The New Debt Ceiling Decision and California High-Speed Rail

The new Debt ceiling agreement is not an FY 2012 budget.  Nor is it an agreement on the six year re-authorization of the Transportation budget.  So, let's not get too exited about the impact of this one event.

However, it is becoming clear that when the Congress reconvenes in September, they will again put on their armor and pick up their swords and spears to fight the battle of the budget.  And, high-speed rail will be a major and highly visible target for the Republicans.

There are many reasons for this, not the least that it is Obama's vanity/legacy program.  It symbolizes his quest for "winning the future." And because it is far more symbolic than useful, it is losing support quickly as reality sets in.  Those still clinging to it are there for the money. Defeating HSR will be a poke in Obama's eye. Yes, among Republicans, he is hated that much, and they will do anything to reduce his re-election chances.  At least that's the agenda.

In all fairness, the Republicans are not so much concerned with budget balancing, their rhetoric to the contrary.  That talk is pablum for the Tea Party base which believes that their personal budget and the national budget are the same thing, only smaller.  

They are, however interested in reducing the size of government, since it's the vehicle for taking money from people who have it, and giving it, in one form or another, to people who don't.  That's called income redistribution and Republicans believe that's what taxes are for. That's why they hate taxes as well as the Democrats who love them.

Before leaving this point, it should be said here that the Republican high-speed rail agenda and mine are exactly the same, regardless of the reasons.

The debt ceiling deal is a preliminary battle anticipating the budget conflicts this Fall, and that's where the real decisions will be made, including over high-speed rail.

What California's Governor Brown will do about all this is not that hard to decode.  The DOT has awarded California over $3 billion, which, coupled with the state's HSR bond funds, will become $6 billion dollars or more for the CHSRA to play with in the state's Central Valley.  I'm sure that the rail authority is already gold-plating several shovels for the September 2012 ground breaking ceremonies.

Will there be more federal funds? Most likely not.  The rail authority hasn't a clue to what they will do when their $6 billion runs out.  They will have cut a 100 mile rail corridor and put down some track. No electrification; no rolling stock. Then what?

But, from California's and the Governor's point of view, the state will have had the opportunity to pump $6 billion dollars into the economy.  And that's what the Democrats care about; not whether a train actually gets built.  

Of course, they and we don't know how much of all that money will actually stay in the state, and how much will be leaving California for other states, or be headed overseas.  But, that's another conversation.

====================================

http://www.mercurynews.com/breaking-news/ci_18605387?nclick_check=1

Budget deal could jeopardize high-speed rail, clean-water programs

By Karen de Sá kdesa@mercurynews.com

Posted: 08/02/2011 09:28:05 PM PDT

Updated: 08/02/2011 09:28:06 PM PDT

The federal government may have staved off the imminent threat of default Tuesday when President Barack Obama signed a bitterly fought budget deal, but the woes and uncertainty for states have just begun.

In California, some of the most likely cuts include nutritional programs for low-income women and children, the federal portion of the controversial high-speed rail project, clean drinking water programs, and subsidies for farmers.

Also potentially at risk are federally funded university research projects and military bases, policy-watchers said Tuesday after hastily reviewing the plan to cut national spending by $2.1 trillion over 10 years. None of the cuts have been specified; Congress will decide the first round of $917 billion in the coming months, and a deficit-reduction committee will take a second swipe at the budget later this year.

In an interview Tuesday, Gov. Jerry Brown excoriated Republicans for their "obsessional" opposition to taxes and warned that because the congressional debt limit agreement lacks additional stimulus funds, "the economy will creep along instead of roaring back."

How much pain will be felt at the state level is difficult to gauge, Brown said, but at stake are hundreds of billions of dollars in federal health programs, education, highways and other vital funds.

"The federal government has to balance its books, and it's got to make tough decisions," but "you've got to have revenue as well as cuts," Brown said, referring to the lack of new taxes in the budget deal.

He argued that U.S. lawmakers "should be deferring the cuts by putting them into law and investing in jobs, whether in Civilian Conservation Corps or high-speed rail or bridges."  [It's all the same to Brown. It's not really about the train; it's about the money.]

Had Congress and the president not reached the deal approved Tuesday, it could have led to an unprecedented catastrophe, affecting payments for many, including veterans and Social Security beneficiaries. Instead, the bitterly partisan battle concluded with a plan for deep cuts to social spending and an agreement to raise the debt ceiling.

Precisely which state programs will be affected and when will be fought in the months to come. But targets could well be programs that have raised controversy in the past. Program cuts to states will mostly take effect in 2013, but some might begin this year.

"Some high-profile programs in California could face -- if not complete elimination -- a severe haircut," said Eduardo Martinez, a senior economist with Moody's who covers California.

Construction on the state's 800-mile high-speed rail project is set to begin next year in the Central Valley.

Martinez said the rail line is the most obviously endangered program, given that Central Valley and Inland Empire congressional leaders have been among the $43 billion project's most vocal critics. Add to that several highly critical independent reports questioning the project's cost, funding sources and projected ridership.

California has already secured more than $3.6 billion in federal funding for its bullet train line. But the state needs at least $30 billion more from other sources -- including about $15 billion from Washington -- to build the rail line from San Francisco to Anaheim. [They're going to need a hell of a lot more than that, aren't they!]

Martinez said the joint House and Senate committee charged with finding an additional $1.5 trillion in spending cuts or new revenue will be looking for "low-hanging fruit" -- and "the recent publicity around the high-speed rail program suggests that could come under the ax partially or completely."

Jeff Hurley, a policy specialist with the National Conference of State Legislatures, suggested federally funded clean water and drinking water programs in California also could land in the committee's sights.

