Tuesday, July 5, 2011

The Voice of Orange County, and the San Diego Union-Tribune gives us several reasons for terminating HSR in California

1. In order to produce a business plan, the CHSRA needs a financial consulting firm to do that.  They haven't been able to hire one.

2. A huge criticism levelled at the CHSRA is their inability to communicate.  They are losing a major contractor, Ogilvy, who was to be their public relations firm.  Ogilvy overcharged, and now quit, not waiting to be fired.

3. The Governor, in finalizing the state budget, cut much of the funding from the HSR state bond budget intended for regional rail service providers who were to create increased ridership access to HSR upon its completion.

4. The rail authority has been sharply criticised for its mis-management by just about every state government agency there is, including the Department of Janitors and Grounds Keepers.  (not really)

5. Senator Alan Lowenthal's ex-wife, HSR-loving Assemblywoman Bonnie, has posted a piece of legislation that would remove accountability and oversight for the CHSRA as it conducts some of its business, like land acquisition. 

6. The CHSRA has yet to produce a serious business plan that doesn't get rejected out of hand by anyone in Sacramento who can read and write.

7. The CHSRA has four months to produce a business plan without having such a capacity on board.  What will happen to the rail authority in October when this business plan is due?  The perp. walk? Shielding their faces against the flashing cameras?

8. The CHSRA has control over around $6 billion to start construction in the Central Valley next year.  They don't have a clue about what to do after that, since they don't have the money and it looks like they won't get any more. 

9. Before a shovel of dirt has been turned, the rail authority has plowed through half a billion dollars of management and administrative costs.  They have about another half billion left.  When that's gone, there will be no more.  Then what?

10. Then, there's the private investment problem.  There won't be any unless the state guarantees investment returns from the HSR project once operating.  That's illegal under the authorizing legislation.  So, no capital development funds from anyone other than the state or federal government. And, the state will be stuck with the operating subsidy bills even though that's illegal.  

And this is just from the two articles below.  There's much more of course. The bamboozling never stops.  This project has been, from the outset, a nightmare.  Nonetheless, the Democrats are clinging to it as if it represented their political life-saver.  I should, by now, not need to point out that the Democrats, if they don't let go of this public works monstrosity, will go down with the ship.

More Bad News for High-Speed Rail

Posted: Tuesday, July 5, 2011 6:42 am | Updated: 7:15 am, Tue Jul 5, 2011.
The California High-Speed Rail Authority has been hit by yet another management problem, this time an inability for months to contract with a financial consultant, according to the analysis of legislation to be heard today in a state Senate committee.

Disclosure of the consultant contract problems came last week at virtually the same time the rail authority lost its PR firm. Ogilvy Public Relations, the company hired to promote California's plans for an Anaheim-to-San Francisco high-speed rail system quit, just before it was going to be fired, according to the San Jose Mercury News.

And in a final bit of bad news, Gov. Jerry Brown, while signing the new state budget last week, cut $147,261,000 from state high-speed rail-related projects, leaving just $7 million. In addition, he recommended the rail authority figure out how to coordinate its work with Caltrans.

The proposed rail system, was approved by voters in 2008 and is estimated to cost $43 billion to $65 billion.

It has faced myriad management problems, including faulty ridership estimates, failure to develop a business plan, and criticism from state auditors charged with protecting public assets.

Hearings are scheduled for today in the Senate Transportation Committee on two bills related to moving management of the project away from the rail authority.

One by Assemblywoman Cathleen Galgiani (D-Livingston) would create a Department of High-Speed Trains within the state's Business, Transportation and Housing Agency to handle actual management while the nine-member rail board would set overall policy.

Another measure by Assemblywoman Bonnie Lowenthal (D-Long Beach) would free the Rail Authority from oversight and approval by other state agencies when is buys, sells, leases or rents land. Currently, the state Department of General Services, the Finance Department and state Public Works Board review such transactions. But Caltrans doesn't have to undergo such scrutiny and Lowenthal's bill would provide similar exemptions.

A staff analysis of the Lowenthal bill lists many of the management problems the Rail Authority has had and then adds a new one.

The Rail Authority is supposed to develop a basic business plan and give it to the Legislature by Oct. 1, but according to the committee analysis, a request for proposal was sent out to financial consultants a year ago this month.

"Due to poor management and a protest by a losing bidder," the staff analysis said, "the HSRA (High-Speed Rail Authority) was unable to enter into a contract for the services of a financial consultant until June 8, 2011." That means it had just four months to prepare the business plan.

"In light of the HSRA's difficulty in managing the procurement of a relatively low value professional services contract," the staff analysis said, "and the LAO's (Legislative Analyst Office's) recommendation that there is a need for ‘hands-on involvement by the state' ", the Transportation committee staff report suggested the full committee might want to change the Lowenthal bill.

The suggested change would require the Rail Authority to contract with Caltrans "for the day-to-day management" of all of the oversight exemptions in the bill.

The rail board currently in charge of planning the train system hopes to break ground in the Central Valley next year, although it doesn't know where it will get the money to finish the project.

