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Cap-and-Trade revenue eyed by the Governor for the HSR project

Lonely track in the Central Valley
Lonely track in the Central Valley
Photo club, K. Hamilton member

Note: Four years ago I began writing for the Examiner and this article is my 200th report writing exclusively on the subject of California high-speed rail project. Originally I began writing because the public was getting only the Rail Authority’s view of the project. Luckily over the years this has changed since major news outlets now question the project’s plan. And so I offer this piece with many facts and a little editorializing.

Cap-and-Trade for High-Speed Rail

The governor has suggested as part of his new budget that the legislators approve the use of Cap and Trade dollars for the High-Speed Rail Project. To suggest this shows the state of desperation both Jerry Brown and his HSR Authority comrades are in. They simply need money to move the program forward. Cap-and-Trade was initially advertised by Dan Richard, Authority Chairman, to be a “backstop” but now it’s seems it’s about breathing life into a project that is clearly on life support.

Let’s backtrack for a moment… The state can’t sell bonds at this time because of court rulings. The court ruled that the Authority abused its discretion when it prepared an illegal funding plan. It was required to show the source of funds for building all the way from Madera to the San Fernando Valley. Cost approximately $31 billion, they have $6 allocated. It also had to complete all the environmental work for the 300-mile path toward Los Angeles. They have 24 miles completed. So for now, they are using advance federal funds but it’s fast approaching D-Day when the federal government expects the state to start spending their own money to begin the 50% match promised. What’s the Governor to do? Answer: Find more money.

Understand that attempting to use cap-and-trade revenue is not about satisfying the Judge’s concern about the lack of funds to build the first legal segment. The $250 million the governor is suggesting taking from auction proceeds is a drop in the bucket compared with a $20 billion dollar gap needed to demonstrate fiscal responsibility for the Initial operating segment. It should be noted that the last 5 auctions netted $530 million according to the LAO’s office. This past year Governor borrowed $500 million of it for the general fund so there is pocket change left from 2013.

It’s all about beginning to satisfy the federal government. It’s about the requirement to match with some kind of state funds starting in April 2014 but even with the Cap-and-Trade raid, there isn't enough. The federal government has allowed the spending grant money first and not requiring a simultaneous state match which it originally required. The Authority needs cash to continue moving the program while they figure out how to satisfy the court order, which is to redo an illegal funding plan illegal funding plan which in reality may be impossible due to time, money, environmental and legal restraints.

The plan could be to spend as much money as they can, perhaps gets shovels in the ground to the point of no return. The poker term, “pot committed” was described by Elizabeth Alexis from Californians Advocating Responsible Rail Design (CARRD), which she explained to students at Fresno state in 2011. mm 5:39 Though this speech is nearly two years old, Ms. Alexis is still right on target.

As a side note, In order to raise more cash, the Authority is attempting to convince the FRA to re-label $145 million in federal funds from the construction category to the planning category in what would be the sixth amendment to the FRA/Authority grant agreement.

The Authority calls this plan, “the shift.” The Authority has not responded if in fact they have executed Funding Plan #6.

Why are they asking for this? The same reason as above, so they can continue to spend federal dollars since state matching funds are unavailable and in addition perhaps the Authority and the FRA want to avoid uncomfortable questions about why they should be spending federal construction dollars since the court forbid the spending of state construction dollars.

What the Legislative Analyst office says

In 2012 cap-and-trade revenue was the subject of conversation. The Legislative Analyst office (LAO) considers the HSR project ineligible to funds. There are legal problems and practical reasons. See Tiffany Roberts, LAO expert on Cap and Trade testify about why the Rail Program doesn’t qualify. Beginning mm 2:10. Also see the budget comments on page 7 and 8 of last year’s budget comments on using cap-and-trade dollars for the HSR program.

Here’s something everyone can understand, HSR will absolutely not bring green house gas levels to 1990’s levels by 2020. The first leg of the train project won’t even be built by then, not even close. This is required by the law, called AB 32. The monies must be used to mitigate green house gases (GHG) because the money collected in the auctions are mitigation fees.

There are practical reasons too. Ask yourself, where is the best bang for the buck? Is it a better investment to contribute dollars for the development of green energy for homes, lend assistance for vouchers for energy efficient vehicles or begin to pay for high-speed rail that has no capital in sight for even the first legal section? They also promised in the project's original scoping agreement that in 2050 it would provide 1 million CO2E savings in GHG emissions. In their newest report published July 1, 2013, the Authority promised a range of the removal of 4.5 to 8.4 million metric tons of GHG by 2030 depending on ridership. As a comparison other investments such as green building can reap 26 million tons of CO2E savings.

What the public voted for

When the public voted for the rail project, they were promised federal and private investment dollars, they were not to pay for any more than the $9.95 billion in state bonds. It was supposed to provide the seed money to build a high-speed rail system and help with connectivity for other transit systems. But the economy and the state of the project have not attracted private or federal dollars and to use state bond funds you must have an equal match from another source. No one envisioned that additional state funds would be used above those voter-approved bonds.

The Authority’s environmental report

July 1, 2013 the Authority published an environmental report. It was prepared by Authority personnel and Parsons Brinckerhoff consultants, not by independent environmental experts. It was required by the Legislature in SB 1029, the appropriation bill. It is a justification of why they believe the project it deserves cap-and-trade funding.

In the ambitious, boldly stated report it promises “zero net greenhouse emissions during construction” and promises by 2022 to begin reducing GHG emissions. It discloses that calculations exclude materials that will be used during construction because of the limitations of information available now.

Construction materials are notorious for raising GHG levels during the building process. They plan mitigations to get to zero emissions by earning credits such as for the planting a whole bunch of trees in the Central Valley. But the really ironic situation is the Authority plans to purchase credits to mitigate construction emissions.

In the fall of 2013, there was a memo found through a Public Records Request from an FRA employee to another FRA employee that says, “ In order to mitigate air impacts from Construction of HSR, the Authority will enter into a contract with a local air district to purchase credits to offset the emissions.”

Cap-and-Trade proceeds were created to reward projects that reduce air pollution by 2020 and the cost would be offset by the polluters. Giving the HSR project money from this program is essentially giving the polluter – the HSRA – a Get Out of Jail Free card, paid for by the bank they just robbed. In other words because construction notoriously raises GHG emissions, they should be buying credits from the auction as a polluter not taking auction proceeds.

Bottom line:

The environmental community would agree, there are a lot of tough choices on how to spend the rather limited cap-and-trade funds; high-speed rail is not one of them. It's an easy 'no' because it’s not qualified. The legislature needs to enforce the laws it passes.

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:

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