Earlier this year I argued that the up-front cost of local transportation projects, like light rail and bus rapid transit, aren't really comparable to the cost of California's high speed rail system. While all of these investments are fighting for the same dollars to some degree, their long-term balance sheets look very different: Local transit typically requires a persistent operating subsidy, whereas even the low-ridership estimates for high speed rail forecast a consistent operating profit. As a result, longer time horizons favor high speed rail, as profits gradually eat away at the high initial capital costs required to build out the network.

Unfortunately, the existing literature on California's high speed rail project doesn't take the long view. The official source for HSR's cost, revenue, and ridership projections—the California High Speed Rail Authority's 2014 Business Plan—limits its analysis to a 35-year operational period, from approximately 2025 to 2060. Much of the rail infrastructure, however, including some of the most expensive aspects of the project such as tunnels, viaducts, and bridges, have 100-year lifespans. Other up-front costs, such as for right-of-way acquisition, will only require a single, one-time payment.

Given this reality, what we need is an analysis that accounts for a more complete utilization of assets—an analysis that can fully amortize the high up-front capital costs over their useful lifetimes and most accurately determine the extent to which California HSR revenues can cover not just operational costs, but also those of capital. The analysis below will look at costs and revenue over a full 100-year period, at which point even the longest-lasting rail infrastructure will require full replacement. The spreadsheet analysis on which this is based can be found here. (Note that this analysis is ultimately just a simple extrapolation, unmindful of whatever technical constraints official analysts are required to work within.)

It's not my intent that the project live or die by its economics, any more than a bikeway or subway line (or a highway) should be discarded just because it doesn't earn money. High speed rail has countless side benefits, including improved connections between California’s major cities, reduced emissions in the heavily-polluted Central Valley and reduced air and road congestion throughout the state, job creation, more sustainable growth near stations, preservation of valuable agricultural land, and reduced car dependence. All of these benefits have been reported at length by writers like James Fallows and Robert Cruickshank, and they're all important to the final “go/no-go” determination. The purpose here is to expand our perspective beyond the social, environmental, and mobility impacts of this project, to include the potential for long-term, direct fiscal benefits as well.

So, let's get started.

CAPITAL COSTS

The California high speed rail project's current capital cost estimate is $54.9 billion (all values reported here will be in 2013 dollars), contingent upon a variety of factors that haven't yet been finalized, including whether the system will travel underground through the Angeles National Forest, or take a cheaper (but more circuitous) route between Palmdale and Los Angeles.