"We would recommend that you not proceed because we think the prospects of success are so small." said analyst Mac Taylor.
The LAO fears the trains will be empty once completed. And it believes construction on the first leg of the railway should not be between Merced and Bakersfield. But rather the Bay Area or Los Angeles.
Fresno County supervisor Henry Perea is a staunch supporter of high speed rail and says the reports findings put 100 thousand new Valley jobs at risk.
"Needless to say we're disappointed but not surprised. The report when you look at the substance of it is basically a recipe for failure and it's a job killer for the Central Valley." said Perea.
Valley congressman Jeff Denham however believes many of these jobs can be saved with shovel ready local projects.
"There's no disputing that we need to improve Highway 99. So we can certainly transfer those dollars if we want the immediate impact of jobs." said Denham.
Federal funding can only be used for high speed rail. But Denham and other California republicans are backing a federal bill that would defer some of the money to state projects like the expansion of Highway 99. So far they've been unsuccessful.
Former republican assemblyman Mike Villines works with a consulting firm for the High Speed Rail Authority. He agrees there should be more flexibility with federal dollars but disputes the other claims.
"It should be built in the Central Valley first. As somebody from the Central Valley you know I believe our tax dollars finally are coming back to the Central Valley. That's good for our kids and our future. That's something that we should want." said Villines.
This report is not binding. Construction is still set to begin here in the Central Valley in the fall of 2012, unless congress and the state legislature decide otherwise.
Another look at California's High Speed Rail
California's controversial high-speed rail project from the Bay Area down to Southern California is raising a new concern -- is the state on the verge of making a multi-billion dollar blunder?
The non-partisan Legislative Analyst Office questions the wisdom of starting California's High Speed Rail project in the Central Valley, which was chosen because the federal government required that location to qualify for stimulus money. In the new report, researchers fear if the entire system isn't built, there'd be trains with low ridership.
"We would recommend that you not proceed because we think the prospects of success would be so small," said legislative analyst Mac Taylor.
However, Assm. Henry Perea, D-Fresno, says this project is vital to the Central Valley for the jobs. He said, "High Speed Rail is an economic game changer for us in the Central Valley."
"I represent a district that has over 18 percent unemployment and some towns, nearly half of the town is unemployed. So high speed rail is going to provide a huge economic opportunity," said Perea.
The Legislative Analyst recommends instead of starting just south of Merced to Bakersfield that the state break ground on the Los Angeles to Anaheim, San Francisco to San Jose, or San Jose to Merced legs.
Despite $10 billion in voter approved bonds, the report was also critical of the project's financing and management. Costs were outdated and under-estimated, risky decisions were being made because of the federal government's deadlines, the business plan lacked details and the state budget might need to make up funding shortfalls.
Assm. Diane Harkey, R-Dana Point, had a bill that would have stripped the high speed rail project of its funding.
"I'm trying basically to call attention to the huge amount of debt and the huge risky undertaking that this is with the lack of information that we have," said Harkey.
"Let's take a deep breath, slow it down, figure out how to do it best and do it," said St. Sen. Alan Lowenthal, D-Long Beach, a High Speed Rail Committee Chairman.
To get the project back on track, the LAO recommends asking the federal government for some funding flexibility to be able to start the project somewhere more viable and to let Caltrans take over the project from the High Speed Rail Authority, which so far has paid 600 consultants.