News

Critics slam high-speed rail business plan

Peninsula economists say project would endanger California's economy

Peninsula critics of California's proposed high-speed rail system released a new report Monday night challenging the economics behind the controversial, voter-approved project and accusing the agency charged with building the rail system of deceiving the public.

The 100-page report, titled "The Financial Risks of California's Proposed High-Speed Rail," was written by Stanford University economist Alain Enthoven, former World Bank analyst William Grindley and financial consultant William Warren. The authors argue that the California High-Speed Rail Authority has made "implausible" claims about the costs and ridership projections of the high-speed rail line, which the authority hopes to build by 2020.

The heavily referenced report cites a slew of other recent studies criticizing various aspects of the San Francisco-to-Los Angeles line, including reports from the Legislative Analyst's Office, State Auditor Elaine Howle, and the Institute for Transportation Study at University of California, Berkeley. It also surveys other existing high-speed rail systems around the world and concludes that under the current plans, California's system would not be economically self-sustainable.

Proposition 1A, which voters approved in 2008, allots $9 billion for the 800-mile project but prohibits public subsidies for rail system's operation.

The authors argue that the rail authority's plans to fund the system through a combination of federal grants, private investment and local contributions (along with the Proposition 1A funds) are more hopeful than realistic. They claim the authority has not yet received any private-investment proposals.

"To not have secured one private lender's commitment in a state that houses the world's largest and most successful risk capital companies speaks volumes," the report states.

The report's three authors write that they "do not oppose high-speed rail in concept," but challenge the assumptions in California's current plan.

"The 2008 Prop 1A promise that captured many voters was that the CHSR would not cost the taxpayers a penny," the report states. "After months of work on this report, we were forced to conclude that the Authority's promise seemed an impossible goal."

The report recommends that state officials demand a "credible financial plan"; establish an independent peer review panel to review the finances; bring in a rail builder and operator "to advise the Legislature on the financial realities of building and operating a system"; and cut off funding for the system.

Comments

Like this comment
Posted by Frank
a resident of Ventura
on Oct 12, 2010 at 10:47 am

Another report questioning (blasting) the business model of HSR - is this news?

My question is are these experts HSR opponents looking for any reason to delay / kill the project or truly as they write that they '"do not oppose high-speed rail in concept," but challenge the assumptions in California's current plan.'

Because if they only oppose the "current plan" where are any kind of suggestions or recommendations for modifications to that plan that might guide the project to a more favorable (in their opinion) outcome.

It is always easy to throw hand grenades at any plan but until you suggest a better path and put your name behind it you don't have much credibility. You can claim your not but you look to me awfully NIMBY.


Like this comment
Posted by MC
a resident of another community
on Oct 12, 2010 at 10:50 am

Nice! And yes, this is definitely news worthy.

And of course followers of the CHSR Blog are saying it's biased since it's not in their favor.


Like this comment
Posted by Timothy Gray
a resident of Charleston Meadows
on Oct 12, 2010 at 11:57 am

Using the word NIMBY adds nothing to the attempts to have a discussion on the merits of the High Speed Rail plan. When facts to counter the very logical and documented fact that the HSR business plan is a sham, out comes the name calling and attacks on the messenger. (when your out of facts, one has to resort to name calling.) We are talking about a plan is just plain faulty.

The following deserves to be repeated:

The current configuration demonstrates no attempt to mitigate the extreme harm that this project would cause to our community.

The Palo Alto Voices are not "NIMBY", but simply call for the HSR Authority to do it right. Very reasonable.

Being against a third-world design for what had previously been advertised as a World-Class project, is not anti-HSR.

To falsely label the correct citizen protest as NIMBY and Anti-HSR is an unethical deception that simply needs to end.

Do it right or don't do it at all. The plan is not right, so the HSR Authority has forced us into an inexcapable conclusion. Give us a World-class plan that respects the communities and you will find all kinds of support for the greater good.

Respectfully,

Tim Gray


Like this comment
Posted by Geoff
a resident of Greenmeadow
on Oct 12, 2010 at 12:05 pm

At 220 mph on a pitch black Fall night, the planned California Super Streak train shot off its tracks and headed straight into high-speed rail oblivion.

Investigators are looking into many possible points of failure for the California HSR disaster. While HSR enjoyed early support and a favorable vote in 2008, widespread disillusionment has subsequently engulfed the concept as more and more facts have become known. Credible observers are raising significant questions and expressing skepticism as revelation after revelation come to light.

