By Martin Z. Braun, Bloomberg
The price tag for building a private high-speed passenger railroad from Southern California to Las Vegas has swelled by nearly 35%.
Brightline West’s 218-mile (351 kilometer) railroad will now cost $21.5 billion, according to the US Department of Transportation’s website, which lists the company as a loan applicant. The initial projection was $16 billion. The higher cost has led the Fortress Investment Group-backed company to seek a $6 billion loan from the Trump administration, according to the site.
RELATED: Newsom, legislative leaders reach deal to fund high speed rail with ‘historic’ $1B annual commitment
Last month, Brightline’s Chief Executive Officer Mike Reininger said construction costs were increasing due to rising labor and material costs, in part caused by high demand due to the proliferation of data centers, power plants and transportation projects.
“Given the increase in project costs we needed to figure out a way to advance the project,” Reininger said in an email.
The federal loan will take the place of a $6 billion bank facility in Brightline West’s original financing plan. The company plans to raise equity to cover most of the $5.5 billion increase in construction costs, Reininger said. It initially targeted an equity raise of $1 billion.
“We have had very productive conversations with USDOT and the Federal Railroad Administration the last few months to continue to move Brightline West forward,” Reininger said in an email.
RELATED:
US Transportation Secretary Sean Duffy has bashed a separate long delayed effort in California to build a high-speed rail to connect Los Angeles to San Francisco as a waste of taxpayer dollars. Costs for the project, initially pegged at $33 billion in 2008, have ballooned to an estimated $89 billion to $128 billion. In August, Duffy said he was canceling $4 billion of federal support for the “boondoggle.”
The Trump administration earlier this year also terminated a $64 million planning grant for a high-speed rail line between Dallas and Houston.
In contrast, Duffy has praised the mostly privately-financed Brightline West, which received a $3 billion grant from former President Joe Biden’s infrastructure law.
“We are excited to be the only high-speed rail project currently supported by the Trump administration,” said Reininger.
Chad Farrington, co-head of municipal-bond strategy at DWS Group, said the increased project costs isn’t a positive development, but the tally is still lower than other similar high-speed rail projects. DWS Group holds $17 million of Brightline West’s $2.5 billion of municipal debt outstanding.
“Fortress has a proven ability in the past to secure financing, which is a plus,” said Farrington, referring to the project’s backer.
Prices on Brightline West bonds issued by the California Infrastructure and Economic Development Bank declined Wednesday following the disclosure of the railroad’s rising costs. Bonds with a 9.5% coupon traded at an average of 87.3 cents down from 91.6 cents on Sept. 23, the last time the securities changed hands. The spread, or risk premium, on the bonds compared with AAA-rated municipal bonds widened to an average of about 900 basis points from 825 basis points.
Brightline West is betting it can capture about 20% of the 47 million annual trips projected between Southern California and Las Vegas by 2031, according to bond offering documents. The all-electric trains on the rail line, built along a median on Interstate-15, are expected to reach speeds as high as 200 miles per hour. Service is expected to begin in September 2029.
Still, the company has the challenge of convincing riders to commute to its rail station, in Rancho Cucamonga, which will be located about an hour from downtown Los Angeles. From there, the train to Vegas is expected to take roughly two hours.
Comparatively, a flight from LA to Las Vegas is about 2.5 hours, including idle time at the airport, while a drive between the two cities can range from 3.5 hours to six.
The federal government is authorized to provide as much as $35 billion in direct loans and loan guarantees to finance development of railroad infrastructure via the Railroad Rehabilitation and Improvement Financing program. The loan’s lower interest rate and long tenor make it an ideal source of capital, Reininger said. The loan can fund as much as 100% of a railroad project with repayment periods of as long as 35 years and interest rates equal to the cost of borrowing to the government plus a premium to account for credit risk.
Brightline West may line up a smaller bank facility to round out a financing plan, which also includes $5.5 billion of tax-exempt bonds, according to Reininger.
“We need to aggregate a little more debt and a lot more equity than we originally planned and so in the face of this, the RRIF loan program became a more important and attractive alternative,” he said.
More stories like this are available on bloomberg.com
©2025 Bloomberg L.P.