With CA High-Speed Rail facing cash crisis in 2027, is new CEO ‘perfect’ for the moment?

Key Takeaways
Key Takeaways
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• California high-speed rail faces a zero-cash scenario by the end of 2027.
• Interim CEO Joe Stephenshaw replaced Ian Choudri after his Oct. 28 resignation.
• Board chair says Stephenshaw is perfect for agency’s financial problem.

The California High-Speed Rail Authority is hoping its new CEO, a state finance official, will help the agency solve a cashflow crisis that threatens more delays and cost increases if it’s not solved by the end of 2027.

The interim CEO, Joe Stephenshaw, is the director of California’s Department of Finance. That agency advises the governor and Legislature on fiscal policy and could help the rail authority find a way to use its promised future state funding to avoid a zero-cash scenario next year.

Stephenshaw said during a Thursday news conference that he has spent his career working on state budgetary issues and with the California Legislature. That experience will be crucial as the embattled rail authority seeks to maintain the support of state lawmakers and Gov.-elect Xavier Becerra.

“I understand the importance of partnership on statewide initiatives,” Stephenshaw said. “That’s a commitment that I’m definitely going to have, and a mindset that I’m going to have in this role.”

The rail authority is attempting to finish 2026 by laying the project’s first tracks in the Central Valley, a physical milestone that would serve as a win in what has otherwise been a politically uncertain year for the project.

Former CEO Ian Choudri floated a reduced system in the Central Valley and various changes to state law that would grant the rail authority more land-use power. Though the ideas have stirred controversy, the agency says they are necessary to finish the Central Valley segment by 2033 at a minimum cost of $35.7 billion.

But the project’s political reputation took another blow in September, when a state report found the rail authority had improperly paid $680,500 for consultants’ luxury travel and leisure during Choudri’s two-year tenure. Choudri resigned Oct. 28, just as Gov.-elect Xavier Becerra began floating the idea of replacing rail authority leaders to rebuild public trust in the project.

Four contractors identified in the state report have committed to return more than $1.3 million to the rail authority while the review of allowable expenses continues. The rail authority has since stressed that it is focused on moving forward with tighter financial controls.

“I am, as CEO, planning on ensuring that the progress and momentum continues but can assure that happens in an accountable way and a transparent way,” Stephenshaw said.

CA rail chair: CEO ‘perfect’ as project faces finance issues

The rail authority last year secured $20 billion for the project through 2045 from the state’s Cap-and-Invest program, which raises public dollars from companies that pollute by requiring them to buy allowances for their emissions.

But that money is being allocated to high-speed rail at $1 billion per year — a rate officials have said is too slow to keep up with the project’s spending schedule. The agency’s inspector general has warned it could run out of cash by the end of 2027, so the rail authority will need the state government to allow it some form of early access to its promised long-term state dollars, though it is not yet clear what that would look like.

“We need to front some of that money in order to begin running those trains in 2033,” rail authority board Chairman Steve Kawa told The Bee on Monday. “We need to come up with a financing mechanism.”

Earlier this year, the rail authority submitted a request for help solving this problem to the California Department of Finance, the other state agency Stephenshaw leads.

“He’s the perfect person who understands state financing,” Kawa said of Stephenshaw.

Kawa has also said Stephenshaw will bring credibility to the agency as it deals with a new governor and Legislature.

As head of the Department of Finance, Stephenshaw will be Becerra’s chief fiscal policy adviser. He also previously served as Gov. Gavin Newsom’s senior counselor on infrastructure and fiscal affairs.

He has held multiple staff positions in the California Legislature over the past two decades, including a director role for the Senate Budget and Fiscal Review Committee from 2017 to 2022, according to his Department of Finance webpage.