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Schwarzenegger vetoes rail-accountability measure
Budget provisions would have required rail authority to respond the critical reports before receiving funding

by Gennady Sheyner

With a stroke of his line-veto pen, Gov. Arnold Schwarzenegger Monday killed a budget provision that would have forced the California High-Speed Rail Authority to improve its business plan and strengthen its outreach efforts by Feb. 1 or have about a quarter of its annual budget withheld.

Schwarzenegger's veto deals a blow to efforts by Sen. Joe Simitian, D-Palo Alto, and other state legislators to hold the rail authority accountable after a sequence of audits revealed a myriad of flaws in the agency's revenue and ridership plans.

"While the Administration supports these reporting requirements, making the (budget) appropriation contingent upon receipt and approval of this report by the Legislature could result in project delays, jeopardize the Authority's ability to meet already tight federal deadlines and result in increased state costs," Schwarzenegger wrote in his veto message.

The penalty for missing the Feb. 1 deadline would have been $55.32 million in state funding.

The provision, which was inserted into the budget by the Senate Budget Subcommittee No. 2 on Resources, Environmental Protection, Energy and Transportation, gave the authority until Feb. 1 to update its business plan and provide an analysis demonstrating that the rail project would not require a public subsidy for operations.

The subcommittee, chaired by Simitian, also called for the authority to respond to a long list of management deficiencies uncovered by the Office of State Auditor. The auditor's office found that the authority's program manager, the firm Parsons Brinckerhoff, filed monthly reports filled with errors. The office reviewed 22 invoices and identified problems in 20.

In May, after hearing a presentation on the report from State Auditor Elaine Howle, members of Simitian's subcommittee said they were deeply concerned about the authority's mismanagement.

Sen. Alan Lowenthal, D-Long Beach, said he found the litany of poor management practices identified by the auditor "astounding." The authority "doesn't have at this point a coherent program," he said.

"Anybody who has read this audit report cannot help but be disheartened by the authority's mismanagement, or at least some folks' mismanagement of scarce public resources," Lowenthal said.

The auditor's report is one of several recent studies exposing flaws in the rail project. The state Legislative Analyst's Office found major flaws in the authority's business plan. One analysis said the plan "superficially addresses many of the most significant risks of the project."

The Institute for Transportation Studies at University of California, Berkeley, reviewed the authority's ridership projections and found them "unreliable."

This week, three financial experts from the Peninsula released an analysis of the authority's financial data and concluded that the authority's "financial promises can't be kept." The report was reviewed and endorsed by 70 Silicon Valley economists and CEOs.

Simitian, whose Midpeninsula constituency includes some of the most vocal critics of the voter-approved project, called Schwarzenegger's veto of the accountability measures "regrettable."

On Oct. 2, Simitian hosted a Town Hall meeting in Palo Alto, where he lauded the budget provisions as an important step to holding the authority accountable. He alluded to the Feb. 1 deadline and said "the clock is ticking" on the authority to get its house in order.

Simitian has persistently said he supports the rail project — but only "if it's done right." The authority, he told the crowd at the Town Hall meeting, has yet to make a successful transition from a small advocacy group to the builder of a mega-project currently estimated at $42.6 billion.

He said the agency has been doing "just barely enough" to retain legislative support and pointed to a series of critical audits as indications that the authority "has come up short in terms of its work to date."

The state Legislature as a whole approved the subcommittee's accountability provisions for high-speed rail before Schwarzenegger vetoed the section of the budget outlining these measures. Schwarzenegger said while he supports the reporting requirements he opposes tying them to funding because that could cause possible delays in the overall project.

California High-Speed Rail Authority CEO Roelof van Ark released a statement this week affirming his commitment to "transparency and accountability" and pledging to update the Legislature and the public.

"Such reporting is appropriate and necessary. Based on my experience in the private sector, regular and accurate reporting is routine, and I am committed to ensuring that the same principles apply for this project," he stated.

Jeff Barker, deputy director for the rail authority, told the Weekly that meeting the deadlines would have been impossible given how long it took lawmakers to pass the state budget. Without a budget, the authority didn't have the resources to comply with the legislators' mandate, he said in an e-mail.

"We had already alerted the Legislature that because of the historically late budget and therefore our inability to hire any additional risk management, oversight, and financial staff as outlined in the budget, it would be impossible to meet the reporting deadlines that were originally outlined in the budget," Barker said.

But Simitian said the governor's veto will make it even more difficult for the agency to restore its credibility with the public.

"The High-Speed Rail Authority desperately needs to rebuild its credibility and public support," Simitian said. "A failure to require accountability measures only makes that task more difficult."

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

Posted by Frank, a resident of the Ventura neighborhood, on Oct 13, 2010 at 12:30 pm

So what is involved in replacing members of the HSR board with better ones? How did these guys get there? I didn't vote for them...

In general I like the idea of replacing them if we think they are doing a poor job better than withholding funding.

Posted by Resident, a resident of Another Palo Alto neighborhood, on Oct 13, 2010 at 12:38 pm

I was under the impression that Arnold was all for HSR. Not sure where he stands now.

Posted by jardins, a resident of the Midtown neighborhood, on Oct 13, 2010 at 4:06 pm

Arnold is clearly more taken with the magic of what he saw in China and Japan recently, rather than with reality or fiscal and built-environmental responsibility.

Posted by Geoff, a resident of the Greenmeadow neighborhood, on Oct 13, 2010 at 4:45 pm

Arnold's veto means the fix is currently in for HSR at the highest level of State government.

