End to San Francisco redevelopment may be near

There’s concern that local, state or federal subsidies would be needed as projected ticket prices between L.A. and San Francisco have almost doubled. And building costs for the first phase have grown. Despite a new $2.25-billion infusion of federal economic stimulus funding, there are intensifying concerns — even among some high-speed rail supporters — that California’s proposed bullet train may not deliver on the financial and ridership promises made to win voter backing in 2008.

Estimates of ticket prices between Los Angeles and San Francisco have nearly doubled in the project’s latest business plan, pushing ridership projections down sharply and prompting new skepticism about data underpinning the entire project.

“This just smells funny,” said state Sen. Alan Lowenthal (D-Long Beach), a supporter of high-speed rail and chairman of the Senate Transportation and Housing Committee.

New inflation-adjusted construction figures show that outlays needed to build the first 520-mile phase of the system have climbed more than 25%, from $33.6 billion to $42.6 billion.

And some government watchdogs are concerned that a linchpin commitment to taxpayers in the bullet train’s financing measure — that no local, state or federal subsidies would be required to keep the trains operating — may be giving way.

High-speed rail planners recently advised state lawmakers that attracting billions in crucial private financing will probably require government backing of future cash flow. “Without some form of revenue guarantee from the public sector, it is unlikely that private investment will occur at [the planned] level until demand for California high-speed rail is proven,” project planners wrote in December.

That is feeding fears that a larger state commitment, beyond the $9 billion in construction bonds approved by voters, could be sought to complete the 800-mile project. “To now put in that we have to [give] some kind of revenue guarantee . . . is totally unacceptable,” Lowenthal said. “That’s not what we agreed to.”

Financial risks and planning adjustments are inevitable in such a massive project, say officials with the California High-Speed Rail Authority. They insist that significant progress is being made, that there is cause for optimism and that they are keeping their commitments to voters. Opportunities for capturing more federal dollars are greater than ever, they say, because President Obama supports high-speed rail.

“The project is moving forward, very much,” said Mehdi Morshed, the agency’s executive director.

Gov. Arnold Schwarzenegger and a coalition of business, labor and political leaders argue that the project is ahead of others in the United States and will provide enormous benefits in job creation, congestion relief and environmental improvements.

Tying San Diego, Los Angeles, Sacramento and San Francisco together with European-style 200-mph trains has been a long-stalled dream for many. The prospect that construction could actually begin has intensified scrutiny of financial, ridership and route issues.

“I think the numbers should be scrubbed,” said authority board member Richard Katz, adding that doing so could help the project.

Jeff Barker, the agency’s deputy director, said the latest business plan fueled confusion about a revenue guarantee.

“We didn’t do a good job of explaining that,” he said. The system is being designed to operate without a taxpayer subsidy, and that will be clarified in a new, as-yet unavailable report, he said.

But Morshed, who is stepping down next month, reiterated that some guarantee, probably from the federal government, may be needed to ensure that cash flow can repay front-end construction investments by private parties. That is not uncommon in federally backed projects, he said, and would not violate the state’s ban on taxpayer operating subsidies.

Current plans call for up to $12 billion from private-sector investors, about $18 billion from the federal government and up to $5 billion from local agencies. New forecasts show an operating surplus topping $1 billion a few years after service begins.

But some analysts point out that almost all U.S. rail systems — and a number of foreign operations — have required large government loans or cash infusions to keep running.

Under the new scenario, one-way fares between L.A. and San Francisco rise from $55 to $105, closer to the cost of an airline ticket. The change shows healthier surplus revenue, which may appeal to private investors. But estimated ridership falls by about one-third, to about 40 million annual boarders in 2030.

Some transit advocates say predictions of private participation aren’t realistic. “A lot of it’s still magical thinking,” said Bart Reed, executive director of the Transit Coalition.

Fare, ridership and financing projections should be viewed as fluid and subject to revision based on changing conditions and assumptions, high-speed rail officials say. But revised ridership estimates have heightened suspicions about the projections’ reliability. Some smaller cities, like Gilroy, Merced and Bakersfield, show numbers of nonlocal trips equal to or greater than Los Angeles. “We’ve never understood their models,” said Lowenthal, whose panel is delving deeper into the projections.

A recent federal Government Accountability Office study found that rail cost and patronage projections around the world, including on some high-speed lines, tended to be overly optimistic, making it difficult to gauge the financial viability of projects. Limited federal money may be available for several competing projects, the report adds.

Such warnings underscore what some see as the mixed blessing of the recent windfall of federal dollars. To help create jobs, California is supposed to break ground in two years.

