California High-Speed Rail: Worth Every Penny and Then Some

Posted on 16 January 2015

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By Alan Kandel

On Jan. 6, 2015, in downtown Fresno in front of a mostly celebratory and welcoming crowd and in the presence of an armada of journalists and dignitaries, the virtues of California’s 800-mile high-speed rail system were extolled. The first 520 miles of which will link San Francisco and Los Angeles by way of the San Joaquin Valley. California Governor Brown gave the keynote address. A symbolic groundbreaking followed – in this case consisting of the on-hand dignitaries putting their signatures to rails and fasteners (tie-plates, mainly) and made possible with special markers that enabled such ink to adhere once dry.

At this auspicious and mostly festive event within ear- and eyeshot of an estimated 700 invited guests in attendance, off to the side, meanwhile, protesters assembled, and in unison chanted something to the effect of: "We need water, not high-speed trains!"

As for all who are opposed, all those highly critical of the project, and who claims include it being overpriced and not worth the expensive, that it will never be completed and a subsidy will be required, nothing that could be farther from the truth.

In support of my position, the cost analysis I have performed below shows unequivocally that the project is worth it, nary a subsidy will be needed and, yes, there is every reason to expect California high-speed rail will be operational.

Considering the $68.4 billion system construction cost (in year-of-expenditure dollars and taking inflation into account), that money will cover the cost of all of the infrastructure and rolling stock (the train sets themselves) in addition to the salaries of the 20,000 or so employees necessary to carry this task out all in the 15 years’ time this is expected to take.

If you’re curious as to exactly how the money will be spent and whether or not it will ever be recouped, according to my analysis, I’m confident it will.

Based on ridership projections I deem to be extremely reliable, subsequent to the 2029 completion of Phase 1 of the network (L.A. to S.F.), the number of riders is estimated to be 37.4 million annually. But, let’s just say that’s way over-inflated and ridership weighs in at a highly conservative 9 million only. Nine million represents 60 percent of the current number of yearly travelers transiting between S.F. and L.A. both by air and by car or, 15 million, in other words.

Assuming a one-way ticket price of $75 (I believe the assumption to be quite reasonable) the generated ticket revenue of those 9 million comes to $675 million per year. Using the $675 million, the cost of the entire system can be paid off in basically just over 100 years.

The presumption, however, is that there will be more than 9 million annual riders. If it turns out the number is doubled, then the time to pay the system off will be cut in half to 50 years’ time.

Okay, what about the permanent employees’ salaries? What happens when this is taken into account?

In listening intently to speeches during the historic groundbreaking, there was sentiment voiced to the effect that the high-speed rail system that Californians will get, will last a hundred years – handily. Regarding employee earnings, assuming a $40,000-per-year-salary average and from 2029 to 100 years out, if the number of permanent employees conservatively number 3,000, the annual expenditure for employee salaries amounts to $120 million. (Both figures could be high or low depending on actual circumstances). Over a one-hundred-year span, money required to cover salaries works out to $12 billion.

In its first century of operation, we’re looking at total costs of $12 billion plus the original $68.4 billion during the 15 year construction period, for a total high-speed rail system cost of $80.4 billion. If money is needed for onboard food and concessions, of course, this would need to be factored in too.

At the end of the day and the way I see it, having one more viable transportation option with which people can choose to travel the state, at 220-mile-per-hour speeds, moving from city center to city center speedily, safely, efficiently, reliably, affordably, regularly and at the same time competitively with aviation services and far superior to highway travel, a system that will likely pay for itself in as little as 50 years, for those who still insist that the system is overpriced, not worth the cost, will need to be subsidized and few will use it, I say bunk! And I would like to add to this that as Californians and regarding the state’s future, what we cannot afford to do is not to see this thing through.

Alan Kandel is a concerned California resident advocating for new, improved and expanded freight (and passenger) rail service. He is a retired railroad signalman previously employed by the Union Pacific Railroad in Fremont, California.