California bullet train’s mishandling of land deals adds to mounting costs and delays

California’s bullet train project confronts an array of political and financial challenges, but its biggest problem involves mismanagement of land acquisitions, which has contributed to construction delays, cost increases, litigation and the launch of a federal audit.

Seven years after its land buying program began, the California High-Speed Rail Authority has yet to acquire hundreds of parcels, even though the state has the power to condemn property in the way of its future tracks.

At the same time, the rail authority has become landlord to surplus acreage that serves no purpose in furthering high-speed rail but still must be managed by the state. It owns toxic waste sites, vacant lots and rental homes.

The California High-Speed Rail Authority is now a player in the agriculture industry with at least 466 acres of land under cultivation, a side effect of having to purchase entire fields just to acquire a corner for the rail route.

Even while it has fallen behind schedule in buying property for its future tracks, rail authority managers have underestimated the footprint they need to relocate utilities — including gas transmission pipes, communication cables, electrical wires, water mains and sewers — that sit in the route of the bullet train.

The issue again came up at a meeting in Fresno last month when project staff told visiting senior officials the most recent bad news: The agency will have to acquire rights to as many as 468 additional parcels for utility relocations either through outright purchases, easements or encroachments.

Such miscalculations vex many rail authority employees.

“We are encountering gut-wrenching delays,� said one key manager with an extensive background in civil infrastructure projects. “Nowhere have I ever worked where I had to keep going back to the same owners for more land.�

Another middle manager said more delays are inevitable, lamenting, “I am going to ride this train, but I am afraid it is going to be my ashes in an urn. I told my kids to take my ashes on the bullet train.�

The new land requirements complicate efforts by rail authority leaders to turn around years of delays, cost overruns and technical problems that are threatening political support for the project. The need for the additional parcels is coming as legislators, frustrated by a decade of slow progress, are considering shifting some of the bullet train funding from the Central Valley to project segments in Southern California and the Bay Area.

Brian Kelly, rail authority chief executive, who returned from a prolonged illness in June, supports keeping the funding in the Central Valley and is building a new management team that, he says, will turn around the problems.

Recently, the authority removed or fired several key managers, including its property chief Kristina Assouri, an employee of consultant WSP. Roy Hill, head of the WSP operation at the authority, is on suspension pending a state ethics investigation. Contracts manager William Grimsley, who oversaw the WSP contract, was pushed out in recent weeks.

“In all, we are seeing the fruits of a lot of effort and hard work across the board by our team,� the rail authority said in a statement. It added that the authority is now transitioning “into a mature organization with the staff, consultants and policies and procedures in place to get the job done when it comes to right of way acquisition.�

Some in the guts of the organization remain skeptical.

“The authority is as broken as it ever has been,� one manager said. “The top officials just bark orders, but nobody follows orders here. Nothing is working.�

Along with needing more land for utility relocations, the rail authority is also short on property it needs for the train’s right of way. So far, it has yet to secure roughly one-sixth of the 1,859 parcels it needs for the 119 miles between Madera and Wasco.

The setbacks in procuring land are costing the state money, since they are causing delays for bullet train contractors.

Ron Tutor, chief executive of Tutor Perini, which is leading the contracting team for construction in Fresno and Madera, recently told securities analysts that the rail authority has caused him 48 separate delays.

Tutor said he may ask the state for $500 million to $600 million in delay claims, on top of past claims the state already paid. That will take his original $1-billion contract to $2 billion, he said.

Tutor said he was encouraged by recent meetings with state officials and hopes to soon have all of the land needed for his work.

But rail construction elsewhere in the Central Valley has also been seriously delayed. A September progress report showed that the work has begun on only four of 50 bridges, viaducts and other structures in Kings County, for example.

The land purchased by the rail authority has sometimes come at a premium.

The authority bought a parking lot in 2016 in a dilapidated area of downtown, about 600 feet away from its future tracks. The lot was owned by the Fresno Redevelopment Authority, which put it up for sale in 2016 as part of a state program to liquidate redevelopment agencies.

An auction started at $1.8 million with only two bidders: local developer Terance Frazier and the rail authority. Frazier said he wanted to build a 10-story condominium with ground-level retail, the kind of housing development that high-speed rail is supposed to attract.

