California Bullet train First Stage (Central Valley) will Cost Almost double from Original Estimate of $6 Billion

The LA Times recently reported that the CalHighSpeed Rail budget ballooned $2.8 billion with a total estimated cost to build at $10.6 billion. The original estimate was $6 billion for the central valley portion. This according to the LA Times is the worst case scenario. The cost increases stem from higher land acquisition costs, costs of relocating utility systems, new safety barriers in the area freight and Speed rails trains meet. The new chief executive director Brian Kelley ($400k salary) said the high speed rail is crucial for the future economic needs of the State, but it has tough challenges. Such as where are they going to get the new $2.8 billion? This will require the state legislator for more money. The State approved the bonds and the increase will cover the train for the central valley, but if they are having such cost overruns now in the lower priced valley. How can they pay for land acquisition in the Bay Area and downtown LA? The original projection was that this fancy rail line would cost $40 billion and it is now estimated to need $64 billion to complete. The new report brings to view that the authorities underestimation for the cost to acquire the land, the environmental approvals and subsequent litigation. Many critics are saying that the authority estimated lower costs to politically protect the project. They basically underestimated the costs and overstated the benefits. I guess when it is not your personal money being spent it is easy to do. The LA Times spoke to James Moore, director of the transportation engineering program at USC. "It is in my opinion overly deceptive. We have seen on transportation projects this militant defense that is meant to cause the public to remain calm." Moore forewarns that the costs are likely to produce much greater future increases. On the horizon are more difficult segments, such as the long underground passage through the Tehachapi and San Gabriel Mountains and the route into the urban San Francisco Bay Area. Lt. Gov. Gavin Newsom has declined to even speak about the rail for the past two years. Liberal state governor candidates are avoiding the issue entirely. Repaying the bonds will cost $18 billion in the next 30 years. This means our roads will suffer, and money will not be available for Hwy improvements. One of their biggest mistakes has been they have not acquired the land in advance. They indicated they will amend that mistake, but acquiring the land and then planning the construction. Does that mean they will begin buying in the Antelope Valley? Likely not right away, but they will begin the process much earlier. Part of the problem as well maybe that California is a one party state. Only liberals make decisions, and opposing views are not even considered.

A Tale of Two Tracks

Currently the largest infrastructure project is both in limbo and at full-speed ahead. The Cal Rail Authority’s has a long term plan to run 500 miles from San Francisco to San Jose before turning to the valley and south to Los Angeles. The fast train is expected to take 2 ½ hour and be well under one hundred dollars, maybe under fifty. They will need a lot of riders to cover the current 64 Billion price tag and ongoing operation costs. The target is limited service from San Francisco to Bakersfield will launch in 2025. The world will have crowned two world cup champions by then. That is not far away. That will entail a lot of digging between San Francisco and San Jose. That is expensive real estate within two major California municipalities. Money: Money from Washington is critical for Jerry Brown’s dream project which can’t be funded alone by state and private financing. The government in Sacramento is at polar odds with the White House. The House Majority Leader Kevin McCarthy of Bakersfield, sent a letter this since the inauguration to The Department of Transportation, requesting a halt Fed funds and grants for the electrification of Caltrain’s Bay Area corridor. This upgrade is essential for the high speed rail. Right now Fresno is booming with construction. Hwy 99 is being diverted to accommodate the rail line. Bridges are being built, homes relocated, roads changed, thousands of acres of land has been bought. Dirt is flying everywhere and Fresno is benefiting. This project has been going on since 2015, but lawsuits and land acquisitions have set things back. Wait until they get to a major city. California approved this dream in 2008, and costs have almost doubled since then. When has the government done anything under budget? It the project runs out of money and the federal government withdraws then the rail must be handed over to Amtrak. Could this be the most expensive Amtrak upgrade? Will California seek funds from abroad? If that funding comes from China then they may require China steel and Chinese trains. This is not like building the transcontinental railroad in the 1800’s with undeveloped land making the “Big Four” the richest in the west. At some point the steam will come to a head.

California High Speed Rail to Break Ground in Central Valley in 2011 and Eventually Tracking a Path to Palmdale, Ca. But, Is It a Train to Nowhere?

The Federal Government seems to be forcing the hand of The California High Speed Rail Authority. Recently, the Feds provided $715 million toward the rail system. The CalHighSpeed Rail Authority press release this week stated that the Federal Railroad Administration forwarded their requirement that the full amount of the $4.3 billion be allocated to infrastructure investment for the proposed system in California’s Central Valley. These funds have to be directed to the rail lines from Merced to Fresno or Fresno to Bakersfield. These funds were part of the American Recovery and Reinvestment Act, and California has received more funds of this type then any other State.

We wonder if this is choreographed or a knee jerk political reaction by the Obama Administration to reward California for staying in the Democrats Camp. GOP elected Rep. Mica trashed the idea of having the federal government continuing to fund a Tampa to Orlando high speed rail line, as he spoke to the Associated Press this week “I am a strong advocate of high-speed rail, but it has to be where it makes sense,” Mica said. “The administration squandered the money, giving it to dozens and dozens of projects that were marginal at best to spend on slow-speed trains to nowhere. The Republicans and the Obama Administration differ in how to pay for fast trains as a Republican Congress wants the rail transportation system to be self supporting, but the Obama Administration expects states like Ohio and Wisconsin to absorb operating losses for their rail systems. California lacks the funds to absorb losses. The newly elected Governor of Ohio John Kasich said via news reports that “the train is dead” He was referring to the Ohio slow passenger train from Cincinnati, Columbus and Cleveland. Also, The Wisconsin Republican Governor Elect Scott Walker promised to cancel the Wisconsin High Speed rail (Milwaukee to Madison). BizTimes Daily reported this week that the Wisconsin Dept. of Transportation told contractors to halt work on the $810 million project.

The California High-Speed Rail Authority CEO Roelof van Ark said in their press release
“The Central Valley is indeed key to creating the core of a true high-speed rail system in California, as that is where our trains will travel truly high speeds of 220 miles per hour,” van Ark said. “But no matter where we start building, the goal remains the same: a statewide high-speed rail system up and running in 2020 connecting the Bay Area with the metropolitan area of Los Angeles and Anaheim, that creates thousands of jobs, improves air quality, and provides us all with a cheaper, faster and more convenient way to travel.”

The Mercury News indicated that the agency says it could build just half of the 50-mile track from San Francisco to San Jose section with the funds available while they can build the entire 60 miles Merced to Fresno corridor or 113-mile Fresno to Bakersfield span. In Southern California, the authority thinks it could build two thirds of the 30 mile stretch. "We have to build a system that is going to be operable as soon as possible and that means building many miles of track that are connected to each other," van Ark said.
But a Central Valley segment will have no operational significance van Ark said major population centers need to be linked and the agency will not bother starting service there.
"We will not have trains when we build this first segment," he said. CalHighSpeedRail Authority release also indicated that they will discuss target constructions locations and other business in their next meeting in December.

We have tempered our celebration since at first glance this would be a track to nowhere, with only rails, bridges, with empty stations, and no train or passengers. This is not a proposal that a Republican influenced Congress would approve as it will not pay for itself. Would Governor Elect Brown call this living within our means? Would the Chinese Banks cover the additional funds needed?

A possible land investment opportunity could be buying land ahead of the rails especially near Fresno, Ca. as that city is certain to be on the trains map. We will keep track of this news and events as it progresses.