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 in Palo Alto, which has emerged over the past two years as a leading critic of the proposed line. Though the council had urged voters in 2008 to support Proposition 1A, 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 council's Rail Committee considered taking an even stronger stance -- a request that the state should terminate the project. The four committee members all said they support this position (though Councilman Pat Burt said he would "likely" support it) but balked at voting on it because they couldn't agree on which reasons to list to justify the city's opposition.

"The problem is that there's so many reasons to oppose this," Committee Chair Larry Klein said.

The committee decided to split itself into two two-member subcommittees, each of which would submit a proposed policy for the council's consideration. But all four members agreed that the authority's business plan violates Proposition 1A both because of its vastly expanded price estimate and because of the rail authority's proposal for constructing the line. Klein equated Proposition 1A and the rail authority's subsequent actions as a "fraud on the voters."

Councilman Pat Burt said the rail authority's proposal is "fundamentally in violation of what the voters approved."

"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," 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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Like this comment
Posted by Martin Engel
a resident of Menlo Park: Park Forest
on Nov 30, 2011 at 12:17 pm

So, let's review:

1. What the CHSRA intends to do in the Central Valley with its initial construction violates the edicts of Prop. 1A and is illegal.

2. There will be no further funding to add to the currently available $6+ billion for Central Valley construction.

3. The rail authority will not build an operational high-speed rail in the Central Valley. Without further funding, that will be the only construction completed; one hundred miles of tracks usable only by Amtrak.

4. The voters were misled by the Proposition 1A bond issue ballot measure in 2008. The current plans call for a very different project, with three times the cost and a construction period of 22 years, 14 years more than in the initial plan.

5. The costs of this project take funding away from far more urgent needs in the state.

Like this comment
Posted by tom h
a resident of Menlo Park: Downtown
on Nov 30, 2011 at 12:36 pm

OK I was wrong in the beginning of this high speed scam I said it would be double the original cost. So all the corporate BS management are being payed millions of $$$ on our tax dollars and it is like the bridge to no ware but at high speed. Stop the madness!

Like this comment
Posted by John
a resident of Menlo Park: Linfield Oaks
on Nov 30, 2011 at 4:19 pm


Like this comment
Posted by Joe
a resident of Menlo Park: Suburban Park/Lorelei Manor/Flood Park Triangle
on Nov 30, 2011 at 4:22 pm

Government efficiency at its finest.

When would it be a good time to cut our losses and move -- 2 years ago? Only a fool continues to throw bad money after bad money.

Like this comment
Posted by Doug
a resident of Atherton: West of Alameda
on Nov 30, 2011 at 4:56 pm

wow...only 98 billion and 22 years to complete? And figure the final price tag another 30 billion or so and another 5 years on top? Geez. So what's the problem?

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

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