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Senate Transportation Committee California State Senate
Follow its sittingsSpeaker 1
I'd like to welcome both of you here and welcome you as soon as you're ready to make your opening presentations. And we would ordinarily keep those to five to seven minutes. We understand I just asked you to cover a lot of ground. So we'll do our best to accommodate you. Thank you.
Speaker 2
Good afternoon, Chair Cortezi. And when Vice Chair Strickland comes and joins us and members of the committee, thank you for the opportunity to present the California High Speed Rail 2026 business plan. I'm Ian Chaudhry, CEO of the Authority, and I'm here to outline where we are, what we have achieved and how this plan puts the program on a realistic, disciplined and deliverable path forward. Let me begin with a short video that shows the progress that we have made to date on the program.
Speaker 3
These are just some of the people making the dream of high speed rail in California a reality. Each day, as many as 1,700 workers report to the 119 miles of construction in the Central Valley. These workers have already helped complete nearly 60 structures. And in the coming year, they will help us take an even bigger step toward the future of transportation. This is the winter twenty twenty six high speed rail progress report.
Just a handful of structures remain closed in construction package one, the 32 miles that stretch across Madera and into Fresno County. Road 26 is the last remaining structure under construction in Madera County. This overpass will take cars and people over high speed rail tracks. It's made up of 49 precast girders, and the deck itself took more than 6,500 cubic yards of concrete to complete. That's enough concrete to fill two Olympic sized pools.
Striping and paving still needs to be done, as well as hauling in 2,500 cubic yards of embankment before this structure will be completed. Over the summer, work began on the Shaw Avenue grade separation. The first step was realigning the road away from construction so it could remain open during the build out. Substructure work is underway, building bents and placing concrete abutments for the structure. This project will eliminate cars having to wait at the busy freight tracks that currently cross Shaw Avenue.
It will also allow cars, bikes, and pedestrians to safely pass over high speed rail tracks. The 65 miles of construction package two three is buzzing with construction work. Soon, every structure needed in this stretch will either be complete or underway. Manning Avenue in Fresno is one of the many great separations in this section. Work is underway there on the diaphragms, which run between the girders providing lateral support and improving stability.
One of the more recognizable projects in C P 23 is the Tide Arch Bridge. It crosses over State Route 43 and continues to take shape. Over the summer, the arches were poured and the formwork should be removed in the coming weeks. Forms have been striped and the arch formwork is remaining. More than two dozen gigantic tub girders have been placed for the Dutch John Cut Bridge and the Cole Slough Bridge.
Speaker 13
These girders weighed nearly a quarter million pounds each and required two cranes working in tandem to be placed. The largest structure so far on the project, the Hanford Viaduct, is seeing the final portions of the deck being completed. The last section over the San Joaquin Railroad will require nearly 1,000 cubic yards of concrete to complete it. The Hanford Viaduct is more than a mile long and will serve as the future home of the King's Tulare Regional Station. 28 girders across seven spans have been placed at the Corcoran Highway grade separation.
Speaker 3
Formwork for the diaphragms has begun. This project will take traffic over a canal, 5th Street, and high speed rail tracks. Rebar is being tied and concrete is being poured on various sections of the Tule River Viaduct that's more than 3,500 feet long. This project will take trains over the existing BNSF tracks, the Tule River, and State Route 43. Work is also underway, tensioning various sets of interior support cables and bars along the structure.
Some signs of progress on the high speed rail project are not as visible, but just as important. In November, the authority released one of its largest contracts ever in a request for proposals for track and systems construction. This step comes as we have completed track installation at the railhead facility in Kern County. This area will serve as the logistics hub for high speed rail materials. Both of these moves mark a major acceleration toward track installation later this year.
In Southern California, the authority also released the draft environmental documents for the Los Angeles to Anaheim project section. This release initiates the final step toward full environmental clearance for phase one of the alignment. Approval for the EIR EIS will come later on in the year. All of this means 2026 will be monumental year for this program as the dream of high speed rail comes closer to reality.
Speaker 2
So a lot of progress, a lot of work being done. As you can see from the video that we just played, that work in the Central Valley right now continues to progress. The big thing here that you can see is not about plans anymore, it's about construction getting done and entering into the next phase of the project where we will start laying tracks this year. 87 of our major structures are either in progress or completed out of the 92. And 80 of the 119 mile, which is our initial operating segment, is complete now, ready to receive tracks.
80 miles are ready to receive tracks. We will be contracting with the track builder within the next five to seven weeks. And so we will have a track builder on board to make that a reality as well. Utilities and relocations, which was a major challenge for us through the last ten years or eight years of the project, 93% is done 99.8, which is almost like very few parcels remaining out of the 2,300 right of way parcels we had to acquire. That included also temporary construction easements.
So we are almost done within the 119 mile. We have also reached a critical point now, the launch of track and system, which is what it means to us is that we are ready now after that, track and systems are installed to run trains. And so we are actively working this year to get the construction of tracks starting towards the end of this year, And it will take about three to four years to lay tracks and put the systems in place and then get the trains to start testing. And then by 2032, complete the testing and put in revenue service, the initial operating segment, by early two thousand and thirty three. I want to take a moment to thank the Governor and the legislature for securing the last year's appropriation that we had the extension of Cap and Invest program.
That was very, very important. This is now the state's commitment of €1,000,000,000 annually through 2045 that provides a critical and stable foundational funding. That's not for the entire thing, but it does give us enough to get private sector excited to come and invest. This sustained investment supports long term stability, enables our continued progress and positions the state to continue to advance the project despite ongoing uncertainty and challenges with our federal partners. At the same time, we acknowledge the fiscal constraints that have challenged this project throughout its history.
This is why we are maximizing available resources through a more disciplined approach to delivery, including some of the things, Jelkortis, you mentioned, design optimization is part of it. We are looking at how to optimize and build just in time for what we need and not overbuild and not underbuild. Anything we build, it's the clock starts the moment you put the infrastructure in place, the life cycle begins to go towards its end. It could be fifty years, seventy five years of life cycle, but the moment you put in place. So if you're not going to use the infrastructure, we don't want to build it at a time.
So that's design optimization. We upgraded the grades on which we were building on. We looked at our seismic criteria. We updated that. And then we also improved our procurement and delivery strategies.
One other thing that I brought up in 2025 was to improve our time to procure different types of packages and contracts and also remove constraints that we were using contractors for the type of activities that they were not well suited for. For instance, if we had to buy rail, we were using general contractors to go buy rail for us. Instead, we have decided that all those commoditized materials that we have to purchase directly, A rail is a rail, it doesn't change. Which contractor do you bring? A tie is a tie and a pole is a pole.
So we ended up pulling those items out of the general contractors' scope and made sure that we go and visit the factories and purchase those directly from the suppliers in The United States. And so that is something we said last year that we'll put in place, we did. And now we have a rail production steel manufacturer on board and the rail manufacturing will start September, October this year. So we'll start receiving materials in our Wasco yard that you saw in the video. This approach has resulted in over $14,000,000,000 in optimization of cost.
Now optimization means that we not that we are not going to build the rest of the system, but we definitely have optimized in a way that is a permanent savings in the central value. Reducing capital cost now has reached to about €35,660,000,000 for the Merced to Bakersfield early operating segment, more than $1,000,000,000 or additional savings since the 2025 supplemental project update report has been identified. We are continuing to evaluate options to address the timing, the sequencing and the resources available to us. In doing so, it's important to recognize that these large scale infrastructure projects inherently involve trade offs and that's just the practice that we have to go through. It's very common that I've seen in nine, ten other countries where I've worked, including the need to balance available resources with cost, casual and related risks.
Speaker 9
What high speed rail authority is committed to is clearly communicate those decisions, impact on project delivery and provide policymakers with clear, actionable options to navigate these realities while maximizing projects' outcome. To that end, we are continuing to work with the administration to evaluate options that sustain the project's momentum and advance delivery in a manner that reflects both current and anticipated resources. As we finalize the business plan, we will provide additional details on those efforts, including strategies to achieve our priority for completing the Merced to Bakersfield early operating segment by 02/2003 while also positioning the project to support the broader high speed rail build out across our state that is the Phase one, laying out viable options to get beyond the Central Valley into population centers with San Francisco to Bakersfield presenting the fastest path to revenue generation, producing $47,100,000,000 in net operating profit over forty years. In the last fiscal year alone, the project generated $2,900,000,000 in economic output across California, supporting jobs, businesses and local communities. But construction, just remember that is not and the funding are not the only part of the story.
Speaker 2
High speed rail must succeed as a transportation system and as a business as well. That is why this business plan introduces the first true corridor wide ancillary revenue strategy for this project. Beyond the ticket revenue, which we call the farebox recovery, We are building a model that captures value from real estate development, energy generation opportunities, broadband, digital services and logistics opportunities such as express cargo. Now, we want to treat this corridor like any other European country and in Japan as the corridor of opportunities. This matters because early economic commercial success changes what is possible.
Our revenue generating system allows us to finance future expansions through tools like revenue bank bonding and private investments that reduce long term reliance on state appropriations. It also enables meaningful public private partnerships where private capital can take on risks, bring innovation and accelerate delivery. And we have launched a code development agreement procurement to bring in a private partner by 2026 with a strong market interest already demonstrated. Globally, this model has worked. A lot of countries have done that.
In Japan, high speed rail transformed regional economies. In Europe, cities have become economic hubs. Through high speed connectivity, California has the scale, the demand and the economic depth to achieve similar outcomes that would link the Bay Area and Los Angeles through fast growing Central Valley communities. This is not just about faster trips. It is about expanding labor markets, increasing housing access and creating new economic opportunities across the state.
The plan before you sets out a clear sequence, completes the Merced to Bakersfield segment with an updated delivery target of 2032, expand services to major population centers to achieve revenue positive operations and begin early commercialization of assets to generate the capital needed for continued build out. We are also addressing lessons learned. This plan identifies policy and implementation reforms necessary to streamline delivery and maintain schedule certainty going forward. Members here, high speed rail is a long term investment. It is already generating economic activity.
It is already shaping infrastructure in the Central Valley. And with this plan, it is positioned to become a commercially viable system that can sustain and expand itself over time. The 2026 business plan reflects a program that has matured, one that is grounded in data, aligned with fiscal realities and focused on delivering measurable progress. Our responsibility at the authority is to build this system in a way that earns public trust, delivers economic value, and creates a durable transportation backbone for the state. This is the path that we are all on.
Thank you, and I look forward to your questions.
Speaker 1
All right. Thank you, Mr. Chaudhry. Mr. Talhysen, were you going to make remarks yourself, or you're just in support?
I'm in support.
Speaker 1
you. Appreciate that. We'll go to we'll come back to the committee for questions at this time and or comments. Anybody? Yes, Senator, go ahead.
Speaker 5
Yes, thank you. Thank you for your testimony. It's good to see you. Hello. My question is about economic development as part of this project, which seems like a really good idea.
And it also seems like it's a good idea for transit throughout our state. And I have floated it multiple times with different heads of transit agencies. And also, I have a subcommittee on the low sand rail corridor, which is the three fifty miles that goes a lot along the coast, but also inland through L. A, Union Station. And I'm wondering why it is you think that we haven't been able to actualize that in California yet, and why you think this will be different.
And I say that because it does seem like there is a model in Europe and in Japan that recognizes the economic development potential that's on property that's owned by the transit districts. And then we also see really good success with our airports in The U. S, having a lot of commercial activity that generates revenue for the airport. And I was on the San Diego Airport Authority Board as well when I was in local government. But our transit agencies do not seem to be doing that very effectively, and I don't fully understand why that is.
And I know this is part of what your vision is for high speed rail and how it will be successful. And so I just wanted to hear your insights about our thoughts on why it is that we are not doing that more along the Los Angeles Corridor or other parts of California and how it is that you think you're going to be able to make that happen for this particular corridor?
Speaker 2
Thank you, Senator. Two or three things different in California then. And then within California, transit agencies, how they operate in the regional rail, how they operate and how we are thinking differently. One, metro systems in general, they either feel that they don't have the jurisdictional powers to go and commercialize on the real estate like the airports. The airports are a very good example in The U.
S. Of how concessions work and how the property of the land they own, how they can capitalize by any way possible, they can generate revenue and they're always profitable. They have gate fees for airlines that they use for generating revenue, then they have concessions all across terminals. We don't do that. And the reason could be, and I have to look into it, why a system like BART or the one that you are talking about, Losan or Metrolink cannot generate those kind of revenues.
What you mentioned about Europe and Japan, what's different, high speed rail systems are part of their rail program. And so that includes regional, intercity, and high speed, all together combined. And in their approach, and this is I'm going to refer to Italy, France, Spain, and Japan in general, they do take fare box recovery ratios very similar to us, which is ranging between 35% to 45%. But they're always profitable and they expand their system as they go forward. And the reason of that is, it's not the farebox that is going to give them the revenues, It is all the ancillary revenues that they are generating from the system.
And what is that? Commercial development on their land. If the nation of Japan decided that they will build high speed rail and they will build five star hotels on the station grounds and or they will put a convention center in place or they will have concessions with a lot of different merchants, then that's decision made within their laws and they are doing it and they are generating over 160% to 170% of their operational costs. What they do with the rest of it is they put it back into the system. Currently, what we are doing at High Speed Rail is looking at that model.
