In April 2012, The Los Angeles County Metropolitan Transportation Authority (Metro) Board of Directors approved a $299 million contract to purchase 78 new light rail vehicles (LRV) from Kinkisharyo International, LLC; the #1 supplier of low floor light rail vehicles in North America.  The contract further included four options to buy another 157 light rail vehicles for an additional $591 million for a total contract value of up to $890 million for 235 new rail cars.

The new LRVs will be used by Metro for a number of projects, including the Expo Phase II to Santa Monica, the Foothill Extension, and the Crenshaw/LAX Line.  The contract will also provide Metro the means to replace up to 69 aging cars on the Los Angeles to Long Beach Blue Line which has suffered significant delays in the past partly due to deferred maintenance.

Part of the contract is that the federal and local tax revenue that will pay for the LRVs will help create jobs in California.  In July 2013, the Metro Board of Directors approved two of the four options with Kinkisharyo International for an additional 97 new LRVs at a cost of $400 million.  This triggered a provision which requires the supplier to establish a factory in LA County.  In addition, Kinkisharyo is moving their U.S. corporate headquarters from Boston to El Segundo, CA.

Kinkisharyo is looking to open their LRV factory in Palmdale, CA at Site 9, the former B-1B bomber plant, inside Air Force Plant 42 (AFP 42); a premier design and test facility for the United States Air Force.  The Palmdale Kinkisharyo facility will provide close to 200 new jobs to the area. 

Two LRVs are to be delivered in Metro’s pilot progam by October 2014, the next 76 will be delivered starting in May 2015 through February 2017.  Delivery of the 97 LRVs to be built in Palmdale is expected to begin March 2017.


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Now that you’ve had the chance to view the video let’s cover some important facts:

• The California (CA) High Speed Rail (HSR) is the largest planned infrastructure project in America.  It is projected to be the first high-speed rail system in America.  The CA HSR is being planned, designed, built, and operated by the California High-Speed Rail Authority.
  
• Traveling at speeds just over 200 MPH, the CA HSR is proposed to run from San Francisco to Los Angeles in just under 3 hours by 2029.  The CA HSR is anticipated to eventually extend to Sacramento and San Diego.
• On November 4th, 2008, Californian’s approved Proposition 1A a $9.95 billion bond that allocated funds for the California High-Speed Rail Authority.  The California High-Speed Rail Authority also received $3.3 billion in federal funding.
• The cost of the CA HSR has increased from an initial estimate of $33.6 billion in 2008 to an estimated cost of $68 billion today.  The CA HSR has faced sharp criticism that largely centers on its hefty price tag.  The truth is, no matter how well or poorly your economy is performing, it’s never a “good time” to spend such a large amount of money.  In other words, large expensive projects like this one have always faced opposition even when the benefits outweigh the costs.  For example, the expensive California Aqueduct, a 700 mile system of canals, tunnels, and pipelines that brings water from the Sierra Nevada Mountains and Northern and Central California to Southern California faced enormous opposition.  However, without this water system Southern California would have lacked the necessary water to grow the way it has.

• The initial construction segment will be in California’s Central Valley.
• On June 13th, 2013, the Surface Transportation Board (STB) ruled that the state could begin construction as long as it maintains the current route and follows through on promises to mitigate any potential damage to the environment caused by construction.
  
• The CA HSR project is expected to break ground on construction in 2013 and expected to carry passengers by 2022.

As an investor, the question is not whether this project is right or wrong given the cost or any other circumstance.  The question is will people ride it?  Whenever I've asked anyone about the California High Speed Rail, whether they were opposed or for it, I have yet to find a single person that claims they would never ride it.

Assuming that people will ride the rail, it is reasonable to expect that smaller less developed cities will receive significant population growth and economic benefits from sharply reducing commute times to large mega-cities like Los Angeles.  


Several experienced investors are already benefiting from this information.  Join us at our next event to discover how properly investing near this project and several others can help you reach financial security: Event Calendar.