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Increasingly bleak future for high speed rail

The past month has been a precarious one for high speed rail projects – the demise looks inevitable for the US programme, Brazil’s TAV is suffering and last week, Portugal disbanded its high speed rail authority Rave.

Looking at it pessimistically, the only projects left will be French and Chinese.

Last week US Congress failed to agree on a budget and so temporary legislation was put in place to ensure government departments still receive capital funding.

However, this came with the caveat of some of the biggest spending cuts ever made in the US. About $40bn (£24.5bn) will be shaved off 2011 fiscal year funding while the high speed rail programme has been one of the hardest hit (see News).

Appropriations Committee Chairman Hal Rogers says that deep reductions were needed in almost all areas of government and the level of debt is unsustainably high.

“Never before has any Congress made dramatic cuts such as those that are in this final legislation,” he said in a statement last week.

 Answering the question of whether the US high speed programme is dead, or at best breathing rasping gasps, is another issue.

To make the situation more difficult, reports are conflicting on exactly how much money has been slashed.

Whatever the figure, the programme is likely to be deeply wounded.

Lloyds Bank USA head of project finance Tony Porter told NCE he doubts whether President Barack Obama’s vision that 80% of Americans would be provided with access to a high speed rail line will ever be realised.

“I can’t imagine how the HSR Programme can survive if the budget cuts are significant,” he says.

New York University Fellow and author of Obama’s Bank, Michael Likosky, says that proponents of high speed rail need not be too worried as private finance could plug the hole.

“One thing that makes more sense is using private finance,” he told NCE. “Some of the projects will be set back – I don’t think that the North East corridor [between Boston and Washington DC and via New York and Philadelphia] will be set back though. I think it’s less about the high speed cost and more about what makes us think differently about how to fund this rather than whether to fund it.”

However, from a private sector perspective, Porter says this just is not feasible.

“I would personally like to see high speed rail be successful but I don’t think that can happen without a strong public sector funding commitment to the program,” he says.

“If you step back and look at it, rail transactions do not usually cover the cost of capital and operations…it would require a significant funding commitment from the public sector to attract private sector financing for HSR projects.”

He says the only likely scheme to continue is California’s hugely expensive £26.4bn plan.

“There is approximately 400 miles [644km] between San Francisco and Los Angeles with a number of high density cities in between, so a high speed rail route could prove to be an attractive alternative [to air travel],” Porter says.

In Brazil, construction of the £11.1bn Sao Paulo to Rio de Janeiro line looks shaky. Bids were due last week but the National Land Transport Agency (ANTT) decided to instead push the deadline back until July.

At the end of last month, Brazil’s federal prosecutor, the Federal Public Ministry, submitted two separate complaints to court against the ANTT concerning the tender process and recommended that the project at least be suspended, if not cancelled.

Sources on the ground have said that it looks increasingly unlikely that this line, if it does go ahead, could ever be ready for the 2016 Olympics.

Portugal is battling with its own economic problems due to the sovereign debt crisis plaguing the country and the disbanding of RAVE creating great uncertainty for the already-financed Poceirão-Caia line (News last week).

All of this, along with the present economic instability, is likely to raise questions over the robustness of the UK’s High Speed Two plans.

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