From the Mercury News Story:
Rail authority leaders had planned to ask the agency's board on July 14 to fire Ogilvy and search for a new PR firm. But Ogilvy leaders apparently caught wind of the news, first circulated internally on Monday, and by Thursday morning rail authority CEO Roelof van Ark had received the firm's resignation letter.

"We are unable to develop a solid working relationship with your agency, and that impeded the kind of top-notch work we are accustomed to providing our clients," Michael Law, Ogilvy PR's West Coast managing director wrote to van Ark.

Reached late Thursday, Law said the firm "elected" to leave the contract but still "believes in the project."

Rail authority Deputy Director Jeff Barker said the agency has budgeted $2.3 million for PR in the fiscal year that began Friday. Rail planners will be launching a search for a new PR firm this month and consider communications and outreach to be critical.

Ogilvy signed a $9 million contract with the Rail Authority in 2009. It was supposed to extend for four-and-one-half years.

The Mercury News story said former Rail Authority board member Quentin Kopp accused the PR firm of charging the state "thousands of dollars for simple tasks such as a few hours of reading news articles. He also accused them of over-billing the authority several hours for brief meetings."

And June 30, the same day the news broke about Ogilvy, Brown slashed high-speed rail spending for fiscal 2011-2012 to just $7 million from the proposed $147 million for work to enhance local transit systems that would act as feeder routes for the main rail line.

He criticized the planning the Rail Authority did in preparing its spending proposal.

"The High-Speed Rail Authority (Authority), the Department of Transportation (Caltrans), and local jurisdictios should work together to develop a comprehensive statewide rail plan," he said in his veto message.

"The projects identified for funding by Caltrans and the California Transportation Commission appear unrelated to the high-speed rail project or an integrated rail plan," he added., "As plans for the high speed route are further developed, the Authority should work with local agencies to build mutually beneficial projects."

One last piece of bad news for the rail project.

According to the Senate Transportation Committee staff analysis of Galgiani's bill, when voters in 2008 approved the $9 billion for the rail system, $8.1 billion was allocated for construction and $900 million for planning, engineering and administration.

In the three years since then, the staff analysis said, $377.2 million has been spent on management and project development, leaving, according to the Legislative Analyst's Office, $522.8 million.

With construction scheduled to begin in the Central Valley next year and expected to take five years, as well as planning and engineering costs for the rest of the Anaheim-to-San Francisco route, a "burn rate" of $100 million a year would eat up all of the bond money allocated for project development and overhead.

"Then what?" the staff analysis asked. "If the bond funds run out, there is no apparent source of funding for the ongoing operations of the proposed DHST (Department of High-Speed Trains.)


Time to address job growth, rail woes
By Union-Tribune Editorial Board 
midnight, July 5, 2011
For months, the conventional wisdom has been that only after a budget was finished would state leaders take comprehensive action to stimulate job growth and to fix – or scrap – the state’s troubled high-speed rail project.

Well, for better or worse, probably the latter, a budget deal has been struck. And because the budget presumes a $4 billion surge in revenue from a recovering economy, it’s more crucial than ever that Gov. Jerry Brown and the Democratic and Republican leadership of the Senate and Assembly jointly agree on basic measures to stimulate California’s private-sector economy. Giving a tax credit to businesses for new hires and easing regulations that make business creation and expansion costly are obvious possibilities.

Unfortunately, as we just saw in failed efforts to strike a compromise over a special election on extending expiring tax hikes, pension and budget reform, and regulatory relief, Brown and the Democratic leaders seem to view measures to help the private-sector economy primarily as political chits to extract support from the business community – not attempts to help the millions of Californians who are out of work. With California on track to surpass Nevada this summer as the state with the highest unemployment of all, this attitude has to change.

In America’s other megastates, bipartisan attempts to rev up the private-sector economy are common. In Albany, lawmakers seek to aid New York’s finance, tourism and manufacturing industries. In Austin, lawmakers look to boost Texas’ energy, aeronautics and information technology companies. In Tallahassee, lawmakers try to promote Florida tourism, agriculture and international trade.

This approach needs to also be the norm in Sacramento.

We also need new thinking from the governor’s office about the California High Speed Rail Authority. For nearly a year, state Treasurer Bill Lockyer has warned that the finances of the authority’s rail project – initially predicted to cost $32 billion and now expected to top $65 billion – just don’t work. 

Lockyer doubts the state can attract either the federal funding or the private investment it assumes is forthcoming. He also says Wall Street is leery of the $9.95 billion in bonds that California voters have authorized as seed money for the project.

For its part, the Legislative Analyst’s Office questions the legality of the rail authority’s business plan, which appears designed to entice private investors with a de facto guarantee of taxpayer subsidies if the project loses money – something that’s forbidden under state law. For their part, both the Assembly and Senate have passed bills that amount to votes of no confidence in the rail authority.

It’s time that Brown finally respond to Lockyer, the LAO and the Legislature and explain to Californians how he can – or if he can – salvage high-speed rail. The last thing our struggling state needs is a multibillion-dollar public works fiasco.

© Copyright 2011 The San Diego Union-Tribune LLC.

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