And for us, at the state level, with a program that goes about eight sixty miles long when we combine Phase I and II, there is a lot of opportunity for us to capitalize on value capture. So that's the difference in the way we are looking at it. I believe that the local systems, like metros and subways, they were set from the past to not have those opportunities given to them. And I think that's just because it's not in the statute for them to go do those developments. I think we should open up, as well, for them.
Speaker 5
Through the chair. So, you're saying you do feel you have the tools to make that happen?
Speaker 2
That's right. And so, when we come to land value capture that we put in the business plan, we have a discussion with local jurisdictions to see how that works. We have opened the dialogue on that with local jurisdictions in Central Valley. We think that's the right thing to do because the state have already invested and purchased the land. And so now local permitting and the use of those lands should be given to the state.
Taxpayers have already paid once. So why now not to have the value capture and put the money back into the program? We don't have it now. We are discussing that.
Speaker 5
Okay. So the status of the economic development effort right now is that you are what's the exact status?
Speaker 2
On the land value capture is under discussions on putting fiber optic cables or doing broadband connectivity or doing energy through our corridor. We have the authority to do that. And that's, again, value capture in terms of revenue generation. When it comes to land, when it comes to tax increment districts, that's a discussion that we are we just started through the business plan. We are not there yet on that.
Senator Greyson. Thank you, Mr. Chair. And I want to commend you for your leadership since taking over and kind of maybe to help me understand better your answer that you just gave to my colleague, I think what you were saying for economic development is while you are in the stage that you are in, you are putting everything into a station that needs to be there to accommodate any type of private business that would generate revenue. I think that's like fiber optic and other things that would attract business for economic development.
Speaker 6
But I want to go a step before that. First of all, I want to thank you for just being innovative and cost saving measures. For instance, direct procurement of materials is genius. Instead of running through other parties where they put markups, Just procuring those materials saves will save California billions and billions of dollars. However, do we have in place what we need to foster private public private partnerships in getting this job, getting this project moving quicker or closer to the end faster?
Speaker 2
Yes, it's a bigger question. So we do have private sectors interest now. We never had it before, but we do now. They are engaged. They have submitted their proposals and we are reviewing that.
And there are two parts of our strategy. One, are looking at infrastructure infrastructure or private sector financing against a state backstop, which is state funding commitment. And then second is energy, which is the we are required to put renewable clean energy grid in our system. We So are also looking at public private partnership with those folks who do business related to renewable and clean energy. Both sides of those activities, we have received a lot of interest from the private sector.
The real question is that we are trying to work on and resolve is like when we have $1,000,000,000 a year capital invest appropriations done, thanks to you all. And then now we are saying, how do we bring that cash forward instead of building €1,000,000,000 a year till 2045 because the value of that dollar goes down as we move forward? So that is a tool or instrument that we need to advance cash through bonds or through some other ways. That is under discussion. We are not there yet on that.
Now private sector does financing against funding commitment that or collateral that is available at the state level. And in order for them to do that, we need to show them how quick we can pay them back to bring the interest rate down. At this stage, we have seen that they are very, very interested, thanks to the $1,000,000,000 a year till 2045. That helps us in building Merced to Bakersfield. But we need to get beyond that and so we need to get them excited about building outside of that.
And we are debating and discussing and deliberating with our colleagues in the administration to see how we can do that.
Speaker 1
Vice Chair Strickland, by the way, I had an opening. I know you were moving around from place to place here, but no problem. I just wanted you to know we were hoping for some comments from you as Vice Chair, and I'm sure you have questions and things you want to talk about in addition to your overall duties here. Thank you.
Speaker 4
Thank you. I'm sorry about my tardiness. But I want to thank we had a really robust meeting in my office, and I really appreciate it. You are starting to think, quite frankly, I wish you were here when this first transpired. But I still have some real, questions I would like to bring forward just because I I understand where you're going, but, my big issue is, part of your plan, is generating revenue from changes that will require this legislature to move forward on your plan that you have put forward with us today.
Mine is and I go senator Blakespeare, I believe, brought this up, but you're proposing that we grant you the tax increment financing authority. Do you have a legal opinion? Because wouldn't that violate our state constitution to do
Speaker 7
Thank you, Senator. One of the things that, as CEO Chaudhry mentioned, we want to continue to work with communities around how we actually execute on that. Really, what we're looking at is taking some of those global best practices to recognize that a high speed rail system, a station, does produce additional development in those communities. So what we're looking to do is share in that opportunity for that growth. So there are existing tools available to us, EIFDs, a lot of variations to that.
So we would like to continue to work with communities to see how those tools could be utilized or if there are changes needed to those tools.
Speaker 3
Well, and I respect that because as someone who's served over a decade in this legislature, California doesn't always use global best practices when we go through the legislature. And I am going to be very concerned about that being a component of your issues moving forward because you're going to get a lot of local government who are going to push back. Right now, I would believe it's unconstitutional, and this legislature would have to change that. The other one, this seems that the authority wants to exercise regulatory influence with those stations in the areas constitutionally reserved for local government. My understanding is with a lot of the electric side, you're going to have to work and move some of the electric folks around based on your time line.
Speaker 4
Do you have that commitment from the electric companies that you could be able to do that?
Speaker 2
So our biggest challenge has been on this project, has been the utilities in the way. And we don't have any jurisdictional authority over any And of these we are asking to have that given to us because without that, this program has significantly suffered in the past. Cost overruns are very simple. They happen because of either we are having acquisition of land that got delayed because of the court cases that we couldn't resolve because we didn't see the date in court for years or it is because a utility company that we are dealing with and these are big ones, these are for profit companies who are either electrical or communications. If they don't move their lines out of the way in a timely manner, and we have fully mobilized our contractors to go build, it's very simple that those contractors are not going to be working there for the good of their heart.
They are going to be billing us every day until that is gone. We don't have those jurisdictional powers. We are asking. We asked it last year. We're asking it again.
We do need that in order to put some certainty in the schedule and the cost. We don't have it.
Speaker 4
And I understand where you're going. In fact, I respect where you're going. Again, I would go back to I don't think California always does what are the global best practices. We talked about, you know, Europe and and Japan and what they've done. Yep.
They've given that authority to move this forward. But we would, as a legislature, have to give you that authority. And I'm not sure this legislature will move forward on giving you authority over some of the electric companies. And, again, I I'm just going through some of this, and I understand where you're going. The other one.
You know, this should have my opinion, it should have started in a population center and go from BART, who is one of the few areas in the state that is actually built around the horse carriage and up, and they have a mass transit that's a lot different than the rest of California.
Speaker 4
I see that you're gonna start using some monies into the l on this plan, the LA and Bay Area. I'm not objecting to that, but the legislature really tied your hands in some ways, we'll have to untie that because we're now at a point where it's supposed to go from Merced to Bakersfield. We don't have enough money from Merced to Bakersfield, but we're also going to move some money over to LA and San Francisco. Can you explain that?
Speaker 2
So we are not asking about moving funds from Merced to Bakersfield because we have the funds to build for what we have currently planned, Merced to Bakersfield. What we are asking is once we have private investors on board, they should be able to look at what the full high speed rail system Phase one is, which is L. A. To San Francisco. So the high speed rail system is not Merced to Bakersfield.
It is L. A. To San Francisco. That's why we say, can we unlock the private financier's ability to look at the schemes of San Francisco to San Jose to Gilroy and, on the other end, look at L. A.
Union Station going to Anaheim, Burbank and coming to Palmdale. Instead of us constantly going from inside out, bring it from outside in from both sides and build the Merced Bakersfield at the same time. That is commercially viable. And not only that I'm saying it, I've built some of these projects in Europe, but I can tell you private sector is telling us that every day.
Speaker 4
Well, and and, again, I I I think if you're able to get private sector resources after you take a project that was supposed to be 33,000,000,000, and then turn it into 231,000,000,000, And is this far overdue? I give you a lot of credit if you're able to raise a lot of that private capital. We talked about that earlier. The other part is now that we're going to one track instead of two tracks in the program. Believe I have to look at my notes.
I think originally 171 miles was supposed to be double tracked. Now we're going down to 20 miles and double tracked from my understanding reading the document. If you go to that one track system, is it really high speed rail?
Speaker 2
The system maintains the same speed as built to high speed standards. It's built to the speeds that are high speed.
Speaker 2
So the standard of high which is over 200 mile per hour. I mean, systems in Europe run at 185. We have decided to go above 200. The entire European system today is at 185 because they have tested it at 200 and they thought after ten years of using it that it is cost prohibitive to maintain and operate. But we have decided to go at 200 plus.
That's the infrastructure that we are building. As it comes to double track or where you put the sidings, the system will run at the speeds that are high speed. And if we choose that infrastructure should be built just in time for when you need it, don't overbuild. That's part of our strategy, is to say double track, meaning passing loops where the trains do not come. In Merced Bakersfield, we'll be running six to eight trains a day.
There is not a chance that you cannot run and have a siding that the train the other train passes. That's what the double track does. If we build the entire system double track, we're not going to be using it. And here is what happens, what I said at the beginning. You will build infrastructure that you will have it sit there and maintain it but not use it.
And so what we are doing is ride sequence, these things. And as we connect further and send more trains, then put more track, build more longer platforms. This is how Europeans have done. They expanded the system. Running the train first is our top priority, building tracks enough to do that, building it to the high speed itself.
Yes, that's what we're doing. And we are building enough tracks that give us the service that we need.
Speaker 4
Okay. There's a bill going through the legislature right now that says we're not going to have to report spending on the high speed rail or public transparency and accountability, and especially where we've been. And I know you weren't here during this, but we passed AB two thousand eight and seventy nine to talk about large scale change orders. It was the largest change order in history of any project. It was a $537,000,000 change order on April 29.
What are your feelings about the bill that's going forward about the lack of transparency from the high speed rail? Because right now, I think the trust of the people and again, this is not you, but the trust of the people of this authority, has been say I'll say it's been a major failure, because what's been promised has almost been a three card money, saying this is gonna be only $33,000,000,000, and now the total amount is $231,000,000,000 and it's supposed to be done in 2020. And when there's a bill going through the legislature, has me very concerned that there's not going to be announcements of accountability. What are your thoughts about moving forward, making sure that this committee and other committee and the public knows exactly the steps that you're taking to move forward on this project?
Speaker 2
I don't know. We are not the sponsor of we didn't ask for any bill to change any of our transparency that we have currently. I mean, get audited fourteen twelve to 14 times a year between the local, state, internal, and federal. How many audits do we get, Jamie? Can you talk about that?
Speaker 4
For you guys, again, the legislature is the legislature, and you're telling me right now that you're not supporting it. Again, you're new to this. But I I would say that any measure that moves forward that lacks accountability and transparency I'm asking you as the head now, and I'm glad that you're here. Would you be open and willing to continue, with any kind of changeover of this size or any kind of transparency when we're spending money, the taxpayers' money?
Speaker 2
We want to stay as transparent as we can. Absolutely, yes. And that's the goal of my entire team. Okay. And and and, Seneral, you made a comment about, like, you know, we build in Central Valley and it was Yeah.
This was a decision made way before Way before you, I know. Way before in the sense like there was different consideration at the time. But if you look at the European systems and the rest of the world, it starts where the best value to the public goes as fast as we can. If Central Valley was decided because there was environmental challenges there, I believe that that was the decision at the time was with that thought process, nothing else.
Speaker 4
And I think a big part of the CASA overruns is it's not different than doing any business in California. And I just wanted this committee to understand, I know where you're going because Italy and Europe and Japan, they don't have these kind of cumbersome rules that they have here in terms of permitting here in California. And in California, a lot of your plan does not comply with a host of authored, bills that are here in the legislature that you're gonna be asking the legislature to waive if my if I'm understanding correctly. I think, quite frankly, it should have been done at the very beginning. The other question and again, I don't want to dominate the time, Mr.
Chairman, but just last question. I know you're going to private money. How long will it take if things go smoothly and we get the $200,000,000 which I don't see as happening? I actually think, you know, I I am I don't believe this bill this will be built as proposed to people of California. I've been on record saying that.
I do want success, though. When you go into private capital, they're going ask you the point blank question, how long will it take to get from L. A. To San Francisco on this train?
Speaker 2
Well, currently, as we have projected, and I think our current business plan projects about 126,000,000,000 130,000,000,126 billion dollars in total for phase one. That's LA to seven. No, I'm not
Speaker 4
talking about cost. I'm talking about time. If you get on a train from San Francisco and you have a ticket to go to Los Angeles on a high speed rail, under your authority, if we get the financing, how long will it take for a passenger to get from San Francisco to Los Angeles?
Speaker 2
That is calculated on an average somewhere between $68 to $84 depending on how do you use the system. Those models are done based on the economy the understand. And
Speaker 4
are there any percentages now that if it's 68 to 84, will it go to the investors? What will the state get back in terms of because now if we move forward, we're putting in $231,000,000,000 I assume a lot of that will be private enterprise if your plan goes correct. Again, that's why I think we're going to have problems. But how much will come back to the taxpayers from Sure. That
Speaker 2
I mean, the private sector financing is there are two ways to pay them back. One is purely availability payments. You pay them back over time. They get the concession, $40.50, 60 years concession, and they run the system. We, as a state, define what the tariff should be, what the fare box, what the ticket should be and then they do the ancillary revenue generations.
