The No Blank Check Initiative, which is set for the November, 2016 ballot, would give voters the right to decide whether to fund — with revenue bonds — projects that cost more than $2 billion. If passed, this would put the funding for the high-speed rail project up for another vote.


Revenue bonds are typically issued for projects that will be able to repay the bonds through a stream of revenue such as ticket sales. The initiative would allow the public not to provide additional funding in the wake of the rail’s delays, overrun costs, and questionable revenue estimations.


In a report released by the Los Angeles Times, Ralph Vartabedian uncovered evidence that the rail project will not be able to operate without massive government subsidies. Ferrovial, a Spanish multinational infrastructure developer, conducted its own research and found that only 3 of the 111 rail projects worldwide are able to cover their operating costs. “More than likely, the California High-Speed Rail will require large government subsidies for years to come,” as quoted in the Los Angeles Times.


How much those subsidies will be is still uncertain. Critics of the rail project believe that funding for the project will need more push from the taxpayers. The rail authority has failed to secure a significant amount of private funding and the cap-and-trade fund receipts have fallen well below expectations.


However, the High-Speed Rail Authority claims that it is confident that their ridership will be able to cover operating costs and produce a profit. The authority projects that ridership will generate $2 billion in sales in 2030 — just two years after L.A.-to-San Francisco service begins. This number is far above the estimated $700 million in operating costs.


Even if ridership projections are off, the Authority believes it will still be able to cover its operating costs, according to an article in the Los Angeles Times. The Authority also plans to generate additional revenue from leasing its right-of-way to utilities, advertising and concession fees at concessions. “When we say we can hit the break-even point, we have a lot of reliability in the statement”, said Morales, the chief executive of the rail authority, in Los Angeles Times.


Since the project began, and voters approved the bond funding, estimates of the costs of have gone up from $33 billion to $64 billion. In addition, the Authority has decided to postpone the southern segment of the project in favor of a northern segment.


Just last week the authority issued almost $64 million in change of orders to one of their contractors as they weren’t able to begin in 2013 because they failed to secure the land they needed.


Questions about the revenue and profitability of the high-speed rail are likely to continue, but may become less relevant as the state has committed to building the system. However, the No Blank Check Initiative that will be on November’s ballot could change all of that.


If you think your property or business may be taken for the high-speed rail project, you can learn more about your options by giving us a call at (866) EM-DOMAIN.