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Review urges delay in borrowing billions for bullet train

State-mandated panel concludes that the high-speed rail program 'is not financially feasible.' Gov. Jerry Brown's office signals that he isn't likely to be swayed by the findings.

January 04, 2012|By Ralph Vartabedian and Dan Weikel,Los Angeles Times
  • California High Speed Rail Authority shows an artist's rendering of a high-speed train speeding along the California coast.
California High Speed Rail Authority shows an artist's rendering… (California High Speed Rail…)

In a scathing critique that could further jeopardize political support for California's proposed $98.5-billion bullet train, a key independent review panel is recommending that state officials postpone borrowing billions of dollars to start building the first section of track this year.

Gov. Jerry Brown has said he will ask the Legislature in the coming months to issue the first batch of $9 billion in voter-approved bonds for a high-speed rail network that backers say will create jobs, help the environment and transform the state's economy.

But in a report Tuesday, a panel of experts created by state law to help safeguard the public's interest raised serious doubts about almost every aspect of the project and concluded that the current plan "is not financially feasible." As a result, the panel said, it "cannot at this time recommend that the Legislature approve the appropriation of bond proceeds for this project."

Although the panel has no legal power to stop the project, its strong criticism, coupled with recent polls showing public opinion has shifted against the proposal, is giving some key political leaders pause.

"The peer review group report raises important issues for the Legislature to weigh as we consider any appropriation for the project during this year's budget process," said the leader of the state Senate, Darrell Steinberg (D-Sacramento), a longtime supporter of the program.

The project has won major support from organized labor, some big-city mayors and many state lawmakers. But Tuesday's report adds to a string of negative assessments from the state auditor, the state inspector general, the legislative analyst, the UC Berkeley Institute of Transportation Studies, as well as the transportation committee in the U.S. House of Representatives.

A few local agencies along the proposed route, the first leg of which would be built in the Central Valley, have voted to oppose the project. Powerful agriculture and railroad interests have joined the attack and several lawsuits are seeking to block construction.

The expert panel asserted that the plan to start construction between Chowchilla and Bakersfield does not meet requirements approved by voters. Their report also found ridership estimates are unverified, construction costs may exceed the current $98.5 billion estimate, and the state agency overseeing the project lacks adequate management resources.

Most problematic, the report said, is the lack of certainty about funding the balance of the project once the state exhausts the $9 billion in available bonds and $3.3 billion in federal grants. Congress has eliminated future funding for the project, and Republicans are attempting to freeze funds already granted.

"The fact that the funding plan fails to identify any long-term funding commitments is a fundamental flaw in the program," the panel said. "We cannot overemphasize the fact that moving ahead on the high-speed rail project without credible sources of adequate funding … represents an immense financial risk on the part of the state of California."

The panel includes private-sector financial experts, a University of California dean of engineering, a former Caltrans director and a local government representative. Their warnings are likely to weigh heavily on lawmakers as they consider the project in coming months, said Sen. Joe Simitian (D-Palo Alto), a longtime supporter of high-speed rail who has grown increasingly concerned about the project. Simitian has raised the possibility of putting the entire project on hold for a year to reevaluate the current plan.

"We can't simply dismiss the legitimate concerns by a group of this caliber," Simitian said. "Denial is not going to move the project forward."

The California High Speed Rail Authority, the state agency building the system, said the review panel's report is "deeply flawed, in some cases misleading and its conclusions are unfounded." The authority argued that many of the problems cited by the authority have already been addressed.

But even authority board Chairman Tom Umberg acknowledged the report's potential to cause damage. "What is most unfortunate about this report is not its analytical deficiency but that it would create a cloud over the program that threatens not only federal support but also the confidence of the private sector necessary for them to invest their dollars."

Brown's office signaled that the governor isn't likely to be swayed by the panel's findings. "It does not appear to add any arguments that are new or compelling enough to suggest a change in course," said Gil Duran, Brown's press secretary.

Committed supporters dismissed the idea that the report would derail the project. Assemblywoman Cathleen Galgiani (D-Tracy) who wrote the 2008 ballot measure for high-speed rail, said she supports building the first phase in the Central Valley because much of the environmental review has been done, billions in federal funding have been authorized and jobs can be created quickly.

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