Frazier, along with investors that included former major league pitcher and Fresno native Matt Garza, submitted the winning bid of $2.4 million. But within a few days, the city invoked its power to take the property back and then shortly sold it to the rail authority for $1,000 over Frazier’s bid.

“It was shady,� Frazier said. “It was not the right thing to do.�

Frazier said the rail authority could have purchased the lot at the $1.8-million opening bid. “The city made out like a bandit,� he said. “They got another $600,000 out of it.�

In its justification to the State Public Works Board for buying the property, the rail authority said it wanted it on a “protection basis� to avoid development that would later affect its plans for the Fresno rail station.

A Fresno city official said the rail authority collaborated with the city to make plans for a bus, taxi and ride-share station on the property. As for the auction, it was required under state law, he said.

But state law governing the dissolution of redevelopment agencies makes no mention of auctions, only that property sales “be done expeditiously and in a manner aimed at maximizing value.�

Dan Carrigg, legislative director of the League of California Cities, said such property sales were closely monitored by the state Department of Finance and local control boards for the redevelopment agencies, which in Fresno’s case included the city, school districts and other local agencies.

Inside the rail authority, some staff saw the parking lot deal as a way to funnel money to the city in exchange for favorable treatment elsewhere on the project.

The rail authority tapped a $2.5-billion federal grant for the parking lot and its invoice was approved by federal regulators, according to an authority spokeswoman.

But the U.S. Department of Transportation’s inspector general is auditing that grant and has questioned authority employees about the parking lot deal, according to individuals who have spoken to federal agents. The audit is due to be released this fall.

At the Times’ request, the rail authority provided a list of such parcels, which it calls “non-operational properties.� The list is 46 pages long with more than 700 properties listed.

It includes a grab bag of Central Valley properties, including a 154-acre site in Hanford and .01-acre mini outpost (about the size of a residential swimming pool) in Selma.

A review of internal documents, including the original detailed land surveys of the right of way, show bits and pieces as small as a few square feet. Exactly how the rail authority will manage or dispose of such property is not clear.

Don Odell, director of real property for the rail authority, said the agency has put off declaring the nonoperational properties as excess that can be sold and will retain them until the bullet train system is completed.

The utility relocations further complicate the picture.

Odell said in an interview that the staff is conducting a detailed study to determine how many of the 468 parcels for utility relocations are already owned by the rail authority and how many will require new land takes.

“We are working through the numbers now,� he said. “It is important to recognize that these are not large footprint right-of-way acquisitions.�

Odell said he believes the authority already owns a high percentage of the parcels.

As the authority struggles to obtain needed land, it has ended up with surplus land it must manage.

In hundreds of cases, the rail authority has been forced to buy entire plots of land even though it only needed a small portion for its right of way. Some past acquisitions have raised eyebrows as well.

In downtown Fresno, the rail authority has acquired dozens of surplus parcels, including a former dry cleaner with a toxic plume that it must clean up.

The land problem has many causes, but involves the authority’s decision in 2012 to issue construction contracts when it had completed only 15% of the engineering design without all of the detailed design of utility relocation. The early engineering studies did not include the final size of bridges, overpasses and track beds that would also affect utility equipment.

At the same time, PG&E, among other utilities, had incomplete records of where its equipment was buried and imperfect legal records of its easements and franchises, which are rights to encroach on private property.

Some project managers are privately less optimistic than senior executives, saying most of the 468 parcels for utilities will require either new land purchases or complicated legal permits even if it is already owned. And worse, they say even more parcels will eventually be needed, because the design keeps changing.

A June contract amendment the rail authority signed with utility giant PG&E reveals some of the costs involved.

The new five-year deal, a copy of which was obtained by The Times, adds $27 million to the bill for just PG&E’s equipment. Other big operators requiring so-called third party relocations include AT&T, Kinder Morgan, Southern California Edison, Union Pacific Railroad, BNSF and various irrigation districts.

Mark Wasser, a Sacramento eminent domain attorney who represents dozens of landowners in the San Joaquin Valley, said the rail authority’s changing plans have forced several of his clients to surrender land more than once.

“There are a lot of loose ends involving utility relocations that are still unfolding,� he said. “We just settled a case where a utility pole was in the middle of a driveway.