Now there are two ways you pay them back. Availability payment is they advance the cash and you pay them back over time, which is pretty much like normal P3 financing. The one that we are going after that we think is more valuable to the taxpayers is revenue risk. So we want them to take the revenue risk in terms of when they commercialize the assets, when they generate the revenue, the money have two places to go, back to the taxpayers or pay the loan. Okay.
Right? And so we are keeping both options open. I mean, we can put that back to the program through these private investors or pay them back. And if we pay them back, it's better because then you're not asking for more appropriations because they are paying themselves out of the payment plan. So we have both options on the table at this point.
Speaker 4
Well, I'll just conclude and yield back to the chair, but I'll end with I really appreciate your communication. I really appreciate your leadership and what you're trying to do. You're running into a lot of what a lot of California businesses run into, an overregulated state that doesn't do global best practices. There's a reason why we have these cost overruns. There's a reason why it's exploded from 33,000,000,000 to whatever it is now, $2.81, and growing.
I think you're doing a lot of the right things that they should have been doing at the very beginning. I wish you luck. I don't think this will ever be built as proposed to people in California. I just I know I wouldn't put my money and invest in this, but I wish you luck. And, you know, and this legislature is gonna have to waive a lot of things that they historically have been against on CEQUA exemptions, on being able to take away local government money, tax money, from a lot of different, items.
I I don't see giving you authority over the, you know, the energy companies. I see what you're trying to do, and I see that's what you probably had to do in Japan and Europe, But I don't see this legislature going along with some of this plan. But I do wish you luck. And I really appreciate your communication, thanks for your time. And I really appreciate you answering my questions today.
Thank you. Thank you.
Speaker 1
I'm gonna go to Senator Archuleta, followed by Senator Richardson. We'll come back to Senator Weiner. And if there's a time constraint, you know, any of you are able to let me know. Senator Archuleta, Temporarily? Okay.
Speaker 1
Sorry. No. No. It's a public hearing. We're we're this is what we wanna have happen.
We're gonna move on to senator Richardson, then senator Weiner, and senator Soyvertow.
Speaker 8
Hi. I had a question for you. I recall hearing something about the federal government potentially removing their match or some portion of what they were intending upon paying towards this project. Could you give us an update of I kind of saw that in passing, frankly. So if you could give us an update of are there any federal funds that we're hoping to utilize, now and going forward?
Speaker 9
And what the status are those funds still real, or in fact, did the president, withdraw them? And any other things that you could share with us regarding that?
Speaker 2
Sure. Last year, yes, we were challenged with two major grants that were already committed, and the federal government withdrew from those, roughly summing up to about $4,200,000,000 And so there was a case presented by the state and there was a lawsuit and then at some point that didn't go anywhere, so that was withdrawn. I think, Jamie, can we talk more about if there are federal grants still available for us?
Speaker 8
Absolutely. It's a great question. We still have about $270,000,000 worth of grants that we have left. We've completed the match on our largest grant, which was the Ara grant that came back a number of years back. So, the grants that remain are for various discrete scopes of work within Merced to Bakersfield project segment.
But as our CEO mentioned, the largest thing that happened after a significant effort to show, you know, how we've been moving and advancing the project, they still pulled point $2,000,000,000 from the program.
Speaker 9
And do you see us being able to get that back? Or how are you backfilling that?
Speaker 5
Well, there you know, there the idea is if history repeats itself, then potentially we could see funds restored for the authority like it was in the Trump one point o presidency and then the, Biden presidency, but that remains to be seen.
Speaker 8
Well, in the first, Trump administration, a billion dollars was taken from the authority. And after that, four year stint, in the Biden administration, that billion dollars was restored back to the authority.
Speaker 9
So, am I hearing you correctly that you're banking on, if there's a new administration in a couple years, that they would restore the $4,000,000,000 that was originally promised?
Speaker 2
I'll say this, Senator, that today, in the program, the way we have allocated funds and appropriated for the construction of Merced to be because we are good without the $4,200,000,000 However, we are going to continue to apply for federal grants this year, next year, every year when the grants open because I think it's the right thing to do is to apply for those grants. California contributes to a large amount of federal dollars through taxes. So we will continue doing that. However, in terms of impact to the program, it is always about you took $4,000,000,000 away, we will build less of a house just because we don't have the money to do everything that we wanted. And so at this point, Merced, Bakersfield, plus some, we can do.
But if we had $4,100,000,000 available, we would have done more of our construction outside of the valley. We just have to adjust.
Speaker 2
This was in between the attorney general office and the federal attorney the AG's office. The reason that as we read in the news was all about that this program does not deserve the funding from federal government. That's how far I understood it.
Speaker 10
Thank you, Mr. Chair, and thank you for the update today and for all your work to move forward this critically important project for the future of California. I think a lot of times, it's really sad to me that the sort of PR propaganda campaign against this project has sort of sunk in to some extent, although the recent polling shows the voters still support this, right, after everything. All the propaganda about the train to nowhere as if L. A, San Francisco, San Jose and Fresno are nowhere and all the other pieces of propaganda against the project, whether it's Elon Musk and Hyperloop the Hyperloop scam.
It's a complete scam, but they used that for years. And just propaganda after propaganda after just, you know, I won't use any curse words. And the voters still get it. And the voters understand that we do not have a true statewide rail system in California. No offense to Amtrak.
Amtrak's great. But when it takes twice as long to get from the Bay Area to L. A. Via train as it does by car, that's not a true statewide rail system. And it is, to me, embarrassing and harmful that California does not have a true statewide rail system.
And so, all of these debates about what exact speed is it, to me, is beside the point. It's fast and it will create a true statewide rail system for California. And every time anyone goes to Europe or Asia or any of the other parts of the world that spend way higher percentage of GDP on rail than The U. S. Does, The U.
S. Is so far behind in terms of percentage of GDP dedicated to rail, behind countries I think like India, not only the wealthiest of the wealthy countries. We under invest in rail in this country, and so we need this system, and we need it yesterday. And it really is sad to me that it's become, in some ways, a partisan issue and that Trump keeps targeting it. This benefits everyone, and it's good for economic development and quality of life in addition to climate action and reducing traffic and reducing pressure on our airports.
So we need to get it done. And I know we will get it done. And I know we will get it done. I want to just know and you talked about the permitting issues. I actually, as you know, had a bill last year, as the chair knows as well, to deal with the permitting issue.
And when we look at high speed rail, in some ways, it is a poster child for how California sometimes cannot get out of its own way in terms of delivering projects that many people, majority of people agree we need. We see it with housing all the time. We see it in a lot of clean energy, that Texas and Florida produce more clean energy than California. And it's true with high speed rail. And the fact that you could have a project, a project that is approved, is being built, does not fully fund it but has the funding to move forward, and then you have this project that's been approved and has funding, and everyone and their brother has a veto over it.
Every city or town, no matter how big or small, every water district, every school district, every community college district, every utility district, every sewer district, every mosquito abatement district, every utility, every cable company, every telecom company if it touches the geography of any political jurisdiction, if you need to move one minor wire from Comcast or PG and E, the whole thing can get shut down. You've had to demobilize contractors because of this, because there's a minor encroachment perimeter or Comcast needs to move a cable that could be done like in a day, and no one's responding. And it's to me, it's horrifying that we would that's like government at its absolute worst, and that's why our bill would have created at least a shot clock to say they have a certain amount of time, and if they don't respond, then you can just move forward and do the work yourself. And what happened the chair remembers this it was like an absolute orgy of opposition. I mean, just descending of everyone, really showing what the problem was.
The cities and the special districts and the telecom and cable companies and the utilities and PG and E, and PG and E of course has this way of sort of upending everything, and they were doing it again here. And it was like everything it was missing the forest for the trees. And that's why I really think that and so we ended up our bill got eaten alive. It just got chopped down, chopped down, chopped down. It's not a criticism of anyone.
It's just the way sometimes things work in this building, and then ultimately died. And I really do believe that this is a governor issue. The administration needs to put its full muscle behind permitting reform for high speed rail and for other regional transit systems. We shouldn't have these multi jurisdictional projects get held up like this. So, we took a good run at it last year.
It got torn apart. I hope it can happen because it's important for this project and other projects. I also think that a P3, I think, to me makes a lot of sense for this project, and I hope that that can be explored and happen. And the last thing I want to say is for high speed rail to really be truly all that it can be, it needs to truly go from Downtown L. A.
To Downtown San Francisco, and that means the portal, and that means what we used to call the downtown extension, extending rail from Raquel train and high speed rail all the way to the Trans Bay Transit Center, which has been built, is open, is wonderful, and it needs a train to come there. And we are working very hard to make sure we have the funding for that. I know there had there was supposed to be there was a commitment of $550,000,000 from high speed rail to the Portal project. I think it's really important for that to happen, and I want to encourage you and urge you in the strongest possible terms to have the authority recommit to that $550,000,000 for the Portal. Thank you.
Speaker 10
And could you comment specifically? First of all, on permitting, before we comment on it before, and I know you can't speak for the administration, but I really think the administration, in my view, needs to lean into it. And secondly, about the portal and the funding.
Speaker 2
Yes. I spoke with you last year about the permitting issue. Now I can tell you the numbers of what happens if this is not resolved. Right? And so, with all the bottom up estimates that we did and the cost optimizations and realigning and rightsizing the project, it's clear to me that if we don't solve these uncertainties in the schedule and cost, meaning, if we keep bringing contractors in and subjecting them to the same challenges, the results are not going to be any different.
It's just madness that we keep doing it because here is what happens. One year of delay in construction is 7% to 9% of the overall cost, escalation, inflation. I'm not even talking about commodities. I'm not talking about steel, copper, aluminum, none of that. That goes up 200%, 300% in ten years.
This is 7% to 9% straight by year inflation escalation combined on a project, call it for €200,000,000,000 or €150,000,000,000 7% to 9% is billions. And so we just need to know and recognize that we present a business plan with a cost and a schedule and other jurisdictional authorities that we need, they're all together. It only works if they're all solved. So we know we can build this 02/2003 schedule, but we also are asking, we need these controls over the destiny of this project, number one. Number two, when we say L.
A. To San Francisco, can build it by 02/2009, meaning in our lifetime, we can see it, well, that also requires these reforms that we have been asking. We asked it first time in 2024, then 'twenty five. And thank you, Senator, you did support it a lot on this permitting issue. It's not there.
Well, next year, when we will sit with the new update, we will have 7% to 9% added to the program because those constraints do remain in place. So we need to be clear eyed about it. We are telling our team, make sure everyone understands, if these things don't move, then this thing cannot stay constant here. The costs and schedule are not constant. They are going to move along with the constraints that are provided.
When we come down to the DTX project, and I visited with them several times. I don't know about the $550,000,000 commitment, not that I have discussed that. However, my view on that is extending the service from 4th And King at Townsend and into the portal is critical. But for what we can do right now, when I visited that with the team there, I think there's a commercial opportunity for the entire thing right now. And we can put it on our P3 tracker that that structure that is in place is really not being commercialized.
And through our P3 investors who are coming on board, I would love to put this on our program tracker and put those P3 investors who actually look at how they can commercialize the real estate we already have built around that. So I will get back to you on that. I will think about that and get back to you in a few weeks' time.
Speaker 10
And that's great. And I think all options should be on the table. But cash is king, as they say. I don't think that's true in all aspects of life, but in this, here it is. And I do think we need financial commitment from the State of California to make sure that that critically important piece of the project happens.
Speaker 1
Thank you, Senator. And we'll certainly have ongoing discussions on the permitting also about the weaponization of some of those delayed tactics on an intentional basis. I don't think I'm not going to speak for Senator Wehner. I think that's it's suspicious how things happen sometimes. It may be intentional.
It may be negligent. It may be through misunderstandings about what high speed rail is attempting to do in a particular geographic area. But it's certainly something in and of itself that needs to be addressed because we should all be pulling in the same direction, you know, especially in the local government and special district arena. Senator Sayoroto?
Speaker 11
Thank you. So, you know, I appreciate the progress that you guys have been making trying to regain your footing on this project. You know, and my colleague was talking about propaganda against the project. The biggest propaganda against the project is the project itself. I was around when we were talking about the high speed rail going from San Diego right through the town I live in.
We were all excited about it. And then up through Anaheim, then LA, and then up to San Francisco. That made sense. It made sense to people. They were very excited about that.
And when we were looking at that price tag of 11,000,000,000, but the whole project was supposed to be $30,000,000,000, People were really excited about that. When they thought by 2020, they'd be they'd they'd be on this thing, they were really excited about that. That didn't happen, and it didn't happen. It wasn't even close. And in fact, the project that we're presenting now, even described by, some of some of the people that are on the board for oversight and stuff, they they say this this in no way resembles what taxpayers thought they were gonna pay for in '20 and that's not on you guys.