Farmers are also worried. The California Farm Bureau expects cuts to direct payments to farmers, subsidies that totaled $149 million last year and which could now face elimination.

State GOP Chairman Tom Del Beccaro called the deal nothing more than "stopgap measures," saying he would have preferred structural changes such as fixes to Social Security and Medicare. "I don't think we're on the road to fiscal recovery from this," he said.

Senate President Pro Tem Darrell Steinberg, noting the narrowly averted effects of a federal government default, said: "There is much for Californians to be concerned about in the agreement reached by party leaders, but the alternative would have been catastrophic."

Gov. Brown argued that the unprecedented move by Republicans to tie the debt-ceiling vote to their agenda is a dire signal that the country's democratic traditions are in danger.

"The specter of a country that can't govern itself is not pretty," Brown said, adding that "we saw that here in California" during recent budget battles. "And while politicians are fighting, the country is suffering."

Staff writer Mike Rosenberg contributed to this report.

When it comes to High-Speed Rail, watch and learn from the mistakes of China

We recently pointed out that often the perceived problem is not the real problem, but only a symptom.  China is a great case in point. 

Despite news black-outs, threats to Chinese media, and other obstructions on the part of a rigid autocratic government determined to never let news critical of the government go public, lots of information got out of China anyhow.

Looking for faults, people pointed to lightning strikes, faulty PTC (positive train control), inadequate engineer safety training, hasty and sloppy construction, corruption, and, for all we know, gremlins.  Well, maybe.  But, we would argue here, these are only symptoms of more deep-seated problems, and these are well described here in this Wall Street Journal article.

The government of China acts with great contempt for its people, and treats them all like disposable parts of a great machine which the elite bureaucrats operate in their own interests.  We saw millions of people arbitrarily re-located with the construction of the Three Gorges Dam. 

The government is determined to outrace all Western and Eastern Industrial nations by coming from behind and by blindly throwing of all the resources at the most massive infrastructure development growth at their command.  That's how they attacked rail development by promising more miles of high-speed rail track in China than all the rest of the world combined.  Furthermore, there were determined not to do this in an incremental, evolutionary way, but as one more dazzling aspect of their economic revolution.

The game was not to create an effective rail system, but a superior, prestigious one, a symbolic one, one to envy.  The Chinese copied and stole patent rights and technologies from the HSR leaders such as Japan and France and ignored the instruction manuals by making these trains run faster than intended.  They valued the appearance more than the substance.

With the vast amounts of funding being thrown into this effort, and the culture of corruption rampant, small wonder that lots of the funding went into personal black holes.

The message here ought to be clear.  We have colleagues who have instructed us not to make too much of the Chinese train wreck.  Well, as a worst-case-scenario blog, we intend to make "too much" of this accident. It's an object lesson for California that all HSR supporters ought to pay close attention to.  

It's becoming quite obvious, even to some of the Chinese, that HSR was not the best way to run a railroad.  They should have created a standard passenger AND freight rail system throughout China first.  And, incrementally, added HSR to such a network on the most high-demand routes first.  And they should not have initiated their program with the fastest trains and in such a ridiculously forced short schedule, but moved up gradually, learning on the way.

California is about to make the exact, same mistakes.  We lack a serious regular passenger rail system.  Amtrak has a very long way to go in our state before it can be taken seriously, with, say, 110 mph trains.  That should clearly come first.  But, improving California's existing rail capacity was never the intention of the promoters, such as Quentin Kopp, Rod Diridon, Curt Pringle, Jerry Brown and the others. That would not have been spectacular enough for them.

These guys has visions of sugar plum dollars dancing in their heads.  By-passing the drudgery of Amtrak choo-choos, our politicians saw a macho fantasy train that would capture the admiration of all the residents of this state, and make gobs of money for a lot of their croneys, besides.  Let's be clear, they knew next to nothing about railroading.  Their rail education came from expensive junkets to Europe, Japan and China where they were "sold bills of goods," so to speak.  Great food, great hotels and great train rides.

Politicians being who they are, the idea, never more than a vague, macho concept, became packaged as the salvation of all of California's troubles.  And, not having done any homework, the voters bought it, hook, line and sinker in 2008.

Well, it's not too late to throw this wretched fish back in and forget that it ever happened.  Look what's going on in China now. Is that what we need here, in the United States?  We are on track for a financial train-wreck of epic proportions.  Nobody is in charge with their hand on the brakes.  Right now, it's a run-away train. Time to jump off before we all get "killed" in this economy. 

==========================

http://online.wsj.com/article/SB10001424053111904292504576481800484601640.html

AUGUST 2, 2011

Crash Spotlights China's Train Crisis 

The Railways Ministry, Whose Products Beijing Hoped to Export Globally, Now May Need a Bailout

By DINNY MCMAHON 

BEIJING-China's debt-burdened Railways Ministry, under fire after last month's deadly train crash, might need a central government bailout and will have difficulty raising new funds, some analysts predict, adding to concerns around the country's high-speed rail system.

A high-speed train arrives at Beijing's south railway station on Thursday.

Construction of the fast-train network was a linchpin of China's economic stimulus plan to counter the global financial crisis. Led by lending from commercial banks, the Railways Ministry's debt burden increased to hundreds of billions of dollars, largely used for accelerating the construction of the high-speed network, which Beijing heralded as world class.

The railways' debt woes are part of the larger stimulus tab now starting to weigh on China's government and could also call into question the economics-and not just the safety standards-of an industry China had hoped would become a significant global export.

