Financial Reports

Major Reports         Briefing Papers          Briefing Notes

To Repeat – The CHSRA’s Train Will Need A Subsidy Forever – August 22, 2012, Second Edition - December 17, 2012 Link (.pdf)

The financial reports featured on this site were prepared by a team of financial experts. The reports are broken down into three types. Click, above, on the section you would like to investigate. The Major Reports section contains large, detailed reports dealing with the contents of the California High-Speed Rail Authority (CHSRA) Business Plans. The Briefing Papers section contains smaller, more specific reports dealing with the contents of the CHSRA Business Plans. The Briefing Notes section contains about two dozen one-page summaries of specific issues contained in the 2010 Business Plan. Alternative access to these reports can be obtained by visiting their site: www.sites.google.com/site/hsrcaliffr

The following experts have reviewed and analyzed the financial aspects of the proposed high-speed rail project, and have documented the financial risks. They have prepared the Major Reports, Briefing Papers, and Briefing Notes found on this website. Our appreciation and thanks to:

Alain C. Enthoven – Marriner S. Eccles Professor of Public and Private Management (emeritus), GSB Stanford; President, Litton Medical Products; Economist, Rand Corporation; President’s Award for Distinguished Federal Civilian Service; Fellow American Academy of Arts and Sciences; Founder, Jackson Hole Group (BA Economics, Stanford; Rhodes Scholar–Oxford; PhD Economics, MIT)

William C. Grindley – World Bank; Associate Division Director, SRI International; Founder and CEO, Pacific Strategies, ret. (B Architecture, Clemson; Master of City Planning, MIT

William H. Warren – Officer, US Navy. Forty years of Silicon Valley finance, sales and consulting experience and management, including CEO of several start-ups, Director/Officer at IBM, ROLM, Centigram, and Memorex (BA Political Science, Stanford; MBA, Stanford)

Michael G. Brownrigg – Founder, Managing Partner, Total Impact Advisors; Managing Partner, ChinaVest; US State Department, Foreign Service; US Trade Representative’s Office; Board, Foundation for A College Education; (BA, Economics Williams College)

Alan H. Bushell - McKinsey & Co.; CEO/COO/CFO of several technology companies; ret. (BA Stellenbosch University, Chartered Accountant SA; MBA Harvard)

Links to Financial Reports

The following Financial Reports can be read in pdf form by clicking on the corresponding links.

Major Reports

This “Major Reports” section contains large, detailed reports dealing with the contents of the California High Speed Rail Authority (CHSRA) Business Plans. The Community Coalition on High-Speed Rail is proud to make available the following financial analyses of the proposed California High-Speed Rail Project, prepared by a panel of business and financial experts. These reports are presented in reverse chronological order:

Major Reports — 2012 Plan

Second Edition – To Repeat – The CHSRA’s Train Will Need A Subsidy – Forever (December 2012) Link (.pdf)

Executive Summary of the “To Repeat” Report Link (.pdf)

Synopsis: To keep their project alive, California’s High-Speed Rail Authority (CHSRA) has “low balled” both revenues and O&M expenses – revenues to seem to be competitive with airline fares, and O&M costs to seem to produce profits. Real life examples show that existing high-speed rail fares run above 40¢ per passenger mile (PPM) while operating costs are above 30¢ PPM. Acela’s riders in the northeast USA pay 72¢ PPM, while it costs at least 62¢ PPM to keep Acela running. But CHSRA claims fares at 23¢ PPM and operating costs at 10¢ PPM, a fraction of what they should be to not require a legally prohibited subsidy.Link (.pdf)

California High-Speed Rail Authority’s 2012 Draft Business Plan Assessment: Still Not Investment Grade (January 2012) Link (.pdf)

Major Reports — 2010 Plan

Revisiting Issues In The October, 2010 Report: The Financial Risks of California’s Proposed High-Speed Rail Project (September, 2011 edition ) Link (.pdf)

Synopsis: This new 2011 edition of Financial Risks explores the even more devastating results of the project’s increased costs and lack of new Federal grants.

