CHSRA Loses One Appeal, Others Remain

Apr 16th, 2014 | Posted by

The California High Speed Rail Authority had asked the 3rd District Court of Appeals to delay or reverse Judge Michael Kenny’s decision to allow a trial on the question of whether the “blended plan” and other elements of the high speed rail phasing process violated Proposition 1A. Their argument was that they were appealing other parts of the case, where Judge Kenny found that the financing plan violated Prop 1A, and that those appeals should be exhausted before having a new trial.

Unfortunately the appeals court did not agree and ruled today against that request. As Tim Sheehan explains, here’s what’s at issue in the looming trial:

• That the blended system is substantially different than a line of fully dedicated tracks only for high-speed trains that some hard-core advocates and project opponents both say was what voters were promised in Prop. 1A.

• That sharing tracks with the Caltrain commuter line between San Francisco and San Jose will keep high-speed trains from achieving Prop. 1A’s ultimate mandate for a 2-hour 40-minute nonstop ride from downtown San Francisco to Los Angeles’ Union Station.

• That the system would not be able to operate without a public subsidy.

The alleged shortcomings collectively add up to an illegal expenditure of public funds for the high-speed rail program, according the lawsuit. In early March, Sacramento Superior Court Judge Michael Kenny denied a motion by the rail agency to dismiss this portion of the Tos/Fukuda/Kings County case.

These are all very thin reeds for the Kings County folks to clutch. Their strongest argument was indeed the financial plan and though they won a victory in Superior Court, it will either be overturned on appeal or the Legislature will simply write a new one that satisfies the ruling. And the Steinberg cap-and-trade plan gets a really long way toward that goal.

So this ruling is unfortunate but something of a sideshow for now. The main event is the appeal of Judge Kenny’s ruling, and there is still plenty of reason to believe the Authority will prevail there.

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Darrell Steinberg Supports Using Cap-and-Trade Funds for HSR

Apr 14th, 2014 | Posted by

State Senate President Pro Tem Darrell Steinberg today announced a new proposal to guide the use of California’s cap-and-trade revenues. It includes earmarking 20% of those revenues for the high speed rail project:

In addition to permanent funding sources for affordable housing and mass transit, the strategy (available here) also provides a permanent source of funding for highway and road rehabilitation to improve traffic flows and repair, to retrofit streets for cycle-lanes, and for the Governor’s High Speed Rail project, which is projected to reduce heavy emissions generated by air and road travel. Senator Steinberg’s proposed strategy identifies funding for green infrastructure projects and clean-vehicle programs, seed funds to assist clean projects, and rebates for consumers.

From the Cap-and-Trade Investment Strategy:

III. A permanent source of funding for High-Speed Rail. (20%)

a. Purpose: Ongoing source for construction of HSR.
b. Allocation method: Continuous appropriation. Could be securitized.

What that means is HSR would would be explicitly authorized as a recipient of 20% of the cap-and-trade revenues. And the California High Speed Rail Authority could borrow against those revenues, which is what the “securitized” reference means.

Securitization of cap-and-trade revenues for HSR would be a game-changer for funding. That means the state could borrow against expected future revenues and have a lot more money available now – maybe, just maybe, enough to build the Initial Operating Segment to Los Angeles.

What might those numbers look like? Cap-and-trade auctions brought in $1.4 billion in revenue in 2013. 20% of that is $280 million a year. If those revenues don’t grow, then that comes out to $4.76 billion by 2030. That’s a big help to the project’s finances but not enough to get the tracks through the mountains and into LA. If those revenues do grow, then so does the HSR share. If cap-and-trade brought in $3 billion a year, HSR’s share is $600 million annually and $6 billion over ten years (say, 2020 to 2030).

30 years is a standard length for a revenue-backed bond. So what if the state were willing to “securitize” 30 years of HSR revenue? That could mean $8.4 billion in revenue at current cap-and-trade revenues and $18 billion at the speculative $3 billion a year in cap-and-trade revenues, though perhaps less depending on how interest costs are paid. That latter amount just might get the tracks into the LA basin.

UPDATE: In fact, Sen. Steinberg’s plan actually includes a projection of $5 billion a year in cap-and-trade revenues. They peg HSR’s share at $878 million each year. Over ten years that’s $8.78 billion. Over 30 years, that’s $26.34 billion – enough to get the IOS built.

