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After the House Transportation Hearing: Thoughts by the Tos Legal Team

Flashman questions Rail Authority new construction segment
Flashman questions Rail Authority new construction segment
Stuart Flashman, Attorney for Prop 1A (Tos/Fukuda/King County) suit

Attorney Stuart Flashman, who is co-counsel for the Tos/Fukuda/Kings County case, watched parts of the Congressional hearing held on Wednesday and had thoughts about Dan Richard’s proclamation that the Authority may well change rename the Initial Construction Segment as its new “usable” segment.

The segment spans about 130 miles from Madera to north of Bakersfield. Many wondered how the Rail Authority could possibly comply with the court ruling; that is, come up with the funds to construct and the obtain environmental clearance for a 300 mile segment which crossed five environmental corridors. Now we know the answer, they don’t intend to.

When asked what the court would think about the High-Speed Rail Authority essentially re-labeling their Initial Operating Segment (usable segment) to the Initial Construction segment, Flashman noted there was a misconception about the judge’s ruling. “There’s not a requirement to have Judge Kenny’s approval for the new funding plan. The writ says that the Authority has to rescind the funding plan. The changes that Chair Richard unveiled aren’t yet before the court in the current lawsuit. It would take a new or supplemental complaint to bring them to the court’s attention.”

If they change the location of the usable segment, do they have to go back to the Legislature?

Stuart Flashman thinks yes. “ They got an appropriation for the ICS (Initial Construction Segment) but they got it in the context of a specific usable segment. If they aren’t going to do that usable segment, they need a new appropriation. That’s my position. That could be the basis for a separate new legal claim.”

Will the New Plan fly? Independent Utility vs. Usable Segment

Stuart Flashman states the federal definition of “independent utility” means “if they can build it as such that Amtrak can use that segment once it’s built then that satisfies the independent utility requirements under the federal grant. But it doesn’t satisfy the state requirements for the usable segment for the use of bond funds. For the use of bond funds among other things whatever they build it has to have two stations, be high-speed rail ready, be electrified, have positive train control, arguable it has to have rolling stock etc.”

Will there be funds to pay for the newest segment?

It may be the same identical segment, the same 130 miles that the Authority has chosen, but the additional ballot measure requirements come with a price tag.

“It’s got to cost far more than the $6 billion they now have. “ We’re probably talking more in the range $10-12 billion, or even more. If they are going to put out a funding plan for the ICS and call it a ‘usable segment,’ they have to show where the funds are going coming from to do all those additional things.”

Flashman also explains that not having a subsidy is a crucial difference between the federal and state law. He explained that with enough time and money you can fix environmental and funding requirements. “What isn't fixable is the bond measure’s requirement that a usable segment not require an operating subsidy.”

Note: Having enough ridership to support the usable segment is only the first step necessary to determine if an operating subsidy would be required. Logic would dictate that the shorter the segment is, the less ridership one would have [and by basic economic principles, the higher you raise the ticket price, the lower the ridership goes].

Authority board and staff are on record saying that the Initial Construction Segment would not qualify for an Initial Operating Segment because it lacked ridership. Previous boards have used the term, usable segment and Initial Operating Segment, interchangeably though Richard pointed out during the Congressional hearing that “Initial Operating Segment” does not exist in the laws that govern the project.

What does Dan Richard, Authority Chairman say about all this?

He gave us a hint in the House Transportation Hearing held January 15th, in answer to Congressman Dan Webster from Florida who questioned the first segment’s ridership.

Dan Richard admits they won’t have the ridership to operate the first segment without subsidy. He says, “ Not on that first segment which is why we‘ll probably use it for upgraded Amtrak service, but as we get over the mountains to Palmdale and to connect to LA, we believe we will be able to start operating without a public subsidy.”

In answer to another question asked by Webster, Richard replied, “ So Congressman, this gets into the issue of how we are building in a stair-step fashion. That is the segment is what we have the funds to build today that is not going to be a segment where we’re going to be able to start full high-speed rail service. We are going to do in the interim is to upgrade the existing Amtrak service on that segment while we clear the environmental process and put the funding package together to get to the next segment which is over the mountains to a community of Palmdale, right at the edge of the Los Angeles basin. That’s where I think we’ll be able to start to operate [high-speed rail]”

HSR Board chairman Dan Richard and Attorney Stuart Flashman clearly disagree, a disagreement bound to be headed for court. Richard is betting that the Legislative Counsel opinion dated June 8, 2012 is taken seriously. It said Initial Construction segment (ICS) was eligible to be a “usable segment” and reliance on that report is exactly what the Authority’s new strategy may be. Flashman, by contrast, thinks that the bond measure’s language is clear, and the Legislative Counsel’s interpretation is both unnecessary and wrong. Judge Kenny already saw that report which was in the record for the Tos hearing and made no reference to it in his opinion.

