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Bullet train bidder has history of cost overruns

SACRAMENTO – The lowest-bidding partnership for the first segment of California’s high-speed rail line includes a firm with a history of cost overruns and costly lawsuits.

The California High-Speed Rail Authority on Friday announced that the American joint venture of Tutor Perini/Zachry/Parsons was the “best apparent value” with a low bid of $985 million – below the $1.09 billion bid by the next-lowest bidder.

On construction projects in California, the lowest bidder has a strong advantage in the eventual selection process. Rob Wilcox, a spokesman for the authority, declined to comment on bidders as the matter is finding its way to the authority’s board of directors.

“Five world-class teams competed for this opportunity, and the process is ongoing,” Wilcox said.


The first segment of the estimated $68 billion system is proposed to run 28 miles from Madera to Fresno in the San Joaquin Valley.

According to an August report by The Bay Citizen, sister site of California Watch, 11 major projects in the San Francisco Bay Area completed by Tutor in the last dozen years cost local governments $765 million more than they expected, or 40 percent above the initial bids.

A company spokesman did not return a message seeking comment. CEO Ron Tutor said in the August report that attacks against him were unfounded and overruns were caused by contracting agencies changing the projects in midstream.


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Contractors among biggest donors to BART board campaigns

Construction companies are pumping tens of thousands of dollars into the race for the Bay Area Rapid Transit board in an effort to unseat incumbent Director Lynette Sweet.

The construction firms accuse Sweet of meddling in bids for BART construction work and are backing 25-year-old Zakhary Mallett, who until recently was a UC Berkeley graduate student. Sweet’s backers counter that she is being punished for standing up to BART contractors who shortchange and discriminate against minority subcontractors.

The heated contest underscores a fact that often goes unnoticed by the 400,000 daily BART riders: One of the transit agency’s main functions is handing out billions of dollars in contracts for construction, track repair and new BART cars. This year alone, the transit agency has awarded $2 billion in contracts. The board’s elections and policies often are shaped by contractors who have a financial interest in the outcome.

In the upcoming election, 44 percent of the money donated to the 13 candidates vying for five open seats on the BART board has come from companies or employees of companies that have done – or want to do – business with BART, according to an analysis by The Bay Citizen. Another 14 percent of all donations are coming from unions, including some that soon will be negotiating new contracts with BART management.


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Community college districts' bonds inflate taxpayers' repayments

Several California community college districts have sold bonds that allow them to put off payments for up to 40 years, causing the total repayment to cost taxpayers from five to nine times the principal.

Poway Unified School District made headlines this month for issuing a bond for $108 million that will end up costing taxpayers nearly $1 billion over 40 years.

Poway has become the poster child for long-term capital appreciation bonds, increasingly common but controversial tools that enable districts to get cash now for voter-approved construction programs, while delaying the payments and tax levy for decades.

A retired Detroit Free Press reporter, Joel Thurtell, reported on Poway's bond sale on his blog. After Voice of San Diego reported in-depth on the deal Aug. 6, the story garnered national attention.


The Los Angeles treasurer and tax collector’s office has taken an aggressive stance against long-term versions of these bonds.

“Once you see a repayment obligation that materially exceeds the principal amount, by that I mean four, five or 10 times more, you have to question why they did it,” said Douglas Baron, director of public finance at the Los Angeles County treasurer and tax collector’s office.

More standard bond sales cost closer to $3 per dollar borrowed.

Filed under: Higher Ed, Daily Report


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Alameda to allow construction of new apartments

For the first time in nearly 40 years, the city of Alameda has zoned large swaths of land for apartment buildings.

The City Council's vote paves the way for new affordable housing in the city, which residents have tried to block for decades.

The new zoning plan came eight months after a community group called Renewed Hope Housing Advocates threatened to sue the island city. The group argued that Alameda's ban on new apartment construction, which voters approved in 1973, violated California law.

“State law doesn’t say you can prohibit apartments on every single inch of your city,” said Laura Thomas, president of Renewed Hope Housing Advocates.


