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Costs Balloon for California's High-Speed Rail

Even though the project will cost $2.8 billion more than planned, Gov. Jerry Brown still thinks it's worth it: "It'll last for 100 years, after all you guys are gone."

California high speed rail construction
A section of the California high-speed rail system under construction near Fresno, seen here in December 2017.
(AP/Rich Pedroncelli)
California’s ambitious effort to build high-speed rail between San Francisco and Los Angeles suffered another big setback last week when officials revealed that the costs of the initial segment of the route had risen by $2.8 billion -- a 36 percent increase over the current budget.

That means the Central Valley portion of the route is now expected to cost $10.6 billion, instead of the $6 billion that officials once thought, or the $7.8 billion that the state had assumed in its most recent estimate. Several factors contributed to the increase, including higher-than-expected costs to buy land, expensive barriers to separate high-speed passenger tracks from nearby freight tracks and increased construction costs because of those delays.

The overruns are not entirely a surprise -- the Los Angeles Times and other outlets have reported many of the additional costs along the way -- but they come at a critical time for the high-speed rail project.

Construction is well underway, but several obstacles loom large.

Gov. Jerry Brown, one of the project’s biggest champions, will leave office in less than a year, and it’s unclear whether the next governor will continue to make it a top priority. The state is using cap-and-trade money to help fund the project, but that’s still nowhere near enough to complete it. The federal government almost certainly won’t come to the rescue, and private investors are taking a wait-and-see approach beforing helping to finance the service.

In his final State of the State address on Thursday, Brown acknowledged the obstacles but defended the megaproject, saying it will still be cheaper than expanding airports and building new highways.

"Difficulties challenge us, but they can't discourage us," he said, adding that "it'll last for 100 years, after all you guys are gone."

To keep the project on track, the California High Speed Rail Authority announced last week that Brian Kelly, the state’s secretary of transportation, will become CEO of the agency starting next week. (Kelly, whose current job includes overseeing the high-speed rail project among many other duties, will leave his job as transportation secretary.)

Despite the troubles, Kelly is still enthusiastic about the high-speed rail project. He says the difficulties can be worked out.

“The focus has to be on the user benefit. Today, it takes seven or eight hours to get from San Francisco to Los Angeles in a car. We are trying to offer a solution that would do it in under three,” he says. “No matter how many freeways you build, cars cannot travel at 200-plus mph. Fast trains can.”

But Kelly also recognizes that the high-speed rail agency must first earn people’s trust that it can deliver the project.

“Nothing I say is going to mean more than what I do,” he says. “You establish credibility by getting things done. We have construction projects under contract right now, so my first priority is seeing that those are completed as soon as possible. We will establish credibility by performing.”

One of Kelly’s first tasks in his new role is to deliver an updated business model to the legislature, which requires those plans every two years.

The 2016 plan calls for service to start between San Jose and a station north of Bakersfield by 2025. That “Valley to Valley” segment, running between Silicon Valley in the north and the Central Valley to the south, could also be extended farther north to San Francisco and farther south to Bakersfield. It could also jog northeast off the main line to include Merced.


This map from May 2016 shows the proposed route the rail line may eventually take. Currently, the only section under construction is a 199-mile segment from San Jose to a station north of Bakersfield.(California High Speed Rail Authority)

Kelly anticipates that the new plan will still rely on those same basic principles, if not the same schedule. Those principles include making high-speed rail available as soon as possible to demonstrate its benefits, improving areas along the anticipated line with the goal of eventually linking them together and getting ready to build more segments when money is available.

The new plan will have to reflect the increased costs recently disclosed by the board. Kelly says the agency has tried to keep lawmakers and the public aware of the complications driving those cost increases. The problematic areas that it had identified earlier account for 63 percent of the higher costs, he says.

One of the reasons that California started building in the Central Valley, rather than at either end of the route, was because officials thought it would be the simplest and fastest segment to build. That helped the state secure more than $3 billion of federal funding from the Obama administration’s 2009 stimulus package.

But Kelly says the federal requirements -- especially ones that required the state to spend the stimulus money quickly -- also drove up costs. In most big transportation projects, for example, construction wouldn’t begin until the state secured all of the land it needed. But California began working on its new rail line before it had the entire right-of-way in hand because it had to meet federal deadlines. That meant the state had to pay for delays when construction stopped, because the state hadn’t secured the land yet.

“Going forward, for future construction projects, it would be unlikely that we would get into construction before we have a handle on all of those things, so I think our future contracts will not suffer as these have,” he says.

Of course, there are other areas where costs could increase.

The agency’s 2016 plan, for example, points out the difficulty of tunneling or negotiating the steep terrain of the mountains near Los Angeles. Delivering power to remote locations, or finding a route that would avoid wind turbines, could also prove costly.

In the long run, Kelly is still holding out hope that private funding could help the state build high-speed rail. He says an outside operator would be more likely to get involved once California can prove it can run its trains and make a profit doing it. The state could bid out operations of the existing system and then use the resulting money to build more of the line.

For now, though, Kelly says the high-speed rail authority has to be straightforward about how it’s going to address the problems that have come up.

“I think the public expects big megaprojects are going to have problems,” he says. “What I think is important is that the authority says, ‘And here’s our strategy for dealing with those.’”

*This story has been updated to include Gov. Jerry Brown's State of the State speech.

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