How To Build a New Railroad Without Federal Money

By Noel T. Braymer

The most critical segment for decent passenger rail service in California is a new alignment between Los Angeles and Bakersfield. The current route built mostly by hand with mules and black powder would still take around 4 hours even if millions for track improvements were spent to get between Los Angeles and Bakersfield. With a new fast link instead rail passenger service can run quickly and economically serving most of California. Lack of a decent alignment on this segment is what is preventing massive ridership growth on California rail passenger service. Until such a link is built investors are not willing to invest in California High Speed Rail.

So what will this cost? At the October 5th RailPAC/NARP meeting in San Francisco Dan Richard, California High Speed Rail Authority Chair said that they estimate the cost at $10 Billion dollars for construction between Bakersfield and Palmdale. There is still $4 billion in bonds left from Prop 1A for High Speed Rail. The problem for this project is finding the other $6 billion dollars. The plan is once the California High Speed Rail Authority has a 300 mile route between Merced and Burbank with connections at each end to most of the populated areas  of the State an initial system would then be able to make an operating profit.

Dan Richard made it clear that the California High Speed Rail Authority (CHSRA) will not be in the business of running passenger trains. Its job is to build a High Speed Railroad. It will finance its operations from a combination of sources such as leasing use of its right of way for things like fiber optics, commercial development around its stations and income from High Speed Passenger Trains which the operators will pay the CHSRA to use its tracks. Dan Richard made it clear that the CHSRA would welcome Las Vegas to Palmdale Trains which could use its future railroad from Palmdale to Los Angeles.

So how can this new railroad be built without more State and Federal Taxpayer’s money? Well they could borrow it. Has that been done recently for a new railroad? Here are 3 good examples although there are many more since this is done all over the world. First, the Alameda Corridor is just over 20 miles of fully grade separated railroad built between downtown Los Angeles and the harbors is owned by the county of Los Angeles. It is used for port traffic by the UP and BNSF. It was financed with private money and tolls paid by the railroads are used to make the loan payments.

If we look back at the start up of the Chunnel between England and France, construction began when Margaret Thatcher was Prime Minister of Britain. After years of delays Thatcher approved the Chunnel project on the condition that no government funding be used so it had to be privately financed. That was the way it was built and still being paid for. The Chunnel handles high speed passenger trains, truck/auto ferry trains and freight trains. It is capable of running trains in each direction every 3 minutes or 20 trains an hour. The Chunnel is capable of running 8 high speed trains an hour per direction of which at most it now gets 2 high speed trains an hour. The Chunnel has surplus track capacity and is seeking more users to increase its revenue and pay off its bills to the banks.

A good model to follow for building a high speed railroad between Los Angeles and Bakersfield would be High Speed One or HS1 in England. HS1 is 67 miles long with 4 stations for a high speed railway between London and the portal of the Chunnel. It cost 5.8 billion pounds (that’s 9.4 billion dollars). So who owns HS1? How about two Candian Pension funds: Borealis Infrastructure and Ontario Teachers Pension Plan.

To pay the investors for HS1, it has high speed trains to and from the Chunnel, freight trains for the Chunnel as well as local high speed rail passenger service. Other operators are seeking to extend service to London from other parts of Europe besides the Eurostar service from Paris and Brussels. The future should see greater traffic in a few years for both the Chunnel and HS1.

The question is can we find lenders who will finance at least 6 billion dollars for a high speed railroad in California? Most lenders are happy to lend you money as long as you are able make the payments. The State might “co-sign” the first loan to get this vital link started to insure financing. The question is will the California High Speed Rail service operate at a profit? Most High Speed Rail Lines operate at a profit. A few so far have paid off the full cost of their construction. There is a large potential market in California capable of supporting profitable high speed rail service.

The secret to breaking even on anything is to control costs and maximize revenue. With any large capital project like a railroad, it must be kept in revenue service as much as possible. The passenger trains should have no trouble making money. But for the High Speed Rail Authority to break even it needs to get as much use out of the railroad as possible. This is why HS1 is a good model for California High Speed Rail. Not only does it have Eurostar trains to and from the Chunnel, but also British high speed passenger trains and freight. HS1 is in use all day long 7 days a week. Maintenance is handled generally at night on HS1.

The CHSRA is looking for partners to help fund construction. One plan being floated is having the freight railroads share in building and using a new right of way over the Tehachapi. The expectation is freight would use separate tracks and not share passenger tracks. The CHSRA believes that because of California Air Quality regulations sooner or later the railroads will be forced to electrify their railroads and an economical way to do this by sharing the cost with the CHSRA.

It is doubtful the railroads will be interested in working with the CHSRA on electrification. The railroads want to use compatible locomotives on their entire system. They don’t want unique equipment for just one location and then have to change locomotives. The railroads are planning to change over from diesel fuel to liquified natural gas both to save money and meet future air quality rules.

Another issue about rail freight is the main traffic in California are from the ports of Los Angeles/Long Beach with most of the trains heading up the Cajon or San Gorgonio passes. The Tehachapi pass gets much less traffic by comparison from the Port of Oakland and local traffic headed east from the San Joaquin Valley.There is heavy truck traffic in the San Joaquin Valley going north and south, But there is little rail freight traffic going in that direction. The railroad now is too slow and the distances too short to interest the freight railroads in local intra-California freight.

So what can the CHSRA do to insure financing to build the vital link to get from Bakersfield to Los Angeles? They can line up more customers. They will have some San Joaquin Trains running in just a few years using a part of their new railroad. A new station is being built in Fresno for the new tracks, But once the high speed trains are running all the San Joaquin Trains are suppose to go back to using the existing station a mile away. This makes no sense from a rider’s standpoint. This new railroad has the capacity for 20 or more trains an hour per direction. It is doubtful it will have anywhere near that traffic for some time. The San Joaquin Trains will be able to run 125 miles per hour in the near future. In years to come that speed could be raised as more fast trains are added to the line.

Speaking of capacity, will full double tracking be needed initially between Bakersfield and Palmdale? Building the start up service with some single track will save money . This is particularly true for tunneling. Using steeper grades can save money to get a railroad built as well. A railroad is never finished. As need and funding is available double tracking and faster alignments can be built. It is easier to borrow a smaller amount of money to get started.

Instead of talking to the railroads, it would make sense to talk instead to the shippers. The shippers would welcome improved and less expensive transport through the Central Valley and up to Oregon and Washington State. This would likely be in the form of trailers or containers on flatbed and or passenger trains converted to handle small containers. No one would want to run high speed trains mixed with heavy commodities trains. But these would be lighter axle load freight trains with high value cargo justifying faster speeds. Freight trains since they are longer than passenger trains don’t have to be run as often. In San Diego County freight trains share the tracks with light rail. They run at different times so they don’t share the tracks at the same time. Freight could run at times there is little or no passenger service through the Tehachapi.

If the CHSRA could work out a deal with the shippers to set up a new high speed freight service along the West Coast they would be in a better position to interest lenders for money to build through the Tehachapi. A private short line operator would be needed for such a service on the high speed tracks which could cooperate with the railroads to share facilities and interchange cars. For the San Joaquin Valley this would reduce truck congestion on the 5 and 99 freeways and improve air quality. This would improve the CHSRA cash flow and increase its credit line to expand service. The more people who benefit from High Speed Rail construction the more support it will have and the better chance it will have of making money.


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