Under state law, every city must have a general plan that outlines how and where it will grow. As part of those planning documents, a city must show where it plans to build both single-family homes and apartments, including affordable housing. If the plan does not comply with the law, the city cannot compete for state parks and transportation funds.

After last Tuesday's vote, Alameda has now zoned 17 locations throughout the city for developers to build a total of 2,420 apartment units.

Had Alameda failed to change its zoning rules, the city faced losing tens of millions of dollars in regional transportation funds over the next four years, City Manager John Russo wrote in a memo to City Council members before the vote.

The city could have also lost millions of dollars in state funding for local parks designed to support affordable housing.

And if Renewed Hope Housing Advocates filed suit, Thomas said, Alameda could have lost its zoning authority.


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Despite demand for apartments in Bay Area, new construction slows

Although rents are soaring and demand for rental units is growing, developers are not building many new apartments, condominiums or homes in the Bay Area, according to a new report.

The region added 6,382 housing units between April 2010 and July 2011, an increase of just 0.2 percent, newly released estimates from the U.S. Census Bureau show.

Counties that are home to such cities as Fargo, N.D., Cicero, Ind., and Rock Hill, S.C., all added more housing units than Santa Clara County, the home of Silicon Valley.

The result, analysts said, is that in San Francisco, the Peninsula and the South Bay, rents are rising as new workers at social media companies like Facebook and Twitter power a second Internet boom.


“The boom in high-quality, technology-related jobs is driving higher rents in the apartment and multifamily business,” said Stephen Duffy, managing director for Moss Adams Capital, a real estate investment firm.

“These people, mostly 18 to 34 years old, prefer to rent rather than buy,” he said.

“The vacancy rate in some areas is getting close to zero,” said Paul Zeger, president and CEO of Pacific Marketing Associates, which handles housing sales for major Bay Area developers.

In most of the Bay Area’s more desirable neighborhoods, rents now average more than $3,000 a month, he said.

Still, Zeger said, “we still have a hesitancy on the part of construction lenders” to fund new apartment projects.

That hesitancy is a result of the huge oversupply of housing, mostly single-family units, that was built before the bust.


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Senate hearing today will address seismic safety reforms

Prompted by a scathing audit and proposed legislation, the state's top construction administrators are scheduled today to discuss ways to improve the seismic safety and oversight of public school building projects.

State Architect Chester Widom and Lisa Silverman, executive officer for the Office of Public School Construction, will appear before a special meeting of the Senate Select Committee on Earthquake and Disaster Preparedness at 10 a.m. at Canyon Middle School in Castro Valley.

The hearing will be the first public update on state reforms initiated in the wake of a California Watch investigation and a California State Auditor report that found serious problems in how the state ensures the earthquake safety of its schools.

California Watch last year found the state had routinely failed to enforce the seismic safety requirements, allowing children and teachers to occupy buildings with structural flaws and potential safety hazards that were reported during construction. The investigation triggered a state audit that concluded that regulators had failed to ensure schools were safe. The audit slammed the state's oversight, calling it “neither effective nor comprehensive.”


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Rail authority to accept Fresno-area bids within weeks

SACRAMENTO – Contractors vying to build the first sections of California’s proposed high-speed rail line will get the green light to start making their bids within just a few weeks.

Yesterday, the California High-Speed Rail Authority approved the terms and conditions that bidders will be expected to meet in designing and building a 29-mile segment of the line from east of Madera to the south end of Fresno – a stretch that is expected to cost about $1.5 billion.

The request for bids still must be approved by the state’s Public Works Board, but after clearing that hurdle, five potential teams of construction companies from across the U.S. and around the world can begin making their bids.


The five contractor teams that have been prequalified to bid on the project through Fresno are:


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High-speed rail construction likely delayed until 2013

Construction of a high-speed train line in the central San Joaquin Valley was supposed to start late this year. Now, officials say, it’s not likely to start until early 2013, even if state legislators approve billions in bond money this spring.