Speaker 19
You guys have been hired to try to fig try to salvage salvage this thing. And in doing so, sometimes there are desperate efforts to find any kind of revenue streams to make up for what's probably going to be a lack of ridership ridership paying for the maintenance because that was the other thing promised to people was it would be able to maintain itself with the ridership and and then it wouldn't be a public it wouldn't be the drain on public finances. And and this particular element, it appears that we're that you've moved the stations away from the cities themselves. The city centers, you've moved them outside of those city centers. And and why was that decision made?
Speaker 11
And and how is that going to affect ridership? Because I know one reason I would never take, the Metrolink, especially in the early days, was because no matter where I went, I still had another five or 10 mile journey from where it would let me off. And so it was just more worth it for me to to drive myself. So how does this how does this new plan address that issue? Because at the end of the day, this train is supposed to have riders.
That's what the appeal is for everybody, because I'm gonna ride on a train and get somewhere easier. But right now, we've gone to this to this in an area that does is not conducive to maintaining that ridership.
Speaker 2
Senator, just a question on that. Are we referring to a station in Bay Area or in Southern California? No, we're
Speaker 1
So specifically about Merced and Makersfield movement, if I may jump in. I think the issue has been, there's been, in fairness, your predecessor, last time we had a hearing Senator Sarato was here, 2024, there was some discussion about, well, you know, we're not going to have stations in a fig orchard. We're going to have them in the downtown area. You know, I'm paraphrasing. We were kind of left with that note.
As I understand it from discussions with High Speed Rail Authority, with yourself, and looking at the PER, that's up in the air still. And so, I was going to ask a similar question, but I'd like you to just explain, Are there contracts? Were those stations locked in and now you're going to break contracts and move them elsewhere? Has it always been up in the air? Know, should they be in the urban areas?
Should they not be in the urban areas? Are cost differentials? I think that's what's I don't mean to paraphrase the Senator's question. That's fine. Think it's part and parcel of the same question.
Speaker 2
Sure. I mean, none of those extensions are under contract by any means, so we have nothing there. What we have right now is in the Merced area, we are actually discussing with the city and the county, both of those entities. They do have their development plans that we have reviewed with them towards the Southeast Of Merced. And our view is, it's not about getting into the downtown.
I mean, you look at the European models or even the Japanese, they're always on the outskirts. High speed systems always come closer. And then because they are massive structures and people generally avoid to bring them into the old downtown. So our discussions has been ongoing. We have not contracted anything.
It's still open. So we don't know where it will end up in terms of conversations in Merced. In terms of Bakersfield, it's pretty much the same. These are discussions. There is no contract in place.
There is nothing that we have decided. In order for us to put a business plan together, we had to make some assumptions. And those assumptions are the ones that you see that are there. If during the discussions with the City Of Merced and County Of Merced or the Kern County, Bakersfield, we end up somewhere that makes sense to the city and county in both sides, that will become the final destination or the station in agreements with the locals, local cities and counties. So we are not there.
We have not contracted anything on those locations.
Speaker 11
Okay. Because our report makes it seem like there was going to be they had moved the stations outside of
Speaker 2
We did make an assumption there and it could evolve as we go in our conversations with both the city and county.
Speaker 11
The risks of increment tax increment financing were of great concern to the legislature in 2012, then they stripped cities of the ability to do just that for redevelopment agencies. And so do you feel like there is any risk to doing tax increment financing for areas that have, well, basically nothing right now? So any incremental financing means that the property tax added is all part of a financing which takes away from, know, guess who, the school districts and everybody else who usually benefits from that property tax. Do you are anticipating that there's going to be a little bit of a fight about that?
Speaker 2
We started the discussion. There will be definitely a discussion. This is not unusual. I mean, as you know, the rest of the country does it every day, all day, and they've been we have been doing it for over one hundred years. So value capture, because of the investment done in high speed rail at the state level by the taxpayers to get into those localities where there will be significant economic activity within the high speed rail real estate that we have and around high speed rail system.
All what we proposed in the plan is to have sharing of the value so we can pay back the program for what we invested and to build more. That's a very common practice. Now, discussion has started. Of course, we sat down with a couple of cities and counties, and the dialogue just started like last week, two weeks ago, where we are proposing some details around what that could look like. We have not reached any agreement with any of the entities.
We are not also saying anything that comes out of high speed rail owned properties,
Speaker 2
is state owned, and what goes around the development within a radius of certain that we want all the value back to the state. Are not saying
Speaker 2
That's what we were proposing. And we are like, have some of it shared back so that we can build more and then
Speaker 11
the rest stays with the local jurisdictions. The impact to local jurisdictions when property taxes are distributed, if you've taken out the property taxes from something that is actually generating the need for more infrastructure in other parts of the community to be able to attach to that. In other words, those connector routes from where the station winds up to being where it would be convenient for people if there is a job center there, that's the draw. If there's a job center there, there's not a lot of tourism going on in those communities out there. Their big need is attaching where they live to job centers and those job centers are generally San Francisco and LA.
So this portion would have to find a way to stay alive And that way is gonna be us, legislature and the state Right. Trying to subsidize it. Now that's the honest truth about how we're gonna keep this alive. While we try to do the actual hard part of putting this system in. This is just $34,000,000,000 and we're struggling with that.
How much of the 34,000,000,000 do we actually have on hand? And I thought it was like the report was $24,000,000,000 is still out there?
Speaker 11
And we're including in because it says we have the money, but you're including in that we have the money, future money from GGRF funds.
Speaker 11
With the billion dollars. And is that securitized on bonds? Or is it a combination? Or is it just the billion dollars that we hope the GGRF funds can give it every year?
Speaker 8
Currently it's just revenue that comes in. It's cash flow. It's not bonded. Okay.
Speaker 11
So that's kind of, I mean that's kind of risky. And going forward, when you're looking at what will no doubt be a $200,000,000,000 project at the end, if we're able to do it, we're talking about the environment here in California. Everything you are experiencing is what everyone else experiences in this state when they're trying to build something. And yet the legislature responds to the little just these little things. And this isn't a little thing, but they're things that they're interested in.
In the meanwhile, the person trying to build bring a business in so that we would actually have some workers that would like to ride the train to go work at the business, they can't even do it because they can't get through that process that you guys can't get through either. And and so that's, you know, for the legislature, that's something that we have to change. Because if we don't change that, this doesn't work for not only that, but, you know, your public private partnership. Well, the private has to happen for that to happen. And it won't be private if we don't change how we do business as far as our permitting, our regulatory environment, our legal environment, our labor environment.
All of those things have created a vacuum in California that does not allow businesses to come here and set up to kind of and be successful in a way that would support what we're trying to build for everybody. I would love to have a high speed rail train. Four years ago when we were doing this, my comment was, unfortunately, California's environment is not very conducive to us getting one done in the time frame or monetarily that gains the confidence of the public. So when you ask the public, you think high speed rail is awesome? They'd say, yes.
We support having one. But if you ask, how about if it costs you this? How about if it sucks all the money out of transportation dollars, even if the feds decided to give a bunch of money for transportation dollars, and it all goes to this, but it doesn't go into the roads that they're stuck on out there in my area? While we grow and we have no we have no train coming our way. All of those things come into people's minds.
So it's not really a propaganda thing. It's not really a partisan thing. It is normal people who thought they were going to get something and didn't. And now they're super distrustful of it. And so that's a big hill for you guys to climb.
And I wish you luck while you're trying to climb it. But I also you know, if if there is an inability to get the things done that you're you're this is depending on, we need to know about it sooner than later because we need to stop throwing good money after bad after this after this segment because we have lots of projects that we could put people to work doing. Lots of projects. Infrastructure projects galore. We could put everybody everybody to work if we would do those things.
So anyway, I don't think I asked any more questions in that. If you had any more comments, you're welcome to
Speaker 2
I definitely would say, Zig, you're right. Then we are looking at permitting issues, but we're also looking at CEQA, exemptions on things that are renewable energy sites. That's we are talking about the green energy. And we are asking exempt those sites. Why?
Simply because we do national level clearance, which is the NEPA process that got further streamlined so we can do very quick all the fair things that we are required by federal law to do. And this is for us is redundant, number one. Number two is about air quality. We are talking about green energy. And so if we have a side that we have to put solar or other systems to generate energy, exemption means two to three years of scheduled saving.
Two to three years scheduled saving also means a lot of costs that we just take out of the system. And we have put it in our proposals that this is one of the things that we would like to have your support on. So thank you, Senator.
Speaker 1
Great discussion. We'll try to get to the next panel in a moment here. A couple of comments and then eight question, one question. We heard a lot of things. I'll try to summarize that before this panel concludes.
First of all, I want to acknowledge the very first topic that came up, Senator Blake Spears' comments about economic development. This is certainly a public works project, a train project like every other train that was built in California, but different in the sense that it's also the largest economic development project potentially in North America for sure, probably in the Western Hemisphere right now. And that has to get going, in my opinion. We had a bill last year, SB five forty five, that had the funding identified for the bill, a study that was held in assembly appropriations. As you know, that's without explanation, so we're not real clear why that happened.
But whether it's the sequel to that bill, a new version, or whatever, I just want to say I appreciate others bringing this up, because when you have a 400 mile corridor in the largest public investment in the history of the state of California, and it's not an aqueduct, it's something that people want to be around, stations and transportation, we should at some point continue to check on the change orders and make sure that there is no waste, there's no fraud, all of those things that we get accused of, right, wrong or indifferent. But we also talk about this as something more than just a public works project. It's extremely striking to me listening to the conversation that I may be one of the few people and could be happenstance, just where I ended up, where my upbringing was. Could be I'm an older guy now, but I grew up in an area and was born in an area that looked almost identical to the most rural parts of Merced, the most rural parts of Kern County without the oil wells, and the most rural parts of Fresno. And it's now called Silicon Valley.
And the road I lived on, a two lane road, was called Rural Route 3. Rural Route 32 Lanes. Go see it today. It all built with public private partnership. It was all built with benefit assessment districts, exactions that came from landowners who were speculating on residential and commercial development and ultimately built residential and commercial development to the tune of a million in population.
I'm talking about a community that was 85,000 people, the city of San Jose. It's 1,000,000 people. The county's 2,000,000 people. It now creates more GDP than any county in the world. It would rank twenty fourth as a community among nations in GDP.
One county. And it looked like Merced not that long ago. So I agree that these aren't, these tools that we have are not new tools necessarily. We might not even need new tools. The tax increment fight's always gonna go on.
I appreciate your colleagues bringing that up. Not much of Silicon Valley was actually built aside from the downtown area with tax increment. The rest of it was all voluntary agreements. There were Melrose districts, benefit assessment districts. Those aren't and for the people in Merced, you know, I think they know that.
I think their attorneys know that. But those aren't those aren't put out by the state of California as a burden on local governments. It's quite the opposite. There are a half a dozen of those benefit assessment tools that allow local governments to engage local property owners who, believe you and me, are going to come in and start speculating around these station areas soon because they're seeing the public investment, they see the same thing that we saw on the video. The speculation's going to start, and the opportunity for local governments to go to those property owners and say, you can enter into voluntary agreements, voluntary agreements, not mandates, not requirements, not exactions, to leverage the very development that we're going to entitle through local government entitlement processes, not through high speed rail, through local government entitlement processes to pay for curbs, gutters, street lights, parks, community centers, libraries, and it goes on, it goes on.
And to the extent that those general plans are approaching the high speed rail corridor, and they are, because I've checked with Bakersfield and Fresno, I've talked to the mayor of Merced, I've talked to county supervisor of Merced, those general plans are already designed to head towards the anticipated station sites. And when that confluence happens, what ends up happening is a beautiful thing in terms of California development process is the private developers and the local governments work together to put together the basic elements of infrastructure that are needed so that subdivisions have fire hydrants in them, so that there's fire stations located. To the extent that Mello Roos districts allow transportation projects and transportation tributary projects to be paid for with those same kinds of devices, it needs to be explored. So think all of that is, but can be even more so headed, you know, in very spectacular direction. But we have a lot to do.
Going back to Rural Route 3, it was a road, San Filippi Road, said it's four, you know it's four lanes now. You can go through 64 miles of expressway system, highway systems, interchange systems, BART to the South Bay, the Berryessa BART Station, which is the most recent station on the BART line, is surrounded by CREIA's EIFD opportunities and the builders are coming in 4,000, 5,000 units at a time, commercial development. We see what's happened. We saw what happened around Oracle Arena in San Francisco, which was frankly a dump. It looked like a wrecking yard there before that public private investment, essentially a public private investment that created that stadium.
We'd walk through there. You'd never think that that was a place in need of any kind of investment or subsidy today. This is the potential that we have all the way along the rail system, and I have faith that we'll get there, but I do believe that everything folks have said here about transparency, about locking down these station locations and making sure we're engendering trust with people, about obviously this horrible problem of permitting obstacles. All of that, you know, is going to need to be done. And we're going to need to have the trust of local governments, not just in the Central Valley, but imagine the trust that's going to need to be engendered on the Peninsula at some point to get from San Jose to San Francisco, where it's already developed and now we're dealing with infill development in 101 local governments just in the Bay Area alone.
