California taxpayers to subsidize high-speed rail -report

SAN FRANCISCO, April 11 Thu Apr 11, 2013 7:45pm EDT

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SAN FRANCISCO, April 11 (Reuters) - While California Governor Jerry Brown rode a bullet train in China, the libertarian Reason Foundation released a report on Thursday saying the state's planned high-speed rail system will likely need between $124 million and $373 million a year in operating subsidies once its core line is completed.

Brown, on a trade mission in China, is a champion of his state's ambitious project, which has been a magnet for controversy and critical reports since California voters in 2008 approved roughly $10 billion in general obligation bonds to help build it.

California officials last month approved the sale of up to $8.6 billion in bonds to help build the system, which has a price tag of $68 billion and will take decades to complete.

Planners at the California High-Speed Rail Authority aim to break ground later this year on the system's first leg in the state's Central Valley with the help of state and federal funds.

They expect future funds from the U.S. government, along with private-sector investment, to help finance expanding the rail network across the most populous U.S. state to connect its far-flung metropolitan areas.

The Los Angeles-based Reason Foundation's report said assertions regarding the system's financing are "virtual fantasy" and cast doubts on the authority's forecasts for travel times on its planned lines, saying the times will be longer than anticipated and discourage riders, who will have to be lured from their in cars in any case.

Fewer riders would push ticket prices up, which would further reduce ridership and turn the rail system into a money-loser whose day-to-day costs California taxpayers would have to pick up, the report said.

"The California high speed rail project cannot be delivered at the cost promised to taxpayers, is based upon a business plan incapable of delivering on its legal requirements, and is justified by proponents based upon unachievable benefits," the report said. "The taxpayers and the state of California would be best served by its immediate cancellation."

California High-Speed Rail Authority spokeswoman Lisa Marie Alley criticized the report, noting the authority had not been contacted by the Reason Foundation.

"The non-partisan U.S. Government Accountability Office released an audit last month that gave the Authority high marks and found our ridership, revenue and cost estimates reasonable," she added.

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