The July 23 collision between two high-speed trains, which killed 40 people and injured 191, has unleashed widespread public anger that analysts say has likely weakened the clout of the formerly powerful Railways Ministry-the only Chinese government agency other than the Finance Ministry allowed to issue bonds-both within the government and with investors. That in turn is fueling doubts about its ability to raise more funds needed to cover its existing debts and keep building the prized high-speed network and is prompting some to call for the ministry's restructuring or abolition.

"Given the way the accident has drawn attention to the [Railways Ministry's] management practices, it may well be awhile before the [ministry] can come back to the debt markets," Standard Chartered economist Stephen Green said in a research report. "There will be financing difficulties and, inevitably, increased pressure on interest payments."

Mr. Green said he doubts the rail ministry's operations generate enough free cash flow to cover the interest payments on its debts. He and other analysts said that the Ministry of Finance likely will have to step in at some point with a capital injection.

China's Railways Ministry didn't respond to requests to comment.

For the central government, the ministry woes add to concerns around debt from the stimulus plan. Special borrowing entities created by local governments have also racked up enormous debts--about $1.65 trillion, or 27% of China's gross domestic product last year, according to a June estimate by the National Audit Office. Private-sector estimates have put the total higher.

While few question the government's ultimate ability to cover such debts, analysts warn that the burden could suck funds away from other fiscal priorities and could saddle China's state-run banks with bad loans.

Zhao Jian, professor of economics at Beijing Jiaotong University, said that ultimately the Ministry of Railways needs to be restructured, splitting the commercial elements of the rail network from the government's control.

"Currently people are paying the most attention to the crash and safety side of the issue, but this will lead them to scrutinize more Ministry of Railways' debt and finance issues," said Mr. Zhao.

Even before the crash, the high-speed network was under fire over corruption and expensive tickets that put the high-speed trains out of reach for ordinary Chinese.

"Building high-speed rail cannot generate enough cash flow. Cash flow comes from the number of passengers," said Mr. Zhao. "They should have built ordinary trains, but instead they built high-speed ones, which doesn't correspond to market demand."

The Railways Ministry's debts have ballooned in recent years. At the end of the first quarter its obligations totaled 1.98 trillion yuan ($307 billion), about 5% of China's gross domestic product, up from about 2% in 2007.

Deadly Train Crash in China

Workers at the site of China's high-speed train crash near Wenzhou, during clean-up operations on July 24.

In a prospectus issued July 14 for a planned bond issue, the Railways Ministry disclosed that its operating costs in the first quarter exceeded its operating revenue by 3.8 billion yuan, raising the prospect it may struggle to find enough cash to cover interest payments, particularly if its debt burden expands further.

"There is no evidence that operating revenues can grow significantly faster than operating costs," said Mr. Green. "Indeed the evidence at present suggests the opposite may be true."

The bond sale, which occurred two days before the July 23 accident, failed to find enough buyers for the full 20 billion yuan issue.

As a sovereign issuer backed by the financial resources of the Chinese government, there is no concern it will default on its bonds. However, sentiment is clearly moving against the ministry as a debt issuer.

A Shanghai-based analyst with a brokerage firm who deals with the Railways Ministry said he originally expected it to issue between 140 billion yuan and 160 billion yuan of bonds over the rest of this year-more than doubling the 2010 figure. He now expects the amount to be scaled back given indications demand is fading for the debt. The ministry has already issued 105 billion yuan of new bonds this year, up from 115.5 billion yuan for the whole of last year.

-Ina Zhou and Yoli Zhang contributed to this article.

Write to Dinny McMahon at dinny.mcmahon@wsj.com 

Three California Democratic State Senators are going to China to study High-Speed Rail. Don't laugh.

Worst Story of the Day Department:  Several Democratic State Senators are going to China to study high-speed rail.  The Chinese are covering all the costs for this junket.

Hey,China.  How about covering the costs for my wife and me to come to China and study your wonderful trains.  Maybe I'll close one eye and like them, and influence the right people to contract to buy some for California. Oh, wait. I'm just an ordinary citizen, not a Democratic State Senator that supports high-speed rail. 

"Given this interest by the Chinese in California’s high-speed railway project, the opportunity to meet and engage Chinese rail officials and engineers is timely and beneficial to our efforts here in California,’’

Well, I should say so. And why shouldn't they go? "The senators were invited by the Chinese ministry, which is paying for travel expenses and providing a demonstration "related to high-speed rail technology, stations, engineering and manufacturing,’’

What State Senator wouldn't benefit from learning about "HSR technology, stations, engineering and manufacturing?" And the food and accommodations won't be that bad either. 

So, let's speculate about what kinds of knowledge and wisdom our three Democratic State Senators will come back with.  All those many mechanical/technical failures and the accident were a minor fluke and all the problems with PTC have been fully solved. Not to worry.

And, all those stolen patent-rights and infringements of Japanese and French rail technologies?  No longer a problem.  The Chinese will "re-patent" all that stuff to make sure it stays patented.  

What else? The Chinese learned their lesson and promise to be more "transparent" about news suppression and fact distortions. "News black-out? We know nothing about that!"  

By the way, we still don't know the total body-count in this accident.  We read the number 40 in many of the articles, but who knows? In a country of 1.3 billion people, I guess it's not that important. 

And, while there, our Senators might want to study the rapid deployment of back-hoes to bury evidence after any train accident we might have in California, after we have bought and are running Chinese High-Speed Rail equipment between San Francisco and Los Angeles.

Thanks, Senators DeLeon, Calderon and Correa, for making such a sacrifice on our behalf.  Although, it is odd that no Republican Senators, Like Doug LaMalfa, are coming with you. 

=================================

http://latimesblogs.latimes.com/california-politics/2011/08/california-lawmakers-travel-to-china-to-study-high-speed-rail.html

California lawmakers travel to China to study high-speed rail

August 1, 2011 | 12:43 pm

A group of state lawmakers has flown to China to see if California can learn anything from that country about building a high-speed rail system.

