CASE STUDY $5\mathrm{.}2$ California$$s High$-$Speed Rail Project

With the announcement that California would be committing $$4\mathrm{.}3$ billion to the construction of a $29-$mile rail link between the cities of Fresno and Madera in the state$$s Central Valley, California$$s $20-$year$-$old quest for a high$-$speed rail line was finally coming true. The California High$-$Speed Rail Authority $($CHSRA$),$ first established in the mid$-1990$s$,$ had long pursued the goal of linking the San Francisco Bay metropolitan area in the north to the cities of Los Angeles and San Diego in the south. Under the administration of President Obama, the federal government set aside money from a stimulus package to fund high$-$speed rail initiatives in several states, including Wisconsin, Florida, Ohio, Illinois, and California. The election of Republican governors in Ohio and Wisconsin led to a rethinking of the projects in those states, and they ultimately refused the seed money grants from Washington, harboring suspicions that the rail projects were both unnecessary and likely to be subject to huge cost overruns, for which state taxpayers eventually would be held responsible. As a result, Transportation Secretary Ray LaHood reclaimed $$1\mathrm{.}2$ billion from these states to be presented to $13$ other states.

One of the states that stood to benefit most from this redistribution of federal money was California, with its ambitious and, as many argue, ultimately foolhardy decision to support a massive transportation project to link its cities with high$-$speed rail. The history of the CHSRA$$s drive to create high$-$speed railways is a fascinating one, with supporters and critics in equal measure. As part of its initial pitch for the project, the CHSRA argued that the system would lead to multiple benefits. For a one$-$way $$55$ ticket, passengers in Los Angeles would be able to travel to the Bay Area in less than $3$ hours or reach San Diego in $80$ minutes. Estimating that $94$ million passengers would use the rail system each year and that its development would generate hundreds of thousands of permanent jobs, the CHSRA used these projections to help convince state voters to approve a nearly $$10$ billion bond issue and support the project in a $2008$ referendum. Other advantages the organization cited included the reduction of pollution and fossil fuel use by diverting millions of people to the rail line who otherwise would use automobile or air travel between cities.

With a revised estimated cost of at least $$69$ billion, the overall project would first operate trains up to $220$ mph along a $520-$mile route between Anaheim and San Francisco. Extensions to San Diego and Sacramento would be built later. The Obama Administration approved a total of $$3\mathrm{.}18$ billion in federal funding for the state$$s bullet train proposal, the largest amount for any pending rail project in the nation. With matching state funds, the amount available for construction was about $$5\mathrm{.}5$ billion, according to the CHSRA.

Since its approval, a number of events have led insiders to reconsider the wisdom of pursuing the rail project. First, based on other high$-$speed rail projects, the CHSRA has revised its projections for ridership downward, suggesting that the project will serve $39$ million passengers by its tenth year of operation, which is about $40\%$ of its original estimate prior to getting funding approval. Second, another change in the original business model is that projected ticket prices have been raised to $$105$ for a one$-$way trip, although critics suggest that actual prices, based on comparable cost$-$per$-$mile data from Europe and Japan, are likely to be closer to $$190($the CHSRA$$s current projections are that tickets will sell for $$86).$ A third concern relates to the decision to start the project with a link through largely empty agricultural farmland between two Central Valley communities; that is$,$ though the high$-$speed rail project is specifically designed to join major metropolitan areas such as San Francisco and Los Angeles, the first pilot stage is to be constructed along a route that is one of the lesser$-$populated segments of the line. This decision sits poorly not only with rail critics but also with rail supporters, who recognize the need to make a more significant statement in order to answer other objections of critics. $$It defies logic and common sense to have the train start and stop in remote areas that have no hope of attaining the ridership needed to justify the cost of the project,$$ U$.$S$.$ Representative Dennis Cardoza $($D$-$CA$)$ wrote in a letter to Transportation Secretary Ray LaHood.

A fourth closely questioned element in the project is the projected final price. Though the CHSRA and state officials hold to the latest $$69$ billion price tag $($a figure that has doubled since the original $$33$ billion estimate approved by voters in $2008),$ others, including the transportation consultants at Infrastructure Management Group, have suggested that this figure, based on historical data, grossly underestimates t