hsr compilation report july 2011

8/6/2019 HSR Compilation Report July 2011

1/19

Is High Speed Rail Coming Through

Your Town Soon?

By: Assemblywoman

Diane Harkey

73rd AD

A Compilation Report on

issues, concerns and actions

July 2011


2/19

The Legislature Lacks Information because the

High Speed Rail Authority Lacks Details

Legislature suffers from a lack of good information that is needed to makedecisions about the appropriation of funds for the high-speed rail project.

Given the very large size of this project, its extended construction timeline,

and the novelty of this type of project for California, it is reasonable that

some key project decisions must be based on the best available analysis and

assumptions rather than hard numbers. (HSR at Critical Junction; LAO Pg 11)

The December 2009 business plan of the High-Speed Rail Authority

(Authority) lacks detail regarding how it proposes to finance the high-speed

rail network (program) and mitigate associated risks.

The Authority Anticipates needing $17 billion to $19 billion from the federalgovernment. ..it will need $10 billion to $12 billion in private investmentthe

Authority has not received any commitments from private investors.

Additionally, a revenue guarantee, without which the private investors are

unlikely to participate, lacks specifics. (State Auditor; pg 17)


3/19

Cost Estimates - Outdated & Likely Understated

the project is likely to cost muchmore than the $43 billion originally

estimated for the first phase from San

Francisco to Anaheim. For example,

based on the states agreement with

FRA, the cost of the initial

construction segment between Fresno

and Bakersfield alone is now

estimated to be $4.5 billion, which is

57 % higher. ..If the cost of building

the entire Phase 1 system were to

grow as much as the revised HSRA

estimate for the 100-mile segment

discussed above, construction would

cost about $67 billion. (LAO)


4/19

Vague CHSRA Funding PlansPrivate investors will require a revenue guarantee. The business plan

indicates the Authority plans to rely on them to supply $10 billion to $12

billion, primarily backed by projected future operating surpluses50 parties

who responded to the spring 2008 request and others [state that] private

investors will require minimum revenue guarantee from a public entity in the

event that ridership projections, and thus operating surplus projections, are

not met. This viewpoint is also expressed in the 2009 CHSRA business plan.

(State Auditor Pg22)

The Authoritys spending plan includes almost $12 billion in exclusively

federal and state funds through 2013, more than 2.5 times what is now

available. Before it may commit funds from Prop 1A for construction, state

law requires that the CHSRA: 1) have estimates of the full cost ofconstruction; 2) identifies the sources of all funds; 3) the anticipated time of

receipt based on commitments or assurances from potential funding sources;

4) verified by Director of the Department of Finance.

(State Auditor; pg 21)


5/19

No State Subsidies?

Potential Need for Operating Subsidies Could Lead to General Fund Cost

Pressures. The CHSRAs business plan indicates that the initial costs ofoperating a high-speed rail system may exceed $1 billion per year.

Proposition 1A requires HSRA to submit a plan which certifies that, once

complete, service will not require a local, state, or federal operating subsidy

prior to appropriation of the $9 billion in state bond funds for capital costs. The state could discover during development or after construction that the

system needs [an operating] subsidy. If the train does not attract the number

of riders projected, operating revenues would likely be less than expected.

This situation could place an additional financial pressure on the states

General Fund. (HSR at Critical Juncture; LAO; Pg 7-8)

That a revenue guarantee might violate state law - CHSRA consultantindicated that the revenue guarantee would not be used as an operating

subsidy but a limited-term contingent liability used to support up-front

capital investmentTherefore, a guarantee could increase costs to the public

[or General Fund. No] indication of who would be responsible or cost.

(State Auditor pg 22-23)


6/19

Can You Define Subsidy?

Section 2704.08 (J) in Assembly Bill 3034 of August 2008states, The planned passenger service by the authority in the

corridor or usable segment thereof will not require a local,state, or federal operating subsidy.

However, there is confusion over the definition

initial operating years of any project...especially in one inwhich the initial phase cannot serve primary markets as

planned, will incur early operating lossesAs noted in our

November report, the definition of operating subsidy is

unclear and urgently needs further clarification by the

Legislature. (CHSRA Peer Review Committee Report to CHSRA May 2, 2011)


7/19

CHSRA on Compliance Issues

No system in place to track expenditures funded by Proposition

1A to ensure compliance with statutory limitations on

administrative and preconstruction task costs As Authority

staff began spending funds from Proposition 1A in 2009, we

expected them to have defined the types of costs and to haveestablished systems for recording, reporting, and planning for

these costs, but that was not the case.

CHSRAneeds to develop some systems to track and report on

the use of Recovery Act funds. Because of its $2.25 billion

federal award, the Authority will be required to comply withboth the Recovery Act reporting requirementsand with the

readiness requirements of the California Recovery Task Force.

