Posted by: BayAreaComRE | January 29, 2010

Getting to Places Very Fast: High Speed Rail & the San Francisco Bay Area

“There’s no reason Europe or China should have the fastest trains…workers will soon break ground on a new high-speed railroad funded by the Recovery Act. There are projects like that all across this country that will create jobs and help our nation move goods, services, and information.” President Obama’s words echoed in the congressional chamber during his first state of the union address of his presidency and a roar of applause lifted from both Republican and Democratic sides of the aisle.

The pledge of over $8 Billion to begin work on the 14 metropolitan-area-connecting high speed rail system, and over $2.5 Billion to California seems like a pretty penny, but what are the implications of this enormous endeavor? Is the result of a more interconnected Northern and Southern California truly on our horizons, or does California’s current credit rating and monstrous deficit hurdle pose an abominable challenge in getting the high speed rail system completed.

Reason.org, a non-profit free speech political watchdog group, had the following to say about the proposed high speed rail system, highlighted in their 196 page due diligence report published at the end of 2008, which they re-affirm holds true as of Obama’s Speech last evening:

“It appears unlikely that sufficient private funding and public subsidies will be found to finance the complete HSR plan. There are no genuine financial projections that indicate there will be sufficient funds to complete Phase I, much less Phase II or any other phases. It is possible that the system will either be built only in part or not at all.

Claims of profitability could not conceivably be credible under even the most optimistic assumptions, unless some or all capital and debt costs are ignored. This due diligence analysis indicates that the San Francisco-Los Angeles line alone by 2030 would suffer annual financial losses of up to $4.17 billion, with a small profit possible under only the most optimistic and improbable conditions.”

So where does that leave us? It sounds like with any major infrastructure projects, there will be a lot of political posturing and speculation as to the end result. What do we know? The rail system will create a lot of jobs from the planning, architectural, and engineering worlds (good for COM RE) and although the costs are unfamiliar at this point, one thing is certain; connecting the two economic epicenters of California via a 3 hour commute has numerous unknown paybacks by today’s measures. The California High-Speed Rail Authority is projecting that for every $1 billion spent on the project, 20,000 jobs will be created, leaving a $4.5 billion investment to translate into 90,000 jobs across California. This also pushes the San Francisco Transbay Terminal plan further towards the finish line, Bay Area Com RE reported on this a while back (here & here). We’ll stay relatively objective when commenting on politics, however we’re all for projects that create jobs, incite public and private development, and advance the infrastructure of our back yard. We’ll continue to track this story as future developments progress.

Below is a rendering of “FLY California” in action and the route it will take North from Anaheim and then North from San Diego, jump to the 1:05 mark to see the Bay Area portion of the line.

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Responses

  1. […] makes it a successful public transportation thoroughfare. It will be interesting to see how the High Speed Rail train “Fly California” will come into play, when these same technology tenants will be just a few hours away from Los […]


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