Plan to pay for high-speed rail draws fresh scrutiny

Legislative Analyst's Office finds that rail authority's latest proposal to build the line would conflict with state law

The California High-Speed Rail Authority's new business plan, which shows the price tag of the controversial project nearly tripling from initial estimates, is drawing a fresh wave of criticism from local officials, rail watchdogs and independent analysts who claim that the latest proposal to pay for the rail line would violate state law.

The business plan, which the authority released earlier this month, estimates the cost of the San Francisco-to-Los Angeles line at $98.5 billion -- more than $60 billion above the estimate presented to California voters in 2008 and more than twice the $43 billion estimate in the authority's 2009 business plan. Voters approved a $9.95 billion bond for high-speed rail and related transportation improvements in November 2008.

Both the bond measure and the bill authorizing it -- Assembly Bill 3034 -- include a host of provisions and limitations on how the money should be spent. These include requirements that the line not rely on operating subsidies; that the rail authority has a funding plan for a "usable segment" of high-speed rail before construction can begin; and that trains be able to get from San Francisco to Los Angeles in less than 2 hours and 40 minutes.

The document lays out a plan to build the line in phases, starting with the "initial construction segment" in the Central Valley, between north of Bakersfield and south of Merced. After this segment is constructed, the line would be extended either north, toward San Jose, or south to the San Fernando Valley in what the rail authority is calling the "initial operating segment." This segment would enable the rail line to make its debut. Later phases call for stretching the line to San Francisco and Los Angeles.

The plan estimates that high-speed rail would generate operating profit and draw $11 billion in private investment -- money that would be collected only after the initial segment is constructed. The new plan also extends the timeline for completing the San Francisco-to-Los Angeles line by 14 years, from 2020 to 2034.

Though widely seen as a major improvement over the 2009 business plan, the new document is facing a fresh chorus of criticism from rail experts and analysts who say that its funding proposal would violate Proposition 1A. They particularly question the authority's proposal to build the $6 billion initial construction segment before getting all the funding in place for the first truly usable segment of high-speed rail. The initial construction segment would not feature bullet trains but would enhance the existing Amtrak service if the rest of the rail line doesn't get built.

The Palo Alto-based group Californians Advocating Responsible Rail Design (CARRD) submitted a letter to the authority earlier this month raising a red flag about the business plan. CARRD argued that the authority would not be able to complete all the required environmental reviews for the rail line's first usable segment before beginning construction, as required by law.

David Schonbrunn, president of the nonprofit group Transportation Solutions Defense and Education Fund, made a similar point in a recent interview with the Weekly. He said the rail authority is not meeting the Proposition 1A requirement for a "usable segment" of high-speed rail. Schonbrunn made a similar point at a Nov. 15 public hearing in Palo Alto, at which time he compared the rail project to an emperor with no clothes and urged legislators to kill the project.

The latest critical review of the business plan came Tuesday from the nonpartisan Legislative Analyst's Office (LAO), which issued a report highlighting various flaws in the document. These included findings that the business plan's economic-impact analysis is "imbalanced" (it "portrays the project more favorably than might be warranted") and that its expected funding sources are "highly speculative."

The report notes that "Congress has approved no funding for high-speed rail projects for the next year."

"As a result, it is highly uncertain if funding to complete the high-speed rail system will ever materialize," the LAO report states.

Perhaps most critically, the LAO concluded that the new business plan conflicts with the requirements of the 2008 bond measure.

"Our review finds that the funding plan only identifies committed funding for the ICS, which is not a usable segment, and therefore does not meet the requirements of Proposition 1A," the LAO report states. "In addition, the (rail authority) has not yet completed all environmental clearances for any usable segment and will not likely receive all of these approvals prior to the expected 2012 date of initiating construction."

LAO Analyst Farra Bracht voiced similar concerns at the Nov. 15 public hearing. At that meeting she said it was "unclear if the business plan satisfied the requirements of Proposition 1A."

"Proposition 1A appears to require funding available for a usable segment," she said. "We're not sure if this meets the test."

Rail authority officials have maintained that the new business plan is a realistic and sensible proposal for advancing the project forward. Thomas Umberg, chair of the rail authority's board of directors, said in a statement that the new plan is "mindful of the economic and budgetary constraints facing both the state and the nation." Michael Rossi, a newly appointed board member, called it "a current, realistic and transparent plan" that "identifies the funds and financing necessary to implement high-speed rail in California."

Rossi and Dan Richard, another recent appointee to the board of directors, both took part in the Palo Alto meeting and defended the plan's projections and funding points. Richard said the plan includes "real numbers" about the rail line's capital costs, operating costs and projected ridership.