(State Auditor ; pg. 28-29)


8/19

HSR Ridership Calculations

Dont Add UpWe can say that the sheer number of constraints placed on themodel parameters makes this model system unreliable forpredicting the shares of the competing modes (air, train, automobileand HSR) in the CHSR corridor. While there are advancedeconometric techniques that could alleviate some of the

biases we have found, it is likely that application of these

techniques would lead to larger standard errors than are

reported. ..the true confidence bands around the estimates fromthese models are probably wide enough to include demand

scenarios where HSR will lose substantial amounts of money aswell as those where it will make a healthy profit.(ITS Berkley, pg 9-10)


9/19


10/19

Questioning the High Speed Rail

AuthorityAssemblywoman Harkey and Senator Lowenthal questioning the project & Authority

http://www.youtube.com/watch?v=5a9gROsdSlU&feature=relatedhttp://www.youtube.com/user/derailhsr#p/u/51/9zabuRbLlew

http://www.youtube.com/user/derailhsr#p/u/55/nslMiQQm-gw

http://www.youtube.com/user/derailhsr#p/u/60/hnI4CYF0NK8

Legislative Analyst Office Report: High Speed Rail is at a Critical Juncture

http://www.lao.ca.gov/reports/2011/trns/high_speed_rail/high_speed_rail_051011.pdf

The State Auditors Office Report on the High Speed Rail Authority

http://www.bsa.ca.gov/pdfs/reports/2009-106.pdf

The Institute of Transportation Studies from The University of California, Berkeley Report

Review of Bay Area/California High-Speed Rail Ridership and Revenue Forecasting Study

http://www.its.berkeley.edu/publications/UCB/2010/RR/UCB-ITS-RR-2010-1.pdf


11/19

Media Reaction: Washington Post

If federal high-speed rail investment makes

sense at all, it's probably in the densely

populated Northeast Corridor, where demand

for passenger trains is highest. At the very

least, California should have to fill in its

project's economic and logistical blanks before

any more money - from state taxpayers or therest of us - is spent. Washington Post


12/19

Media on Ridership

Supposedly 39 million people will eagerly pay much more than an airfarein order to travel slower. Between 2008 and 2009, the projected costincreased from $33 billion to $42.6 billion. Newsweek

In 2010, Amtrak carried 29.1 million passengers for the entire year. That'sabout 4 percent of annual air travel (2010 estimate: 725 millionpassengers). Washington Post

The irony is that California has the highest rate of car-ownership in thecountry, if not the world. It also, despite years of neglect, has one of thebest road networks anywherecertainly leagues ahead of Japans. On topof that, it enjoys a highly competitive network of budget airlines serving itsmain cities. The Economist


13/19

On Debt & Taxpayer Dollars

if I had to sell a purehigh speed rail bond,

that the uncertainties,

the (issues of) revenue

streampassenger

volumerevenues were

so unsettled that noinvestor would want to

take that risk. State

Treasurer Bill Lockyer

We must examine and

re-examine everypossible way to save

taxpayer dollars

Governor Jerry Brown


14/19

But Other Countries Are Doing It

Japan, with the worlds leadingsystem, illustrates the financial

devastation that high-speed railcan produce. For 25 years, Japanborrowed to build a systemserving the ideal rail corridor,nestled along a single coast witha population of more than 75million people. Ridership wasartificially increased by highgasoline prices and one of thehighest highway tolls in theworld. National Review

Building trains is an immenselycostly enterprise--not just

financially costly, butenvironmentally and personallycostly, as people and habitats areuprooted, and metal is torturedinto rails and switches andcars. If you are going to installone, you should be reasonably

certain that there will be peoplearound with an interest in ridingyour train. After all, a trainrunning mostly empty emits a lotof carbon. The Atlantic


15/19

Media Coverage on the Subsidy

Question But the rail authoritys analysis suggests that itwill be unable to attract the minimum $10billion in private funding it needs without arevenue or ridership guarantee. The LegislativeAnalysts Office says such a guarantee amountsto a promise of a subsidy if the project doesntmeet expectations, and is thus illegal. SanDiego Union Tribune

Ridership on a train traversing our sprawlingstate is unlikely to ever be high enough to beprofitable without heavy, ongoing taxpayersubsidies. Orange County Register

It is dismaying that the federal government hasoffered $2.8 billion for the project, when even acursory examination would show that the railsystem cannot operate without huge continuinghandouts from a state that has the largestbudget deficit in the nation. Oakland Tribune


16/19

LAO: Voter Packet with Corresponding AB 3034 Language

(AB 3034 Passed in 2008 is the CHSRA Authorizing Legislation)

Limitations . bond funds may be used to provide only up to one-half of the total cost ofconstruction of each corridor or segment of a corridor. The measure requires the authority

to seek private and other public funds to cover the remaining costs. The measure also limits

the amount of bond funds that can be used to fund certain pre-construction and

administrative activities.

Accountability and Oversight Specifically, the bond funds must be appropriated by theLegislature, and the State Auditor must periodically audit the use of the bond funds. In

addition, the authority generally must submit to the Department of Finance and theLegislature a detailed funding plan for each corridor or segment of a corridor, before bond

funds would be appropriated for that corridor or segment. The funding plans must also be

reviewed by a committee whose members include financial experts and high-speed train

experts. An updated funding plan is required to be submitted and approved by the Director

of Finance before the authority can spend the bond funds, once appropriated.

