TRANSACTIONS NEWSLETTER ONLINE

April 1999: Focus on High-Speed Rail

High Speed, High Finance

Construction of the high-speed rail system being proposed for California would be a considerable financial investment, estimated at $23 billion. How would the money be raised to pay for it?

In a word, taxes. The business plan being developed by the California High-Speed Rail Authority assumes that state taxpayers would play the role of financier for the construction of the new line. Although the authority believes that high-speed rail service would generate an operating surplus once it is up and running, the prospect of future operating revenues is not sufficient to attract adequate private investment for capital financing.

"We just don't see any way to build a high-speed train system in California exclusively with private funds," said Mehdi Morshed, the rail authority's executive director. "So we've taken the more realistic approach of saying that, if you really want high-speed rail, you're going to have to put public funds into it -- a substantial amount of public funds."

To finance the system, the High-Speed Rail Authority favors a boost in the state sales tax, by either 1/4-cent or 1/2-cent. The authority considers the sales tax a more reliable funding mechanism than the state gas tax -- which the panel also seriously explored as an option before rejecting it in March on the advice of the authority's financial consultants. Federal funding would be pursued but not relied upon, while local contributions have been ruled out as a source of funding. Private financing still would be sought, but only for station-area parking facilities and concession sites.

The rail authority's fast-track work schedule calls for the delivery of a complete high-speed rail business plan, including a recommended funding mechanism, to the Legislature and the governor by the end of 1999. Final approval rests with the state's voters, who could be presented with a ballot measure as soon as the November 2000 election. The ballot measure would specify the amount and the duration of any proposed sales tax increase. A simple majority of voters is needed for passage.

-- Joe Curley

 

Contents

• High-Speed Rail Picks Up the Pace
• High Speed, High Finance
• Notes From a European Rail Adventure
• News Briefs -- New Transit Leaders, Tranny Awards, Freeway Service Patrol Adds Trucks, Growth Crisis Documentary

Special Web Feature

• Q & A with Mehdi Morshed, Executive Director of the California High-Speed Rail Authority