High-Speed Rail at High Risk of Never Completing

California’s high-speed-rail project, as envisioned in Proposition 1A, faces significant risk of never reaching completion, the state’s non-partisan Legislative Analyst’s Office (LAO) said in a brutal report released Tuesday. Reasons include unrealistic funding assumptions, weak leadership overseeing operations, and federal deadlines being missed because of public opposition.

The California High–Speed Rail Authority (HSRA) assumed the state would receive $17-$19 billion from the Federal Rail Authority, but to date has only received $3.6 billion, the report stated.

“Given the federal government’s current financial situation and the current focus in Washington on reducing federal spending, it is uncertain if any further funding for the high-speed rail program will become available,” LAO representatives wrote. “In contrast to the interstate-highway system, which was constructed with the dedication of funding from the federal-excise tax on gasoline, federal funding for high-speed rail is not supported by a dedicated-revenue stream and, therefore, must compete with other annual federal funding priorities.”

HSRA’s latest 2010 business plan indicated the potential need for a “state-operating subsidy,” which is contrary to explicit provisions in Proposition 1A, said the LAO. Proposition 1A assumed the state would sell $9 billion in general-obligation bonds—however, California would incur annual-debt-service payments of $1 billion for the next two decades, should the state sell bonds.

“Due to the dire condition of the state’s general fund, adding such costs for debt service in the near future means that the Legislature would have to consider reducing costs for other state programs, or increasing revenues to offset these costs,” the LAO wrote.

Federal funding came with strict deadlines, which caused HSRA to hastily approve construction of the Central Valley segment without proper analysis of future funding sources. Potential ridership of a high-speed rail line within the Central Valley segment alone would be “insufficient to operate the system without a substantial subsidy,” and significant local opposition over how the alignment of the tracks could affect agricultural operations makes meeting federal deadlines unlikely, the LAO concluded.

The current HSRA board does not have the proper engineering or construction management expertise to effectively and efficiently build a successful high-speed-rail program. As a result, LAO recommended replacing HSRA with the California Department of Transportation.

“We recommend that the Legislature remove decision-making authority over the high-speed rail project from the HSRA board to ensure that the state’s overall interests, including state fiscal concerns, are fully taken into account as the project is developed,” the LAO stated.

California legislators need more time from the federal government to make more informed decisions, and the state needs to improve governance and oversight of the project in order to ensure the increased success of the high-speed-rail project, the LAO concluded.