California's bullet train is hurtling toward a multibillion-dollar overrun, a confidential federal report warns

California’s bullet train could cost taxpayers 50% more than estimated — as much as $3.6 billion more. And that’s just for the first 118 miles through the Central Valley, which was supposed to be the easiest part of the route between Los Angeles and San Francisco.

A confidential Federal Railroad Administration risk analysis, obtained by The Times, projects that building bridges, viaducts, trenches and track from Merced to Shafter, just north of Bakersfield, could cost $9.5 billion to $10 billion, compared with the original budget of $6.4 billion.

The federal document outlines far-reaching management problems: significant delays in environmental planning, lags in processing invoices for federal grants and continuing failures to acquire needed property. 

The California High-Speed Rail Authority originally anticipated completing the Central Valley track by this year, but the federal risk analysis estimates that that won’t happen until 2024, placing the project seven years behind schedule.

The report, the most critical official assessment of the project to surface so far, is labeled a “confidential-draft deliberative document for internal use only” and was presented by senior Federal Railroad Administration executives to California rail authority board Chairman Dan Richard and Chief Executive Jeff Morales on Dec. 1 in Washington.

This analysis puts the state on notice that it could face bigger cost overruns than anticipated and much longer delays than have been made public, a troubling critique by an agency that has been a stalwart supporter and longtime financier of the nation’s largest infrastructure project.

Morales cautioned in an interview that the numbers in the analysis are only projections and estimates that do not account for intervention by the rail authority, and he asserted that the construction in the Central Valley will cost less than the risk analysis indicates. The estimates, he said, are based on a lot of assumptions that the authority wants to ensure are correct.

“The point of doing this analysis is to identify the challenges and work through them,” he said. “They are not conclusions and not findings.”

The Federal Railroad Administration is tracking the project because it has extended $3.5 billion in two grants to help build the Central Valley segment. The administration has an obligation to ensure that the state complies with the terms, including a requirement that the state has the funding to match the federal grants. 

Rep. Jeff Denham (R-Turlock), chairman of the House rail subcommittee, said Friday he would conduct an oversight hearing in the near future and fight any further federal funding.

“Despite past issues with funding this boondoggle, we were repeatedly assured in an August field hearing that construction costs were under control,” he said in a statement. “They continue to reaffirm my belief that this is a huge waste of taxpayer dollars.”

The railroad administration’s analysis shows that the state authority could lose $220 million in one of the federal grants this year if it cannot submit paperwork by June 30, to meet the Sept. 30 deadline of the Obama administration’s stimulus act. 

To hit those milestones requires spending $3.2 million per day, a very high rate of construction spending. But Morales said the rail authority’s construction progress and spending rate ensure that all of the grant funds will be used. So far, the authority has spent $2.2 billion of the grant, leaving $300 million to spend.

Federal Railroad Administration spokesman Matthew Lehner did not answer specific questions about the risk analysis but said that it “is a standard oversight tool used on major capital projects — not just California.”

Lehner said that he’s confident the state can meet its deadline, “with continued focus and hard work.”

Other recent documents, however, paint a dark picture of California’s ambitious transportation project and help explain some of the performance problems.

Audit reports last year, for example, found that the rail authority lacks consistent management processes, takes on unnecessary contract risks, does not have orderly records and is short on clearly defined responsibility for its top officials.

And an internal report obtained by The Times notes a just-completed survey in which employees complain that morale is low and has declined in each of the last three years. Employees interviewed by The Times say turnover is consistently high, leaving staff overworked. The rail authority’s senior deputy, its chief administrative officer and its top information technology executive recently left.

Rail authority spokeswoman Lisa Marie Alley said that the authority takes the issue seriously and that it is “currently making changes that we expect will help in that regard.”

About 80% of all bullet train systems incur massive overruns in their construction, according to Bent Flyvbjerg, an infrastructure risk expert at the University of Oxford who has studied such rail projects all over the world. One of the biggest hazards of such mega-projects is a government agency that is attempting to do something highly complex for the first time.

The California system is being built by an independent authority that has never built anything and depends on a large network of consultants and contractors for advice. Engineering and construction experts have warned that early cost and schedule problems will be difficult to reverse and that early cost increases likely will drive up the final cost of the project.

Proponents of the project, including many veteran transportation experts, have said that California’s massive economy can handle higher costs for the project — even more than $100 billion — by increasing sales taxes or making firm commitments for additional future funding from the state’s general fund.

But the Legislature already has balked at giving the rail authority the ability to borrow against future state revenues, saying it would have to make do with existing allocations. And that was before Gov. Jerry Brown warned Tuesday that California’s projected 2017-18 budget shows a $1.6-billion deficit.

Proponents say short-term financial concerns are more than offset by the future value of a transportation system connecting the state.

Brown, meanwhile, has sought to shield the project from interference. He vetoed a bill with bipartisan support in September that would have increased oversight of the project and clarified estimates of how much the project will cost. And last January, a joint committee rejected a proposal to ask the California state auditor to examine the project for the first time in four years.

The federal risk analysis identifies several major problems that have dogged the project for years and proved difficult to remedy.

In January 2012, the rail authority said it would start construction in Fresno by June, but it had not purchased a single piece of land. 

Farmers resisted from the start, saying the route would cut diagonally through some of the nation’s most fertile acreage, devastating their operations.

Actual construction did not start until 2014 — and even then at a slow pace — and the federal report shows that property acquisition delays are growing worse.

Last February, the rail authority had expected to hand over 100% of the parcels in the Fresno construction segment by June 2018. Now, that is not expected until June 2019, according to the federal report.

Even after five years of effort to buy property, the authority still lacks 25% of the parcels for the 29-mile section from Madera to Fresno, and just over half of the parcels needed for the 118 miles in the Central Valley.

The federal report also raises concerns with the rail authority’s billing system. It found that the state authority requires three months to process an invoice — too long, the report suggests.

State employees say they are stymied by high turnover, cumbersome computer systems and poor record-keeping.

The effort to get through environmental reviews also has taken much longer than expected and is getting worse, according to the federal review. 

The rail authority has said for at least two years that it would have all of its environmental statements and decisions completed by this year. But the federal review projects that all of the environmental work will not be completed until 2020. Morales attributes some of the delays to other government agencies that must review the rail authority’s plans, but he expects the environmental statements will be completed earlier than the federal risk analysis shows.

Possible delays do not surprise community activists in the San Fernando Valley. David DePinto, an opposition leader in Shadow Hills, has noted that the rail authority is still conducting geological soil investigations in the San Gabriel Mountains to determine the routes for lengthy tunnels that will pass through the range.

The environmental reviews have grown ever more costly, based on an analysis of the rail authority’s documents. The original cost projection, made in a September 2010 grant agreement with the Federal Railroad Administration, put the cost at $388 million. By last August, the authority’s official “funding contribution plan” showed that cost had jumped to $1.03 billion.

The cost increase amounted to 171%. 

ralph.vartabedian@latimes.com

Follow me on Twitter @rvartabedian

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UPDATES:

2:45 p.m.: This article was updated with a statement from Rep. Jeff Denham (R-Turlock).

This article was originally published at 8:40 a.m.

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