Saturday, February 25, 2012

Mark Powell's revue of the CHSRA Business Plans, from 2000 to 2012.

Mark Powell, who does a really great blog, has now outdone himself.  This summary of high-speed rail in California, and all the "broken promises" from the rail authority, is required reading for the entire working population of Sacramento, and for all the rest of us voters and taxpayers in California.

Mark has reviewed the several business plans produced by the CHSRA and teased out all the falsities that pervade each iteration.  While he suggests that the earliest version, from 2000 is the most "honest," I respectfully disagree.  

They knew even then what the actual costs would be, and that whatever their early projections, these early cost forecasts would multiply five-fold, with Parson Brinckerhoff's Boston Big Dig as a prime example. They also, persistently, foretold of operating surplus revenues which all existing systems worldwide (except for two) disprove.

The Due Diligence Report, by Cox and Vranich, documented all the rail authority's BS in the earlier business plan.

( I don't even know why they keep calling them business plans, since this will not be a business in the normal sense of the word.  It will be, like all mass transit, a subsidized public utility. That's hardly a business.)

Well, never mind.  The subsequent business plans are shameful enough. And Mark points out how, brick by brick, this crumbling structure was assembled. It's time to take it down before someone gets hurt.

There's not much more to say about this, except to point out that this statement, below, is sufficient reason to terminate this project.


A History of Deceit and Broken Promises

With a lull in news about California’s high-speed rail project as both proponents and opponents await the release of the Final 2012 Business Plan it is worth looking back over the past two decades at the promises and the reality of this project.

The California High-Speed Rail Authority was created in 1996 so that California might “have a comprehensive network of high-speed intercity rail systems by the year 2020.  To achieve this goal it was to immediately “begin preparation of a high-speed intercity rail plan similar to California’s former freeway plan and designate an entity with stable and predictable funding sources to implement the plan.” [Note 1]

Early Promises (2000 Business Plan)

Now mostly forgotten, and with only remnants of the plan still available on the Authority’s website, this plan’s highlights promised:

• 6 years of environmental and preliminary design work followed by a 10 year construction schedule for the statewide system that would connect all major metropolitan areas [Note 2].
• a $25 billion cost (expressed in 1999 dollars) [Note 3].
• a proposal to fund the project with a temporary sales tax increase (? cent for 20 years or ? cent for 10 years) [Note 4].
• ridership of 32 million intercity passengers per year [Note 5].
• a $24 one-way fare from San Francisco to Los Angeles [Note 6].
• an annual operating profit of at least $300 million per year [Note 7].
• 300,000 job-years of employment during the construction period [Note 8].

Although clearly missing the mark on construction costs and fare prices when compared to more recent plans, there was at least a level of honesty in the plan that has been sorely lacking in subsequent plans.

First, the plan actually specified a “stable and predictable funding source” and called on Californians to pay for a transportation system to be built in their state for their use.

Second, the plan made no attempt to confuse “job-years” of employment with “permanent construction jobs” as has been the case with recent plans.

Third, the plan made no specific claim of infrastructure savings offsets.  Instead, the plan simply compared its $25 billion cost to the $220 billion “the state and its subdivisions will raise (based on current rates for fuel and sales taxes dedicated to transportation projects) and spend on transportation over the next 20 years” [Note 9].

Fourth, the plan did not talk of “phased implementation”, “blended operation”, “initial construction segments”, or make claims that any short construction segments would have any utility at all.  However, it did state:

“specific revenue-producing segments could be completed and opened earlier in the implementation schedule.  For example, a core segment from Los Angeles to San Francisco could potentially be completed at the end of the seventh year with completion of the remaining segments to follow.” [Note 10]

In other words, the first segment likely to possess “independent utility”, as mandated for all construction segments by the legislation that later put Proposition 1A on the November 2008 ballot, was the completion of what is now referred to as Phase 1, the high-speed rail system linking Los Angeles and San Francisco.

Contrast that promise with the claim in the Draft 2012 Business Plan that a 130 mile section of non-electrified track running from north of Fresno to north of Bakersfield at a cost of $6 billion will have “independent utility” because it may be suitable for Amtrak trains and might save a half a million riders per year 45 minutes of travel time [Note 11].

With principal and 4% interest charges on $6 billion born by the taxpayer at a cost of $582 million/year for the next 30 years, the taxpayer must find that each Amtrak passenger’s time is valued at $1600/hour if the claim of “independent utility” is to be justified.

