California will need to double down on support of the bullet train by digging deeper into the state’s wallet and accepting a three-year delay in completing the project’s initial leg, a new business plan for the 220-mph system shows.
Rail planners have turned their construction plans upside down, attempting to fit the mega-project within the state’s limited budget.
The 2016 business plan, released last month, shows that the Los Angeles-to-San Francisco rail link has proved to be politically and technically more complicated to build than foreseen in 2008, when voters agreed to help finance the project with a $9-billion bond.
The plan acknowledges the biggest of those problems: The costly and geologically complex crossing of the Southern California mountains cannot be completed by 2022, as the rail authority had long contended.
A Times analysis in October concluded that the plan to bore 36 miles of deep tunnels through the mountains, lay 300 miles of track, build a half-dozen stations and install high-voltage systems along the route almost certainly could not be completed by 2022 and within the projected budget.
The California High-Speed Rail Authority disputed the story.
But the plan cuts the price tag of the entire system by $4 billion, to $64 billion.
Aside from construction difficulties, funding remains the biggest question mark. The rail authority needs to pay for the project with money from private investors, the state and federal governments and the bond authorized by voters.
Rail authority chairman Dan Richard acknowledged the difficulties caused by funding questions and restrictions.
“If we had started with all the money in the world, this program would have probably proceeded differently,” Richard said in an interview. “If we did not have some of the requirements of the bond act, this program would definitely have proceeded different.” The first leg, he added, “would probably have gone from L.A. to San Diego.”
Rail officials say the new plan is a breakthrough that solves many funding problems because the state has amassed enough money to build a $21-billion initial operating segment from San Jose to the Central Valley by 2025. Construction of that segment will help persuade investors to put up money to complete the entire system, the officials say.
“For the first time we are able to say that with the dollars in hand or allocated to us, we can build the first half of the system and get it up and running in a reasonable time frame without a subsidy,” Richard said. “It was always the case this project was going to have to be built in stages.”
The business plan also makes clear that the state Legislature will have to extend its financial commitments to the middle of the century, although even the extension will not eliminate the risk of insufficient funding to complete the system.
“They have never answered how they are going to get the money for construction,” said Richard Little, an infrastructure policy consultant and former director of USC’s Keston Institute for Infrastructure. “They are still trying to do magic with numbers.”
Though the plan can point to sources for the $21 billion to build an initial system, every piece of that is subject to risk.
The Legislature has committed a quarter of the state’s greenhouse gas fees to the project through 2020. Under the plan, the rail authority would use the revenues through 2024 and then seek to borrow $5.2 billion against the future fees from 2025 to 2050.
Congress is never going to allocate more money to a project that lacks the ridership numbers, speeds, private funding and voter support once promised.
Investors will probably want the state to stand behind any such debt mechanism, which means taxpayers would pay if the greenhouse fees are less than projected.
Other funding sources also face risks. The bonds passed in 2008 are subject to a lawsuit. Most of the existing federal grants will expire next year, possibly before the state can spend all of the money.
The rail authority hopes Congress will chip in an additional $3 billion to extend the initial segment into San Francisco and Bakersfield, but at the moment future federal money is almost unattainable. The Republican majority in Congress would rather scuttle the project.
“Congress is never going to allocate more money to a project that lacks the ridership numbers, speeds, private funding and voter support once promised,” Rep. Jeff Denham (R-Turlock), chairman of the House rail subcommittee, said in a statement.
“Without the billions in funding they need, the authority’s change in plans amounts to nothing more than wishful thinking,” Denham said.
The new plan calls for completion of the entire system by 2029, one year later than under the old business plan. Once the initial system starts showing a profit, the business plan asserts, private investors would jump in with an estimated $21 billion, based on financial calculations.
Private investment also carries a lot of uncertainty. Private parties have demanded a guarantee from the state that they will not lose money on operating the system, a guarantee that is prohibited by the bond act.
Even if that problem is solved, the state will be short $25 billion to complete the line. There is no identified source for that $25 billion, other than the federal government.
When the project was approved by voters in 2008, it was expected that the $9 billion in bonds would pay for about a third of it and that the balance would be borne equally by the federal government and private investors. That formula has fallen apart as the project’s cost has increased.
“It is made of whole cloth,” Kopp said.
Over the last five years, the Legislature and Gov. Jerry Brown have repeatedly expressed support for the rail system. Still, the new business plan’s technical and financial compromises will receive close scrutiny, including revisions that now call for using additional slower, shared track in Los Angeles and two changes in mountain tunnel designs: the elimination of emergency ventilation systems and the narrowing of tunnel diameters.
The 99-page plan and its backup technical documents again raise questions about service and speed. A sample operating schedule does not show any nonstop trains between Los Angeles and San Francisco. The fastest travel time between the cities would be 3 hours and 14 minutes, not the 2 hours and 40 minutes many people expect.
The plan’s cost reductions are attributed to many factors, including lower bids from construction companies during the first three contract awards, lower cost designs for embankments and retaining walls, and the two tunnel design changes.
The ventilation systems are intended to clear the air in an emergency evacuation from fire or smoke. Agency spokeswoman Lisa Marie Alley said any future design would comply with state and federal safety regulations.
Reducing the diameter from 30 feet to 28 feet should speed up tunneling and cut the amount of concrete needed in the linings, said Herbert Einstein, a tunneling expert at the Massachusetts Institute of Technology.
The trade-off is that the smaller-diameter tunnels will create greater aerodynamic forces as trains rocket through. A 2014 analysis of the proposal by the rail authority indicates the smaller tunnels will save about $500 million, but it could require a 10% to 20% reduction in speeds. The longer tunnels in Southern California would require a speed of just 130 mph, according to the analysis.
“This plan is seen as complete desperation by the rail authority,” said Elizabeth Alexis, a co-founder of a watchdog group in the Bay Area critical of the authority. “The plan was dead on arrival. It doesn’t work.”
But supporters see the opposite.
“Once you have a system up and running, that is going to be a game-changer,” said David Ossian Cameron, a senior official at the Teamsters, which strongly backs the project. “We are dealing with the most complex and expensive infrastructure project in the nation’s history, so a three-year delay is acceptable.”