Report: High-speed rail to launch in Silicon Valley

California’s high-speed rail system would make its debut in the Bay Area, with bullet trains whisking passengers between San Francisco and Bakersfield by as early as 2025, under a business plan that the California High-Speed Rail Authority released Thursday.

The proposal to start the San Francisco-to-Los Angeles rail system in the northern half of the route is an abrupt, though not wholly unexpected, change of direction for a project that received approval from California voters in 2008 but that has since been saddled with cost-overruns, lawsuits and political opposition in the Peninsula and beyond.

Last fall, the California High-Speed Rail Authority made a surprising announcement that it was launching an environmental analysis on the San Francisco-to-San Jose segment, a decision that perplexed local officials and rail watchdogs. Up to that point, the rail authority had indicated that the first usable segment would be constructed in the Central Valley and that the line would only later be expanded to San Francisco and Los Angeles.

The new business plan also includes a lower cost estimate for the project than the 2014 plan. The price tag, pegged at $67.6 billion two years ago, now stands at $64.2 billion. The business plan states that the rail authority achieved this decrease by “factoring in lessons learned from our first construction bids, design refinements suggested in those proposals and other reviews, advancing more detailed engineering and design work and incorporating contractors’ viewpoints.”

The rail authority is proposing to invest $2.1 billion from these savings in transportation improvements between Los Angeles and Anaheim. Planned improvements include grade separation of the railroad tracks, improved regional rail services and new tracks between Los Angeles and Anaheim, which would support high-speed rail in the future, according to the business plan.

The most dramatic change announced in the plan, however, isn’t the shifting price tag but the rail authority’s pivot toward Silicon Valley and San Francisco. The decision to launch the system in this region was driven by the agency’s goal of “getting a high-speed passenger line into operations as quickly as possible,” the plan states.

The agency’s analysis — which considered funding sources, travel-speed requirements and revenue projections — indicated that the segment that could be built most quickly (and turned into a revenue generator) would be between Silicon Valley and the Central Valley, with the southern tip ending just north of Bakersfield.

This portion, the business plan notes, can be built with funding from Proposition 1A bonds (the 2008 bond measure that included $9.95 billion for high-speed rail and related transit improvements), along with federal funds and proceeds from the state’s cap-and-trade program.

Private investment, which has not materialized to date, is expected to play a central role in the ultimate build-out for the high-speed-rail project, which eventually would stretch to Sacramento and to San Diego.

But according to the business plan, the rail authority is not banking on private funds for the first segment. Once the passenger service is running between the Bay Area and Central Valley, it will generate revenues that could then “unlock private dollars to continue sequencing the rest of the system,” the plan predicts.

Though the focus of the first phase is to link Silicon Valley and Central Valley, the plan makes a case for extending the first operating line a bit further, so that it stretches between San Francisco and Bakersfield.

This extended line, the plan states, “would significant enhance ridership and revenues and therefore attract higher value private sector concession bids based on future discounted cash flows.”

The rail authority plans to build the line by 2024 and launch the passenger service in 2025. The new document calls the implications of connecting the two Valleys “tremendous.” Completing the link “will change how people travel, work, live and play.”

“Today it takes about three hours to drive from Fresno to the Bay Area; flights are available but often at exorbitant prices,” the business plan states. “With this new connection, a trip from Fresno to San Jose will take about an hour on high-speed rail, which is a game changer both for the people and the economy of the Central Valley and for Silicon Valley as well.

“New job markets will be opened up for people living in the Central Valley, and creating a high-speed connection to the Central Valley would help address the affordable housing crisis in the Bay Area,” the plan states.

“New linkages will be created between higher education institutions in the Central Valley and high-tech and other cutting-edge industries in the Silicon Valley. And some high-tech companies might choose to locate certain corporate functions in the Central Valley, where commercial real estate is less expensive, generating new job opportunities in this region.”

The business plan estimates that if the system is built between San Francisco and Bakersfield, it would attract 5.1 million riders in 2025, its first year of operation. Ridership would then grow to 7.1 million in 2026 and to 9 million in 2027.