Finally, it is worth noting that the 2000 Business Plans cost estimate of $25 billion was the last time the Authority would publicize an estimate of the cost for the entire statewide project.  The plan called for a cost of $14.6 billion to build the San Francisco to Los Angeles segment (including rolling stock) and another $10.4 billion to construct segments connecting to Sacramento and San Diego and purchase additional rolling stock.

Election Year Deceit (2008 Business Plan)

Assembly Bill 3034, the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century was signed into law by the governor on August 26, 2008, only 70 days prior to the November 4 election where it asked voters to approve $9.95 billion in rail bonds to help fund construction of a proposed 800 mile statewide system of high-speed rail connecting all large metropolitan areas throughout the state.  In putting the initiative, Proposition 1A – Safe, Reliable High-Speed Passenger Train Bond Act, on the ballot AB 3034 circumvented no less than 10 separate sections of California and Federal Election Code.  The more serious of these violations included prejudicial wording in the initiative’s title and statement appearing on the ballot, and the fact that it was allowed on the ballot at all since AB 3034’s approval by the governor did not come close to the statutorily required 131 days in advance of the upcoming election [Note 12].

Assembly Bill 3034 also called for the Rail Authority to issue their 2008 Business Plan by September 1, 2008 [Note 13]. However, the Authority held back on releasing their business plan until after the election [Note 14]. With the advantages of prejudicial ballot wording, little time for opponents to organize, and no business plan to argue against, proponents of high-speed rail won a narrow victory on election day which to this day the Authority shamefully refers to as a “mandate”.

A quick reading of the 2008 Business Plan, released three days after the election, reveals how voters were fooled on election day.  The business plan proposed using ALL of the available rail bonds to build the section connecting Los Angeles and San Francisco [Note 15], leaving no bond money to help fund the segments connecting to Sacramento and San Diego.  In fact, the business plan provided no cost estimate or timeframe for building connections to Sacramento and San Diego in spite of a reference on the Supplemental Voter Guide made by the Legislative Analyst’s Office that the Authority had told the LAO in 2006 that the cost of the statewide system would be $45 billion [Note 16].

The 2008 Business Plan did promise the voters:

• a 9 year construction schedule for Phase 1 (San Francisco to Los Angeles/Anaheim) [Note 17].
• a construction cost of $33.6 billion (expressed in 2008 dollars) [Note 18].
• a funding plan chiefly consisting of $15.6 billion in federal grants, $7 billion in private investment and use of ALL $9 billion of the approved rail bonds [Note 19].
• 40 million intercity passengers per year [Note 20].
• a $68 one-way fare from San Francisco to Los Angeles [Note 21].
• annual operating profits in excess of $1.1 billion per year [Note 22].
• 160,000 construction jobs to build the high speed train system [Note 23].
• 320,000 permanent jobs by 2030 indirectly resulting from the system [Note 24].
• a savings of nearly $100 billion in 3000 miles of freeway lanes and airport expansions that would otherwise be needed over the next 20 years [Note 25].

This deceitful business plan again clearly missed the mark on construction costs and fare prices when compared to more recent plans while discarding the honesty found in aspects of the 2000 Business Plan.

The plan for a sales tax to fund the system is replaced by bond debt, private funds, and federal grants.  Californians today know that there is no private interest in funding the project, and federal funds have dried up entirely after the token $3.5 billion in federal stimulus funds meant for “shovel ready jobs”.

The term “construction jobs” has leaked into the plan in place of the proper phrase “job-years of employment” as has the category of “indirect jobs” of which the Authority claims there will be 320,000.

Gone from the plan is a comparison of high-speed rail capital costs versus the budget for all state and local transportation projects (both new and repair projects) over the next 20 years itemized at $220 billion in the 2000 Business Plan.  In its place the Authority simply makes the preposterous claim that the development of high-speed rail will eliminate the need for nearly half of these expenditures.

Final Promises (Draft 2012 Business Plan)

In November 2011 the Authority released their latest business plan, a plan more dishonest and less grounded in reality than the previous plans. The Draft 2012 Business Plan continues the trend of promising more high-speed rail benefits to compensate Californians for project delays and cost escalation.