But the lesson may be about what not to do: the state senators are arriving in a country mourning an accident last month in which two Chinese bullet trains collided, killing at least 39 people and injuring 200.

The delegation includes Democrats Kevin De Leon of Los Angeles, Ron Calderon of Montebello and Lou Correa of Santa Ana and is being paid for by the Chinese Ministry of Railways.

The July 23 accident has raised questions about the safety of the Chinese high-speed rail system, with the Shanghai Railway Bureau finding that  "design flaws" in the track's signaling equipment contributed to the accident.

The senators were invited by the Chinese ministry, which is paying for travel expenses and providing a demonstration "related to high-speed rail technology, stations, engineering and manufacturing,’’ De Leon’s office said.

Calderon has supported the proposal to build a high-speed rail system in California because of the jobs it would create, said spokesman Rocky Rushing.

He noted that a Chinese rail authority has signed agreements with some U.S. companies to collaborate on technology they hope will be used on California’s proposed system.

"Given this interest by the Chinese in California’s high-speed railway project, the opportunity to meet and engage Chinese rail officials and engineers is timely and beneficial to our efforts here in California,’’ Rushing said. "This is made even more true in light of the recent deadly high-speed rail crash and other problems and challenges the system has faced.’’

-- Patrick McGreevy

It's not short staffing; it's short thinking that promotes the high-speed rail disaster

Often, the perceived problem is not the real problem.  To understand the real problem, you have to begin with the people who are implementing the program.  What's the difference between their claimed goals, and their actual goals?  What is their intent here?  Who will be the beneficiaries? Who will be the winners and who will be the losers?

We've been tracking this project for many years.  There are numerous articles covering project development events that go back a number of decades. <http://www.counterpunch.org/trainor12092003.html>, <http://www.calrailnews.com/bullettrain.html>

We suggest that this project has been a politically driven boondoggle or a government pork barrel with vast sums of money to be earned (or made) by participating in this "cancerous" effort.  Whether an actual train ever gets actually built and operating or not, the incentives have been financial and political, which is why the route proposed is what it is, snaking through this district or that town.

This project in California has been on the drawing boards for decades.  Nonetheless, it is the Democrats who are now promoting it, and the Republicans who are fighting it.  Why is that? Wouldn't you think that at least some Republican politicians would support it and some Democratic politicians would oppose it? Why does something this vast divide along political/ideological grounds? Are there political or self-serving agendas behind the espoused, publicly stated ones? 

What is the state's political network that has sustained this project?  Who has resisted it, identified it's endless shortcomings, and based on those findings, made definitive decisions?  One might say that there's more than enough blame to go around.  It is fair to say that the Democratic majority in the Legislature "own" this project as much as the CHSRA Board.  They are, therefore, part of the problem.

The White House and the DOT had no business creating and implementing the HSR program in such a rush, shoving $8 billion into the ARRA stimulus bill as earmarked pork for the states and districts, so that they would instantly beg with proposals in hand to study, design and start construction in a number of months, when it should be taking years. Talk about market creation! 

Two agendas clashed. There were HSR promoters eager for funding which did not exist.  And there was a federal government eager to stimulate the economy and create jobs.  The needs of one problem were superimposed on the other.  A very bad marriage indeed. 

The Federal government, which has failed to conduct a single cost-benefit analysis on the efficacy of HSR,  is as much to blame for this impending disaster as the State Legislature, along with the former and current California Governors, as well as those who advised both Governors and Legislature to appoint the members of the CHSRA Board, some of whom have been there since its foundation.

In human factors research, they talk about "plan continuation errors" or "plan continuation biases."  Once something is started, no one has any investment in its re-direction or termination no matter how badly it is turning out. It is a typical factor in pilot error and aircraft crashes. And that's what we are watching as high-speed rail observers.

There are bureaucratic investments, political investments (state and national), and private party investments (land-speculators and developers, for example) that fight for project continuation despite how badly it is turning out, and how definitively the data tell us that termination is the only possible reasonable outcome. By now, many salaries depend upon the perpetuation of the HSR vision, regardless of how pointless it is.

This article to the contrary, claims that there has been too much out-sourcing is itself not a problem.  Whether developed in-house or out-sourced, a program can be done well or badly depending on the intentions of the participants.  The CARRD organization is quoted as saying: "We actually see this as a primary problem with the project,"  "It's not just outsourcing," she added. "It's the way that the outsourcing has been done."  I would say that it's not only the way everything has been done, but what the motives were to do it this way in the first place.

Was there ever a full examination of what California's transportation and transit needs are now and what they will be over the next fifty years?  Were all modalities considered in a study of evolving technologies in highway, airway and railway transit?  No, of course not.  What happened instead was the single-minded promotion of a single solution -- high-speed rail -- and then a search for problems that would justify the dazzling costs of this project.

Ten years ago, unemployment was not such a critical issue across the US.  The economy was considered quite healthy.  Those two 'problems' -- unemployment; bad economy -- were unavailable then. However, others were found and used to market the project; crowded highways, foreign oil, air pollution by cars.  As the times changed the problems changed as well.  In other words HSR was a useless solution in search of problems.  That's the most dishonest way to justify a government project of such magnitude.

With a staff of six or sixty, there will be insurmountable problems for this project.  This HSR project is misconceived and has no substantive basis for existing.  It's a fabrication woven out of whole cloth.  Each day, new problems surface, and new explanations and excuses quickly follow.  Not enough staff; too many staff.  It doesn't matter. The project has no business existing, with or without a business plan.  

