyman Rich Gordon, D-Menlo Park, a past project supporter who chairs the budget subcommittee that controls funding for the rail line.
Sen. Doug LaMalfa, R-Richvale, said he would introduce a bill to send the project back to voters in light of the recent price increase.
Yet business groups, construction unions, the governor and others praised the idea as an innovative way to create jobs and build the nation's most advanced public transit system, which could be an alternative to building more airport terminals and freeways.
"While the projected price tag to build out the high-speed rail system is high, reaching the same mobility goals through business-as-usual approaches will cost us much more," said Senate President Pro Tem Darrell Steinberg, D-Sacramento.
The 230-page business plan includes much more new information on how many people will ride the train, how much fares will cost, and how much it will cost to run.
The state now expects the system to attract about 36.8 million riders per year by 2040, down from the 2009 estimate that 41 million people would ride it several years after full service begins. When voters approved the plan in 2008, they were told it would attract 55 million riders annually.
Elizabeth Alexis, a leading analyst on the project who has delved into the ridership estimates, said the rail authority is using the same ridership formula that UC Berkeley experts had already denounced as not credible. For instance, she said their estimates show current train ridership in Bakersfield would increase twentyfold with the introduction of high-speed rail service.
The expected revenue from the bullet train has also dropped, from an estimated $6.2 billion per year to $5.5 billion annually once the trains are running for several years.
Once the bullet trains are running, the state should expect to make a profit -- although $900 million less than previously projected and not enough to pay back construction costs.
Another key decision is whether to start service from Central Valley to either San Jose or Southern California. The report shows that building first to the Bay Area is a bit cheaper but will generate less revenue. The intermediate line between San Jose and San Fernando Valley would open in 2027.
But there is good news. Fares to ride the train would drop from the most recent estimates, because they are based on future airfares, which are expected to be cheaper than previously thought. Therefore, the average bullet train fare between San Francisco and Los Angeles, and between San Jose and Anaheim, is set to be $81. That's $24 lower than the last estimate but still $26 more than what voters were promised.
Most high-speed rail systems around the world require a public subsidy, but California voters have forbidden the Golden State's bullet train from using tax funds for operations.
And the rail authority has also embraced a two-track alignment along the Caltrain route, sharing the existing commuter rail corridor, at least at the start. The state could later build four tracks between San Jose and San Francisco.
Ultimately, Tuesday's plan could decide the fate of the biggest public works project in the country.
"If you look at the numbers, they are reasonable; financially, this plan is current, it's transparent, it's honest and it's realistic," Rossi said. "I personally look forward to hear from critics of the plan because that's the only place we'll make it better."
Contact Mike Rosenberg at email@example.com or 408-920-5705.