On April 26, 2001, the Southern
California Association of Governments (SCAG) Maglev Task Force approved the
California Maglev Business Plan. The Business Plan lays out the steps for
deploying the 92-mile, $7 billion high-speed Maglev line from LAX to March
Inland Port in Southern California. The Business Plan will be considered for
adoption by the SCAG Regional Council on May 3, 2001. There will also be a one
hour session on the Business Plan at the SCAG General Assembly in the afternoon
of May 3rd. The General Assembly consists of Mayors and City Council members
from the 185 cities that make up the Southern California Association of
Governments and represents a total population of 17 million people. According to
the Business Plan, revenues from passenger fares and cargo fees will cover all
construction and operating costs for the 92-mile high-speed line. Once approved,
the Business Plan near term action steps will be initiated. One of the key early
steps is the issuance of a request for proposals from private consortia who
desire to compete for the opportunity to serve as the private partner in the
public-private partnership that will deploy the Maglev system. Please let us
know if you are interested in this solicitation.
Why is it possible to fund Maglev from operating funds when public transit
projects in the U.S. generally depend upon huge subsidies? The answer is, Maglev
is structured as a business enterprise, not as a publicly subsidized service.
Fares and other user fees and revenues are set at rates to fully recover all
capital construction and operating costs. In this sense, Maglev is more like an
airline service than a public transit service. Imagine Maglev as an airplane
flying close to the ground -- a "groundplane." There are three key
attributes of Maglev that make the financial plan for Maglev viable. The first
is its very high speed. At top speeds exceeding 200 mph and average speeds over
90 mph, Maglev is able to attract sufficient ridership to secure the necessary
revenues required to fund the system. The second feature of Maglev is its
relatively low capital and O&M costs. The system is automated and this
reduces operating costs. The absence of wheels and physical contact with the
monorail guideway reduces maintenance costs. Use of available public rights of
way for placement of the elevated system minimizes real estate acquisition
costs. These factors combine to achieve a system plan that is self-financed
using revenue bonds and loans. The Maglev project from LAX to March Inland Port
represents a new business model that offers the federal government some key
benefits. By supporting the project through the environmental review process and
providing construction loan guarantees, and by allowing construction and
operation to be funded from operating revenues, the federal government plays an
active but limited role in the project. The California Maglev Project could be a
model for future transportation infrastructure projects.