THE US Department of Transportation (USDOT) on June 4 released a Federal Railroad Administration (FRA) compliance review report finding that the California High-Speed Rail Authority (CHSRA) is “in default” of the terms of two federal grants totalling $US 4bn. CHSRA has up to 37 days to respond, after which USDOT says the grants for the California high-speed project could be terminated.
The 310-page report contains nine key findings including missed deadlines, budget shortfalls and over-representation of projected ridership. In a letter to CHSRA CEO, Ian Choudri, FRA notes that its report identified a trail of project delays, mismanagement, waste, and skyrocketing costs.
“The project has received approximately $US 6.9bn in federal dollars in roughly 15 years but has not laid a single high-speed track,” USDOT says. “Even with continued federal support, the project is far short of the funding needed to finish just a fraction of the track.”
In response, CHSRA says it strongly disagrees with the FRA’s conclusions, which it says “are misguided and do not reflect the substantial progress made to deliver high-speed rail in California.”
“We remain firmly committed to completing the nation’s first true high-speed rail system connecting the major population centres in the state,” a CHSRA spokesperson told IRJ.
The review
FRA initiated a compliance review of the two grants in February. Specifically, they are a $US 929m Cooperative Agreement from 2010, and a $US 3.07bn Cooperative Agreement from 2024 issued under a Federal-State Partnership for Intercity Passenger Rail (FSP) Agreement.
USDOT wanted to determine whether CHSRA had met its commitments to FRA under the agreements between June 15 2021 and January 31 2025, or whether action was necessary “to protect the federal taxpayer from potential misuse of federal funds.” The investigation included meetings with state oversight entities and CHSRA officials, visits to construction sites, risk analysis, and reviewing several thousand documents.
The nine key findings of the investigation are as follows:
- CHSRA has executed numerous change orders and is likely to issue many more in the near future to account for contractor expenses as a result of project delays
- CHSRA has missed its deadline for finalising rolling stock procurement
- CHSRA has at least a $US 7bn funding gap to complete the Early Operating Segment (EOS) in the Central Valley between Merced and Bakersfield, with no credible plan to secure additional funds
- CHSRA does not have a viable path to complete the EOS by 2033 per its commitment in two grant agreements
- CHSRA is reliant on volatile non-federal funding sources, which present significant project risk
- CHSRA lacks time and money to electrify the EOS by 2033
- CHSRA’s budget contingency is inadequate to cover anticipated contractor delay claims
- CHSRA has over-represented its ridership projections for the EOS, and
- CHSRA lacks the capacity to deliver the EOS by 2033.
As a result, FRA concludes that CHSRA does not have the capacity to deliver the full California High-Speed Rail System, intended to eventually connect the San Francisco Bay Area with Los Angeles
“This 2025 compliance review demonstrates that CHSRA has not learned from its mistakes and mismanagement and has therefore failed to create an organisation capable of effectively and efficiently managing project delivery,” the FRA report says. “Despite the substantial scope reduction, the CHSR Project still continues to face numerous delays and cost overruns. At this rate, CHSRA will never complete the CHSR System.”
“This report exposes a cold, hard truth: CHSRA has no viable path to complete this project on time or on budget,” says US transportation secretary, Sean Duffy. “CHSRA is on notice. If they can’t deliver on their end of the deal, it could soon be time for these funds to flow to other projects that can achieve President Trump’s vision of building great big beautiful things again.”
What happens next?
FRA has requested CHSRA’s initial response within seven days of receiving the letter. It says that if CHSRA proposes to challenge FRA’s claim of it being in default, it must provide supporting documentation within 30 days. Any proposed corrective action is due 30 days from the date of its initial response. FRA adds that if it makes a final determination to terminate the agreements, it will reallocate unspent federal funds and may also reassess other federal funding awards to CHSRA.
CHSRA says it will fully address “and correct the record” in its formal response to the FRA’s notice.
CHSRA’s position
Chourdi took up the post of CHSRA CEO last autumn, vowing to identify cost savings, accelerate construction, cut red tape, create conditions conducive to attracting private capital, and to stabilise state funding for the project.
Construction is currently completed or underway on 154km of the 191km section of the high-speed line in the Central Valley and on 85 of the line’s 93 structures. CHSRA is aiming to complete this section by 2028. Design and pre-construction activities are also proceeding on and the full 275km Merced - Fresno - Bakersfield section, which is scheduled for completion by 2030-2033. CHSRA said earlier this year that there is currently a funding gap of $US 6.5bn for the Merced - Bakersfield section.
CHSRA has secured environmental clearance for the entire 672km high-speed line from San Francisco to Los Angeles. It said in March 2023 that it expects this to cost $US 128bn, identifying a funding gap of more than $US 100bn.
Private funding?
While it admits that federal funding is important for the project, CHSRA says the State of California has provided the majority of the project’s current funding. CHSRA is actively courting private support for the project. It said last month that private-sector interest in the project is “strong,” pointing to an industry forum held in January that was attended by more than 400 delegates from around the world.
CHSRA says that this has enabled meaningful private-sector engagement, including interest from private equity firms exploring new financing opportunities. “The authority has continued to build on that momentum - gathering ongoing insights on how to shape future partnerships with private industry through sustained engagement,” CHSRA says.
In addition, CHSRA says the governor of California, Gavin Newsom's, proposed budget wants to guarantee the project a minimum of $US 1bn per year up to 2045. CHSRA says this provide the necessary resources to complete the EOS.
“This will resolve the number one risk for completion of Merced - Bakersfield - funding uncertainty - and will address the funding gap previously identified by the Authority’s Office of the Inspector General,” CHSRA says. “This will help accelerate project delivery, lower long-term costs, and increase flexibility. It will also help mitigate escalation risk, which has been one of the largest drivers of increased project costs.”
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