High-speed-rail agency strapped for cash

Rail authority looks for a state loan for 800-mile high-speed-train line

Just months after California voters approved the sale of $9.95 billion in bonds to build a high-speed rail line between San Francisco and Los Angeles, the agency in charge of the project says it's running out of funds and is banking on a state loan to keep the work on track.

So far, several contractors have already halted their engineering work on the 800-mile rail line, which the California High-Speed Rail Authority plans to build and operate by 2020, rail authority officials said last week. According to a report issued last month by the state treasurer's office, the high-speed rail project had about $4.2 million in unpaid bills for work already performed.

Given the tight fiscal situation, the agency's Executive Director Mehdi Morshed said the agency will have to "do the responsible thing and stop work" if it doesn't receive state funds in the next few months, according to an Associated Press report.

"If we do not have any money for the next few months, we can't in good conscience ask people to keep working," Morshed said, according to the AP.

But Judge Quentin L. Kopp, chairman of the agency's board of directors, said this week he expects the project to overcome the temporary financial setback and meet the agency's projected timeline. Though he acknowledged that some contractors stopped working because of the funding shortage, he said he expects the rail authority to soon get an injection of funds from the state's infrastructure fund, which is managed by the Pooled Money Investment Board.

"Only a few contractors slowed their work," Kopp told the Palo Alto Weekly. "Many contractors are continuing to work, on the promise that they will be paid as soon as the treasurer derives proceeds from the Pool Money Investment Fund or we get some other type of financing."

The treasurer's office has placed the high-speed rail project on a list of infrastructure projects that could get a state loan, even if the bulk of the infrastructure fund remains frozen. The loan would then be repaid with proceeds from the $9.95 billion in bonds, which have not yet been sold. But the board has yet to release the money for any of the projects on the list.

The rail authority is banking on a mix of federal funds, private investments, bond money and contributions from local agencies to finance the $45 billion rail line, which would allow passenger trains to reach speeds of 220 mph and travel from San Francisco to Los Angeles in 2 hours and 40 minutes.

The San Francisco-to-San Jose section would cut through the Peninsula along the Caltrain corridor. Rail officials are expected to begin putting together an Environmental Impact Review for this section. The document is expected to analyze the various track alternatives for the train (elevated, underground or trenched) and consider locations for rail stations.

The project has stirred controversy in Palo Alto and neighboring cities, some of whose residents are concerned that the Rail Authority will take their properties by eminent domain to make room for new railroad tracks.

Rail officials have consistently warned that delays would add major costs to the rail project. Rod Diridon, who sits on the rail authority's board of directors, told the Palo Alto City Council on March 2 that delays could cost the authority about $2 billion per year.

"When you're talking about a $40 billion project, if you lose a year you lose $2 billion worth of buying power," Diridon said.

But agency officials aren't panicking yet. The rail authority is just beginning its engineering work for the eight sections of the 800-mile line and actual construction won't begin for about two years. This gives the state time to sell bonds from Proposition 1A and make the $9.95 billion available to the authority.

"We're still in the front end of the whole project," said rail-authority spokesman Jeff Raimundo. "The delay does threaten to raise costs, but if the money is released in a few months, it's not a big deal."

The rail authority also hopes to land a sizeable chunk of the $8 billion President Barack Obama included in the economic stimulus bill for nationwide high-speed rail projects. To do that, it has to demonstrate the project could be "shovel ready" by 2012.

But rail officials hope the state infrastructure fund will address the authority's immediate needs. The state's Pooled Money Investment board is scheduled to meet on March 18 to discuss the infrastructure fund. At that time, the board will decide whether to open up the fund, keep it frozen or release a portion of the funds, said Tom Dresslar, spokesperson for the state treasurer's office.

"We don't know when the final freeze on all infrastructure projects will be lifted to any extent," Dresslar said.

Kopp said he was confident that once the money is released, the halted work would resume and the project would proceed as planned. The high-speed project, he said, is in no way in danger.