At its meeting tomorrow in Sacramento, the California High-Speed Rail Authority will learn about an updated schedule for the $6 billion construction project.

The slowdown in the schedule is the result of revisions to environmental reports for the 120-mile Fresno-to-Bakersfield section of the rail line – part of the backbone of a proposed 520-mile system of electric trains connecting San Francisco and Los Angeles. Later extensions would add lines to Sacramento and San Diego.

About $3 billion in federal stimulus and transportation funds earmarked for the project in 2010 and 2011 were based on construction starting by September 2012. But a 2013 start isn’t expected to endanger the funds because the more important deadline is having the work completed by late 2017.


An environmental report for the track segment was issued last fall, but two months of comment and public hearings across the Valley attracted a slew of objections, including opposition in Kings County to a route that would take trains through farmland east of Hanford.

That uproar prompted rail authority engineers to withdraw the environmental report in order to revise it with a new alternative that bypasses Hanford to the west. The authority expects to issue the revised draft report this summer, triggering another round of public hearings and comment, months after the authority originally expected to have a final version approved.


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Contractors OK'd to bid on Fresno-area bullet train construction

Fourteen construction companies are on the short list of firms poised to bid for contracts to begin building California’s high-speed rail system in the Fresno area later this year.

The list was revealed by California High-Speed Rail Authority CEO Roelof van Ark at the authority board’s monthly meeting yesterday in Sacramento.

Van Ark said the companies have formed into five teams that the authority has qualified to compete for a contract on a stretch of the line through Fresno, from the San Joaquin River at the north end to American Avenue at the south end. The contract is expected to be worth $1.5 billion to $2 billion.

The builder teams are:

  • California Backbone Builders, a consortium of two Spanish construction firms – Ferrovial Agroman and Acciona
  • California High-Speed Rail Partners, composed of Fluor Corp. of Texas, Sweden-based Skanska and PCL Constructors of Canada
  • California High-Speed Ventures, made up of Kiewit Corp. of Nebraska, Granite Construction of Watsonville and Comsa EMTE of Spain
  • A joint venture of Dragados SA of Spain, Denver-based Flatiron Construction Corp. and Shimmick Construction of Oakland
  • Tutor Perini Corp. of Sylmar, Zachry Construction of Texas and Pasadena-based Parsons Corp.

The project includes building 12 street overcrossings or underpasses, two elevated viaducts, a tunnel and a bridge across the San Joaquin River. Laying the tracks will be done later under a separate contract.

While the authority has qualified the teams in a screening process, significant hurdles remain, and it could be months before the companies get a chance to submit bids.


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Critics worry high-speed rail approvals will be fast-tracked

Since the recession began, the state Legislature has put some big-ticket construction projects on the environmental fast track in the name of creating jobs.

At the behest of then-Gov. Arnold Schwarzenegger, lawmakers agreed in 2009 to exempt 10 multimillion-dollar highway construction projects from environmental review, including the $400 million expansion of the Caldecott Tunnel, the freeway link between the Bay Area and Contra Costa suburbs.

Last year, they gave a similar environmental green light to a proposed $800 million, 75,000-seat professional football stadium in Los Angeles.

In both cases, project boosters said the promise of creating thousands of construction jobs in a weak economy justified sidestepping some protections of the California Environmental Quality Act, the state’s landmark green law.

Now, opponents of the biggest-ticket construction job of all – California’s controversial $98 billion bullet train – say they worry that a similar effort might be contemplated to ease the project past a gauntlet of environmental lawsuits.


A measure introduced last week by Assemblyman Mike Feuer, D-West Hollywood, to provide expedited environmental review for “public rail transit projects” caused concern among groups worried about the financial and environmental effects of the massive high-speed rail project.

Although Feuer’s staff said the bill is not intended to fast-track the bullet train, the issue is an “ongoing concern,” said lawyer Stuart Flashman, who represented Peninsula groups in two environmental lawsuits concerning the project.


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