We need to improve project delivery in order to deliver service upgrades to transit riders at an acceptable cost and timeline. One way to achieve this is through service-led planning. The State Rail Plan identifies service-led planning and project delivery of organizational, electronic and concrete improvements as critical to delivering a 2050 vision of 1500 miles of electrified rail, and 15 minute frequencies on many regional rail lines, including from Roseville to Davis on Capitol Corridor.
Critically this paradigm relies on segmented, phased delivery of capacity improvements over time to modernize infrastructure for better and more rail service.
Unfortunately, we continue to see patterns of dysfunction in the delivery of discrete infrastructure for phased service improvements for regional and intercity rail. If we are to implement the State Rail Plan and fully embrace service-led planning, California must get better at delivery of targeted capacity projects like additional mainline tracks and sidings.
It is important to stress, however, that agencies seeking to improve service are not solely or primarily to blame for these issues. When they make choices in terms of program and project management that are suboptimal, they are responding to structures and systems that constrain their ability to make good decisions.
Specifically we will look at how 3rd party permitting, design, and funding structures and systems have impeded the delivery of relatively straightforward capacity improvements that can deliver much-needed service to regional and intercity rail riders.
Sacramento to Roseville Third Track Project
This blog post examines Capitol Corridor’s Sacramento to Roseville Third Track (Third Track) project. This concept was originally identified in 2008, fleshed out in 2012 and is found in Capitol Corridor’s 2014 service vision. It originally consisted of nearly 18 miles of third mainline track, 11 new railroad bridges and overcrossings, new rail ties and crossovers on Union Pacific’s ROW east of Sacramento as well as a new layover facility in Roseville. Environmentally cleared under CEQA in 2015, the project would increase 1 round trip (RT) of service to 10 RT from Roseville to Sacramento. Long-term, the State Rail Plan envisions through-running regional rail service from Davis to Sacramento Valley Station to Roseville in 39 minutes, which is faster than peak and competitive with off-peak auto trips.
Around 2014, legislators interested in apportioning some of the Prop 1A High Speed Rail bond to local projects directed $52m to the Third Track Project as construction funding while design was still functionally at 0% completion. This meant project sponsors and funders were committing to building a project before they had any definition to the scope, costs or budget. This decision to commit early to construction funding absent details meant: 1) the project had the state’s commitment regardless of how much cost rose; 2) the $52m formed a floor through which 3rd parties, namely gas utility Kinder Morgan, telecom utility AT&T and railroad Union Pacific, could negotiate costly improvements in exchange for for their cooperation.
From 2015-2016, Capitol Corridor realized that the estimated construction costs of $275m would far exceed state and local funding of $85m. Consequently the project was split into phases prioritizing 11 miles of third track, a few bridges and the layover facility in Phase 1, which would yield 3 RT.
After cobbling together local and state sources from discretionary, competitive programs Capitol Corridor obtained enough cash to hire a consultant designer/engineer in late 2018. In 2019 the designer progressed with geotechnical investigations, surveys and identifications of parcels necessary for construction. Between 2020-2022 the designer began identifying the utility conflicts that needed to be resolved. At this point Capitol Corridor started having difficulty negotiating with 3rd parties, including gas utility Kinder Morgan and fibre optic cables owned by AT&T and others. These utilities ran longitudinally, or alongside, the Union Pacific ROW and in some instances must be shifted off to accommodate additional 3rd mainline track either on existing ROW or newly acquired ROW or easements.
When Capitol Corridor tried to get critical input from Kinder Morgan and AT&T on how to safely relocate their facilities so the third track could be constructed, these third parties failed to provide critical information for thirteen months – between July 2022 and August 2023. When these utilities finally did provide the necessary information for the proposed relocations in August 2022 they cost far more than Capitol Corridor anticipated. Because Capitol Corridor was now critically delayed in developing its utility relocation plans and civil construction plans, it lacked the bargaining power to push back against these very high costs. Capitol Corridor, and taxpayers, were forced to absorb these higher direct costs and escalation costs from utility delays.
In addition to delays and cost escalations caused by utilities the project was delayed when Union Pacific failed to approve plans for a layover yard facility for trains in the central part of Union Pacific’s yard. Recall that Union Pacific jointly developed the 3rd track concept with Capitol Corridor and provided early conceptual support for passenger trains using Union Pacific’s layover yard. Union Pacific withheld approval for this layover plan after nearly twelve years of developing the concept in conjunction with Capital Corridor and only after Capitol Corridor was nearing final design.
