Plan to pay for high-speed rail draws fresh scrutiny

Legislative Analyst's Office finds that rail authority's latest proposal to build the line would conflict with state law

The California High-Speed Rail Authority's new business plan, which shows the price tag of the controversial project nearly tripling from initial estimates, is drawing a fresh wave of criticism from local officials, rail watchdogs and independent analysts who claim that the latest proposal to pay for the rail line would violate state law.

The business plan, which the authority released earlier this month, estimates the cost of the San Francisco-to-Los Angeles line at $98.5 billion -- more than $60 billion above the estimate presented to California voters in 2008 and more than twice the $43 billion estimate in the authority's 2009 business plan. Voters approved a $9.95 billion bond for high-speed rail and related transportation improvements in November 2008.

Both the bond measure and the bill authorizing it -- Assembly Bill 3034 -- include a host of provisions and limitations on how the money should be spent. These include requirements that the line not rely on operating subsidies; that the rail authority has a funding plan for a "usable segment" of high-speed rail before construction can begin; and that trains be able to get from San Francisco to Los Angeles in less than 2 hours and 40 minutes.

The document lays out a plan to build the line in phases, starting with the "initial construction segment" in the Central Valley, between north of Bakersfield and south of Merced. After this segment is constructed, the line would be extended either north, toward San Jose, or south to the San Fernando Valley in what the rail authority is calling the "initial operating segment." This segment would enable the rail line to make its debut. Later phases call for stretching the line to San Francisco and Los Angeles.

The plan estimates that high-speed rail would generate operating profit and draw $11 billion in private investment -- money that would be collected only after the initial segment is constructed. The new plan also extends the timeline for completing the San Francisco-to-Los Angeles line by 14 years, from 2020 to 2034.

Though widely seen as a major improvement over the 2009 business plan, the new document is facing a fresh chorus of criticism from rail experts and analysts who say that its funding proposal would violate Proposition 1A. They particularly question the authority's proposal to build the $6 billion initial construction segment before getting all the funding in place for the first truly usable segment of high-speed rail. The initial construction segment would not feature bullet trains but would enhance the existing Amtrak service if the rest of the rail line doesn't get built.

The Palo Alto-based group Californians Advocating Responsible Rail Design (CARRD) submitted a letter to the authority earlier this month raising a red flag about the business plan. CARRD argued that the authority would not be able to complete all the required environmental reviews for the rail line's first usable segment before beginning construction, as required by law.

David Schonbrunn, president of the nonprofit group Transportation Solutions Defense and Education Fund, made a similar point in a recent interview with the Weekly. He said the rail authority is not meeting the Proposition 1A requirement for a "usable segment" of high-speed rail. Schonbrunn made a similar point at a Nov. 15 public hearing in Palo Alto, at which time he compared the rail project to an emperor with no clothes and urged legislators to kill the project.

The latest critical review of the business plan came Tuesday from the nonpartisan Legislative Analyst's Office (LAO), which issued a report highlighting various flaws in the document. These included findings that the business plan's economic-impact analysis is "imbalanced" (it "portrays the project more favorably than might be warranted") and that its expected funding sources are "highly speculative."

The report notes that "Congress has approved no funding for high-speed rail projects for the next year."

"As a result, it is highly uncertain if funding to complete the high-speed rail system will ever materialize," the LAO report states.

Perhaps most critically, the LAO concluded that the new business plan conflicts with the requirements of the 2008 bond measure.

"Our review finds that the funding plan only identifies committed funding for the ICS, which is not a usable segment, and therefore does not meet the requirements of Proposition 1A," the LAO report states. "In addition, the (rail authority) has not yet completed all environmental clearances for any usable segment and will not likely receive all of these approvals prior to the expected 2012 date of initiating construction."

LAO Analyst Farra Bracht voiced similar concerns at the Nov. 15 public hearing. At that meeting she said it was "unclear if the business plan satisfied the requirements of Proposition 1A."

"Proposition 1A appears to require funding available for a usable segment," she said. "We're not sure if this meets the test."

Rail authority officials have maintained that the new business plan is a realistic and sensible proposal for advancing the project forward. Thomas Umberg, chair of the rail authority's board of directors, said in a statement that the new plan is "mindful of the economic and budgetary constraints facing both the state and the nation." Michael Rossi, a newly appointed board member, called it "a current, realistic and transparent plan" that "identifies the funds and financing necessary to implement high-speed rail in California."

