WASHINGTON — Despite the financial struggles and criticism faced by prominent fast-rail projects in California and Florida, high-speed and regional rail is likely to proceed out of necessity, according to an analysis by Fitch Ratings.
The analysis, issued Thursday, concedes that projects like California’s largely bond-financed proposal to build 500 miles of high-speed passenger train lines between San Francisco and Los Angeles face obstacles as state governments look to cut spending and voters continue to feel the effects of a weak economy.
That, however, won’t ultimately prevent them from moving forward as the result of “societal and practical factors,” the rating agency said.
“Ideas around driving less have entered the mainstream and are sometimes at odds with basic transportation needs,” Fitch said. “State and federal spending on transportation has not kept up with needs, while Interstates (particularly in land-constrained regions) have seen an increase in congestion that requires expensive highway expansions.”
The California rail proposal’s estimated costs more than doubled, from a 2010 estimate of $45 billion to a revised 2011 estimate of $98.5 billion. A peer review panel recommended this month that California hold off on borrowing billions of dollars to finance the project, calling the endeavor “an immense financial risk.”
Gov. Jerry Brown, however, said he would ask the Legislature to authorize a $9.95 billion general obligation bond measure for the project that was approved by voters in 2008. Republican lawmakers said this week they would seek to block those bonds from being issued.
The project also took a verbal whipping in Washington last month during a meeting of the House Transportation Committee, where chairman Rep. John Mica, R-Fla., said the project was “imploding.”
Fast rail has also struggled in Florida, where Gov. Rick Scott in early 2011 refused to accept $2.4 billion in federal funds to build a portion of a high-speed network there.
Fitch said rail projects should proceed in small phases, and secure funding that runs beyond initial construction costs, unlike California’s massive undertaking.
“Plans need to include subsidies that run beyond the startup phase, as these projects are rarely (if ever) profitable from their origins,” Fitch analysts said. “Clear funding from the federal and state levels is necessary given their regional scope. We believe that bipartisan support is critical, since the lengthy implementation periods and funding needs will cross multiple election cycles.”
This might mean a delay in getting such projects off the ground, but Fitch analysts believe that short-term loss will be a long-term gain for the future of high-speed rail in the U.S.
“Over the short term,” Fitch said, “securing the considerable political and public support for HSR and other rail solutions is much more important than beginning the work on them.”