Newsom’s high-speed rail dispute

The feud has festered for 16 months, since Gov. Gavin Newsom asked the Legislature for a $4.2 billion appropriation in early 2021. The request has triggered a standoff with Assembly Democrats, who have steadfastly refused to hand over the last remaining funds from a 2008 bond measure for high-speed rail.

The battle involves who will exert control over the project’s future, how to improve its efficiency and how the remaining funds can yield the greatest benefits, which involve sharp disagreements that could be difficult to resolve.

“The project is not proceeding according to a robust plan, which results in waste and other inefficiencies,” said Bent Flyvbjerg, a business expert in mega projects at the University of Oxford’s Saïd Business School and IT University of Copenhagen. “Given the political divisions, the cost growth, the schedule delays and the lack of a sound future revenue source, this project is going to the graveyard of famous boondoggles.”

Proponents of high-speed rail dispute such grave characterizations, asserting the project is solid.

“The naysayers are always going to be naysayers,” said Ray LaHood, U.S. Transportation Secretary under President Obama and a crusader for high-speed rail. “There’s construction underway. Hundreds of people are working on the project and have good paying jobs. There’s a plan now to go to Bakersfield. The future is very encouraging. It hasn’t stopped.”

A legislative standoff

But serious problems remain unresolved in the Central Valley, and new issues with utility relocations along the future tracks are again holding up construction.

The rail authority estimated in 2008, when voters approved $9 billion for the system, it would cost $33 billion and start running by 2020. But slow land purchases, delays in environmental documents, employee turnover and litigation over the last 14 years keep putting the goal further out of reach.

“There is no confidence in the project,” said Speaker Anthony Rendon, a Los Angeles Democrat. “We had an end date of 2020 and now we don’t have an end date.”

The latest estimate, made earlier this year, set the cost at $105 billion. The new price tag is based on some estimates made in 2019, not accounting for the spurt of inflation in construction materials and labor, according to the Legislative Analyst’s Office, the non-partisan adviser to the Legislature. The risk is that the real cost is still not known.

In his negotiations with the Legislature, Newsom has offered several billion dollars of sweeteners to the urban centers to get the $4.2 billion. So far, the Assembly has not bitten.

Newsom’s office did not respond to a request for comment.

Against this backdrop, Rendon and a majority of Democrats in the Assembly want to essentially detonate Newsom’s plan for the rail.

Asked in a recent interview what he could not accept, Rendon said, “I think this strict adherence to the current project is not really what we’re interested in.”

Newsom unveiled the “current project” in 2019, when he scaled back former Gov. Jerry Brown’s plans and adopted a blueprint for an electrified 171-mile partial operating system between Bakersfield and Merced. It would cost $23 billion, leaving the state with $2 billion to cover any setbacks, according to the 2022 business plan unveiled earlier this year.

“This project is big and complex and complicated and difficult and needs oversight,” said Laura Friedman, a Glendale Democrat and chair of the Assembly Transportation Committee. “It seems like there’s pressure being put on us to very quickly give them their money and just move on. ‘Legislature, get out of our way,’ which to me is really, really committing legislative malfeasance.”

The Senate has maintained its long silence on the rail project. Senate Transportation Committee chair Lena Gonzalez, a Democrat from Long Beach, declined an interview request and to answer written questions. In a statement, she said she is working on a “robust transportation funding package.”

Each side in the dispute believes the ultimate success of the project to connect downtown stations in Los Angeles and San Francisco with a 220 mile per hour train — an ambition that has existed for 40 years — hinges on their approach.

Competing California high-speed rail plans

In an Oct. 15 letter to Newsom, Rendon and Friedman offered to provide a $1 billion appropriation for upcoming construction and another $1.5 billion for cost overruns. As part of that offer, they sought an increase for high-speed rail segments in Southern California and an improved plan to connect the Central Valley segment to the Bay Area.

No deal was reached, though negotiations between staffs from the Legislature and the governor’s office have resumed in recent weeks. The budget for the next fiscal year would be adopted by July 1 with a possible revision in August.

In a statement, rail authority spokesperson Annie Parker noted that Newsom “proposed a $9.1 billion comprehensive transportation package” for transit and climate goals. It includes, she said, $4.9 billion for transit and other green transportation projects, as well as the $4.2 billion for the bullet train.

The bullet train, she added, “has been an economic engine.”

The rail authority’s need for the $4.2 billion immediately is not clear. The rail authority has about $1.5 billion in cash on hand, according to its financial reports, meaning it could keep the project going for at least a year.

Helen Kerstein, who monitors high speed rail for the Legislative Analyst’s Office, said the current standoff — though not an immediate threat — is important to resolve for the long-term future of the project.

But rail authority chief executive Brian Kelly has insisted that the agency needs the money now to provide stable planning and to make orderly advanced purchases of such items as trainsets that take a long time for delivery.

The views of Assembly Democrats, a majority of whom voted for a resolution last year that backed a recalibration of the program, rankles many supporters.

