FRA Revokes California High-Speed Rail Funding, CHSRA Fires Back (UPDATED 8/21)

The FRA’s decision follows the release last month of its Compliance Review Report, which found the CHSRA project is “in default” of the terms of two federal grants.

Following the “Compliance Review, and consideration of all information submitted by CHSRA, FRA has concluded that CHSRA cannot deliver on its commitments,” FRA Acting Administrator Drew Feeley wrote in the FRA’s final decision letter dated July 16 (download below). He explained: “FRA has determined CHSRA has breached the commitments made in the FY10 Agreement [which obligated $929 million through the High-Speed Intercity Passenger Rail (HSIPR) Program grant] and the FSP Agreement [which obligated $3.07 billion under the Federal-State Partnership for Intercity Passenger Rail grant program]. Based on CHSRA’s inability to complete the EOS [Early Operating Segment or 171-mile corridor between Merced, Calif., and Bakersfield, Calif.] by December 31, 2033, the CHSR Project does not adequately serve the purpose of the statute under which the FY10 Agreement was authorized and funded, and this failure constitutes a Project Material Change under the FSP Agreement. Furthermore, anything short of an operational EOS by December 31, 2033, undermines FRA’s basis for selecting the CHSR Project. For these reasons, as set forth in this letter, FRA has determined to terminate the FY10 Agreement and the FSP Agreement, effective today, and will de-obligate the associated funds.”

USDOT in its announcement reported that “FRA will start exploring how these [revoked] funds can be made available to viable and meritorious passenger rail projects.” Additionally, it said it has directed FRA “to review other obligated and unobligated grants related to the CHSRA project,” and will “consult with the Department of Justice on the finding of FRA’s Compliance Review.”

That 310-page review included what USDOT called nine “key findings”:

1. “CHSRA has executed numerous change orders and will likely have many more change orders in the near future to account for contractor expenses as a result of project delays.
2. “CHSRA has already missed its deadline for finalizing its rolling stock procurement.
3. “CHSRA has at least a $7 billion funding gap to complete the EOS, with no credible plan to secure additional funds.
4. “CHSRA does not have a viable path to complete the EOS by 2033 per its commitment in the FY10 Agreement and the FSP Agreement.
5. “CHSRA relies on volatile non-federal funding sources, which present significant project risk.
6. “CHSRA lacks time and money to electrify the EOS by 2033.
7. “CHSRA’s budget contingency is inadequate to cover anticipated contractor delay claims.
8. “CHSRA has overrepresented its ridership projections for the EOS substantially.
9. “CHSRA lacks the capacity to deliver the EOS by 2033.”

Following the Compliance Review, FRA sent CHSRA a formal Notice of Proposed Determination to Terminate, and pursuant to that Notice, CHSRA provided responses.

In one, CHSRA CEO Ian Choudri issued what the Authority called “a firm and detailed rebuttal” in a letter to Drew Feeley. Choudri’s 14-page response was said to “correc[t] the record on the FRA’s unfounded, outright misleading and disingenuous assertions and methodologies, highlighting elements of the review as nothing more than rhetoric aimed at justifying a pre-ordained conclusion.”

“Termination of the Cooperative Agreements is unwarranted and unjustified,” said Choudri. “FRA’s conclusions are based on an inaccurate, often outright-misleading, presentation of the evidence. Among other things, the FRA distorts data that the Authority has furnished to the FRA, includes citations to reports that do not support its conclusions, and employs opaque and disingenuous methodologies. I must also take this opportunity to dispute, in the strongest possible terms, the misleading claim that the Authority has made ‘minimal progress to advance construction, The Authority’s work has already reshaped the Central Valley. We have built many of the viaducts, overpasses, and underpasses on which the first 119 miles of high-speed rail track will run. Major structures completed include the 4,741-foot San Joaquin River Viaduct in Fresno and the Hanford Viaduct in Kings County, the largest high-speed rail structure in the Central Valley, spanning the length of twenty-one football fields. A railyard for materials laydown and logistics to allow for high-speed rail construction is under construction and scheduled for completion this year. These are momentous achievement. Combining feats of engineering, complex logistical and legal coordination, and, on average, the labor of more than 1,700 workers in the field every day, mostly in Fresno, Kings, and Tulare Counties. In total, 53 structures and 69 miles of guideway have been completed.”

