In 2010, when the Obama administration started to pony up more than $2.5 billion in economic stimulus money for construction of California’s high-speed rail project, the funds came with three important conditions:
▪ That the money be used for construction in the San Joaquin Valley.
▪ That the money be completely spent by Sept. 30, 2017.
▪ That construction of the Valley segments from Merced to Bakersfield be completed by Sept. 30, 2017.
That once-immovable completion deadline is now just days away. And while all of the stimulus money from the American Recovery and Reinvestment Act has indeed been spent and construction is happening in earnest in Fresno and Madera counties, much of the Valley route in Kings, Tulare and Kern counties – considered the “backbone” of a system to eventually link San Francisco and Los Angeles – remains on the drawing board.
People don’t realize … how many handcuffs and constraints were put on this project that have been a challenge to deal with.
Dan Richard, California High-Speed Rail Authority board chairman
The California High-Speed Rail Authority has three construction contracts covering about 115 miles of the rail project from Madera to Bakersfield with a total value of nearly $3.3 billion. The earliest that any of those contractors are required to be finished is mid-2019. A fourth contract is anticipated to be bid later for laying tracks over the Valley route.
And a starting date for passenger service that was once forecast for 2022 with trains running between Merced and Los Angeles has now been bumped to 2025, with a plan for trains to speed between Bakersfield and San Jose.
What the heck happened?
Beset with complications and a schedule in jeopardy, the rail authority prevailed upon the Federal Railroad Administration to let California first spend the stimulus money – and to relax that pesky construction deadline.
A combination of delays – from lengthy environmental reviews to protracted lawsuits to the excruciatingly slow pace of buying land for the railroad right of way – have plagued the rail project in the seven years since Joseph Szabo, then-head of the Federal Railroad Administration, visited Fresno in October 2010 to present a ceremonial check for $715 million to the California High-Speed Rail Authority.
“People don’t realize … how many handcuffs and constraints were put on this project that have been a challenge to deal with,” said Dan Richard, chairman of the rail authority’s nine-member board. “Every day when we wake up, there are pressures on cost, schedule and scope. Our job is to try to manage those.”
Tom Richards, a Fresno developer, was appointed to the rail board by then-Gov. Arnold Schwarzenegger in late 2010 and is the second-longest tenured member of the board. He said he understands concerns about the project’s ever-extending schedule, but points to the tangible construction that residents in Fresno and Madera can see happening along the route. “We’ve not seen construction on this scale in our community that I can point to, ever, in terms of complexity and certainly in sheer size and cost,” Richards told The Bee last week.
“Admittedly, it’s not on the schedule we originally believed we could accomplish,” Richards added. “But we’ve tried to be forthright in our business plans to indicate what we thought was achievable and where we are going.”
One of the most glaring issues has been right-of-way acquisition by the rail agency. The authority reported this month that it needs more than 1,740 pieces of property for its route, as well as associated structures like street over- and underpasses, from north of Madera to Shafter in Kern County. As of July 31, it had managed to purchase and deliver 1,160 parcels – about two-thirds of what it needs – to its construction contractors. But it’s taken five years to reach that point.
A slow start early on cost the agency tens of millions of dollars to its prime contractor for its Fresno-Madera section because it was more than a year after the $1 billion contract was awarded in mid-2013 before the rail authority had enough parcels for construction to begin. The $63.5 million payment for the delay in right of way is the single largest change order taking a bite out of the available contingency fund for the 32-mile contract.
To help contain those penalty costs, the rail authority has focused its real estate efforts on “critical path” parcels – the land most needed to move things along on structures like viaducts, trenches and road overpasses that take the longest time to build.
Chief engineer Scott Jarvis told the rail board last week that while the agency continues to face construction delays and the risk of rising costs because of right of way challenges, progress is happening. Construction is going on at 13 different sites in Fresno and Madera counties, “and we do have enough right of way to allow construction to start” for two contracts south of Fresno.
The statewide high-speed rail project falls under the stringent auspices of the California Environmental Quality Act. The law requires both an exhaustive analysis of potential environmental effects and measures to offset those impacts. In the case of the rail program, not only did the statewide plan have to go through this type of review, but each of the 10 individual sections from San Francisco to Los Angeles also need to have an environmental analysis – in most cases, thousands of pages of documentation, statistics, comments and responses – before that segment can be formally approved and bids sought for construction.
To date, only two construction segments have received full environmental approval from the state rail authority and the Federal Railroad Administration: Merced-Fresno, certified in 2012, and Fresno-Bakersfield, finalized in 2014. And even in the Merced-Fresno portion, an area around Chowchilla was carved out for additional study and has yet to be officially approved.
In 2016, the agency set a goal of having the environmental review and certifications completed for all of its remaining segments by the end of this year. Now, however, it seems likely that none of those additional reviews will be completed by that time, and some may not be done until fall 2018.
“I think a lot of us on the board were skeptical of the 2017 date for all 10 environmental segments being done,” Richard told The Bee. “What you had there was management trying to keep pressure on people to move forward.”
