Dive Brief:

• High-speed rail proponents in the U.S., using California’s bullet train project as a cautionary tale, are seeking private funding rather than public in an effort to avoid regulatory delays and legislative involvement, Reuters reported.
• Rail developers in Minnesota, Texas and Nevada are seeking global investors for their projects and forming partnerships with Japanese and Chinese train manufacturers whose domestic businesses has slowed down.
• On the other hand, proponents of government funding have said that rail projects, while profitable once up and running, typically do not generate enough profit to repay private loans and investors.

Dive Insight:

In addition to government funding hoops, high-profile rail projects are often subject to the political winds, which can change direction quickly, leaving a popular project on the outs with politicians and taxpayers if it encounters financial or logistical problems. And then there’s the technology component. Countries like Japan and China have had successful high-speed rail systems in their countries for years and can lend their expertise as well as their money to the development of a U.S. system.

Using the California bullet train project as an example once again, California invested only $10 billion in the $64 billion rail plan, so the state will most likely need to finance the rest privately anyway. The California High Speed Rail Authority recently approved a revised plan for its bullet train project, which included a first-segment change from Southern California to Northern California. This move eliminates the requirement for massive tunneling operations for a route between Los Angeles and San Francisco. 

The authority and state lawmakers have had a rocky relationship ever since a Los Angeles Times investigation suggested authority officials had not been 100% honest with lawmakers about the cost and feasibility of the project. Since then, legislators have held several special hearings regarding its financing and operational capabilities. 

Another Times investigation in March found that, largely due to delays in construction, the authority had accumulated another $400 million in change order costs. Contractor Tutor-Perini submitted $51.7 million in change orders, with more reportedly to come, and many subcontractors and material suppliers have hiked their original bids by 10% to 30%. Rail officials have said those amounts are not finalized and that there could be back charges to contractors as well.