High-Speed Rail

Big change in high-speed rail: CEO steps down, says new leader needed

California High Speed Rail Authority CEO Jeff Morales, center, speaks to media before a tour of the Fresno River Viaduct construction site in Madera in this 2015 photo.
California High Speed Rail Authority CEO Jeff Morales, center, speaks to media before a tour of the Fresno River Viaduct construction site in Madera in this 2015 photo. Fresno Bee file

Jeff Morales, who for the past five years has been the chief executive officer in charge of California’s embattled high-speed rail project, announced Friday that he is stepping down as head of the California High-Speed Rail Authority.

The formal announcement came in a letter to Gov. Jerry Brown and to the rail agency’s board of directors.

“We’ve gotten the program moving,” Morales, 57, told The Bee. “Look at where we’ve come in five years, taking this from not much more than an idea to having 1,000 construction jobs in place and all the work you can see there in Fresno and Madera.”

“My goal – and I shared this with the board and the governor – was to get the program up and running and to hit some key milestones,” he added. With the sale this week by the state treasurer of the first bonds from Proposition 1A – the $9.9 billion rail bond measure approved by California voters in 2008 – and progress in construction of the first sections of the project in the Valley, “it’s just a good time now to transition and bring in a fresh horse to run the next leg.”

Morales’ official last day is June 2, but he said he will work with the agency during a transition to new leadership. Morales said he’s been in discussions with the authority’s board for a couple of months on a transitional plan even as the agency has been conducting a recruitment and search for a new chief operating officer. “Everything is moving forward together,” he said. “Over the next few weeks we’ll see how this all comes together. We’re working on it as a package.”

Fresno developer Tom Richards, vice chairman of the rail authority board, said he initially gulped hard when Morales broached the subject of leaving the agency.

It’s been five years in this role. In some ways that feels like dog years in a program like this.

Jeff Morales, California High-Speed Rail Authority CEO

“I was thinking about where we were before Jeff joined us,” Richards said. “When he came on board in 2012, we had a staff of 26. Now we have well over 200. And it’s not just about the numbers, but the quality of the people he’s attracted. We have an executive team, none of which was on board before except for (general counsel) Tom Fellenz.”

Morales, Richards added, brought in professionals with strong financial and construction leadership backgrounds. “We’re moving from a planning and design organization to really a construction organization now,” he said. “I’m very excited about where we are in that process.”

A database of state employee payroll indicates that Morales was paid an annual salary of $395,000 in 2016.

Morales was hired by the rail authority in May 2012 at a starting salary of $365,000 a year, and he was someone the agency already knew well as a vice president for Parsons Brinckerhoff, the international consulting company that was the authority’s main project management firm on high-speed rail. Morales worked 12 years for Parsons Brinckerhoff.

Morales was head of the California Department of Transportation from 2000 to 2004. Prior to that, he was the executive vice president of the Chicago Transit Authority.

Morales said there was no single factor precipitating his decision beyond determining that it was simply a good time to move on.

“It’s been five years in this role,” he said. “In some ways that feels like dog years in a program like this.  I am really very proud of what we’ve accomplished, and you see it most directly in Fresno, with all the businesses working on the project. It’s something you don’t get to do very often.”

The five-year mark “is a good milestone” for the organization,” he added. “As we move into full-blown construction, we can bring in someone who’s more oriented that way. So it’s been very much a collaborative process to lay out a smooth transition, so there’s no lapse in the program and in leadership to keep things moving ahead.”

In a written statement, authority board chairman Dan Richard praised Morales: “Jeff has successfully built the organization over the past five years and we’re grateful for his leadership. He moved the high-speed rail project from the planning phase into construction, laying the groundwork for commercial operation.”

Brown was similarly complimentary. “Jeff was instrumental at a crucial point in time and led California’s high-speed rail project through a very challenging period. His dedicated and skillful leadership is exactly what was needed.”

Both before and during Morales’ tenure, the rail project was dogged by legal, political and financial challenges. Morales replaced Roelof Van Ark, a former rail company executive who was widely respected as an engineer but who some observers suggested lacked the political skills needed to steer the controversial project in Sacramento.

The new transition will occur as the California High-Speed Rail Authority continues to cope with a schedule under stress. While Morales, Richard and Richards praised the agency’s progress, the work has gone much slower than the leaders expected when, in 2010, the Obama administration committed the first installments of about $3 billion in federal stimulus and transportation grants for California’s bullet train program. The stimulus funds came with strings requiring that the money be spent by Sept. 30, 2017. The authority’s initial declarations were that “substantial completion” of the first 120-mile, $6 billion section of rail between Madera and Bakersfield was required by that date.

The first construction contract for work in Fresno and Madera counties was awarded in mid-2013, but major construction work didn’t get underway for about two years. The project has been beset by a chronically slow pace of acquiring property needed by the state for the railroad right of way – something that continues to be identified as a schedule risk in the Valley.

Jeff was instrumental at a crucial point in time and led California’s high-speed rail project through a very challenging period.

California Gov. Jerry Brown

The delays from property acquisition, a string of lawsuits and questions about how the authority could come up with rest of the $98 billion once estimated for the entire San Francisco-to-Los Angeles rail system forced Morales and other authority leaders to negotiate a series of extensions with the Federal Railroad Administration. Those changes enabled the authority to spend its allocation of stimulus funds from the American Recovery and Reinvestment Act first, before being required to come up with its share of matching state funds.

In the meantime, a Republican-controlled Congress has repeatedly declared that no additional federal money would be allocated for California’s project. That forced Morales and the authority to maneuver repeatedly to keep hope in the project alive – first by “value engineering” the project to reduce the estimated costs to about $68 billion, and then determining that it would be cheaper and less technically challenging to establish the first operational route from the San Joaquin Valley to San Jose instead of the Valley to Los Angeles.

Additionally, because lawsuits managed to tie up the state’s ability to sell the Proposition 1A bonds to be used for construction, Morales, Richard and Brown turned to cap-and-trade money – raised for the state’s greenhouse gas-reduction program through auctions of emissions credits to companies to offset their own air pollution – first as a stop-gap measure, and then as a crucial component of long-range funds in the absence of additional federal investment.

The challenges are unlikely to abate for a new CEO, Morales said.

“There are the day-to-ay issues of delivering the project, making sure everything from right-of-way acquisition is continuing to just managing the contracts,” he said. “The other big issue is stabilizing the cap-and-trade funding (beyond its 2020 expiration). The governor has proposed doing that, and we expect the Legislature to take that up soon.

“I think all of the pieces are in place, whether it’s in the organization or contracts, or having the Proposition 1A funds in hand, to keep moving forward and to do so even faster,” Morales said.