California auditor issues recommendations for 'risky' HSR project

The California High-Speed Rail Authority’s (CHSRA) funding situation has become increasingly risky and the agency still has “weak oversight,” according to a report issued this week by the California state auditor.

The report is a follow up to an April 2010 review that questioned CHSRA’s ridership estimates, oversight, staffing levels and funding sources.  

The auditor still has many of the same concerns. Although the authority has secured funding for the initial construction segment, it has not provided viable funding alternatives in the event that expected funds are no longer available. And of the latest cost estimate of $98 billion, CHSRA has secured about $12.5 billion, leaving a gap of about $85 billion to be acquired by 2033.

“Although it is possible that the authority may obtain the necessary funding to move forward with the program, it risks significant delays or the inability to proceed if it does not,” the report said.

In addition, the cost estimates outlined in the draft business plan do not include first-phase operating and maintenance costs, which could total more than $96 billion between 2025 and 2060, the auditor’s office said. Although CHSRA officials anticipate the system’s revenue will cover the costs, they do not include any alternatives if the system doesn’t generate revenue, according to the report.

The auditor also still questions ridership estimates and the methods CHSRA used to obtain them, the processes for monitoring the performance and accountability of contractors, CHSRA’s ability to oversee the program with limited staff and the authority’s expenditure tracking.

As a result, the auditor has recommended the following:

• The authority should clearly report total costs, including projected operating and maintenance expenses.
• The state Legislature should draft legislation that establishes an independent ridership review group.
• CHSRA should continue to fill vacant positions.
• The authority should establish written policies and procedures for tracking whether all designated employees and consultants have completed and filed their statements of economic interests on time, thereby identifying any potential conflicts of interest. In addition, CHSRA should require subcontractors to file statements of economic interest.
• The authority should hire a risk manager as soon as possible to avoid circumstances that could significantly delay or halt the program. CHSRA also should monitor the program manager’s risk-management practices to ensure it identifies and promptly addresses risks.