The plan shows the estimated cost of the San Francisco-to-Los Angeles line rising to $98.5 billion, up from the original $36 billion estimate that was presented to voters in 2008. The timeline for the controversial project has also been stretched, with the projected date of completion moved from 2020 to 2033.
The council's Rail Committee criticized the 230-page plan for not revising one of the most controversial aspects of the California High-Speed Rail Authority's previous analyses: projections of the number of riders who would use the proposed line. The business plan claims that the new line would bring in operating profits even under the lowest-ridership scenario, a claim based on calculation methods that have been widely disputed by state legislators, experts from UC Berkeley's Institute for Transportation Studies and analysts from the Palo Alto-based watchdog group Californians Advocating Responsible Rail Design (CARRD).
Though the business plan slightly hedges its earlier numbers by providing a range — 28.9 million to 42.9 million riders annually — the estimates and the methodology used to derive the figures have not changed significantly between the rail authority's 2009 business plan and the new document.
Councilwoman Nancy Shepherd called the rail authority's failure to revise the ridership data a "devastating blow" to her and to rail watchdogs, who have consistently dismissed the numbers as wildly inaccurate.
Councilman Pat Burt, who represents the city on the Peninsula Cities Consortium, which addresses rail issues, said the new report has "the same sort of fundamental flaws that we saw three years ago and pointed out to the authority."
"Not only did they not correct the flaws that existed in the model, but when you apply the same model to the Initial Operating Segment, it grossly exacerbates the flaws that were already there," Burt said, referring to the proposed first segment of the rail line following the completion of the Fresno to Bakersfield stretch.
The committee also voiced skepticism about the rail authority's plan to pay for the line. Though the project has received $3.4 billion in federal grants and state voters authorized $9.95 billion in bond proceeds for construction, it remains unclear where the rest of the money would come from.
The business plan proposes a phased approach to construction that would allow early, individual segments of the line to operate even if the authority were to fail to get more federal funding. Divided into five stretches, the first — from Fresno to Bakersfield — would cost $6 billion and be completed by 2017; the second, called the "Initial Operating Segment," would either extend south to the San Fernando Valley or north to San Jose and bring the total cost to $33 billion; the third, called "Bay to Basin" and including the northern or southern stretch not built as the Initial Operating Segment, would raise costs to $54 billion; the fourth, called "Phase 1 Blended," would utilize improved, local rail infrastructure, such as Caltrain, to extend the reach of the system to San Francisco and Los Angeles, at a total cost of $78 billion; and the final segment would complete a high-speed-rail infrastructure between San Francisco and Los Angeles, bringing costs to $98 billion.
The authority's plan relies on $11 billion in private investment, which would come in after the Initial Operating Segment is constructed, and a "qualified tax credit bonds" program under which the federal government pays interest on bonds through tax credits. The problem with the latter proposal, as several committee members pointed out, is that this credit program currently doesn't exist. Councilman Larry Klein, who chairs the Rail Committee, likened the authority's plan to get tax credits from the federal government to getting an inheritance from an uncle one has never met.
The committee agreed that the city would need to further analyze the business plan and directed staff to come back with a scope of services for a consultant contract. The consultant's analysis should focus on the Peninsula section of the line, the committee decided.
Council members also agreed that Palo Alto should work with neighboring cities, including Menlo Park, Atherton and Mountain View, and with local watchdog groups on further analyzing the business plan. These include CARRD and area residents William Grindley, Alain Enthoven and Bill Warren, who have been analyzing the uncertainties behind the financial projections.
The rail authority on Tuesday characterized its new plan as the foundation for a project that will create 1 million jobs and reduce carbon emissions by 3 million tons annually. Thomas Umberg, chairman of the rail authority's board of directors, said in a statement that the board has "carefully constructed a business plan that is mindful of the economic and budgetary constraints facing both the state and the nation."
"It will deliver to California and Californians a cost-effective, efficient and sensible alternative to more highways and increased airport congestion," Umberg said.
To justify the rail project's price tag, the authority states that other transportation infrastructure — including 2,300 miles of new highway lanes and various airport improvements that would be needed over the next 20 years — would cost more than $170 billion.
"Providing equivalent new capacity through investment in highways and aviation would cost California almost twice as much as the Phase 1 (San Francisco to Los Angeles) high-speed-rail system," the report states.
The authority attributes the rail line's cost increases to the extended timeline (which added $27.5 billion in inflation costs), $16 billion in contingencies and California's changing landscape.
Since officials first began the project more than a decade ago, the state has added almost 5 million people, and large expanses of previously vacant land have become "bustling communities, suburbs and roadways," according to the report.
The 2009 plan, for example, estimates tunnel costs at less than $6 billion. In the new plan, the estimate for tunnels is greater than $15 billion. For aerial viaducts, the cost estimate has climbed from less than $5 billion to more than $13 billion.
"The new development landscape has necessitated adding many miles of elevated structures, tunnels and other infrastructure," the report states. "The new designs permit access to major downtown population centers with less community impact and disruptions."
The new plan also incorporates some of the components of a proposal that U.S. Rep Anna Eshoo, D-Palo Alto, state Sen. Joe Simitian, D-Palo Alto, and state Assemblyman Rich Gordon, D-Menlo Park, made earlier this year. The three Peninsula lawmakers proposed a "blended system" in which high-speed rail shares tracks with Caltrain on the Peninsula — rather than building a separate track system for the ultra-fast trains. They also voiced opposition to an earlier proposal by the rail authority to send the new trains over the Peninsula on aerial viaducts.
Simitian praised the new plan for being more frank in its cost estimate than previous projections but also expressed caution.
"The good news is that we finally have a realistic number on the table," Simitian said. "The bad news is it's a very scary number."