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California high-speed rail project’s future shaky without funding boost

To throw more money at a project that's $100 billion over budget and with no completion date, or to back out with half-built tracks and trestles crisscrossing the Central Valley — that is the question plaguing lawmakers.

SACRAMENTO, Calif. (CN) — California’s high-speed rail project has reached a critical point as lawmakers must decide whether to seek more federal aid to finish the first segment, under construction in the state’s agricultural center. 

When California voters first passed Proposition 1A greenlighting the project in 2008, the initial price tag was pegged at about $33 billion with a completion date of 2018. The cost estimate has since climbed to $128 billion and the completion year has been pushed from 2033 to no certain date, according to the High Speed Rail Authority. 

State Assembly members got a new report Wednesday from the authority, which is now under the auspices of an inspector general, to decide what to do next. 

California High Speed Rail Authority's CEO Brian Kelly speaks to lawmakers in Sacramento, Calif. (Screenshot via Courthouse News)

The authority's CEO Brian Kelly asked lawmakers to let him seek a long-term financial commitment from the Biden administration and explore funding options to connect San Francisco to Los Angeles.

The federal government approved starting the project in the Central Valley, to avoid right-of-way issues and spark economic development in economically disadvantaged areas with poor air quality. 

With skyrocketing costs and declining projections for ridership, Kelly's proposal was met with skepticism. The entire project has a $10-$12 billion funding gap, and the segment connecting Merced to Bakersfield could cost between $3 billion and $10 billion to finish. In a 2018 report, the state auditor said the authority began construction despite knowing the risks of doing so before completing critical planning tasks. 

While the state and then-Governor Jerry Brown said funds generated by the cap-and-trade program on carbon emissions will be siphoned off to support high-speed rail, it remains unclear how much that program can generate.

Assemblymember Vince Fong, a Republican from Bakersfield and the only committee representative speaking for the Central Valley, is a vocal critic of the project. 

“I live in this community, and I’ve seen the difficulties and chaos from this project. I’m seeing the destruction,” he said. “I would make the argument right now that even though we’re fatigued … we stop this project and put resources to other uses.” 

Assemblymember Bill Essayli, a Republican from Corona, said he wants to see accountability for the authority’s performance because what is being built and what it costs is not aligned with Proposition 1A.

“If this was done in the private sector with this type of deception, we’d call it investment fraud,” Essayli said. 

Louis Thompson, chairman for the high speed rail project's peer review group in California, speaks in Sacramento. (Screenshot via Courthouse News)

The project’s peer review group chairman, Louis Thompson, recommended that the Legislature get an independent analysis of the project, or request the Legislative Analyst’s Office to analyze ways to fill funding gaps.

“The project has always been over promised and underfunded,” Thompson told the committee.

The Legislative Analyst's Office principal fiscal and policy analyst Helen Kerstein reminded the lawmakers that Prop 1A funds — a general obligation bond — and 25% of state cap-and-trade dollars go to the project, or between $750 million to $1 billion per year. The Legislature can reallocate or change the appropriated funds for the project at any time, she said. 

The authority has not been as successful in securing federal funds, having applied for $1.6 billion in the last two years and received only $50 million. It’s also uncertain how many people would use a high-speed system in the Central Valley. 

Helen Kerstein. Principal Fiscal & Policy Analyst. for the Legislative Analyst's Office in California, speaks in Sacramento. (Screenshot via Courthouse News)

“People are traveling differently, and the state’s population has not grown as robustly as was assumed originally,” Kerstein said. 

Assemblymember Corey Jackson, a Democrat from Moreno Valley, said he supports high-speed rail but thinks it's time for lawmakers to take a firmer hand.

“I don’t think history’s going to judge us well from the decisions we’re making on this project right now," Jackson said.

Pressured to answer more questions, Kelly said, “I don’t BS the Legislature. We can do this in bites to advance the concept. But the benefits of the system are still significant. Today, 100% of the design is done, 96% of the right of way is done and we have a much better definition of what’s in front of us.”

Some lawmakers thought the project has gone too far for the state to back out.

“I understand we’ve never fully funded this project,” Assemblymember Luz Rivas, a San Fernando Valley Democrat, said. “I feel the decision we made last year to release the remaining bond funds was an indication that we think it’s good enough.”

Assemblymember Philip Ting, a San Francisco Democrat and committee co-chair, said that when the Golden Gate Bridge and BART were constructed, the headlines were also bleak with uncertainty about cost overruns. He said if the state has committed to the Central Valley track, they should stay committed to connect the Bay Area to Los Angeles. 

“The challenge for us is, what does commitment look like?” Ting asked.

He noted that Governor Gavin Newsom will have to be actively involved throughout the process. In 2019, Newsom gave a State of the State address that seemed to indicate his concerns about the project. But in 2022 he convinced the Legislature to appropriate the $4.2 billion remainder of a $9.95 billion bond issue voters approved in 2008, by securing $3.65 billion from the state’s budget surplus for local projects in return for freeing bond dollars. 

Assemblymember Laura Friedman — a Democrat from Glendale and also a committee co-chair — said the Biden administration may not have congressional support to consistently fund the project. 

“There’s certainly a lot of very loud voices in the public that want to see this project completed, but without presenting to the public the tradeoffs that might entail, it’s hard to have the public dialogue,” Friedman said. 

Asked if he recommends moving forward with the project as it stands, Thompson did not answer but said lawmakers must consider why it is so different from the proposal voters approved in 2008. 

“You should step back and see what you’re getting for your money,” he said. “This should not be postponed forever.”

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