California high-speed rail asks Newsom to release $4.1 billion as cost continues to swell
The California High-Speed Rail Authority is asking Gov. Gavin Newsom and state legislators to release about $4.1 billion in state bond funds to ensure that there is enough money to complete construction that’s now underway on the bullet-train route in Madera, Fresno, Kings, Tulare and Kern counties.
If the governor, the state Assembly and the state Senate ultimately concur this spring, the money would come from Proposition 1A, a $9.9 billion high-speed rail bond approved by California voters in 2008. The rail authority’s board unanimously approved the request in a Zoom video meeting Tuesday.
Still pending in the state’s 3rd District Court of Appeal, however, is a legal challenge over whether the state can use the Proposition 1A money for what critics say is not a fully usable section of what voters intended as a statewide system of electrified trains between San Francisco and Los Angeles.
Brian Annis, the rail agency’s chief financial officer, told board members the money is for completion of 119 miles of work now under construction in the central San Joaquin Valley, from north of Madera to the community of Shafter, northwest of Bakersfield. The funds are needed because one of the major sources of construction money – revenue from the auctions at which companies buy “cap-and-trade” pollution credits in the state’s greenhouse gas reduction program – have taken a hit since the coronavirus pandemic reached California about a year ago.
The authority, Annis said, has already exhausted most of its other sources of money for the Madera-to-Shafter work, for which the cost is now estimated at about $13.8 billion. That new estimate is about $1.3 billion more than what was forecast a year ago by the agency.
The quarterly cap-and-trade auctions have generally amounted to an average of about $180 million for the high-speed rail authority, Annis said. But the effects of the COVID-19 pandemic knocked the May 2020 auction down to only about $6 million. That auction, and two subsequent auctions in August and November, cost the agency about $288 million in projected cap-and-trade income, officials estimate.
The authority has either spent or earmarked about $3 billion in cap-and-trade money for the Valley section, and has also spent about $2.1 billion in federal stimulus funds that were awarded to California during the Obama administration. Another $2.6 billion has been spent from prior allocations of Proposition 1A bond money.
The new injection of bond money, if it is approved, would allow the rail agency to use that instead of uncertain cap-and-trade auction funds, Annis said, allowing greater flexibility for the auction money to be used in future work.
With the bond money, Annis said, “we can continue to open new job sites and complete more miles of guideway for track construction.” If not, he added, “we would have to slow construction, possibly close existing job sites and reduce the workforce on the project.”
In presentations Tuesday about the request for bond funds and on a revised business plan due to be submitted to legislators this spring, Annis and authority CEO Brian Kelly said they also have high hopes that the Biden administration will restore a $929 million rail improvement grant awarded to the state in 2010 that was canceled by the Federal Railroad Administration under President Donald Trump in 2019.
Critics, however, said that’s not necessarily a given.
“Hoping that the federal government will come in and save your asses is not a business plan,” said David Schonbrunn, president of the nonprofit Transportation Solutions Defence and Education Fund, or TRANSDEF.
Questions over bond funds
Schonbrunn’s organization, along with Kings County walnut farmer John Tos and other foes of the state’s current bullet-train plan, are among those appealing a court ruling over a state law allowing Proposition 1A money to be used on a “usable segment” of tracks.
Stuart Flashman, an Oakland attorney representing Tos and others in the appeal, said Tuesday that he expects the case to be scheduled for arguments before the appellate court this summer.
The lawsuit argues that the 119-mile stretch of construction does not truly constitute a “usable segment” of a statewide system, and that by allowing the bond funds to be used that way represented an unconstitutional change in what voters approved when for the bond measure was passed almost 13 years ago.
Tuesday’s 9-0 vote by the authority board effectively starts a 90-day clock for review of the request, during which Annis said he expects the state Legislature will likely hold hearings. The authority’s goal is for the money to be included in Newsom’s proposed 2021-22 budget.
Closer look at revised business plan
The latest edition of the authority’s business plan, in the meantime, reflects an ongoing increase in costs and schedule delays in construction in the Valley, as well as further scaling back the plans.
Besides the $1.3 billion increase in the budget for the Madera-Shafter section, the rail agency now forecasts that the work won’t be completed until late 2023 – about a year beyond a deadline set by grant agreements with the Federal Railroad Administration. The delays are due in part to the COVID-19 pandemic, which has reportedly idled at least 244 workers who had to quarantine because they either contracted or were exposed to the virus over the past year.
The pandemic contributed to even more delay in acquisition of more than 2,000 pieces of property needed for construction of the line in the San Joaquin Valley, including eminent domain or condemnation cases being stalled as courts have closed or shrunk their hours.
Additionally, the business plan now calls for building a single set of tracks, instead of two, along most of the 119-mile stretch. Kelly said one set of tracks would allow for the testing of train sets and other systems before early passenger operations commence between Bakersfield and Merced in about 2029.
Kelly said building only one set of tracks as an initial phase reflects the agency’s ability to construct what it has money to achieve, and could persist even into passenger operations along the route. “We believe we can meet all the operating requirements” with one set of tracks along with sections of passing tracks, Kelly told board members Tuesday. “Phasing allows us to get the system going” on an electrified line that is distinct from existing freight rail lines and also separated from roads and highways so that there are no at-grade road crossings.
The first construction contracts for the Valley line were awarded almost eight years ago – before much of the land for construction was purchased, before most of the engineering design work for the route was done, and before many needed agreements with utilities, adjacent railroads, and local government agencies were completed.
Kelly said that construction and engineering have advanced far enough now that the agency hopes to award a contract in August for construction of tracks and safety systems on the Valley section.
Extending the line northward to Merced and southward into Bakersfield would allow for starting to run trains on an “early operating segment” to carry passengers. The long-term goal is for the Valley to form the “backbone” of a system of electrified trains running between San Francisco and Los Angeles at speeds up to 220 mph.
This story was originally published February 9, 2021 at 2:05 PM with the headline "California high-speed rail asks Newsom to release $4.1 billion as cost continues to swell."
CORRECTION: The original version of this story incorrectly reported the amounts spent by the authority in cap-and-trade money for the Valley section, as well as the amount spent in federal stimulus funds that were awarded to California during the Obama administration.
