- Associated Press - Tuesday, November 1, 2011

SACRAMENTO, Calif. — A business plan released Tuesday projects that the cost of California’s ambitious plan to link its major cities by high-speed rail has ballooned to nearly $100 billion over 20 years, accounting for inflation.

The daunting figure may cause sticker shock even for the most ardent supporters of the project.

The business plan comes after Gov. Jerry Brown appointed two new members to California’s high-speed rail commission and asked them to take a hard look at the proposal and assess its viability. They concluded the project is doable, if built in phases, but the cost will be more than double the original projection.

“The good news is the numbers are more realistic; the bad news is they may well be beyond reach,” said state Sen. Joe Simitian, Palo Alto Democrat.

The report shows the estimated cost at $98.5 billion if the route between San Francisco and Anaheim is completed in 2033. The plan assumes private investment will account for roughly 20 percent of the total cost, with much of the rest coming from additional public borrowing.

“This is not a promotional document. This is not a political document. This is a business plan,” said Dan Richard, one of Mr. Brown’s two appointees on the California High-Speed Rail Authority.

The initial estimate to build the system when voters approved bond funding for it in 2008 was $43 billion. In non-adjusted, 2010 dollars, that amount is now $65.4 billion. The plan also says the system would be profitable even at the lowest ridership estimates and would not require public operating subsidies.

It also calls for retaining the most controversial aspect of the proposed rail line - starting construction in the Central Valley. Critics want to start in more populated areas of Southern or Northern California in case money runs out before the full system is finished, which they worry would create a “train to nowhere.”

But $3.5 billion in federal funding is contingent upon the Central Valley route, and construction must begin before October 2012. That does not leave enough time for new engineering proposals and environmental reviews to be conducted elsewhere, the plan says.

The business plan says the system will be built in sections than can operate independently and make money, even if no more track were ever built, Mr. Richard said. Planners hope each new section will generate momentum - and private investment - to complete subsequent sections.

If the segments are built faster, the cost would decrease, the report said.

At a news conference Tuesday to release the plan, officials with the rail authority stood before steam locomotives at the California State Railroad Museum in Sacramento. They stressed that the new business plan calls for the rail line to be built in phases, which would break the project’s costs into manageable pieces - about $2 billion a year.

“It is clear that we don’t have funding yet” for the entire project, said Michael Rossi, Mr. Brown’s other appointee to the rail board. He said that is not unusual for a project of this size and said officials have enough money already to begin the first phase.

“It will be three years before we need to worry about getting those funds” for the next section, he said.

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