California's $98 billion high-speed rail project relies on risky financial assumptions and has just a fraction of the money needed to pay for it, raising more questions about the heavily criticized plan, the state auditor said in a report released Tuesday.
The review by Elaine Howle is the latest in a series of critical reports that have questioned the financing, proposed route and ridership projections for the 220 mph bullet train voters approved in 2008. That has caused lawmakers from both parties who once supported the project to have second thoughts.
While construction costs for the statewide system could range from $98.5 billion to $117 billion, the latest plan from the California High-Speed Rail Authority identifies just $12.5 billion in promised funding. About $3.5 billion of that is from the federal stimulus program, and $9 billion is from voter-approved bonds.
Howle's audit notes that the draft business plan, released in November, relies upon the federal government as the largest source of financing yet "provides few details indicating how the authority expects to secure this money." It also does not offer viable alternatives if that money is unavailable, the audit said.
A response included in the audit from then authority's chairman at the time, Thomas Umberg, said the information Howle relied upon to conclude the funding is risky "are purely speculative and should not form part of an audit response."
His response said many of the more detailed projections Howle is seeking can be found within the pages of charts and graphs in the 215-page business plan. It includes various cost and revenue projections broken down by ridership, revenue and construction cost estimates.
Gov. Jerry Brown has continued to back the project despite the critical reviews, appointing two advisers to revamp its board. Umberg and CEO Roelof van Aark stepped down earlier this month, and Brown appointee Dan Richard is expected to take the leading role.
Richard said Tuesday that he is working on a revised business plan that he hopes will address some of the concerns. He said his top priority is to fix the organizational problems identified in Howle's audit and others.
"I want to make sure that we have the gold-standard in the state when it comes to how contracts are let, how contracts are monitored, updated, our personnel practices -- we just need to be at the top of our game because of what's at stake," he said.
The Democratic governor devoted a substantial section of his State of the State address earlier this month to high-speed rail, comparing California's aspiration to ambitious ventures such as the Central Valley Water Project of the 1930s and the construction of Bay Area Rapid Transit system, which was derided in 1966 as a "billion-dollar potential fiasco."
"If you believe that California will continue to grow, as I do, and that millions more people will be living in our state, this is a wise investment," he told lawmakers. "Building new runways and expanding our airports and highways is the only alternative. That is not cheaper and will face even more political opposition."
Republicans have called for a halt to the project. On Tuesday, a petition was cleared to begin collecting signatures for a ballot initiative seeking to prohibit the state from paying for high-speed rail unless voters approve a new constitutional amendment.
Assemblywoman Diane Harkey, R-Dana Point, has introduced legislation that would effectively kill the project. Sen. Doug LaMalfa, R-Willows, called the plan a "financial fantasy."
"How many unfavorable reports are needed before Gov. Brown realizes that this project will destroy state funding for schools and public safety?" LaMalfa asked in a news release Tuesday.
A report earlier this month by the state-appointed High-Speed Rail Peer Review Group urged lawmakers not to authorize the sale of $2.7 billion in voter-approved bonds for the initial section of the train, saying the rail plan is not financially feasible.
And in November, the state's legislative analyst said the plan does not comply with some parts of the 2008 ballot measure voters approved to provide the seed money. The analyst said the initial stretch planned for the Central Valley would not be a stand-alone operating segment of the high-speed rail line, as required by Proposition 1A.
Tuesday's report by the state auditor also questioned the rail authority's transparency and oversight. It noted that readers must delve 100 pages into its plan before they see that construction costs could climb as high as $117.6 billion, "whereas it uses one of its lower cost estimates of $98.5 billion throughout the plan."
Brown is asking the Legislature to authorize selling $2.7 billion in state bonds to match $3.5 billion in federal funding to build 130 miles of track between Chowchilla and Bakersfield. That stretch would form an integral part of the line's first segment, proposed to eventually span 290 miles from Bakersfield to San Jose or 300 miles from Merced to the San Fernando Valley.
Proponents envision that the trains, traveling at up to 220 mph, would help transform the state's economy by relieving congestion on clogged highways, allowing quicker travel between metropolitan areas and generating much-needed construction jobs. High-speed rail officials were forced to back off their initial claims that the project would create more than 1 million jobs.
The auditor's report also finds: -- A panel established to independently assess ridership projections was hand-picked by the CEO, meaning its conclusions may not be reliable. -- The authority has inadequate processes for monitoring the performance and accountability of its contractors, partly because of its own understaffing. Umberg acknowledged the authority suffers from a lack of sufficient qualified staff. -- Its contractors and subcontractors outnumber its employees by about 25-to-1.
--------------------------------By JULIET WILLIAMS
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