Report: Halt state funding for high-speed rail

Peer-review group finds flaws in business plan for high-speed rail, urges Legislators not to use bond funds for project

California's quest to build a high-speed rail system between San Francisco and Los Angeles suffered a heavy blow Tuesday when a peer-review committee recommended that state legislators not fund the project until major changes are made to the business plan for the increasingly controversial line.

In a scathing report, the California High-Speed Rail Peer Review Group found that the business plan the California High-Speed Rail Authority unveiled in early November offers inadequate information about funding, fails to answer the critical question of which operating segment will be built first and features a phased-construction plan that would violate state law. The group, which is chaired by Will Kempton, recommends that the state Legislature not authorize expenditure of bond money for the project until its concerns are met.

The report deals the latest of several recent setbacks to the project, for which state voters approved a $9.95 billion bond in 2008. Since then, the project's price tag more than doubled and several agencies, including the Legislative Analyst's Office and Office of the State Auditor, released critical reports about the project.

High-speed rail has become particularly controversial on the Peninsula, where several grassroots groups have sprung up in the last two years to oppose it. Menlo Park, Atherton and Palo Alto had filed a lawsuit challenging the rail authority's environmental analysis and the Palo Alto City Council last month adopted as the city's official position a call for the project's termination.

In its letter to the Legislature, the peer review group highlighted some of the same flaws that local officials and watchdogs have long complained about, most notably a deeply flawed funding plan. The project currently has about $6 billion in committed funding and the rail authority plans to make up much of the balance from federal grants and private investments -- investments that would be solicited after the first major segment of the line is constructed. The peer-review group found this plan to be vague and insufficient.

"The fact that the Funding Plan fails to identify any long term funding commitments is a fundamental flaw in the program," the report states. "Without committed funds, a mega-project of this nature could be forced to halt construction for many years before additional funding could be obtained. The benefits of any independent utility proposed by the current Business Plan would be very limited versus the cost and the impact on state finances."

The group also faulted the rail authority's business plan for failing to choose the "initial operating segment" for the rail line. Though the authority has decided to build the first leg of the line in Central Valley, this segment would not be electrified and would serve largely as a corridor for testing the new line. The first "true" high-speed rail segment would be built later and would stretch either north toward San Jose or south toward San Fernando Valley.

Though the peer-review group acknowledged that a phased approach is the only feasible way to build the system, it also found that this plan violates a requirement of Proposition 1A, which mandates that the rail authority identify funding for the first usable segment of the line before construction begins. The Central Valley segment, the peer report notes, "is not a very high-speed railway (VHSR), as it lacks electrification, a CHSR train control system, and a VHSR compatible communication system. Therefore, it does not appear to meet the requirements of the enabling State legislation."

The peer review group also wrote in its letter that the authority should have determined in its business plan whether the first "operating segment" would go north or south from the Central Valley. Its letter states that "it is hard to seriously consider a multi-billion dollar Funding Plan that offers no position on which IOS should be initiated first."

"This indecision may also have consequences in obtaining environmental clearances. We believe that the Funding Plan as proposed should not be approved until the first IOS is selected."

The report reserves "final judgment" on the funding plan because the rail authority's business plan is still in draft form and subject to revisions. But it also makes clear that major changes would have to be made before the project warrants state funding. The letter notes that while legislators could potentially come up with a funding source for the project, without such a source "the project as it is currently planned is not financially 'feasible.'"

"Therefore, pending review of the final Business Plan and absent a clearer picture of where future funding is going to come from, the Peer Review Group cannot at this time recommend that the Legislature approve the appropriation of bond proceeds for this project," the peer group's letter concludes.

The new report presents a potentially devastating blow to the rail authority, which is banking on getting $2.7 billion in Proposition 1A funds for construction of the Central Valley segment. The agency has also received $3.5 billion in federal grants.

The state funds are particularly critical given the lack of private investment and increasing local opposition. The authority had acknowledged that private investment would not start coming in until later phases. Future federal funding is also deeply uncertain at a time when many Republicans in the House of Representatives are vehemently opposing the project.

The rail authority responded to the report by disputing many of its findings and by claiming that it "suffers from a lack of appreciation of how high-speed rail systems have been constructed throughout the world." The authority also said in a statement that the peer-review group's report "makes unrealistic and unsubstantiated assumptions about private sector involvement in such systems and ignores or misconstrues the legal requirements that govern the construction of the high speed rail program in California."