Electing Meg Whitman may be the only way to change HSR support coming from the Governor's office. I'm not advocating Whitman, just reporting the relative support of HSR by Jerry Brown (supports) vs Meg Whitman (does not support).

Supporting those representatives who favor holding HSR Authority to its earlier promises would also be a positive step.

Posted by bill, a resident of the Barron Park neighborhood, on Oct 13, 2010 at 5:19 pm

I wonder how the report by Professor Emeritus Eccles, Silicon Valley Manager will Warren, and William Grindley, a former World Bank official, will affect future decisions on the HSR? Apparently this is a well researched study and reports on the many severe flaws in the project.

It's a long report, and one can download it and skim for particular items of interest. Paste the site description below in your browser since this is not a web link.

Web Link

Posted by bill, a resident of the Barron Park neighborhood, on Oct 13, 2010 at 5:21 pm

The link I gave was converted into a web link. Thank you Online.

Posted by HSR supporter, a resident of the Midtown neighborhood, on Oct 13, 2010 at 7:24 pm

Arnold is 1) European and 2) smart. He knows that HSRs are the future of railways, just as everybody else in the world knows, including China, Japan, many European countries and enlightened Americans. Those opposed to HSR either live close to the tracks and are afraid by all the disinformation put out there on noise and other impacts, or people stuck in the past, who want to keep our 1920s version of trains.

Posted by howard, a resident of the Crescent Park neighborhood, on Oct 13, 2010 at 9:46 pm

re:" I wonder how the report by Professor Emeritus Eccles, Silicon Valley Manager will Warren, and William Grindley, a former World Bank official, will affect future decisions on the HSR? Apparently this is a well researched study and reports on the many severe flaws in the project."

Not so. It was written by Eccles, who had a serious conflict of interest. He lives next to the tracks in Atherton and will do anything to stop HSR. The rest of the "authors" just rubber stamped the report -- to their discredit.

Posted by credibility, a resident of Another Palo Alto neighborhood, on Oct 13, 2010 at 11:40 pm

Are you quite sure, Howard? I didn't know Eccles was still with us. Web Link

Posted by John Galt, a resident of the Fairmeadow neighborhood, on Oct 14, 2010 at 10:39 am

Arnold signs or vetoes bills based on the VERY LAST advise he gets. Whoever gets to him last, wins. I have seen him take a position, a good one he has supported, and then veto it at the last minute. Go figure.

Posted by NIMBY-maybe, a resident of the Ventura neighborhood, on Oct 14, 2010 at 6:17 pm

I've never seen the sense in running HSR up the peninsula, where it won't be able to run at high speeds anyway. It ought to have a San Jose station and let people transfer to BART or Caltrain or buses, and then skirt the Bay Area to the east, speeding along to Sacramento. (Somewhere, I sense an Important Person scowling, someone who wants to stay on his butt all the way to San Francisco and not have to change trains. Oh, well.)

Then spend some of the money upgrading Caltrain and maybe -- dare I say it? -- completing BART around the Bay). Long-distance travellers benefit, we locals benefit.

But I have no confidence that anyone will try to maximize the benefits and minimize harm from this thing. They can't even get rapid transit to the airports. As for Meg, Someone Important will whisper in her ear about how much money he stands to lose if HSR isn't built, and she'll change her tune. That's the way the world works.

Posted by jim, a resident of another community, on Oct 16, 2010 at 6:11 pm

There's difference between oversight and accountability, and appeasing people who will never be happy unless they get their way. All Californians are subject to, and obligated to, do their share in helping the State move forward in the new century. We have a future to consider, and economy, and a place in the world market. California is not some barefoot hillbilly backwater, lallygagging along the bayou. WE are a dynamic world leader on many fronts and must compete on the global stage for a share of the world's commerce. While nations around the world are moving forward to update their systems of commerce, including the movement of people and goods, we get stuck with a bunch of tired old cronies squawking like chicken littles about how the sky is gonna fall if we implement any of those fancy, newfangled contraptions.

You know when the railroad first appeared in America there were people who said that the human body could not withstand high speeds in excess of 20 or 30 mph. I guess some of those people are still around. Luckily they are a minority.

Posted by trappings over substance, a resident of the Evergreen Park neighborhood, on Oct 16, 2010 at 8:06 pm

"California is not some barefoot hillbilly backwater, lallygagging along the bayou. WE are a dynamic world leader on many fronts and must compete on the global stage for a share of the world's commerce. While nations around the world are moving forward to update their systems of commerce, including the movement of people and goods..."

This really displays naivete. It is like putting in a very expensive wiring system into the walls of a city government building in order to keep up with the Joneses, only to find that current technology needs different, or no, built-in wiring. Choosing any old type of high speed rail without careful consideration of the exact impact and future needs is typical government misallocation of funds to show how "with it" we are.

Part of the thinking has to be the hard work of making local mass transportation infrastructure work. If we can't make it work for airports, we can't make it work for HSR.

Part of the thinking has to be the hard work of analyzing where the real jobs and economic impact will be. If it advances China's HRS building industry, how does that help us?

Part of the thinking has to be the hard work of building a business model that pays out and doesn't provide long term stress on our inflamed budget problems.

But none of this work has been done. We just want to show that "California is not some barefoot hillbilly backwater." Actually, building HSR as currently planned shows that we are exactly that. We don't understand transportation, its technology, and its economic impact enough to consider them in our thoughts!

Posted by Requirements for HSR, a resident of the Charleston Gardens neighborhood, on Oct 18, 2010 at 4:50 pm

Why would you require this work to be done for HSR? It's not done for road work or airports.