It’s been in the works for 30 years, but California’s high-speed rail project is once again potentially going off the rails.
A new report from the Office of Inspector General for High-Speed Rail found that the California High-Speed Rail Authority could run out of money for the project as early as next year. The report adds that the authority is low-balling future costs of its first segment, should it ever get completed.
The 43-page report found that the project’s latest business plan does not clearly communicate rising costs, shifting scope, delays and looming financing needs.
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Financial issues
While the new report focused on several issues, cost was the biggest one.
The first part of this project is a connection between Merced and Bakersfield, which has already come under legal scrutiny.
Inspectors say officials are downplaying the ballooning costs.
“The business plan does not adequately communicate the scope changes and cost increases between past and current Merced-to-Bakersfield (M-B) cost estimates, obscuring the fact that—absent scope reductions—costs have substantially increased on the M-B segment,” the report reads.
The report also confirmed those legal concerns.
The latest plan to build that segment cites a roughly $1 billion reduction from its 2025 estimate.
However, this inspector general report said those savings largely come from building less rather than constructing the same project more efficiently.
“Furthermore, to the extent the Authority ever builds to downtown Bakersfield at a later, unknown date, the cost of doing so will likely be higher than what was estimated,” the report reads.
The plan calls for a temporary station north of the city, which cuts down the track mileage from 171 miles to 162. It also calls for a single-track infrastructure instead of dual track, something that is specified in state law.
The report also found the latest estimate excludes several potentially significant expenses. That includes between $3.6 billion and $6.6 billion in financing costs and roughly $1.7 billion associated with a settlement agreement with the city of Shafter. The current estimate for the Merced-to-Bakersfield line is around $36 billion.
This new report puts that number closer to $48 billion.
That’s a concern because the funding deadline is approaching. The Authority says it has enough funding over time to cover this first segment. However, the money may not arrive quickly enough to pay for construction as currently scheduled.
That means the Authority could run out of liquid funds as soon as late next year.
“The schedule showed that the Authority will run out of funding as soon as December 2027 without financing and will need an additional $2.2 billion for the remainder of fiscal year 2027-28 to cover planned expenditures,” the report reads.
Other funding issues come from President Donald Trump’s disdain for super-blue California. His administration pulled grants worth some $4 billion for the project although Gov. Gavin Newsom vowed to keep the project afloat.
Calling the project a “boondoggle,” Transportation Secretary Sean Duffy in July announced a hold on the funds.
“Federal dollars are not a blank check – they come with a promise to deliver results,” he said in the release.
Scheduling delays
The report also found the project is running behind its previous schedule.
The completion of that first section has already been pushed back nine months from December 2031 to September 2032. The report found it could even be pushed back as far as September 2034.
Even that date could be in jeopardy because, according to the report, it relies on assumptions about legislative changes and other actions that have not yet happened.
What’s the cause of the delay?
Also unclear.
The Authority’s business plan reportedly attributed the nine-month delay to “optimization and pending policy changes.” Still, the report said the plan did not explain what those changes were or whether the delays could have been avoided.
What’s next?
This plan was supposed to connect Los Angeles and San Francisco with a train that could do it in roughly three hours.
The truth is that’s not happening anytime soon.
Moving forward, the inspector general’s office recommended that the Authority’s board adopt stronger policies governing its annual reports. That includes getting them out in a more timely manner so stakeholders can review complete information before the reports are finalized.
All of this comes as the Authority seeks legislative support for a new strategy to build the rail system. That includes additional financing and changes to the project’s scope and delivery approach.
In the meantime, this project remains stuck at the station.
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