Special note: For those of you who want to get up to speed on the overall project see:
It’s been a second tough week for the Rail Authority as the Legislature closely questioned them about the draft business plan published on November 1st. While pleasantries were exchanged about improvements to the plan, there were very pointed questions about where the capital will come from, the likelihood of subsidy and the overall value of spending $6 billion dollars for tracks in the Central Valley.
Senate Transportation and the Senate Select Committee on High Speed Rail- Business Plan Hearings:
In his opening statement, Senator Simitian questioned where the money is going to come from to build this project; and said he remains concerned and anxious about the never ending questions about the ridership numbers which drive a great deal of the conversation.
He pointed out the choices the legislature has: “We can say damn the torpedoes full [speed] ahead and hope it works out” or we can do what we’ve done in the past which is authorize funding with conditions of approval or maybe take a one year time out. He added, there will be a serious discussion on whether or not we should put the project back on the ballot or “we just say give it up because the dollars aren’t going to be there in the long-haul.” http://www.youtube.com/watch?v=0zTp4yTvmao
HSRA Chairman Umberg’s opening statement explained why the Central Valley was chosen. “We get more miles per dollar in the central valley than any other area in the state”, it gives flexibility to go north or south and the federal match of $3.5 billion is dependent on beginning construction by the third quarter of 2012 - - something starting in the Central Valley would allow them to do. Simitian stopped him and asked if starting construction then was a requirement of the federal funding? Umberg responded yes, the Senator probed: “can you tell us what the federal language says? He could not, he’d have to get back to them. He added their CEO was on vacation. Dan Richard, board member, said it was his understanding that 2017 is a statutory obligation and the 2012 is a grant condition. See the exchange with board member and Senators Simitian, Lowenthal and La Malfia. http://www.youtube.com/watch?v=Q8Og7eGiPPg
Senator Simitian told Umberg and Richard that it was time for proactive planning position for the state and he preferred not to be in a reactive position. “In all due respect, accessing 3 billion dollars unwisely if it’s going to cost us $100 billion isn’t anything I want to rush forward with,” said Simitian.
The LAO was up next. They said it was their understanding that $2.3 billion (federal stimulus funds) had a 2017 finish date; and that the remaining $715 million had no deadlines. Farra Bracht, LAO Managing Principal Analyst, said her office reviewed the grant agreements and has not found a construction start deadline. She has not been provided the location of the start of construction language from either HSRA or the Dept. of Finance, requested two or three months ago. http://www.youtube.com/watch?v=aZw2tojhEyQ (The first six minutes of the Youtube posting covers this issue. The rest covers the LAO’s business plan review.)
Senator Simitian asked the HSRA to provide the document with the start of construction language by noon, December 16th. And Senator Mark DeSaulnier added, “It’s hard to believe at this point, with all due respect, unless your administrative officer has gone to another planet, this is a pretty direct question that we need to have answered. Senator Simitian has been more than kind to give you two weeks to provide the information.”
Brian Weatherford of the LAO office then presented the business plan review. He said the business plan itself appeared to have most of the components required but they were still studying the plan but would not have final answers until after a meeting with the high-speed rail authority staff. As covered in the Assembly Transportation Committee on November 29th, the LAO does not feel the Funding Plan is adequate and does not meet the requirements of IA. (More details concerning these issues are provided in their handout; in particular starting at page 5.) http://www.lao.ca.gov/handouts/transportation/2011/HSRA_Business_Funding_plan_11_29_11.pdf
The Treasurer’s office then provided testimony. Their representative, Blake Fowler first sent the Treasurer’s regrets that he could not attend and told the board that Lockyer was very supportive of the high-speed rail project. Fowler’s role was to discuss the capital gap needed for the project.
While not directly stated, it became obvious from the report that the funding in the HSR business plan was dependent on special federal bonds called Qualified Tax Credit Bonds (QTCB). This is not a current program offered by the federal government for rail projects. It was also apparent the funding in the draft business plan assumed QTCB terms would be more favorable than have been granted to other industries in the past.
According to Ken Orski, author of “Infrastructure Banks: Losing favor with the White House”, the option of this form of financing becoming available is slim since neither the US Senate or House have seen fit to include an Infrastructure Bank in their proposed transportation bills. (See the article, half way down, for details that outlines the issues with the proposed financing, a Solyndra type financing.) http://www.examiner.com/transportation-policy-in-san-francisco/authority-s-views-on-revenue-ridership-the-capital-gap
After Fowler’s technical financial presentation, Senator Lowenthal asked him, “now, can you summarize that in English?” With apparent reluctance Fowler finally said, “if those bond dollars are not available in the amounts that are included in the draft business plan, they would have to be made up from other federal sources.” “Or somebody’s sources,” said Senator Lowenthal.
Joining the discussion, Senator LaMalfa, in a “Colombo” like fashion, commented , “so we have an idea that doesn’t have a piece of legislation that hasn’t passed yet that's about leveraging” in a bad economic environment. LaMalfa also asked Fowler if” he drew the short straw to be sent over from the treasury office.” And added “I can understand why Treasurer Lockyer wanted to be somewhere else.”
A translation of what was proposed by the Authority was provided in English by the last speaker of the afternoon, Central Valley resident, Frank Oliveira. Mr. Oliveira suggested, “there is an expectation that federal elves will show up with gold coins in wheel-barrels from a yet undiscovered gold mine.”