There’s a lot of ifs to those numbers and so I don’t want to overstate this. The cap-and-trade money alone, even securitized, may not be enough to build the IOS if revenues don’t grow to projections. But it’s a huge shot in the arm for the project and goes a long way toward resolving the financial and legal problems triggered by Congressional Republican hostility to HSR funding.

Sen. Steinberg’s plan appears to have broad support:

Attending the press conference in support of the strategy:
Robbie Hunter, President, State Building and Construction Trades Council of California
Jim Earp, Executive Director, California Alliance for Jobs
Ann Notthoff, California Director, Natural Resources Defense Council
Tom Adams, environmental activist and retired environmental lawyer
Shamus Roller, Executive Director, Housing California
Marina Wiant, Policy Director, California Housing Consortium
Joshua Shaw, Executive Director of the California Transit Association
Steve Heminger, Executive Director of the Metropolitan Transportation Commission
Bill Higgins, Executive Director, California Association of Councils of Governments
Chris McKenzie, Executive Director, League of California Cities
Mike McKeever, Executive Director of Sacramento Area Council of Governments (SACOG)
Joel Keller, Board President, Bay Area Rapid Transit (BART)
Jeanie Ward-Waller, California Policy Advocate, Safe Routes to School National Partnership

I’m especially pleased to see the NRDC listed here, filling in for the utter lack of leadership we’ve seen from Sierra Club California on this issue.

What’s not immediately clear is how much support this has in the State Senate. But my guess is that Sen. Steinberg would not have proposed this unless he had strong confidence that it had a majority. And since this plan merely allocates existing revenues, rather than creating new ones, it requires a simple majority for passage rather than a 2/3 vote. That gives me confidence that this can become law, especially since one would imagine Governor Jerry Brown would be pleased with this plan.

I gotta say, today was a good day.

State Asks FRA For Flexibility on Buy America Rules — But Only For Prototypes

Apr 10th, 2014 | Posted by

Currently there are no makers of high speed trains in the United States. Companies like Siemens have US-based facilities, but do not currently build bullet trains there. That presents a paradox to the California High Speed Rail Authority, since federal “Buy America” rules currently prevent them from buying prototype trains abroad to test in this country – even if the plan is to ultimately build those trains here.

So California is seeking a waiver from the “Buy America” rules, but only for those prototypes:

So in late February, the state rail agency and Amtrak each requested a waiver from the Federal Railroad Administration asking to be excused from the Buy America requirements. Each wants permission to purchase two prototype trains that are built overseas, but to American specifications, for testing purposes until the chosen manufacturer can build a production factory — or modify an existing plant — in the U.S. to build the trains….

California’s rail authority “decided to apply for a waiver in the event that the manufacturer that made the best offer wouldn’t have the ability to assemble a prototype in America that meets the Authority’s and Amtrak’s strict schedules for procurement,” said Lisa Marie Alley, the agency’s press secretary.

That is a sensible approach. The Authority wants to comply with the Buy America rules when they actually order the trains that the system will use. But if there are no US-based manufacturers at this time, it is reasonable to allow them to purchase those prototypes overseas. After all, the winning builder will open up a new factory, or a new production line at an existing factory, in the US that will employ a lot of people here. And that’s the entire point of the Buy America rules.

The FRA ought to grant this reasonable waiver, as doing so actually serves the goals of the Buy America program.

Texas HSR Could Face Same Challenges as California HSR

Apr 8th, 2014 | Posted by

In recent days there’s been a spate of posts and articles touting the Texas high speed rail project as a better approach than the California project. Some of this is undoubtedly the California-Texas rivalry at work, but it’s also fueled by the routine misunderstanding in the media about the nature of California HSR’s problems. Those problems exist solely because opponents of California HSR found powerful allies in the Congressional Republicans, and have been able to block future funding and create a cascading set of problems that stem from that denial.

One of the reasons for Republicans’ hostility to high speed rail is their ideological opposition to government funding for trains and buses. And so the Texas HSR project gets touted for its reliance on private funding in outlets like the Dallas Morning News this week:

The United States has been touting high-speed rail for years. Texas even made a push in the early 1990s. Yet there’s still no bullet train in the country, at least nothing like what’s being proposed here.

