Wednesday, November 23, 2011

Why the California High-Speed Rail Clock is Winding Down

To first answer the last question in this article, below; one word: "NO!"  There; that was easy.  We do not want this train.

This is one of those long, summary overview articles that make such good reading for people who want to know about his project beyond a few headlines. It doesn't cover every single issue but does a great job of hitting the key ones and brings us up to date. David Futch deals with the rail authority politics, the mismanagement and their lack of professional organizational and leadership skills.  

When you think about it, putting responsibility for a well over $100 billion project in the hands of this stunningly incompetent rail authority -- and in this economy -- is outrageous, whether this is a good and necessary project or not.  

State Senator Lowenthal tried legislation that would have shifted the responsibility for the project from these kindergarten clowns to a more grown-up Transportation Department within the state government, but that bill got nowhere. That's appalling and the height of negligence and irresponsibility on the part of the Democrats in the state Legislature.

Moving on. I disagree with Futch's assessment of Jerry Brown's intentions to get greater honesty from the rail authority with his appointment of Rossi and Richard to the Board.  Even though these two guys manipulated the recent version of the business plan and they acknowledged far higher costs, they nonetheless continue to endorse this project despite what must be understood as a gross failure of cost/benefits. Rossi and Richard signed off on the frighteningly irrational notion that cost, regardless of how high, is no object. 

And they perpetuate such falsehoods as claiming profitability for all high-speed rail systems worldwide when the opposite is the case, thereby seeking to make the case that this California project will also be profitable. What nonsense!

The construction costs, we all know by now, will continue to climb dramatically, and at the same time, there are no plausible identified sources for such funds.  What is this, a joke of some kind?  Apparently, and tragically, not.

The rail authority did this with the transparently fraudulent argument, which with these new far higher costs has become common-place, that it will cost even more to not build this train than to build it.  That phony claim is based on the notion that this train will carry so many passengers that it will reduce the demand on automotive and air travel.  And, if not built, oblige major expansions of highways and runways at far greater costs.  Not so. 

The response to that erroneous formulation is that for this high-speed train, unsubsidized high ticket costs rule out any mass migration from two established transit modalities to this not yet built new one.  

Furthermore, the auto traffic problems which we seek relief from, are within urban and regional population centers, not between them.  Furthermore, there are already so many airports at, and so many competing air carriers between, the two cities -- SF and LA -- that a single rail line to a single train station at each end cannot begin to compete with transit demand.

Unlike Futch, I would not make too much of any perceived "crack" in the Democratic position in the state legislature, Assemblyman Rich Gordon's comments to the contrary notwithstanding.  The only two legislative members who are fully forthright and forthcoming about their beliefs regarding this train project are Doug LaMalfa of the Senate and Diane Harkey of the Assembly.  There are others as well, but they are all also Republicans. 

There is not, at least not yet, a break-away Democrat splinter group that concedes the need to terminate this project.  The Republicans have articulated their opposition clearly and loudly. We wait for such an unambiguous stand from our Democratic representatives, including Gordon, Simitian or Lowenthal.  They have not yet let go of this project, despite its overwhelming burden of problems and faults.

You will recall that the State's Inspector General (before Jerry Brown closed down that office), the State auditor, and the state Legislative Analysts' Office all issued highly critical reports about the management of this project, as did the project's own Peer Review Committee.  What difference have those reports made in the thinking of the Governor and the Legislative majority?  Not much. Another State Auditor analysis and report is way overdue. There is no longer an Inspector General's Office. The recommendations of the Legislative Analysts' Office to shut this project down have been ignored. 

How much more does the state government need to know in order to take the appropriate actions? Failure to act signifies, shall we say, questionable motives on the part of the Governor and Legislature for such reluctance to do the "right thing" and terminate the high-speed rail project in California.

This comes in the face of the ever clearer fact that there will be no future funding from Congress for the foreseeable future.  Therefore, it should be obvious to everyone that the state government is determined to seek those awarded (and recently totally obligated) federal $3.5 billion to start construction, regardless of any illegalities, simply for the sake of hastily getting those dollars into the California economy, whether a train is actually built or not. 

That final question, do Californians want that train or not, cannot be assumed to have an answer at this point in time.  This is no longer 2008.  We now know that such a train is both unnecessary and out of reach.  Reality has already made this decision for us. All the rest is politics.

$100 Billion Bullet Train
Democrats fray as cost skyrockets, feds bail, and Amtrak starts to look good
By David Futch
published: November 24, 2011
How much does it cost to go from Los Angeles to San Francisco by train?

Nearly $100 billion.

