High-speed-rail business plan draws criticism

State legislators concerned about revenue projections, skeptical about ridership figures

California's legislators have yet to fully digest the latest business plan from the California High-Speed Rail Authority, but the new document has already caused ripples of concern around the Peninsula and in Sacramento.

The new document is expected to be at the forefront of Thursday night's public hearing on the high-speed rail project in Palo Alto. The hearing, which will take place at 7 p.m. at City Hall, will be co-hosted by state Sens. Joe Simitian and Alan Lowenthal, both of whom had already expressed concerns about the high-speed-rail project at an informational hearing Tuesday.

At that meeting, both Simitian and Lowenthal questioned the rail authority's financial projections and asked high-speed-rail officials to release more details about their plans to solicit private funds. Simitian also quoted from a variety of newspaper editorials characterizing the high-speed-rail project as a "boondoggle" and demanded more accountability from the rail authority.

"This to me is as fundamental an issue as anything else," Simitian said at Tuesday's hearing. "There's no one being held accountable."

Both senators also pointed to a recent report from the Legislative Analyst's Office (LAO), which found a multitude of flaws in the rail authority's new business plan. The report noted that the rail authority's business plan "assumes some form of revenue guarantee from the public sector to attract private investment." It also pointed out that the state bond that voters approved for the project in 2008 expressly forbids public subsidies for the system's operations.

LAO's analysis also faults the plan for having an "uninformative timeline" and an inadequate discussion of project risks.

"The plan only superficially addresses many of the most significant risks of the project," Eric Thronson, an LAO analyst, told the Assembly Transportation Committee on Jan. 11. "These are wholly inadequate mitigation strategies that leave us with no understanding of how the authority is considering the threats to the project."

The project attracted great scrutiny on the Peninsula last year, when residents learned that high-speed trains would glide through their communities, possibly along elevated tracks. More than a dozen Peninsula residents and elected officials from Palo Alto, Menlo Park, Atherton and Burlingame attended the two public hearings in Sacramento in recent weeks to demand more information and criticize the current business plan.

Former Palo Alto Mayor Mike Cobb argued at the Assembly hearing that the rail authority's plan to get more than $4 billion in local funds for the project is unreasonable, given that cities like Palo Alto are already facing severe budget shortfalls.

Elizabeth Alexis, a Palo Alto resident who helped found a new organization called Californians Advocating Responsible Rail Design (CAARD), also attended the Jan. 11 meeting and criticized the rail authority's new pricing model, which pegs the price of a San Francisco-to-Los Angeles ticket at $105 -- almost twice as much as in the 2008 plan. Alexis, who is a financial analyst, was also skeptical about the rail authority's plan to use public funds to offer assurances to private investors.

"The revenues would go to private-equity investors while ordinary Californians would retain the risk that ridership falls short of forecasts," Alexis told the Assembly committee.

Nadia Naik, also a member of CAARD, encouraged the rail authority to adopt the collaborative "context sensitive solutions" approach to planning the train line's alignment throughout the state. The rail authority had already agreed to adopt the approach on the Peninsula.

At the Jan. 11 meeting, members of the state Assembly also said they were worried about the High-Speed Rail Authority's latest projections. Assemblywoman Joan Buchanan questioned the authority's assertion that the system would be profitable and its assumption that the state will receive billions of federal dollars annually for the project.

Assemblyman Roger Niello was even more blunt. He said he has "huge concerns" about the proposed project and the authority's plan to pay for it. The authority is banking on more than $10 billion in private funding; more than $17 billion in federal grants; and more than $4 billion in local grants to fund the project. That's in addition to the $9.95 billion California voters approved in November 2008, when they passed Proposition 1A.

Niello called the rail authority's plan for the new system a "romantic notion" that becomes increasingly troubling upon closer examination.

"I wake up from my romantic notion and I see something next to me that's not as attractive as it was when I was entertaining my romantic notions," Niello said.

