Google Analytics

Tuesday, April 24, 2012

More On Cost/Benefit Analysis

We have already commented on how easy it is to warp the Benefit side of the equation using the California Bullet Train, aka the Train To Nowhere.  Now here is the other side of the equation, the Cost side.  Today's Los Angeles Times makes the point clearly.

Bullet train authority underestimates operating costs, study says

California taxpayers potentially will have to provide billions of dollars annually once the system is running, a group of financial experts say.

By Ralph Vartabedian, Los Angeles Times
April 24, 2012

The state rail authority has grossly underestimated future operating costs of California's proposed bullet train, meaning taxpayers potentially will have to provide billions of dollars annually once the system is running, according to an analysis released Monday by a group of outside financial experts.

The California High Speed Rail Authority's claim that its future system would generate hundreds of millions of dollars in surpluses is based on unrealistic assumptions about what it will cost to operate the network, according to the study group, which included former World Bank official William Grindley and Stanford University management professor Alain C. Enthoven.

The rail authority claims it can operate the 510-mile system at a cost of about 10 cents per passenger mile, less than one-fourth of the 40 cents to 50 cents it costs high speed rail operators in other countries, the analysis found. If California's bullet train operating costs rise to the international average, losses will range from $2 billion to $9 billion annually, according to the report.

"We are confounded by where the authority is getting its operating costs," Grindley said.

The group, which also includes Silicon Valley executives William Warren and Alan Bushell, has written a series of financial assessments of the bullet train plan that sharply question its economics. The four experts are affiliated with the Community Coalition on High Speed Rail, located in the Bay Area.

No comments: