Despite construction contract, Valley's high-speed rail faces obstacles

The Fresno BeeJune 8, 2013 

Even as officials celebrate what they call a "milestone" contract to start building a statewide high-speed train system in the Fresno-Madera area, uncertainty looms in the form of deadlines, environmental rules and opposition lawsuits.

The California High-Speed Rail Authority's vote last week to award the $985 million contract to a trio of American companies came months later than officials originally anticipated. The project was put out for bids in March 2012 with an expectation for awarding a contract by December and construction starting in February.

Jeffrey Morales, the rail authority's CEO, is likely to finalize the contract with the contractors — a consortium comprised of Tutor Perini Corp. of Sylmar, Zachry Construction of Texas and Parsons Corp. of Pasadena — in July. Once that happens, the agency will be ready for work to begin on the 29-mile stretch from Avenue 17 northeast of Madera to American Avenue south of Fresno.

Some of the earliest tangible work — clearing vegetation, relocating utilities and demolishing buildings along the path — could start this summer.

If there are no additional delays, that is.

Dealing with deadlines

The Madera-Fresno section is the first of five major construction contracts for the high-speed railroad infrastructure in the San Joaquin Valley. The next three contracts would push the line south toward Bakersfield, and the fifth would pay for laying steel rails through the entire 130-mile Madera-Bakersfield section. The work in the Valley will amount to about $6 billion.

The construction schedule is critical because more than half of the money tabbed by the rail authority for construction in the San Joaquin Valley is coming from the Federal Railroad Administration.

The Obama administration has granted more than $3 billion in stimulus and transportation funds to California's high-speed train project. But the money comes with conditions that it be spent on construction in the San Joaquin Valley between Merced and Bakersfield, and that work using the federal money be substantially completed by September 2017.

The federal conditions represent a hard deadline, and each delay or adjustment to the project timetable squeezes an already-aggressive schedule.

Much of the work in the contract approved Thursday will happen north of downtown Fresno, in an area covered by environmental certifications for the Merced-Fresno section of the statewide system.

But the contract also includes about five miles of the proposed rail route south of downtown Fresno — an area that still awaits final environmental clearances. No work on the stretch between downtown Fresno and American Avenue can take place until the authority certifies a final environmental impact report for the entire Fresno-Bakersfield segment of the statewide system. That's not likely until this winter; even then, rail critics in Kings and Kern counties — where opposition to the project has been strident — are expected to challenge the approval with lawsuits.

Potential pitfalls

Before that happens, however, the rail authority has more immediate concerns.

The first is a lawsuit filed by Hanford farmer John Tos, homeowner Aaron Fukuda and the Kings County Board of Supervisors, who allege that the authority's statewide plan violates Proposition 1A, a $9.9 billion high-speed rail bond measure approved by voters in 2008. Attorneys for the Kings County plaintiffs argue that the agency failed to make the proper certifications for a funding plan that was the basis of the California Legislature's allocation of money to commence construction.

The challenge hinges on whether Prop. 1A's requirement for a detailed funding plan represented a promise to voters, or if the plan is simply one of several reporting requirements to the Legislature. Another issue is language that requires the authority to have all of the necessary environmental approvals before construction commences.

Attorneys for Kings County are asking Sacramento County Superior Court Judge Michael Kenny to rule that the funding plan was illegally certified by the rail authority, thus voiding the lawmakers' subsequent budget vote. But lawyers representing the rail authority insist that funding plan was legal and that there is no reason for a judge to invalidate the plan or the vote.

Kenny has until late August to issue a ruling.

The rail authority also awaits a decision by the federal Surface Transportation Board on whether the state must obtain federal construction permits. The state agency has applied for an exemption from the permit requirements.

The Surface Transportation Board, comprised of a trio of presidential appointees, has emerged as yet another battlefield between the rail authority and project opponents. Dozens of protest letters have urged the federal board to deny the exemption and conduct hearings on issuing permits to the state.

The rail authority originally asked the Surface Transportation Board to find that the Madera-Fresno high-speed rail section did not fall under federal jurisdiction; the federal board denied that request in April, dealing the state agency a modest setback.

The state wants the federal board to decide on the exemption by June 17.

Officials at the rail authority won't say whether the agency expects to begin construction before either the Tos/Fukuda/Kings County lawsuit or the Surface Transportation Board application is decided. Nor would representatives discuss the potential fallout — including the risk of starting construction and then having to stop — if either of those decisions go against the authority.

Instead, agency spokesman Matt Rocco said the authority "will ensure that we are in compliance with any such conditions and directives" from either the Surface Transportation Board or the Sacramento judge. "We're moving forward from today, and we'll deal with those decisions when they are made."

Contractor concerns

Tutor Perini, the lead company in the consortium chosen to build the Madera-Fresno segment, has come under fire from high-speed rail opponents because of what they call a history of cost overruns on some of its high-profile projects.

On Thursday, several critics also pointed to a downgrade last fall of the company's bond rating, and its work on a disputed high-rise hotel project in Las Vegas, as evidence of financial and technical woes that they believed should disqualify Tutor Perini from winning the contract.

Among the five bids for the contract, the Tutor Perini/Zachry/Parsons team submitted the only bid to come in at under $1 billion when the bids were opened earlier this year. Engineers and consultants for the rail authority originally estimated that the Madera-Fresno work would cost between $1.5 billion and $2 billion; those projections were later reduced to $1.2 billion to $1.8 billion.

But while the authority declared that all five of the competing contracting teams were found to be technically capable of performing the work, the Tutor Perini/Zachry/Parsons consortium had the lowest scores for technical merit.

Authority member Jim Hartnett, who posed several pointed questions to the agency's staff in May about how bids were evaluated, said he was satisfied with the process. "My questions boiled down to, 'Can the successful bidder do the job and will they do it within the confines of the contract,' " he said Thursday.

"We have a highly qualified team that can deliver the project, and offered to do so at a price that is about $100 million less than what anyone else offered, and several hundred million less than what we estimated," Hartnett added. "We're at a much better starting point than we could ever have imagined."

As the rail authority awarded its contract to Tutor Perini and its consortium partners, however, another state agency cited the company on Thursday for labor law violations on a public library construction project in Orange County.

California Labor Commissioner Julie Su held Tutor Perini jointly responsible for the failure of its framing subcontractor, Cal Framing of Redlands, to pay proper wages and overtime to 25 workers. The subcontractor was assessed nearly $118,000 in unpaid wages and almost $31,000 in penalties.

New appointee

Also on Thursday, the rail authority announced that Assembly Speaker John Perez appointed Patrick W. Henning Jr. of Fair Oaks to one of two remaining vacancies on the agency's board.

Henning, 66, was the director of the state Employment Development Department before his retirement in 2010. He has a lengthy history in state government, having served for 17 years as a labor and employment policy consultant to the Legislature. He is also a former state Labor Commissioner, a former member of the state Commission on the Status of Women, and a former member of the state Agricultural Labor Relations Board.

Prior to his government service, Henning was a labor union representative in Southern California.

Henning's appointment leaves the nine-member board with only one vacancy, to be filled by the state Senate Rules Committee.


The reporter can be reached at (559) 441-6319, or @tsheehan on Twitter.

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