Rossi and Dan Richard, another recent appointee to the board of directors, both took part in the Palo Alto meeting and defended the plan's projections and funding points. Richard said the plan includes "real numbers" about the rail line's capital costs, operating costs and projected ridership.

But the authority's plans and projections continue to face heavy skepticism in Palo Alto, which has emerged over the past two years as a leading critic of the proposed line. Though the council had urged voters in 2008 to support Proposition 1A, members have turned against the project as more details have emerged about the design of the line and the plan to pay for the line. The council voted unanimously last year to take an official position of "no confidence" in the California High-Speed Rail Authority. The city also joined its neighbors, Menlo Park and Atherton, and a coalition of nonprofit groups in filing a lawsuit against the rail authority, challenging its environmental analysis for the project.

On Monday, the council's Rail Committee considered taking an even stronger stance -- a request that the state should terminate the project. The four committee members all said they support this position (though Councilman Pat Burt said he would "likely" support it) but balked at voting on it because they couldn't agree on which reasons to list to justify the city's opposition.

"The problem is that there's so many reasons to oppose this," Committee Chair Larry Klein said.

The committee decided to split itself into two two-member subcommittees, each of which would submit a proposed policy for the council's consideration. But all four members agreed that the authority's business plan violates Proposition 1A both because of its vastly expanded price estimate and because of the rail authority's proposal for constructing the line. Klein equated Proposition 1A and the rail authority's subsequent actions as a "fraud on the voters."

Councilman Pat Burt said the rail authority's proposal is "fundamentally in violation of what the voters approved."

"They're implementing a plan that is contrary to Proposition 1A and AB 3034 in that they want to construct an initial construction segment that is to be done before they have identified funding for the initial operating segment," Burt said. "That's a basic violation of Proposition 1A."

"The reason why it matters so much is because there's a very good chance that for a long time and maybe forever that's all that's going to be built and they would have spent $6 billion to upgrade an Amtrak segment in the Central Valley."

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Like this comment
Posted by Nayeli
a resident of Midtown
on Nov 29, 2011 at 5:14 pm

$100 Billion???

I can think of much less expensive transportation methods between San Francisco and Los Angeles.

Seriously...this project is essentially dead (for now).

Like this comment
Posted by Nayeli
a resident of Midtown
on Nov 29, 2011 at 5:25 pm

BTW, this project is reminding more and more of the Superconducting Super Collider that was canceled by Democrats controlling Congress during the Clinton Administration in 1993. Sometimes, the cost outweighs the benefits.

Of course, I think that society would have gotten more use out of the super collider.

BTW, it is interesting to note that the ENTIRE budget of NASA is higher than ever before...and it is was $17 Billion this year. That included EVERYTHING -- including shuttle missions, the International Space Station, probes, telescopes, research and development of new projects, money paid to contract companies and workers, base operating costs and the salaries of all NASA workers (from administrators to scientists to engineers to janitors).

$100 Billion is just wayyyyy too much money to build a fast train from San Francisco to L.A. I don't know about you, but I don't know that many people who would travel on that train very often.

Like this comment
Posted by George
a resident of Leland Manor/Garland Drive
on Nov 29, 2011 at 5:39 pm

Listing the reasons city council members oppose high-speed rail should be a slam-dunk.

Submit 2 or 3 lists if you must, showing the different vote totals on each list. List One, 9-0; List Two, 8-1; List 3, 7-2; etc. That way all the reasons are out there for everyone, especially elected officials, to consider. Then each can arrive at their own informed conclusion.

Palo Alto may well be home to the best informed high-speed rail experts on the planet, especially those not looking at HSR through rose-colored glasses like Authority members are.

Let's put their expert thoughts in print, accompanied by Palo Alto Council votes, for all to see.

Then let's see what our elected officials, both state and federal, do about it.

