You’ll Have to Build It to Find out the Cost

California Representative Nancy Pelosi famously told Congress it would have to pass the Obamacare bill to find out what it said. Now California officials are telling residents they will have to spend tens of billions of dollars building the San Francisco-Los Angeles high-speed rail line to find out how much a ticket will cost. As one official says, “We will not know until late in the game [meaning after the line is built] how everything will turn out.”

On one hand, all of the ticket prices quoted to date–which range from $50 to $105 a ticket–are based not on rail costs but on airline prices: the quoted fares are set to be below, and supposedly competitive with, airfares. On the other hand, the ballot measure approved by voters in 2008 requires that fares cover operating costs–and proponents claimed that the trains would earn such a large operating profit that private investors would willingly put up billions in exchange for being able to keep those profits.

The high-speed rail authority projects that the line will attract 18 million to 31 million riders a year and, at the currently projected ticket price of $86 from LA to San Francisco, would earn $700 million more per year than its operating costs. Yet even the low figure of 18 million is unrealistically high. In 2014, Amtrak attracted fewer than 12 million riders on its Boston-to-Washington Northeast Corridor, which has more people today than the California corridor will have in 2030. While Amtrak’s trains aren’t as fast as the California rail line might be (although it won’t reach its full promised speed until sometime after 2040), the Northeast Corridor is anchored by the New York urban area’s 19 million people. By comparison, the middle of the California route is Fresno with fewer than 700,000 people. That means most of the trips in the Northeast Corridor are less than 250 miles long, while most in the California corridor would have to be much longer for it to be a success.

The Los Angeles Times article quotes a lot of numbers as if they are fact when in reality they are pure speculation. “By 2040, 77% of bullet train riders will come from personal vehicles and 16% from buses or conventional rail,” while “only about 6% of train passengers are projected to be diverted from airlines.” Yet the article admits that no one knows how many people actually drive between San Francisco and L.A. each day, so no one can guess how many could be diverted to rail.

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In short, there are so many variables that no one can predict what the demand for high-speed rail will be in 13 years, when the line is expected to become operational, much less in 25 years, when the line will actually operate at the promised time of 4 hours 40 minutes between San Francisco and Los Angeles. This just shows the folly of planning a megaproject that requires such huge subsidies.

The Interstate Highway System was also a megaproject, but it was built strictly on a pay-as-you-go basis, meaning it would be constructed no faster than user fees covered the cost. If people weren’t using it, it wouldn’t have been completed. Yet Californians have to spend $68 billion or more before a single wheel of the state’s high-speed rail system will turn, and even then the trains won’t go at the full rated speed so proponents will claim that the state will have to spend more before it can conclude the project is a failure.

Yet there are clear indications that the project will fail. As the Antiplanner has noted previously, a 1994 study from economists at U.C. Berkeley found that high-speed rail would be the high-cost form of travel between Los Angeles and San Francisco, when compared with either driving or flying. At the time that study was made, planners projected that the rail line would cost just $15 billion (in today’s dollars) to build, whereas the current projected cost is at least five times greater. This means there is no way high-speed rail will be able to compete with airfares or the cost of driving.

One more thing we know: So far, the mythical private investors who were supposed to fund 20 percent of the capital costs haven’t put up a single cent. They can see that the state’s numbers are ridiculously inflated, and the rail line, if it is ever built, could not possibly cover its costs. Since that was one of the requirements for its construction, the state should stop wasting money on this project now.