In several months, the next business plan is due.  Will they have the right people contracted to say the right things?  Will the new consultants tell the rail authority that the numbers don't pencil out; this project can't be built or operated? Of course not.

They'll crank out a business plan full of holes, just like previous ones.  And, we'll go through the recriminations cycle all over again.  Meanwhile, the rail authority is getting ready to dig holes and spend lots of money in the Central Valley, because nobody has the cojones to stop them.

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http://www.bakersfield.com/news/business/economy/x965389479/Short-staffing-hampers-high-speed-rail-project

Short staffing hampers high-speed rail project

BY JOHN COX, Californian staff writer 

jcox@bakersfield.com | Saturday, Jul 30 2011 08:00 PM

Last Updated Saturday, Jul 30 2011 08:00 PM

Supporters and opponents of California high-speed rail agree on few things, but on this they concur: The hugely ambitious project is woefully understaffed.

Twenty-two administrative and support personnel oversee an army of private contractors -- a ratio so out of balance that a legislative advisory panel worries the shortfall could delay a project federally required to begin construction in the Central Valley late next year.

Even if it does start on time, some fear project costs will spiral out of control unless the state Legislature and the governor's office authorize the California High-Speed Rail Authority to hire more people to oversee hundreds of millions of dollars in consulting contracts.

But the staffing problem reaches beyond Sacramento budget politics. Years ago a decision was made to rely heavily on outside contractors as a way of ensuring independence and access to professionals experienced with high-speed rail. Had the strategy been to fold the project into CalTrans, for example, short staffing might never have been an issue.

Project officials and observers also point to the Obama administration's decision to allocate billions of federal dollars over a short period to the project, proposed to connect Anaheim with the Bay area with trains traveling up to 220 mph by 2020. They say that money came so suddenly and with such tight deadlines that the rail authority has had little time to scale up properly.

Hiring spree

Progress is being made on hiring nevertheless. The 2011-12 state budget gave the rail authority approval to hire 32 additional people -- the same number the authority requested, which would more than double the size of its staff. Jobs recently advertised include fundamental positions such as chief financial officer and chief counsel.

Still, members of the authority board and the legislative panel wonder whether the extra help will be enough, given the immensity of the task ahead.

Rail authority Chairman Tom Umberg said he did not know what the "optimum number" of staff members is. To him, the guiding principle behind hiring is to ensure transparency and accountability inside the authority.

Vice Chairwoman Lynn Schenk said that if the rail authority had project oversight comparable to the level provided within CalTrans, then "we should have dozens" of staffers at the top tiers.

"Will we get as many as we need?" she asked. "Probably not."

An alternative that she and others have proposed would give the rail authority personnel on loan from agencies including CalTrans. She is optimistic that such loans will still be made.

Already the staffing shortage has been blamed for poor public outreach and accounting missteps.

Last year, for example, the state Office of the Inspector General faulted the rail authority for paying out more than $3 million in expenditures without first obtaining adequate supporting documents. The office blamed inadequate staffing (the rail authority had only about 11 employees at the time), even as it cited improvement in the agency's accounting practices.

Too much outsourcing?

Critics wonder whether it is even possible to bring in enough people to oversee a network of consultants as complex as the one the rail authority has already created.

Elizabeth Alexis, a leading critic of the project and co-founder of Californians Advocating Responsible Rail Design, said the central problem is that the rail authority has outsourced too many important functions, from financial analysis to environmental review and community outreach.

A related difficulty, she said, is that the agency relies on consultants to keep tabs on contractors who then contract out work to subcontractors, in some cases comprising up to four layers of oversight, all of them outside the rail authority.

"We actually see this as a primary problem with the project," she said.

"It's not just outsourcing," she added. "It's the way that the outsourcing has been done."

An early decision

Some of this is inherent to the structure settled on years ago, even before California voters created the quasi-independent rail authority with their approval of Proposition 1A in 2008.

Former board member Quentin Kopp, who was involved with California's high-speed rail dreams since before the proposition's passage, said the idea early on was to create a relatively small agency that would hire outside experts, as has been done with high-speed projects elsewhere in the world.

That approach led to repeated pleas to the state Legislature for funding, he said.

"We couldn't get staffing," he said. "I don't mean general counsel or CFO, but you need a professional who knows how to administer contracts, which means enforcing them, which means checking invoices, etcetera, and we didn't have anyone to do that."

Alexis and other critics say the rail authority's contracting flexibility has come at a high price. They assert that paying consultants public money creates the wrong financial incentive.

"It's a change order factory," she said.

Project critic Randal O'Toole, a policy analyst with the Cato Institute, a libertarian think tank based in Washington, said a better strategy would have been to create some kind of public-private partnership similar to a toll road that reverts to public ownership after years as a private asset. That way, he said, public sector participants are strongly motivated to make the project work.

As it stands, consultants have the opposite motivation, he said.

"It's other people's money," he said, "and so nobody has an incentive to be efficient."

Peer advice

Creating a public-private partnership to build and operate the rail project is just one of the staffing-related recommendations made recently by the California High-Speed Rail Peer Review Group.

The industry group, formed by the state Legislature to provide advice on the project, warned that the rail authority must strike a better balance between its own staff and outside consultants. Failure to do so "will ensure major problems of budget management, cost control, project accountability and schedule slippage," according to a letter by the group.

Part of the challenge originated well outside California, said the group's vice chairman, John Chalker, managing director with LM Capital Group LLC, a San Diego-based investment advisor that manages public and corporate pension plans.

Chalker said the rail authority was unprepared when the Obama administration's gave the rail authority more than $3 billion in federal money over a period of only 16 months. He said that money came with demanding stipulations.

"What we've got here is a race in which, frankly, too much money has been thrown at them with too short a deadline for usage," he said. "They're inadequately staffed right now to handle that."

