Costly California bullet train will be millions more due to inflation, board says
Inflation and supply-chain issues are combining to drive up the forecast cost of highspeed rail construction between Merced and Bakersfield by billions of dollars by the time the anticipated stretch becomes operational.
The timeline for electric passenger trains to start running on the 170mile route — most recently expected by 2030 — is also undergoing strain, with California HighSpeed Rail Authority officials reporting Thursday that the “schedule envelope” now extends to somewhere between 2030 and 2033.
Rail authority CEO Brian Kelly, addressing the agency’s board members Thursday, advised that an upcoming project update report due to the state Legislature on March 1 will include changes to the cost and schedule projections for the Merced-Bakersfield portion of the route.
The Valley segment is planned to be the first operational portion for what is ultimately planned as a 520-mile system to connect San Francisco and Los Angeles/Anaheim by way of Fresno and the San Joaquin Valley.
“We’re updating all of those cost estimates (and) we’re doing it in a high inflationary period,” Kelly told The Fresno Bee in an interview this week. “That’s not just affecting us but affecting transportation megaprojects all over the country and certainly in California.”
Kelly said state legislators, in a budget agreement last year to free up the last $4.2 billion from a 2008 bond measure for high-speed rail construction, directed the rail authority to prioritize completion of the MercedBakersfield section. Construction is underway on about 119 miles of the route from northwest of Madera to near Shafter, in Kern County. But extending the construction work north to downtown Merced and south to downtown Bakersfield “comes with a new scope, and we have to recognize that,” Kelly said.
“It’s a little bit more than what we had before,” he added, “and it’s very clear that federal help … is going to be key to us getting this project done.”
Higher cost estimates In the California HighSpeed Rail Authority’s 2022 business plan sent to the state Legislature last year, cost estimates for the planned MercedBakersfield interim operating segment ranged from $22.5 billion and about $24 billion.
As the agency attempts to account for inflation from the 2022 business plan, the new cost range is rising to between $29.8 billion and $32.9 billion for completion of the Valley sections, Kelly reported.
“Our projections are going up a bit, and we’re going to have to deal with that,” Kelly told The Bee. “We reset our pricing to 2022. When we projected going forward, our escalation rate used to be 2%.“This year it’s 5 1/3%. The next couple of years will be over 3% using Department of Finance projections.”
One issue the authority realized last year is that the agency underestimated the cost of installing track and systems on the Merced-Bakersfield route. “We saw the supply chain impacts in the marketplace and we saw the inflationary impacts,” Kelly said. “So now we’ve upped our estimates for what track and systems will cost going forward.”
Cost and schedule fluctuations are nothing new for the controversial bullet-train project since 2008, when voters approved Proposition 1A, a $9.95 billion high-speed rail bond measure. Since then, California received more than $3 billion in federal railroad and economic stimulus funds in 2010 and 2011.
The San Francisco-Los Angeles/Anaheim system was once expected to cost somewhere around $43 billion; that later ballooned to almost $100 billion in late 2011 before the state rail agency sought ways to bring the costs back down.
The newest figures reported Thursday by Kelly, and which will be included in the March 1 project update report to legislators, offer a base estimate of $106.1 billion, but with a possible range from as low as about $88.5 billion to a high of almost $128 billion.
The variability reflects ongoing uncertainty over the cost of key construction features including tunnels through the mountains between the San Joaquin Valley and Gilroy/San Jose and through the San Gabriel Mountains between Palmdale and Burbank. Taking longer to build Also uncertain is whether the state will be successful in its applications for what will likely be billions of dollars from the Biden administration under the federal Bipartisan Infrastructure Law — and what that will mean to the construction schedule.
Slippage in the construction schedule has been a chronic concern for the rail authority because much of the money awarded to California by the federal government in 2010 and 2011 came with a requirement that the money be spent by the end of 2017.
That deadline compelled the agency to rush forward with construction contracts in the San Joaquin Valley before it had acquired the vast majority of the property needed to build the route.
It’s a mistake that the agency is vowing to avoid repeating on its extensions to Merced, Bakersfield and in other parts of the state.
“Because construction is out of sequence, the construction delays are on us, and we’ve paid a price for that,” Kelly told the board.