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Continuing the fantasy: new plans for California high-speed rail

A very interesting article was written by the LA times in which newly elected Senate President Pro Tem Kevin De Leon said, "If we do high-speed rail," De León says, "the governor has to be intelligent and invest the dollars at the 'bookends' — San Francisco and Los Angeles."

“How do you make that happen? ‘We're going to have to persuade the governor,’ De León answers. ‘We're going to have to save the governor from himself on high-speed rail.’ “ Read full article by the LA Times here.

Now that’s an interesting quote from Senator De Leon and his idea is not without merit. It does make sense.

Paul Dyson, President of Rail Pac a pro-rail organization which promotes the expansion and improvement of Rail Passenger Service in California and Nevada made similar points at the March 27, 2014 Senate Transportation Meeting.

Dyson believes that the Rail Authority is building in the wrong place. Instead of Central Valley, he believes building from Los Angeles Union Station and build north toward Bakersfield would help fill the gap that exists now. Dyson also believes rather than the current location in the Central Valley, the project needs a “big box or anchor city,” much like a shopping center does so people will see the value and it will have more ridership. They’ll be more inclined to “dig into the pockets and pay for a ticket.” 8 minutes

It would have been a good idea, that is, if this was the beginning of the project but it’s not. The $3.3 billion in American Recovery and Reconstruction Grant (ARRA) funds and the matching state contribution must be spent in the Central Valley, in particular the Fresno to Bakersfield segment. That’s the deal.

Using cap-and-trade dollars might be another story. The new idea that the Authority is floating is starting another high-speed rail segment from Burbank to Palmdale. Building south to North as well as North to South. Cost? No one knows for sure but a conservative guess if it followed the Union Pacific Railroad route it would be at least $6.5 to $6.8 billion but it’s likely to be much more since that route has 6.5 miles of tunnels and about 14.2 miles in urban areas. Tunnels are notorious for adding costs to transportation projects.

There are three things that are wrong with the addition of the Burbank to Palmdale idea, one there is not enough money to complete even what was first advertised as 130 miles from Madera to somewhere north of Bakersfield. Recent articles show 113 miles will likely be built but other financial experts predict it will be closer to 90 miles. That’s 90 miles for $6 billion in federal and state funds and the cost number was an April 2012 number, which has been challenged as too low by companies who work on the project so it’s likely to be much more. This will translate into fewer miles built since the dollars are finite.

The state funds are currently frozen due to a court action and that makes up around $2.7 billion. See page 15 for approximate costs for each segment in the Legislative Update prepared in March 2014. Board members have said many times in the past that time was the killer because even with inflation rates of 2 and 3% project costs rise. Yet the project's costs actually went down a few million in the 2014 Business Plan released in April, two years after the 2012 plan was published.

Two, the environmental work is not yet completed for Burbank to Palmdale or for that matter no other segment other than the two central valley segments are completed. See the Authority’s Legislative Update page 17 for environmental completion dates.

Three, the ARRA funds cannot be used for any other segment other than the ICS so any promise to build a new segment must come from other sources. Cap-and-trade funds is one possible source but there isn’t enough money to do so quickly, no one can predict what the amount will be, except to say that the Authority will get 25% of some amount.

Court challenges that are in process that have affected the program and will continue to do so since new challenges have been recently filed. If the Authority wins their court battle in the Appellate Court which is an attempt to overturn a lower court ruling requiring them to redo their funding plan, Prop 1A bond money could flow. This would eliminate the need to spend Cap-and-Trade funds for the match required by the federal grant funds. But spending additional bond money for a new segment would have to be appropriated by the Legislature because those are the rules in Prop 1A.

The very premise that the project is worthy of cap-and-trade revenues is an entirely different matter and is being challenged in court by the TRANSDEF organization with Stuart Flashman representing them. See TRANSDEF’s information about the suit.

While the Palmdale to Burbank section is part of the initial Operating segment, it is not part of the initial construction segment that the feds oked. One has to wonder if it is prudent to begin building a little here and a little there when you don’t have the money to finish either. If the building of this new segment went forward there would be gap right in the middle from Bakersfield to Palmdale, over the treacherous Tehachapi’s. This is the only segment that has no passenger rail, only a bus; some jokingly call it the high-speed bus. This is the section was recognized as the most urgent by then State Senator Alan Lowenthal. He wanted to have the Authority start there but they told Lowenthal they didn’t have the funds to build that section. The Authority’s March 14, 2014 project update to the Legislature shows that segment will cost $9.4 billion.

Promises that can’t be kept:

Jeff Morales wrote in his letter to Senator Fran Pavley prior to the vote on cap-and-trade last month, “The Burbank-Palmdale segment, which potentially could become an operating segment on its own, would accelerate benefits to the Los Angeles region. It would also allow for the earlier connection of our system with the proposed XpressWest.