The delay in approval forced Capitol Corridor to re-design its layover to the edge of the Union Pacific ROW at an existing sand and gravel supply business. This re-design delayed design progression and increased both design costs and construction costs for the project. It also required Capitol Corridor to acquire 9.5 acres of additional private property to build a dedicated layover yard apart from Union Pacific’s layover yard. Due to this and other changes to certain bridges demanded by Union Pacific, Capitol Corridor was required to conduct a new, supplemental environmental impact review to assess impacts. This supplemental EIR, only finalized in 2024, incurred additional cost, delay and risk for the Capitol Corridor project.
As a result of these delays Capitol Corridor was forced to seek an extension from the California Transportation Commission of prior grants awarded to the project by two years. These delays and expensive scope changes demanded by utilities and private railroads have further delayed the construction of the project by forcing Capitol Corridor to obtain additional funding from the Federal government through the CRISI program. The total cost for Phase 1 increased from a 2022 estimate of $185m to a 2024 estimate of $229m. It is unclear at this point what the cumulative Phase 1 and Phase 2 costs will be from a prior estimate of $275m in 2017. At the same time the Phase 1 service decreased from 3 RT to 2 RT with 7 RT still for Phase 2. (Oddly enough, the project’s fact sheet indicates both phases will somehow deliver 10 RTs.)
What can we learn from this project?
The delays and cost escalations for a relatively simple capacity project are frustrating. The drivers of delay and cost escalation, however, are not unique to the 3rd Track Project or even Capitol Corridor – projects throughout California suffer from them. The upshot If we can identify these systemic issues and implement policy reforms then Californians can reap the benefits of better and more cost effective service sooner.
3rd Party Permitting
Unlike rail agencies in other developed countries, Capitol Corridor lacks powers to force utilities to coordinate design and resolution of utility conflicts for infrastructure projects. Of course rail projects in Europe that have such powers still must pay for utility relocations but they aren’t subject to endless negotiations, delays and gold-plated exactions.
The powers vary: some countries like Germany invest agencies with powers to unilaterally relocate utilities. Other places like Ontario and Quebec offer agencies preemptive power for relocations after statutory timelines for negotiation. Italy provides a universal consultative planning process called a Conference of Services where the agency and all affected utilities hammer out designs over a time-limited period with limited opportunities for utilities to substantively appeal agency decisions. The positive constraints imposed by this process ensures that all affected parties pay attention and arrive at the bargaining table with the authority to make decisions.
If we’re going to deliver projects on time and on budget, transit agencies need more equal bargaining powers with utilities, railroads and local governments in designing and permitting improvements. Of course an incumbent should expect to be made whole for a new project that may interfere with their operations. But the current ability of static entities like utilities and local governments to endlessly delay approvals provides them overwhelmingly bargaining power against agencies that must move a project forward. A more equalized and fair process must be established for parties to identify, resolve and allocate costs for conflicts and improvements. That could be master permitting, timelines for review and approval or global, binding design processes like conferences of services. These changes could help many transit and rail projects in California that are plagued by similar issues. They would also require strong legislation from the Senate, Assembly and Governor.
Design
The four year gap in bringing aboard a designer – from completion of the EIR in 2015 to 2019 – created unnecessary risk and cost pressure for the project. Under CEQA project leads are limited in spending money on design/engineering until the project is environmentally cleared. If resources were available, Capitol Corridor could have started preliminary design in 2015 when the EIR was certified and the Record of Decision was logged. Instead, because Capitol Corridor did not have access to in-house engineers or by-right funding to hire consultant engineers it had to piece together tens of millions from local and state discretionary, competitive sources. This process can take years unto itself and is not guaranteed.
Once the competitive award was made in 2017 Capitol Corridor still had to issue a Request for Qualification under procurement rules and evaluate responses in order to award a contract to an engineering firm. Work in earnest on design does not appear to have started until 2019. While some work on funding and agreements with third parties may have occurred in this time the foundational work of progressing the planning, design and engineering of the project was essentially frozen.
Why is this design interregnum an issue? First, for every year of delay on public works contractors bid up material and labor costs through escalation of bid prices. Escalation is tied to specific inflationary pressures on components of infrastructure but can generally vary from 3-7%. Thus four years of delay can increase base construction anywhere from 12-28%.
