Thursday, February 10, 2011

The New York Times reports in on the HSR costs in California

This is from today's New York Times.  It takes a hard look at the realities of high-speed rail costs in California and cites the research work done by the CARRD group in Palo Alto.  We've talked about their work in prior blog entries, particularly about the higher construction bottom line.

However, before the article gets to the cost issue, it describes how the rail authority is now soliciting possible bidders for construction, and/or private financing.  I find that confusing.

The article's author, Colin Sullivan points out that the rail authority has gone out for expressions of interest to contractors to participate in the construction process when it is intended to begin at the end of 2012 in the Central Valley.  

Sullivan, like several other authors describing these rail authority actions, also confuses -- or at least, confuses me -- the pursuit by the rail authority of private investments, and the pursuit of contractor bids on the construction.  Obviously they are not the same thing, unless a contractor lends the value of his work to the rail authority which is then in debt for the cost of the job plus interest.

The sentence that caught my eye was this, "Authority officials said they are seeking all manner of private interest, in either the first, 120-mile leg of the project in the Central Valley or any future phase, to include financing and core systems work in electrification and signaling."  It's that phrase "private interest" that raises so many questions. Private interest in lending, or building? Or, both?

So, you can see my confusion. Which is it, seeking financing or seeking construction candidates who will submit bids?  Jeff Barker, boy spokesperson, told reporters "it's time to turn to the private sector."  For what, Mr. Barker?  Private investment funding or contractors that will need to be paid for their work.    But, the confusion doesn't end there.  We repeat the article's comment about seeking "private interest" in "core systems work in electrification and signaling."  

The rail authority has already indicated that this -- electrification and signalling -- will not be part of the construction in the Central Valley because they don't have enough funds for it after they complete the approximately 120 miles of track.  So, what are they looking for?  A handout from construction companies that will give or lend them this work to electrify and create signal systems "on the come" as they say?  I look forward to having all these floating ambiguities cleared up by some well informed authority. Perhaps Jeff Barker himself. 

We've already commented on the new cost figures produced by CARRD out of documents obtained from the rail authority itself.  Their totals are far higher than those acknowledged by the rail authority, which has a tendency to overlook those costs which raise the bottom line.  CARRD puts the new number at $65 billion.  

Two years ago, in a conversation with the prior CEO of the CHSRA, Mehdi Morshed, he stated to me, almost in passing, that the real cost number is around $50 billion, when at that time the "official" cost number was $43 billion. The only conclusion one can draw is that they make up almost everything they tell us.  (He also said that they would tunnel or trench on the Peninsula if that's what we wanted. Ah, well.)

Anyhow, even the $65 doesn't indicate what the costs will be when actual construction bids come it.  We saw this same surprise when the new Bay Bridge went out for bids and the numbers promptly doubled. 


February 10, 2011

Calif. Gauges Private-Sector Interest in High-Speed Rail as Critics Question Cost, Ridership

California went fishing for private contractors and investors yesterday with the state's first open invitation to outside parties looking to participate in construction of an 800-mile high-speed rail line.

The agency in charge of the project, the California High-Speed Rail Authority, gave interested parties a five-week window, until March 16, to express interest in design, construction, financing, operations and maintenance of the north-to-south line.

The first step in the authority's open-tent approach is meant to gauge interest before a more formalized request for proposals is issued later this year. Authority officials said they are seeking all manner of private interest, in either the first, 120-mile leg of the project in the Central Valley or any future phase, to include financing and core systems work in electrification and signaling.

The first phase of the project will cost about $5.5 billion with more than half of that to come from federal sources (and most of it already obligated). Jeffrey Barker, the authority's deputy executive director, told reporters yesterday "it's time to turn to the private sector" following public-sector financial commitments and voters having approved the project in a 2008 ballot measure.

"This is opening the door to that process," Barker said during a press call.

The pitch comes as Washington continues to heighten its scrutiny of the California blueprint, especially in light of well-publicized rail retreats in Ohio and Wisconsin. Just this week, Vice President Joe Biden announced plans to spend $53 billion over the next six years on high-speed trains and rail improvements, with an $8 billion down payment on the sector to be included in the White House budget next week (Greenwire, Feb. 8).

But with Republicans now in charge of the House, there is some question as to whether appropriators will agree with President Obama on high-speed rail. In Washington yesterday, according to a report from McClatchy Newspapers, House Transportation and Infrastructure Chairman John Mica (R-Fla.) indicated he would prefer spending cash on rail improvements in the busy Northeast rather than California.

The story quoted Mica saying he is not impressed with California's plan to build the first segment of its rail line in the Central Valley. Mica questioned if ridership in a state, where the car is king, would ever meet expectations.
$65B price tag?

Adding to the pushback were new cost estimates released yesterday by a watchdog group called Californians Advocating Responsible Rail Design that pegs the entire project's cost at $65 billion. That is up from a $43 billion estimate the authority released in 2009.

Nadia Naik, co-founder of the Palo Alto-based group, explained her organization had been hoping to see updated numbers from the authority, but when she lost confidence that those numbers would appear anytime soon, the group decided to release its own estimate.

"Our figures are based on the authority's documents and [American Recovery and Reinvestment Act] applications and were calculated over two months ago," she said. "The 2009 $43 billion figure was outdated the day it was released, because it [priced] the project as it existed circa 2005."

Naik also called on the authority to release its own updated cost estimate as soon as possible, noting that a business plan for the project was due to the state Senate by Feb. 1 but that deadline has slipped until later this year because the authority's relationship with its financial consultant, PricewaterhouseCoopers, apparently fell through.

Elizabeth Alexis, an economist and another co-founder of the group, said the organization prepared the new estimate by filling in the gaps of a 2009 spreadsheet from the authority. For instance, the 2009 estimate did not assume reconstruction of Caltrain stations along the high-speed rail's route south of San Francisco, which Alexis said would add significant costs. Nor did the 2009 estimate include figures on what it would cost to build extensive aerial platforms in Bakersfield and Fresno, she said.

"They know these numbers, they just don't share them," Alexis said. "It shouldn't just be the small club of high-speed railed obsessives that are in on the joke. The public should see these numbers."

Alexis said her group wants to work with people on both sides of the rail debate.

"We're just a group of normal people who kept running into each other at the same meetings," she said.

A spokeswoman for the rail authority, Rachel Wall, defended the California project, saying it represents the first mega high-speed rail project attempted in the United States.

"California is building a true high-speed rail system connecting major metropolitan cities," Wall said. 
"It will generate revenue and be a cheaper, faster transportation alternative for Californians. We are building a system that is analogous to the systems in Asia and Europe."
Sullivan reported from San Francisco.

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