Palo Alto officials not sold on rail business plan

City Council committee questions plan's ridership assumptions, financing plans

The new business plan for California's proposed high-speed rail line drew sharp rebukes from Palo Alto's elected officials Thursday morning (Nov. 3), with various members of the City Council saying they remain puzzled by the ridership projections and financing plans proposed by the agency charged with building the line.

The plan, which the California High-Speed Rail Authority released Wednesday (Nov. 2), showed the estimated cost of the San Francisco-to-Los Angeles line rising to $98.5 billion. The timeline for the controversial project has also been stretched, with the projected date of completion moved from 2020 to 2033.

The council's Rail Committee on Thursday criticized the 230-page plan for not revising one of the most controversial aspects of the rail authority's previous analyses: the ridership projections for the proposed line. The rail authority's business plan claims that the new line would bring in operating profits even under the lowest-ridership scenario, a claim based on projections that have been widely disputed by state legislators, experts from the UC Berkeley's Institute for Transportation Studies and analysts from the Palo Alto-based watchdog group Californians Advocating Responsible Rail Design (CARRD).

Though the business plan slightly hedges its earlier projections by providing a range of numbers, the estimates and the methodology used to derive these numbers have not undergone any significant changes between the rail authority's 2009 business plan and the new document.

Councilwoman Nancy Shepherd called the rail authority's failure to revise the ridership data a "devastating blow" to her and to the rail watchdogs who have consistently dismissed the numbers as wildly inaccurate.

Councilman Pat Burt, who represents the city on the Peninsula Cities Consortium, said the new report has "the same sort of fundamental flaws that we saw three years ago and pointed out to the authority."

"Not only did they not correct the flaws that existed in the model, but when you apply the same model to the Initial Operating Segment, it grossly exacerbates the flaws that were already there," Burt said, referring to the proposed first segment of the rail line following the completion of the the Fresno to Bakersfield stretch.

The committee also voiced skepticism about the rail authority's plan to pay for the line. Though the project has received $3.4 billion in federal grants and state voters authorized $9.95 billion in bond proceeds for the line's construction, it remains unclear where the rest of the money would come from. The rail authority's business plan proposes a phased approach to construction that would allow the initial segment of the line to operate even if the authority fails to get more federal funding.

The authority's plan also relies on $11 billion in private investment (which would come in after the initial segment is constructed) and a "qualified tax credit bonds" program under which the federal government pays interest on bonds through tax credits. The problem with the latter proposal, as several committee members pointed out, is that this credit program currently doesn't exist. Councilman Larry Klein, who chairs the Rail Committee, likened the authority's plan to get tax credits from the federal government to getting an inheritance from an uncle one has never met.

The committee agreed that the city would need to further analyze the business plan and directed staff to come back with a scope of services for a consultant contract. The consultant's analysis should focus on the Peninsula section of the line, the committee decided.

Council members also agreed that Palo Alto should work with neighboring cities, including Menlo Park, Atherton and Mountain View, and with local watchdog groups on further analyzing the business plan. These include CARRD and area residents William Grindley, Alain Enthoven and Bill Warren, who have been analyzing the uncertainties behind the rail authority's financial projections.

"I'm skeptical about not using real earnest and accurate information," Shepherd said toward the end of Thursday's discussion. "Instead, it's looking like just another layer of a public-works project that wants to get done through a political system."

Related story:

Price tag swells for California high-speed rail project

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Like this comment
Posted by Mary
a resident of Meadow Park
on Nov 3, 2011 at 11:18 am

Reasoned analysis like that from the Palo Alto Rail Committee will steadily uncover fatal flaw after fatal flaw in California High-Speed Rail Authority thinking.

One of the first rules of investing is 'rely on trusted sources, then verify.' HSR has proven to be anything but 'a trusted source.' Quite the opposite.

Legislators, both state and federal, are finally getting the picture that the HSR show is proving to be one big smoke-and-mirrors charade that looks ever more ugly as the light of day hits it.

You are now witnessing HSR in its death throes.

Like this comment
Posted by Mike
a resident of Professorville
on Nov 3, 2011 at 3:04 pm

Does Palo Alto really need to spend money on a consultant to analyse this latest plan for a project that will collapse of its own weight? I'm guessing there are a lot of smart people in the city/region who would be happy to do for free the analysis/review that the council (or a subcommittee) should be doing themselves. Many of the critical questions (like where is the funding possibly coming from?) are not a matter of "expert opinion" anyway.

Like this comment
Posted by bill g
a resident of Barron Park
on Nov 3, 2011 at 9:47 pm

Mike. An excellent idea. Why not also use the information from the U.C. Berkeley's Institute for Transportation Studies and the Palo Residents who have spent hours reviewing the HSR plans?

Why must the City spend scarce dollars on another consultant? The Council should pretend City money is coming from their own bank accounts. I'd bet there would be fewer consultants and less money wasted on "nice to have" projects.

Like this comment
Posted by Steve
a resident of another community
on Nov 4, 2011 at 12:35 am

Perhaps the city's paid High Speed Rail lobbyist told them a consultant was needed to study to business plan. Construction on the peninsula is not scheduled until 2026. A better use of limited resources would be to find funding to keep Caltrain afloat.

Like this comment
Posted by Bill
a resident of Another Palo Alto neighborhood
on Nov 4, 2011 at 9:42 am

Isn't this the same City Council that overwhelmingly endorsed the HSR ballot initiative a couple years ago? It would be a little difficult to have them say Yes! one day and No! the next without people asking: "Do you folks who pretend to be our political betters really know what you are talking about?"

Of course they are going to have to find someone who is a "consultant" and then to tow-the-line, based on this unknown entity's "credentials".

It's a shame we don't have all of the City Council's meetings archived on-line, so that we could easily find what these people said, verbatim, rather than the highly censored "sense notes" delivered up by the City Clerk.

Well .. for better or worse .. they are on the "right side of the line" this time ..

Like this comment
Posted by observer
a resident of Another Palo Alto neighborhood
on Nov 4, 2011 at 10:14 am

Bill, Have you been following this at all? Many people still support HSR, done right, but when they City Council first supported it, I don't think anyone could possibly have dreamed that the people running the project would regard the Peninsula like a wasteland between the cities of LA and SF.

Like this comment
Posted by Herb Borock
a resident of Professorville
on Nov 4, 2011 at 4:44 pm


The Council meeting of October 6, 2008, at which the Council unanimously supported Proposition 1A is archived by the Media Center:
Web Link

Like this comment
Posted by paloaltotreewatch
a resident of Palo Alto Orchards
on Nov 5, 2011 at 8:38 am

We have a triple train problem
1) old Caltrain using old technology
2) no connections to Bart in Millbrae or in Union City
3) a high speed rail boondoggle.

We need a modern electric train passing through the city to
bring in the folks for the jobs in PA and Stanford and to reduce the car footprint.

High speed rail should pickup at select nodes like Oakland and San Jose and not trash the rail corridors with a concrete moat.

The $ the state gives Caltrain for operation should go to the development of BART extension. And Stanford should through their financial and intellectual weight in order to make it happen.

Who knows we could even redo the PA train station from 1940s technology into a modern train station with perhaps a hotel and restaurant above.

Looking at all three train issues together can provide a solution forward.

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

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