California High Speed Rail Competes for Federal Stimulus; Benefits from State Bond Approval

A lot has happened since we last spoke to you in April 2008. The $10 billion bond to support high speed rail passed in the state of California and now there is the federal stimulus money allotted for high speed rail. How is the High Speed Rail Authority utilizing the monies available?

Over the past ten years we have been going through the arduous process of completing the initial feasibility studies for high speed rail and going through the process of developing programs and environmental documents that will establish the potential route. We have put together a team of world-renowned experts to go to the next phase-actually starting construction. The work and construction starts with the project-level environmental work and engineering. We have that team in place. We are waiting for funding. The voters have approved the funding, which means that now we are full speed ahead with environmental plans for the project and engineering. Of course the addition of the federal stimulus money puts some additional pressure because we may have money faster than we expected. All of those are very positive events and have finally made it clear that it's no longer a question of whether or not we are going to build a high speed train. Now the question is, "How quickly can we build a high speed train?"

As you said, you've done program-level EIRs and EISs. What is the status of those processes? How are you going to go forward, as an agency, to accomplish those project-specific EIRs and EISs?

We have started the project-specific EIR process in different segments. Some segments are ahead of others. For example, the L.A. to Anaheim segment is about a year-and-a-half to two years ahead of other segments. That is mainly because the Orange County Transportation Authority put $7 million into funding the environmental work.

We are now working on environmental studies for all of the other segments. Eventually we will build this in segments. As we look into which segments to build, we have to look into what segments are going to have some independent utility while we finish the rest. We will be going through that process over the next few months to flesh out those segments and find out where the best places are to put the funds.

With the passage of the bond you've staffed up again and contracted with firms to begin work. Can you give us an update on the staffing capacity of the authority and also the firms you have already contracted with to do management?

We have contracted with more than two dozen firms for the program management, engineering, environmental reports, and overall state guidelines of each segment. Practically every major engineering firm in the country is on contract with us. We have assembled the cream of the crop around the country in high speed design and building.

We have Parsons Brinkerhoff along with a number of additional sub-contractors for program management. They are like the arm of the High Speed Rail Authority in terms of managing the program, developing the schedule, driving the schedule, and budgeting the engineering work, quality control, and so forth.

Then, we have the firm SPV, with sub-contractors, doing the L.A. to Orange segment. We have the team of Hatch Mott McDonald, and others, who are doing the L.A. to Palmdale segment. We have the team of URS, Hatch, and others, who are doing the Palmdale to Bakersfield segment. We have AECOM doing the segment from Fresno to Sacramento. HNTB is doing San Francisco to San Jose, also with the Parsons team. Parsons is doing San Jose to Gilroy. AECOM is contracted to do the Altamont corridor. Each one of them involves other sub-contractors.

As for the authority staff itself we are a little bit behind in that because we haven't been able to attract sufficient candidates on the state side, primarily because the state salaries are not high enough to attract the kind of people that we need. We are still working on that.

What is the schedule going forward in terms of selecting technologies and the operational folks to build out these segments?

The technology, essentially, has already been selected-steel wheel on rail technology going 220 miles per hour, which will be very similar to the existing technology being used in Spain, France, and soon to be Japan and China.

The VerdeXchange Conference in January featured Judge Quentin Kopp, the chair of the High Speed Rail Authority, who was addressing business leaders from countries that have high speed rail and are carefully watching California's high speed rail project to see what role their technologies might play. What do those companies and countries need to know about the schedule going forward in California?

We are working on finishing the environmental and engineering. We will put it out to different stages-some design-build contracts for civil infrastructure. Those contracts will go out within the next two years. Maybe some of them will be sooner. Some we have to accelerate in order to meet the federal stimulus deadlines, so maybe sooner than that. There will be a number of civil design-build contracts that will be going out sometime late next year, and later.

Beyond that we are also looking to develop a process to bring on board potential investors and providers of the equipment, systems, and operation to work side by side with us in designing the system. We don't know yet what the mechanism is to do that. We are still in a learning stage. We are visiting different countries and exploring what they did. We are doing our research and due diligence before we set up a process for entering into those agreements.

About 25 members of the California Congressional Delegation sent a letter in late March to Transportation Secretary LaHood with criteria for a strategic plan for high speed rail-advocating for how to use the $8 billion in federal funding to develop inter-city rail investments from the American Recovery and Reinvestment Act. The administration hopes to have additional funds every year. What is the federal opportunity for California high speed rail, and is there a time frame in place for how to continue to use this money?

The criteria that the Congressional Delegation recommended reward people who have done their homework and are looking at building state-of-the-art systems. They reward people who are willing to put their own money into the project. Those kinds of criteria are excellent and obviously would be beneficial to us because that's what we have been doing. That puts us in a very competitive position to compete with the rest of the country on a merit-based scale for the federal stimulus money.

Talk a little bit more about that competition around the country-in the press the regions are competing with each other. How is California faring in the early stages of the politics of competing for the federal money for high speed rail?

In terms of the merit and looking at what the president so nicely articulated-that the nation needs to start building a network of high speed trains-we are head and shoulders ahead of everybody else.

Let's talk about the economics of high speed rail. When we interviewed you a year ago the High Speed Rail Authority had brought in a team of financial consultants including Lehman Brothers and ING Group. Obviously, a lot has changed in the financial market, including the disappearance of Lehman Brothers. What is the financial status of phase one and the rest of California's high speed rail agenda?

We issued a business plan last November, which laid out for phase one, from San Francisco to Anaheim, at about $34 billion in 2008 dollars. The California voters made $9 billion available. Over the next ten years we expect to get $12 billion to $16 billion from the federal government. Also, we anticipate that we will get about $8 billion from the private sector. That was the conclusion of the financial consultants in terms of a realistic approach. Since then we have had the election of a president who is focused on building high speed rail. That makes the expectation of the federal funds more realistic than it was in November when we issued our report.

We do know that because of the time it takes and some uncertainties in the process that the private investors are not going to invest until we have finished some of the early stages of environmental, engineering, and right-of-way work, because those are some of the major "it" factors that the private investors want the public sector to undertake. Therefore, the actual going out in the market and trying to search for private money is maybe four or five years away. Obviously today's economy is not giving us a good basis to figure out what it is going to be like four or five years from now. We all hope that four or five years from now that we will be back to prosperity and economic discovery. But the current economic downturn really has very little impact on our activity. If anything, we are benefiting from it by the fact that there is a desire to put more money into infrastructure from the federal government.

What benchmarks should followers of high speed rail look for in the next three to nine months? What benchmarks should they keep their eye on to see how the project is proceeding?

They should be looking at the process at the federal level-the selection of the actual projects that will be funded and the amount of funding available will dictate the next five to six months. That will be a strong indication of how things might be moving.

As for actions by the California High Speed Authority, we are in the middle of just doing what we need to do. I don't see any milestones within even the next 12 months. We have a project to do and we have a lot of process, engineering, and environmental work to do. We just have to do it.