“But after you’ve driven people as hard as you can, how do you step back and say we’re just not going to be able to do that – and maintain public confidence?” he asked. “While we were pushing on our contractors to move this forward, it was probably unrealistic to expect that all of these were going to be done by 2017.”
Richard said that while it has taken longer than desired for environmental consultants to do their work, the Federal Railroad Administration that oversees the project under the National Environmental Policy Act has not been able to keep up, either. “The FRA was not, until recently, allowed to accept funding from us to augment their staff to help process these,” Richard said.
After President Donald Trump signed an executive order for federal agencies to find ways to streamline environmental reviews, however, the state has been negotiating with the FRA to transfer or delegate responsibility for the federal environmental analysis to the state.
Even before 2012, when the rail authority certified the environmental impact report for its Merced-Fresno segment, opponents peppered the agency with lawsuits challenging various aspects of the project.
Several suits were filed challenging the adequacy of the environmental analysis; simultaneously, other lawsuits sought to target whether the rail authority’s ultimate plans complied with the requirements of Proposition 1A, the $9.9 billion high-speed rail bond measure approved by California voters in 2008. In the latter, the litigation stalled the rail authority and forced the state to hold off on using the bond funds to meet its cost-sharing obligations under the federal grant agreements.
That meant the state had to pivot to a Plan B – using cap-and-trade dollars raised at auction from companies buying air-pollution credits under the state’s greenhouse gas reduction program until the Proposition 1A money became available.
We’ve not seen construction on this scale in our community that I can point to, ever ... Admittedly it’s not on the schedule we originally believed we could accomplish.
Tom Richards, Fresno developer and California High-Speed Rail Authority board vice chairman
At the same time, uncertainty over the bond funds led the state and the federal rail agencies to negotiate changes to the grant agreements allowing California to spend the federal money first – and beat the clock on this month’s spending deadline for the stimulus funds – and chip in the state’s share later.
“The original idea was that our money from the bonds and the federal money would go into the project dollar for dollar, basically at the same time,” Richard said. “But we ran into litigation that held up our ability to get to the bond funds. And nothing would have started, nothing would have happened without the federal government allowing us to spend their money first. … We never would have had a chance of making the spending deadline without them.”
The federal accommodation “helped us get through a very difficult period where we basically lost a year and a half to litigation,” Richard added. “We had a number of people who opposed high-speed rail who openly said they were bringing litigation in hopes of stretching us out past the timeline where we could spend this money, and hobble or stop the project.”
A moving target
Just as the environmental, construction and operational schedules have been very much a moving target in the public’s eyes, so too has been the cost for California’s ambitious bullet-train program.
In 2008, the agency predicted that it could build Phase 1 of the statewide system – a 520-mile line between San Francisco and Los Angeles – for about $33 billion. By 2009, in a report to the state Legislature, the estimate was revised to $34.9 billion, or $42.6 billion adjusted for inflation.
A draft business plan released in late 2011 caused whiplash for many observers when it predicted construction costs of $64.5 billion in 2010 dollars – or an eye-popping $98.1 billion adjusted for inflation through 2033. At that time, the cost included fully dedicated tracks with long stretches of elevated tracks through urban areas – structures that some engineering consultants for the rail authority said can cost twice as much as at-grade tracks.
By April 2012, the authority issued a business plan that scaled back both the plan and its cost. It introduced the idea of a “blended” system in which high-speed trains would share existing and upgraded commuter-train tracks on the San Francisco Peninsula between San Jose and San Francisco, as well as in Los Angeles. The price shrank to $68.4 billion in inflation-adjusted costs.
As of 2016, based on lower-than-expected bids on the first three construction contracts in the Valley, the authority revised its estimates downward once again, to about $64 billion. Some of the savings were the result of a decision by the agency to shift its focus from the technically – and financially – challenging task of navigating and burrowing through mountain ranges between Bakersfield, Palmdale and Los Angeles in favor of taking the route north and west to San Jose and continuing on to San Francisco.
The authority will be required to prepare and submit a new business plan to legislators by next May, and it’s likely to include an updated schedule and revised cost estimates for not only the Valley construction segments, but also for the proposed first operational portion between Kern County and San Jose and for the entire San Francisco-Los Angeles stage.
“If I could change one thing about this project, it would be the level of public confidence that we can do this,” Richard said. “I keep running into this sense that, ‘Well, we can’t do this. It’s too hard.’ ”
“It’s going to be expensive, probably more expensive. It’s going to take longer. But 50 years from now, people are going to forget that, just like they forgot the 2,300 lawsuits over the Golden Gate Bridge or that it took 30 years to finish Interstate 5,” he added. “It’s here now; we’re going to get this done. And it’s going to be hard.”
Richards, the board vice chairman, agreed. “The reality is that in any project like this, and frankly in anything you do in life, it’s a matter of managing alternatives and managing problems,” he said. “That’s what we’ve done, and it’s what we do every day.”