But the authority's plans and projections continue to face heavy skepticism. The Palo Alto City Council, for one, had urged voters in 2008 to support Proposition 1A. Its members have turned against the project as more details have emerged about the design of the line and the plan to pay for the line. The council voted unanimously last year to take an official position of "no confidence" in the California High-Speed Rail Authority. The city also joined its neighbors, Menlo Park and Atherton, and a coalition of nonprofit groups in filing a lawsuit against the rail authority, challenging its environmental analysis for the project.

On Monday, the Palo Alto council's Rail Committee considered taking an even stronger stance -- a request that the state should terminate the project.

"They're implementing a plan that is contrary to Proposition 1A and AB 3034 in that they want to construct an initial construction segment that is to be done before they have identified funding for the initial operating segment," Councilman Pat Burt said. "That's a basic violation of Proposition 1A."

"The reason why it matters so much is because there's a very good chance that for a long time and maybe forever that's all that's going to be built and they would have spent $6 billion to upgrade an Amtrak segment in the Central Valley."


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Posted by Pleasantonian
a resident of Mission Park
on Nov 30, 2011 at 9:18 am

Pleasantonian is a registered user.

I am amazed that anyone with half a brain could possibly still support this. I was horrified that it passed in the first place but for people to still support it is mind boggling. It will be the final straw to throw CA into complete financial ruin if allowed to move forward.

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Posted by Joe Crosslin
a resident of Pleasanton Valley
on Nov 30, 2011 at 12:09 pm

This is like gambling at Rick's, I'm shocked: costs tripling, shocked!

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Posted by Bill
a resident of Amberwood/Wood Meadows
on Nov 30, 2011 at 12:56 pm

The board of directors is made up of lawyers, public relations, real estate, financial, and union executives. What's the word for white collar mafia?

Seems to me if you are building a railroad, it would be nice to have people on the board that understand how a train works.

Lawsuits have already started from the central valley. It would be a sin to replace some of the richest soil on Earth with a freak-in train that is 3X slower then jets that fly to LA every 15 minutes.

How many hundreds of billions have already been spent on airport infrastructure between LA and the Bay Area?

The High Speed Rail Authority is just another dumping ground for people with political connections to get paid a king's ransom for doing a job where the outcome does not matter.

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Posted by Watching the Boondoggle
a resident of Another Pleasanton neighborhood
on Nov 30, 2011 at 1:00 pm

Echoing Pleasantonian's comments, what a travesty--driven by career politicians who are more interested in keeping their taxpayer-paid board positions and (generous, I'm sure) benefits rather than admitting this is a complete, utter train wreck (pun intended).

If all this money was redirected toward schools and our crumbling infrastructure (roads and bridges), we'd be much better off, but that makes too much sense.

I wish there was some way this whole thing could be completely stopped. It's not needed, it's too expensive, and it won't accomplish anything other than to put this state that much deeper in debt for decades to come.

More proof that the smartest people in this state certainly aren't the politicians who are running it--or better said, ruining it.

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Posted by steve
a resident of Parkside
on Nov 30, 2011 at 1:25 pm

This will be Jerry Brown's legacy, if it goes forward. He wants to push this forward so he can say he created jobs in Calif, since he knows of no other way to promote employment other than through union payoffs.
By the way Joe Crosslin, loved your post....hilarious reference!

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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Nov 30, 2011 at 2:14 pm

High-Speed Rail Authority’s new business plan details some significant differences from the original Proposition 1A and their recent Business Plan. The original 43 billion dollar price tag is now projected to be 2-3 times the advertised amount, while revenue projections are shrinking. Yet the HSRA still claims that this project is self sustaining. How the HSRA can continue to make the claim given increased cost and declining revenue projections is beyond suspect. My fear is that the project will end up costing taxpayers over 150 billion dollars assuming it’s completed at all. Even then, because this projects numbers are so ridiculously out of line with initial projections from just a few short years ago, I suspect this is just one more transportation project that will require taxpayer subsidies for decades to come. California, and California taxpayers, can’t afford this boondoggle. Here are some of the concerns expressed by the Legislative Analyst Office:

Phase 1 completion date extended 14 years. Completion of Phase 1, from the San Francisco’s Transbay terminal to Anaheim, has been extended from 2020 to 2034.

Estimated cost of Phase 1 has more than doubled. The original cost of Measure A was an estimated 43 Billion. The recently released estimate from HSRA is 99-118 Billion

Revised Patronage and Revenue Forecasts. Projected ridership appears 10% lower than the 2009 HSRA plan. Projected revenue declines by 21% based on reduced ridership and decreased fares.