The goal is to start Los Angeles, Bay Area and Central Valley segments about the same time. But the backhoes would be digging before officials know how much future federal and private funding will be available to connect the system, officials say.

Conflicts are brewing in Southern California as planners step up efforts to squeeze trenches, viaducts and extra tracks into a crowded rail corridor cutting across the region. Problems remain over how the bullet train will pass through Los Angeles’ Union Station transportation complex. Existing buildings, freeways, rail lines and overpasses around the station make it an extremely tight fit.

In Buena Park, city officials recently learned that part of a new award-winning transit-oriented residential project tied into the city’s 3-year-old Metrolink station may have to be ripped out.

A high-speed rail representative told local officials, “We either take the condominiums or we take your station,” recalled Councilman Art Brown, who has generally supported the bullet train. Planners are reexamining the issue, but it remains unresolved.

Katz, who also serves as a Los Angeles County transit official, wants a review to ensure that the L.A.-to-Anaheim leg, which has nearly doubled in cost, is based on actual demand and is efficiently designed to avoid duplication with existing rail services. “I think there are a number of legitimate questions that need to be raised,” he said.

Communication with cities is being improved, said Barker, the rail agency’s deputy director. “We’re playing catch-up,” he said. Overall, his quasi-independent agency, with a small staff and mostly contract planners, has produced results, he said.

But lawmakers are likely to overhaul the high-speed rail agency and move it more directly into state government, Lowenthal said. “It’s not going to be out there on its own,” he said.

Still, the $41 million project to widen Santa Barbara Boulevard from four to six lanes “is moving ahead well. We’re making good progress,” said Steve Neff, Cape Coral traffic engineer.

Neff said that the project is on schedule to be finished by the summer of 2011.

Construction began in early 2007 on Santa Barbara Boulevard from just north of Pine Island Road south to Gleason Parkway.

By the end of this week, the route should be six-laned from Kamal Parkway to Gleason Parkway, the southern end of the project, said Maricelle Venegas, project spokeswoman.

The other end of the project has also been finished and construction has begun at the intersection of Santa Barbara Boulevard and Hancock Bridge Parkway just to the south, Venegas said.

For the people like her who have had to deal with the construction almost daily while driving around the city, the project “is a pain in the butt,” said Jean Nagy, who lives in southwest Cape Coral.

However, Nagy said she also feels that the project is necessary: “That road is packed with people,” Nagy said.

According to city traffic counts, as many as 20,000 vehicles drive through the construction area daily.

Nagy said that many people like her have learned to bypass the sections under construction.

“You can skip a lot of the construction by going onto Santa Barbara Place which runs parallel to Santa Barbara Boulevard between Nicholas Parkway and Trafalgar Parkway,” Nagy said.

“I can skip a lot of the construction by sneaking onto that street,” she said.

Neff said that along with the completion of Santa Barbara Boulevard, the project to widen Del Prado Boulevard North is on scheduled and should be finished by the spring of 2011. More than 18,000 vehicles travel along the route daily, according to city traffic counts.

The last phase of that $42 million project, from Diplomat Parkway south to Pine Island Road, is continuing, Neff said.

When finished, the city will have two major six-lane north-south routes “allowing for better traffic flow in Cape Coral,” Neff said.

Solar tower technology uses mirrors to reflect sunlight on to a thermal receiver atop a tower. The reflected sunlight boils water inside the receiver to create superheated steam at 440C (824F), which drives a turbine and generates electricity.

The plant is a demonstration facility built by eSolar, one company among dozens in California aiming to heed President Obama’s call for a new energy industry that is less reliant on fossil fuels. ESolar, which is based in Pasadena, started less than three years ago and has gathered $170 million (£107 million) of investment, including funding from Google, in its attempt to make solar power mainstream.

The Sierra SunTower facility features two 190ft (58m) towers surrounded by 20 acres (8ha) of mirrors in neat rows that stand at about chest height. The five-megawatt plant produces electricity for Southern California Edison (SCE) and can power more than 4,000 homes. Each one-metre-square mirror, or heliostat, sits on a mechanism that allows computer software to move it in precise increments, so that it is always at an optimal angle to reflect the Sun’s ray’s on to the thermal receiver.

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ESolar claims that its tracking software makes the plant far more efficient than previous technologies for concentrating solar power. The company says that its prefabricated modular designs have solved many of the problems that have held back large-scale solar generation, includ-ing cost, speed of deployment and proximity to existing transmission lines.

In particular, it says that the lightweight mirrors need much less steel and concrete to set them in place, which reduces construction costs. The company touts the Sierra SunTower model as one that can be replicated anywhere that the Sun shines, on industrial sites or on uneven ground, and is looking to franchise out its technology to other companies to build and run solar power plants.

