The 2008 CHSRA Business

Plan
Focus on Funding Issues
Elizabeth Alexis
September 25, 2009
Business Plan Elements

1. Operational Plan (route, schedule)

2. Primary Benefits
3. Sources of Funds for Construction and Operation
4. Phasing Strategy
5. Risks and Mitigations for Risks
Funding Plan

Source: 2008 High Speed Rail Business Plan

Threading the Needle
State funds
Each segment requires 50% match
Must not require operational subsidy
Bonds require 2/3 vote in legislature to put on ballot

Federal funds
Strict deadlines
Buy America
Loans require high credit rating or match
Not responsible for cost overruns

Private funds
No "greenfields" projects
Fear of environmental review
No eminent domain powers, limited authorization under state law

Local funds
What money??
Prop 13 rules
A budget gap exists

Construction cost estimates are incomplete. ($10bn??)

Example: temporary ROW, alteration of existing grade
separations, Caltrain electrification, modifications to existing
commuter rail stations.
Bond money is not "2008 dollars" but "Year of Expenditure
$$" ($2 bn)
Limited private $$ ($4-5bn)
Limited local $$ ($1-2bn)
No "ramp up" reserve (?)
2020 ≠ 2030

Source: guardian.co.uk
"Private" ≠ free money

1. "Private" = project-related debt

2. $1 billion of debt = $70 million to $120 million annual
payments

Source: 2008 Business Plan and author's calculations

 Public-Private Partnerships (P3)

"Moreover, the significant revenue surplus (greater revenues

than operating costs) will attract the private sector to pay for
part of the capital costs...The California High-Speed Train
Project is an exceptionally commercially viable project"

Source: cahighspeedrail.gov September 22, 2009

"Private appetite for ridership risk is limited

without revenue guarantee or until ridership proven."

Source: CHSRA Finance workshop September 3, 2009

Substantial completion risk

Risky project "greenfields"

No volunteers to be bagholder
Playing catchup, many options off the table
Certain expectations of legislators and public
Operational plan no longer consistent with AB3034

Not enough money + no "owner" Completion risk

less $$ + more strings + "get it while you can" mentality
More completion risk
Plan to deal with completion risk

Hire a lot of lobbyists and visit Washington DC

frequently "Why do you rob banks?"
Spread out benefits regionally to maintain support
Limit cost overruns by contracting (fixed price vs. cost and
materials)
Change in rhetoric "down payment"
"Independent utility"