Hyperloop is a new transportation method imagined up by entrepreneur Elon Musk.
The 5-mile test track will be built halfway between Los Angeles and San Francisco.
The system uses depressurized tubes, as well as magnets and fans, to propel up to 28 people at a time at high speeds.
This model will be slower and shorter than the full-sized near-supersonic system envisioned by Elon Musk.
Hyperloop Transportation Technologies announced the agreement with the developers of Quay Valley, California, a planned community that emphasizes sustainability.
The system will be built alongside the Interstate 5 freeway in central California, and the developers claim that it will be the first passenger-ready Hyperloop to be built in an urban area.
Elon Musk, who founded companies like Paypal, SpaceX, and Tesla Motors, first announced the idea of a Hyperloop in a 57-page white paper in August 2013.
In his original envisioning, Elon Musk imagined the system transporting people between Los Angeles and San Francisco- a distance of about 400 miles – in 30 minutes.
Shortly after the announcement Elon Musk handed the concept over to the public for anyone to develop, saying that he was too busy with other projects.
Since then hundreds of engineers have contributed ideas to the project during their spare time.
Elon Musk has described the design as a cross between Concorde, a railgun and an air hockey table.
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