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California HSR will not serve San Francisco

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It is usually possible to sell debt, even it is junk, as long as the interest rate is high enough to justify the investor risk.  This is especially true if the issuer buys insurance for the bonds.  Unfortunately, poor bond ratings mean that the issuer will pay more in interest than if the bonds were of higher quality.  In the case of a business, the cost of debt is passed on to the customers in the price of the goods and services or the stock holders if the pricing mechanism will not absorb the interest.  Of course, a prudent management would not issue debt unless it believed that it could service the debt through its pricing mechanism.   In the case of a public entity, like the California HSR project, much of the higher bond interest will be worn by the taxpayers, since the project is unlikely to recover its operating costs let alone its capital costs.  The people of California have the highest combined tax burden of any state.  Hopefully, they will use the HSR trains in droves.  They are surely paying for it.  Visitors to California should also use the system whenever possible.  They too will be paying for it through large federal subsidies.        If the initial offering was purchased by a French consortium of HSR interests, it raises several questions.  Did they buy the bonds for investment purposes?  Or did they buy them as leverage to participate in the building, equipping, or operation of the rail line?
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