It's a tremendous amount of work, and I don't know how much staff time it's going to take to meet with these folks. I don't know, if anything, that the legislature needs to do other than try to provide help in financing that kind of work, those kind of studies and those kind of convenings that bring people together to determine what it is that the local governments expect to get out of this, and what it is that the local and not so local private developers expect to get out of this at the end of the day. That's what's going to drive ultimately the cost, the recapture, but it's going to end up paying for the bulk of high speed rail well beyond what we see with GGRF or not. And so far, you know, the Vice Chair's right. I mean, so far he's right that what was promised hasn't been delivered And that can't continue.
But nobody ever asked about Rural Route 3 when I was 15 years old, when I was 20 years old or was I 25 years old or 30 years old before the road was widened. Nobody ever asked is it going to cost as much to widen it to six lanes versus four lanes as we predicted in 1956 and 1960? No one ever asked that question. People said keep investing, keep widening the road, keep building the infrastructure, add another fire station. Nobody asked should that be done at a 1960 or '65 or 1970 general plan cost.
What what was what was called for in 1970 will never be built at the same cost in 2026, and and and that area is still building out to this day. And and nobody's questioning the inflationary cost of the public works investment. So I think we have to be real about that. We're creating jobs. It's public investment.
So long as there's not fraud, so long as there's not mismanagement, what we're ending up with is what we're paying for. That's the bottom line. And we're ending up with a lot of infrastructure that we're aware of and a lot of jobs being created. So I, for one, am fine with that, but we need to figure out the rest of it real quick, the P3 and the rest of the economic development. The question I had was this, and then if there's nothing else we can move to the next panel and try to get out of here before it's way too late.
The question is, the inspector general talked about statutory requirements that weren't met in this PER, and what we're really here today for is to accept the PER from you and to ask our questions about it. To me that's really the ultimate question that's left hanging with the purr. I think you've walked through and answered many of our questions, at least as best you can for now. But we haven't heard from you on the compliance issue. And before we bring that panel in, which includes COIG, and rather than necessarily keep you here all night, I hope you can stay longer, I wanted to make sure we give you an opportunity to say, is that a problem?
If so, how are you going to remedy it? If it's not a problem, if you want to rebut that, you're welcome to do that. But whatever your position is on the statutory noncompliance of the PRRR, I think that's critical for us to hear. Otherwise, the hearing's a sham, really. I mean, we're here to hear about that, really, at the end of the day.
Speaker 2
Yes. Thank you, Senator. And we did receive the report. We appreciate the OIG pointing out some of the things we put in the draft business plan. And I think my view is that those will be addressed when the business plan is finalized and final version is issued.
The questions around infrastructure, how we build and how we sequence construction, one other thing is that, oh, well, is the station in this location or the other? That's ongoing discussion with the cities and towns. And we may not have an answer to that until that is agreed upon with the jurisdictions that we are dealing with. So I think that will continue to evolve as we move forward for the locations. But other items that OIG has identified, those will be addressed.
Those will be addressed in our final report.
Speaker 1
Maybe we can conclude this this way and hopefully I can get an affirmative answer from you. Transparency was brought up here in a big way and also a lot of gratitude. Evidently you've been making sure to speak to members of the committee on a one on one basis and answer questions. The compliance issue is really the purview of this committee, not necessarily the full legislature or anybody else. Would you commit to resolving that issue?
The issue of per compliance? I heard you say you're committing to it, but then coming back to each member of this committee, we can certainly help with the distribution of any response. But what I'd like to see is the same thing we would ask for if there was an independent audit, for example, by an outside audit firm, reconcile the audit comments and come back to us and specifically say in writing whether you're moving toward compliance, whether you have now complied since the hearing, or whether you, you know, take issue with, you know, with the assertions that have been made. I think that we all need to get that from you. If we're not going to get it in written form today, it doesn't look like we are or an absolute testimony.
But something you're still working on, we can't wait until next year to get the answer is
Speaker 1
And your expectation for when you can get that resolved? It sounds like a few days, but give me a realistic timeframe.
Speaker 2
No, I think we are getting all the public comments as we go now. And I think what is the schedule on closing the public comments and
Speaker 7
Yes. We have several more days for public comment, but our commitment is to address all the OIG's findings in the final business plan.
Speaker 1
Yeah. And understanding that your Board's taken up the business plan this week, again, it would be important for us not just to hear their acceptance of the plan, but also to specifically hear, not to be redundant, but to hear your final response on the noncompliance issue.
Speaker 2
Absolutely, yes. And the final business plan will incorporate all of the OIG comments.
Speaker 1
All right. I accept that timeline. Is there any objection from members of the committee on that? All right. Thank you.
All right. Well, appreciate you, taking up these questions and responding to them. At least for my part, feel like anything was glossed over. Gave us the best answers that you seem to have at this point in time about everything from station locations to communications that are going on with local governments. So we look forward to the next report, but hopefully we'll hear a lot more from you between then and now.
Absolutely. Thank you. Thank you.
Speaker 1
Next panel, please. Office of Inspector General and the Legislative Analyst Office. Helen Kerstein from the Legislative Analyst Office and ROIG Benjamin Belknap, High Speed Rail Inspector General. Thank you for being here. Mr.
Reinerdy, also from the office of, Inspector General. Good to have you here. Please proceed
Speaker 12
Perfect. Thank you so much. Helen Kerstein with the Legislative Analyst Office. Thank you for inviting me to participate in this evening's hearing. I know we've already had a very robust discussion, which I really appreciate.
I'll try to have a lot of content. I'll try to move pretty quickly, because I know the hour is late, but I think this is really an important project. There are billions of dollars at stake, so I want make sure we also give it the time it deserves. So I have a handout, which the surgeons, I think, should have passed out to you. It's also on our website and on the committee's website, and so I'll try to go through that handout briefly with you.
If you turn to page one on the background, I'm not gonna go through all of this. I just wanna point out a couple things, because I'm gonna come back to them, about recent legislation. So SB one ninety eight, you all are probably pretty familiar with that legislation, but that the legislature really told the authority, focus on Versailles to Bakersfield, and actually specifically defined that segment. So in the legislation, it's defined as an electrified dual track segment between Bakersfield and a downtown station in Merced that also serves the Gold Runner and the Altamont Corridor Express. So that was actually in the legislation.
That legislation also required some additional components of business plans. I think we'll hear about that later as well. And then last year, actually, the legislature added even yet some additional requirements, and specifically for this business plan, the 2026 business plan. So those were added as part of AB three seventy seven. If you turn to page two, I wanted to focus on a few of the major features of the business plan.
There's a lot in there. The first one, and I know there's been a lot of discussion about this, so I wanted to provide hopefully a little bit of clarity about what the scope is for this initial operating segment. So the plan never specifically mentions that the station locations are being changed. That's in a technical appendix, a separate technical document. The plan itself doesn't mention that, however, the cost estimates assume that.
In fact, there are billions of dollars of savings that are included because there's an assumption that we're going to cut off nine miles, and we're going to go to the outskirts of Merced to the outskirts of Bakersfield. So it's a really critical assumption because it affects the cost estimates and other things so much. I wanted to highlight that that Merced station location is not consistent with the SB 198 requirement. It is not downtown. It does not connect to those existing services.
Also, the business plan assumes most, as we heard, most of that segment is single track. It also assumes pretty basic stations. We heard about the just in time, but we're talking pretty basic stations. So the ability 'd need to be additional infrastructure to do that kind of big development. The second point I wanted to bring up is that there also assumed significant reductions in scope for phase one, and a lot of that is related to additional blending of the system.
So we'd have more of the system share existing tracks, for example, with Metrolink. And that does have some time implications. So we likely would not be able to according to the authority, actually, we would no longer be able to meet the requirements under Prop 1A for the travel times. If you turn to page three, we highlight that the plan assumes the approval of a variety of statutory changes. We've discussed that at length, so I'm not going go through all of them, but just wanted to highlight that.
Also, we identify that the plan does provide updates to the funding and the costs of the plan. And I think most of it was covered already, so I'm not going go over that in too much depth. And then on page four, we highlight again that there is this mismatch in timing. So we have greenhouse gas reduction fund revenues that are anticipated to come in through 2045. The project needs them sooner.
So there is this need to borrow, and there is discussion of a P3 as as one potential approach. And then, again, there's a timeline that's provided, and I think we heard about that from the authority. Again, that that timeline is really assuming all the statutory changes that were discussed are implemented and also that there are no funding constraints. So I think those are important aspects. If you turn to page five, we highlight some issues that we think are important for the legislature to consider in reviewing this plan.
The first is, and I think the OIG will discuss this at greater length, I'm not going to spend much time on it, but the draft plan appears not to meet many of the statutory requirements, and I think that's the OIG's analysis, including not meeting any of the requirements in last year's legislation, AB three seventy seven. And so that makes it harder for the legislature to make decisions around the project. The second point I wanted to bring up is that, in our view, the draft plan's approach lacks transparency, and that's because, again, they're assuming that they're changing station locations, including changing the Merced location to a location that's not consistent with state law. That is never clearly identified in their plan. So you could read the entire business plan, and you would not come away with that view.
And we think that's a very substantive change to the program and the plan, and it should be called out so that folks really understand what's happening. It's not just kind of optimization in terms of a little efficiency this is really a scope change in our view. It also makes it really hard to compare costs, right? It looks like, oh, costs are pretty much the same, but it's really a different scope. So it's less meaningful to compare the two.
If you turn to page six, this, I think, is one of the most important points I want to make sure to get across, which is that unilaterally assuming a different location for Merced, we think doesn't really recognize the legislature's prerogative to set that scope. So the legislature identified the scope in law. It's perfectly reasonable to revisit that approach. In fact, we may need to downsize because, as I'll get to, there's not a lot of funding for this project relative to the needs. However, simply assuming that law is going to change in a different location than is actually identified in law kind of assumes legislative action and kind of takes away that authority, whereas I think it would be more appropriate perhaps for the authority to come forward and propose a change, if that's what they're interested in doing.
The next point I wanted to highlight is this is kind of along the same theme. The draft plan assumes a lot of changes to state law, and those are embedded in those cost estimates. So, again, you know, I think that's kind that's an issue where we think it's premature to assume those. Given as we heard, some of them have some controversy, some of them have been things that the legislature has maybe had some challenges passing, or concerns have been raised. They're not simple.
We're talking about CEQA, we're talking about local land use authority, we're talking about lots of things that are difficult questions. If you turn to page seven, we highlight that we think there's significant risk that funding won't be sufficient even for that shorter segment. So it looks on paper like there's enough money, and the authority indicates they believe there's sufficient funding. However, there's no borrowing costs assumed, and that could be billions of dollars. So right there, that could potentially push the project over into not having sufficient funding.
We also think there's a lot of risk. Again, this assumes all the statutory changes are made. We don't know if that's going to happen. They're assuming project savings materialize, including changes to agreements that they have with local government that may not happen. They're assuming they're going to stay on budget, and we know that hasn't always happened.
So we think there's quite a bit of risk here, so it's just unclear to us whether that smaller segment is achievable within the existing funding. And then that kind of brings us to the next point, which is that larger Bursat to Bakersfield segment, and looking at the numbers, we don't think it's likely that there's sufficient funding to do that currently. So again, we might have to value engineer if the legislature doesn't want to provide additional funding because that is likely to be outside of the existing budget. And then there's a very large funding gap for anything beyond. And I know there's a lot of hope that a P3 is going to come and solve it, and it might be part of the solution.
But even the initial responses that the authority got indicated that ancillary revenues at this point, they said, are not considered credit worthy sources of funds to raise financing at this stage. That's a direct quote from their summary of the responses. So I think we're at this point where it's unclear how much that's going to be able to contribute to the capital costs from Merced to Bakersfield. If we turn to the next page, page eight, we talk a little bit about borrowing and the challenges with borrowing, and I want to highlight the Greenhouse Gas Reduction Fund and some of the challenges that are really unique to that funding source. So one of them is that the amount of funding that that revenue source brings in are really dependent on the program structure.
And the California Air Resources Board, for example, right now is undertaking a rulemaking that could potentially significantly reduce the amount of funding that comes into GGRF, potentially threatening whether the authority gets $1,000,000,000 a year. So I think there's a not it would not be unsurprising if, even in the next few years, there is insufficient funding to provide everything in that tier, tier two, to fully fund that. So that it's hard to borrow against a funding source where you just don't know if you're going to have that funding materialize. And then also, there's just inherent volatility. You can have undersubscribed auctions, for example.
So we think there would probably need to be changes to facilitate borrowing. To date, we haven't seen a plan from the authority about what they're specifically proposing or exactly when they would need it, but it looks like probably 'twenty seven, 'twenty eight, so coming up. And then P3s, again, they could be part of the solution, but from a borrowing perspective, if it's just going to be availability payments, that can sometimes be a pretty expensive way to borrow. So I think we're going have to think about the trade offs there. And then finally, on page nine, we talk about the statutory changes really presenting difficult trade offs.
So again, some of them might make a lot of sense, but some of them might also have downsides, and those are going be things the legislature is going to want to really have time to weigh. So the key questions facing the legislature, I start on page 10. Really, all of those flow through. I'm going go very quickly. One is the lack of compliance.
