Your eyes on California Government

DEC. 7, 2011

By KATY GRIMES

At a hearing on Monday held by the Senate Transportation and Housing Committee and the Select Committee on High-Speed Rail, rail authority board members continued to push legislators for approval to build the new rail system, while evading answers to legislators’ questions.

Legislators from both parties expressed skepticism in moving forward with rail construction plans. Committee Chairman Sen. Alan Lowenthal, D-Long Beach, said that he was concerned with the role of the private sector in the project – or more accurately, the lack thereof.

Throughout the four-hour hearing, legislators repeatedly asked members from the California High-Speed Rail Authority Board of Directors where the money for the $98.5 billion project was going to come from. No answers or specifics were offered by Board Chairman Thomas Umberg, or from board members Dan Richard and Jim Hartnett.

With the lack of affirmative answers to legislators’ questions, it was surprising that the High Speed Rail board members did not say,  We have to build the rail system in order for you to find out how much it will actually cost.

They instead offered comparisons to the cost of air travel and the increase in gas prices as reasons to support the construction of a High-Speed Rail in California. When legislators pressed for information about the decision to build the Central Valley rail segment ahead of sections in higher density urban areas of the state, Umberg and Richard admitted that they were motivated by $3.5 billion in American Recovery and Reinvestment Act funds — federal stimulus money.

The string attached to the ARRA funds is that the Central Valley segment must begin construction by the third quarter of 2012, and be completed in 2017.

“I am getting frustrated by getting jammed by the authority,” Sen. Joe Simitian, D-Palo Alto, said. “It is time for us to start planning as a state. I get a stiff back when I hear we have to start doing something. That we are getting $3 billion but spending $100 billion is a concern.”

Federal Control

Sen. Doug LaMalfa, R-Richvale, a vocal opponent of the operations by the High-Speed Rail Authority, said he is increasingly frustrated that the project was now in the hands of President Barack Obama and U.S. Transportation Secretary Ray LaHood. “How much effort have you made and discussions have you had with LaHood or the Obama administration, so we are not hurrying through? What have your conversations been like?” La Malfa asked Umberg, Richard and Hartnett.

“We have to be under construction by September 2012,” Umberg said, dodging the question. “ARRA funding was created to stimulate the economy.”

Despite the elimination of federal high-speed rail funding by Congress, in September LaHood met with Gov. Jerry Brown in Oakland, where they had a “long discussion” about the high-speed rail project. “We are not gonna [sic] be dissuaded by a little bit of background noise of criticism, because there’s a loud, loud amount of support for high-speed rail in California,” LaHood famously said.

“Why do we have to accept it?” Sen. Ted Gaines, R-Roseville, asked Umberg, about taking the federal stimulus money. Gaines suggested that the authority should not accept the stimulus funds, and instead engage private-sector companies to build the most profitable segment of the rail system.

“Every year the project is delayed, we add several billion dollars to the cost,” Umberg said. “Around the world, every High-Speed Rail project is operating at a profit.”

Members of the audience at the hearing quietly gasped, and a hum of quiet comments could be heard immediately after Umberg’s comment, while others laughed.

Business Plan Inconsistencies

A recent report by the Legislative Analyst  found that future funding sources are “highly speculative,” and the economic impact analysis included in the rail authority’s plan “may be incomplete and imbalanced, and therefore portrays the project more favorably than may be warranted.”

Interestingly, the project has not completed all of the necessary environmental reports, and it is not likely that the rail authority will receive all of these approvals prior to the expected 2012 date of initiating construction, according to the LAO.

Legal Troubles

Adding to an already shaky reputation, a lawsuit filed in November in Superior Court alleges that the present High-Speed Rail business plan fails to meet crucial requirements of California law, and asks the court to prohibit California lawmakers from allocating the Proposition 1A bond money until the requirements are met.

Stating that its plan for the Central Valley portion of the rail line violates sections of Proposition 1A, the lawsuit contends that an operating subsidy will be needed for construction of the Central Valley segment. An operating subsidy is outlawed under Prop. 1A. And complicating matters, the first segment of the rail system won’t even run high-speed trains until the entire system is build.

With unrealistic cost estimates and poor management charges, even the least expensive segment of the entire system is becoming a financial and political nightmare.

Sen. Michael Rubio, D-Bakersfield, who represents the Central Valley, even questioned why the Central Valley segment would be the first to be constructed. Since this segment runs through California’s farming areas and less-populated Central Valley cities, Rubio suggested that bringing water back to the Central Valley would be far more advantageous to the area than a high-speed train. “Why the Central Valley? Why not build from Bakersfield to Los Angeles or San Jose to Fresno? Get to the heart of the project.”

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Background

In the three years since voters passed Proposition 1A, the $9 billion High-Speed Rail bond measure, the High-Speed Rail Authority has spent $800 million. But no new track has been constructed, no new, super-fast trains are running and no private investors have committed.

In November, the High-Speed Rail Authority released its long-awaited business plan. However, the plan leaves many important operations and funding questions unanswered, and it does not address how the authority will acquire private investors.

Many are deeply concerned that the authority will attempt to start construction of the grossly overpriced Central Valley segment, leaving taxpayers with the bill. The $98.5 billion current estimate has many questioning the ongoing out-of-control spending in California, on this plan, and many other state agencies.

Following a scathing report from the Legislative Analyst’s Office in November about the draft High-Speed Rail business plan, a recent Field poll found that 37 percent of voters, who supported the High-Speed Rail bond measure in 2008, would vote against it today.

“The poll finds that if such a re-vote election were held, Californians would reject the $9 billion bond package by a wide margin – 59 percent to 31 percent, with 10 percent undecided,” the Field website states.

The LAO report found that the earlier High Speed Rail plans lacked critical detail, and said that the 2012 plan had “inconsistencies, deceptive numbers, and missing details.”

Glaringly absent from the plan was any acknowledgment or estimate of the cost of anticipated economic losses resulting from negative impacts to businesses because of right-of-way acquisitions and construction activities, or losses from increased traffic near rail stations.

Further damning the project, the LAO said that the rail authority’s business plan does not comply with provisions in Proposition 1A. And the LAO expressed concerns about questionable and apparently inflated cost comparisons of building a new High-Speed Rail system, to the cost of increasing highway, road and airport capacity.

“The plan includes limited information about the initial 130 mile long construction segment that would run through Fresno,” the LAO stated, critical about missing plan details.

Tags: California budget, California Legislature, government, High-Speed Rail Authority, infrastructure, Jerry Brown, Katy Grimes, legislature, regulations, Sacramento, waste