That’s because the economics usually stink. Flying is cheaper, cars are more convenient and the U.S. population is too spread out. High-speed rail usually requires billions in subsidies, and we have better uses for that money.

That’s why the Texas Central Railway is quick to say: “This is not a government project.”

In fact, it’s a private play on infrastructure, targeted at the best corridor in the country.

But hey, guess what, even the Texas HSR project will need federal money:

While the Texas Central Railway has agreed to operate that leg with high-speed trains, it won’t pay for construction.

Some of that would fall to federal and local government, and local officials are leading the effort.

The pitch will go something like this: Let’s leverage the private investment with maybe a 20 percent match from the feds and build something even more special.

The Texas HSR project has been pegged at $10 to $12 billion to build. That number will rise. But 20% of that gets you $2 to $2.4 billion. California HSR has already gotten more than that. But Republicans in Congress were furious even with that amount, and have vowed no more money for HSR anywhere. Republican governors in Wisconsin, Ohio and Florida also had similar federal matches and rejected it. So already the Texas HSR proposal is basing its financing on a wish that federal funds would come through – when all the indications are that no such money will materialize as long as Republicans are in the majority.

In other words, the Texas HSR project suffers from the same problem as the California HSR project: gathering all the money it needs to complete the route. Even that hagiographic column in the Dallas Morning News had to acknowledge, though buried at the end, that federal money will be needed. Just as the XpressWest bullet train project from LA to Vegas needed a federal loan, it’s a sign that the private sector cannot actually finance and fund infrastructure of this scale.

But let’s play along with the Texans and assume the money comes through. Other defenders of the Texas project have argued that Texas has numerous advantages over California – all of which dissolve upon closer inspection.

Tom Jackson at Equipment World points to three factors that he thinks make Texas a better fit than California:

1. Both DFW and Houston have relatively compact downtown business areas. You can walk to a lot of the places you need to go, and both downtowns are well served by taxis. Los Angeles is a massive, metastasized sprawl. You can cab around but it’s going to cost you. San Francisco is less spread out, but because of the hills it’s no fun to walk, even short distances. (Houston sprawls with the best of them, but most of the business traffic goes straight downtown.)

Really?

This is just nuts. Both SF and LA are much denser than either Dallas or Houston, with better transit networks and connections – especially once the Metro Rail lines planned for LA are built. Houston is literally the poster child for massive, metastasized sprawl.

2. Interstate 45 in Texas is flat and low density. This would make construction and engineering less complicated and acquisition of land rights much less problematic.

3. Texas isn’t eaten up with environmental zealots. Trust me, as soon as they find an endangered mugwort, the California bullet train will come to a screeching halt while the state conducts 10 years of environmental studies.

This argument was also made in the Dallas Morning News column and by Tobias Buckell, that Texas has lower land costs and less environmental obstacles and so the problems caused by California NIMBYs won’t be an issue in Texas.

But if that were true, the Trans-Texas Corridor would have been built instead of killed. The TTC would have included high speed rails, along with new toll highways, pipelines, fiber, and more. It was planned for stretches of rural Texas and would have been financed mostly by private funds. In other words, it had all the positive attributes of the current Texas HSR project.

And yet it was killed by the Texas government after a massive uprising from residents in the TTC’s path and from those adamantly opposed to what was seen as a governmental power grab. Texas NIMBYs didn’t have the same judicial paths open to them that California NIMBYs have, yet they found other paths and killed the TTC anyway.

The truth of the matter is that while Texas is a great place to build high speed rail, any project there will encounter exactly the same obstacles as California high speed rail:

• Inability of the private sector to fund multibillion dollar infrastructure without government aid

• Ideological opposition among Republicans to any public funding for rail

• NIMBY opposition to whatever route is chosen, no matter what that route is

• Misguided environmentalism prioritizing open space over reducing CO2 emissions

• Lack of urgency, unwillingness to believe that high speed rail is a priority.

Those are the problems that have to be solved for high speed rail to be built anywhere in the United States. I wish Texas all the best and I hope they get HSR built. But until they solve those problems, not imaginary problems with government or with California, their efforts will inevitably stall.

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