Of the urban legislators, former rail authority chairman Dan Richard said, “They will never be satisfied. I made agreements to give $470 million for Los Angeles Union Station and $700 million for electrification of Caltrain. We didn’t even get invited to speak at the dedication.”

The Assembly plan would also delay installation of a high voltage electrical system, until the Central Valley tracks connect somewhere. In the interim, it wants the rail authority to consider a new generation of battery-operated trains, which manufacturers say could reach 170 mph and higher in coming years. Kelly disputes that the battery trains could travel fast enough to comply with legal requirements.

A more basic question is whether the state can ever afford to make the costly connections to the coasts, involving lengthy mountain tunnels near seismic faults. Bakersfield to Los Angeles is priced at $50 billion and San Francisco to the Central Valley tie-in at Chowchilla $22 billion, according to upper end estimates in the 2022 draft business plan.

“There is a very significant outstanding question of where that money will come from and how to proceed at this point,” said Kerstein.

Legislators are worried that the 171-mile system would remain isolated.

“The idea that you would spend all your money on a train that doesn’t connect to anything and just hope that you’re going to get more money, I find a really frightening business proposition,” said Friedman.

Federal support likely insufficient

Bullet train proponents believe that the Bi-Partisan Infrastructure Law that was signed by President Biden last year could provide new money. But there is no designated carve-out for the California project, unlike for the Acela train from Boston to Washington, D.C. California might expect no more than $5 billion, grant experts say, a helpful amount but not a game changer.

A state-appointed peer review group raised serious concerns about the future of the project in an April letter to legislative leaders. It praised progress on environmental clearances and acknowledged the impact of COVID, but it faulted out-of-date cost estimates, lack of technical experience for upcoming contracts and legislative oversight.

“The cost and schedule experience so far does not yet support optimism about future performance,” wrote the author, Louis Thompson, the longtime chairman of the panel and a former Federal Railroad Administration executive and World Bank railroad expert.

Thompson went on, “Despite the possibility for additional federal funding, overall project funding remains inadequate and unstable making effective management extremely difficult. In addition, the authority has no clear guidance from the Legislature on the next steps in the project.”

Utility relocations derailing bullet train

Another complication is that construction in the Central Valley is bogging down, once again failing to meet a revised schedule. There are 119 miles currently under contract for roadbed and structures, which originally was supposed to be completed by 2017.

“There is visually nothing happening in the Central Valley,” said Jeff Denham, the former chairman of the House rail subcommittee, a Republican almond farmer who voted for the project when he was in the Legislature but later became a strident critic. “Equipment has been moved out.”

Construction has significantly slowed, said three officials working or consulting on the project, who asked not to be identified because they are not authorized under state contracts to speak to the news media. They say the state’s schedule for completion of 119-miles by December 2023 is impossible and a more likely outcome would put completion anywhere from 2026 to 2030.

Parker, the rail authority spokeswoman, said it is working on construction updates and will present those to the rail board this summer. One of the three construction contracts, led by the Spanish firm Ferrovial, is expected to be “substantially complete” by the current deadline, she said.

A central problem involves utility relocations, which are far behind schedule and delaying the start of bridges and viaducts. The rail authority’s most recent progress reports validate the executives’ concerns.

Slow construction

In its April progress report, the rail authority said that 57% of 1,850 utility relocation projects remain uncompleted by three teams of contractors some 10 years after construction began.

After utility owners approve designs to move wires or pipes, the rail authority has six months to start work, according to the three executives. If it goes past that window, it must start the process over, they said. For many reasons, designs often go through reapproval.

Parker said the authority has been transparent about the overall problems, which originated from starting construction “out of sequence” with land purchases and utility relocations. She noted, “Currently, we are working through those challenges and we’re implementing procedures to prevent these issues from happening on future contracts.” She said that work has begun on some uncompleted utility relocations, leaving 28% yet to start.

Slow land purchases have loomed over the project for a decade. The state lacks 222 parcels out of 2,291 that it needs, the report said. Only 28 of the 66 structures across four counties have been completed.

The rate of construction spending by the teams led by Tutor Perini and Dragados are lagging far behind projections, the reports show. At current billing rates, it will take about four years to complete the remaining value of work under their contracts, according to the progress reports. It would put completion at about 2026.

Two years ago, Kelly was quoted in the news media saying construction would reach full speed by now and employ 1,700 to 2,000 craft workers. In its April report, employment was reported at 906. Parker said the estimate was made before the COVID pandemic.

The three current contracts cover only 119 miles of the 171 miles of the route that Newsom wants to build. New contracts and land acquisition would be needed for 52 additional miles. Tracks, a complex signaling system and a high voltage electrical system would come after bridges, track bed and viaducts are largely completed.

As a result, the rail authority is facing monumental challenges to carry its first passengers on the Bakersfield to Merced partial operating system by Newsom’s deadline of 2030 and within the current $23 billion budget.

“Rail is challenged regarding economic return under the best of circumstances,” said Flyvbjerg, the Oxford and Copenhagen universities expert who describes the California project as a case study of how not to build a bullet train. “So, the last thing rail projects need, in terms of economic return, is delays and cost overruns that further undermine that return.”