Bill Gross, the chief executive of eSolar, said: “Sierra is just the beginning. Soon eSolar technology will be deployed worldwide to provide clean, affordable energy to hundreds of thousands of homes. We’re at an historic point when technology can finally enable clean, renewable energy at a price competitive with fossil fuels.”

In February eSolar announced an agreement with NRG Energy to develop three plants in California and New Mexico that will generate up to 465MW of electricity. The first plant is expected to come onstream in 2011.

ESolar is also looking overseas. India, in particular, has ambitious plans for solar power generation and, in March, the company licensed its technology to ACME Group, which is based there, for approximately one gigawatt of solar thermal capacity. Its first 2.5MW plant is under construction in Rajasthan and the installation of a 46MW plant is likely to begin in 2010 for completion in 2011. India boasts arguably the most ambitious solar energy development plan in the world, with a target of 20,000MW for 2022. The country has excellent solar resources, particularly in the northwest.

Raed Sherif, eSolar vice-president of international development, said that the business was in talks with companies in Jordan, Kuwait and Egypt and had opened an office in South Africa.

The US Energy Department has calculated that a 62-square-mile (160 sq km) parcel of the Mojave that straddles Nevada, Utah, California and Arizona receives enough sunlight to power the entire country. In Lancaster, the site of the eSolar facility, there are about 300 sunny days a year and the company says tests indicate that the plant works even on partially cloudy days.

Other Californian start-up companies are getting in on the act. BrightSource Energy, based in Oakland, has contracts with Pacific Gas & Electric and Southern California Edison for its Ivanpah plants, with a capacity of 440MW in the Mojave. Bechtel, the huge American project-management specialist, has signed on as the engineering contractor and equity partner for the project. BrightSource is also constructing a 29MW thermal plant for Chevron in Coalinga, California, and the company has operations in Israel and Australia. Arnold Schwarzenegger, the Governor of California, has become a keen supporter of solar power generation in the Mojave and has fostered legislation to cut carbon emissions and tackle climate change. Last month he mandated that, by 2020, at least 33 per cent of state energy comes from renewable sources.

In all categories of solar power generation, including photovoltaic, the United States ranks fourth, after Germany, Spain and Japan, producing about 8,800MW last year, according to the Solar Energy Industries Association, or less than 1 per cent of America’s energy use.

President Obama has called for that figure to rise substantially. In all, $80 billion of stimulus grants has been spent to jump-start clean-tech industries such as solar thermal. The American Solar Energy Society has forecast that a shift to renewable sources could create as many as 37 million jobs by 2030.

Global solar industry leaders went to Copenhagen this month to highlight the impact that solar energy technologies can have on combating climate change. Solar arrays leave no carbon footprint after manufacture of components and construction.

However, the ultimate aim of achieving “parity” with fossil fuel power production — when it is as cheap to make electricity from solar sources as from coal — is still some way off, according to experts.

Obama admitted that the “idea may not be very glamorous” but declared Tuesday that he found insulation “sexy.” Lawmakers also are getting excited by the concept, which they said could help create badly needed jobs for the beleaguered building trades.

Some supporters have dubbed the program “cash for caulkers” because it would use direct government incentives to consumers to spur economic activity, similar in some respects to the popular “cash for clunkers” rebates that sparked a surge in auto sales last summer.

Under one proposal being considered by House Democratic leaders, $20 billion from February’s economic stimulus package would be used to offer incentives of $1,000 to more than $3,000 for people to apply to projects that improve the energy efficiency of their homes. About 5 million homes could be retrofitted under the program, saving homeowners a total of $3.3 billion annually on energy bills, supporters said.

“Here’s what’s sexy about it: saving money,” Obama said at a Home Depot store in Alexandria, Va., as he stood in front of rolls of pink fiberglass insulation.

“If you saw $20 bills just sort of floating through the window up into the atmosphere, you’d try to figure out how you were going to keep that,” he said. “But that’s exactly what’s happening because of the lack of efficiency in our buildings.”

The idea is simple, he said: The incentives would increase consumer spending, helping create jobs at retailers such as Home Depot and for contractors who would do the weatherization work. The program also would help consumers save on their heating and electricity bills as well, saving on the nation’s energy use.

Australia launched a similar program aimed at retrofitting 2.9 million homes that it projects will create 4,000 jobs.

“It makes sense because it’s a win-win-win,” said Rep. Peter Welch (D-Vt.), who proposed such a program last winter. “Our U.S. manufacturers are the ones that produce about 85% of the product. It’s our local contractors that do 100% of the work.”

