California’s long-delayed high-speed rail (HSR) may be in jeopardy. In late February, U.S. Transportation Secretary Sean Duffy ordered the Federal Railroad Administration (FRA) to conduct a “compliance and performance review” of roughly $4 billion in federal grants awarded to the California High-Speed Rail Authority (CHSRA). The FRA will decide whether the state has honored its grant agreements and, if not, whether the federal government should claw the money back. If that were to happen, the Central Valley spine construction project currently underway could face an immediate cash crisis.
Surety Bond Professionals is a family-owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.
The Focus of the FRA Review
According to the Department of Transportation, the FRA’s review focuses on the 171-mile starter line from Merced to Bakersfield. Auditors will determine whether California has met specific deadlines and the “Buy-America” steel requirements written into earlier awards during the Obama and Biden administrations. Federal officials say they will also assess cost controls after a report by the state inspector-general suggested that the segment, which has already received almost half of the federal grant money allocated, faces a funding gap of at least $6.5 billion. A recommendation on whether to suspend or terminate the grants is expected before the end of 2025.
The FRA investigation is not the only inquiry into the high-speed rail project. In March, Representative Kevin Kiley (R-CA) asked FBI Director Kash Patel to launch a criminal fraud investigation into cost estimates that have soared from $33 billion to well over $100 billion. Earlier, a group of California GOP members asked the House Oversight Committee to subpoena CHSRA records, and the FRA has instructed the agency to preserve e-mails and contracts to support an investigation.
California Democrats are divided. A POLITICO-UC Berkeley poll found that two-thirds of California voters, including 82% of Democrats, still support high-speed rail. But there is growing reluctance to keep tapping state revenues if federal support evaporates.
Shifting Deadlines and Swollen Budgets
When voters approved $9.95 billion in state bonds for high-speed rail in 2008, backers advertised a Los Angeles–San Francisco line that would open by 2020 at a cost of $33 billion. Five years after that deadline, the estimated cost has ballooned to anywhere from $88 billion to $135 billion or more, depending on the source of the estimate. The first 171-mile section is now anticipated to open in 2033, while the full 500-mile system is unlikely to be completed before 2040.
Main High-Speed Rail Issues Under Scrutiny
Federal examiners will investigate three chronically weak areas:
- Cost control and risk management. More than $13 billion has already been spent, yet only 22 miles of the Central Valley guideway are ready for track installation. State inspectors say some contracts have change order rates in excess of 30%, which suggests some systemic budgeting problems.
- Schedule performance. Work that needs to be done before full track installation can begin–such as viaducts, grade separations, and utility relocations–has missed target dates by up to three years. Each month of delay increases labor and materials costs.
- Grant-agreement compliance. Federal awards require California to match federal outlays with state dollars and document how each expenditure advances the federally approved scope of work. The FRA can suspend reimbursements if auditors determine that match requirements have been missed or that invoices were for ineligible work.
CHSR Fights Back
The Authority is fighting back on two fronts:
- On social media, it boasts that 171 miles of the high-speed rail system are under active construction, with 50 major structures completed and 14,600 jobs created. In a formal statement, CHSRA insisted in February 2025 that every dollar spent on the project is accounted for and has been thoroughly reviewed by the Office of the Inspector General. The statement described the project as being too far along to stop now.
- CHSR has also begun seeking private investors, offering them revenue-guarantee mechanisms, to close an immediate $7 billion gap if federal money stalls.
What Happens if Washington Pulls the Plug?
If the FRA de-obligates or freezes the $4 billion in grants, California must quickly replace the funds to avoid construction shutdowns that trigger delay penalties and contractor demobilization costs. HSRA already needs $7 billion by June 2026 simply to finish the Merced-Bakersfield segment.
Beyond the Central Valley, a federal pullout would dim prospects for extending tracks to Silicon Valley or Southern California ports, jeopardizing the ridership needed to meet the greenhouse gas emissions limits. Failure to deliver promised greenhouse gas reductions can result in the FRA reopening the grant or demanding remedies, including repayment.
Test of Federal-State Partnership
Politically, the probe reflects America’s infrastructure dilemma: megaprojects demand decade-long continuity, yet elections can upend assumptions overnight. For now, crews keep pouring concrete in the Central Valley while accountants in Washington and Sacramento pore over ledgers. Whether targets justified the project in the first place, the work in progress becomes the backbone of a transformative high-speed rail network, or a monument to political dysfunction may hinge on the findings of this investigation in the months ahead.
Call Us Today
Our surety bond professionals will help you grow your revenue by maximizing your surety capacity. Call us today!
