The move marks a sharp turn from the direction of Newsom's 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."
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 City Council initially supported Proposition 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 through the city. 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.
Since then, the rail authority has repeatedly changed its strategy for rolling out what was frequently billed as 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.
In November 2018, State Auditor Elaine Howle released a scathing report on the project, titled "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 on which to build, determine how to relocate utility systems and 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 the 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 the 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.
State Sen. Jerry Hill, whose district includes Palo Alto, Mountain View, Menlo Park 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 Proposition 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 Weekly.
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