New California High Speed Rail Authority report released: will key federal funding be forfeited?

The federal government is footing more than half the bill for the $5.8 billion Central Valley high speed rail segment. California won the bulk of federal grants available for high speed rail projects, based on a commitment to provide significant matching funds and the premise that plans were far enough along that a 2017 cutoff for spending ARRA (stimulus) funds could be met.

In reality, the project was nowhere close to being shovel ready.

The official grant agreements between the Federal Railroad Administration and the California High Speed Rail Authority have been amended five times to accommodate project delays and legal challenges that have prevented California from accessing the high speed rail bonds voters approved in 2008.

In addition, every quarter a new “Funding Contribution Plan” (“FCP”) is produced and agreed upon that changes the terms of the deal.  The FCPs show spending to date as well as a forecast for how much will be spent, when it will be spent and who will do the spending.

The latest FCP shows another major change in grant terms and highlights the very real risk that project delays will entail a loss of federal grants.

We received the June report and September 2015 FCP today through a Public Records Act request (California’s FOIA). [Side note: we originally requested the June report on August 3, 2015 – under the law, we should have gotten it on August 13th]. Previous plans are online at the Authority’s website.

Some quick observations:

  •  Originally, California was required to match federal spending dollar for dollar, in real-time. The new plan is to exclusively use Federal ARRA money to pay construction costs until the remaining $1.6 billion  in grant funds are used up. California won’t have to chip in its promised matching funds until 2017 – when the IOU to the federal government will be more than $2 billion. If legal challenges to the 2008 bond dollars are not resolved, California will have to find a new source of funds. For details,  see the evolution of plans here and read a recent GAO report about the change in requirements for matching funds.
  • Originally, the project was supposed to be done in 2017, which was subsequently changed to 2018. Now, construction in the Central Valley will not be completed until December 2019 and there may be further delays. Funding Plan one year
  • Even with heroic efforts to spend Federal funds as fast as possible, there is a real likelihood a key deadline in 2017 for using ARRA money will not be made. The project is still mostly in the design phase, which takes time but not that much money. California may have to forfeit critical funding for the project since Congress included  “use it or lose it” clause in the ARRA program to ensure that only projects which were close to “shovel ready” got funded.  More on this later in another post.

If all this wasn’t enough of a problem…the remaining “uncommitted contingency” will not be enough to cover all the costs that are known but not currently accounted for, like environmental mitigation costs and utility relocation. Once everything is added in, we think the $5.8 billion project is now a $7 billion project, not counting costs to actually have power supply to run trains. California might need to find a lot more money to finish the project and make up for forfeited federal grants. A LOT more on this later.



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