LAX-Palmdale railway mired in confusion.

Who will pay for it? Will it link with an east-west line?

Hopes of making a $4 billion, high-speed rail line between Los Angeles and Palmdale the first privately built mass transit project in the Southland appear to be making a U-turn, with the project's fate increasingly tied to the availability of public funding, transit officials conceded last week.

That recognition, which some cast as a policy change, could ease the financial concerns of firms eager to erect the proposed 69-mile line but worried about how to pay for it. Then too, the specter of hefty public subsidies could doom the project politically because of higher-priority transit lines and the perception it has become a taxpayer-financed system.

"We're concerned that there might be too much public money and not enough private," said Jack Bacharach, a board member of the Los Angeles County Transportation Commission, which is overseeing the proposed project between L.A. International Airport and Palmdale Airport. "If that's the case, the line may not make it."

Added an executive for one bidder, "It's taken on dimensions other than privatization."

The LACTC has tentatively earmarked $1.2 billion for the LAX-Palmdale train, which would likely travel on a north-south route down the median of the Golden State (5) and Antelope Valley (114) freeways when construction is finished at decade's end. Last July, when the commission approved requests-for-proposals from 14 bidders, talk of subsidies centered on paying back preliminary engineering costs.

Aside from financing, however, another central issue remains unsolved: whether the train will be linked physically or technically to a separate, $1.2 billion line slated to run 16 miles through the San Fernando Valley on a east-west route. While state legislation requires that all LAX-Palmdale line bidders be given first crack at also constructing the San Fernando Valley line, some believe that preference could derail one or both projects.

In general, the valley line is considered more of a sure bet because of the area's greater population density and traffic. The LACTC has set aside $1.25 billion for that line in its draft 30-year plan, giving it more emphasis than the LAX-Palmdale train, though theoretically each system could be built simultaneously by different companies.

"We just felt there was a better opportunity on the east-west line," said Dave Phipps, business development manager for Ralph M. Parsons Co. of Pasadena, which considered bidding on the LAX-Palmdale line but took the option to bid only the valley route instead. "For a single company to pursue both the lines would require a tremendous degree of resources. Very few companies would be able to handle both."

In an effort to jump-start the LAX-Palmdale proposal, the LACTC is looking for new sources of public cash and novel ways for the private builder to turn a profit. Government subsidies, according to LACTC Project Manager George Swede, could come from the state or even local agencies like Los Angeles Department of Airports or the City of Palmdale, which hopes to accommodate more passengers because of LAX's overcrowding.

Separately, sources said, the commission is also applying for a $375 million grant under the recently passed federal Surface Transportation Act, though some believe the LACTC may not qualify for the money.

"We've accepted from day one that this could not be 100-percent privately financed," said LACTC Executive Director Neil Peterson. "We've told the private sector to 'Give us your best shot and tell us how you need to make the project a complete go.'"

That "shot," sources said, has been crimped by the recession, which has tightened credit markets and shrunk cash reserves needed to build the line.

The evolution of what was originally hailed as an experimental, privately built transit system into a line dependent on public money has no shortage of precedents. In the past year alone, hopes for futuristic, privately built trains -- including a Las Vegas-Anaheim line and 317-mile system in Florida -- have died because of their need for taxpayer bailouts. A $5.7 billion highspeed line in Texas, proposed by a consortium led by Morrison Knudsen, may go belly up without $3 billion in taxpayer bonds, according to Newsweek.

To further reduce the costs borne by the winning contractor, Swede said, the LACTC is weighing a number of options. The commission might buy the line's valuable rights-of-way from Caltrans, lease the land cheaply along with air rights to the builder, who could then rent it out commercially. Or it might get a utility, like Southern California Edison, to buy excess electricity from the train's privately funded power plant.

Five of the 14 construction outfits that expressed interest last spring in erecting the line have obtained request-for-proposal documents. Those firms include Idaho-based Morrison Knudsen, which a lost a bid to the build automated cars for the Norwalk-to-El Segundo Green Line, Siemens of Germany, French-owned Matra Corp. and AEG Westinghouse. A consortium made up of construction manager Daniel Mann Mendenhall & Johnson, Tokyo-based HSST Corp., Perini Corp. of Massachusetts and Hughes Aircraft's Ground Systems Group are also bidding.

The LACTC's January deadline for proposals now been pushed back to April at the bidders' request. They cited the project's engineering and financial complexities, as well as new contract stipulations favoring firms that commit to employing the largest number of Los Angeles workers.

"Right now we are wrestling with whether we can be assured, as a private company, of making a profit," said Frank Turpin, Morrison Knudsen's vice president for project development. "The financing problem is more a function of what the LACTC is willing to commit in terms of repayment or recovery of our investment."

If financial and technical hurdles can be cleared, the LACTC is expected to select an LAX-Palmdale builder in March 1993, with construction starting in the fall of 1994.