Project 2047 February 2021 Evaluating Innovative Financing Mechanisms for the California High-Speed Rail Project Shailesh Chandra, PhD Timothy Thai Vivek Mishra Princeton Wong CSU TRANSPORTATION CONSORTIUM transweb.sjsu.edu/csutc MINETA TRANSPORTATION INSTITUTE MTI FOUNDER Hon. Norman Y. Mineta Founded in 1991, the Mineta Transportation Institute (MTI), an organized research and training unit in partnership with the Lucas College and Graduate School of Business at San José State University (SJSU), increases mobility for all by improving the safety, MTI BOARD OF TRUSTEES efficiency, accessibility, and convenience of our nation’s transportation system. Through research, education, workforce development, and technology transfer, we help create a connected world. 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Co-Founder Joint Powers Board San José State University ** = Past Chair, Board of Trustees must prepare a new cohort of transportation professionals Mehlman Castagnetti Rosen & Thomas Ian Jefferies* Toks Omishakin* who are ready to lead a more diverse, inclusive, and equitable President & CEO Director transportation industry. To help achieve this, MTI sponsors a suite Maria Cino Association of American Railroads California Department of Vice President Transportation (Caltrans) of workforce development and education opportunities. The America & U.S. Government Institute supports educational programs offered by the Lucas Relations Hewlett-Packard Enterprise Graduate School of Business: a Master of Science in Transportation Management, plus graduate certificates that include High-Speed and Intercity Rail Management and Transportation Security Management. These flexible programs offer live online classes Directors so that working transportation professionals can pursue an advanced degree regardless of their location. Karen Philbrick, PhD Executive Director Hilary Nixon, PhD Deputy Executive Director Asha Weinstein Agrawal, PhD Education Director National Transportation Finance Center Director Brian Michael Jenkins National Transportation Security Disclaimer Center Director The contents of this report reflect the views of the authors, who are responsible for the facts and accuracy of the information presented herein. This document is disseminated in the interest of information exchange. MTI’s research is funded, partially or entirely, by grants from the U.S. Department of Transportation, the U.S. Department of Homeland Security, the California Department of Transportation, and the California State University Office of the Chancellor, whom assume no liability for the contents or use thereof. This report does not constitute a standard specification, design standard, or regulation. Report 21-06 Evaluating Innovative Financing Mechanisms for the California High-Speed Rail Project Shailesh Chandra, PhD Timothy Thai Vivek Mishra Princeton Wong February 2021 A publication of the Mineta Transportation Institute Created by Congress in 1991 College of Business San José State University San José, CA 95192-0219 TECHNICAL REPORT DOCUMENTATION PAGE 1. Report No. 2. Government Accession No. 3. Recipient’s Catalog No. 21-06 4. Title and Subtitle 5. Report Date Evaluating Innovative Financing Mechanisms for the California High-Speed Rail Project 6. Performing Organization Code 7. Authors 8. Performing Organization Report Shailesh Chandra, Timothy Thai, Vivek Mishra, Princeton Wong CA-MTI-2047 9. Performing Organization Name and Address 10. Work Unit No. Mineta Transportation Institute College of Business 11. Contract or Grant No. San José State University ZSB12017-SJAUX San José, CA 95192-0219 12. Sponsoring Agency Name and Address 13. Type of Report and Period Covered State of California SB1 2017/2018 Trustees of the California State University 14. Sponsoring Agency Code Sponsored Programs Administration 401 Golden Shore, 5th Floor Long Beach, CA 90802 15. Supplemental Notes 16. Abstract Millions of dollars are involved in high-speed rail (HSR) infrastructure construction and maintenance. Large-scale projects like HSR require funding from a variety of avenues beyond those available through public monies. Although HSR serves the general public’s mobility needs, any funds (whether State or Federal) flowing from the public exchequer usually undergo strict review and scrutiny. Funds from public agencies are always limited, making such traditional financing mechanisms unsustainable for fulfilling HSR’s long-term operational and maintenance cost needs—on top of initial costs involved in construction. Therefore, any sustainable means of financing HSR projects would always be welcome. This research presents an alternate revenue generation mechanism that could be sustainable for financing HSR’s construction, operation, and maintenance. The methodology involves determining key HSR stations, which, after development and improvement, could significantly add value to businesses and real estate growth. Any form of real estate taxes levied on properties surrounding such stations could substantially support the HSR project’s funding needs. In this research, a bi-objective optimization problem is posed in conjunction with a Pareto-optimal front framework to identify those key stations. With 28 California HSR stations used as an example, it was observed that the four proposed HSR stations in Fullerton, Millbrae-SFO, San Francisco Transbay Terminal, and San Diego would be excellent candidates for development. Their development could increase the economic vitality of surrounding businesses. The findings could serve as valuable information for California HSR authorities to focus on developing key stations that would generate an alternate funding source for an HSR project facing funding challenges. 17. Key Words 18. Distribution Statement High-speed rail, station, optimization, No restrictions. This document is available to the public through The National business, cost, accessibility Technical Information Service, Springfield, VA 22161. 19. Security Classif. (of this report) 20. Security Classif. (of this page) 21. No. of Pages 22. Price Unclassified Unclassified 25 Form DOT F 1700.7 (8-72) Copyright © 2021 by Mineta Transportation Institute All rights reserved. DOI: 10.31979/mti.2021.2047 Mineta Transportation Institute College of Business San José State University San José, CA 95192-0219 Tel: (408) 924-7560 Email: [email protected] transweb.sjsu.edu/research/2047 M INETA T RANSPORTATION I NSTITUTE ACKNOWLEDGMENTS The research team would like