Dive Brief:

• Even the scaled-down version of the bullet train that California Gov. Gavin Newsom recently proposed could come up $1 billion to $3 billion short, a Los Angeles Times analysis suggests. California High-Speed Rail Authority (CHSRA) will reportedly have to try to tap into additional sources of revenue.
• Original plans for a Los Angeles-to-San Francisco line were estimated to cost as much as $77 billion. The rail authority expects the revised Central Valley Bakersfield-to-Merced route, where $10.7 billion of work is already underway, to cost about $16 billion to $18 billion, the Times reported, but only $15 billion is currently available through 2023.
• The authority has potentially underestimated the cost to electrify tracks, with an estimate that is reportedly six times less than that of a similar project. Additional red flags, according to the Times, include an aggressive spending schedule despite uncertain revenue; potential legislative holdups in trying to borrow against future cap-and-trade income; and potential land acquisition delays, given the roughly 200 eminent domain actions that are still outstanding. 

Dive Insight:

A spokesman for the authority told the Times that the agency believes it has enough money to complete the Bakersfield-to-Merced line and will release more details in May. 

But soon after California Gov. Gavin Newsom announced last month that the $77 billion plan, which almost doubled from its original budget, would be reduced to the single Central Valley line, the project was dealt a big blow from the federal government. The Federal Rail Administration notified the CHSRA that it intends to cancel a $929 million funding agreement ( known as the FY10 Agreement) for construction. The FRA said it does not believe the authority is in a position to meet its deadlines, a predicament also echoed in the Times report.

In addition, President Donald Trump’s administration has also threatened to claw back $2.5 billion in bullet train grants that the authority has already spent.

The CHSRA on March 4  responded via two letters, one to FRA Administrator Ronald Batory, and the other to Jamie Rennart, the FRA's director of the office of program delivery. In both missives, the authority refutes the FRA’s allegations that the project has not complied with the terms of federal funding agreements. In the letter to Batory, authority CEO Brian Kelly said that “termination of the FY10 Agreement would be unwarranted, unprecedented and harmful to the project and to the people of the Central Valley, the state of California and the nation.”

To pull back the more than 2,600 craft workers constructing the 119-mile segment in what is considered an economically distressed region would be "disastrous policy," he said.