CHSRA also said it “rejected the FRA’s claim that it lacks a plan to close a projected $7 billion funding gap,” pointing to Gov. Gavin Newsom’s proposed extension of California’s Cap-and-Trade program, now referred to as Cap-and-Invest, “which would guarantee at least $1 billion annually through 2045.” The Authority also noted its forthcoming Request for Expressions of Interest (RFEI) “to engage private partners for potential innovative and creative partnerships that could improve cost and schedule of project delivery.”

Choudri also took issue with the review process, stating that the FRA’s own monitoring report in October 2024 “found no significant compliance issues, and that the FRA’s new position is outwardly inconsistent with its own prior findings. There have been no meaningful changes in the past eight months that justify FRA’s dramatic about-face. Instead, the FRA has looked at essentially the same facts it considered in the fall of 2024 and simply reached a different conclusion. Hostility to public investments in high-speed rail, and to California’s leadership—hostility that dates back to FRA’s initial attempt to revoke federal funding to the Program in May 2019—appears to be the real basis for the proposed determination.”

The letter also “underscores that environmental clearance is complete from downtown San Francisco to downtown Los Angeles and that electrification of the Caltrain corridor between San Francisco and San Jose is finished.”

USDOT in its July announcement said that “[n]either response [from CHRSA] satisfactorily addressed FRA’s significant concerns, as described in the Compliance Review, and FRA has therefore decided to terminate the [FY10 and FSP] agreements.”

Drew Feeley pointed out in FRA’s July decision letter that “CHSRA’s criticisms of FRA’s Compliance Review are unfounded and CHSRA has not adequately demonstrated it will complete the EOS by 2033.” He noted that “CHSRA fails to address the substantive concerns underlying FRA’s decision“; “FRA relied on sound data for the Compliance Review“; “FRA’s decision to terminate the cooperative agreements is timely“; “FRA relied on CHSRA’s representations but did not endorse CHSRA’s prior performance“; “CHSRA’s civil construction project progress does not adequately demonstrate CHSRA’s ability to deliver the EOS“; “CHSRA provides only vague and speculative plans that do not demonstrate CHSRA’s ability to complete the EOS“; and “FRA’s termination decision is not driven by animus toward the CHSR Project.“

Specifically, among his comments:

