California High Speed Rail Moves a Step Forward

On July 6, the California State Senate narrowly approved the use of $4.5 billion in proceeds from state Proposition 1A bonds for transportation projects. Governor Jerry Brown is expected to sign the bill into law. Full text of the bill can be found here. Senate Bill 1029 is intended to preserve California’s rights to about $3.3 billion of federal American Recovery and Reinvestment Act (ARRA) funds for the long-awaited California High Speed Rail.

About $2.6 billion of the state bond proceeds is now dedicated to High Speed Rail, intended to match the $3.3 billion of ARRA funds for a total of about $5.9 billion in funding for the early rail projects. (The remaining $1.9 billion is earmarked for local transit improvements, such as $140 million for new BART cars, $705 million for Caltrain electrification, $61 million for the SF Muni Central Subway, and $500 million for Metrolink and related systems.)

The early High Speed Rail funding focus is on the Initial Operating Section (IOS), which runs down the Central Valley from Merced to the San Fernando Valley (about 130 miles of initial segments and about 300 miles in total). Design-build package HSR11-16 has already been shortlisted to five bidders; this is for 23-29 miles of infrastructure around Fresno (including a major river crossing and many grade crossings) and is estimated at $1.2-1.8 billion. According to the Request for Proposal, award is scheduled for December of this year.

Further design-build packages for infrastructure connecting Fresno with Bakersfield, and for stations and track along all of these segments, would be expected to follow. There would also be associated architect/engineer and construction management contracts, and two design-bid-build contracts for multiple-use crossings. Additional design-build packages for infrastructure, stations and track connecting Merced with Fresno, and Bakersfield with the San Fernando Valley, are expected in the future. A procurement package for the trains would then ensue.

The contracts for these later segments face some additional significant hurdles. They are conditioned on additional agency signoffs, completion of the environmental impact review process, and negotiations with scores of landowners, cities and counties. Furthermore, more funds would have to be released by state and federal legislators. US congressmen have already announced their intention to audit how the High Speed Rail Authority has spent existing funds, and it is possible that Congress will limit or defer funding for the future segments. Some observers remain doubtful that all of these approvals will be obtained (let alone obtained on schedule).

All of the initial packages are expected to make use of public funds. Opportunities for public-private partnerships (PPPs), such as DBFOM contracts and concessions, are expected to be available for the urban sections closer to San Francisco, LA and San Diego, and for operating phases. However, the High Speed Rail Authority says unsolicited proposals for private financing may be considered.

The rail projects receiving ARRA funds are subject to the Buy America mandates of 49 U.S.C. 24405(a), requiring steel, iron and manufactured components to be of US origin. http://www.fra.dot.gov/Pages/11.shtml Bidders have already been warned that no waivers should be assumed (see page 13 of the RFP).

This legislation is intended to preserve California’s claim on the ARRA funds, and indicates a significant step forward for initial segments of High Speed Rail. Because more approvals and money are required for the overall project (now estimated to cost $69 billion in 2011 dollars), stakeholders will have to make many more strides before opening day.