It's not a punch line. It's the sticker-shock price tag from the California High-Speed Rail Authority to build a bullet train that engineering and transportations experts now say probably will not reach speeds of 150 or 200 mph, offering instead a not-that-fast rail route between L.A. and the Bay Area, whose cost will be paid by Californians for decades.

The nine-member California High-Speed Rail Authority board — made up almost entirely of big-labor cheerleaders of the project, as well as Democratic and Republican ex-politicians with little grasp of bullet-train engineering, finance, management or construction — had insisted that the train would cost $45 billion.

Yet for the past two years, one independent analyst after another has pilloried that figure, or estimated the true cost as being far higher.

In August, Gov. Jerry Brown set out to inject some honesty into the debate over the cost and business plan for the vast public works project — for which taxpayers are on the hook. He appointed two nonpoliticos, who also are free of longtime insider ties to big labor: rail expert Dan Richard and financial guru/banker Michael Rossi.

Their job was to help the reform-minded rail authority CEO who took over in 2010, Roelof van Ark, fix the spreadsheets and, no less important, repair the veracity of the High-Speed Rail Authority. Van Ark, with 30 years' experience as an engineer and manager for such big transportation companies as Siemens — which built the ICE bullet trains in Germany — crafted a truth-telling business plan with substantial tweaks made by Richard and Rossi, key state legislators tell L.A. Weekly.

Then, on Nov. 1, they revealed the staggering new $98.5 billion cost estimate.

Rail Authority spokesman Lance Simmens says Richard and Rossi "immersed themselves in every aspect of the new business plan and brought a green eye-shade view that created a credible, realistic and transparent perspective to the plan."

But their candor may be too late to save California's misfiring bullet-train project. None of the wealthy investors who were supposed to share the pain with taxpayers has materialized for this struggling "public-private" project, and on Nov. 17, a crucial source of billions of dollars in public funds dried up when the U.S. Senate voted to kill all future federal funding for high-speed rail — including for California's.

USC professor and transportation planner Lisa Schweitzer recalls that in 2008, when then-Gov. Arnold Schwarzenegger, then–Assembly Speaker Fabian Nuñez and their appointees on the rail authority board insisted the cost would be just $34 billion, "the coffee shot out of our noses" at USC.
Schweitzer's graduate class at USC's School of Policy, Planning and Development later completed an independent estimate, coming up with a figure of $90 billion to $105 billion, which closely aligns with the figure the authority released Nov. 1.

She describes the California High-Speed Rail Authority board as playing the ultimate political game with other people's money: "Lowball the cost, lowball it again, then at the last minute they say, 'Here's what it's really going to cost.'?" The $98.5 billion figure, Schweitzer says, is "finally ... a good number."

For years, state Sen. Alan Lowenthal, a Democrat from Long Beach, has criticized the authority for acting like a group of cheerleaders when they really needed to be critical and perform due diligence.

 He's glad to see the realistic cost estimate and a new business plan — both of which Lowenthal has been demanding since 2007, when he was state Senate Transportation Committee chairman.
A similar report he received from the rail authority in 2009 "was totally inadequate," Lowenthal says. "They did not do a good job of doing their job. It was no way to do business. I told them they were crazy."

Now, a crack is forming in the once-solid Democratic political support for the California bullet train, which presents a problem for Jerry Brown, who several days ago staked much of his reputation on getting the bullet train built. In response to the unveiling of the new $98.5 billion cost, Brown declared, "California's high-speed rail project will create hundreds of thousands of jobs, linking California's population centers and avoiding the huge problems of massive airport and highway expansion."

State Assemblyman Richard Gordon is one Democrat who is beginning to break from the pack. He represents Menlo Park, a wealthy, liberal, high-tech enclave near Stanford University, where many residents are furious about the bullet train, which would chop up parts of Palo Alto and other suburban Bay Area communities.

In mid-November, Gordon did a radio interview in which he slammed the cost, as well as what seems to be a plan for a less-than-fast train that will make numerous stops.

Gordon tells the Weekly that Brown could hurt himself in a risky throw of the dice. "In light of the new business plan and cost, the governor may be rethinking his position," he says. "I need answers, and I hope he's looking for some as well."

Brown has the power to fix a key, underlying problem — the behavior of the California High-Speed Rail Authority board, which has long been dominated by entrenched politicos and labor-backed union insiders. The governor appoints five of the nine members.