Frank Koppelman came to the meeting to discuss the ridership model. Koppelman is the head of the ridership panel selected by the High Speed Rail Authority to re-review the ridership numbers. He confirmed there was not time to redo the ridership model which was created in 2007 by Cambridge Systematic. It was used for the business plan with some modifications due to the slowdown in population and economic growth. Koppelman was on the peer review team on two previous occasions prior to the publication of the critical findings from University of California at Berkeley, Institute of Transportation (ITS).
Regarding ridership in the draft business plan there is the following disclaimer:
“The information and results presented in this memorandum are estimates and projections that involve subjective judgments, and may differ materially from the actual future ridership and revenue. This memorandum is not intended nor shall it be construed to constitute a guarantee, promise, or representation of any particular outcome or result. Future the material presented in this memorandum is provided for the sole purposes of the Authority’s business planning and should not be used for any other purpose.
Mr. Koppelman was unclear why this was necessary to put in the business plan. He didn’t feel it was necessary and perhaps it was some boilerplate language put in as a standard practice.
Note: These numbers may be used for the Central Valley’s Initial Construction Section (ICS) funding request and that could be considered beyond the constraints of this warning.
Koppelman did not think there would be any substantial changes in the ridership model with would evolve at a later date but did believe the risk levels would be smaller. When questioned about some examples that were produced from the model, Mr Koppelman was not familiar with them.
Richard Tolmach, President of California Rail Foundation, later gave a very specific example to the committee that demonstrated how the ridership model was working. He indicated that there were 16 daily departures from Merced and 900 boardings per train. Tolmach said this was unrealistic when the current Amtrak boardings in Merced are 20. In the model, Merced has more boardings than Paris, Madrid and New York City.
Senator Simitian continued and questioned if the proposal on the table for the Central Valley was worth spending six billion dollars since it wouldn’t produce high-speed rail, only track. He also asked if it was worth shaving 45 minutes off the current schedule if Amtrak were to use the new “HSR” tracks?
Tom Umberg, Chairman of the HSR, answered that they don’t think about it that way. “We aren’t planning for failure.” He compared HSR to the inter-state highway system suggesting if people had questioned starting first in Missouri, there wouldn’t have been an interstate highway system. In the end, Umberg conceded if no more money appears, the Central Valley segment gives HSR the right of way and infrastructure to continue the project at a later date; and that it would shave 45 minutes off of the Amtrak time through the Central Valley.
La Malfa noted there has been a “lot of back-slapping going on “about being honest now about the $98.5 billion in project construction costs but that the “people feel they’ve been had on this.” http://www.youtube.com/watch?v=S-Yxh8YbcOc
Note: a Field Poll (the gold standard of polls) taken this month suggests that the public agrees with LaMalfa: 64% of the public want a revote. The poll says that 59% would vote no for the project today. http://www.mercurynews.com/breaking-news/ci_19484490
When time for public comment arrived, over 40 people gave testimony about the project. Here are just a few you-tubes of those comments:
Frank Oliveira: General Partner in Mel’s Farms in Kings County and co-founder of Citizens for California High Speed Rail Accountability (CC-HSRA) gave the last testimony of the day. Mr. Oliveira had more of a conversation with Senator Lowenthal and Senator Simitian rather than a public comment. Oliveira made four points very clearly. 1. the project is” not Prop 1A compliant.” 2. “There is an expectation that federal elves will show up with gold coins in wheel-barrels from a yet undiscovered gold mine.” “There is no money to build this- the plan is unrealistic”. 3. “HSR Authority has built their project on fraud.” [] 4. “If we’re dealing with a dishonest bunch,[] that’s asking us for more money, why would we give them more money? To build something that is based on fraudulent data is to build a bad project that will waste more money- so end the project.” http://www.youtube.com/watch?v=5oc3o4FjPiE
Elizabeth Alexis, co-founder of Californians Responsible for High Speed Rail Design (CARRD) She questions the Authority’s assumptions about jobs and highways vs. high-speed rail as well as the planning and routing, faulty EIRs in the Valley and named the real beneficiary in the project: Parsons Brinckerhoff, the consulting company. http://www.youtube.com/user/derailhsr#p/u/8/mrWnwQuoryI
David Schonbrunn, President of TRANSDEF and Rich Tolmach, President of California Rail Foundation, both normally high speed train supporters “blasted the project for not following the funding requirements of the law and Schonbrunn start said starting in the Central Valley is a ridiculous use of the funds for very little ridership. Schonbrunn –Tolmach. See their short comments. http://www.youtube.com/watch?v=pS-pd1nsUoo
Diana Peck, Kings County Farm Bureau representative, hoped that the board’s actions would be consistent with their words; and asked to dissolve the agency and end the project. http://www.youtube.com/user/derailhsr#p/u/4/kOdlE9SvGas
Richard Hackman, City of Palo Alto representative, is unhappy with the draft business plan, funding and ridership data. http://www.youtube.com/watch?v=kMweX6rykxI&feature=mfu_in_order&list=UL
Next events:
- The High Speed Rail Authority Board meeting on December 13th in Merced.
- The Independent peer review group and the Legislative Analyst’s office will issue final reports later this month or in early January.
- The final draft of the business plan is scheduled to come out sometime in mid-January.
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