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Reason Foundation

Study: XpressWest Train Likely to Fail, Costing Taxpayers Up to $6.5 Billion

Train is using outdated revenue and ridership estimates off by 70 percent to seek a federal loan that would dwarf Solyndra’s

August 16, 2012

XpressWest, the proposed high-speed rail line from Victorville to Las Vegas, is based on a series of overly optimistic, outdated market and ridership assumptions that make the project likely to fail, which would cost taxpayers up to $6.5 billion according to a new Reason Foundation analysis. 

“XpressWest is being marketed as a private project. Yet nearly all of the money to build it would come from a taxpayer-guaranteed loan of up to $6.5 billion,” said Adrian Moore, vice president at Reason Foundation and the study’s project director. “If the train fails, the company defaults on the loan and taxpayers are stuck with the losses. Politicians should learn from Solyndra, which was actually a much smaller loan than this would be. This train is far too risky to gamble taxpayer money on.” 

The Reason Foundation study finds that XpressWest, previously known as DesertXpress, is asking for a federal loan of up to $6.5 billion based on ridership and revenue forecasts completed in 2005 that wrongly assumed “a continuation of generally good economic conditions, both nationally and with respect to the Las Vegas urban areas.”

“Things have changed dramatically since 2005 and few areas have been hit harder than Las Vegas,” said Wendell Cox, the study’s author and principal at Demographia. “To loan billions of taxpayer dollars to a project based on rosy economic and tourism calculations made before the recession would be irresponsible.”

Research shows international train projects have traditionally overestimated ridership by 39 percent. Reason notes the Victorville to Las Vegas train predicts it will carry more than four times the number of passengers that Amtrak’s Acela train carries between Washington, D.C. and New York City.

The Reason Foundation study concludes that XpressWest’s ridership numbers are overestimated by 70 percent, primarily because XpressWest has inflated the number of Los Angeles residents who would drive to Victorville, an 80 to 100 mile trip for most, and then opt to take the train instead of simply driving the rest of the way to Las Vegas.

The study also warns XpressWest’s ridership numbers could be even worse if the train’s actual customer market ends up being made up mostly of people who live in the Inland Empire – the Riverside-San Bernardino-Ontario metropolitan area. Ridership would be 75 percent lower than any of the current forecasts in that case. And if the customer market for XpressWest turns out to be limited to people who live in the immediate Victor Valley area, ridership would be 97 percent lower than current predictions.

“People wouldn’t save time or money by using this train,” Cox said. “So its difficult to understand why they’d drive a third of the way to Las Vegas, park, unload their luggage, wait for the train, and then ride it when they could simply keep on driving to Las Vegas and get there nearly as fast.”

The full study, The XpressWest High-Speed Rail Line from Victorville to Las Vegas: A Taxpayer Risk Analysis, contains detailed analysis of XpressWest’s projected ridership, revenue, ticket prices and travel times. It is online here and here (.pdf).

About Reason Foundation

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason Foundation produces respected public policy research on a variety of issues and publishes the critically acclaimed Reason magazine and its website www.reason.com. For more information please visit www.reason.org.



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