The current board includes:

-Brown's appointees, Rossi and Richard; 

-Thomas Umberg, a Democratic ex-legislator from Orange County, who was appointed by Fabian Nuñez; 

-U.S. Rep. Lynn Schenk, a Democrat appointed by former Gov. Gray Davis and reappointed by Schwarzenegger; 

-Thomas Richards, a Republican appointed by Schwarzenegger, who is CEO of a Fresno real estate firm; 

-Russell Burns, a labor backer of the project and business manager of Operating Engineers Local 3 union, appointed by Assembly Speaker John Pérez; 

-Robert Balgenott, a labor backer of the project and president of the State Building and Construction Trades Council, AFL-CIO, appointed by California Senate President Pro Tem Darrell Steinberg; 

-attorney and Democrat Jim Hartnett, ex-mayor of Redwood City, also appointed by Steinberg; 

-and Los Angeles Business Journal publisher Matt Toledo, a Republican businessman appointed by Schwarzenegger.

Aside from Democrats Rossi and Richard, the two other authority board members not entangled in labor unions or career politics are Republican businessmen Toledo and Richards.

Noted Stanford historian Richard White, author of Railroaded: The Transcontinentals and the Making of Modern America, a damning look at California's love affair with trains, calls the High-Speed Rail Authority board "largely a booster club without much experience in high-speed rail. When you examine the numbers, [their plan] falls apart. There is certainly a lot of money in this for contractors and land speculators."

With the $98.5 billion cost now having been made public, White says, "The parallels with Union Pacific in the 19th century make me very uncomfortable. It takes a lot for me to agree with anything the Republicans say — but opposing this project is one of them."

He believes that the governor, in embracing the project a few weeks ago despite the ballooning cost, is appeasing his political constituency and his construction-union campaign contributors by pursuing "green travel" and future construction jobs at a very high cost.

Brown has somewhat altered the inexpert nature of the board by bringing in Richard, who ran BART, and Rossi, an ex–banker/businessman who had been acting as Brown's senior adviser on job creation.

Until just a few weeks ago, when the authority's report — influenced by Rossi and Richard — was released, the board was "putting out promotional pieces and not really answering the tough questions," Lowenthal tells the Weekly. He makes it clear that he "truly believes in high-speed rail" but says he has long feared the High-Speed Rail Authority's cost estimates had no basis in reality — and represented sleight of hand by rail boosters out to persuade California voters to approve the high-speed rail bond measure, Proposition 1A, in 2008.

"They were just hell-bent on moving forward and building something," Lowenthal says. "I now have to give them credit that they at least have changed somewhat. They've made a major step forward with this new plan."

But, he warns, "I'm not saying we can pay for it."

Like Lowenthal, Gordon believes in the vision of high-speed-rail — but is highly skeptical about who will pay for it.

Gordon is concerned that the state would commit billions of borrowed dollars to the project when the fiscally wrecked state government is facing a challenge in even paying its current debt service. The rail authority wants the state Legislature to allow it to spend $3 billion from Proposition 1A while authorizing $3 billion in matching money from the feds. Those funds would be expected to finance construction of 130 to 180 miles of track in the Central Valley.

"I don't see us borrowing more — and the federal government isn't going to give us more money," Gordon predicted the other day, shortly before the U.S. Senate did indeed vote to cut off future money for bullet trains.

When the high-speed train idea surfaced 15 years ago, traveling from Southern to Northern California in the time it takes to watch Planes, Trains, and Automobiles courtesy of a sleek bullet train like those zipping from London to Paris seemed a sci-fi dream. Then, in 2008, California voters approved Proposition 1A, which called for spending $9 billion in state money on the train and another $950 million to upgrade existing rail. With a push from President Obama, the feds have fully committed to $3 billion.

The project was billed as a train that would reach 220 miles per hour with just one stop, in Stockton, whipping between L.A. and either San Francisco, San Jose or Oakland. But now, beyond the skyrocketing cost, the design and the slow-going route with its many stops present major problems.

There is intense community opposition to plans to slash through cities and private properties. 

Moreover, the rail authority's decision to insert stops in the Central Valley may harm the train's ability to achieve European-style speeds of 200 to 220 mph, or, some say, even 120 mph. If that happened, the project would be more on par with Amtrak's quick Acela trains on the East Coast, but Californians would have paid the premium costs of a bullet train.

"Ultimately, the people supported high-speed rail not because of how fast it will go but because of what it is and what it could become," Lowenthal says. "But if it can't do L.A. to San Francisco in three hours, it can't compete with air travel. The rail authority is going to have to show it can compete."

So far, the authority has spent $600 million without laying any track and has made no final decision on how many stops the train will make between the Bay Area and Southern California.

"The authority is doing this bass-ackwards," attorney Stuart Flashman says. "This is not a board of experts but a political board that makes decisions based on what garners them the most support from other politicians."

Flashman represents a host of plaintiffs suing the High-Speed Rail Authority, including the cities of Palo Alto, Atherton and Antelope Park.