Next, to the extent program and project managers are not moving the project forward because they are waiting on discretionary grant applications for design this is waste overhead for agencies unless they can find other projects to advance. But if these managers are spread too thin between different projects on different life cycles of project delivery they are less empowered to closely manage planning, 3rd parties, consultants and contractors.
Finally, the delay in getting into design undermines the ability of Capitol Corridor to rely on prior agreements and assumptions with 3rd parties like utilities and railroads about the planning and design of the project. For example, the use of Roseville Union Pacific yard was clearly contemplated through the initial and conceptual studies and EIR by both Capitol Corridor and Union Pacific from 2008 to 2015.
But the four year delay in getting a designer/engineer on board created uncertainty and space for Union Pacific to reconsider its prior commitments. What may have made sense in the slower business environment in the wake of the global financial crisis of 2008 may have become unworkable with structural changes in goods movement in 2020 and beyond. Union Pacific, as a Class I railroad, exercises considerable power and discretion and the offer of shared layover space was clearly withdrawn by 2022. Similarly the delays in getting a designer onboard provided more leverage for Kinder Morgan and AT&T to demand costly utility conflict resolution mitigations.
Clearly delays in progressing design are not costless. But what can be done? In low and medium cost countries there are two consistent options: 1) money for design is provided by-right once environmental and planning approvals are complete; 2) engineering and design are provided in-kind through state engineering departments or state-owned engineering firms to local agencies to advance projects. In the former option, money for advancing design is the natural next step for approved transit projects and the state/national government provides it to agencies as long as they are advancing state/national service planning goals. The other option of state/national level engineering talent lent out to local projects shouldn’t be so alien to Californians. This is literally what Caltrans District Offices do for local and county road and bridge projects.
A way forward here would be to expand transit and rail engineering capacities within Caltrans and re-allocate existing project management within Caltrans District Offices to support local agencies seeking to advance design on environmentally cleared projects. This would require the support of the Governor and key legislative budget chairs.
Funding
The third lesson from the 3rd Track Roseville project would be for state funding programs to stop the practice of early construction awards for projects at 0% or 15% design. The 3rd Track Roseville project was earmarked money as part of the Prop 1A High-Speed Rail connectivity funding before even the EIR was finalized. This is akin to purchasing lumber for construction of a house before the dimensions of the house are finalized – you are risking significant capital on the hope that no costs will rise or nothing unexpected will happen. Moreover, by committing early to the project’s construction budget there is less leverage for agencies like Capitol Corridor to hold a firm line when utilities, railroads or other parties seeking to extract value make demands. There’s alway more money in the banana stand right?
By committing early to construction costs the State of California also locked itself into funding the project no matter the costs. As a funding agency CalSTA lost its leverage on Capitol Corridor (and by extension 3rd parties) to optimize design when it gave money based on 0% design. When costs more than doubled in 2017 after receiving $52m from California in 2014 the Capitol Corridor did not go back to the drawing board to reduce costs. It simply segmented the project and pushed out the total 10 RT benefits another decade.
Another downside of early commitments is that when costs inevitably rise as scope becomes defined the project has to make claims on more local and state resources. This crowds out other projects and breeds cynicism as the public sees the value of tax dollars reduced and the benefits of service pushed further out in time.
A better way would be for the State of California to hold off on construction awards until design is complete or nearly complete. Iin low and medium cost countries like Switzerland, The Netherlands, Germany and France, there is much more willingness to fund design early but the national governments do not commit to construction funding for projects until late in the process. For instance, MTC’s Joint Report on Swiss Transit found that the Swiss freely give funding for project design, but require a public referendum for construction funding over a certain threshold. This ensures there is collective buy-in, optimization and a clear demonstration of benefits prior to state commitment towards construction funding. Swiss projects have not suffered major cost overruns in the manner of California.
California need not adopt public referenda for transit projects. But its funding programs like TIRCP could be modified to refrain from construction funding until design is complete or nearly complete. This would require the support of the Governor and Transportation committee chairs of the Legislature.
As of writing the 3rd Track Roseville Phase 1 project has not broken ground thirteen years after Capitol Corridor formally started planning the project. It is still a good project that can deliver important intercity and regional rail service for Sacramento Valley residents. But we will need scores of projects like the 3rd Track Project and many projects that are more complex like electrification in order to implement the service vision of the State Rail Plan. Until the administration and legislature address the structural issues to delivery identified here – and others covered in our December letter to the Select Committee on Permitting Reform – the service vision will remain mostly on paper.