HIGH-SPEED RAIL:

Calif. auditor slams management of $43B project, urges overhaul

California's legislative auditor is calling for an overhaul of how the state manages its nascent high-speed rail line, saying the mega project is unlikely to succeed unless the state Legislature intervenes with major changes.

Legislative analyst Mac Taylor said in a report released yesterday that initial management decisions related to the $43 billion project "pose threats" to the rail line's successful development because of uncertainty associated with federal funds, a weak oversight board, over-reliance on outside consultants and what amounts to a bad deal with the Federal Rail Administration.

The report's author, Eric Thronson, who works in the Legislative Analyst's Office, urged the Legislature to replace the High Speed Rail Authority with a new arm of the California Department of Transportation as well as renegotiate the terms of $3.6 million in federal funds already committed to the project.

The report also recommends delaying initial work on the line in the Central Valley to revisit where the proposed 800-mile, north-to-south rail line should start. It says the decision to build the first leg in an area where no riders would ride the train initially, rather than in Los Angeles or the Bay Area where the first section could be used faster, should be re-examined.

"If the legislature chooses to go forward with the high-speed rail project, we have concluded that two key steps could be taken now to improve the likelihood of its successful development," the report concludes, saying the Legislature needs more time to revisit critical decisions and attempt to modify restrictions imposed on expenditure of federal funds.

Among the recommendations are a request that the Legislature reject the Jerry Brown administration's 2011-12 budget request for $185 million in funding for consultants to perform project management, public outreach and other work to develop the project. The report said state funds totalling $7 million are needed at this time to perform state administration.

Otherwise, the report calls on state officials to "obtain relief" from restrictions imposed by the Federal Rail Administration on the timing of the initial $3.6 million, calling for more flexibility as to when the money is spent. The state is required to spend much of the money secured under the American Recovery and Reinvestment Act by 2017, a requirement that Taylor says directly led to the decision to begin construction in the Central Valley.

"Largely as a result of these federal deadlines and requirements, [the High Speed Rail Authority] decided in December 2010 to begin the construction of the statewide system within the Central Valley," the report says. "This decision ... represents a big gamble that additional monies will eventually become available from the federal government or other sources to connect the Central Valley line to other major urban areas of California."

The report also argues that the High Speed Rail Authority's assumption that an additional $17 billion to $19 billion will be produced by Congress for the project is faulty. "Given the federal government's current financial situation and the current focus in Washington on reducing federal spending, it is uncertain if any further funding for the high-speed rail program will become available," the report says.

Taylor compared the project to the interstate highway system, noting that interstates were funded from a federal excise tax on gasoline. Federal funding for high-speed rail, he noted, "is not supported by a dedicated revenue stream and therefore must compete with other annual federal funding priorities."

Last, the LAO report calls for a new and separate division of Caltrans dedicated to the high-speed rail project. The report says a CalTrans agency should replace the High Speed Rail Authority, which has been much maligned in the press, to assure better fiscal decisions.

Click here to see the report and links to a related LAO press conference.

Sullivan is based in San Francisco.

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