Pushing Back Against the Flawed State Auditor Report
Predictably, the State Auditor’s flawed HSR report has led to its share of “omg HSR is DOOOMED!!!1!1” articles in the media – as well as some more measured and sensible pieces. Mike Rosenberg and Will Oremus again show they’re two of the best reporters on the HSR beat with this article – and I’m not just saying that because I’m quoted in it:
Robert Cruickshank, chairman of Californians for High-Speed Rail, called the criticisms in the audit “generally sensible.” He chalked up some of the rail authority’s oversight problems to “growing pains.”
But Cruickshank said he found it “weird” that the audit held the rail authority responsible for the shortage of federal funding for the project.
“It’s worth keeping in mind that California voters approved $10 billion in state funding at a time when there was no federal funding for high-speed rail and none had been proposed yet,” he said. “Everybody realizes that if there is no additional federal funding, then the project falls.”
The auditor’s comments, he said, should have been directed toward members of Congress instead.
As Spokker put it yesterday, it was a “cheap shot” by the Auditor to use the ongoing fight for federal funding as a reason to claim the HSR project is flawed and in trouble. It indicated a fundamental lack of understanding of the federal HSR funding situation as well as a lack of understanding how the planning process works.
The Auditor made it sound like there’s just $2.25 billion in federal funding for California, no more is coming, and we’re screwed. And we would be screwed if there were no more federal funding – although crucially, as the Auditor’s report did not mention, the federal funding we do have requires “independent utility” so if that is all we get, the money still will go to something we can use.
However, the Auditor is totally wrong to imply that we’re only getting $2.25 billion. There are four additional sources of federal funding that have either been enacted, approved by part of Congress and awaiting final action, or proposed:
• $50 billion in the new transportation bill has been approved by a House subcommittee and has support from over 100 members of the House. President Obama has supported some form of long-term HSR funding in the transportation bill.
• And there’s still a proposal out there for a National Infrastructure Bank that the Obama Administration has backed.
Could the $50 billion fall through? Might a National Infrastructure Bank die? Possibly. But that’s out of the Authority’s hands. To blame the Authority for the federal funding issue is unfair. And it’s misleading to suggest the funding isn’t there.
Unfortunately, the Auditor’s flawed report has led some HSR critics in the media to use it to repeat their previous opposition to the project, like the Sacramento Bee’s Dan Walters:
California’s high-speed rail project leaders tell us it’s on track and that the state’s residents can confidently look forward to a future of superfast bullet trains whisking them from one end of the state to the other at airlinelike speeds.
However, the state auditor’s office is saying officially what outside analysts already had concluded – the bullet train isn’t ready to roll, lacking the tens of billions of dollars in federal and private financing the project will require.
Again, this is a misleading way of reporting on the issue. Federal funding has not yet been secured, but that’s nothing new. It is on its way, and any criticisms about the slow arrival of those funds needs to be directed at Congress, not at the Authority.
The High-Speed Rail Authority is hoping for a big wad of federal funds – about half the total – but so far has received just a fraction, with no commitments for any more.
This too is misleading, implying that the CHSRA is wrong to expect more money. It has not been “committed” in terms of the budgeting process, but it has been “committed” politically. There is every reason to believe that funding will arrive. And if there’s doubt, again, the target must be Congress, not the HSR project itself.
However, the biggest unknown, as state Auditor Elaine Howe points out in a report issued Thursday, is whether private investors would be willing to commit at least $10 billion.
The enabling legislation says the bullet train will not have any state operating subsidies, but the authority’s own documents say that private investors need “revenue guarantees” to protect their investments. That raises the specter of operating subsidies, as another recent report by the Legislature’s budget analyst also points out.
“To plan adequately for private investment, the authority should further specify the potential cost of revenue guarantees and who would pay for them,” the auditor’s report recommends.
In some ways this is a problem of the Authority’s own making – they didn’t need to put a “revenue guarantee” in the business plan. But we know that the private sector doesn’t need one. Siemens USA president Oliver Hauck explained that private companies will shoulder the risk.
Further, there is every reason to believe we’ll get private funding. The Auditor doesn’t seem to have known that China is actively seeking to bring the private funding the Authority seeks, as are several other countries.
All in all, the Auditor’s report is a badly flawed document that basically argues “the HSR project hasn’t nailed down all of its funding, so it’s DOOMED” while ignoring the fact that the funding is in the process of being secured. The Auditor would have done well to limit their criticisms to the operational matters they identified and not delved into a set of issues they clearly do not understand.
It is unfortunate – and troubling – that the Auditor, like the LAO before them, seems to be willing to make strong criticisms of the HSR project without really understanding the project. If California’s state analysts lack the expertise to properly examine HSR, then we have a very serious problem in getting 21st century infrastructure built.