• “Rather than addressing the event of default, CHSRA raises concerns regarding the Compliance Review and suggests FRA failed to consider the documentation CHSRA provided. In doing so, it attempts to obfuscate its own failures with glossy artist renderings, while nitpicking some of FRA’s references and contending that FRA has assented to CHSRA’s delays and budget gaps. CHSRA almost exclusively highlights progress that is not part of the EOS commitment. For example, CHSRA’s response disproportionately details peripheral project elements that are unrelated to the EOS itself. If anything, CHSRA’s focus on the Salesforce Transit Center, electrification of the Caltrain commuter service, and Los Angeles Metro projects, to name a few, demonstrate that CHSRA is not taking its EOS commitment seriously. Rather than presenting a plan to document that it can complete the EOS on time and on budget, CHSRA chooses instead to highlight tangential projects. CHSRA’s dissembling is not a basis for FRA to ignore the terms of the Cooperative Agreements.“
• “CHSRA generally challenges some of the factual bases underlying FRA’s conclusions and highlights certain documents that it believes refute FRA’s factual findings. FRA reviewed project documentation, among other relevant sources, as part of its Compliance Review process. As described in its Notice, the document request was one component of FRA’s decision. The purpose of this component of the review was to gather project documentation to give FRA a more complete understanding of how CHSRA is managing the CHSR Project. FRA temporally bounded the document request to focus on more recent project documentation and reduce the burden on CHSRA. In its Final Response, CHSRA now argues that FRA somehow forfeited its rights to consider any material that was not provided by CHSRA within the scope of FRA’s document request. In attempting to direct FRA’s review of its own grant, CHSRA fails to cite any authority or provide any reason why FRA should have limited its decision to only those documents within the document request period. FRA’s oversight authority as the grantmaking agency allows FRA broad discretion to consider any relevant information regarding recipient compliance. The Notice clearly explains the sources FRA relied on for its decision, and CHSRA’s attempt to limit the scope of FRA’s consideration is without merit.“
• “FRA has reason now to conclude the EOS cannot be delivered by CHSRA as promised. In less than a year since the obligation of the FSP Agreement, CHSRA’s delays have already burned through most of the schedule contingency. CHSRA argues that FRA is taking drastic action based on one missed project milestone. CHSRA again attempts to dismiss FRA’s concerns as minor administrative matters instead of addressing the substantive reasons underlying FRA’s decision. FRA is taking action now because FRA has no confidence CHSRA can deliver the EOS by 2033, a fundamental commitment CHSRA made in the Cooperative Agreements. The erosion of schedule contingency and the missed milestone only serve to illustrate FRA’s concerns. FRA outlined similar concerns with the project budget. Notably, FRA has seen reports that the $7 billion funding gap has already grown to $10 billion in the short time since FRA initiated its Compliance Review.“
• “CHSRA faults FRA for not acknowledging the progress that CHSRA has made on the Project so far. FRA does not dispute that CHSRA has advanced civil work along the 119-mile First Construction Segment. However, CHSRA again completely misses the concerns underlying FRA’s decision, which focus primarily on CHSRA’s ability to deliver the EOS by 2033. FRA’s concern, as described in the Compliance Report, is focused on the cost, the rate of progress, and CHSRA’s management of the EOS. While some progress has been made on civil construction, the budget gap continues to grow and the schedule continues to lose ground. FRA considered the rate of current progress in its projections and in determining that CHSRA cannot deliver the EOS on time or consistent with the agreed upon budget. In addition, the many projects CHSRA identifies in its Final Response suggest it is focusing its energy on projects other than the EOS. CHSRA’s response shows it has focused on off-system projects (e.g., the SalesForce Transit Center), but it has yet to lay track on any portion of the EOS.“
• “Further, Governor Newsom’s proposed plan to set a $1 billion-dollar minimum funding floor from cap-and-trade proceeds for CHSRA is insufficient to overcome the CHSR Project’s budget issues. FRA acknowledges that a funding floor, if enacted, would alleviate some funding volatility with the Project’s reliance on the State’s Cap and Trade Program, but a funding floor does not guarantee available funding to support the Project, as this assumes first enactment (a significant hurdle), then that the State will receive sufficient revenue from the project, the State Legislature will not sunset the program, and the State will not defer high-speed rail costs to address more critical State priorities. These factors are outside of CHSRA’s control and continued reliance on a singular source of funding has substantial risk. Furthermore, the funding floor does not commit any additional State monies to the project and therefore does not address the substantial funding gap needed to complete the EOS. As a result, FRA’s concerns regarding project funding remain, and CHSRA has not provided documentation adequately demonstrating that it can right-size the project budget, avoid costly delays, and deliver the EOS by 2033.“
• “CHSRA accuses FRA of making its termination decision due to hostility against the CHSR Project. Not so. As explained in its Compliance Report and in this letter, FRA’s decision is the result of a comprehensive look at the CHSR Project and based on CHSRA’s inability to deliver the EOS by 2033 in breach of the commitments made in the Cooperative Agreements. FRA designed the Compliance Review to allow it to take a complete look at the CHSR Project. FRA notified CHSRA of the review and sought CHSRA input throughout the process through document requests and regular meetings. FRA memorialized its decision and provided CHSRA with an opportunity to respond. In making its decision, FRA relied largely on official reports produced by CHSRA and by California oversight bodies. Then, FRA publicly released a detailed report outlining its findings and conclusions, both favorable and unfavorable to CHSRA. For example, in the Compliance Report, FRA concludes that CHSRA has generally complied with its reporting requirements and in producing deliverables. However, FRA also found that CHSRA cannot deliver the EOS as promised, which was the basis for FRA’s proposed decision.“

California Fires Back

Gov. Newsom’s Office on July 16 said in response to the POTUS 47 Administration “illegally terminating federal grant agreements funding California high-speed rail,” that the state is “putting all options on the table” to fight the action.

