High-speed-rail agency strapped for cash
Original post made by HSR Bankrupt on Mar 24, 2009
Rail authority looks for a state loan for 800-mile high-speed-train line
by Gennady Sheyner
Palo Alto Online Staff
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Just months after California voters approved the sale of $9.95 billion in bonds to build a high-speed rail line between San Francisco and Los Angeles, the agency in charge of the project says it's running out of funds and is banking on a state loan to keep the work on track.
So far, several contractors have already halted their engineering work on the 800-mile rail line, which the California High-Speed Rail Authority plans to build and operate by 2020, rail authority officials said last week. According to a report issued last month by the state treasurer's office, the high-speed rail project had about $4.2 million in unpaid bills for work already performed.
Given the tight fiscal situation, the agency's Executive Director Mehdi Morshed said the agency will have to "do the responsible thing and stop work" if it doesn't receive state funds in the next few months, according to an Associated Press report.
"If we do not have any money for the next few months, we can't in good conscience ask people to keep working," Morshed said, according to the AP.
But Judge Quentin L. Kopp, chairman of the agency's board of directors, said this week he expects the project to overcome the temporary financial setback and meet the agency's projected timeline. Though he acknowledged that some contractors stopped working because of the funding shortage, he said he expects the rail authority to soon get an injection of funds from the state's infrastructure fund, which is managed by the Pooled Money Investment Board.
"Only a few contractors slowed their work," Kopp told the Palo Alto Weekly. "Many contractors are continuing to work, on the promise that they will be paid as soon as the treasurer derives proceeds from the Pool Money Investment Fund or we get some other type of financing."
The treasurer's office has placed the high-speed rail project on a list of infrastructure projects that could get a state loan, even if the bulk of the infrastructure fund remains frozen. The loan would then be repaid with proceeds from the $9.95 billion in bonds, which have not yet been sold. But the board has yet to release the money for any of the projects on the list.
The rail authority is banking on a mix of federal funds, private investments, bond money and contributions from local agencies to finance the $45 billion rail line, which would allow passenger trains to reach speeds of 220 mph and travel from San Francisco to Los Angeles in 2 hours and 40 minutes.
The San Francisco-to-San Jose section would cut through the Peninsula along the Caltrain corridor. Rail officials are expected to begin putting together an Environmental Impact Review for this section. The document is expected to analyze the various track alternatives for the train (elevated, underground or trenched) and consider locations for rail stations.
The project has stirred controversy in Palo Alto and neighboring cities, some of whose residents are concerned that the Rail Authority will take their properties by eminent domain to make room for new railroad tracks.
Rail officials have consistently warned that delays would add major costs to the rail project. Rod Diridon, who sits on the rail authority's board of directors, told the Palo Alto City Council on March 2 that delays could cost the authority about $2 billion per year.
"When you're talking about a $40 billion project, if you lose a year you lose $2 billion worth of buying power," Diridon said.
But agency officials aren't panicking yet. The rail authority is just beginning its engineering work for the eight sections of the 800-mile line and actual construction won't begin for about two years. This gives the state time to sell bonds from Proposition 1A and make the $9.95 billion available to the authority.
"We're still in the front end of the whole project," said rail-authority spokesman Jeff Raimundo. "The delay does threaten to raise costs, but if the money is released in a few months, it's not a big deal."
The rail authority also hopes to land a sizeable chunk of the $8 billion President Barack Obama included in the economic stimulus bill for nationwide high-speed rail projects. To do that, it has to demonstrate the project could be "shovel ready" by 2012.
But rail officials hope the state infrastructure fund will address the authority's immediate needs. The state's Pooled Money Investment board is scheduled to meet on March 18 to discuss the infrastructure fund. At that time, the board will decide whether to open up the fund, keep it frozen or release a portion of the funds, said Tom Dresslar, spokesperson for the state treasurer's office.
"We don't know when the final freeze on all infrastructure projects will be lifted to any extent," Dresslar said.
Kopp said he was confident that once the money is released, the halted work would resume and the project would proceed as planned. The high-speed project, he said, is in no way in danger.
"This does not threaten the overall project in any way, shape or form," Kopp told the Weekly. "And it does not delay the eventual timeline because we have about two years of engineering to complete."
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