New cost estimate for California high-speed project puts it deeper in the red

When Governor Gavin Newsom unveiled his scaled-down plan for California’s high-speed rail four years ago, he proposed building a 171-mile starter segment in the Central Valley that would begin operating in 2030 and cost $22.8 billions of dollars.

Now the plan is unraveling as costs now exceed future funding, an official estimate of future ridership has dropped by 25% and the timeline to start transporting people is slipping. This raises new concerns about the future of the country’s largest infrastructure project.

New cost figures released in an update report from the California High-Speed ​​Rail Authority show the construction plan for the initial 171-mile segment has peaked at $35 billion, exceeding secured funding of $10 billion.

The cost of that partial system is now higher than the $33 billion estimate for the entire 500-mile system from Los Angeles to San Francisco when voters approved a bond in 2008.

Worse, that total system cost is pegged at $128 billion in the update, leaving a total funding gap of over $100 billion.

Ethan Elkind, who studies transportation issues in California as director of the climate change program at UC Berkeley School of Law, said the growing problems cloud the future of the project.

“He’s in danger,” Elkind said. “It’s risky. There’s no way forward for the full system from Los Angeles to San Francisco. It’s important that they do something.”

The $128 billion price does not include cost updates for two separate segments between Palmdale and Anaheim, as the rail authority in the past has not updated costs until it has not completed environmental assessments. There may be additional sticker shock jerks when these costs are added in the future.

“It is clear that additional funding will be required to provide the … operational Merced-to-Bakersfield system for passenger service,” the report said.

Brian Kelly, chief executive of the rail authority, said in an interview that the higher costs, which have affected projects across the country, present a “tougher challenge”.

“There has never been an easy time for this project,” he said. “Nothing has ever been easy here. This project was never fully funded.

Kelly notes that the range of estimates for the Central Valley segment is from a high of $35 billion to $28 billion. The price of the project has increased since 2008, exceeding all previous cost ranges.

The current struggle follows a period when the project enjoyed strong support from the Biden administration and Congress. But the Republican takeover of the House in the 2022 election could herald tougher times.

House Speaker Kevin McCarthy, a native of Bakersfield, has long called the project, which would serve his own district, a waste.

“In no way, shape or form, should the federal government allocate another dollar to California’s inept high-speed rail,” McCarthy said in a statement to CalMatters. “The California High-Speed ​​Rail Authority has missed countless deadlines and misled the public about costs, which are exorbitant compared to original estimates.”

Among nonpartisan state analysts, the reliability of the new cost estimates is likely to come under scrutiny, including by the state-appointed peer review panel.

Bill Ibbs, a retired civil engineer from UC Berkeley who is part of the group and has consulted on international high-speed rail projects, said he was concerned about the lack of attention to technical risks.

“They don’t directly address basic engineering issues,” Ibbs said, particularly the 38 miles of mountain tunnels that are planned for Southern California alone. “What are the main engineering challenges ahead of you and why aren’t you talking about them in this report?” »

The report also states that the operating date of the 171-mile system could extend to 2033 from 2030, which would delay public benefits and explain cost pressures.

And perhaps more worrisome is a 25% reduction in predicted future ridership, due to the fact that the COVID-19 pandemic has fundamentally reduced public transit use and growth California’s expected demographic has fizzled. An important rationale for high-speed rail from its inception was the expectation that population growth would necessitate improved passenger rail transport. The report nevertheless claims that the system’s passenger loads would be comparable to those of Amtrak’s Northeast Corridor.

These factors are beyond the rail authority’s ability to control, although it has had its own construction problems in the Central Valley over the past 10 years.

Over 1,000 change orders, either from the rail authority or from contractors, have been approved and account for a large portion of the cost growth. They include costly elements, such as the miscalculation of the need for massive barriers to prevent freight trains on nearby tracks from derailing and crashing into a high-speed train. About 20 change orders for this article alone cost over half a billion dollars.

Construction was delayed due to problems moving utilities, such as underground sewers, water lines, and gas lines. About half of the 2,800 underground utility relocation projects have not been completed, according to a separate status report issued by the railway board’s finance and audit committee. Two dozen major structures, such as overpasses and bridges, have not even begun construction.

But those issues are being resolved, and major disputes over change orders are in the rearview mirror, according to the report. Of the 2,300 lots needed for the railway, only 92 remain to be acquired.

Newsom adopted his plan for a start-up system in 2018, based on a strategy that demonstrating a working system in the Central Valley would generate public support for building the most expensive passages through the Coast Mountains to the Bay Area and Southern California.

That idea preceded significant cost growth that outpaced funding, leaving Democrats in the Legislature increasingly finicky and Republicans calling for a full-fledged retreat.

“He is now on life support,” said Sen. Brian Jones, a San Diego County Republican and Senatorial Minority Leader. “The governor could not keep any of his promises.”

At this point, Jones says, the project should be stopped and existing structures in the Central Valley demolished if they cannot be reused.

Democratic leaders declined or did not respond to interview requests. Newsom’s office did not respond to a request for comment.

Kelly thinks there is a reasonable way forward. The report, released March 1, sets a goal for the rail authority to secure $8 billion in federal grants under the bipartisan infrastructure law passed by Congress last year.

The total amount of money for rail enacted into law is $75 billion, so $8 billion would seem like a reasonable share for California. But the Biden administration and Congress have been far more generous to the Amtrak system in law, allocating about $24 billion to its operations while setting aside no guaranteed money for California. Additionally, there are other passenger rail systems in California that may want a cut of any money going to the Golden State.

Kelly acknowledges the $8 billion goal is “aggressive and rightly so” because California is paying 84% of the cost so far.

“If the national government wants to achieve a cleaner and faster electrified national rail system, it must do better than 16%. And so we are going to argue this case,” he said.

“I think it’s a reasonable and prudent request.”

The state will know early next year whether it will get the lifeline. Without it, the lack of funding will be mind-boggling. Before that, the Senate and Assembly will hold hearings next month.

“It’s definitely a significant funding shortfall,” said Helen Kerstein, who covers the rail project at the Office of the Nonpartisan Legislative Analyst. “Absent very significant additional federal funds, the state will have to provide additional funds to complete this segment of Merced in Bakersfield.”

Kerstein noted that the project has failed to get a financial boost from the general fund as the state has been flush with surplus revenue in recent years. Now the state is saddled with a deficit, with the likelihood of more to come. At the same time, there are other priorities.

Kerstein added: “It’s going to be difficult.”

Elkind, a UC Berkeley law professor, said ultimately the state will have to go back to voters and demand another bond issue if there is any hope of building the full system.

“It’s going to be harder to get back to voters and ask for more funding, but I think that’s ultimately what’s going to be needed, which is why it’s so critical that they finish that first segment,” he said. he declared.

“It’s incredibly sad that it’s taken two decades from the time voters approved this for the top 25% of the system to work – which is also the 25% of the system that serves the least population – California wise along the road. is a nonprofit, nonpartisan media company explaining California policies and politics.

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