Again, we heard that commitment, so that's great. The second one is what scope the legislature wants to commit to funding. This is an issue we brought forward to the legislature for a number of years, and it's a critical question. What do you want to make sure you fund? Because some of the scope might require significant additional state funding, and if that's the case, where is that funding going to come from?
The next point on page 11 is about the legislature's comfort with the authority's borrowing approach and P3 approach, and whether the legislature has sufficient information necessary to allow it to understand those plans. And then finally, related to the statutory changes, again, does the legislature have the information it needs to make sure it's comfortable with whatever is being proposed? So those are my comments. Thank you for your indulgence at this late hour. Happy to take questions at the appropriate time.
Speaker 13
Good evening, mister chair, members of the committee. My name is Ben Belknap. I'm inspector general of the High Speed Rail. I have Mark Reinhardy with me, my chief deputy, here to answer questions. One of my office's responsibilities is to review the authority's annual reports.
A state law sets forth a series of required elements for business plans, including a requirement that the authority's cost estimates be prepared in such a way that stakeholders can compare current estimates with cost estimates from previous years. My office has reviewed the draft business plan and has found that it falls short of complying with statutory requirements that allow the legislature to have a clear view of project conditions and to be able to hold project officials accountable for those conditions. Staff has provided you with a series of tables that summarizes my office's assessment of the completeness of the draft business plan. As indicated in Table one of that handout, the authority's draft business plan includes most of the original requirements established in state law. However, as indicated in Tables two and three, the draft business plan does not comply with newer, more specific requirements established by SB 198 and AB three seventy seven.
I will focus my remarks on three areas of deficiency. First, unauthorized changes in the statutorily defined scope of the Merced de Bakersfield segment second, the inadequate funding plan and third, the absence of projected dates for significant procurement related milestones. In its draft business plan, the authority provided the legislature with a cost estimate schedule for a shorter, largely single track system that does not have a station in Downtown Merced and has no connection to the Altamonte Court Express, which does not comply with state law. As a result, the legislature has no ability to compare the cost estimates in the draft business plan to previous year's reports, which then limits the legislature's ability to question why, scope reductions aside, costs for the Merced to Bakersfield segment have actually increased by hundreds of millions. According to the authority's draft business plan, these project scope reductions, often lumped under the term optimizations, have contributed to a one year delay in the baseline schedule for the Merced to Bakersfield segment.
So not only is California getting less train under these scope reductions, the redesigns and delays in procurements associated with these optimizations have pushed out the project delivery date at least one year. These facts are obscured by the presentation of the draft business plan and the legislature is thereby limited in its ability to interrogate why costs have risen and schedules have slipped and what can be done about these problems. The second concern I will discuss is the lack of an adequate funding plan. SB 198 requires that the authority prepare a funding plan for the Merced To Bakersfield segment. The recently enacted AB three seventy seven provides more detailed funding plan requirements, including a timeline of when funds need to be received to stay on schedule.
Speaker 17
As indicated in Table three, we found the authority to not comply with these requirements in this draft business plan. The authority acknowledges that, to stay on schedule, it needs financing to bring future Cabin Invest revenues forward to pay for near term project expenses. Although the authority has information on when it will need this financing and it has the ability to estimate how much this financing will cost, it has not included this information in its draft business plan. In fact, when the authority provided estimates of the total cost of the Merced to Bakersfield segment, it does so in a way that does not include any cost for needed financing, which the Authority previously estimated could approach $4,000,000,000 The effect of this decision is that the Authority is able to show in its draft business plan a funding surplus on the segment, a portion of which it has argued it would like to spend outside of the segment. With the recent loss of $4,000,000,000 in federal funds, there is no funding surplus on the Merced To Bakersfield segment.
Speaker 13
Dollars spent outside of the segment are not available to complete the segment. Further, until financing is put in place, cash on hand will be leveraged a leverage resource needed to keep multiple parts of segment construction moving forward. Therefore, in the near term, any dollars spent outside of the Mercedgett Bakersfield segment will have an outsized impact on the authorities' ability to keep the segment on schedule. This is the type of information that is obscured by the lack of an adequate funding plan in the authorities' draft business plan. Final one third: missing procurement milestones.
State law requires the Authority to include in its business plan additional milestones that are necessary to complete the Merced to Bakersfield segment. The completion of key procurements, including the design and construction of segment components, are critical milestones that allow stakeholders a clear view of whether the project remains on schedule. Although the Authority has information on when these procurements must be accomplished, the authority's draft business plan does not detail these dates. Thus, when the authority experiences delays in these procurements, project stakeholders do not readily recognize that procurement delays have occurred and do not have an ability to see their impacts on the schedule. In conclusion, the authority has indicated today that it's going to be adding those missing elements into the final business plan.
To be clear, those elements should have been in the draft business plan that was submitted to the legislature for your review. Providing an incomplete draft to the legislature limits its ability to effectively exercise its oversight role. This is the fourth annual report of the authority I have reviewed as Inspector General and, as I have expressed in the past, I am concerned that the authority appears to be making strategic decisions about what information it shares in annual reports. Clear, reliable reporting of project conditions and estimates is not an ongoing strategic decision but rather should be a function of well established process and reinforced culture. This draft business plan demonstrates that the authority needs to make improvement in both of these areas.
With that, I will conclude my remarks and be available to answer your questions.
Speaker 1
All right. Thank you for the thorough reports. We'll come back to Senator Blakespeare and then Vice Chair Strickland and then Senator Syarco.
Speaker 5
Well, this is a disaster. I mean, I am such an enthusiast for rail, and I really want this to be successful. And just hearing these things makes it seem like we're this is we're proceeding on a wing and a prayer, basically, that we're we don't have a way to finance it. We have changes to the plan. We don't know what's actually going to happen.
And we don't have accurate information. I guess I want to ask the committee if there's anybody available from the High Speed Rail Authority to come back up and answer some of these questions.
Speaker 1
Thought they answered most of them about the station locations, for example, earlier.
Speaker 5
Yeah. Can we go over this the decision making around moving the station location and not having that be reflected in these documents and not having approval to do it?
Speaker 7
I'm Mark Dulson, Chief of Staff at the Heisbury Rail Authority. So as CEO Choudhury had mentioned, we are in active conversations with communities who have brought additional ideas to us, and we've worked with them to see if there are opportunities to get into communities faster and more economically. So we are looking into that. Our draft plan does reflect, those changes. I think we have been clear that any of those changes that would be made would require the legislature to weigh in on those changes to, SB 198.
So our plan does reflect some of those conversations, although, as the CEO had mentioned, we have not finalized any decisions there.
Speaker 5
I mean, the LAO information seem perspective seems to be that it's not even clear that that's actually happening, but you're proceeding with a smaller footprint that goes fewer miles because the train location is actually moving. So, you know, being in conversations with communities, that answer seems like it's obfuscating.
Speaker 7
Well, what I would say is that we are still having those conversations. But in terms of the draft plan, we do need to outline what those cost assumptions are based on. So those are based on a South Merced station and a North Bakersfield station.
Speaker 5
Okay. I mean, I would like to understand more, though, about train location is really important. So, there are existing assets within that community that there was a vision of them being served. And so, now, if it's going to some outskirt area I mean, I'm not intimately familiar with these communities, but it does seem like these are huge decisions. And they need to be made consciously and with a full involvement of the legislators who represent that part of the state and the local elected officials.
And, you know, it doesn't appear to me that that is actually happening. I mean, what is actually happening in terms of this decision making? Is it is the decision made?
Speaker 7
The decision has not been made. So we continue to have conversations with the city of Merced, County Of Merced, the COG there, around different opportunities. So there is a sphere of kind of pathway of development towards that South End Of Merced. And There's been interest by the local government there to explore those opportunities. So that's what we're working with them on.
We've been having conversations since actually post the release of our supplemental project update report. So I believe it was maybe our October board meeting where we had significant comment from the local communities, and our CEO made a comment to say, We'll continue to work with you on ways to get to your community faster and you know, more economically. So we have done that. We do have letters from both the city and county coming out of, I believe it was a January council meeting and a January Board of Supervisors meeting to say that the community did support exploring that opportunity and working with us on a potential station move from downtown to South Merced. We have not made any final decisions there but are continuing to work with those communities on what that could look like.
Speaker 12
Yeah. I think one thing I would add is that I think what would have been most appropriate for the authority to do is, in their business plan, have the full Merced to Bakersfield, as was envisioned in 01/1998, say this is what it would cost, and then say, okay, we're in conversations. We might reduce it. Here are some options for reducing it, or here's our proposal for reducing it. This is how much we would save.
Speaker 15
So the so one, it was very clear that they were reducing the scope, because again, if you read the document, if you don't read the basis of cost report, which came out a couple of weeks later and is a supplemental document, kind of, that probably most people don't read, unless you read that, you would not know that these station locations are changing. It is not clearly identified in the plan anywhere. And so I think it's not very transparent. And again, it's certainly appropriate to consider additional other locations to propose changes to SB 198, if there's agreement that that makes sense, and the legislature can consider that. But that should be done in a transparent way, and it should be clear what those cost estimates assume, because sort of suggesting there are various optimizations, and, oh, we've saved all this money on this without identifying, that's because we're assuming cutting off nine miles, the part that goes through urban areas.
Speaker 5
Yeah. I mean, it definitely appears deceptive. So, you know, the high speed rail authority proceeding with a clear understanding, clearly saying to the legislature and to the public, this is what this is going to cost. If we want to shave off nine miles to save money and go out into the suburbs, we could do that. It does this really does appear deceptive.
Do do you wanna respond to that? Because I I find myself feeling really angry about that. I I wanna support this project, but I also don't want it to be adrift in us to have no oversight and no ability to be able to engage with it.
Speaker 14
And, Senator, to your point, I think we have been transparent in those communications with the communities. I will say that as far as a North Bakersfield approach, dating back to our 2024 business plan, that was proposed as a potential ability to stop short based on where our federal grants allowed us to go. I think for us, we are still committed, if we have full funding, to get beyond Bakersfield to Palmdale to build that downtown Bakersfield Station. What we are working with them is to see if there is a desire from the community to look at opportunities to build a potentially temporary station on that North Side Of Bakersfield in the interim until there is full funding to really develop out the full system, getting not only to Palmdale but beyond. So those are active conversations, and we're trying to be responsive to conversations with both the city as well as the county.
Speaker 5
Okay. Well, I just want to express my dissatisfaction with this process right here. And I I I was, on the committee that was, interviewing the candidates to be the inspector general, and part of the the whole focus of that, and that we have an inspector general, is we want to know what's going on. And the legislature can't You know, you're not The high speed rail authority is not operating underneath Caltrans. It is its own part of the government, and we need to be able to have you disclose, as required, as we the legislature continues to give enormous amounts of money to the high speed rail authority every single year.
So, I just really want to emphasize the importance of listening to what they both said and actually doing it. You know, not having a fifth year where the document that's produced is obfuscating the facts and suggesting that you're doing cost savings or optimization when really you're changing the project. And if you need to if we need to be if you want to propose legislation, there are ways to do that, to say this is what we want to change the line to be. But where the track goes and where the stations are are hugely important decisions, and everything will flow from that. And so the idea I perceive what's happening is that there's you feel bad that it's costing so much, so you're changing things so that it can cost less.
But then you're not telling us that you're doing that, and we could very well end up with something that we didn't expect. And then, again, say, What were we doing? Why did we build it here? And it's, well, we didn't really realize, and then all of a sudden, track was laid and we didn't realize. And I don't want us to be in that position.
Speaker 7
So I just I really want to emphasize, you know, when we were going through the cap and trade renegotiations, the discussion about accountability and what do we expect from the high speed rail authority and what does accountability look like, and part of it, having the inspector general and having the LAO provide this documentation and look in detail at all the supplements and all the information and let us know what is actually happening, we shouldn't have to have that. We should have the information provided directly from high speed rail authority and not be in this position. So I really, in the strongest terms, want to express that I'm diss atisfied by that, and you should try to keep your champions champions. I mean, I am one of the very few very strong champions for this project and all rail in the state, and you want us to continue to have confidence in the project. So, yeah, with that, I'll yield back to the chair.
Speaker 4
Well, one thing I do agree with my colleague from North San Diego County is it's a disaster. I've been saying this for years. When you go through this, I have a lot of questions, so bear with me. I want to go through some of the projects. So it goes from double track to single track, and that's a violation of our current law.
So we would have to change a law hearing in the legislature in order to move forward with this plan on on that single track, double track, or is that not the case?
Speaker 12
Yeah. So both so SB, one ninety eight both identifies that station location, and it mentions the electrified dual track. Now, you know, I think the authority ultimately may want to build dual you know, I think sort of what's technically required under the legislation, there could be some, discussion about that because I think and and I don't wanna speak for the authority, but I think that they have indicated in the they hope eventually to build a second track. So the fact that they hope eventually to build a second track, does that comply is that sufficient to comply? I guess I would argue probably not.
But and I would argue that if they want to do the plan as they're proposing in the cost estimates, that they're assuming that they would ahead.
Speaker 4
Thank you. If I can go again, I'm sorry about the long questions, but single track to double track from double track to single track, we have the law already in place on that. I get why you're doing it, but wouldn't that also be sharing with freight and Metrolink? And if you're sharing the same track, how is it going be high speed going from L. A.
