Transportation Secretary Sean P. Duffy lashed out on Thursday at “mismanagement” in California’s troubled high-speed rail project, announcing an investigation into how the state was spending a $3.1 billion federal grant on a project that he said was “severely — no pun intended — off track.”
In a letter to the state High Speed Rail Authority, the Federal Railroad Administration said it would conduct inspections, review activities and examine financial records. It warned that the state could be liable for any further expenditures of federal money under the grant authorized by the Biden administration if they are not determined to be in compliance with the grant’s requirements.
The loss of so much federal money, if it were eventually held back, could fundamentally threaten a project that is already struggling with inadequate funding, potentially delaying the installation of electrical systems and the purchasing of trains — both essential big-ticket items.
The project, as it was originally envisioned, would connect Los Angeles and San Francisco in two hours and 40 minutes with 220-mile-per-hour trains, among the fastest in the world, at a cost of $33 billion. But Mr. Duffy noted that the costs of the project have escalated threefold since then and that it was failing to achieve the goal.
“The project is not going to happen,” Mr. Duffy said at a news conference at Los Angeles Union Station. “There is no timeline in which you are going to have a high-speed rail that is going to go from Los Angeles to San Francisco.”
That original ambition had already been scaled back by Gov. Gavin Newsom, who committed in 2019 to building a starter line within the Central Valley, from Merced to Bakersfield. But the estimated $22.9 billion cost of even that minisystem has escalated to over $30 billion, leaving a $6.5 billion shortfall in the available funding — even with the $3.1 billion federal grant expected to be received.
A decision by the Trump administration to cancel the grant could strike a crippling blow. It would leave the project to proceed through construction with a roughly $1-billion-per-year revenue stream from the state’s greenhouse gas auction program, barely enough to maintain the historical spending pace of $3 million per day.
Ian Choudri, chief executive of the rail authority, said the project had already been an important source of economic activity and job creation for California, even before the first train runs.
“We welcome this investigation and the opportunity to work with our federal partners,” he said in a statement. “With multiple independent federal and state audits completed, every dollar is accounted for, and we stand by the progress and impact of this project.”
The project continues to have a core of supporters in California, some of whom turned out Thursday at a noisy demonstration that interrupted Mr. Duffy’s news conference.
Yet rail projects in Europe historically have had much broader popular support, said C. Williams Ibbs, professor emeritus of civil engineering at the University of California, Berkeley, who consulted on bullet train projects around the world and who chairs the state-appointed peer review panel for the project.
“We are not sold on rail systems,” he added. “We are sold on cars.”
The lack of broad political support has taken a toll. Mr. Newsom declined to support additional major state funding, even when the state was flush with tens of billions of dollars in surplus revenue. When voters approved a $9 billion bond issue in 2008, it was supposed to provide a third of the project’s funding, while private investors and the federal government were expected to chip in the rest. Since then, however, private investors have shown no interest, either.
And through the years, the project has consistently grown in cost — a result of inflation, changes in plans, higher land acquisition costs, the Covid pandemic and inaccurate cost estimates, all of which happened at a faster pace than new sources of money could be found. As a result, the funding gap has grown, not narrowed.
“This just emphasizes the underlying problem that it is unmanageable without adequate funding,” said Louis S. Thompson, a veteran railroad expert who chaired the state-appointed peer review group until last year. “If federal funding is withdrawn, it will make management of the project all the more difficult.”
A full loss of federal funding, some analysts said, could mean that the project might have to run lower-speed diesel trains on the new tracks. Such a fallback plan was originally proposed as part of grants, issued under the Obama administration, that called for any construction to have “independent utility” if a bullet train system were not realized.
Mr. Duffy’s announcement is not the first warning about problems with the project. Earlier this month, the inspector general for the project, Benjamin Belnap, warned that completion of the Bakersfield-to-Merced line by 2030 or even by 2033 was “unlikely,” and he cautioned that there were other “ongoing risks of delay.”
The harshly worded report by Mr. Belnap renewed longstanding concerns that the optimistic projections by the rail authority were unrealistic, and also added fuel to President Trump’s efforts to further scrutinize the project. Mr. Trump targeted the project in his first term, as well. The Federal Railroad Administration rescinded a $1 billion grant that the Transportation Department under the Obama administration had allocated to the project. California sued to get the money back, and former President Joseph R. Biden Jr. restored the money when he entered office.
The California rail authority applied for an additional $8 billion infusion under Mr. Biden’s ambitious national infrastructure program. That money failed to materialize, but the $3.1 billion grant was approved.
Mr. Trump signaled earlier this month that he wanted an investigation of the rail project. Several Republican state lawmakers, who have generally opposed the large funding allocations to high-speed rail, sent him a letter applauding the idea of such an investigation and saying they “stand with you.”
“By all metrics, the High-Speed Rail is a colossal failure,” they wrote. “The $1 billion the state spends on the High-Speed Rail each year would be better spent on protecting lives, homes, and jobs against wildfire and other natural disasters as well as securing water infrastructure for our economy to grow.”