The new business plan was released at a time of transition for the California High-Speed Rail Authority. Earlier this month, the authority announced that Mehdi Morshed, its executive director, will retire at the end of March and began its search for a new chief executive officer.

The rail authority had also hired a consultant to evaluate its operating structure, said Curt Pringle, chair of the High-Speed Rail Authority Board of Directors.

"We're preparing to demonstrate that we're ready to move forward from a planning, conceptualized agency to a development, construction agency," Pringle told the Assembly committee.

Tonight: Simitian hosts high-speed rail hearing.

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Like this comment
Posted by Martin Engel
a resident of Menlo Park: Park Forest
on Jan 21, 2010 at 4:46 pm

"We're preparing to demonstrate that we're ready to move forward from a planning, conceptualized agency to a development, construction agency," Pringle told the Assembly committee.
That's a coincidence, Curt. I'm moving forward from being a sous chef in a restaurant to being a brain surgeon. I mean, how hard could it be? It's all about politics, isn't it?

What's next after the train, Curt, entering the space race and managing a new high-speed shuttle to Mars? No skills necessary. Anyone with your background can do it.

After all, who needs professional managers, professional rail engineers or professional transportation specialists. We can hire some and tell them what to do, right?

Like this comment
Posted by Michael G. Stogner
a resident of another community
on Jan 22, 2010 at 11:15 am

WOW, WOW, WOW, I attended the Money Grab.... I mean High Speed Rail meeting last night.

"We're preparing." = We're BS ing.

Senators Alan Lowenthal, Joe Simitian, I have great regard for both of you.
Palo Alto, Menlo Park, Burlingame, Atherton you have been represented well.

Everyone is so polite, Flawed was used to describe the business plan rider-ship number.
fraud might be closer.

A lot of Citizens were there to learn more about the plan. They were unable to hear very well do to several union members in the back were talking up a storm about more important subjects I guess.

For the most part everyone seemed open for discussion and answers which continue not to show up. Answers to questions which have been asked repeatedly by numerous well qualified people. One woman speaker pointed out very well and clear that from San Jose to San Francisco the time saved would be only 3 minutes. We already have a baby bullet train.

I'm glad I went

Like this comment
Posted by R.GORDON
a resident of another community
on Jan 22, 2010 at 4:27 pm

R.GORDON is a registered user.

How did every country in Europe and Asia manage to move past us with hundreds of thousands of HSR trains while our banking system just grew and grew and all of you expected to retire to a world of gardening, golfing, and living in a community of upper middle class solvency without having anything to do with the outside world?
You are NOT special. Gates and Jobs are SPECIAL. The people of CA and the U.S.are SPECIAL. Take a drive over to the Stanford Campus an have a look at the students there.
They are mostly from different countries,have higher I.Q's, and the graduate school of admissions is from Russia.
You are not fools. You just are unconcious. We will have HSR not only in California but across this nation.....we will not have airlines, we will not have well maintained roads and bridges. Our autos will be foreign made except for the 200 TESLAS plugged in to your plugs.They will NOT succeed because the U.S. at this point, cannot even assemble or complete a 7 year project on the Bay Bridge.
Grow up.
HSR is inevitable. You are a one trick pony where your arguments are concerned and your selfishness towards the rest of America is lacking.
Get people back to work..
If you only had an idea how outmoded the venture capitalists and philanthropists are in the small area which you seek to protect from the big bad bullet train, you would realize, that they are not going to repeat what they did in the past ten years....this time, if they try to be the sole money making entrepreneurs, they will most likely land in jail with the corruption it took to get them wealth. I will guarantee you not a soul is aware how some people from this group actually lost hundreds of millions and were planning a career in politics before 9/11 and the "wars".
They are scared. They are too old to start with the past ways. The future is going to be there for the bright and ambitious and hard working.
The skin colors are going to be totally different as people intermarry. The young today think very opposite from you or the "hoi polloi" of San Mateo County's "special people". If you are part of that, you all have to get a new way of thinking and mostly, a new attitude. This country is going to the next generation. Grow up.

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