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Federal warning of higher bullet-train costs prompts sharp opinions, plans for congressional hearings

A confidential estimate by federal regulators that the cost of California’s bullet train project could jump significantly has prompted critics of the $64-billion Los Angeles-to-San Francisco rail effort to call for new investigations and proponents to disclaim reports that project costs are growing.

The federal estimate has been the most troubling assessment of the rail project to surface, particularly as it was produced by the Federal Railroad Administration, an agency that has strongly supported the state. The estimate, formally a risk analysis that was presented to top state rail authority executives on Dec. 1 in Washington, D.C., was obtained by The Times from individuals close to the project and disclosed last week.

State officials have accused The Times of mischaracterizing its findings. In a letter to members of the Legislature, the California High-Speed Rail Authority accused The Times of incorrectly using internal deliberations to suggest cost overruns and delays that are not borne out by facts.

But critics of the project said the federal analysis validates their concerns that the state will be saddled with multibillion-dollar unbudgeted costs for the foreseeable future.

Rep. Jeff Denham (R-Turlock), chairman of the House rail subcommitee, said he would call for hearings and an audit in the near future. Critics in the state Legislature said they would redouble efforts to seek new oversight of the project, which was approved by the Assembly and Senate last year but vetoed by Gov. Jerry Brown.

The Times reported Friday that the confidential risk analysis said that the total cost of building a 118-mile initial segment from Merced to Shafter could rise from an original budget of $6.35 billion to a range of $9.5 billion to $10 billion. The report cited significant delays in land acquisitions and environmental approvals, warning that the construction work could be delayed by as much as seven years past its original completion date of this year.

In disputing the story, the rail authority letter cites its own plan to build the partial segment for $7.8 billion, which would include electrical wiring, signalling systems and track. But the federal risk analysis showing a higher cost covers less work.

The federal analysis is based on tasks that were detailed in a 2010 grant agreement “statement of work” and does not include the electrical systems, signals or stations, according to individuals close to the project and knowledgeable about the federal estimate. It means the federal estimate is much higher than the state estimate. The federal risk analysis explicitly makes clear that its estimates are based on the grant statement of work. Asked for a clarification, a rail authority spokeswoman said the documents “speak for themselves.”

The rail authority also said The Times “overstates” the risk that California could lose federal funds, because it can not meet spending deadlines in one of the grant agreements. But the risk analysis was clear that the state is expected to invoice $2.33 billion by a deadline later this year and that amount “is $220 million short of invoicing all available [Obama administration stimulus act] funding.” The story quoted rail authority Chief Executive Officer Jeff Morales asserting that the state is on track to spend all of the money.

The Times story noted that the authority’s internal audits last year identified a number of management problems. The rail authority said in the letter that it has corrected issues uncovered in a 2012 audit, but the letter did not mention the issues in the more recent audits.

“I am not surprised that the cost problems exist or that the rail authority is denying them,” said Assemblyman Jim Patterson (R-Fresno), whose bipartisan bill to increase oversight on the project was vetoed last year. “They have denied problems and denied and denied. This is shaking the confidence of a lot of people who support high-speed rail. The more we learn about high-speed rail, the less we like it.”

Patterson said he intends to reintroduce his legislation that would require greater transparency at the rail authority.

In response to the Times story, state Sen. Andy Vidak, a Central Valley Republican, said he has asked for the Joint Legislative Audit Committee to authorize the California state auditor to immediately initiate an audit of the rail authority, the first in several years. A similar request by Vidak was voted down last year.

Other members of the Legislature did not respond to a request for comment.

Stuart Flashman, an attorney who has sued the rail authority to block the sale and expenditure of bond funds, said the new federal cost estimates may be too low. Flashman noted that the Caltrain commuter rail system recently committed to converting its operations to electric power, a plan that would erect wiring over 40 miles for $2 billion. Its advanced signalling system cost another $2 billion. Such equipment for a bullet train segment over 118 miles could cost far more, Flashman said, even though the budget is far less.

“The high-speed rail authority is trying to muddy the waters so you can’t see what is going on,” Flashman said.

ralph.vartabedian@latimes.com

Follow me on Twitter @rvartabedian

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