Schenk, the rail authority's vice chairwoman, agreed that the federal money -- along with voter approval of Proposition 1A -- put sudden pressure on a small group of people who for years had labored in obscurity.

"All of a sudden this becomes the biggest infrastructure project in California's history, and people wake up to it and all of a sudden they want information," she said.

Chalker pointed to other staffing-related challenges as well, including community outreach failings and other instances in which project consultants lacked proper accountability.

Fundamental tasks ahead

He said an even bigger challenge looms as the rail authority hurries to complete a business plan due before the Legislature in October. The plan will need to address key questions of how the train system will be modeled, a fundamental consideration the peer review group says should have been settled years ago.

Creating the business plan and the business model will require intensive work by top-quality personnel, he said.

"Those two items alone require some very skilled individuals to negotiate and draft those items, and a much larger staffing number -- whether it be contracted or internal -- than the authority (has) at its disposal."

He added that the business model could dictate the project's future staffing needs.

"Until you know that business model," he said, "you actually don't know what kind of skill set that you're looking for and what kind of people that you hire."

High-Speed Rail: You can't just blame it on the President

Amy Alkon's article incorporates a great deal of the Wall Street Journal's article by Holman Jenkins.  There are some good points, but also a number of problems that should be addressed.

Passenger rail has not, contrary to Jenkins' statement, proven "unviability" in the US for almost 100 years.  It was "viable" until mid century and then declined.  While it was never a major revenue producer, like freight, it did manage to at least break even and did serve as the major inter-city transit modality since its inception.  It was the advent of affordable cars and affordable air tickets that spelled the demise of passenger rail in the US.  We've discussed this in detail in prior blog entries.

But, yes, I too fault the President I voted for for overreaching with his dramatic fantasy-vision of HSR as his "sputnik moment" or Kennedy-esqe "moon shot."  HSR will not benefit the United States in any of the ways he envisions it.  It will benefit, with endless government subsidies (just exactly like Amtrak), all those affluent enough to buy the most expensive train tickets to be available.

And yes, especially high-speed trains, if they are ever built, will be tempting terrorist targets, if only because of their high visibility as national symbols, which is their actual entire purpose. Making a fruitless comparison with faster airline trips by suggesting the many on-the-ground delays, ignores what will be ever more present, including for rail, so long as terrorism remains the  strategy of choice for political or religious radicalism.  

I agree with Jenkins' cynicism about, as he puts it, "Politics has long been defined as the process of determining who gets what. Politicians are professionally motivated to enlarge the resources under their control."

High-Speed Rail is bureaucratically driven the way any organism is. It needs to be fed (with money as the nutrient) and seeks always to increase its size (headcount) and territory of control.  That's what political leverage is all about. High-Speed Rail has a life of its own.  It exists for the sake of existing.  There are no ulterior benefits; only major costs.  Or perhaps, like a pet, very expensive to acquire and maintain, but it makes us feel good to have it and show it off.

But, perhaps the best part of this article is the cost-benefit arithmetic at the end. While I don't agree that "half of the HSR passengers will come from autos," there is a persistent habit on the part of the train promoters to compare 'bad' cars with 'good' trains.  It has been a specious comparison and will become ever more so as automobile technology improves along the current trend lines. 

And, the article conclusion is one that you have been reading in these blogs since they started.  High-Speed Rail is travel for the affluent who can afford the train tickets.  Most of us in the US and in California will not be able to afford them.  

At the very least, that's a gross injustice.

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http://amyalkon.mensnewsdaily.com/2011/07/31/the-handouts-president/

The Handouts President

July 31, 2011

By Amy Alkon

The Handouts President

Holman Jenkins writes in the WSJ about Obama's high speed train fantasy:

Mr. Obama's mumbo jumbo about high-speed rail is always especially delicious. Passenger rail has spent almost a century proving its unviability in most of the U.S. as competition to cars and planes. Mr. Obama resorts to pure fantasy: "Imagine boarding a train in the center of a city," he said in one of his gaudier speeches on the subject, "no racing to an airport and across a terminal, no delays, no sitting on the tarmac, no lost luggage, no taking off your shoes. Imagine whisking through towns at speeds over 100 miles an hour, walking only a few steps to public transportation, and ending up just blocks from your destination."

Huh? Trains have been a favorite terrorist target around the world, including London and Madrid, so expect security delays. As for the ineffably swift and sure service Mr. Obama seems to guarantee, we'll refrain from mentioning the Post Office.

But the real purpose is spending without purpose, to colonize a sector of the economy and turn it into an adjunct of Democratic fund raising. That's why $8 billion in Obama stimulus funds were spread over "high-speed rail" projects that mostly had nothing to do with high-speed rail, but did happen to cover a lot of congressional districts.

...It's not that Mr. Obama doesn't recognize the desperate nature of our budget crisis. He does--and is fighting by every means possible to protect and enlarge the government's share at the expense of the private sector's.

Politics has long been defined as the process of determining who gets what. Politicians are professionally motivated to enlarge the resources under their control. Mr. Obama certainly is not a breaker of molds. His political core consists entirely of spending interests. His intellectual inspiration, Saul Alinsky, the godfather of community organizing, was all about mobilizing to gain power over resources. He wasn't particularly deep about the larger purposes of society or how resources come to exist in the first place.

Here in California, if you buy your plane ticket in advance, it's $59 from LA to San Francisco on Southwest. From a paper on the cost of high-speed rail by the Community Coalition on High Speed Rail (references for the piece below at the link), here's the price of a train compared to driving:

The CHSRA expects more than half their passengers will come from autos. In 2008 The California High-Speed Rail Authority (CHSRA) said the cost of a one-way ticket between Anaheim/Los Angeles and San Francisco would be $55.1 By the end of 2009, that one-way fare had risen to $105.2 That's a 90% increase in one year. According to the CHSRA, for a family of four to ride the train between those destinations it will cost $840 round trip; and then they'll need to rent a car.