California State Auditor Elaine M. Howle released one of the most devastating studies of the authority's behavior and fiscal health in her April 2010 audit, which was initiated at the request of legislators. She titled it "High-Speed Rail Authority: It Risks Delays or an Incomplete System Because of Inadequate Planning, Weak Oversight and Lax Contract Management." A spokeswoman for Howle says an upcoming audit will be just as tough.

The rail authority also doesn't seem to have any particular talent for estimating or identifying incoming revenue.

Board members said they expected a huge contribution from the feds, as much as a $19 billion windfall. And the rail authority board failed to make clear which government entity would be responsible for the future revenue guarantees (to be generated mostly from ticket sales) that are needed to lure private investors, without whom the California bullet train cannot be completed.

Rail authority spokeswoman Rachel Wall says there are good reasons why construction is still down the road. The $600 million spent so far went to "preliminary engineering and environmental clearance and review," she notes, and none of the clearances required under tough California environmental laws have been granted yet. That's a big reason why "nothing's been built."

Wall describes the vast project as more than "800 miles of survey area, from Sacramento to San Diego. Seismic tests along every potential route. We're looking at a huge array of options. In some places we're doing review for two tracks or four tracks, places that might have two stations or four stations. Everything we anticipate is in those engineering reports."

Meanwhile, state Sen. Doug LaMalfa, a Richvale Republican, is pursuing a ballot measure asking voters to kill the train. His measure is highly unlikely to be approved by the Democrat-controlled state Legislature and placed on the ballot. Even so, LaMalfa thinks Californians should be asked a second time if they want to kick in $9 billion, particularly now that it's no longer a $34 billion or $45 billion but a $100 billion train — and one that might not attain speeds much faster than Amtrak's best.

"It seemed like a nice thing," LaMalfa says by phone from his Central Valley farm. But, he asks, "Where are the commuters who are going to ride this thing? I just don't see it. Are people in Merced going to go to San Jose or to the San Fernando Valley and Burbank?"

LaMalfa questions the widely attacked rider predictions from the authority, whose use of very high ticket-sales projections has allowed bullet-train boosters to claim that California residents would not be unduly squeezed in order to subsidize the train's steep and ongoing operating costs.

The authority had projected that 41 million people annually would ride the train between Anaheim and San Francisco, for example. But currently only 12 million customers fly nonstop on the extremely busy air route between Los Angeles and San Francisco each year.

Amtrak's Acela train has attracted 3 million riders a year in the dense corridor of Washington, D.C., Philadelphia, New York and Boston, but California's rail authority insists 50 million riders would flock to its bullet train in far less dense California. They've since knocked that widely attacked figure down to 16.7 million to 23.7 million riders per year between L.A. and the Bay Area. But some analysts suggest the bullet train will attract ridership similar to Acela's — a few million riders per year.

California bullet-train backers also boasted of much cheaper tickets for those traveling by train, but tickets now are projected to cost $65 to $120 per person, one way. (A Horizon Air ticket from L.A. to San Francisco ranges from $59 to $147 one way.)

LaMalfa says Brown, Speaker Pérez and state Senate leader Steinberg should use their appointment powers to replace California High-Speed Rail Authority board members with experts who aren't "yes-men," asking, "Where are the critics on this board? There aren't any."

But the board's chairman, Umberg, a former California legislator and a drug-policy appointee in the Clinton administration, says, "Saying no to high-speed rail is ridiculous."

If all goes well, the first turn of the shovel is scheduled for September 2012, starting north of Fresno near Merced and ending just north of Bakersfield. That 130-mile stand-alone fragment of track is expected to be finished in 2017, he says, but the leg "will not carry passengers. The first passengers will get aboard in 2021."

He says the authority still has time to find enough financing for the bullet train, because "we don't need money for three years."

Umberg is so convinced of the benefits of the high-speed train that, he warns, "Our standard of living will decrease dramatically if we do nothing" and fail to copy countries with bullet trains.

Yet Schweitzer and Stanford professor White suggest that California's standard of living could be damaged, not improved, if the authority goes ahead.

Schweitzer, who is part of the METRANS Transportation Center at USC and California State University-Long Beach, charged with analyzing large transportation issues in the region for the U.S. 

Department of Transportation and Caltrans, says, "If you're a private investor, you don't (pony up). You wait until taxpayers have eaten most of the construction costs and hope nobody else wants to run it — then you jump in."

But because the feds have cut future bullet-train funding, she warns, Californians themselves will pay most of the $98.5 billion in construction costs.

"There's the choice," Schweitzer says. "No sugarcoating, no contortions, no obfuscating. It's not: 'Oh, we can have this, and the private sector/the feds will give it to us.' Nope. It's just Californians having to decide what they want. Do we want it or not?"

Reach the writer at davidfutch@

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