To San Francisco?
Speaker 7
So today, as we build out that infrastructure in the Valley, as our CEO had mentioned, we are still intending to build a dual track system, San Francisco to Los Angeles. We are building the infrastructure that we need today in the moment. So what that is getting from Merced to Bakersfield, allowing us to still run high speed service, that would be done with single track and passing loops, essentially, building the double track where we need the double track today as we continue to build out the system. So as far as SB 198 is concerned, our intent is to still build out an electrified double tracked system. We are just sequencing it in a way that we believe makes the most sense from an infrastructure maintenance perspective and the infrastructure that we need for the train sets that we'd be running based on the ridership.
We will continue to build that out. I think the restrictions under SB 198 today, until we have that built out system, we wouldn't be able to spend dollars outside of Merced to Bakersfield. That is a conversation that we want to continue to have with the legislature as we bring in, private partners. If there would be the openness to allowing those expenditures So
Speaker 4
we would have to come back to legislature on that? Yes. Okay. That's one of the questions I wanted to ask. Also, you mentioned, Elio, that this plan has no borrowing cost assumed.
And you used the term in your document that's a risk, a lot of risk. Do you want to elaborate on that?
Speaker 12
Absolutely. So, again, cap and invest revenues, these GGRF revenues, are anticipated to come in through 2045. So we're banking on revenues that come in through 2045, but we're gonna need them we're gonna we're assuming that we're gonna have an operational segment here by 2033. So you need to pay for that operational segment at least by then, right? So you've got to have to have some borrowing.
And typically, people want money in return for giving you their money to borrow, so typically there would be a borrowing cost. So we think that it's appropriate to outline what that cost would be and to include that in the assumptions. And again, as I believe the OIG mentioned, some past work that they've done has identified that past high speed rail documents have estimated that cost potentially at about $4,000,000,000 So if you add that $4,000,000,000 in, you no longer have enough money. And so, again, there's a lot of uncertainty depending on what that is, but it's, we think, important to include some borrowing reasonable borrowing cost.
Speaker 4
And you mentioned the term risk and very large funding gap. What how large is the funding gap in your opinion, and what are the risks when we go into a situation like that when we don't have the resources? I mean, what are the risks?
Speaker 12
So I think the large funding the particularly large funding gap is when you get outside of that Merced to Bakersfield. And then you're looking at potentially tens of billions of dollars. And if you proceed and start doing work outside of what you have funded, you could have an issue of, one, diverting resources from that core first initial operating segment that you want to get up and running, and also you have the risk of potential stranded assets. Right? You buy property out in other places, and you can't build it because you don't have the money.
And the other thing that can happen is the legislature can have it kind of its back against the wall because it's like, oh, well, we already have this, you know, right away, we already started building, oh, I guess we need to pay for it. So that seems like a backward way to approach it. We think it's important to have a funding plan upfront. This is how much it's going to cost. This is where we're going to go at the funding.
There's, you know, there'd be agreement on what that funding plan is before proceeding with work that there's currently.
Speaker 4
So in your professional opinion, do you believe that we have a major funding gap and cash flow gap within this plan?
Speaker 12
So I think for Merced to Bakersfield, there is a significant cash flow issue, and there is potentially, depending on what the scope is, a funding gap there as well. And I think anything beyond that, there is a large funding gap, a very large funding gap, so getting So outside of the Central
Speaker 4
based on kind of the funds, the legislature's already dramatically put aside from cap and trade or cap and invest. Even with all that, with the legislature, we still are how far behind in terms of getting this project even beyond life support.
Speaker 12
Merced these numbers that we've been talking about Bakersfield. So Merced to Bakersfield, we're probably if it's the SB 198, we're probably least a dollars we're probably a few billion dollars short. We haven't seen I think one of the challenges is, because of the way that this document is done, and the fact that there is no cost estimate for Merced to Bakersfield as defined by SB 198 provided. So we don't really know, but based on information that we've received, it seems likely that it's at least a few billion dollars more to do Merced to Bakersfield as defined in statute than what's identified here. And so there's probably a few billion dollars worth of funding gap there.
Speaker 4
Where we are right now in terms of the commitment of funding, is it realistic that this plan moves forward to go up from LA to San Francisco?
Speaker 12
I don't think we have seen yet a viable funding plan to do that. So at this point, I think there's a lot of lack of clarity about what that plan would be.
Speaker 4
So I'll just and here, I probably have some other questions, but I just I think I made my point. You know, with the significance of what we've already done Oh, one other question. I don't know for any of you. Have we violated anything when we passed one a? Because this has changed so dramatically since the voters originally passed this program.
Are we opening up ourselves for court or lawsuits because such is the dramatic change from the original initiative back at one a back in, what what was it, 2012? Are are we exposing ourselves because we've now dramatically changed this whole program, this whole project? And that's for any of you to answer.
Speaker 13
I don't know the answer to that question. I I think that You'll start. I'll I'll I'll put it in the back of my brain. We'll consider it. But but right now, sitting here, I wouldn't be able
Speaker 4
to answer. I would love to have an answer to that question because, again, this is so much different than what was first proposed to the people of California and dramatically. And and we don't like, look, I've been on record. I don't believe this will ever be built the way it was proposed to people of California. But say we're moving forward.
This has changed so dramatically. Are we exposing ourselves to some tort reform or some not tort reform, some lawsuits because we moved well beyond the authority the voters gave us?
Speaker 12
So I'm not an attorney, I'm so I weighed very carefully here. I think I would say that though, that, for example, this new blended approach one of the reasons why the authority originally had more dedicated line is because it's faster. So one of the changes that's being made here is blending now South Of Palmdale. That additional area that they're going to blend, again, it may make sense to use more existing line. That's something that we could weigh.
However, it's slower. And the responses I got when I asked the authority about their anticipated travel time, the response I got was actually somewhat different from the one that you heard from the CEO. The response I got in writing was that it would take three hours and twenty six minutes to do that, which is still pretty fast, so it's still nice, but that actually is higher than the design speed in Prop 1.8. So whether that would be a legal issue, I don't know. Again, at this point, we're kind of pretty far into spending Prop $1.8, But I think that's one area where I think intentionally, originally, it was designed with more dedicated track for that travel time, and now we're kind of moving away from that.
Speaker 4
Okay. On my own time, as I said earlier, there's so many things in this plan. Look, I get where the authority is going for in this plan, but there's so many things that I don't think the legislature is going be comfortable with within this plan. Not to mention the financing part, just some of the provisions that have to go forward on this plan. I'm going to be pleasantly surprised if this plan and some of the things you're asking the legislature to to undo do what they've been doing over a long period of time.
I personally don't think this plan is realistic, both from a financial and from that point going to legislature with the statutory changes. And when we talk about the total amount, LAO, again, I want to make sure it's on record. Right now, the projection without the borrowing, LA to San Francisco is $231,000,000,000?
Speaker 12
So, yeah, that would be without borrowing, and that would be that but that would be I think one of the things to clarify is that's without the sort of changes in the scope that the authority is proposing. So now they're proposing blending and other things that gets that cost down to, I think, dollars 126,000,000,000.
Speaker 4
But that's also without borrowing. Right. Correct. So now we're talking about a project. When this was originally put forward to the people of California in 2012, the whole entire state budget was less than 100,000,000,000.
It was 98,000,000,000. So you're talking about something that was one project that's more than the entire state budget was ten years ago and, quite frankly, almost what this whole state budget is today, and we're spending a lot of money. We have a lot of again, we're moving forward with a deficit this year, maybe next year, and we are committing so many billions of dollars from state coffers on top of the cap and trade, that also is adding to the cost of gasoline prices to the people of California. I just personally believe, when you talk about that funding, the funding should be going to other places. I think there's shovel ready projects around the state that are better for the people of California.
For example, I'm in Southern California. There's a lot of need for infrastructure that would help out with the World Cup and the Olympics that's probably better for the entire state of California than this one project. I respect the people coming forward. They're trying to do your best out of a situation that, quite frankly, has gone on. And you're you're running into the same thing that a lot of folks, run into in the state of California.
So much, has to do with the permitting and everything else and the cost. I get what you're trying to do, but at the same time, I again, I don't think this plan is realistic, and I will go on the record again to say this plan will never be built as proposed by the people of California. And I'll yield back to the chair.
Speaker 11
Thank you. I like this congressional yielding back to the chair staff now. Yeah.
Speaker 11
It's a kind handoff back indicating we're finished our comments. Hey, I had one question regarding AB two thousand eight seventy nine. And I believe we have a change order that's going to be voted on. Is that tomorrow? It's in closed session.
Does that get reported out after closed session? Is that how it complies with AB two thousand eight hundred forty nine seventy nine?
Speaker 7
That's correct. It will be discussed in closed session and reported out at our board meeting.
Speaker 11
Okay. Do we know what that is about? Or is I realize sometimes closed session items are sensitive items, but the whole idea between twenty eight and seventy nine was for us to understand change orders as they were coming to us. And now we're gonna find out after the fact what the change order is as opposed to should we be change should we be going down that road?
Speaker 7
Yes. So what I'd say to that is that our Board and it's, I believe, its January meeting, met and did report out and subsequently provided additional settlement authority up to a certain amount. We are continuing to work with our design builder to figure out how we can actually get that into a formal change order. That will be discussed in our Board meeting on Wednesday.
Speaker 11
Okay. Thank you. So one of the things, and I think the LEO mentioned this a little bit, but one of the things that's keeping this project alive is the sunk cost argument, how much money we have already put into it. And I feel like diverting funds to try to sink some costs in some of the other areas is done for the purpose of us going down that path with that part too. Because it's not just, you know, sunk cost that we're putting in, you know, there's a lot of people whose jobs are dependent on a project continuing on.
And and so there seems to be this effort and I think the very informal term is to bamboozle us into supporting something that we can't normally support the way it's going and we don't really have an off ramp for this project. It it it gets, you know, really difficult to say we just can't do this. And and I feel like we're getting closer and closer to that. And and this is kinda like the thrashing about before you you finally go, you know what? You're right.
We can't do this. I hope that day doesn't come. I hope we have some miracles, but I don't know that we're going to. And we need you know, in the meanwhile, this board and and and the legislature, we we wrote those laws for a reason. It was so we would be fully informed of what's going along so we could hit the off ramp if we needed to.
And and right now, feel like sometimes we're not being we're being led away from the off ramp with variety of of ways to do it. And and and that that that like senator Blake Spear said, that's annoying to me because I I do wanna be helpful. But at the same time, there are so much so many things that we need to attend to in this state. And if if the answer is we can't do this in this this state right now because of the way the state is, that's the answer. And and that someday we're gonna have to come to that realization and and take the appropriate action.
So appreciate you all being here today and and giving us a chance to hear the good, the bad, the ugly, and appreciate your honesty on all this. Thank you.
Speaker 7
And Senator, I do appreciate, you know, the perspective there. And what I will say is that, you know, from the authorities' perspective, we do believe that we've laid out a viable plan to deliver Merced to Bakersfield within the funding that we have available. Yes, we do need a tool to accelerate those funds forward, so we can actually deliver on a 02/1933 schedule. We continue to work towards that, but we do believe that we can get to operations by those dates with the plan that we've laid out today. As it pertains to the broader Prop 1B, I, again, don't want to play lawyer up here, but ultimately, when we build out the full system, San Francisco to Los Angeles, the intent is for a fully Prop 1A compliant system that meets all of the requirements in terms of travel times.
We do have legislation. I don't have the number in front of me, but it does allow us to build this project in the building block approach to ultimately get to that ultimate build. So that's what we're laying out in our plan. We do lay out options of how we could deliver the full system as proposed by 2038, 2039. That obviously takes significant capital upfront, as we've talked about.
But as far as Merced de Bejesel is concerned, we do believe that we have a viable plan to deliver.
Speaker 1
Okay. Thank you. And just a couple real quick questions and get us out of here. One, to the LAO. Is it in terms of the statutory authority, you can maybe Mr.
Belknap should answer this actually. Is there somewhere in the PER that you can point to where the high speed rail authority has said that they are going to move forward with station relocations or alignment changes without authorization from the state legislature? I mean so they're not out of compliance yet?
Speaker 13
No, I don't believe that they said they're going to move forward without authorization.
Speaker 1
The CEO was here and himself that those proposed station relocations are not under contract yet. The negotiations are still going on. Yeah. So your fear is that they will be out of compliance if the legislature doesn't act?
Speaker 13
No, our criticism is that the cost estimate and schedule that's in the business plan is built on a different scope than
Speaker 1
most So of the if you were you know, I'm trying to get you to be constructive here. So if you were building the purr yourself, would you wait a year to let this body know that you wanted to negotiate different station locations while the legislature's pursuing statutory changes, which as you know takes some time from January to February until October when the governor signs the bill. Should they wait? Should they call time out and wait before they continue discussions with Merced and Bakersfield? No.
Or should they continue discussions with Bakersfield and Merced and leave it out of the PRRR so none of us know what's going on?
