Saturday, October 20, 2012

One of the Lawsuits Against the California High-Speed Rail Authority: by Mark Powell

You better read this, slowly and carefully.  It explains a lot of what the rail authority intends to do, and why it's illegal. These are Mark's words, taken verbatim from his web-site, not mine.  It means that there is still some hope that justice will prevail.  I hope that he's right.



“We cannot expect people to have respect for law and order until we teach respect to those we have entrusted to enforce those laws.”    Hunter S. Thompson

Following the appropriation of rail bonds by the state legislature this past July, the California High Speed Rail Authority (CHSRA) began adding highly paid executives to its staff and embarked on a spending spree to advance the rail project.  Against the formidable forces of the state stand two Kings County farmers, their lawyer, and the Law.

CHSRA was chartered in 1996 [Note 1] and tasked with “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 [emphasis added].  In spite of failing at this task for 16 years, the Authority now seeks to begin construction early next year in what the farmers’ lawsuit contends is in violation of the voter approved Proposition 1A ( “the Law”).

The farmers’ lawsuit, moving forward in the Superior Court of Sacramento with a trial scheduled for mid-2013, contends CHSRA, Governor Brown, and other state officials have acted lawlessly in their actions leading up to the appropriation of the rail bonds this past July and seeks to constrain the state and its officers to acting within the law when they write the required updated funding plan prior to actual release of the rail bonds.

The gist of the farmers lawsuit is that Proposition 1A requires (1) the high speed rail system be built in usable high speed rail segments “suitable and ready for high speed train operation” [Note 2 ], and (2) a certified funding plan be written showing commitments for all funds needed to complete the usable segment and a schedule for receipt of those funds [Note 3 ].  Furthermore, Proposition 1A makes no provision for funding the partial construction of a usable segment.  Yet that is exactly what the state and its agencies are planning to do in the Central Valley.

The farmers’ complaints concern the two funding plans mandated by Proposition 1A.  The first funding plan was a requirement needed to obtain “appropriation” of bond proceeds into the state budget [Note 4].  The second funding plan, with criteria very similar to the first plan, is required prior to “committing” any bond proceeds to begin construction activities [Note 5]. The plaintiffs’ case makes the following points regarding the lawlessness of a planned expenditure of $6.1 billion to build 130 miles of non-electrified track though the Central Valley.

Funding Plan Deficiencies

• “The absence of electrification, HSR-compatible signaling, and any electric trains whatsoever, means that the Authority cannot possibly make the MANDATORY CERTIFICATION (in its funding plans) that the 130 miles of Central Valley track will be suitable and ready for high speed train operation “.

• “Proposition 1A does not permit the building of a “partial” usable segment; nor does it permit a “phased approach”, that is, building first a 130 mile conventional rail system, with a HSR system to follow at a later time; such a “phased” system is not permitted under Proposition 1A; yet plaintiffs allege that this is exactly what defendants intend to approve, authorize, and illegally expend bond funds upon” when they approve the second funding plan.

• “In its April, 2012 Revised Business Plan, the Authority describes its version of its “usable segment” (the Initial Operating Segment or IOS) as running from Merced to the San Fernando Valley, a distance of about 300 miles.  The “first part” of that so-called usable segment is the 130 mile conventional rail portion from south of Merced to north of Bakersfield [Note 6], and the intent of defendants is that $6.1 billion will be spent on that conventional rail section (which is not itself a usable segment).”

• “For the usable segment identified by the Authority, running from Merced to the San Fernando Valley, the defendants have no funding committed or available to ensure completion of that segment.  The defendants indicate that the entire 300 mile section from Merced to the Los Angeles Basin (San Fernando Valley) will cost an ADDITIONAL $20 BILLION*, on top of the $6.1 Billion for the 130 miles of conventional rail that will initially be built within the 300 mile segment.”

