High-Speed Rail

High-speed rail money risks come under Assembly scrutiny

Put on your hard hat: A look at high-speed rail construction in Fresno area

See March 2016 work on high-speed rail sites in downtown Fresno (where the Tuolumne Street bridge has been demolished), trench work behind the Zacky Farms feed mill and at sites along Highway 99 in Fresno and Madera.
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See March 2016 work on high-speed rail sites in downtown Fresno (where the Tuolumne Street bridge has been demolished), trench work behind the Zacky Farms feed mill and at sites along Highway 99 in Fresno and Madera.

Legislators in Sacramento focused on financial risks and realities as they held their initial oversight hearing Monday on a high-speed rail plan that proposes running trains from the San Joaquin Valley first to San Jose and the Bay Area instead of southward to Los Angeles.

Representatives of the California High-Speed Rail Authority, the state’s transportation agency, regional rail organizations and legislative advisers testified in front of the Assembly Transportation Committee for nearly three hours on the authority’s 2016 draft business plan.

Many of the questions from both Democratic and Republican members of the committee involved the ability of the authority to come up with not only the estimated $21 billion to pay for the first operational segment from north of Bakersfield to San Jose, but the entire $64 billion that the agency says it will ultimately need to span the 520 miles from downtown San Francisco to downtown Los Angeles.

The committee’s chairman, Assemblyman Jim Frazier, D-Oakley, visited construction sites in Fresno and Madera counties about two weeks ago to get a firsthand look at work on the first 29-mile construction contract.

The draft business plan, issued last month by the rail authority, included several major revisions from what was proposed in the 2014 version of its plan – most notably a pivot from an initial operating segment hauling passengers between the San Joaquin Valley and Los Angeles by 2022 to a plan to start running trains between the Valley and San Jose in 2025.

It’s a shift in focus that the rail authority expects will save about $10 billion from the cost of heading south. But it also puts off the anticipated start date of passenger operations by three years.

It also relies on some uncertain sources of money – about $11 billion out of the $21 billion the authority estimates is needed to build and equip its 239-mile northern initial operating segment from Shafter to San Jose.

In addition to a little over $3 billion in federal stimulus and transportation funds and about $3 billion more in money from Proposition 1A for initial construction in the San Joaquin Valley, the authority is counting on using an ongoing stream of $500 million to $600 million a year in cap-and-trade money through 2050 from the state’s greenhouse gas-reduction program.

There are serious questions, however, about whether the cap-and-trade program – money raised through auctions of emissions credits to companies to offset their own air pollution – will continue beyond 2020.

And the authority cannot get to most of the money from Prop. 1A, the $9.9 billion high-speed rail bond measure approved by California voters in 2008, until it comes up with a detailed funding plan that lives up to the bond act’s stringent requirements. Such a financing plan would also likely be subjected to lawsuits that could take years to untangle.

“Some of us have a lot of concerns, but since we’re moving forward, we want to make sure that funding will be available,” said Assemblywoman Young O. Kim, R-Fullerton.

State Transportation Secretary Brian Kelly told legislators that the California Air Resources Board, which administers cap-and-trade, believes it has the authority to continue the program beyond 2020. “There is no doubt some risk,” Kelly said, referring to a pending appeal over whether the program is an illegal tax or a legitimate fee or charge for state services. The state won in a Superior Court ruling that is now on appeal.

But Jessica Peters, a fiscal and policy specialist with the state’s Legislative Analyst’s Office, said there is considerable doubt about the future of cap-and-trade. “About half of the (Valley to San Jose) funds would come from cap-and-trade beyond 2020,” she said. “If it does not extend beyond 2020, it would not be available unless the Legislature took action to do that.”

Assemblyman Adam Gray, D-Merced, expressed his displeasure that while Merced was the northern terminus of a Merced-Los Angeles operating segment in the 2012 and 2014 versions of the business plan, the shift to a San Jose line leaves the city and its residents sitting and waiting.

“We had no heads-up, no input, no notice of this significant change,” said Gray, who sat in on Monday’shearing as a member of a select committee on high-speed rail. “Merced was always in the initial operating segment. The departure from the northern San Joaquin Valley is a great concern to me.”

Richard and Jeff Morales, the rail agency’s CEO, expressed regret for failing to advise Merced leaders ahead of time. But they attributed Merced’s circumstance to the constraints the authority is facing in lining up its construction contracts – including a gap in environmental clearances in the Chowchilla area that prevented them from contracting for construction between Madera and Merced.

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