California's high-speed rail project has 'no viable path forward,' new report says

LOS ANGELES - The U.S. Department of Transportation (USDOT) has released a new report detailing significant issues with California's high-speed rail project. 

The Federal Railroad Administration (FRA) found the project in default of its federal grant terms, citing missed deadlines, budget shortfalls, and overrepresented ridership projections. 

What we know:

The FRA has issued a 300-page Compliance Review Report, concluding that the California High-Speed Rail Authority (CHSRA)'s high-speed rail project is in default of its federal grant awards. 

These two grants collectively amount to approximately $4 billion in taxpayer money. 

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The report outlines nine key findings, including project delays, mismanagement, waste, and skyrocketing costs. 

Despite receiving around $6.9 billion in federal funds over roughly fifteen years, no high-speed track has been laid.

What they're saying:

U.S. Transportation Secretary Sean P. Duffy expressed strong disapproval regarding the project's progress. 

"I promised the American people we would be good stewards of their hard-earned tax dollars. This report exposes a cold, hard truth: CHSRA has no viable path to complete this project on time or on budget," said Secretary Duffy. 

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He also issued a warning to CHSRA: "If they can’t deliver on their end of the deal, it could soon be time for these funds to flow to other projects that can achieve President Trump’s vision of building great, big, beautiful things again. Our country deserves high-speed rail that makes us proud – not boondoggle trains to nowhere."

Timeline:

The investigation into the CHSRA's high-speed rail project began in February, when Secretary Duffy announced that USDOT would be launching a review of two specific grants: a $929 million Cooperative Agreement from 2010 and a $3.07 billion Cooperative Agreement from last year. 

Under the Secretary’s direction, the FRA conducted a detailed review of CHSRA’s compliance with federal grant agreements related to over $4 billion in funding. 

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As part of its investigation, the FRA contacted state oversight entities, visited construction sites, conducted a risk analysis, met with CHSRA officials, and reviewed several thousand documents.

Key Findings:

The FRA's 310-page report details nine key findings concerning the project's issues:

• CHSRA has executed numerous change orders and is likely to have many more in the near future due to contractor expenses from project delays.
• CHSRA has already missed its deadline for finalizing its rolling stock procurement.
• CHSRA has at least a $7 billion funding gap to complete the Early Operating Segment (EOS), with no credible plan to secure additional funds.
• CHSRA does not have a viable path to complete the EOS by 2033 as committed in the FY10 Agreement and the FSP Agreement.
• CHSRA relies on volatile non-federal funding sources, which present significant project risk.
• CHSRA lacks the time and money to electrify the EOS by 2033.
• CHSRA's budget contingency is inadequate to cover anticipated contractor delay claims.
• CHSRA has substantially overrepresented its ridership projections for the EOS.
• CHSRA lacks the capacity to deliver the EOS by 2033.

The backstory:

The California High-Speed Rail project was initially envisioned in 2008 as a two-phase system connecting Los Angeles to San Francisco, and later extending north to Sacramento and south to San Diego, covering an 800-mile segment. 

Since then, the project's footprint has been significantly reduced, first to a 171-mile segment and now to the current vision of 119 miles. 

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Despite substantial federal support and funding, the FRA's report states that CHSRA does not have the capacity to deliver the full high-speed rail system.

The current compliance review indicates that CHSRA "has not learned from its mistakes and mismanagement and has therefore failed to create an organization capable of effectively and efficiently managing project delivery."

What's next:

CHSRA has up to 37 days to respond to the FRA's report. 

Failure to provide a satisfactory response could result in the termination of the federal grants, meaning the nearly $4 billion in taxpayer money could be reallocated to other projects. 

The FRA notes that CHSRA's "inability to deliver the EOS by 2033 renders the CHSR Project inconsistent with the goals of the HSIPR Program and constitutes a Project Material Change under the FSP Agreement. These findings support a conclusion that CHSRA is in default under the FSP Agreement and the CHSR Project no longer effectuates the goals of the funding programs, which may give rise to an action under the funding agreements, which could include termination." 

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The FRA also raises a "reasonable question about whether continued Federal investment in the CHSR System is a prudent use of taxpayer dollars."

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