*The number is misstated in the lawsuit on the low side.  The actual number is $25.3 BILLION. [Note 7]

• “Plaintiffs allege that there is no funding committed, available, or in place, for that entire 300 mile segment.  There is no private funding, no further federal funding, and no state funding that is, or can be, committed to this entire 300 mile segment.” [Note 8]

• “The ‘adequate funding’ requirements of Proposition 1A, perhaps the most important of all the restrictions, will therefore be violated if funding is permitted for the 130 mile project from the proceeds of Proposition 1A, and the entire 300 mile Central Valley project is therefore ineligible for Prop.1A funding, due to the lack of the additional $20 Billion in funding needed to complete the last 170 miles.”  [Note 9] [Note 10].

• “Plaintiffs further allege that the allegations of this paragraph concerning inadequate funding and violations of Proposition 1A are supported by numerous studied analyses by respected state agencies, including the LAO [Note 11] and the State Auditor’s Office [Note 12], and by the Peer Review Committee.”  [Note 13]

To all this the state counters that the 130 miles will be usable by Amtrak.  In an even flimsier justification, the Legislative Counsel advised democratic State Senators Simitian, Lowenthal and DeSaulnier  that the 130 miles of track might be deemed suitable and ready for high speed rail service because the only component being built , the rail component, is being built to high speed track specifications.  In other words, it will be suitable and ready when electrification is added, trains are purchased and it is finished. [Note 14] All three senators read this opinion and then voted against appropriation of the rail bonds.

Environmental Clearance Deficiencies

• “Plaintiffs allege that it was ILLEGAL for the Authority to approve (the first) Funding Plan in advance of required environmental approvals [Note 15] and certifications and that it was ILLEGAL for the authority to submit said Funding Plan to the Legislature, and that it would be illegal for defendants to authorize or approve any funding for the Central Valley project from Proposition 1A bond funds.  The Central Valley project is accordingly INELIGIBLE for Proposition 1A bond funding/financing.”

Travel Time of 2 Hours 40 Minutes from LA to SF

• “Plaintiffs allege that documents from defendant Authority (recently produced pursuant to a public records request) indicate that the trip will take a minimum of three hours (express) and longer with local stops.  Defendant Authority has further indicated that it has no written documentation whatsoever to support their claim that the trip will be made in 2 hours, 40 minutes.”

• This is in clear violation of Proposition 1A [Note 16] and precludes funding of the Central Valley project from Proposition 1A bond funds.  The Central Valley project is accordingly INELIGIBLE to receive Proposition 1A bond funding by reason of this violation.”

Illegal Expenditures are Already Occurring

• “The Authority has already begun sending Requests for Proposals (RFP’s) to contractors/subcontractors in order to obtain bids from such entities for the CONSTRUCTION of the first portion of the Central Valley Project; more than $900,000 of public funds has already been spent by the Authority in connection with preparation of those RFPs.  These RFPs are directly related to CONSTRUCTION work on the Central Valley project to be bid on and performed, and are thereby capital expenses for construction-related work . Such construction-related expenditures  are an illegal expenditure of Proposition 1A funds that has ALREADY OCCURRED.”  Such Proposition 1A funds cannot be committed or expended until the second funding plan has been issued and approved. [Note 17]

• “In connection with its construction program, the Authority has committed/obligated itself to reimburse, in an amount up to $2 million each, the bidding costs of any qualified contractor which is unsuccessful in its bid for the contract. Alternatively, in the event the Authority cancels that RFP, each qualified bidder will be reimbursed its costs in preparing its bid up to $2 million each. Defendant Authority has made an IRREVOCABLE FINANCIAL COMMITMENT of Proposition 1A bond funds. Again, this type of commitment cannot legally be made until after the second funding plan is approved.”