Financial Analysis of the Proposed California High-Speed Rail Project (June, 2011) Link (.pdf)

Synopsis: This report measures the impact of four critical California high-speed rail project variables: 1) the decline, if not disappearance, of Federal grant money; 2) the near-certainty of increasing construction costs; 3) the certainty that cash-strapped cities and counties will not have money to contribute to the construction of the high-speed rail project; and 4) the high probability that the California High-Speed Rail Authority will not achieve its projected operating results. Using the Authority’s business plan operating data, the forecasted financial results show insufficient monies from operations to service the construction debt. The burden of this debt will fall to the taxpayers, who will need to service it at the expense of priorities such as education and public safety.

The Financial Risks of California’s Proposed High-Speed Rail Project (October, 2010) Link (.pdf)

Executive Summary of October 2010 Financial Risks Report Link (.pdf)

Appendix A - Analysis of The High Speed Rail Authority’s Planned Pricing (October, 2010) Link (.pdf)

Appendix B – A Comparison of Different Financing Alternatives (October, 2010) Link (.pdf)

Appendix C – Financial Aspects of California’s Proposed High-Speed Rail Project (October, 2010) Link (.pdf)

Briefing Papers

The authors of the Financial Reports presented on this website have released a series of Briefing Papers. This Briefing Papers section contains smaller, more specific reports dealing with the contents of the CHSRA Business Plans. Summaries are provided for the most recent Briefing Papers. Briefing Papers are presented in reverse chronological order:

Briefing Papers — 2012 Plan

Diminishing Prospects For The CHSRA's Initial Construction Section (FRA's Central Valley Project) - More Legal And Financial Problems For California's High-Speed Rail Authority
Link (.pdf)

Overview: If they ignore what Prop1A, AB3034, plus their own Business Plans and Agreements with DOT/FRA say, the Authority seems to have funds to build much of the ICS. However, the unique structure of how Federal funds are allocated to specific sections of the ICS causes legal problems with their 2011 Funding Plan. Even if those problems are resolved, they still have a shortfall of at least $600 Million - even with their risky assumptions about soils conditions south of Fresno, and allocating no contingency funds in their latest Agreement with the DOT/FRA. After spending about $7 Billion to duplicate parallel tracks, the ICS could well stop some 40 miles north of Bakersfield. Not a bright prospect for fulfilling 2008's promises to voters.

How Realistic Are The CHSRA's Plans To Build From Madera To Bakersfield? Link (.pdf)

Overview: By ignoring earlier obligations as well as promises such as starting in Madera instead of 33.5 miles north in Merced, by not building ". . high-speed rail alignment . ." and by eliminating features of a 220 mph train's infrastructure, the Authority may be able to build a dirt mound from Madera to somewhere north of Bakersfield with the $6 billion it has in hand. However, if the cost per mile increases as in other rail projects (45%), the Authority's resources will fall short of the funding needed to build between Madera and Bakersfield. Expectations following CP#1 need to be dramatically lowered AGAIN if more miles are to be built. The probability of an isolated asset still looms large.

The CHSRA Knows Their Proposed High-Speed Train Will Forever Need An Operating Subsidy (March, 2012) Link (.pdf)

Summary: CHSRA was told several times during 2011 that the proposed train’s operating costs may be about three or four times more than their current projections. This would cancel any possibility of operating with a profit. As important as this finding is, the Authority’s own staff and Parsons Brinckerhoff had access to the same information and did not use it in their profitability calculations. Unlike Europe and Japan, California’s deregulated air transport marketplace, as well as its lower gasoline prices, will not allow higher high-speed rail ticket prices to cover higher operating costs.

An Analysis of Local Transit Agencies’ Proposals to Claim High-Speed Rail Monies for their Capital Enhancements (March, 2012) Link (.pdf)

Summary: Conclusions are: that current FRA grants cannot be used, that the $950M of Proposition 1A transit funds may be used with matching funds from the local agency, and that the $9B of Proposition 1A high-speed rail funds may only be used with matching funds from the local agency and with conformance to specific conditions within AB 3034.

Twelve Misleading Statements On Finance And Economic Issues In The CHSRA’s Draft 2012 Business Plan (January, 2012) Link (.pdf)

Summary: Michael Rossi, Governor Brown’s jobs czar and a CHSRA Board member, said: “…there was no plan to mislead anyone by manipulating the numbers.” San Jose Mercury News, December 21, 2011

A Proposal To Constructively Use Federal Grants and State Prop 1A Funds To Build The CHSRA’s ICS From Bakersfield Towards Los Angeles (January, 2012) Link (.pdf)

Briefing Papers — 2010 Plan

Financial Aspects of California’s Proposed High-Speed Rail System (August, 2011) Link (.pdf)

Summary: This is a fifteen page, graphics-driven (Power Point) presentation on the numbers surrounding the California high-speed rail project as proposed by 2008’s Proposition 1A. The presentation touches on everything from likely construction costs and ridership numbers for the proposed high-speed system, to jobs and to the devastating impact on California’s General Fund. The authors of this presentation have used it throughout California to educate elected officials and others. It is a useful tool for explaining the project to the financially inexperienced.