“Canceling these grants without cause isn’t just wrong—it’s illegal,” CHSRA CEO Choudri said as part of the statement released by the Governor’s Office. “These are legally binding agreements, and the Authority has met every obligation, as confirmed by repeated federal reviews, as recently as February 2025. America’s only high-speed rail project underway is fast approaching the track-laying phase, with 171 miles under active construction and design, 15,500 jobs created, and more than 50 major structures completed. This is no time for Washington to walk away on America’s transportation future.”

The Governor’s Office noted that “[i]n the last year, [California] high-speed rail has marked significant progress—with all environmental reviews spanning 463 miles from Los Angeles to the Bay Area complete, the electrification of Caltrain complete, trainset selection underway, station and track construction on deck, continued work with partner rail systems to create a southwest regional high-speed rail network, and more than 15,000 good paying jobs created. Passenger service is expected in the coming years, between 2030 and 2033.”

According to a KSEE24/CBS47 report, CHSRA Board Member Henry Perea Sr. “says this project will continue despite the [USDOT] announcement.” 

“Until somebody says, stop, we’re going to keep building—and we’re building,” Perea said, according to the Fresno, Calif.-based media outlet. 

“Perea says he anticipated this announcement, and the CHSRA was prepared,” KSEE24/CBS47 reported. “He says they have enough money to keep working.”

Gov. Newsom summed up in a July 16 statement: “With projects like the Texas high-speed rail failing to take off, we are miles ahead of others. We’re now in the track-laying phase and building America’s only high-speed rail. California is putting all options on the table to fight this illegal action.”

On July 17, the Governor’s Office announced that CHSRA is filing suit again the POTUS 47 Administration. In a statement it said the “lawsuit alleges that termination of the agreements is petty, political retribution, motivated by POTUS 47’s personal animus toward California and the high-speed rail project, not by facts on the ground.” 

POTUS 47’s “termination of federal grants for California high-speed rail reeks of politics,” Gov. Newsom said. “It’s yet another political stunt to punish California. In reality, this is just a heartless attack on the Central Valley that will put real jobs and livelihoods on the line. We’re suing to stop [POTUS 47] from derailing America’s only high-speed rail actively under construction.”

House Committee Investigation

“A bipartisan congressional committee is investigating whether California’s High-Speed Rail Authority knowingly misrepresented ridership projections and financial outlooks, as alleged by the [POTUS 47] administration, to secure federal funding,” the Los Angeles Times reported Aug. 20. “In a letter sent to Transportation Secretary Sean Duffy on Tuesday, House Committee on Oversight and Government Reform chair James Comer (R-Ky.) requested a staff briefing and all communications and records about federal funding for the high-speed rail project and any analysis over the train’s viability.”

According to the newspaper, Comer wrote in the letter, which copied U.S. Rep. Robert Garcia of California, senior Democrat on the committee: “The Authority’s apparent repeated use of misleading ridership projections, despite longstanding warnings from experts, raises serious questions about whether funds were allocated under false pretenses.”

A CHSRA spokesperson told the Los Angeles Times that the committee’s investigation was “‘another baseless attempt to manufacture controversy around America’s largest and most complex infrastructure project,’ and added that the project’s chief executive, Ian Choudri, previously addressed the claims and called them ‘cherry-picked and out-of-date, and therefore misleading.’”

Further Reading:

• CAHSR: ‘Building a Dream’ to Nightmare?
• CHSR: USDOT Drives Another Coffin Nail. (Updated with Full CHSRA Response)
• New York Times Editorial: There Is a Liberal Answer to the Trump-Musk Wrecking Ball
• Whither (Wither?) California High-Speed Rail (Reprise)
• Will Duffy Deep-Six CHSR?
• 2025 Passenger Rail Outlook: ‘Murphy Was an Optimist!’