UPDATE 1-Plan cuts California high-speed rail plan cost

Mon Apr 2, 2012 6:01pm EDT

(Adds comments by lawmakers, labor group)

By Jim Christie

SAN FRANCISCO, April 2 (Reuters) - California officials on Monday unveiled a major overhaul of a controversial plan to build a high-speed rail system in the state, slashing the cost by some $30 billion, to $68.4 billion, and addressing other criticisms of the massive project.

The new plan must now receive a final blessing from the California High Speed Rail Authority before going to the state legislature, which has to approve the release of the first chunk of the nearly $10 billion in rail bond funds voters approved in 2008.

The state must greenlight the spending and sell the first of the bonds to obtain $3.3 billion in federal matching funds and start construction in the fall as planned.

Planning for the project has been sharply criticized after cost estimates ballooned to nearly $100 billion and the High Speed Rail Authority failed to quell opposition from communities that would be affected by the train lines, especially the wealthy suburbs south of San Francisco.

Governor Jerry Brown, a staunch supporter of the project, responded with a shake-up of the High Speed Rail Authority, which was then charged with producing a new business plan.

Under the new proposal, much of the initial spending would go toward upgrading commuter train tracks near San Francisco and Los Angeles rather than building separate lines. That approach is supported by local transit officials who see an opportunity to improve existing services.

The so-called "blended system" design could also mean increased travel times, though the new plan still projects a two-hour, forty minute travel time between San Francisco and Los Angeles.

The new plan also proposes an initial track - which would be the first high-speed rail corridor in the United States - linking the Central Valley town of Merced to the San Fernando Valley at the doorstep of Los Angeles.

The federal grant money requires that construction start in the farm-rich Central Valley, but the previous proposal to start with a regional line connecting the cities of Fresno and Bakersfield was widely ridiculed as a "train to nowhere."

The plan proposes expanding the system with new tracks only when the legislature identifies funding for the work.

The plan notably proposes using revenue raised through California's new carbon trading system for reducing greenhouse gasses, which goes into effect this year and is expected to raise billions in revenue.

Democrats responded cautiously to the new plan.

Senator Joe Simitian, a Democrat who chairs a subcommittee overseeing high-speed rail, said lawmakers may not take up the matter of bonds for the rail system before the June 15 deadline for a state budget as they believe Brown, a Democrat, will urge.

"We need to take the time to get this right," Simitian said.

Republicans said they remain concerned about the price tag for the system and whether it can truly operate without subsidies as its proponents say it can.

They're also doubtful about the prospects for money from Washington.

Republican Assemblywoman Diane Harkey said members of Congress told her during a recent trip to Washington that they will not approve further funds for high-speed rail in California, though they may back assistance for existing regional rail lines.

Republican Senator Doug LaMalfa said he was not impressed by the new plan, adding that would press on with efforts for a ballot measure asking voters to reject the state debt they had approved for the rail system.

LaMalfa said the plan's proposed work on existing regional rail lines was an attempt to "buy off" lawmakers from urban areas and that California cannot afford the less expensive high-speed rail effort outlined in the plan.

"We have no more dollars available now than we had last week to build this," LaMalfa said.

The California Labor Federation, an influential union group in the state's politics, embraced the new plan, noting its potential for expanding payrolls.

California's unemployment rate stood at 10.9 percent in February, compared with a nationwide jobless rate that month of 8.3 percent.

"High-speed rail will transform our state's economy and lead to sustained job growth," California Labor Federation Executive-Secretary Treasurer Art Pulaski said in a statement. "The construction of the project will put hundreds of thousands of Californians, who have lost jobs through no fault of their own, back to work." (Reporting By Jim Christie; Editing by Jonathan Weber and Christopher Wilson)

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