Like this comment
Posted by Arn
a resident of Menlo Park
on Nov 29, 2011 at 7:03 pm

Stop this now! Any objective observer would see the absurdity of HiSpeed rail.
Voters approve $10B bond which is only 10% of the cost and no one really has an idea of where the rest of the money is coming from. I think fed govt just voted to end HSR funding. And what happens when cost doubles AGAIN in another 3 years??? Boondoggle big time! :-)
Of course the people "in charge" want to push forward.
If this project is dropped, they are out of a plush job.
Even if one believes hi speed rail could be a great thing, one has to be honest and say the numbers on this project don't even come close to adding up.
To spend this money now to build something in Central Valley when total route has not been determined or funded and faces local opposition is crazy.

Like this comment
Posted by Zelda
a resident of Downtown North
on Nov 29, 2011 at 9:13 pm

Another Solendra in the works.

Like this comment
Posted by Stan
a resident of Charleston Gardens
on Nov 29, 2011 at 9:24 pm

I'm glad the curtains are being pulled back from this black-box boondoggle. The so-called business plan is little more than an advertizing brochure, long on promises the CA HSR can never fulfill, and short on hard facts and figures. The train is the decoy for a massive fraud perpetrated by the Democratic party lead by Brown and Obama, on the citizens of this state, and the nation since Federal dollars are at stake as well.

That Obama allocated federal funds for the Central Valley HSR project if, and only if, they were spent in the district of struggling congressional candidate Jim Costa should have raised red flags. Obama is ready to spend your tax dollars to re-elect his dwindling party numbers. Not that there is anything unique about this in American politics, sadly, but it should never be tolerated.

The CA HSR project isn't about any mass transit need, or even infrastructure needs, this is a pay out to big labor, period. There are far more pressing infrastructure needs, desperate for funds now, that affect nearly every citizen in this state. Why are they starved at the expense of a train relatively few will ever ride? Broken roads getting fixed don't make for exciting news, nor does a reliable water transport system, or even a modern electrical grid, but a fast train, even if it only fast in the brochure does make news. That the debate has pretty much always been focused on the ridiculously high number of jobs that will be created, rather than any need for a train, speaks volumes as to the real motives or this project. It's not about jobs, or transit, it's buying CA Labors votes in the elections to come.

Like this comment
Posted by Thomas Paine IV
a resident of Greenmeadow
on Nov 30, 2011 at 8:24 am

High speed rail is worth the sacrifices it will require. We can pay for this vital project by increasing tuition and fees at the UC system and eliminating the grant programs. The UC’s can make a profit for the state rather than being a cost. If we increase UC tuition to $35,000 per year from the current $12,000 we can generate $4 billion to help pay for high speed rail. $35,000 is much lower than private colleges such as USC. That $4 billion will help connect two cities in the Central Valley that are vastly underserved by transit and create several thousand jobs in California and around the world.

Like this comment
Posted by Nayeli
a resident of Midtown
on Nov 30, 2011 at 8:24 am

So, in a nutshell...

Taxpayers must pay $100 Billion for a fast train between San Francisco and Los Angeles that will be completed in the year 2034...which, when completed, will probably be slower, more expensive and less safe than air travel?

Like this comment
Posted by Nayeli
a resident of Midtown
on Nov 30, 2011 at 8:32 am

@ Thomas Paine IV:

Are you seriously suggesting that the state TRIPLES the tuition at the public University of California schools? And, you would end grant programs for students?

California ALREADY has one of the highest tuition rates for public universities in the nation! Students were nearly rioting at the last rate increase.

I went to a major public university in Texas. It was a third of the cost of attending a UC school!

If the state of California raises tuition any further, many students will opt to go out-of-state for their education. Even with often doubled out-of-state tuition rates, it will STILL be less expensive to attend those schools in Texas, Florida, etc... than for in-state student in California.

If you are truly concerned about the future, you wouldn't want to hinder students from obtaining a quality education in this state.

For me, the bottom line is that this project's price tag has ballooned out of control, and most taxpayers didn't sign on to it. The 2008 vote was for something entirely different than the current monstrosity.

Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on Nov 30, 2011 at 9:05 am

This is not an either/or situation, I think we have a rather sarcastic comment above which is not expected to be taken seriously.

No education and infrastructure investments are investing in the future for those who are going to be living in California in the future and probably not those of us who are voting and living here in the present.

Investing in education and infrastructure are totally necessary for the economic future of the State. I am not a numbers person, but there is a better way of balancing the books than we are doing now. All the various riots around the state and the country are costing taxpayers a huge amount and yet they still protest regardless of what it is costing them as taxpayers (presuming that they are taxpayers).