Initial Construction Segment Proposed Using Committed Funds. 6.3 Billion dollars (projected) will be spent on 130 miles of High-Speed Rail Line between Merced and Bakersfield. Note: there will be a legal challenge on this issue because the original plan called for initial funding to only be used on a “USABLE” corridor. This section of line is not classified as “Usable”.

Possible Future Funding Sources Identified. The plan acknowledges that no future funding sources currently exist. Part of the original plan calls for future Private/Public partnership but acknowledges that private partnership won’t happen until a USABLE portion of the HSR exists and is profitable.

Committed Funding Not Identified and Environmental Review Process Incomplete. Our review finds that the funding plan only identifies committed funding for the ICS, which is not a usable segment, and therefore does not meet the requirements of Proposition 1A.

Availability of Funding to Complete a Usable Segment Highly Uncertain. The possible future sources of funding necessary to complete Phase 1 that are identified in the draft business plan are highly speculative. In addition, Congress has approved no funding for high-speed rail projects for the next year. As a result, it is highly uncertain if funding to complete the high-speed rail system will ever materialize.

Link to the easy to read LAO report (a 5 minute read): LAO report on the High-Speed Rail Authority (HSRA) business plan: Web Link

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Posted by From the Mercury News
a resident of Another Pleasanton neighborhood
on Nov 30, 2011 at 4:35 pm

"the rail line could be a $6 billion waste of tax funds at the expense of social services, education and other transportation projects."

Top analyst warns state could waste $6 billion over high-speed rail

The state's top analyst on Tuesday not only questioned the legality of launching a high speed-train, but also warned legislators that starting construction on the rail line could be a $6 billion waste of tax funds at the expense of social services, education and other transportation projects.

In the sharpest critique yet of the state's newly revised plan to spend two decades and $99 billion building a bullet train line, the Legislative Analyst's Office bashed planners for relying on "highly speculative" funding sources.

As a result, the analyst concluded that it's "highly uncertain" the full project will ever get built. Even so, the state intends to start construction in the Central Valley next year by spending $2.7 billion in state bonds plus a $3.3 billion federal grant to build a stretch of track too short for bullet train service -- a move that has already triggered a lawsuit. But passengers won't start zipping between San Francisco and Anaheim unless Congress bankrolls more than half the project, a dubious scenario considering federal lawmakers have killed all high-speed rail funds for two straight years.

"It appears doubtful that substantial additional federal support will be forthcoming anytime soon," the report says. "This makes it increasingly likely that the (initial stretch of track) may be all that is ever built," a project that is "unlikely to justify (the) expense."

Read more: Web Link

""High-speed rail certainly faces a challenge that it does not have a dedicated revenue source like the gas tax," said Dan Richard, one of Gov. Jerry Brown's appointees to the California High-Speed Rail Authority board. "If the federal government chooses not to continue to fund high-speed rail, it's going to be very difficult to see how we can complete this.""

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Posted by Joan Buchanan says
a resident of Another Pleasanton neighborhood
on Nov 30, 2011 at 6:03 pm

"Assemblywoman Joan Buchanan, D-San Ramon, a committee member, said voters might wonder why the money isn't being spent on infrastructure that needs work now.

"In the meantime, my constituents (are) stuck on a freeway that's like a parking lot, when we could be using the money to extend BART," Buchanan said."

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Posted by Charlotte
a resident of Spotorno Ranch
on Nov 30, 2011 at 7:12 pm

Instead of gowging citizen taxpayers on such a useless project, they should be finding ways to give us back our tax money. How about tax exemptions for people who drive HumVees and other SUVs? We already pay so much for gas, and then we're expected to donate to this boondoggal? Whom are they kidding?

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Posted by Steve
a resident of Parkside
on Nov 30, 2011 at 7:45 pm

Jane (posting as Charlotte)....leave it to you to post a sarcastic, babbling response full of spelling and grammatical errors. Why don't you just say what you feel...building this track to nowhere will only benefit your union buddies and further bury our state finances. Why should you care, you can always move back to the east coast when you're done bleeding this state dry.

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Posted by to steve
a resident of Amberwood/Wood Meadows
on Nov 30, 2011 at 7:57 pm

See California rated worse run state, and one doing the most to spread the wealth:
Web Link

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Posted by William
a resident of another community
on Nov 30, 2011 at 9:46 pm

The fast rail thing is stupid

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Posted by Kathleen Ruegsegger
a resident of Vintage Hills
on Nov 30, 2011 at 9:56 pm

Gollum is "gowging"everyone tonight.

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a resident of Another Pleasanton neighborhood
on Nov 30, 2011 at 10:09 pm

Barnidge: Can governor railroad through his $6 billion request?

