Newsom scales back high-speed rail plans

(An expanded version of an earlier story.)

California’s decadelong dream of building a high-speed rail system between San Francisco and Los Angeles hit a dead end in Sacramento on Feb. 12 with Gov. Gavin Newsom declaring his plan to significantly scale back the hugely ambitious but deeply flawed project.

Newsom said in his State of the State speech that he plans to focus the state’s attention and spending on the one stretch of the line where construction is already in full gear: the segment between Merced and Bakersfield. He also said he remains committed to improving regional rail projects in the northern and southern parts of the state.

For Newsom, the move marks a sharp turn from the direction of his two predecessors, Jerry Brown and Arnold Schwarzenegger, both of whom were big proponents of high-speed rail. But with the project’s price tag rising from the initial estimate of about $40 billion to $77.3 billion, and recent audits raising red flags about wasteful spending and insufficient contract oversight, Newsom acknowledged in his speech that the project, as currently planned, “would cost too much and take too long.”

Newsom also faulted the project for having “too little oversight and not enough transparency.”

“Right now, there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to L.A. I wish there were,” Newsom said. “However, we do have the capacity to complete a high-speed rail link between Merced and Bakersfield.”

State Sen. Jerry Hill, whose district includes Menlo Park, Palo Alto, Mountain View, and much of San Mateo County, called Newsom’s announcement a “wise decision.” Hill, who helped lead the effort in 2012 to adopt the “blended system” plan agreed with Newsom that the state doesn’t have the resources to pursue the full project at this time.

The project’s expectations, Hill said, were too high and the execution has been faulty. He noted that when the project was first proposed, the state was planning to fund the project through a combination of state, federal and private funds. And while some of the Prop. 1A bonds have been sold, the rail authority’s hopes of getting significant outside funding never materialized, he said.

“I think there’s still a strong need for a high-speed train system from southern California to northern California, but this doesn’t seem to be the time to continue that plan,” Hill told the Palo Alto Weekly.

Menlo Park Mayor Ray Mueller said he was still processing what the governor’s announcement means for the city. He raised concerns that the chance could come with a shift in the state’s priorities for funding grade separations. He added that the City Council will continue its plans to choose a preferred alternative for its plans to separate the rails from the roads in Menlo Park.

The proposed Merced-to-Bakersfield line is a significant departure from the project that California voters approved in November 2008 through Prop. 1A, which earmarked $9.95 billion for the new high-speed rail system and related transportation improvements. The revised scope will bring some solace, however, to the project’s many opponents in places like Palo Alto, where public sentiment on high-speed rail has gradually soured.

Though the Palo Alto City Council had initially supported Prop. 1A, it adopted in 2010 a position of “no confidence” in the project, citing unrealistic ridership and revenue projections, insufficient funding and a problematic design, which initially called for four tracks running along a berm. Things settled down in 2012, when the California High-Speed Rail Authority agreed to adopt a “blended system” on the Peninsula, where high-speed rail would share two tracks with Caltrain.

The rail project also faced significant opposition in Menlo Park and Atherton, with both municipalities challenging the rail authority’s ridership projections and taking part in numerous lawsuits against the California High-Speed Rail Authority. In 2008, Menlo Park and Atherton alleged in a lawsuit that the rail authority had failed to conduct the necessary environmental analysis to justify its choice of Pacheco Pass as the preferred route for the rail line. Their lawsuit forced the rail authority to decertify and update its environmental impact report for the rail system.

The Peninsula cities and their allies were less successful in subsequent challenges to high-speed rail, including one that claimed that the rail authority’s revision of the proposal project from a four-track to a two-track system on the Peninsula segment effectively makes its environmental analysis obsolete. A Sacramento County Supreme Court judge rejected this argument in 2013, allowing the project to proceed.

Since then, the rail authority has repeatedly changed its strategy for rolling out what was frequently billed the most ambitious project in California’s history. After initially considering launching the project between the Central Valley and Los Angeles, the agency in 2016 declared its intention to instead start the line between San Francisco and Bakersfield in what it called a “Valley to Valley” segment.

But while the scope of the project changed, it remained plagued by the very problems that had haunted it from the start: insufficient funding, poor contract management and flagging political support.

Menlo Park resident Mike Brady, who has been involved in litigation against the High-Speed Rail Authority, called the decision a “wise move.”

“It’s not going anywhere because they don’t have the money,” he said. He went further, arguing that the project should be dropped completely. He said he’d prefer to see California legislators bring a ballot measure to voters, asking them to authorize redirecting remaining high-speed rail funds toward water projects and education in the state.

“It’s questionable … how excited riders are going to be to go from Bakersfield to Merced on the train,” he said. “The state has many more important priorities.”

The lawsuit he’s working on makes the argument that the high-speed rail project is violating the will of the voters, who supported a San Francisco-to-Los Angeles high-speed rail line. In letting go of that goal, he said, “suddenly all of the (High-Speed Rail Authority’s) spending is illegal.”

In November 2018, State Auditor Elaine Howle released a scathing report on the project, entitled “California High-Speed Rail Authority: Its Flawed Decision Making and Poor Contract Management Have Contributed to Billions in Cost Overruns and Delays in the System’s Construction.”

The auditor’s office found that the state rail authority has failed to complete “many critical planning tasks before moving forward with construction.” The report cited the rail authority’s failure to acquire sufficient land for building upon, to determine how to relocate utility systems and to obtain needed agreements with external stakeholders, including local governments and railroad operators.

“These risks have contributed to more than $600 million in changes to construction contracts to pay for work for which the authority had not sufficiently planned or budgeted,” the audit states.

The authority had countered that it needed to move forward with construction to meet the deadline for $3.5 billion in federal grants, of which it had already spent $2.6 billion.

The audit also found significant flaws in the rail authority’s contract oversight, which was outsourced in 2016 to a group called the Contract Management Support Unit. The unit, the audit found, is staffed by consultants and has “performed only weak and inconsistent oversight.”

The rail authority, the audit stated, “has in essence placed portions of its large contracts into the hands of outside consultants, for whom the state’s best interests may not be the highest priority,” the audit stated.

Despite his new direction for the project, Newsom stressed in tweets Tuesday that he is not abandoning high-speed rail. Doing so, he said, “means we will have wasted billions of dollars with nothing but broken promises and lawsuits to show for it.”

“I’m not interested in sending $3.5 billion in federal funding — exclusively allocated for HSR — back to the White House,” Newsom tweeted.

He also said in his speech that he plans to adopt new “transparency measures” and government changes, including appointment of Lenny Mendonca, his economic development director, as the new chair of the rail authority.

“We’re going to hold contractors and consultants accountable to explain how taxpayer dollars are spent — including change orders, cost overruns, even travel expenses,” Newsom said. “It’s going online, for everybody to see.”

Newsom said he plans to continue the state’s regional rail projects in north and south, while pushing for more federal funding and private dollars. He also pushed back against the characterization of the proposed system as a “train to nowhere,” calling the description “wrong and offensive.”

“The people of the Central Valley endure the worst air pollution in America as well as some of the longest commutes,” Newsom said in his speech. “And they have suffered too many years of neglect from policymakers here in Sacramento. They deserve better.”

After Newsom’s announcement, rail authority CEO Brian Kelly said in a statement that the agency is “eager to meet his challenge and expand the economic impact in Central Valley,” as well as to complete the environmental work statewide and to pursue additional federal funding for rail.

“We welcome this direction and look forward to continuing the important work on this transformative project,” Kelly said.

Kate Bradshaw contributed to this report.