Speaker 13
I think there's a way to do both. You would do is you would lead with, this is the information that's required by state law. These are the cost estimates and schedule that comply with SB 198. Here's the information. And it would present a problem because those dollar amounts would be higher.
And then you would say, here's we have available solutions. One is the state could give us more funding. Okay? So maybe that one's not so viable. The other is we could do scope reductions.
And here's where those savings would be, and this is what we would need.
Speaker 1
But that's assuming that they're just doing that for reasons of scope reductions only. Has it occurred to you that it's possible that when you go talk to the city and county of Bakersfield, especially the city, about building a high speed rail station. This is not a commuter station, as was implied by one of my colleagues. This is a high speed rail station. It's bigger than most of the malls that you'll find in California, and bringing in potentially what's going to need to be double tracked, at least in the downtown area, to set up for the eventual double track in a four or five square block construction zone in the middle of Downtown Bakersfield, that maybe the people in Bakersfield are saying that's going to cost you a lot of construction mitigation.
You're going to have to pay for the relocation of our businesses. You're going have to pay for trench plate up and down our streets. You're going to have to pay for with the disruption of aquifers underneath our streets, pipes that we don't know where they're mapped because they were laid into the ground one hundred and fifty years ago? Is it possible that a prudent builder, developer, like the CEO who's built high speed rail all over the world might be going in and saying that's the disaster that's waiting to happen. Us going into Downtown Bakersfield and doing what's currently envisioned or was by his predecessor, not necessarily by the original proposition?
Or does it make sense to stay just outside of the downtown frame somewhere with this massive station and do it much more efficiently? Yeah. I understand. I didn't see that called out in your report. I I I love working with you, but I'm just looking for a constructive approach to this.
I appreciate your last comment because that was constructive. Lay the report out differently. That's a good suggestion.
Speaker 13
I do think, Senator Cortezi, it's important to understand that my criticisms that you see before you in those tables is of the business plan. Meaning, how is it laid out? Does it comply with state law?
Speaker 13
Now it isn't necessarily a criticism of the project and their thoughts on how to move forward with it. My criticism is this plan is not transparent. There is a way to do it that is transparent, and I would encourage them to do that, which would lay out lay out options for scope reductions in a way that would be transparent for you and your body to to review.
Speaker 1
Right. He came here to evidently to be transparent because I thought he answered those questions. I thought he clearly answered the question that you seem to call out to the LAO as if it was never stated at all. He clearly said, and I'm going to paraphrase, but clearly said, in equivalent words to what I'm going to use, that if we aren't able to bond against, we aren't able to borrow against the GGRF money, we're not gonna be able to fund Baker Schulmer said. That conversation's been going on with the legislature for a long time, through the entire GGRF process, through the cap and invest process.
The people who were here who served on the cap and invest study group know that. So I thought that was a very honest oral augmentation of the draft report coming in here. When I asked those questions, response was, yeah, we're not going to get there. I haven't heard from this CEO ever any representation that you're going to get beyond Bakersfield to Merced without significant new funding sources. But if I hear it being called out as if it's not being said by high speed rail, is that your allegation or assertion, or is that your report telling us what we already know?
We already know? Think everybody in this building and the next building over know that we don't have enough money to get beyond Bakersfield? Is that the epiphany of today?
Speaker 12
So, yeah, that is not we have said that, I think, in a number of analyses over the years, so I don't claim that this is the first time we've said we don't have enough money to get outside the Central Valley. A couple of points I wanted to make. Yes, the CEO indicated that they need to borrow. That's also been something that the authority has mentioned for for a number of years. That's been in a variety of different business plans and project update reports.
We're not alleging that that was not clear. I think what we mentioned is that there's no cost that's tied to that. And then on Bakersfield How
Speaker 1
would you put a cost when you haven't locked down the station locations yet? Because there are no contracts for that, because converse to what has been implied in the report, they actually haven't committed to those stations yet. Isn't that a damn good reason why there wouldn't be a cost number? So Other than the cost estimates that are actually in the report? Yeah.
Because they do have those.
Speaker 12
The cost estimates in the report assume a specific station location. That is assumed that's how they came up with the numbers.
Speaker 12
Right, right. And so is while that could change, that is the assumption in there. And the previous locations were also, you know, ones that were known, right? These are ones that have gone through processes, including the the Bakersfield station. There was I mean, there already, this is we're at the locally generated alternative because there were conversations with Bakersfield on that.
There are real trade offs, and we don't mean to minimize the real trade offs in the station locations. Yes. If you go downtown, you're gonna have more conflicts. You're gonna have to take more properties. You're gonna have more, you know, your potential issues there.
On the other hand, you could have some ridership benefits. So I think it's important for the legislature to understand what's being proposed and what those trade offs are. Again, there could come to different decisions. With Bakersfield, also, I just wanted to note that this station location is not what the authority intends to be the permanent station. So this North Bakersfield station, they are intending to be a temporary station.
They would ultimately build that one that's more in the kind of more central part of Bakersfield. So it's not my understanding that they have made a decision that this is a better station. In fact, they're anticipating eventually moving away from this station location, or at least creating the other station and location as well. So, again, you know, there are tradeoffs with any location, but really having that information so that the legislature can make those informed decisions, I think, is what we think is most important.
Speaker 1
You think it's more prudent for the state legislature, on an ongoing basis, to lock in by statute the nuances of the project, the alignment of the tracks, the sequencing of the tracks, the exact locations of the stations, or do you think it would be more prudent to work with local land use jurisdictions like the city and county of Merced, the city and county of Bakersfield, who have land use control that the state doesn't have, allow a living transformation of the construction documents and the critical path as obstacles are determined, as political negotiations come to be, as people get elected and not elected? Or is it better for us to just lay down the law literally and say for the next ten years don't make a decision other than what this statute says? What's what's the better way to proceed? I I don't know what your constructive background is. I have my opinion because I've built things.
Speaker 1
And I I'd have a hard time. I'm just gonna tell you my answer to the question with somebody telling me, go build that project. The state legislature, though, says you can't change a damn thing on it. You got to start today and finish the project in five years, and no matter what you encounter, you're not going to change it. Is that the way we should do it?
Speaker 12
I think there's a real trade off, right? I think one of the challenges was
Speaker 12
No, absolutely. And I think one of the challenges, to be fair, that the authorities had over the course of this project, is that Prop 1A had a number of prescriptive things, and that's been a challenge for the Is she
Speaker 12
Right. No, with 01/1998 specifically, I think it depends on what the legislature's priorities are. If the legislature really cares about some specific thing, we you know, it certainly is the legislature's prerogative to memorialize that in statute as was done. If but the of course, the legislature could change that. But, you know, there is a trade off, so you probably wouldn't wanna get down to the minutiae on every single thing.
Right? It's finding those priorities where if there are certain things that are priorities, then those or especially if there's guidelines or kind of guardrails, those could make sense. But I think you're absolutely right. You can get into the position where you are too prescriptive, and there isn't that flexibility. So you do have to weigh those, I think.
Yeah.
Speaker 1
All right. Thank you. I appreciate it. Appreciate the panel's discussion, and kind of a deeper dive into all these things. Appreciate you coming forward and answering questions.
We didn't really have that planned out, although we always know that that's a possibility. Witnesses will have to come back up and answer questions. So appreciate all of this. Obviously, there's going be a lot more discussion going forward through this legislative session. There are bills in progress now and of course in the months and years to come.
It's good that I think we have tension about it because I think the tension is going to make for an ultimate set of decisions that are much better than they would be without tension. So thank you all for helping us provide that. And we're going to now move to public comment. If you'd like to come up and speak, as long as it's relevant to the high speed rail project, you can come up and speak for a minute. And if you're starting to go over, I'll give you an alert about that.
And thank you for your patience, all of you members of the public or whoever you're representing. We appreciate you sticking it out until 06:45. Thank you.
Speaker 4
Good evening, Mr. Chair and members. Marcus Detwiler with the California Special Districts Association, CSDA. CSDA joined a number of other local government associations, including the Illegal California Cities, the California State Association of Counties, the Urban Counties of California and the Rural County Representatives of California and the California Association of Recreation and Park Districts expressing our concerns with the draft 2026 High Speed Rail Authority business plan. I won't regurgitate the entire letter here for you.
Speaker 15
I will merely highlight our chief concerns. Our chief concerns include and center on the tax increment financing proposal. CSDA believes that any such proposal should not proceed without the express, meaningful, and freely given consent of any of the affected taxing entities. And we continue to have concerns surrounding the land use provisions that are discussed in the business plan. Thank you.
Joe you. Next.
Speaker 11
Joe Thank you. Good evening, Mr. Chairman members. Dylan Elliott here today on behalf of the County Of Merced as well as San Francisco. Align a lot of my comments with what was just said before me from the speaker before, but really just want to speak today about the TIF or local increment financing.
Speaker 16
Just got some concerns about what that could look like for a lot of the reasons already outlined. Really would just appreciate some more clarity as to what local jurisdictions are asking to be in response to. Thank you very much.
Speaker 16
Good evening. Keira Ross, on behalf of the City of Burbank. We appreciate the conversation and information relayed to this evening by the High Speed Rail Authority, but remain very concerned about the potential impact of the current alignment to the City Of Burbank. The High Speed Rail Authority is currently planned to include a station at Burbank Airport and continue through Burbank to Los Angeles. The current alignment would significantly impact the portable water infrastructure at an EPA designated Superfund site.
Speaker 17
We believe that the authority is underestimating both the complexity and regulatory implications of relocating wells that are over 30 years old, as well as updating the state and federal drinking water permitting requirements. I would also note the opposition by the cities of Burbank, Glendale, Stockton, to the proposal by the High Speed Rail Authority to create the state controlled tax increment financing. And I'll just echo the comments that were previously made on that.
Speaker 18
Good evening, Chair and members. Carlin Shelby here on behalf of the Trans Bay Joint Powers Authority. TJPA strongly supports the continued progress reflected in the 2026 business plan. We really want to underscore one key point, that the system approved by voters under Proposition 1A was already intended to run from the San Francisco Transbay Terminal, now the Salesforce Transit Center, to Los Angeles and Anaheim. That endpoint was formally adopted by the authority in 2010 and reaffirmed by San Francisco voters.
While the plan references the 4th And Kings as an interim terminus, it's critical that this is not the default endpoint. The system must be completed into the downtown San Francisco, terminal that requires the delivery of the portal, the final connection to the Salesforce Transit Center, which is already built and designed to serve as the northern terminus. We also really want to urge the authority to reaffirm its prior $550,000,000 commitment to the portal in the final business plan, which is essential to advocating for this project and advancing it for matching federal dollars. Thank you.
Speaker 19
Joe Mr. Chair and members, Damon Cockton with the League of California Cities. You know, we recognize the significant financial challenges
Speaker 19
authority faces and appreciate some of the innovative ways and creative ways of overcoming some of those challenges, but with specifically the TIF and diverting local resources, that is a hard line for us. And we recognize the chair's earlier comments about establishing some good partnerships and some trust, but unfortunately diverting local resources for a state project and possibly, you know, reusing property taxes from one county to another would violate. We think there's violations of some questionable legal precedent there and constitutionality. So for those reasons, we're opposed to it.
Speaker 19
Afternoon. Eric Dehart, Fire Chief, Urban Consolidated Fire District in San Joaquin County. Our district serves approximately 22,000 residents. We operate one two person engine company and one two person ambulance. We do this on a lean operating budget of 4,300,000, which may sound significant, but when the majority of that is eaten up with staffing, then considering that fire engines are now costing over $1,000,000 ladder trucks over $2,000,000 every dollar matters.
Speaker 6
About onethree of our revenue comes from our share of the 1% local property tax. The high speed rail authorities draft the business plan proposes to capture that future growth. And while impacted, the broader implications are certainly very significant. At a time when the state is encouraging housing growth and increasing population density, reducing funding for fire protection moves us in the wrong direction. And for these reasons, I respectfully urge for you to oppose any proposal that reallocates critical funding like that.
Speaker 14
Thank you, Mr. Chairman, members of the committee. I want to Keith Dunn here on behalf of the State Building Construction Trades Council. I want to first thank the chair, as the only other builder here that can talk with some authority about the impacts of some of these developments, what it brings to communities. I understand the concerns of the tax increment financing.
They used to do it regularly here in the state of California. I think we've all seen, and you mentioned in your home county what it's done to transform your childhood home to a place that you probably wouldn't have thought possible as a youth. My parents grew up in Fremont. I understand the impact that that's had. Not all of it's welcome, but it definitely brings in additional resources.
So as the authority moves forward and looks at opportunities to finance, you know, when this project was first contemplated and set at 33,000,000,000, they weren't handed $33,000,000,000. They never had that revenue. This project has never been funded in a way that it should be. I wish that it was. It hasn't been.
Speaker 12
But I'm very encouraged by the CEO who's looking at this from a pragmatic perspective and looking to save dollars. I wanna remember that as we look at the the rail procurements and different procurements that he has stated out in his plan to save money. So let's empower him to do it. He's the only guy who's ever built these systems. We're lucky to have him.
Speaker 1
Appreciate your comments. Appreciate everyone's comments all on point. Very much relevant and on point, and, look forward to trying to, have all those addressed in the future. And the senate transportation committee is now adjourned.
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