“As you can imagine, a high-speed, electric rail connection from Los Angeles to Las Vegas would provide tremendous benefits for the region, both in terms of travel and GHG [greenhouse gas] reductions.”

The letter is worded very carefully. Morales promised that the high-speed rail project would be able to connect to the “proposed” [but currently non-existent] Xpress West line that will connect in Palmdale and carry passengers to Las Vegas. But that project is quite dead for the moment. The federal loan application was pulled last year. See the letter written to the Comptroller General of the United States by U.S. Sen. Jeff Sessions, R-Ala., and Rep. Paul Ryan, R-Wisc. who wrote:

“We have been informed that the letter [from the Department of Transportation] explains that ‘serious issues persist’ with the XpressWest loan application; that there are ‘significant uncertainties still surrounding the project’; and that, as a result, [the DOT] has ‘decided to suspend further consideration’ of the XpressWest loan request.”

What should Cap-and-Trade dollars be used for?

Newly elected Senate Pro Tem, Senator Kevin De Leon has mass transit in mind per a quote in the Fresno Bee. His spokesman said using cap-and-trade funds for reductions in GHG gases are best achieved "by investing in mass transit infrastructure in high-density areas, thereby accomplishing our GHG goals in a more cost-effective and efficient manner."

Again, that’s an admirable goal but there are other monies in the cap-and-trade allocation that could be used for that purpose. The monies that were allocated to high-speed rail are for high-speed rail only and high-speed rail is not mass transit. One of the primary consideration which knocks any high-speed rail line out of the category for broad mass transit, meaning the possibility of high ridership is cost. Example, the Ridership and Revenue technical document that supports the 2014 Business Plan, shows the one-way fare from Palmdale to San Fernando would be $31. Burbank is about 10 miles south east of San Fernando. Using an approximate figure of $35 each way, If you used it for work 5 days a week that would run you about $1400 a month, not a lot of people can afford that so it would be hard to categorize this segment as mass transportation. High-Speed Rail has always been considered an expensive mode of transportation compared with standard railroads and subway systems.

Expensive though it is, if starting to build a high-speed rail system, the best segment would have been the Los Angeles to San Diego if ridership was the most vital measurement. According to the Amtrak site, “the Pacific Surfliner (PSL) is the second most popular route in the country.” The PSL offers 11 weekday and 12 weekend round trips from San Diego to Los Angeles and five extend to Santa Barbara and two to San Luis Obispo. But alas this segment was foolishly put in Phase 2, which by the way has disappeared from current business plans.

Using cap-and-trade dollar allocation, without having Prop 1A monies to spend, the state first has to meet a federal obligation to match spending in the Central valley segment. After the obligation is paid, totaling $302M for next year with $51 million due in July, the feds may not care where else the state spends the cap-and-trade revenue stream. The Feds have changed the Funding Agreement 5 times supposedly with a 6th agreement waiting in the wings, so they may well change the timing of the match if they believe it will help the project get off the ground. But the FRA cannot eliminate the match altogether that's in the ARRA fund law.

Does the Rail Authority have the money to do the match? Yes they do. According to SB 862, the Authority gets $250 million cap-and-trade dollars. They have another source of money. California State FY 2013-14 budget loaned $500 million of Cap-and-Trade auction revenues to the General Fund. SB 862 requires that when the loan is repaid, $400 million would go to the High Speed Rail project. If that happens, the Rail Authority will have no trouble meeting their obligations. But everybody has to understand that comes off the top of the cap-and-trade allocation before any other investments can be made elsewhere unless the Prop 1A bond funds suddenly become available. They are currently blocked by the court action being appealed at this time.

Legal challenges in the courts threaten the entire cap and trade program. The question is, it a tax or a fee. While the court sided with the state in the legal challenge in the Superior Court, the decision to give high-speed rail a large chunk [25%] of future cap-and-trade fees gives the appeal new fodder to prove those revenues are taxes not fees. The unworthiness of the high-speed rail project to receive cap-and-trade funds is also being challenged in court by TRANSDEF.

Putting all the pieces together this is a very messy project full of problems- legal battles, insufficient funds and not enough time to complete the first leg of the project by September 2017, a requirement to use American Recovery and Reinvestment Act of 2009 (ARRA) funds.

Jerry Brown’s dream about high-speed rail in California is being challenged in multiple court actions that may indeed prove, “the Emperor has no clothes” as featured in the Fresno Bee Fairy Tale editorial.

Nationwide the project continues to get negative coverage but soon it will gain a new spotlight, the gubernatorial election. It will expose the governor’s Achilles heel in his re-election campaign as his opponent Neel Kashkari hammers what he calls Jerry Brown’s crazy train.

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