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$1B of Private Money for High-Speed Rail?

A billion and more? Wow! There's only one problem: "The group doesn't have money in the bank."

May 04, 2012


Families Protecting The Valley Newsletter

MAY 4 2012


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$1B of Private Money for High-Speed Rail?

One of the big holes in California's high-speed rail dream has been the lack of private investors (and federal money and state money). The High-Speed Rail Authority continues to claim that once the project gets going there will be a lot of investors willing to step up to the plate. According to the article below there are a group of investors willing to pony up a billion dollars to get in the game. Or are there?

From the article: "Madera real-estate developer Ed McIntyre, who said that he and partners are ready to spend $1 billion developing a maintenance yard and more if the authority puts it on their property in Madera." A billion and more? Wow! There's only one problem: "The group doesn't have money in the bank." Oh? No money in the bank? Red flag! Huge red flag! They want to invest a billion dollars, but they have no money? I guess that's the kind of investor we would expect from a project like this, "but McIntyre said he believes that if their site is ed,the partnership could secure the needed financing based on the anticipated profitability of the train system."

So, what exactly do we have here? It looks to us like we have a group with no money that is willing to make a deal with the High-Speed Rail Authority where they will hope to secure loans once their site is ed, then lease it to the authority when built. We hope the High-Speed Rail Authority will have a long conversation with the hypothetical bank that will hypothetically make this loan. What they will see is a group with no money using the taxpayers of California as collateral for a $1B loan that they will call an investment in high-speed rail.

HSR board sets Valley route and gets unexpected boost

By Tim Sheehan - The Fresno Bee

The California High-Speed Rail Authority took a key step toward developing its proposed passenger-train system Thursday, certifying environmental reports and formally approving the first portion of the line between Merced and Fresno.

Skeptics remain even as the authority pushes forward on building as soon as this year. But Thursday, a new booster stepped forward Madera real-estate developer Ed McIntyre, who said that he and partners are ready to spend $1 billion developing a maintenance yard and more if the authority puts it on their property in Madera.

McIntyre told the board before its vote that his group believes high-speed rail pencils out as a money-maker. In his group's case, he said, they're certain they can secure financing and recoup their investment through a lease-buy deal with the authority.

Thursday's votes at the authority's board meeting in Fresno locks in the route choice a hybrid line that follows portions of two different rail lines through the San Joaquin Valley and clears the way for the authority to award construction contracts after bids are received later this year.

It also allows the agency to start negotiating with property owners along the route for buying rights of way and determining other types of compensation for potential losses.

"There's a lot of nexts," said Fresno developer Tom Richards, the authority's vice chairman. "With the certification, we have the ability to start talking directly to people. I think that's going to help relieve a lot of the concern."

Fresno County Supervisor Henry Perea was ecstatic about the vote.

"This is a historic day not only for Fresno County, but for the state of California," Perea said. "Fresno is going to forever be the birthplace of high-speed rail in California."

Perea declared that construction and operation of high-speed trains "will be an economic game-changer" for Fresno and the Valley. "We're going to see the economic base of this county be diversified like we've never imagined before," he said. "We're going to make sure we capture all of the value-added businesses that support high-speed rail."

While the action prompted congratulatory back-slapping among high-speed rail supporters, hurdles remain before the rail authority can begin construction late this year or early next year in the Valley.

The federal government has pledged about $3.3 billion to California to start building a 120-mile stretch from Madera to Bakersfield part of the 520-mile system that would connect San Francisco and Los Angeles. But that money depends on the state putting up $2.7 billion from Proposition 1A, a bond measure approved by voters in 2008.

"If the Legislature doesn't authorize the issuance of $2.7 billion, we have more than a casual difficulty in how to move the project forward because it puts in jeopardy the money from the feds," Richards said Thursday.

"My hope is that the wisdom in Sacramento, and there's a lot of it there, will recognize the importance of this project to not only the economy, but to moving forward to helping transportation stop being a problem and start being a solution," Richards added.

McIntyre, the Madera developer, also described the board's action as "a historic moment."

"To those who want further study or planning ... I think we've planned enough," he told the board before their vote. "I encourage you to move forward."

McIntyre caught the board's attention by dangling the prospect of private-sector investment something the authority's representatives say will be critical to the successful development of the statewide $68.4 billion system, but which skeptics suggest has been sorely lacking in the agency's business plans.

McIntyre told the board that he and development partners want to invest up to $1 billion to build maintenance facilities for the trains and the rail line on property just north of Madera, on the east side of Highway 99 between Avenue 18 1/2 and Avenue 20 1/2. The investment depends on that site being chosen by the authority, from a handful of competing sites up and down the Valley, to house a heavy maintenance station.

McIntyre, who was involved in deals to develop University of California at Merced and Children's Hospital Central California in Madera County, said his group estimates it would cost about $668 million to build a plant where heavy maintenance would be done on the high-speed trains. Another $330 million would be needed to build a command center for the train system as well as a maintenance-of-way station to care for a section of tracks in the Valley.

The group doesn't have money in the bank, but McIntyre said he believes that if their site is ed,the partnership could secure the needed financing based on the anticipated profitability of the train system.

"We finance it, we develop it, we construct it, and we lease it to the authority in a lease-purchase agreement in which (the authority) would own it after a certain period of time," he said. "We're confident that the operation can be very profitable and lease payments can be easily guaranteed."

Not everyone was pleased with the board's approval of the route.

"I feel today like I don't count," said RoseAnn Martinez, whose immigration-service office at the corner of G and Fresno streets in downtown Fresno would be dislocated by the high-speed railroad. "I think your engineers need to spend more time to see what families and businesses you're displacing. I just want each one of you to know that."

Valery Forestiere, whose family's Forestiere Underground Gardens on Shaw Avenue between Highway 99 and the Pacific Railroad line is a national- and state-recognized historic site, said she is unconvinced that there has been sufficient analysis of how noise and vibration from nearby high-speed trains might affect the property.

"My family does not believe, since we were not involved, that the correct processes were followed," she said. "If so, the board would not have reached this conclusion."

"It's impossible to say there's no adverse impact if the correct studies have been done," Forestiere added. "If they were done, please give us copies, because we were never contacted or involved. ... It's insulting that we weren't taken seriously."

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