Roelof van Ark, CEO of the rail authority, said in a statement that the recommendation of the committee "simply do not reflect a real world view of what it takes to bring such projects to fruition."

"It is unfortunate that the Peer Review Committee has delivered a report to the Legislature that is deeply flawed in its understanding of the Authority's program and the experience around the world in successfully developing high speed rail," van Ark said.

Rail authority officials also argued that the peer-review group's report could jeopardize federal funding for the project. Thomas Umberg, chair of the authority's board of directors, said the board takes seriously "legitimate critiques" of the rail program, including recommendations that the authority hire more staff.

"However, what is most unfortunate about this Report is not its analytical deficiency, but that it would create a cloud over the program that threatens not only federal support but also the confidence of the private sector necessary for them to invest their dollars," Umberg said in a statement.

The authority's Chief Counsel Thomas Fellenz called the committee's findings about the project's inconsistency with Proposition 1A "unfounded assumptions." The group's legal conclusions, he said in a statement, are not only "beyond the expertise of the authors, but attorneys at the state and federal government level and the legislative author of the bond measure, profoundly disagree."

The authority also submitted an eight-page letter to state Legislators responding to the peer-review group's criticisms. The authority disputed in its letter the peer-review group's finding that the "initial construction segment" in Central Valley would violate Proposition 1A and argued that the group's demand for a long-term funding plan fails to consider how major transportation projects are normally built.

"By this measure, none of the unconstrained regional transportation plans of any transportation authority should be pursued," the letter from Umberg states. "No project, in our experience, has fully identified funding sources for the entire project at this stage and it is both unfortunate and inappropriate for the Committee to apply this test only to high speed rail."


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Posted by Carol
a resident of Livermore
on Jan 4, 2012 at 11:08 am

While the concept is enticing, it just isn't feasible. Even before the plan was introduced to the public, it was in the works. Ironically, the path that the proposed rail would take goes directly through where irrigation water was cut off to farmers in the Central Valley. This made their land essentially worthless, and therefore, more easily obtainable through eminent domain at a greatly reduced cost. Considering the state of the State AND the Nation, spending this kind of money is irresponsible and inconceivable.

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Posted by DB
a resident of Pleasanton Heights
on Jan 5, 2012 at 8:43 am

It just makes no sense to build that rail, not only because of the political climate, but because heavy rail is not an efficient way of moving people; they are already projecting ticket prices of $200+, so when completed it'll be higher (or subsidized even more heavily than presented). What sense does it make to take an expensive train ride when they can fly SouthWest to SoCal faster, to more locations, safer, and at much less expense?

As for job creation, steel will come from China, construction jobs will be temporary, and trains will likely be manufactured by Siemens in Germany or some other overseas location or company, and there will only be a handful of train personnel jobs...

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Posted by Lemm
a resident of Another Pleasanton neighborhood
on Jan 5, 2012 at 9:06 am

This is a project that might have been feasible if it had been mananaged responsibly, but it fell victim to government mismanagment (CA govt can't manage anything), unions elbowing their way in and vastly increasing costs, Santa Clara and San Mateo counties continuing their four-decades-long refusal to have viable mass transporation in their region, and inept execution. Sadly, a great opportunity was missed and the project has become an albitross. Meanwhile, Govenor Moonbeam is still pushing for spending billions on the project and the same time he wants to raise our taxes -- the guy is either clueless or deranged.

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Posted by Bruce
a resident of Pleasanton Heights
on Jan 5, 2012 at 9:53 am

Did the same Cal Trans estimators estimate the cost of the high speed rail that estimated the cost of the new Bay Bridge? If so, we could probably purchase an airplane for every resident in the state with just the cost over runs. I think its time to state teaching economics in kindergarden and every year after until we develop some voters who can think.

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Posted by Shane
a resident of Another Pleasanton neighborhood
on Jan 5, 2012 at 9:54 am

The project is needed. It will create job growth and it will reduce pollution. It remains a great idea, albeit long overdue. Yes, it will cost. Nothing is free, though the conservative dolts on these sites seem to think they shouldn't have to pony up for policies and projects that are for the good of all of us.

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Posted by Bill
a resident of Castlewood
on Jan 5, 2012 at 9:59 am

For Shane to use the term "dolt" amazing. He pouts when other people run out of money for him to spend.

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Posted by Shane
a resident of Another Pleasanton neighborhood
on Jan 5, 2012 at 10:01 am

For dolts like Bill, there's never enough money ... except for him.