"This does not threaten the overall project in any way, shape or form," Kopp told the Weekly. "And it does not delay the eventual timeline because we have about two years of engineering to complete."


Posted by An Observer, a resident of Barron Park
on Mar 12, 2009 at 2:01 pm

Oh well isn't this a shame. If Diridon was so concerned about expedience, he shouldn't have chosen such a controversial route, which they KNEW was controversial when they chose it.

Posted by menloparkarrogance, a resident of Another Palo Alto neighborhood
on Mar 12, 2009 at 2:48 pm

IT wont be will be the best thing as is the new Medical Centers at Stanford..If you dont want to move forward into the 21 century then move out to the middle of AZ or something

Posted by resident, a resident of Adobe-Meadows
on Mar 12, 2009 at 3:30 pm

This is old news. We knew about this a week ago.

Posted by another observer, a resident of Atherton
on Mar 12, 2009 at 8:12 pm

This is indeed old news. If Diridon hadn't chosen this route, he wouldn't get to build his dream, the Taj Majal of a station in San Jose. The whole project has been corrupt from the very beginning, with insiders buying up land along the route and especially where stations are to be placed. Read about the station, now removed between Gilroy and Merced; this Los Banos station was destined to fatten the pocket books of political insiders. Apparently other parcels especially in the Central Valley have likewise been gobbled up.

Posted by bikes2work, a resident of Another Palo Alto neighborhood
on Mar 12, 2009 at 9:08 pm

Any project that needs money from the sale of bonds is strapped for cash right now. This is hardly isolated to the HST project. Even the new Palo Alto library project is waiting on bond sales. Not many investors looking to buy anything backed by California's government.

Posted by common sense, a resident of Midtown
on Mar 13, 2009 at 7:46 am

An article in the Chronicle

Web Link

on how the high speed rail wants SF to build a train station that supports 12 arrivals, 12 departures per hour, and they were expecting only 4 arrivals, 4 departures per hour.

Posted by bellesdottir, a resident of another community
on Mar 13, 2009 at 8:18 am

Watching this from afar, I am so happy to have moved from within two blocks of the railroad tracks. The best solution I've read: Use the East Bay route, forget the Peninsula. San Francisco is a cul-de-sac for trains. Let the people on the west side of the bay take BART to the train. For the benefit of a few passengers, the peace of mind of the many is to be disrupted?

Posted by rail, a resident of Midtown
on Mar 13, 2009 at 11:46 am

How ironic would it be if people end up losing their jobs due to lack of funding, just as Obama promised that investing in infrastructure would spur the economy.

Posted by wary traveler, a resident of Another Palo Alto neighborhood
on Mar 13, 2009 at 11:53 am

Wow. Either the Diridon-Kopp-Morshed trio is incredibly inept or unabashedly corrupt. The expected capacity of the SF terminal is in the EIR report. I know, I know, it was probably too hard for them to find it, what with all the thousands of pages of research. Let me help. It's on page 10 of an 11 page document titled "Ridership and Revenue Forecasts", online at Web Link.
It clearly states that there'd be 9-10 HSR trains per hour per direction going through SF along the Pacheco Pass alignment. Where did they come up with the number 4??? They're up to something and can't be trusted. Peninsula cities: protect your assets because CHSRA & Caltrain won't. Someone warn Washington, too.

Posted by Fred, a resident of Greenmeadow
on Mar 21, 2009 at 12:42 am

High-speed rail claims (12 arrivals, 12 departures per hour) and two hours to LA probably are as much B.S. as the pre election claims for BART – 90-second headways (time between trains)! Reality, 20 minute headways.

What is for certain, the housing growth by greedy developers around the Central Valley stations will certainly grow to wipe out the agriculture of the valley. Then where will the U.S. get its food?

Posted by Tom West, a resident of another community
on Apr 1, 2009 at 10:35 am

"the housing growth by greedy developers around the Central Valley stations will certainly grow to wipe out the agriculture of the valley. Then where will the U.S. get its food?"
Canada and the mid-west, liek it currently does. Sure, California grows a lot of fruit, but people eat meat and wheat far more.

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