State auditor issues financial warning on California bullet train

California’s $98.5-billion bullet train project has become “increasingly risky” because of uncertainty about where the money will come from to finish even the first phase, the state auditor warned Tuesday.

In the latest in a series of cautionary reports by outside agencies and groups, the report found that the California High-Speed Rail Authority has made some progress in addressing planning and fiscal concerns but still has important work to do to ensure that the project can be built as promised.

“The program’s overall financial situation has become increasingly risky, in part because the authority has not provided viable funding alternatives in the event its planned funding does not materialize,” the state auditor concluded.

The authority has secured $12.5 billion for the first Los Angeles to San Francisco leg of what is planned to be an 800-mile network, the report states. But the auditor notes that the projected cost of that phase has risen to between $98.5 billion and $117.6 billion.

“The success or failure of the program” depends on obtaining up to $105 billion in additional funding, which has not been identified, the report says. It further mentions that the cost estimates for the initial phase do not include operating or maintenance outlays, which the auditor estimates could total roughly $97 billion between 2025 and 2060.

Moreover, concerns have been raised about ridership projections that form the basis of the state financial plan for the system, including those of a group of experts hand-picked by the head of the rail authority, the state auditor said.

The concerns expressed in the report generally echo or amplify issues previously raised by the state auditor, the nonpartisan Legislative Analyst’s Office, an expert review panel created by state law and other organizations.

High-speed rail officials acknowledged that the report identified some managerial deficiencies and said they would consult with the state auditor to remedy problems.

“It was a professional report,” said Lance Simmens, the authority’s communications director. “We had some disagreements, but we will continue to work with the state auditor to correct the deficiencies.”

Despite the criticism, Gov. Jerry Brown, organized labor, many members of the Legislature and business groups are pushing to start construction in the Central Valley later this year. They argue that the bullet train represents a bold vision of progress for the state and will create jobs, accommodate future growth and help the environment.

Backers note that voters approved the project and billions in state funding in 2008. Critics, however, cite recent polls indicating that voter sentiment in the state has shifted away from support for the project.

In addition to financial risks, the state auditor found that the rail authority still struggles to provide an appropriate level of oversight of its contractors because the agency is significantly understaffed. The report noted that the employees of contractors and subcontractors outnumber authority employees by about 25 to one.

Similarly, the auditor stated that the rail agency does not effectively track and collect required statements of economic interests from its officials and contractors; hence, it might not be aware of potential conflicts of interest.

According to the report, the authority also avoided the competitive bid process in at least one multimillion-dollar contract and has delegated significant control of the project to its contractors, which might make it difficult for the authority to obtain information needed for critical decisions about the program’s future.

dan.weikel@latimes.com