Welch’s proposal was included in climate change legislation passed by the House this year that would take effect in 2012. The Senate has not acted on that legislation. But Welch and other lawmakers recently have begun pushing to offer weatherization incentives immediately as a way to create 600,000 to 850,000 new jobs.

Former President Clinton and Silicon Valley venture capitalist John Doerr also have been promoting versions of such a program. Environmental groups, labor unions and construction industry groups support the concept, along with building supply dealers and manufacturers.

“This is the kind of thinking that is going to get America back to work — and make a big difference in many homeowners’ monthly utility bills,” said Joe Robson, chairman of the National Assn. of Home Builders.

Lane Wesley Burt, manager of building energy policy for the Natural Resources Defense Council, said the program could be set up as a government rebate administered by certified contractors that would shave the money from a homeowner’s bill when the work was completed. The contractor then would apply to the government for reimbursement of the incentive, similar to how auto dealers administered cash-for-clunkers rebates.

But auto dealers complained about balky government computer systems and slow reimbursements with that program. And some Republicans are critical of a cash-for-caulkers program. They said the cash-for-clunkers program paid money mostly to people who intended to buy cars anyway and argued that $5 billion in weatherization funds in the $787-billion economic stimulus package passed in February hasn’t helped reduce unemployment.

Obama said the new weatherization program is among several “strategic surgical steps” he is pushing to help create jobs as the unemployment rate remains at 10% despite a return to economic growth after the deep recession. He sketched those ideas in a speech last week and added more detail to the cash-for-caulkers concept Tuesday.

Obama was joined at the event by Frank Blake, chief executive of Home Depot, and Michael Thaman, chief executive of insulation-maker Owens Corning, as well as workers from the Laborers’ International Union of North America. Obama said Owens Corning had seen an increase in exports of insulation to Australia because of that country’s weatherization incentive program.

Thaman said afterward that he could not quantify the increase but said he would expect to see growth in the U.S. as well for its domestically produced insulation.

“We believe if there were a direct incentive to homeowners to improve the energy efficiency of their homes, that would result in a nice uptick in demand for insulation. And obviously we think that’s both good policy and good for Owens Corning,” Thaman said.

He said homeowners usually prefer to invest in home improvements that are more visible to friends and neighbors, such as new windows. But with government incentives, many could be lured into adding insulation, which is a simple way to improve energy efficiency.

“That emotional attachment to insulation just isn’t here, yet it’s critically important to the country,” Thaman said.

Obama said that homes built in the first half of the 20th century can use about 50% more energy than those built today. Much of the energy is lost through leaky roofs and windows.

Making homes more energy efficient not only helps the environment but also helps homeowners save money and boosts the economy, he said.

” “We’re going to create . . . so many business opportunities for contractors here that over the course of the next several years, people are going to see this, I think, as an extraordinary opportunity,” he said. “And it’s going to help America turn the corner when it comes to energy use.”

Bond Program Expanded To Aid Contractors

(NAPSI)-There’s good news for small construction or supply companies that require a completion bond–also known as a surety bond–to bid on a project.

As part of the American Recovery and Reinvestment Act, the Small Business Administration (SBA) can temporarily guarantee bonds on contracts of up to $5 million for small businesses that might not otherwise be able to obtain such bonds.

A surety bond guarantees a company will fulfill an obligation to another party–such as work to be done or goods to be delivered under a contract. In the event the company does not fulfill the contract, the bond is supposed to cover the other party’s losses.

For more than 30 years, the SBA’s Surety Bond Guarantee program has helped small and emerging contractors who have the knowledge and skills necessary for success but lack the combination of experience and financial strength to obtain bonds through regular commercial channels.

The SBA guarantees bid, performance, ancillary and payment bonds issued by surety companies to small and emerging contractors and reimburses the surety a percentage of loss if the contractor defaults.

The agency does not directly bond a contractor. Instead, the contractor chooses a bonding agent, and the SBA reimburses the bond writer between 70 percent and 90 percent of the costs incurred if a contractor defaults.

This government guarantee allows sureties to write bonds for contractors who would not otherwise meet their minimum standards–thus providing small and underserved contractors with contracting opportunities for which they would not otherwise qualify.

In addition to meeting the bonding company’s qualifications, a business must qualify as a small business. This means a company must meet the SBA’s definition of a small business.

The SBA has also implemented another provision of the Recovery Act that would allow it, in some cases, to guarantee bonds in contracts of up to $10 million.

For more information, visit http://www.sba.gov/financialassistance/borrowers/surety/index.htm or call (800) U-ASK-SBA.