The California Legislature has approved $1.25 billion in tax-exempt bonds to finance the first 160-mph "bullet train" in the United States. It would cut the 2 1/2-hour drive from Los Angeles to San Diego to a 59-minute train ride.

Scheduled to go into full service in 1988, the bullet train for 125 miles would run parallel to the interstate highway linking the cities. The fare would be somewhere between today's $16 rail ticket and the $40 cost of a plane ticket.

The feasibility of the $2 billion project depends heavily on the marketability of the newly authorized California bonds.

The bullet train scheme, a favorite of Gov. Edmund G. (Jerry) Brown Jr., was grafted onto legislation only two weeks ago, skirted the usual committee reviews and public hearings and passed both houses with sizable majorities.

"Until two weeks ago all I knew about bullet trains was what I read in the Orange County edition of the L.A. Times," said Michael Gagan, chief deputy state treasurer.

His office now must decide if the bonds are marketable. They will not be backed by the credit of the state of California, but will have the advantage to investors of being exempt from federal and state taxes.

Lawrence Gilson, Amtrak vice president for corporate development and also president of the new company that plans to build the bullet train, said he hopes to make a test run on a short section of the route by 1985 and offer 50 round trips a day by 1988.

To make such a timetable more feasible, the legislature exempted trains running on highway rights-of-way from lengthy public review requirements under the state's environmental quality act. It also gave the state the authority to cede to the bullet train the needed land along Interstate Highway 5.

Gilson said Amtrak's two-year study of the bullet train proposal indicated it would improve the environment by diverting 30,000 people a day "from a polluting, congested road to an all-electric, safe rail system."

Although no American passenger train, not even the popular Amtrak lines between Washington and New York, has broken even in 20 years, Gilson said Japan's 950-mile bullet train system has been profitable since 1966 and a French bullet line that opened last year is already in the black.

The American High Speed Rail Corp. was established earlier this year with directors, consultants, advisers and a few paid staff members. Housed in a temporary office at 444 North Capitol St. in Washington, D.C., it appears to be succeeding so far on the reputation and energies of Gilson, 33, a former Carter White House staff aide, and Alan S. Boyd, 60, the man who played a large role in creating the Department of Transportation under President Johnson and became its first secretary.

Gilson said the idea for building a bullet train in the United States formed among some Amtrak executives as they explored the Japanese rail system while attempting to encourage the Japanese to cooperate with American railway car manufacturers.

He said it became clear to him and other Amtrak officials that Amtrak could not get a federal appropriation to build a bullet train in an era of severe budget cuts. At the same time, private investors made it clear that they would not put money into such a project if it was under the control of a quasi-governmental organization like Amtrak.

Once it became clear that the bullet train could be profitable, Gilson said, he and Boyd, a former Amtrak president, decided to set up a private company to pursue the idea.

Gilson said Amtrak has no rules forbidding his working for the private company while he maintains his Amtrak position. He said Amtrak officials are encouraging the private venture because they feel it will give a boost to all U.S. rail traffic.

The Amtrak general counsel is aware of his dual role, Gilson said, but it will not become a problem until Amtrak and American High Speed Rail have to negotiate some type of agreement.

The advantages of a bullet train over flying, supporters say, would be frequency and downtown-to-downtown convenience. The planned train would make more frequent trips between the cities than airplanes do, and if time to and from airports is included, would be almost as speedy.

Gilson said Japanese technology would play an important part in the construction of the line and that Japanese investors have agreed to pay a fourth of the cost, which he said would probably rise above $2 billion with inflation and interest fees. The state bonds and loans from U.S. banks and other investors would pay the rest, he said.

American High Speed Rail has been investigating prospects of a bullet train in the Miami-Orlando-Tampa area of Florida and may consider future lines in the Chicago area and between Dallas and Houston, Gilson said.

Richard Harris, a vice president of the First Boston Corp. in New York which is serving as a financial adviser for the California project, said engineering and financial studies taking at least three months will be necessary before the company can approach private investors.

Gagan said the state treasurer's review of the project, to determine if investors would buy the state bonds voted by the legislature, also will take several months. For now, Gagan said, his office maintains a "healthy skepticism" about the plan. CAPTION: Picture, Like one of Japan's high-speed trains shown passing Mt. Fuji, the 160-mph San Diego-to-Los Angeles 'bullet' would cut travel time from 2 1/2 hours driving to a 59-minute ride. A lot is riding on $1.25 billion bond issue. Distributed by Los Angeles Times Syndicate