Economist Alain Enthoven, former World Bank analyst William Grindley and financial consultant William Warren just issued a 100-page report titled "The Financial Risks of California's Proposed High-Speed Rail."

The Palo Alto Weekly is saying, 'The heavily referenced report cites a slew of other recent studies criticizing various aspects of the San Francisco-to-Los Angeles line, including reports from the Legislative Analyst's Office, State Auditor Elaine Howle, and the Institute for Transportation Study at University of California Berkeley. It also surveys other existing high-speed rail systems around the world and concludes that under the current plans, California's system would not be economically self-sustainable.'

A faulty business plan and shoddy management techniques are high on the list for disaster investigators.

Undermining the integrity of the high speed rail system is the High-Speed Rail Authority and its plummeting credibility. Many now believe the Authority is simply following a flawed script devised as much as a decade ago by aging politicians Quentin Kopp and Rod Diridon.

Congresswoman Anna Eshoo announced Monday in an interview with the Palo Alto Weekly 'that a high-level federal "working group" is meeting weekly to discuss California's high-speed rail project. It was created in response to growing concerns about the viability of the California project. Eshoo said the working group was created by U.S. Secretary of Transportation Ray LaHood following a September 30, 2010 meeting of six Congress members from California and several high-level federal officials. The 90-minute meeting covered growing concerns about the rail project, currently estimated to cost $43 billion, which would link San Francisco to Los Angeles in its initial phase. Eshoo said the congressmembers expressed concerns about the viability of the California project and leadership of the California High-Speed Rail Authority, based on several authoritative studies that questioned basic cost, design, process and ridership studies of the authority.

'Eshoo said her own position is that some federal funds need to be freed up and applied directly to upgrading and electrifying the Caltrain commute service, struggling to fill a $2.3 million budget gap. Federal funding is from the Federal Railroad Administration under the Department of Transportation.'

These developments will likely prove to be the beginning of the end of California HSR.


Like this comment
Posted by anon
a resident of Santa Rita (Los Altos)
on Oct 12, 2010 at 12:20 pm

More info' on the report and links to it and the appendices at

Web Link


Like this comment
Posted by Dennis "galen" Mitrzyk
a resident of Ventura
on Oct 12, 2010 at 12:34 pm

Gosh Frank (first comment above), i guess you missed that the report suggested that the State cut off funding for this insane boondoggle. That's their very reasonable suggested fix... kill it.

If someone hands you a sow's ear and says, "Look here, i'm going to make a nice silk purse for you", what do you say? I assume you say, "Go ahead, i could use a nice silk purse". What does a rational person say? ..."You can't make a silk purse out of a sow's ear!".


Like this comment
Posted by Joe
a resident of College Terrace
on Oct 12, 2010 at 12:51 pm

Read the report--or at least the ex summary. What the news article fails to report is that there are 70 some co-signers/reviewers of the report who are highly respected business people. Their endorsement of the report is critical in showing that many many experts in this field have no confidence in the finances of HSR.


Like this comment
Posted by Casey Jones
a resident of Addison School
on Oct 12, 2010 at 12:53 pm

This responds to Frank in the first post on this item: Three named individuals are the authors of this report, all of some standing and repute and all capable of being googled and tracked at least to a limited extent. Can Frank show that anyone of the three have a backyard near proposed HSR tracks? If he can not, will Frank explain how he can call the authors NIMBYs. Does this not show that Frank is a "bumper slogan thinker", which substitutes a slogan for actually thinking about a matter, then just keeps repeating the slogan over and over instead of engaging in actual discussion. In other words, Frank is a "BuST".
On a different tack, will Frank explain what is wrong with defending your own back yard? It is one of the moat elementary and basic instincts among all animals. It is completely appropriate at all times and in all places. Please explain, Frank, what is wrong with defending your own backyard. Try to think now. No slogans. Try hard.


Like this comment
Posted by Douglas Moran
a resident of Barron Park
on Oct 12, 2010 at 2:46 pm

Douglas Moran is a registered user.

NIMBY (Not In My Back Yard) is a term that was created to describe people who wanted something, but didn't want to bear the impacts, especially when they were advocating for a facility that would be in someone else's neighborhood but which they would oppose if it was in theirs.

I didn't see anything NIMBY in this report--it says HSR is likely to be bad for California.

Frank's comment (first here) is unfortunately characteristic of the intellectual and moral bankruptcy of the HSR advocates: Attacks on those who question the proposal and demands that critics come up with workable alternatives, even though it is the HSR authority that has the _responsibility_, the time (6+ years?), and the financial resources. Frank seems to want the current HSR "plan" to be built no matter the expense, the infeasibility, and the incompetence and malfeasance of the management, but may be willing to consider less flawed versions.


