Monday, 22 February 2016

High Speed Rail Business Plan Assumes People Will Pay $2500 Per Month to Commute from Fresno to San Jose

The new California High-Speed Rail Business Plan’s switch to connect the Valley with San Jose first generated effusive praise from rail boosters about the economic benefits from linking Fresno’s workforce and housing with the Bay Area.  The Business Plan states,

“The implications of the Silicon Valley to Central Valley connection are tremendous. Today it takes about three hours to drive from Fresno to the Bay Area; flights are available but often at exorbitant prices. With this new connection, a trip from Fresno to San Jose will take about an hour on high-speed rail which is a game changer both for the people and the economy of the Central Valley and for Silicon Valley as well. New job markets will be opened up for people living in the Central Valley and creating a high-speed connection to the Central Valley would help address the affordable housing crisis in the Bay Area.”
Rail boosters gave these effusive quotes for Tim Sheehan’s article in the Fresno Bee:

“Today it takes three to four hours to drive from Fresno to the Silicon Valley,” [CA HSR Authority CEO Jeff] Morales said. “We’re talking about a rail connection of 45 minutes or so, and that’s a game changer for both economies, opening opportunities for people in the Central Valley and helping the Bay Area with its housing crisis.”
In the Bay Area, Silicon Valley Leadership Group executive director Carl Guardino was ecstatic about the new rail plan. “What excites us most is that this is a convergence of commute options all into downtown San Jose,” 
This all sounds really exciting, so I looked deeper in the business plan for more details on the length and cost of this commute.  According to the Ridership and Revenue Forecast, it is a 72 minute (not 45 minutes like Morales claimed) ride and a 1-way ticket would be $63 in 2015 dollars.  That’s a long ride but people are making similar length train commutes to Silicon Valley on ACE and BART today.  However, nobody is paying that kind of cost for commuter rail.  ACE from the North San Joaquin Valley to Silicon Valley costs $20-$25 for a round trip, and a monthly pass is $300 to $350.  An hour long commute on BART is about $12 round trip.

A daily round-trip from Fresno to San Jose would be $126 per day, $630 for a 5-day week, and over $2,500 for a month of commuting.  So is this really a solution for the affordable housing crisis and Valley economy?  Housing cost differences are extreme between the two locations.  A two-bedroom apartment in San Jose goes for about $3,000 per month, and about $1,000 in Fresno - so the rent savings for a commuter is less than the cost of their HSR tickets.  Cheaper rent in Fresno is not an affordable housing solution for Bay Area workers if it raises their total cost of living, and SJV workers will not see enough of a wage boost to be worth these commuting costs.

The bottom line is that I think the commuter/housing benefits of a HSR link between Fresno and San Jose are way overblown.  I want to believe it, but I don’t see this as an economic “game changer”.

I am not totally negative on HSR, it could create a lot of value for the state.  But the project does not create that much value unless it directly links the LA area and the Bay Area, and there still is no viable plan to make that happen.  I question whether they should spend any more money on construction until they have a realistic finance and engineering plan to get to LA.

P.S.  When comparing these costs to existing commuter rail options, it is important to remember that commuter rail operating costs are subsidized.  If the operating subsidy were eliminated, a “Valley to Valley” commute on ACE would be nearly $1,000 per month.  The high speed rail bonds do not allow an operating subsidy.  But even if Fresno-San Jose train commuter received a similar subsidy as a San Joaquin County to San Jose ACE commuter, it would still be about $2,000 per month for the Fresno commuter on HSR according to the information in the HSR business plan.

About the Author

Ethan Jacob

Author & Editor

I am Ethan Jacob Executive Director of the Center for Business and Policy Research at the University of the Pacific, where I have a joint faculty appointment in the Eberhardt School of Business and the Public Policy Program in the McGeorge School of Law..

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