If that same family were to drive that 407 miles between the state's major metropolises, and use the standard deduction the Federal government allows for business trips by car, the total cost would be $206.3 That puts an automobile round-trip at $412, including all the costs of owning the auto; that is, fuel, taxes, insurance, amortization, etc. Only counting gasoline costs at $4.50/gallon, the round trip would cost about $200. Four rail tickets are twice as much as the total cost of driving and four times the gasoline costs.

Using empirical evidence from analyzing fares on high-speed train routes in Europe and Japan, it appears the CHSRA's high-speed rail per mile rate should be about $0.44/mile to recover operating and construction costs; 80% higher than their presently-used $0.24/mile.4 Setting aside for a moment the fact that all but two of the world's high-speed rail routes are subsidized, and assuming they at least break even, the analyzed per mile rate would make a one-way SF to LA ticket cost about $190.5 Therefore, if the CHSRA's assumed private operator must charge enough to break even, four tickets for a LA/SF round trip would cost at least $1,520.

Conclusions: California's 2009 median household income was $42,548.6. For a middle class household to ride the train LA-SF once would cost them about 4% of their annual pre-tax income. CHSRA's 2009 ticket prices probably exclude middle- income households. But a more realistic ticket price definitely excludes them.

High-Speed Rail, a contagious disease, has now infected Australia

Question: What is the distance and travel time between Sydney and Melbourne?

Answer: The Flight distance is 713 kilometres (443 miles). The flight from Melbourne to Sydney varies between 1.25 hours and 1.5 hours.  (The HSR distance would be 830 kilometres, or 515 miles)

 Welcome to the high-speed train lunatic asylum, Australia.  You may be more suitable for this crazy waste of money than we are.

But wait, what's that? It will cost $100 billion for a train system just a little longer than California's?  Can that be right?  Hasn't the CHSRA promised costs of a mere $43 billion for this project?  Why would it be over twice as much in Australia?

And, the train ride, if this thing is ever built, will take around three hours? That is, twice as long as flying?  WOW.  All that sounds just like California also. 

As you read into the article, it becomes clear where the support for such a train is coming from, what the "usual suspects" arguments in favor are, blaming all the opposers for their short-sightedness, and like us, being accused of exaggerating the costs. All very familiar territory.

Of course, they don't have the money either, but want to get into the "get-ready" game, which itself promises to produce studies and other expenditures to get this ball rolling.

Whenever I hear about book titles such as The True Value of Rail, or Trains Unlimited, my crap detector red light starts flashing. With this article about Australia's new enthusiasm for HSR, it reinforces the notion that there is a whole new scam-the-government political game afoot in every country, and it's called high-speed rail.  It's the patent medicine -- it used to be called snake oil -- that will cure all our national ills. And, there are suckers born every minute everywhere.

====================== 

http://www.smh.com.au/national/highspeed-eastern-rail-link-to-cost-100-billion-20110801-1i87y.html

High-speed eastern rail link to cost $100 billion

Andrew West, Jacob Saulwick

August 2, 2011

A FEDERAL government report into high-speed rail along Australia's eastern seaboard has identified a route between Brisbane and Melbourne, via Sydney and Canberra, that would cost almost $100 billion.

Phase one of the report is due to be released by the federal Transport Minister, Anthony Albanese, at an infrastructure conference on Thursday. Briefings for MPs, transport bureaucrats and industry representatives will be held tomorrow.

The Herald understands the report urges the federal government to secure a corridor for the train as soon as possible, with the most likely stops being Brisbane, the Gold Coast, Newcastle, Sydney, Goulburn-Southern Highlands, Canberra, Albury-Wodonga, Tullamarine Airport and central Melbourne.

A source familiar with the report said it was an ''implementation study'', which goes ''well beyond a feasibility study''. The study has the support of the government, opposition and the Greens.

It comes just days before the Australasian Railway Association - represented on the committee that is examining high-speed rail - releases its own report arguing an expansion of passenger and freight rail would result in economic and greenhouse savings.

The association's study, The True Value of Rail, completed by Access Economics, finds one passenger train takes 525 cars off the road and reduces road travel by 3.2 million vehicle kilometres a year. One passenger train also reduces road accident costs equivalent to 130 hospital visits and, in one year, reduces carbon emissions by the same amount as planting 320 hectares of trees.

The estimated $100 billion price tag for high-speed rail reflects the entire cost of a project that would link four capital cities and five major regional centres along the densely populated east coast and would take decades to construct. The cost of building smaller segments would be significantly cheaper.

Federal government sources have indicated there was little chance of starting construction on parts of the project within the next few years but if the government introduced planning controls along parts of the east corridor slated for the high-speed line, it would be easier for future governments to complete the project.

The Melbourne Greens MP, Adam Bandt, who has been pushing the project, said the government should make the Sydney-Melbourne route, which is already the fourth-busiest air corridor in the world, the first priority, rather than starting on a shorter, but more complex and expensive, leg between Sydney and Newcastle. ''I am concerned that the government is thinking small … when they need to be thinking big,'' Mr Bandt said.

The former deputy prime minister, Tim Fischer, who has been campaigning for high-speed rail and is familiar with the rail industry plans, said that by using the shortest route between Sydney and Melbourne - about 830 kilometres - a high-speed train could achieve a commuting time between the two capitals of under three hours ''without breaking any speed records''.