Like this comment
Posted by Steve
a resident of St. Claire Gardens
on Oct 12, 2010 at 2:55 pm

Remember that "right or not at all" can easily become a self-fulfilling prophecy. Most places along the entire HSR corridor up and down the state are 80-100 ft Rights of Way. Does that mean trenches or tunnels in the Central Valley to avoid impacts to present agriculture or future subdivisions? If we work with Peninsula Rail to get things moving locally we can get Caltrain upgraded before it goes out of business. If we don't, the first consequence may be 38,000 extra people in their mostly single occupant vehicles out on 101 and 280 twice a day. For those in Palo Alto who never go anywhere -- That commuter access explains part of your home value.


Like this comment
Posted by Phil
a resident of Midtown
on Oct 12, 2010 at 3:50 pm

Why not just be honest and say one of these things?:

"I don't want to see elevated track when I look out my window in Palo Alto."

"I fear that this train will add to the noise I hear when I open my windows at home."

"I am afraid that some of my property might be taken by the government for this train."

Clear - and refreshingly honest. Unlike some of the sideways attacks on High Speed Rail by people with another agenda.


Like this comment
Posted by Hypocrite alert
a resident of Barron Park
on Oct 12, 2010 at 3:54 pm

"Frank's comment (first here) is unfortunately characteristic of the intellectual and moral bankruptcy of the HSR advocates: Attacks on those who question the proposal "

Without getting into a discussion on HSR, Mr Moran's comments highlight his lack of respect for those he disagrees with. A perfect example of the kettle calling the pot black. Mr Moran should look in the mirror before he labels others as morally bankrupt.


Like this comment
Posted by Paul
a resident of Downtown North
on Oct 12, 2010 at 4:45 pm

"where are any kind of suggestions or recommendations for modifications to that plan that might guide the project to a more favorable (in their opinion) outcome..."

It's like this: I cannot tell a chicken how to lay an egg, but I can tell if an egg is rotten.


Like this comment
Posted by palo alto mom
a resident of Duveneck/St. Francis
on Oct 12, 2010 at 4:49 pm

The most important line from the article (in my opinion)

"To not have secured one private lender's commitment in a state that houses the world's largest and most successful risk capital companies speaks volumes," the report states.

If HSR was such a great idea, wouldn't companies be jumping at in investing in it?


Like this comment
Posted by Rail
a resident of College Terrace
on Oct 12, 2010 at 6:26 pm

California can't balance the budget as it is -- without short-term "tricks". HSR will only make it twice as hard.

Granted, I love the idea of a bullet train. The TGV in France is cool!

But are you really going to ride it regularly? HSR will cost $1000 per person. So how much will it save me per trip compared to SouthWest Airlines? Nothing. And it's slower. And I still need to rent a car.

For a family of 4 or 5, you're better off driving to LA for $70, vs. paying $250-300 for HSR + $50-$100 for a rental car.

What else can we do with $40 billion? There must be something...


Like this comment
Posted by Rail
a resident of College Terrace
on Oct 12, 2010 at 7:00 pm

I guess I forgot to factor in the return trip. So 4-5 people at $100 each round trip + rental car...

around $500 by rail, $70 by car. (You might argue that the car actually costs $0.40/mile, which is $320, but only 5-10% of riders will be that intellectual about it.)

I'll ride it once for the novelty...


Like this comment
Posted by chris
a resident of University South
on Oct 13, 2010 at 11:41 am

I guess all these HSR bashers are rushing to vote for Meg Whitman.
Even Republican Schwarzenegger is thwarting their efforts to stop HSR. If Jerry Brown gets in, HSR is a slam dunk. Right?


Like this comment
Posted by Rail
a resident of College Terrace
on Oct 13, 2010 at 1:47 pm

Has Whitman or Brown taken a stand on HSR? Or are they skirting the issue until post-election?


Like this comment
Posted by Howard
a resident of Crescent Park
on Oct 13, 2010 at 6:32 pm

This report has zero credibility. The prime mover behind it is an Atherton retired business professor who lives a block from the tracks, and is worried that HSR will disrupt his ability to eat on his picnic table outside.


Like this comment
Posted by Robin
a resident of another community
on Oct 13, 2010 at 6:44 pm

And so it begins. The house of cards known as California High Speed Rail begins to collapse. The plan begins to unravel. A light is beginning to shine in the darkness.