Bond Costs If the bonds are sold at an average interest rate of 5 percent, and assuming a

repayment period of 30 years, the General Fund cost would be about $19.4 billion to pay offboth principal ($9.95 billion) and interest ($9.5 billion). The average repayment would be

about $647 million per year.

Operating Costs When constructed, the high-speed train system will incur unknownongoing maintenance and operation costs, probably in excess of $1 billion a year.


17/19

High-Speed Rail: Dead and Loving It

Excerpts from: reason.com/blog by Tim Cavanaugh, June 7, 2011

Thanks to the wording of the law, the California High Speed Rail project now may die a quiet

death. Last Wednesday, the California Senate voted to place the California High Speed Rail Authority(CHSRA, which is currently a standalone agency) under the authority of the states Business,

Transportation and Housing Agency. The State Assembly passed a bill that would demote the CHSRA

to an advisory body while shifting control of the project to a Department of High-Speed

Trains. The creation of a brand new bureaucracy is ominous. But these complementary legislative

moves, by a Democratic legislature under a Democratic governor, have all the characteristics of a face-

saving admission that the Golden States high-speed rail project is either dead or in a persistent

vegetative stateThe Corcoran-Borden route was selected by the Federal Rail Authority specifically

for the relative ease with which the state could roll over rusticated local landowners who lack the

resources to mount a challenge like the one that has emerged on the wealthy San Francisco

peninsula.

The legislature has so far gone along with the Legislative Analysts recommendations, and those

recommendations include scrapping Corcoran-Borden altogether. As if thats not enough, it turns out

we wont always have Palmdale. That plan was scrapped in favor of a track going through the Mojave

Desert and the Antelope Valley into Sylmar. Now the route may be switched back to the Grapevine

again, after a report that the Antelope Valley route would require rebuilding of the California

Aqueduct and/or altering a dam.

Since 1996, the Golden State has managed to disappear a quarter of a billion dollars without laying

any track. In a floor speech, Assemblywoman Diane L. Harkey (R-Dana Point) argues that even the

new bureaucratic deep freeze is too good a fate for the misguided HSR project. Still, better a trickle

of wasted money than a torrent.


18/19

Howard Jarvis Taxpayers Association:Court of Appeals rules that CA Legislature violated Political Reform Act over High SpeedRail

January 28, 2011

Sacramento --- Today, Howard Jarvis Taxpayers Association won a major victory on behalf of taxpayers as well as the integrity of

the ballot process. In a 23-page published decision, the Court of Appeal ruled that the California Legislature violated the Political

Reform Act, an initiative approved by the voters in 1974, when it dictated the contents of what is supposed to be objective

material in the ballot pamphlet.

No longer can the California Legislature use the ballot pamphlet as biased advertising for its own pet ballot

measures, said Jon Coupal, President of Howard Jarvis Taxpayers Association. At issue in the legal action was the High Speed

Train Bond Act of 2008, a measure sponsored and placed on the ballot by the Legislature. Rather than complying with the voter-

prescribed process of having the Attorney General prepare the ballot label, title and official summary, the Legislature hijacked the

process and dictated the language that would appear in the ballot pamphlet. HJTA had alleged that the material was little more

than a sales job on behalf of the bond.

Coupal added the Courts ruling is a stinging rebuke of the California Legislature for manipulating voters by

substituting the proponents advocacy for what is supposed to be a neutral summary by an impartial third party. Voters knowthat the arguments in the ballot pamphlet are advocacy, but they assume wrongly, in this case that the ballot label, title and

official summary are objective. We are very pleased that the Courts ruling demands that, in the future, only an objective party

can prepare those portions of the ballot material which are currently recognized as being official.

While the Courts ruling does not reverse the e lection on the High Speed Rail bonds, it does insure that the California Legislature

cannot manipulate the process in the future.

Tim Bittle, HJTAs Director of Legal Affairs who argued the case before the Court, stated, we have no doubt that,

had the voters been presented with a truly impartial ballot description, the HSR bond would have gone down in defeat. (The HSR

bond barely passed with a 52.5-47.5 % vote). But this ruling slams on the brakes to the future manipulation of the voters by

what, up until now, had been an increasing practice by the California Legislature.Jon Coupal added, the timing of the ruling is important for taxpayers as the Governor and the Legislature are

planning to place massive tax increases on the ballot in June. This ruling will help assure that the material presented to the voters

as official, is indeed objective and not merely advertising for tax increases.

The ruling also has the potential for affecting the two measure placed on the ballot by the Legislature relating to a

Water Bond and Budgeting Reform Measure.

To read the full text of the Courts ruling, visit: http://www.courtinfo.ca.gov/opinions/documents/C060441.PDF.


19/19

Resources

www.bsa.ca.gov

www.lao.ca.gov

www.asm.ca.gov/Harkey www.cc-hsr.org

www.HighSpeedRailBoondoggle.com

www.calhsr.com

www.examiner.com/user-katham3 www.youtube.com/derailhsr

Other references as noted in report

hsr compilation report july 2011

Documents