Will The High-Speed Train Benefit California’s Middle Class? (April 2011) Link (.pdf)

Big Trouble For California’s $66 Billion Train (March, 2011) Link (.pdf)

Seven Deadly Financial Facts (January, 2011) Link (.pdf)

A Train To Nowhere But Bankruptcy (January, 2011) Link (.pdf)

Six Myths Protecting California’s High-Speed Rail Project (November, 2010) Link (.pdf)

Dubious Ridership Forecasts (November, 2010) Link (.pdf)

Briefing Notes

The authors of the Financial Reports presented on this website have also released a series of one-page briefs addressing claims frequently made by proponents of the California High-Speed Rail project. Each Briefing Note counters a specific claim and contains extensive footnotes and quotations from various sources. The Briefing Notes focus on matters of subsidies, costs, jobs, and other financial issues. They do not address local issues, with the possible exception of matters related to the imminent construction in the Central Valley. Briefing Notes are presented in reverse chronological order:

Briefing Note #23 - On A Move To Change High-Speed Rail's Financial Performance Metrics (August, 2011) Link (.pdf)

Briefing Note #22 - On Cash From Operations Paying For High-Speed Rail's Construction (August, 2011) Link (.pdf)

Briefing Note #21 - On What Can Actually Be Built In The Central Valley (August, 2011) [#C]Link (.pdf)

Briefing Note #20 - On The Consequences Of The Increasing Cost Per Mile In The Central Valley (August, 2011) Link (.pdf)

Briefing Note #19 - On The Impact On The State Of Servicing Debt On The 'Entire System' (August, 2011) Link (.pdf)

Briefing Note #18 - On Pre-Phase One Construction, Margins And Accumulated Debt (August, 2011) Link (.pdf)

Briefing Note #17 - On The “Entire System’s” Costs, Margins And Accumulated Debt Over Thirty Years (August, 2011) Link (.pdf)

Briefing Note #16 - On Phase One's Costs, Margins And Accumulated Debt Over Sixteen Years (August, 2011) Link (.pdf)

Briefing Note #15 - On Operating Costs Out Of Sync With The FRA And Reality (July, 2011) Link (.pdf)

Briefing Note #14 - On Evidence-Based High-Speed Rail Fares (July, 2011) Link (.pdf)

Briefing Note #13 - On The CHSRA’s Estimated Operating Revenues (June, 2011) Link (.pdf)

Briefing Note #12 - On The CHSRA’s Estimated Operating Expenses (June, 2011) Link (.pdf)

Briefing Note #11 - On High-Speed Rail's Problems - Déjà Vu All Over Again (June, 2011) Link (.pdf)

Briefing Note #10 - On High-Speed Rail's Financial Shell Games (June, 2011) Link (.pdf)

Briefing Note #9 - On CHSRA’s Assumed Rail Ticket Prices Versus Airline Fares (June, 2011) Link (.pdf)

Briefing Note #8 - On High-Speed Rail Ticket Prices Versus Driving (June, 2011) Link (.pdf)

Briefing Note #7 - On Private Capital For California's High-Speed Train (June, 2011) Link (.pdf)

Briefing Note #6 - On High-Speed Rail's Need For Operating Subsidies (June, 2011) Link (.pdf)

Briefing Note #5 - On Permanent Jobs Created By The High-Speed Rail Project (June, 2011) Link (.pdf)

Briefing Note #4 - On Construction Jobs In The High-Speed Rail Project (June, 2011) Link (.pdf)

Briefing Note #3 - On Cost Overruns While Building Megaprojects (June, 2011) Link (.pdf)

Briefing Note #2 - On High-Speed Rail Riders And Ridership Forecasts (June, 2011) Link (.pdf)

Briefing Note #1 - On The Likelihood Of More Federal Construction Monies (June, 2011) Link (.pdf)