Pleas let this monster die before another dollar is wasted....


Like this comment
Posted by pat
a resident of Midtown
on Oct 13, 2010 at 9:16 pm

For those complaining that only NIMBY’s are against HSR -- even accusing the professor who lives in Atherton! –- are you ready to put your life savings into the HSR business plan?

If not, why are you pushing for it?

As for Alain Enthoven basing his opinions on the location of his home in Atherton, do you honestly think a man with his credentials would do something so stupid? And get his co-authors to go along with such a sham?

Alain C. Enthoven: Marriner S. Eccles Professor of Public and Private Management (emeritus), GSB Stanford; President, Litton Medical Products; Economist, Rand Corporation; President's Award for Distinguished Federal Civilian Service; Baxter Prize for Health Services Research; Fellow American Academy of Arts and Sciences; Founder, Jackson Hole Group (BA Economics, Stanford; Rhodes Scholar-Oxford; PhD Economics, MIT)

William H. Grindley: World Bank; Associate Division Director, SRI International; Founder and CEO, Pacific Strategies, ret. (Master of City Planning, MIT)

William Warren: 40 years of Silicon Valley finance, management, sales and consulting experience, including CEO of several start-ups; Director/Officer at ROLM, Centigram, and Memorex (MBA, Stanford)


Like this comment
Posted by Googlegeek
a resident of Los Altos Hills
on Oct 14, 2010 at 8:44 am

Hey “Paloaltoonline,” or whatever you call yourselves. I haven’t seen a self congratulatory story on how Palo Alto real estate always goes up, up, up forever and ever lately. What’s the problem? Oh, I guess it doesn’t go up indefinitely. Too bad for over-levered real estate debtors in Palo Alto (note, they are NOT homeowners, that would require an equity stake of 51%, otherwise they are minority shareholders). Keep showing your little adds showing how a house that last sold in 1974 recently sold for seven million dollars. Has anyone ever heard of idiosyncratic risk in an investment? i.e. the Belmont explosion, 1987 earthquake, etc. Beter buy real estate, or you will be “priced out forever.” LOL.


Like this comment
Posted by Peter
a resident of another community
on Oct 14, 2010 at 10:10 am

Pat,

Yes, Enthoven IS basing his opinions based on his proximity to the tracks. He even claims in the article that he won't be able to enjoy outdoor meals in his backyard anymore once HSR is running. Seriously.


Like this comment
Posted by Searching Article
a resident of Another Palo Alto neighborhood
on Oct 14, 2010 at 10:43 am

@ Peter - " ... claims in the article ... "

I'm not seeing that in the four .PDF files. Are you refering to another article?


Like this comment
Posted by YIMBY
a resident of University South
on Oct 14, 2010 at 2:16 pm

YIMBY is a registered user.

Rail, a resident of the College Terrace neighborhood, on Oct 13, 2010 at 1:47 pm, asked: "Has Whitman or Brown taken a stand on HSR? Or are they skirting the issue until post-election?"
Having just participated in a Sacramento rally for HSR and Jerry Brown, I can tell you decisively where Brown stands!
From Oct. 12:
"Today in Anaheim (starts the) “Good Jobs Express,” a five-city tour up the heart of California to rally support for high-speed rail and the half million jobs it would create. Over the next few days, workers, elected officials, union leaders, environmentalists and community allies in five cities along the high-speed rail route will rally for jobs and gubernatorial candidate Jerry Brown, who has promised to make building high-speed rail and putting people back to work his priority as Governor."


Like this comment
Posted by YIMBY
a resident of University South
on Oct 14, 2010 at 2:17 pm

YIMBY is a registered user.

oh, here's the link to: Good Jobs Express Tour Kicks Off to Support High-Speed Rail, Jerry Brown
Web Link


Like this comment
Posted by sleepless voter in PA
a resident of Charleston Gardens
on Oct 15, 2010 at 10:53 am

As a lifelong Democrat, even donated $ to dems in the 2008 election, I have determined to vote 100% republican this time- as distasteful as that will be. This is the single litmus test issue that now matters more than everything else, and it has to be stopped. Period. There is no other issue as far as I'm concerned. Once CHSR is killed off, then we can undo whatever damage the republicans might do - but HSR is dangerous, and it has to be stopped now.

God, I hope HSR goes away before Palin runs again - I think I'll just have to die if it comes down to that.


Sorry, but further commenting on this topic has been closed.

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