With Brightline West in doubt, time to pull the plug on High-Desert Corridor

Brightline West, the private high-speed rail line planned for the I-15 median, is facing financial challenges which may prevent it from being completed. These developments raise an obvious question: why is a Southern California government agency spending taxpayer money planning a high-speed rail service to connect with a train that may never be built?

The High-Desert Corridor is a 54-mile high-speed rail line intended to connect Palmdale with Victorville at a cost last estimated to be between $5.8 and $6.6 billion, but likely to be a multiple of that. Connecting car-oriented cities with respective populations of 167,000 and 141,000 only makes sense if the service also connects to other intercity rail lines.

At Palmdale, the High-Desert Corridor is supposed to connect with the state-run California High-Speed Rail project, which has been a dubious proposition for quite some time. Even with a new infusion of $15 billion of cap-and-trade funds, the California High-Speed Rail Authority barely has enough money to connect Bakersfield to Merced. If the Authority is able to complete that segment, its next objective appears to be Gilroy in Northern California with an aspirational service date in 2038. Only after that might we expect work to begin on an extension from Bakersfield south to Palmdale.

By contrast, the Victorville connection to Brightline West seemed like more of a sure thing—until recently. In March, Brightline West raised $2.5 billion on the municipal bond market.  With previous bond proceeds and a Biden-era federal grant, the railroad had raised about half of its $12.4 billion estimated construction cost, putting Brightline in a strong financial position to meet its projected December 2028 start date.

But today, Brightline West’s prospects are much more doubtful. Management disclosed a new, much higher cost estimate of $21.5 billion when it applied to the Trump Administration for a federal loan. It also added nine months to its project timeline.

Other developments have cast doubt as to whether Brightline West can raise more money from banks or bond investors. Its Florida-based counterpart missed interest payments and was compelled to offer a 15% yield on new bonds, after it failed to meet ridership and revenue projections.

The $2.5 billion of Brightline West municipal bond suffered a steep decline in value, plunging to about 85 cents on the dollar in mid-July before rebounding into the low 90s by late August. More recently, with the disclosure of the higher construction cost and delayed completion date, the bonds fell further, trading at 75 cents on October 9. At this price, the Brightline West bonds are yielding 12.7% to maturity reflecting grave (and very understandable) investor doubts about the prospects of repayment.