One of the most frequently mouthed claims about high speed rail is that it is enormously profitable. Indeed, with the claims made by proponents, you might wonder why all the world’s capital had not “beaten a path” to the station. Some of the wildest profits claims have been made by board members and staff of the California High Speed Rail Authority, which plans to proceed with building a $50 billion system from San Diego and Los Angeles to San Francisco and Sacramento. Sadly for rail advocates, these claims are largely bogus.

Recently, Iñaki Barrón de Angoiti, director of high-speed rail at the International Union of Railways in Paris, said that high speed rail is not a profitable business. The New York Times went on to report that he referred to the short Paris-Lyon and Tokyo-Osaka routes as the only ones in the world that have “broken even.”

In fact, rail promoters have never produced financial statements prepared in accordance with generally accepted accounting standards to show that any high speed rail systems are profitable. Invariably, services are provided by government owned railways or other large companies that do not report fully allocated costs and revenues for high speed rail. For instance, in some countries, government payments that would be called subsidies in the United States are called commercial revenues. In others, high speed rail operators operate over tracks owned by government infrastructure companies, which are also subsidized in some cases. And often previous write-offs of capital investments are not a part of the profit equation.

In short, there is a lack of transparency in high speed rail accounting that makes it impossible to demonstrate that profits are being earned. The refreshing statement by Mr. Barrón de Angoiti goes a long way toward clarifying the issue. 

There is, however, one high speed rail system in the world where there is sufficient transparency to make a judgment about profits. The Taiwan high speed rail system, which operates down the west coast of the island from Taipei to Kaiohsiung was built and is being operated as a private, non-subsidized business entity. Despite frequent railfanesque reports, it is far from profitable.

Earlier this month, Taiwan Today has characterized the Taiwan high speed rail system as “loss plagued” and noted that it was in the process of seeking to restructure its debt. A principal problem was that less than 90,000 of the 275,000 daily riders projected to use the system had bothered to buy tickets. No, the stations aren't full of turnstile-hopping commuters. The Taiwanese were either staying at home or traveling another way.

Projecting more passengers than show up is not unusual in high speed rail. For example, the Eurostar service from Paris to London attracts less than one-half of the ridership that was forecast for five years ago and has required a government financial bailout. The new high speed rail system in Korea is carrying little more than one-half the passengers that were projected.

All of this is ominous news to California, where daily ridership projections of Taiwan levels are often cited, despite lower population adjacent to the lines, a longer corridor and much higher automobile ownership.

Unlike the Taiwan project, the California high speed rail system will not have to cover all of its capital costs. State taxpayers have already committed $9 billion in bond funding. The Authority hopes to obtain a large share of the $8 billion soon to be divided between a number of high speed rail corridors in the nation.

However, even if California received one-half of the national funding, it would cover little more than the cost escalation that has occurred since the last formal estimates in 2006. A quarter of the funding would pay for less than two years in cost escalation. The Authority hopes that the private sector will be a significant investor in the venture. However, that may not be “in the cards.” The Authority’s financial advisor, Lehman Brothers (yes, Lehman Brothers) noted serious barriers to private investment in a March 2008 report. The collapse of private capital markets makes that only worse.

A second oft-repeated justification for the high speed rail system is that it can be a significant contributor to the state’s greenhouse gas (GHG) emissions targets. That is not borne out by either the official documentation of the Authority or the California Air Resources Board. Based upon this information and Authority projections, Joe Vranich and I estimated that the cost of building and operating the high speed rail system would be a minimum of approximately $2,000 per GHG ton. We also suggested that more defensible projections would put the cost at more like $10,000 per ton. These figures are rather more than the $15 per ton that the carbon market from which Governor Schwarzennegger and Speaker of the House of Representatives Nancy Pelosi pay for their carbon offsets.

Meanwhile, California, the government equivalent of the HMS Titanic, lumbers on toward construction, apparently intent on winning the coveted Captain Smith Award. Despite every piece of evidence pointing toward an impending disaster, rail advocates refuse to the see the financial disaster looming. This could be the first time a train hits an iceberg.

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Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”