Here are 15 minutes which Dan Richard answers questions from Congressman Jeff Denham and explains the Authority's plans about moving forward with the project despite the court rulings.

15 minutes of an exchange between Dan Richard and Congressman Denham relating to subject of compliance with Prop 1A. http://youtu.be/81tM-ghbvfw

Perhaps equally telling were the actions of those who requested the Legislative Counsel opinion, Former State Senator Joseph Simitian and State Senator Mark DeSaulnier. In the end they both voted no because they obviously were not persuaded by the report. See the article, which shows the you-tube video of their speeches at the time of the vote July 2012. As Senator Simitian reminded his colleagues in the legislature, they were “not voting for a vision but a particular plan and this is the wrong plan, in the wrong place and at the wrong time."

Time works against the project:

American Recovery and Reinvestment Act of 2009 (ARRA) funds must be spent by September 2017 and the Authority is way behind. The HSR project was originally slated to begin the project in the fall of 2012 and it still has not started with any significant construction. In the August 6, 2009 at the Authority’s Operational workshop, Rod Diridon, then HSR board member, made a bold statement, “Sept 2012 contractors MUST be on the ground ready to work or else we have to give the ARRA money back. And, we must have matching funds to use the bond funds.”

Typically all environmental clearance is obtained and all the properties are bought and demolished before construction starts and they have quite a ways to go. They’ve also run across many snags in the plan to get the environmental work completed which in the end could be their undoing since amending a funding plan won’t apply to the September 2017 drop dead date.

New issues have arisen in 2013, sinking land (subsidence) and high voltage power lines over rail tracks, in which no regulations have been set, will certainly require a pause to study and surely will cause a rise in cost.

·They have been very slow to acquire properties. According to a public records request it was revealed that the Authority told the FRA that they expected to buy 55 properties in 2013. An FRA exchange in mid-November indicated they didn’t make it. It said, “For FY 2013 the number of Parcels Acquired is zero. To date only one parcel has been acquired, closed in FY 2014.”

They have over 350 parcels to acquire for the first 29 miles. They have environmental clearance for 24 miles. One would think that all the properties in a chosen segment, which crossed two environmental segments, have to be acquired before building occurred.

According to the Californians Advocating Responsible Rail Design’s (CARRD) website in one of the Authority’s reports: “There is a west side bypass of Bakersfield that is at least being looked at and service plans for the first construction segment are being developed at the FRA’s request. Shouldn’t these service plans get some public feedback?” Scroll down to find the commentary.

This could take extra time if the public and federal agencies need to weigh the benefits of each alternative.

The Authority should be careful because the judge may well be insulted at the Authority’s attempt to simply rename the Initial Construction Segment as the “usable segment.” The court thought its ruling would have a “real and practical effect.”

Here’s what the court said in the final ruling - Pg 3

“Issuance of a writ of mandate directing the Authority to rescind its approval of the November 3, 2011 funding plan based on the finding that the funding plan did not comply with all of the requirements of subdivision (c) thus will have a real and practical effect: it will establish that the Authority has not satisfied the first required step in the process of moving towards the commitment and expenditure of bond proceeds.”

In the newest filing dated January 10, 2014, the Attorney General’s office filed a legal brief in which they are attempting to have claims dismissed that are part of phase two of the Tos/Fukuda/Kings County case. One of the reasons was this:

. “Nothing in Proposition 1A or AB 3034 purports to provide a private cause of action allowing citizens to second-guess the work of the Authority, the Peer Review Group, or the Legislature by submitting contradictory evidence provided by their own hired experts.”

While Judge Kenny made clear that the legislature could decide to appropriate funds regardless of the adequacy of the funding plan, his ruling also made clear that it was for the court, not the legislature, to make the final decision on whether the Authority was complying with the bond measure’s requirements.

One wonders if the Authority feels this way about citizens’ rights, which roughly translated to: “How dare you question the government,” how do they feel about the judge who ruled in favor of those citizens in round one of the Tos case?

Many legal actions will be filed and court cases decided in the next few months as the Authority struggles to start construction.

See highlights of the House Transportation Hearing held January 15, 2014.

http://www.examiner.com/article/highlights-from-congressional-hearing-on-california-high-speed-rail-project?cid=db_articles

Kathy Hamilton has written several recent articles on the current lawsuits and many other subjects concerning the High-Speed Rail Authority. See a brief synopsis by title on her site: http://www.examiner.com/transportation-policy-in-san-francisco/kathy-hamilton