The system still faces significant hurdles, including a pending lawsuit from Central Valley landowners (which was subject to court hearings earlier this month), uncertainty over future funding sources beyond the first segment, and political opposition. While Palo Alto officials aren’t as adamantly opposed to the high-speed rail line as they were in 2011, when the City Council unanimously adopted a resolution calling for the project’s termination, council members continue to be concerned about the impacts of the new rail system on local traffic, particularly around rail crossings.

Today, the Palo Alto council’s top priority is achieving grade separation of the Caltrain tracks, which would mean either submerging the tracks under the crossing streets or vice versa. A coalition of Peninsula cities that includes Palo Alto, Mountain View and Cupertino recently endorsed a funding plan that would allocate $900 million for grade separations.

Yet the business plan suggests that grade separation is not part of the plan for the Peninsula, at least in the near term. In its “core values” section, the business plan commits the rail authority to grade separation in the “dedicated high-speed-rail right of way,” where there will be no at-grade crossings.

For the “blended corridors” (i.e., the Peninsula, where high-speed rail will use the Caltrain tracks), the plan proposes quad gates and intrusion-detection devices to keep people from driving onto the tracks.

The debate over grade separation looms as a potential point of contention between the rail authority and local communities.

Yet for all the unanswered questions, the business plan suggests that that after shifting its attention to the Central Valley about four years ago, the project has picked up significant momentum. Construction is now under way in Fresno, where contractors this month began drilling and concrete operations at a 1.5-mile long trench that will ultimately carry the bullet trains under state Route 180. The business plan emphasizes that in the last two years, “circumstances have changed.”

“Most significantly, for the first time, there is a combination of existing funding sources that allow us to deliver high-speed service and do so within the next 10 years,” the plan states.

“It is our statutory and fiduciary responsibility to utilize available funding in the most efficient and productive manner and focus those resources on a segment that can be built within the limits of available funding. To do otherwise would mean that the State would be left with a segment that would not be complete, could not meet the statutory requirements, and/or that would not generate private-sector participation.”

The new business plan also reaffirms the agency’s commitment to the blended system between San Francisco and San Jose, a design that was initially proposed in 2011 by U.S. Rep Anna Eshoo, state Assemblyman Rich Gordon and former state Sen. Joe Simitian.

The approach, which allows Caltrain and high-speed rail to share two tracks, “minimizes impacts on surrounding communities, reduces project cost, improves safety and expedites implementation,” the business plan states.

Just south of the blended segment, the rail authority plans to spend about $20.7 billion to build a rail line between San Jose and just north of Bakersfield. The largest components from this total include $7.8 billion for track structures and track; $5.3 billion for site work, right-of-way purchases and land; and $3.2 billion for professional services, according to the plan.

The rail authority has already identified the $1 billion in funding it would need to complete the environmental clearance for the first segment: a combination of state bonds from Proposition 1A, federal grants and cap-and-trade funds.

But funding the construction could prove trickier. According to the business plan, the rail authority is banking on about $3.165 billion in federal grants for Silicon Valley-to-Central Valley segment, a projection based on an traditional assumption that major transportation projects typically can rely on the federal government as a funding partner (the fact that Republicans currently hold majorities in both the U.S. House of Representatives and the Senate and that they tend to oppose the rail project doesn’t dim the rail authority’s optimism).

“Although there is always competition for federal funding, we are prepared to make the case that it is warranted because it would leverage a significant increase in ridership, connectivity between major urban centers, revenues and the value of private sector concession agreements,” the business plan states.

The rail authority would also use $4.16 billion from Proposition 1A; $5.3 billion in cap-and-trade funds the agency plans to receive between now and 2024; and $5.2 billion in financing proceeds from cap-and-trade funds that would be collected between 2025 and 2050.

Rail authority CEO Jeff Morales said in a statement Thursday that the business plan presents “a clear path forward within available funding to deliver the system as approved by California voters in 2008.”

“By constructing the line between the Silicon Valley and the Central Valley, while also making significant investments in southern California’s passenger rail systems, high-speed rail service will become a reality in this state in the next 10 years at a lower cost than previously estimated,” Morales said.