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Report: California Rail Project Mismanaged, Underfunded, Behind Schedule

January 25, 2019
By Bill Eastland

California State Auditor Elaine M. Howle says mismanagement by the California High-Speed Rail Authority is responsible for cost overruns.

The project to build a high-speed passenger rail line between San Francisco and Los Angeles, California is mismanaged and far short of funding, a state audit report says.

California State Auditor Elaine M. Howle says mismanagement by the California High-Speed Rail Authority (CHSRA), the agency overseeing the project, is responsible for the cost overruns.

“Costs to date have been significantly greater than originally projected,” says the November 2018 report, “because the Authority moved forward before it completed many critical tasks such as purchasing land, planning how to relocate utility systems, or obtaining agreements with external stakeholders.”

The audit says there is a “high risk” costs could go much higher.

Deadline for Federal Money

CHSRA says its estimated cost to complete the rail line has increased from $40 billion in 2008 to $77.3 billion today. State general obligation bonds and other state revenues and federal grants will provide $12.7 billion of the total funds needed, and CHSRA says it has identified additional future funding of $15.6 billion, for a total of $28.3 billion.

The funds received include $3.5 billion in federal funds from the 2009 stimulus bill, the American Recovery and Reinvestment Act. CHSRA began construction in 2013 on a 119-mile segment in California’s Central Valley in an attempt to meet a 2017 construction deadline under the federal grant.

The federal deadline was pushed back to December 2022, and if that part of the rail line is not completed by then, the state will have to pay back the federal money. Construction is far behind schedule, the report states.

“To meet the current [2022] schedule,” says the audit, “the Authority will need to ensure that construction proceeds twice as fast as it has thus far.”

‘Flawed from the Beginning’

Though CHSRA says $28 billion will cover completion of segments in the Bay area and in the Central Valley, it will not be able to connect them or build the rest of the line to Los Angeles.

CHSRA has no idea where it will get the money to finish the project, says Baruch Feigenbaum, assistant director of transportation policy at the Reason Foundation and a policy advisor to The Heartland Institute, which publishes Budget & Tax News.

“The California high-speed rail project has been flawed from the beginning,” said Feigenbaum. “As the auditor notes, the California High-Speed Rail Authority has only identified about a third of the funding it needs to build the train, and cost overruns are likely.”

Cost overruns are likely because the agency does not understand how to manage a transportation project, says Feigenbaum.

“It has 56 contract managers that perform minimal functions while outside contractors lack management and direction,” said Feigenbaum, “This project has a history of escalating costs and inept management.”

Not So Fast

California voters authorized a high-speed rail-line dedicated to passenger service, but CHSRA began modifying its plans in 2012 to utilize local rail service on the San Francisco Peninsula and in Los Angeles and to share a freight corridor between San Jose and Gilroy, in order to reduce costs, the audit states.

The audit says the use of existing rail lines “subjects high speed trains to lower speed limits and sometimes requires sharing time on the tracks with other rail operators.”

CHSRA’s plan to “blend” high-speed rail with slower transit and freight lines is not what voters approved, says Feigenbaum.

“The system, originally designed as true high-speed rail similar to trains that operate in France and Japan, is now ‘blended’ and will operate much more slowly in the L.A. and San Francisco areas, violating the terms of the 2008 ballot measure,” Feigenbaum said.

Planners vs. the People

Newly elected California Gov. Gavin Newsom has indicated he wants to focus on completing the northern half of the line to serve commuters from the Central Valley to the San Jose-area Silicon Valley.

Newsom is looking for a solution to a problem caused by governments’ efforts at social engineering, says Rick Centner, former deputy director of communications for the Federal Transit Administration.

"Federal planning grants encourage state and local governments to undertake projects that do not serve markets that actually exist," said Centner. “Instead, they serve the vision of the planners, with the hope that ridership will follow.”

‘Train to Nowhere’

Such projects rarely attract the ridership anticipated, says Centner, and the idea that Silicon Valley workers would move to the Central Valley and commute ignores reality.

“People do not locate or relocate based on housing costs alone,” said Centner. “They consider schools and amenities—and the time and cost of commuting.

"You could probably provide a chauffeur-driven limousine to everyone in the Central Valley who wants to commute to San Francisco, for less money,” Centner said.

Feigenbaum says the project should be canceled or scaled back.

“It is my hope that Gov. Newsom will cancel or at the very least reduce the length of the train line,” said Feigenbaum.

“I would like to see the project canceled and any remaining funds disbursed to taxpayers,” Feigenbaum said. It would be hard to find a worse use of taxpayer funds than this overpriced, unneeded train to nowhere.”

Bill Eastland (eastland@reagan.com) writes from Arlington, Texas.

Internet Info

Elaine M. Howle, “California High-Speed Rail Authority,” California State Auditor Report 2018-108, November 2018:

https://www.heartland.org/publications-resources/publications/audit-report-california-high-speed-rail