He said a line built to cope with speeds of up to 330km/h would allow trains to achieve an average speed of 280km/h. ''This is easily within the international standards in places like Europe and Japan,'' he told the Herald.

Mr Fischer, who is on leave from his job as Australian ambassador to the Vatican to promote his book on rail transport, Trains Unlimited, also criticised Max Moore-Wilton, the head of the Department of Prime Minister and Cabinet under John Howard, for opposing the expansion of rail projects.

Mr Fischer suggested on ABC Radio that Mr Moore-Wilton, who is now a board member of the O'Farrell government's agency, Infrastructure NSW, had ''sabotaged [by] greatly inflated cost estimates'' the case for rail.

Read more: http://www.smh.com.au/national/highspeed-eastern-rail-link-to-cost-100-billion-20110801-1i87y.html#ixzz1TngQ3IKK

Here's Another Example of: With Friends like this, who needs Enemies? The Metropolitan Transportation Commission

"Patch," the online local newspaper, has just run an article by Nira Krasnow and Brennan Miller: Metropolitan Transportation Commission to Take Leadership Role in High-Speed Rail Project.

It has to be said.  The "Friends of Caltrain" are not our friends.  Neither is the Bay Area Council, or the Metropolitan Transportation Commission.  And that goes for John Grubb and John Wunderman.  Let's add Adrienne Tissier to this mix of people who are intent on doing enormous harm to the Bay Area Peninsula.

Palo Alto Councilman Larry Klein has it right when talking about Wunderman: "He's trying to find a way to accomplish his goal, which is bringing the high-speed rail to the Peninsula."

I'll stay right on point. Bringing high-speed rail to the Caltrain corridor -- in any permutation -- will be profoundly harmful to each and every city through which it passes.

The Metropolitan Transportation Commission has been around for years and has failed -- completely -- to assume leadership for the most important mission it should have taken on and executed; that is, to create a coherent, networked, unified, public mass transit system for the Bay Area.  Who gave this failing organization the right to assume "leadership" for bringing high-speed rail to the Caltrain corridor?   I certainly didn't.

One of the many fraudulent activities now taking place is what Caltrain spokesperson, Christine Dunn describes, when she says,  “We are continuing to partner with the California High-Speed Rail Authority," "We are conducting a capacity study, which will help us determine whether we can accommodate high-speed rail,”  Yeah, right!

"Oh, look, our study shows that we can't accommodate high-speed rail. Sorry, rail authority, we have no room on our tracks for you.  Good bye."  Is anyone on this planet seriously expecting this outcome?  I'm not.  Which is to say, whatever they are calling a "study" and paying for is a waste of tax dollars since everyone already knows the conclusion. This study is worth about as much as those endless ridership studies being conducted by the high-speed rail authority.

What we have been watching for years is the sneaky, insidious, devious process of bringing high-speed rail to  the Caltrain corridor -- regardless of what the residents of the Peninsula do or don't want.  It's being shoved down our throat, and far too frequently with our cooperation.

Mr. John Grubb and Mr. John Wunderman believe that this is a good thing.  Thanks, guys.

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http://menlopark.patch.com/articles/metropolitan-transportation-commission-to-take-leadership-role-in-high-speed-rail-project

Metropolitan Transportation Commission to Take Leadership Role in High-Speed Rail Project

MTC accepted a role of neutral arbitrator to push project forward.

• By Nira Krasnow and Brennan Miller

• Email the authors

• 5:18am

The Bay Area Council asked the Metropolitan Transportation Commission to act as a neutral arbitrator in the process of merging numerous high-speed rail infrastructure concepts in the Bay Area.

John Grubb, Bay Area Council Chief of Staff, said they would be focused on two projects that are planned for the railway, the electrification of Caltrain, and the integration of a high-speed rail system.

Grubb said the Caltrain electrification is being hampered by lack of funds, while the high-speed rail project cannot proceed until people agree upon the final design. 

"The Bay Area is looking like a region who cannot get their act together, so it’s not looking like a good investment at this point,” Grubb said.

John Wunderman, Bay Area Council CEO, sent a letter to Adrienne Tissier, Chair of the Metropolitan Transportation Commission, urging the MTC to take a leadership role in the process, in part to propel the high-speed rail project. 

"For over 60 years, the Bay Area Council has put itself at the service of Bay Area infrastructure improvement, and I cannot think of a project that will have a more significant and longer-lasting effect on this region," Wunderman wrote.

This position is a deviation from a letter he had previously written, which criticized communities such as Menlo Park and Palo Alto, according to Larry Klein, chair of the Palo Alto City Council Rail Committee.

  

"He’s trying to be more diplomatic," Klein said, "He's trying to find a way to accomplish his goal, which is bringing the high-speed rail to the Peninsula,” he said.

The Bay Area Council hopes that the MTC will be able to combine all of the ideas for the high-speed rail system into one generally accepted plan. Grubb said the main goal right now is to try to "save this system."

“Everyone’s working on their own plan," Grubb said. "We’re asking the MTC to step into this situation and help come up with one plan. Then we will pursue funding," he added, "The MTC will put out the final plan for what this project will be.”

The Metropolitan Transportation Commission has agreed to take on a leadership role, according to Grubb, who also says that Caltrain supports the plan.

Christine Dunn, Caltrain spokesperson, said Caltrain will continue to work with the California High-Speed Rail Authority and is currently trying to determine whether high-speed rail and Caltrain could exist on the same tracks.

“We are continuing to partner with the California High-Speed Rail Authority," Dunn said, "We are conducting a capacity study, which will help us determine whether we can accommodate high-speed rail,” Dunn said.

Grubb is optimistic. 

“If the plan was green-lighted," Grubb said, "It would be possible to get people riding high-speed rail in four years.”