The plan’s highlights include:

• a 22 year construction schedule for Phase 1 [Note 26].
• costs ranging from $65.4 to $78.1 billion (expressed in 2010 dollars) [Note 27].
• costs ranging from $98.5 to $117.6 billion in actual dollars to be spent [Note 28].
• a funding plan deemed “not feasible” by the Rail Peer Review Group utilizing all $9 billion of rail bonds, $11 billion in private capital in exchange for any operating profits  through the year 2060, $3.5 billion from the 2009 federal stimulus bill, and  a whopping $75 to $94.1 billion from non-existent federal programs [Note 29].
• intercity passengers per year are not explicitly stated.
• a $79 one-way fare from San Francisco to Los Angeles [Note 30].
• annual profits through 2060 paid to private investors [Note 31].
• 1,250,000 to 1,400,000 construction job-years [Note 32].
• a savings of $171 billion in freeway lanes and airport expansions that would otherwise be needed over the next 20 years [Note 33].
• no plans complete the statewide system connecting Phase 1 to Sacramento and San Diego.

The facts speak for themselves.  In 12 years the construction time required to build Phase 1 has gone from 7 years to 22 years while start of construction has slipped 6 years.

The cost, in 2010 dollars, has gone from $20 billion in the 2000 Business Plan ($14.6 in 1999 dollars) to upwards of $78 billion.
The vision of a statewide system sold to voters in 2008, including those millions living between Los Angeles and San Diego, and between Merced and Sacramento, has vanished.

Funding the system today with a sales tax would require not a ? cent increase for 10 years, but rather a 2 cent increase for 10 years and so the Authority writes a funding plan based on fantasy federal grant programs.

Infrastructure savings are now portrayed as being nearly as large as the “state and its subdivisions will raise and spend on transportation over the next 20 years” [Note 9].

And estimates of job-years in construction have soared four-fold.

Meanwhile, Californians are expected to put faith in the Authority’s projections of operating costs and ridership, and hence profitability, of a system not expected to be fully operational between Los Angeles and San Francisco for another 22 years.

Notwithstanding the sobering cost projections, construction delays, a public that has now turned 2:1 against high-speed rail [Note 34], the risk of starting a project that may never be completed, and if completed might be highly unprofitable, Governor Brown still maintains his commitment to start construction this year in the Central Valley and build a swath of high-speed destruction through farms, businesses, homes, and families.

Write to the Governor and tell him you know the past and present promises of high-speed rail and based on its history, high-speed rail simply promises to be a disaster for all Californians.

Factual statements made in this article are supported by footnotes shown below:

Note 1:  Senate Bill 1420 High Speed Rail Act, signed into law September 22, 1996, Ch. 1, paragraph (h)
Note 2: 2000 Business Plan, Figure 2.3
Note 3: 2000 Business Plan, Table 2.1
Note 4:  2000 Financial Plan associated with Business Plan
Note 5: Summary of the 2000 Business Plan, page 1
Note 6: Summary of the 2000 Business Plan, page 2
Note 7: Summary of the 2000 Business Plan, page 1
Note 8: Summary of the 2000 Business Plan, page 1
Note 9: 2000 Business Plan Executive Summary, page 2
Note 10: 2000 Business Plan, page 15 section titled “Phase 3: Final Design and Construction
Note 11:  Draft 2012 Business Plan, last paragraph on page 2-10
Note 12: High Speed Railroading of the Public
Note 13: Assembly Bill 3034, page 2
Note 14:  Authority List of 2008 Business Plan Documents and Release Dates
Note 15: 2008 Business Plan, page 21, Figure 26
Note 16: November 2008 Official Voter Information Guide, Analysis by Legislative Analyst, page 5
Note 17:  2008 Business Plan, Figure 25
Note 18:  2008 Business Plan, Figure 26
Note 19:  2008 Business Plan, Figure 26
Note 20:  2008 Business Plan, page 18
Note 21:  2008 Business Plan, page 18 using data in table for LA to SF at 50% of airfare
Note 22:  2008 Business Plan, page 17
Note 23:  2008 Business Plan, page 12
Note 24:  2008 Business Plan, page 12
Note 25:  2008 Business Plan, page 6
Note 26: Draft 2012 Business Plan, Chapter 4, Exhibit 1-2
Note 27: Draft 2012 Business Plan, Chapter 8, Exhibit 8-1
Note 28: Draft 2012 Business Plan, page 8-2
Note 29: January 3, 2012 Peer Group Report
Note 30: Draft 2012 Business Plan, Exhibit 6-4 using 83% of airfare for train fare
Note 31: California State Auditor, High-Speed Rail Authority Follow-up, January 2012, page 2
Note 32: Draft 2012 Business Plan, Exhibit 10-4
Note 33: Draft 2012 Business Plan, page ES-2
Note 34: Field Poll

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