Saturday, February 12, 2011

And now, a word from our leading Southern California HSR watcher, Cynthia Ward

Cynthia Ward is one of the most stalward and articulate opponents of the high-speed rail nightmare in Southern California.  Here is her interpretation of the recent action by the CHSRA, which sent out a Request for Expressions of Interest to every HSR related manufacturer, contractor and consultant on the planet. 

Ms. Ward correctly calls this "fishing" since the rail authority still has no idea what they're doing.  They act like everything is planned, but they are winging it, improvising, on the fly. 

In the Central Valley, where they are obliged by the FRA to begin their construction, the rail authority at this moment can't tell anyone what they will build, how long it will be, and what it will and won't include.  And they certainly can't tell us what they will have to spend, or what their budget short-fall will be. About to spend perhaps as much as $10 billion if not more, they know squat!

The rail authority is a classic, text-book example of an incompetent bureaucracy that is at its best when they are lying.  They spin a fabric of deceit over everything as if they were an advertising agency on Madison Avenue.  The tragedy is that they have been as successful as they are.

Cynthia exposes their mendacity. Without getting into detail here, what we are observing from one day to the next is the rail authority's avoidance of legal requirements, repeated admonitions from the Legislative oversight committees in both State Houses, as well as from the other government agencies that have reviewed their documentation and found them severely wanting.  Their contempt for the authority of the government of which they are a part is stunning.   The CHSRA is the loose cannon of the Governors' Office to which they are attached.

Wouldn't you think that a new Governor who inherited the largest deficit and largest debt the State has ever experienced would take a very hard look at a project that will actually cost the state well over $20 billion in interest and principal, based on the $10 billion GO bond issue?
High Speed Game of Chicken
By Cynthia Ward | 2/10/11 | 4:56 PM EST 

The California High Speed Rail Authority appears to be using private sector businesses, in a high stakes game of chicken with budget leaders. A harsh, slanted viewpoint? Perhaps, but let’s review the facts.

The LA Times has released a story regarding the Authority’s latest outreach efforts, stating that,

“Requests for expressions of interest were sent to thousands of large and small contractors worldwide that may want a piece of the first phase of the ?$43-billion network that is supposed to connect the Bay Area and Southern California with trains running up to 220 mph.”

What is truly interesting is that the Authority still has no genuine idea of what it is they want those private contractors to build, or how they are going to pay for it! The system lacks a final design for even one segment of the project, and the environmental work for any section is yet to be finalized and approved. But they want to start issuing contracts. In the private sector we call it “fishing.” 

Someone starts getting contractors to come out and give a “free estimate” for home improvements, when the owner has no real design for the project, and more often than not lacks the money to do the work! They are using private businesses to get a ballpark idea of what it would take to do that dream house project, and frankly most contractors can see through them as the monumental waste of time that they are.

Occasionally government will do the same, putting out RFP’s for a job they have no funding for, in an effort to get a ballpark for how much grant money they need to procure before the real bids go out. Or they will plug a project to gain public support in a desperate desire for economic opportunity, no matter how nebulous the project might be. Anyone who has answered one of these requests knows how much time, energy and resource goes into that bid packet. To put those resources into a project that is nowhere near ready for shovels is, at least in my mind, not a great use of time for enterprising business owners. But then, I am not on the Authority’s list for contractors, am I?

But the Authority is trapped in a corner, and they need the private sector to start cheerleading for them. They know that some State and Federal leadership is considering pulling the plug on this boondoggle, given the bad press and broken promises. Diane Harkey has introduced AB 76,a follow up to AB2121 that got bogged in committee last year. Activists are spending more and more time in DC as well, so that even Obama’s recent pledge of billions in HSR funding is being questioned for use in California. 

But if the HSRA can convince American businesses that they are just one step away from getting those big contracts that drive jobs, jobs, jobs, well it then becomes a PR nightmare for leaders to cut the funding that might “put Americans back to work.” It is actually a pretty brilliant plan, and the saddest part is that private sector businesses will get sucked into putting in already scarce resources compiling bid packets, for a project that has been harshly criticized by the LAO, State Auditor, transportation experts, and even their own Peer Review Committee!

The latest sign of the Authority not being ready for prime time came and went on February 1st, as they missed yet another deadline to submit an Investment Grade Business Plan! Now keep in mind that the Business Plan was supposed to be completed in early 2008. In fact, Public Utilities Code 185003 states, “The authority shall prepare, publish, and submit to the Legislature, not later than September 1, 2008, a revised business plan that identifies all of the following: the type of service it anticipates it will develop, such as local, express, commuter, regional, or interregional; a description of the primary benefits the system will provide; a forecast of the anticipated patronage, operating costs, and capital costs for the system; an estimate and description of the total anticipated federal, state, local, and other funds the authority intends to access to fund the construction and operation of the system; and the proposed chronology for the construction of the eligible corridors of the statewide high-speed train system. The revised business plan shall also include a discussion of all reasonably foreseeable risks the project may encounter, including, but not limited to, risks associated with the project's finances, patronage, construction, equipment, and technology, and other risks associated with the project's development. The plan shall describe the authority's strategies, processes, or other actions it intends to utilize to manage those risks.”

That deadline was never met, yet Proposition 1A was sent to the voters with the rosy, and thoroughly unverified, ballot statement of safe, reliable, affordable high speed rail!

The Authority has been challenged on this lack of a Business Plan again. 

And again.

And again.

Most recently, Senator Joe Simitian, a Democrat who has consistently voted to support high speed rail both in spirit and in funding, pointed out to Director Roelof Van Ark that on May 24th, Richard Katz, representing  the Authority Board, agreed to address the 6 key issues that had been in the budget language for HSR. Staff leader Carrie Pourvadis again committed to answering those concerns from the Legislature. And when Van Ark took his new job, he sat in Simitian’s office and agreed to that commitment. Shortly after that last promise, the HSR reneged on their commitments, sending a letter to the Legislature that they would be unable to keep that promise, followed by Governor's veto of the budget language that would have held the Authority accountable.  

As it turns out the Legislative Counsel’s office determined that Arnold’s veto was not authorized, but that is now water under the bridge. The fact remains that the HSRA continues to move forward in areas they want, spending hundreds of millions of our tax dollars on contractors, while dodging any accountability in terms of a Business Plan that assures us that our money will be well spent on this project!

The last deadline for a Business Plan was February 1. The Authority is now promising to have it in November. But they have time to move forward with bids and contracts?

By the way, while the Authority insists they lack the staffing to complete the Business Plan in a timely manner, economics expert Elizabeth Alexis, working entirely as a volunteer with no government contract to cover her considerable lost time from work and family, managed to use the Authority’s own documents to complete her own analysis of their budget numbers.

Register your shock and surprise here because according to Alexis, the Authority wildly understated their own estimated costs for this project so far.

When the project went to voters, it was promoted as costing $33.6 billion. Then the number was revised to $42.6 billion. But Alexis’ estimate, released by non-profit CARRD (Cal Respon Rail Design) says to expect the project to be at least $65 billion.

So even as the Authority invites contractors to put their own time and resources into bidding portions of this project, they still have no firm grasp of what they  need the contractors, specifically, to do.

"Even as environmental and planning work has advanced, no update to the official capital cost estimate has been made," CARRD stated in a news release. "This is true even when the only alternatives in most segments still being studied are significantly more expensive than those used to calculate the $43 billion number."

So good luck to any business that is depending on the High Speed Rail contract to save their economic hides. These people have proven that they have no idea what they are doing, or how they are doing it, or how they will ultimately pay for it. In fact, I think the only thing they have been very, very good at to date is spending our money on outside contractors.