This country wastes a great deal of money on weapons, elections, space travel, flying politicians all over the world or across the country, campaigning, handouts, etc. which is all lost money. There is one list of ways to save some money for education and infrastructure.

The future is not the same as the past. If we could see what people thought about money spent on roads and bridges when cars were in their infancy, I feel sure that many people were against roads and bridges being built for exactly the same reasons.

We would be lost without our roads and bridges now because we are dependent on them. I honestly feel that HSR is going to be the way of the future. Horse and buggies are gone the way of the dodo bird. Short hop plane flights are just so last century (or will be).

Like this comment
Posted by Paul Losch
a resident of Community Center
on Nov 30, 2011 at 9:14 am

Let us simplify the complexity here. There are 3 issues around HSR:

1. Spending decision
2. Financing decision
3. Policy decision

I do not want to get into the legalities and technicalities, to my way of thinking, that is just jumping into the mud wrestling match instead of looking at this thing with basic common sense.

I also find tiresome that those who find fault with CA HSR being accused of NIMBYism. There a plenty of things about this flawed concept to kill it without the NIMBY moniker.

So, point by point:

1. Spending decision: is this a worthwhile expenditure? The cost/benefit analysis has been shaky at best, and has gotten worse with each iteration. Change the folks on the HSR management, get rid of the people (such as Kopp and Diridon) who sold this pig in a poke to CA voters in 2008. It still is a pig, and it lacks lipstick.

2. Financing decision: to quote a Dan Hicks song from more years ago than I care to admit, "Where's the Money?" Assume for a moment that this was a viable project, which it is not. How will it be paid for? Non-profit organizations are struggling right now as their supporters have had to reduce their support. This proposed new "non-profit" organization has ludicrous and poorly thought through expectations of how it will work economically to persuade taxpayers and private investors to pay for this boondoggle. Dirty little secret? No private investment will materialize, they know what a turkey this thing is.

3. Policy decision: is this what is the best use of funds? No. If the funds were applied to local transit development, where most of the trips take place, it would have substantially more benefit than would an HSR artery between our part of the world and the southland of California.

Like this comment
Posted by Arch COnservative
a resident of Menlo Park
on Nov 30, 2011 at 10:48 am

It will never be built. But the pols will keep coming up with "comprehenaive plans" that will only cost more money. "Sound and Fury- signifying nothing".

Like this comment
Posted by Thomas Paine IV
a resident of Greenmeadow
on Nov 30, 2011 at 12:07 pm

A sarcastic comment? Not really. Jerry Brown has made the decision to allocate state general fund resources to high speed rail. We are currently spending $740,000 per day from the general fund for this project. That allocation is one reason why UC will have to raise tuition yet again in the coming months. I am merely suggesting that we recognize the reality and act proactively to save UC which dying a death of a thousand cuts. It would be much better to have a tuition funded system with quality staff and resources than the mere shell of a once great university. There are thousands of students in California, in the rest of the US and around the world who would gladly pay $35,000 per year for a great education. Meanwhile, there are options such as the junior colleges and state universities which would remain for those who can’t afford UC. This may sound insensitive but we are living in a new reality. Just imagine the UC budget next year when the Federal government cuts education and research by 10-20%!

Like this comment
Posted by Dan
a resident of Southgate
on Nov 30, 2011 at 6:02 pm

How much does their business plan presume a ticket from SF to LA will cost?

Like this comment
Posted by Stan
a resident of Charleston Meadows
on Nov 30, 2011 at 7:45 pm

This article attempts to illustrate the grip Big Labor has tried to develop, and continues to expand, over the proposed HSR project. Make no mistake, this isn't about transporting people, or creating jobs, it's about Big Labor getting an exclusive pipeline of dollars from taxpayers, to themselves. Sure, some transient construction jobs will be created, but the chance to squeeze hundreds of billions from California tax payers into Union bank accounts is the real engine diving high speed rail here.

