Now, the project is as close to the precipice as it’s ever been. The California High-Speed Rail Authority faces two new threats: Its largest source of funding is evaporating and state legislators have attempted to derail the agency’s plans en masse.
The culmination of woes has cast new doubt on the viability of the rail plan and Gov. Gavin Newsom’s strategy to focus on building the system’s Central Valley segment first.
“The way this project has been managed is embarrassing, to say the least,” Assemblyman Jim Frazier, a North Bay Democrat who chairs the Transportation Committee, told legislators during a June 11 vote to challenge the plan.
“I personally have lost all confidence in this group to develop and deliver what they promised,” he said.
In an unprecedented move, a bipartisan majority of the Assembly rebuked the agency’s plans for the Central Valley segment. The move, led by Frazier and Assembly Speaker Anthony Rendon, was cosponsored by 63 of 80 members.
The resolution demanded the High-Speed Rail Authority not award contracts to build the Central Valley track and electrical grid until the Legislature signs off on funding.
“It is an unelected body, which has taken little input from us, obliging us to vote for dollars that will continue to dog us for the next 30 years,” said Rendon, a Democrat from Lakewood (Los Angeles County).
But the authority plans to push ahead this fall with awarding those contracts, including a 30-year maintenance deal. It will ask legislators to approve $4.2 billion in funding, the remainder of its voter-approved bonds, early next year.
Brian Annis, the authority’s chief financial officer, said the agency looks “forward to a discussion next year” with state lawmakers about its bond funding. He said it would be wrong to halt construction now, because the project would create jobs amid the pandemic-caused recession.
“The case gets stronger for high-speed rail for many reasons,” Annis said. “We are supporting thousands of jobs in many areas around the state.”
The state broke ground on the Central Valley segment in 2015, and work is under way on about 30 construction sites, including overpasses and raised grading separations. No track has been laid.
Senate President Pro Tem Toni Atkins, a Democrat from San Diego, hasn’t called for diverting money from the project. However, she has been skeptical about starting construction, as Newsom and the authority proposed.
“I want to see high-speed rail move forward only in a way that is responsible and in keeping with what we told the voters we would do,” Atkins said in a statement.
At its core, the dispute reflects legislators’ skepticism over Newsom’s plan to start with a 171-mile stretch through orchards and fields between Merced and Bakersfield.
The authority originally planned to also build inward from the Bay Area and Los Angeles, including a line from Silicon Valley to the Central Valley. The vision: Bullet trains would zip between the disparate regions, linking the high-paying jobs on the coast with the affordable housing of the state’s interior.
Supporters say the state’s new vision abandons that goal of leveling inequities between the two Californias: its wealthy, cosmopolitan coast and a lagging agricultural interior.
Newsom stunned many legislators and rail advocates during his first State of the State speech last year, when he announced he would focus only on the Central Valley segment. He suggested the plan for a full San Francisco-to-Los Angeles line would “cost too much and, respectfully, take too long.”
The governor later backpedaled, saying that he still would like to connect the state’s largest metro areas, though there is currently no money for it. His office did not respond to a request for comment.
Labor unions have been among the project’s most vocal backers, saying it would provide trade jobs and help a region left behind by the Los Angeles and Bay Area economies.
“We should not forget that this type of project is exactly what workers in the construction industry need from their government in times of recession, like times we find ourselves in now,” said Jeremy Smith of the State Building and Construction Trades Council.
Some legislators say that in the absence of a robust statewide plan, the high-speed rail money would be better spent on commuter rail projects in Los Angeles and San Francisco. Last year, Rendon pushed for diverting billions from the Central Valley segment.
There are legal arguments that both approaches ignore the sentiment of California voters, who approved a $10 billion bond in 2008, largely for the construction of San Francisco-to-Los Angeles tracks.
Trains originally were supposed to start running this year. Now the agency hopes the Central Valley line will open in 2029, followed by the longer line in 2033. Segments to connect San Diego and Sacramento would come years later.
The project has faced broad ridicule over soaring costs, its budget ballooning from $33 billion to $80 billion, as well as repeated construction delays and a slew of land-acquisition lawsuits.
Quentin Kopp, a retired state senator and former chairman of the High-Speed Rail Authority board, said he’s not surprised legislators have revolted, arguing that the project is no longer what he and other proponents of the 2008 bond pitched to voters.
“It is a disgraceful joke,” Kopp said of the agency. “They don’t deserve a penny because they are fooling California voting taxpayers.”
A growing chorus of lawmakers has called for cutting funding entirely. State Sen. Brian Dahle, a Republican from Bieber (Lassen County), said economic challenges brought on by the pandemic are likely the death knell for the bullet train.
“The project is way underfunded and we’re never going to be able to finish it,” he said. “Sometimes you’ve got to cut your losses, and it’s time to cut our losses.”
The largest source of high-speed rail funding, revenue from the state’s cap-and-trade program, has plummeted as fewer businesses are buying emission credits during the economic recession and stay-at-home restrictions.
The agency typically receives at least $125 million per quarter from the auction of cap-and-trade credits. The last auction, in May, brought in $6 million.
If revenue remains low, it could upend an already shaky financial plan. The authority needs between $500 million and $750 million in cap-and-trade revenue every year through 2030 to complete the first segment.
Annis, the agency’s CFO, said it has plenty of cash on hand and the ability to borrow money, through bonds, to avoid immediate disruptions. He said he expects cap-and-trade auction revenue to rebound.
Meanwhile, federal threats to revoke funding for the project are another problem for the rail agency.
The Trump administration canceled a $929 million grant for the project last year, arguing the state had missed required benchmarks. California officials said the move was politically motivated and are fighting for the money in court.
Dan Richard, a former chairman of the Rail Authority Board who resigned last year, said legislators must focus on the project’s long-term potential to reimagine transportation and connect the state.
He suggested that with a presidential election on the horizon, high-speed rail’s financial woes could be temporary.
“Joe Biden is a train guy,” Richard said of the presumptive Democratic nominee. “If these guys can hold on until the cavalry comes over the hill, that would be good.”
©2020 the San Francisco Chronicle. Distributed by Tribune Content Agency, LLC.