An Important Item Missing from the Farmers’ Lawsuit

In the spring of 2007 the Authority began deliberating over how to break up the statewide high speed rail system into manageable pieces so that a Business Plan and Funding Plan could be developed.  At their May 2007 meeting the Authority approved as Phase 1 by a 5 to 2 vote the San Francisco to Los Angeles/Anaheim section of the statewide system.  The meeting minutes and supporting documents , still available on the Authority’s website, reveal the reasons for this choice.  Then Executive Director Morshed recommended this first phase selection because this segment would (1) be most likely to attract outside investment (for the completion of the statewide system linking to Sacramento and San Diego); (2) have an operating surplus; and (3) would be long enough to develop a train system that could travel at high speeds. [Note 18]

In other May 2007 documents the San Francisco to Los Angeles/Anaheim segment is referred to as the “starter segment”  or the “backbone” of the statewide system.   Never is there a reference to developing a Funding Plan or Business Plan for a sub-section of this segment.  The Authority’s documents speak of funding being an issue and certainly they would have liked to have been able to start with a smaller “starter segment”, but anything smaller would evidently not have met Mr. Morshed’s three criteria, all of which are mandated by the law.  Any reasonable person reading the May 2007 Meeting Minutes on Project Phasing and the supporting documents leading up to that meeting; the May 2007 Phasing Plan [Note 19], Financing Plan Report [Note 20], and Financing Plan Presentation [Note 21] can only conclude that the Authority envisioned the entire San Francisco to Los Angeles/Anaheim “starter segment” as the first “usable segment”  meeting the requirements of the Law.  If one is still not convinced of this fact, then additional evidence is found in the 2008 Business Plan [Note 22] that presented one financing plan for the starter segment and concluded with these words.

“This Business Plan demonstrates how the system’s backbone link (Los Angeles/Anaheim to San Francisco) can be financed.”

With almost no funds to build its “starter segment”  the Authority now has the audacity to (1) label the 130 mile Central Valley non-electrified Amtrak segment the “backbone” of the system; (2) claim that a future segment that extends the “backbone” north to  Merced and south to San Fernando via a Metrolink connection will generate an operating surplus; and (3)  assert that private investors will line up to fund completion of the “starter segment”….San Francisco to Los Angeles/Anaheim.

The Authority’s claims about their project seem to mutate to match their level of funds and become more outrageous with each new plan.  One can only  hope that the Law will be upheld and the project halted until the legally required funding plan materializes.

Footnotes supporting  statements made in this article are listed below and can be linked to by clicking on the Notes contained in the article itself.

Note 1:  Senate Bill 1420, the High Speed Rail Act, dated January 23, 1996
Note 2: Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.08 (c)(2)(H)
Note 3:  Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.08 (c)(2)(D)
Note 4:  Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.08 (c)(1)
Note 5:  Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.08 (d)(1)
Note 6:  April 2012 Revised Business Plan, Executive Summary page 14, Exhibit ES-4 “Construction Schedule”
Note 7:  April 2012 Revised Business Plan, page 7-15, Exhibit 7-10, “Sources and Uses for Completing the IOS”
Note 8:  Parsons Brinkerhoff Transportation Update, June 29,2012
Note 9: Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.08(c )(1)
Note 10: Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.08(c )(2)(D)
Note 11:  May 2012 LAO (Legislative Analyst Office) Report entitled High Speed Rail Is At a Critical Juncture
Note 12: January 2012 State Auditor Report in High Speed Rail
Note 13 2012 High Speed Rail Peer Review Group Report
Note 14:  Legislative Counsel’s Opinion, page 15
Note 15:  Legislative Counsel’s Opinion, page 16
Note 16: Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.09(b)(1)
Note 17:  Assembly Bill 3034, the Safe Reliable High Speed Passenger Train Bond Act for the 21st Century, paragraph 2704.08(d)(1)
Note 18:  May 2007 Authority Board Meeting Notes, page 4, “Project Phasing”
Note 19: May 2007 Phasing Plan
Note 20:  May 2007 Financing Plan Report
Note 21:  May 2007 Financing Plan Presentation
Note 22: 2008  Business Plan, page 21, section entitled Finance Plan

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