Web Link

Like this comment
Posted by Jay Tulock
a resident of another community
on Nov 30, 2011 at 8:40 pm

You ate up the original lies, and now you believe the current one. That is, that this will be a sped up Amtrak line. The 45 minute time savings that the High Speed Authority claims for Amtrak is the High Speed Rail Authority's claim. Amtrak would need connections between the lines, would need signals, would need new faster locomotives, would miss three current stops, would not save a full 45 minutes; they are just saying this to meet the federal requirements that someone else 'can' use the line. No rail carrier will actually use it. Stop believing the lies.

Stop fighting to save your town. Join everyone statewide that is being hurt by the High Speed Authority. You all have the same goal, you all share a common enemy. The High Speed Authority must be terminated. LaMalfa is not going to succeed. Forget the lawsuits and meetings. Spend all your time and money gathering signatures for a citizens initiative to reverse Proposition 1A. You will win.

Jay Tulock, Vacaville

Like this comment
Posted by galen
a resident of Ventura
on Dec 1, 2011 at 8:54 am

Time to drive a stake through the heart of this monster! Haven't we wasted enough time and energy on this boondoggle? I say kill it now and arrest Kopp and Diridon for election fraud. They can share the same cell to begin repaying the money they've stolen from us. HSR supporters incessantly blather on about the great HSR in China. In China, slimy politicos get executed for this kind of betrayal of the public trust.

Like this comment
Posted by Martin Engel
a resident of Menlo Park
on Dec 1, 2011 at 11:38 am

So, let's review:

1. What the CHSRA intends to do in the Central Valley with its initial construction violates the edicts of Prop. 1A and is illegal.

2. There will be no further federal or any other source of funding to add to the currently available $6+ billion for Central Valley construction.

3. The rail authority will not build an operational high-speed rail in the Central Valley. Without further funding, this "initial construction section" will be the only construction completed; approximately one hundred miles of tracks usable only by Amtrak.

4. The voters were misled (i.e., lied to) by the Proposition 1A bond issue ballot measure in 2008. The current plans call for a very different project, with three times the initially promised cost and a construction period of 22 years, 14 years more than in the initial plan.

5. The costs of this project take funding away from far more urgent needs in the state. As a prior comment pointed out, the CHSRA is spending three quarters of a million dollars daily. The primary purpose of those expenditures is to perpetuate their own continued existence.

6. The avowed primary benefits of this project are not enhancements of public mass commuter transit -- this is, after all, a luxury inter-city rail system, but jobs for the unemployed and bolstering of the state economy. Hence the obsessive clutching to the project by the Governor; "It's not the train; it's the money, $3.3 billion worth from the FRA.

7. Job forecasts are based on obsolete mathematical abstractions and formulas. Half a million jobs means half a million "man/years." And, that covers 22 years of construction. The job numbers are marketing intended hyperbole. This is not the 19th century Transcontinental Railroad built by tens of thousands of Chinese near-slaves (coolies). Construction will be technology-intensive, not labor-intensive.

8. A good portion of these funds will not remain in California, but go to contractors whose headquarters are out of state and overseas. So much for that California "economic shot in the arm."

9. What is often overlooked is that this will be a train for the very affluent, as HSR is around the rest of the world. These are, and will continue to be, the most expensive train tickets available. Whatever we are told the current guestimate forecast for HSR train ticket costs are, are meaningless numbers.

Like this comment
Posted by stan hutchings
a resident of Old Palo Alto
on Dec 1, 2011 at 5:49 pm

I've been writing to my elected representatives (Feinstein, Eshoo, Simitian, Gov. Brown, Gordon Brown, PA city council) to stop the HSR. They have not gotten the message. Where can I sign a citizens initiative to reverse Proposition 1A?

Like this comment
Posted by SF to LA Commuter Joe
a resident of Mountain View
on Dec 6, 2011 at 8:40 am

You would be surprised how many people commute from San Jose to Los Angeles and vise versa. I do. Factor in the future price of gas and global warming effects pollution etc., and you have a winner with HSR. Y'all killed BART, now we have traffic jams....we will not retreat and have learned from lessons of the past. You are worried about the real estate of you multi-million dollar homes. What the majority of people, the President and Governor want is jobs.and economic growth. Anyone trying to sue the state over HSR is unamerican and will be another venue due to bad karma. Better sell your home near the tracks now and get out of town since there are also opportunities to build low incme housing next to the rail line... Which will make quite a nice view for your mansion porch. Know any good real estate agents. Might I suggest Ken?

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