“The $6 billion pays for only the rail system, by the way -- not the electrification, train cars or operating personnel -- just 130 miles of track.”

“Gov. Jerry Brown said he will make an ill-advised request when the Legislature reconvenes after Christmas. OK, he didn't call it ill-advised, but a lot of people think it is.

He will ask for $6 billion ($2.7 billion in state bonds, $3.3 billion in federal grants) to begin work next fall on the first phase of a high-speed rail project that eventually will link (a) San Francisco to San Diego and (b) California to a mountain of debt.

This first stretch, connecting travel hot spots Bakersfield and Chowchilla (motto: "Great place for a women's prison"), says something about the rationale behind this undertaking.

Those destinations were not chosen because of customer demand or population density but because environmental permitting will be simpler, residential opposition should be modest and level terrain will make for easier construction.

In other words, it's the path of least resistance to get-it-while-you-can federal stimulus funding (which has already dried up).

The $6 billion pays for only the rail system, by the way -- not the electrification, train cars or operating personnel -- just 130 miles of track. The U.S. House Budget Committee, which specializes in mismanagement, gave "the train to nowhere" its Boondoggle Award. Not coincidentally, more federal funding for high-speed rail is in jeopardy...

State Sen. Mark DeSaulnier, D-Concord: This hardly seems the time to assume added debt. It's like a man who can't keep up with payments on his Honda borrowing to buy a Tesla because it will save on fuel costs and help the planet.

"The costs are huge," DeSaulnier said. "There's no way it doesn't give you a little lump in your breast."

When you're up to your assets in fiscal problems is a strange time to be financing a dream.”

You said it Senator DeSaulnier! BTW, the little lump in your breast is starting to look like a full set of Double D’s. Web Link
What do others think? Read the comment section of the above link.

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Posted by Robert Heeter
a resident of Ruby Hill
on Nov 30, 2011 at 10:24 pm

The Census Bureau says California's population is 37,253,956.
The new budget estimate for the proposed fast train is $150,000,000,000.
That's a minimum of $4000 for every man, woman and child in the state.

And they haven't even broken ground yet, so the actual construction cost is likely far higher, not to mention the fact that it will have to be bond-financed, so there will also be interest costs.

What's the economic benefit to justify all of this cost? Can there possibly be enough ridership for the project to pay for itself?

The interest cost alone would run about $6,000,000,000 each year (assuming rates remain at the current low 4% level). That would be $160 per person per year for everyone in the entire state population. As an estimate, we might assume 10% of the ticket cost couldgo to pay interest, with 10% more to pay principal on the bonds, and the other 80% to actually pay to operate the railroad. If ticket prices were to compete with air, say $200 for a round trip, then the rail might generate $20 per ticket for interest payments. Just to pay for the interest, EVERY SINGLE PERSON IN THE STATE would have to ride the train 8 TIMES EACH YEAR! Or pay the equivalent in taxes. I don't see that happening. (And all of this assumes that the train doesn't require ongoing subsidies like BART...)

Proponents of this project have a large burden of proof here...

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Posted by Kathleen Ruegsegger
a resident of Vintage Hills
on Dec 1, 2011 at 7:12 am

Additional comments can be found at PW's sister paper: Web Link As I recall, Palo Alto is actively fighting this project as it would go through their community.

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Posted by Larry
a resident of Livermore
on Dec 1, 2011 at 8:30 am

The price tag is more now, wow, this is a surprise.
If they build the train, just remember how well they did in
Boston with the big dig. They could give free airline tickets to everyone and it would be a lot cheaper. This reminds me of the prison jobs in the old south, dig a hole, then fill it up, same thing here!

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Posted by Bill
a resident of Amberwood/Wood Meadows
on Dec 1, 2011 at 2:35 pm

Thanks Kathleen for the web link to the Palo Alto forum.

As one commenter from this forum pointed out, the High Speed Rail Authority is costing California $750,000 a day! For nothing!

Another commenter pointed out that it would be cheaper for the state of California to pay for airline tickets for people traveling between LA and the Bay Area, then spend the money it will cost the state to build this retarded railroad.

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Posted by Cholo
a resident of Livermore
on Dec 7, 2011 at 5:48 pm

can somebody pleeeeeze esplain to me why it's such a big deal to take a ride on high speed train...duh...

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Posted by Triple
a resident of Another Pleasanton neighborhood
on Dec 7, 2011 at 10:13 pm

The costs have already TRIPLED and a shovel has yet to be turned. More likely would be 5 times orig numbers by the time anything actually gets started. This is not the decade to take on this project.

Sorry, but further commenting on this topic has been closed.

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