A slew of delays and higher-than-expected costs are driving the anticipated price of high-speed rail construction in the central San Joaquin Valley by more than one-third, to about $10.6 billion.
That’s a $2.8 billion jump from the California High-Speed Rail Authority’s estimate in 2016 of $7.8 billion for the 119-mile section of the route from Madera to Bakersfield. The increased figure was a reality check for the authority’s board members, who received a report on the rising costs at their meeting Tuesday in Sacramento.
“We were just informed this morning,” said Ernest Camacho, who joined the authority board less than a year ago. “It’s horrifying when you look at the amount of money we’re going to have to reinvest to make this program work.”
The report came the same day the authority voted to hire Brian Kelly, currently secretary of the California State Transportation Agency, as its new CEO and executive director. Kelly was approved unanimously by the nine-member board to step into the slot vacated by the resignation of Jeff Morales last June.
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The board approved a salary of nearly $385,000 a year for Kelly, who must now guide the agency through the process of coping with the rising price tag.
Roy Hill, the authority’s chief program officer, said about $725 million of the cost increase is due to the authority’s continuing problems in purchasing the property it needs for its railroad right of way through the Valley. Some of that increase involves having to buy more parcels than originally forecast, as well as paying more than expected for individual properties.
About $325 million reflects the effects of construction delays.
The need to provide for “intrusion barriers” to separate the bullet-train tracks from adjacent freight railroad lines is adding about $450 million to the cost, Hill said. And additional costs associated with agreements with outside agencies – including utility companies, cities, counties and others – represent about $600 million of the figure.
Another $1 billion in added expenses are now forecast to arise from other factors, including the increased cost of installing tracks and operating systems on the rail line, Hill told the board.
For several years, before the first construction contract was awarded for a 32-mile section of the rail line in Fresno and Madera counties, the authority prided itself on a system of assessing the potential budget and schedule risks that could pop up. The Valley segment is supposed to form the backbone of what is planned as a system connecting San Francisco and Los Angeles, by way of Fresno and the Valley, with electric trains traveling at up to 220 mph.
“On the positive side, from what you’re saying, most of these cost drivers were factors we already identified as risks,” board chairman Dan Richard told Hill. “But we didn’t accurately forecast the magnitude of the risks.”
Hill said he believes the new estimates represent a more realistic forecast. “We have lessons learned, the right-of-way experience, third-party agreements, and how we procure things,” he said. “We must make sure the lessons learned are implemented in every package going forward.”
“We will work very aggressively to bring this number down,” Hill added. “Was it the estimates that were the issue, or the fact that things happen? A lot of bad things have happened, and this has been cumulative. … The worst-case scenario has happened.”
The upward lurch in the cost forecast for the Valley comes as the rail authority embarks on the preparation of a business plan it is required to submit to the state Legislature this spring. And it is likely to add fuel to high-speed rail opposition from legislators, including Assemblyman Jim Patterson, R-Fresno, who has long been a critic of the project.
“This is a major public works project that shows all the signs of a project in trouble,” Patterson said Tuesday of the cost increases, delays and executive departures. “The more we learn, the more troublesome the project appears.”
He said the state is “way past the politics of high-speed rail, whether you think it’s a good idea, a bad idea or you’re undecided. Since Central California is at the center of this right now, we’re the canary in the coal mine, the experiment. And the difficulties we’re experiencing will be nothing compared to going into Southern California, getting through the San Gabriel Mountains and those kinds of things.”
Patterson said he will speak at a joint legislative committee hearing on Jan. 30 to ask for an audit of the rail authority and the project. “If this weren’t high-speed rail – if it were a water treatment plant or an airport or a highway project, and saw large cost overruns, time delays, executives departing and internal fund transfers – if you step back and look at it … these are symptoms of a project that is unwinding.”
For Richard, the authority board chairman, Tuesday’s report was a sobering reality check.
“We would prefer a different assessment at this point, but our first responsibility … is to be transparent and forthright about where we see things,” Richard said. “Obviously we need to look at how these cost increases go through the rest of the system. We’ll be looking at that in the (new) business plan.”