California Outlines Alternatives for Initial Operating System

by Sean Jeans-Gail, VP of Gov't Affairs + Policy

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The California High-Speed Rail Authority (CAHSRA) issued a 2025 Supplemental Project Update Report late last month, outlining new alternatives for the configuration of the system’s Initial Operating Segment (IOS). The CAHSRA argues that by reconfiguring the IOS to connect to more heavily populated areas, they can increase ridership and revenue for the system launch, setting future expansions on a firmer footing.

The report presented three phased scenarios for phased delivery:

1. Merced–Bakersfield Segment
   • A 171-mile stretch currently under active construction in the Central Valley.
   • Designed to serve as the backbone of the system, with nearly 70 miles of guideway and 55 structures already completed.
   • Prioritization required by statute.
2. San Francisco–Gilroy–Bakersfield Segment
   • Would extend service from San Francisco through Gilroy to Bakersfield.
   • Includes upgrades to the Gilroy–San Jose corridor to integrate with Caltrain’s electrified network.
3. Gilroy–Palmdale Segment
   • Adds a southern extension through Palmdale
   • Connects with Metrolink, and could utilize the High-Desert Corridor to connect to Brightline West in Victor Valley.

CAHSRA is statutorily obligated to prioritize delivery of the Merced – Bakersfield segment, and the document states that the authority plans to do so unless otherwise directed by the Legislature.

However, CAHSRA argues that financial realities faced by the system require it to look at ways to optimize its initial service footprint and recommends that the state prioritize introduction of service to areas with greater population, ridership, and revenue potential. It also argues that a successful service launch will create greater opportunities for engaging with the private sector through a Public-Private Partnerships (P3) delivery model.

Local leaders in Merced have responded to the news with disappointment, saying they weren’t notified in advance of the report’s publication.

“We felt blindsided on Friday, Aug. 22 when the project update was released suggesting Merced be resequenced,” Deputy City Manager Frank Quintero told reporters. “We are grateful for the optimism high-speed rail has brought to the community, but that brilliance is now tarnished.”

CAHSRA officials insisted that Merced will be part of the system, whichever sequencing the state legislature decides to support.

“There is no question that (the) connection of Merced is important because at some point (the high-speed service will connect) to Sacramento, too,” said CAHSRA Board Member Henry Perea. So, I think everything is on the table and it’s just giving the options to the state Legislature to make a decision on which one they see as a priority.”

Funding Remains an Issue

A central theme of the report is the need for stable, long-term funding. While the report factors in a proposed $15 billion in revenue from the state’s Cap-and-Invest program funding through 2045, it also warns that stop-and-go financing—such as the recent Trump Administration decision to attempt to cancel $4 billion in previously approved grants for the project, which is currently being challenged through the courts—leads to delays and increased costs. To accelerate delivery, the report recommends:

• Streamlining environmental and permitting processes;
• Enhancing third-party coordination; and
• Updating state laws to allow greater construction flexibility.