HSR Audit: Cost Overruns, Poor Management, Slow Trains

California’s under-construction high-speed rail system is mismanaged, faces budget shortfalls, and will operate slower than promised.

Those are some of the conclusions reached by the state auditor in a report released Thursday (Nov. 15) morning. The report is the latest saga in the state’s effort to build a bullet train connecting San Francisco to Los Angeles.

Fresno serves as the system’s construction point of origin, with land purchased, infrastructure built, and businesses relocated.

Auditor Highlights

Elaine Howe

The title of the 93-page report conducted by state Auditor Elaine Howe leaves no confusion on her conclusions: “California High‑Speed Rail Authority: Its Flawed Decision Making and Poor Contract  Management Have Contributed to Billions in Cost Overruns and Delays in the System’s Construction.”

The report’s summary states:

— The High-Speed Rail Authority secured $28 billion for the initial phases; however, it may cost more than $77 billion to complete the Madera to Bakersfield and San Francisco to Gilroy lines. And, those two segments will not be connected.

— Modified plans mean that HSR will share some of its track with other train systems, which will lower speeds.

— The authority “exhausted all feasible options to use existing infrastructure” which could raise future costs.

— There is a high risk of additional increased costs because the authority moved ahead with the project before completely securing land. Costs of contract changes led to an additional $600 million in costs.

— The authority needs to reign in contract management.  “It currently has 56 contract managers throughout its organization, but these individuals generally do not serve in contract management roles full time. Moreover, it has placed portions of its oversight of large contracts into the hands of outside consultants.”

Patterson Livid

Assemblyman Jim Patterson (R-Fresno) long ago sounded the horn on troubles with HSR. His efforts led to the state audit.

“This is a damning audit. The days of happy talk are over,” Patterson said. “The most authoritative, well-regarded, trusted, bipartisan, nonpartisan audit authority in California has just told us the truth.”

He says it is now up to Gov.-elect Gavin Newsom and the incoming Legislature to make the next move.

“(They) better wake up to the reality of it and do their responsibility,” he said. “It is a project in collapse.”

Patterson isn’t optimistic that the HSR Authority will listen.

“The High-Speed Rail Authority made it clear. They are going to empty the cash box. They are going to spend every penny they have,” Patterson said.

Patterson said that voters permitted spending on the rail and they will need to vote to end it. He also warned of a pending federal audit. By the authority spending federal money on the project when it didn’t secure the land, Patterson said the HSR Authority engaged in “fraudulent behavior.”

Auditor’s Recommendations

The auditor’s report recommends that the authority establish benchmarks for property purchases, utility agreements, and other contracts.

The authority should also provide quarterly updates to the Legislature about meeting the federally mandated 2022 deadline.

The report calls for tighter accountability in contracting and management systems.

The California High-Speed Rail Authority risks losing $3.5 billion in federal funds if it fails to complete construction on the high-speed rail system by Dec. 2022. To meet this deadline, the Authority must work twice as fast as it has to date. https://t.co/AKgURWG7v8 #CALeg

— CA State Auditor (@CaStateAuditor) November 15, 2018

Authority’s Response

Coincidentally, the HSR Authority’s board of directors held a regularly scheduled meeting in Burbank on Thursday. Prior to the meeting, board member Mike Rossi issued a statement saying that the authority is already implementing cost controls, even though it doesn’t agree with all of the auditor’s conclusions.

“Many of the recommendations are similar to steps we have previously identified through our own internal reviews.  The Authority will promptly implement all of the Auditor’s recommendations, as we did following the last audit that was conducted in 2012.  We will report our progress to the Auditor, the Legislature and the public as we do so,” Rossi said.

“Our challenge has been to evolve our organization and improve program management processes while concurrently delivering this complex program of megaprojects,” Rossi continued. “Since 2010, we have faced many constraints, from certain restrictions in the original bond act, to deadlines for the expenditure of federal funds, to litigation that halted construction progress for about a year.”

Arambula Still Believes

Assemblyman Joaquin Arambula (D-Fresno) sits on the HSR board as an ex officio member. He also supported the state auditor investigation, and believes the board is already implementing the recommendations.

“I encourage the HSR authority continuing to review and implement the auditor’s recommendations so we can improve transportation options for the people of California and create jobs in the Central Valley,” Arambula said in a statement.