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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jan 5, 2012 at 10:17 am

Bill, Shane is the person who consistently changes his/her name but never his/her spots. Shane never answered on previous postings about Palo Alto's (somewhat closer to Shane's political views) organized fight against this proposed project. And, yes, Shane is always willing to spend other people's money and favors this kind of busy work under the guise of resolving unemployment (separate discussion about who would take those jobs).

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Posted by Shane
a resident of Another Pleasanton neighborhood
on Jan 5, 2012 at 10:33 am

Bill, I'm new to this blog but Kathleen Ruegsegger seems to be a small-minded busybody and gossip who claims to know me and my views. I bet she'd rather see taxpayer money go to 20+ thousand border guards than to progressive projects that would help save our planet. I guess dolts like you and her tend to flock together on these blogs,, no?

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Posted by DB
a resident of Pleasanton Heights
on Jan 5, 2012 at 10:37 am

There would be virtually no jobs for Californians in a train project, just subsidies and bonuses for Sacramento bureaucrats, foreign contractors, and Chinese suppliers. Touting this as a jobs program is a farce. There'd only be a handful of jobs for billions spent; better to just give a few million to the handful and save billions.

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Posted by Gina Channell-Allen
president of the Pleasanton Weekly
on Jan 5, 2012 at 10:47 am

Gina Channell-Allen is a registered user.

Thank you DB for trying to get this topic back on track. (Sorry, I couldn't waste the opportunity for that bad pun.)

Please stop the back-and-forth bickering that does nothing to further the conversation.

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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jan 5, 2012 at 10:52 am

Shane, If you aren't Nate/Slippers/etc., you write exactly the same; never miss a chance to sling an insult or make broad comments that appear to be fact. No, I wouldn't invest in the border guards. How is it the train is more efficient than the plane and would save the planet exactly? Got a link to any EIR for the entire length of the project?

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Posted by Kathleen Ruegsegger
a resident of Vintage Hills Elementary School
on Jan 5, 2012 at 11:00 am

Two volumes: Web Link
Web Link

And here's a link to California High Speed Rail with all the topics that come up when searching EIR: Web Link

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Posted by Bill
a resident of Amberwood/Wood Meadows
on Jan 5, 2012 at 1:00 pm

Wouldn't it be a lot more fun to take one tenth of the money for this high speed rail project, and instead use the funds to build an autobhahn from Sacramento to the LA county line?

I bet people would be lining up to pay to use it, just to not have to put up with truck convoys.

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Posted by DB
a resident of Pleasanton Heights
on Jan 5, 2012 at 8:24 pm

From the states website, and the "HIGH-SPEED RAIL 2012 DRAFT BUSINESS PLAN FACT SHEET*", the total project cost is $98.5 Billion**.

The FACT SHEET also says there will be 4,500 permanent operations and maintenance jobs, and 20,000 construction jobs per year during construction. That is a cost of $21.9 million per permanent job, or $4 million per permanent and temporary job. That's a very high cost for "job creation."

The FACT SHEET also says "CO2 emissions reduced by 3 million tons" which sounds like a big number, until you realize that Californians exhale 30 million tons of CO2 per year, and the Earth's atmosphere contains 3 million megatons of CO2 (3x10^12 tons). CO2 in atmosphere is ~381 ppm, and 3 million tons is 0.000375 ppm; an insignificant amount.

So the "green" benefits of the rail don't pan out, and the cost of job creation is way to high, and it certainly is not worth raising taxes and bonds and going into further debt.

*Web Link

**almost a trillion dollars, and when has the State ever been under budget on anything?

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Posted by Bill
a resident of Amberwood/Wood Meadows
on Jan 6, 2012 at 2:04 pm

DB - good post but 98 billion dollars is almost 100 billion dollars, not a trillion. Although still a huge number when the state cannot even afford to give care to the elderly and disadvantaged citizens.

The state of California cannot even get the numbers right for a budget one year in advance, what makes them believe they can see twenty to thirty years down the road?

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Posted by Patriot
a resident of Another Pleasanton neighborhood
on Jan 6, 2012 at 10:43 pm

"How is it the train is more efficient"

An argument could be made that since air travel on these routes are so heavily subsidized by the government and that the airlines have a government provided monopoly, it is reasonable for the government to subsidize competition for the airlines to improve service and efficiency and provide an alternative for customers.

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