Peer Review Group Wants to Delay HSR Bond Funds – Gov. Brown Disagrees

Jan 3rd, 2012 | Posted by

2012 starts off with a bang today as the Peer Review Group released its report on the California High Speed Rail plan. The headline is the most unfortunate recommendation of the report that the legislature delay releasing the Prop 1A bond funds:

Until a final version of the 2010 [sic] Business Plan is received, we cannot make a final judgement on the Funding Plan. Therefore, pending review of the final Business Plan and absent a clearer picture of where future funding is going to come from, the Peer Review Group cannot at this time recommend that the Legislature approve the appropriation of bond proceeds for this project.

To which Governor Jerry Brown responded: that doesn’t change a damn thing. As reported by KQED’s John Myers, Brown’s office said the report’s concerns “are not new or compelling enough” to stop the project now.

Those are the headlines. Now let’s take a deeper look at what is going on here.

As I’ve been arguing, California’s high speed rail project is getting screwed not by any internal flaws or by public rejection, but by the decision of the far-right extremists in the House of Representatives to oppose high speed rail funding. By calling into question future federal support for HSR, the House has made it easier to attack the California project. As we all know, the $10 billion in voter-approved bond funding and $4 billion in federal stimulus is not enough to complete the project or to build an initial operating segment that can generate its own revenue. That enables further attacks on the project, using the argument that no guarantee of future funding means no funding at all and therefore we shouldn’t even begin any construction whatsoever.

There’s no doubt that the lack of secured, full funding is a problem. The question is how does one resolve it? Do you assume that the federal government will never spend another dime on high speed rail again and call it a day? Or do you press onward and build what you can, working to change Congress’ mind while also hoping that the initial construction can itself act as a spur to win more funding?

The Peer Review Group makes it clear in their conclusion that the funding issue is at the heart of their concerns:

We cannot overemphasize the fact that moving ahead on the HSR project without credible sources of adequate funding, without a definitive business model, without a strategy to maximize independent utility and value to the State, and without the appropriate management resources, represents an immense financial risk on the part of the State of California.

And they develop it at the outset, arguing that the Initial Construction Segment can’t generate its own revenue or serve as a test track for HSR, and because there’s no other funding yet identified, building the ICS would somehow be a net negative to the state finances, ignoring any discussion of the economic stimulus it would provide.

They go on to argue the ICS “is not a very high speed railway (VHSR), as it lacks electrification, a VHSR train control system, and a VHSR compatible communication system. Therefore, it does not appear to meet the requirements of the enabling State legislation.”

That line in particular drew the ire of the California High Speed Rail Authority, which said in a press release today:

Thomas Fellenz, Chief Counsel of the Authority noted: “The Report makes unfounded assumptions about the consistency of the Authority’s plans with Proposition 1A, the High Speed Rail bond measure. Frankly, not only are these legal conclusions beyond the expertise of the authors, but attorneys at the state and federal government level and the legislative author of the bond measure, profoundly disagree. All have expressed confidence that our Financing Plan is consistent with the bond measure. Ironically, several other recommendations of the Peer Review Committee are directly contrary to the plain language of Proposition 1A and could not be implemented by the Authority.”

Overall, the Authority contended, the Peer Review Group erred in its report particularly by not having any consultation with the Authority about these issues:

While some of the recommendations in the Peer Review Group report merit consideration, by and large this report is deeply flawed, in some areas misleading and its conclusions are unfounded.

Unfortunately, many of the most egregious errors and unsupported assertions would have been avoided with even minimal consultation with the CHSRA. Although some high-speed rail experience exists among Peer Review Panel members this report suffers from a lack of appreciation of how high speed rail systems have been constructed throughout the world, makes unrealistic and unsubstantiated assumptions about private sector involvement in such systems and ignores or misconstrues the legal requirements that govern the construction of the high speed rail program in California.

In recommending against proceeding with the high speed rail development “at this time,” the Report ignores many components of the CHRSA’s recent Draft Business Plan and attempts to promulgate a new standard of project feasibility that is inconsistent with national funding of transportation projects.

The report went on to criticize the Authority for not having chosen a business model, and for not releasing its internal models used to make the most recent ridership assumptions in the 2012 Business Plan. But it is the funding question that makes up the core of the Peer Review Group’s concerns.

Along with Governor Brown, other HSR supporters quickly fired back at the report. The California Labor Federation offered this criticism:

Today’s Peer Review Panel report on the California high-speed rail project misses the mark. With California facing a jobs crisis and an urgency to upgrade our failing transportation infrastructure, further delay in breaking ground on high-speed rail is neither prudent nor responsible.

Any project that’s the size and scope of high-speed rail is bound to encounter difficulties along the way. But rather than working to implement the vision of high-speed rail, the panel suggests derailing the project at a critical stage, which would put billions in federal funding at risk. That’s not a viable solution for California.

The Peer Review Group would indeed risk billions in federal funding. They would also risk putting Californians on the hook for the cost of doing nothing – the more than $100 billion it will cost to expand freeways and airports to meet the demand HSR would carry, and the costs of further dependence on oil and lost economic activity.

Their argument appears to be that if the state delays selling the Prop 1A bonds, that somehow the federal funding questions would be resolved. But the only resolution would be that Congress would give up on HSR funding for several years to come. By proceeding on construction now, however, the state would generate further momentum to provide federal funding to turn the Initial Construction Segment into an Initial Operating Segment. After all, the Peer Review Group’s other concerns can all be easily addressed – it’s the federal funding question that is the biggest hang up. However, there’s no realistic scenario by which California refusing to spend HSR money now would somehow produce Congressional willingness to provide more money in the future.

Ultimately, then, this is a political and not a technical question. Should California start building and use that to generate momentum for federal funding, or not start building and basically give up? The latter is the route taken by people like Scott Walker and Rick Scott. The former is the route California took in 2008 and vindicated when Barack Obama delivered $8 billion in federal stimulus for HSR in 2009.

There’s no doubt this report will be used by HSR critics in Sacramento to argue against spending the bond money. But they’ll have to fight Governor Brown, President Obama, California’s Democratic Congressional delegation, and the California Labor Federation. In an election year, with many legislators running in unfamiliar and unsafe districts in a top-two primary, the support of all those figures (and the campaign contributions of the Labor Fed) will matter more than ever.

So we will see what happens in the coming months. The battle lines are drawn, and the immediate future of California high speed rail hangs in the balance. The legislature ought to continue ahead with high speed rail, as that’s the only way to generate momentum for more funding to complete the system. Otherwise it will be many more years before the stars align again to get the project going again, as the costs of doing nothing continue to mount. That’s not good for California or its finances.

  1. Karl
    Jan 3rd, 2012 at 21:56

    Thanks for the summary and write-up in this post, Robert. I always appreciate your synthesis of CAHSR issues.

  2. Jerry
    Jan 3rd, 2012 at 22:57

    We need the jobs.
    We need to upgrade the rail infrastructure.

    VBobier Reply:

    And the ICS, Even if It were the only segment built, would be usable, as Amtrak-California could run on the rails & Amtrak-California trains doesn’t use electric locos, not yet at least. But then future funding may not be guaranteed in 2012, but It’s not impossible, not written in stone and not something that is illegal for a Future Congress to fund, like say in 2013.

    Joey Reply:

    Wonderful. 350 km/h double track being used for less than 10 180 km/h round trips per day potentially for all eternity.

    VBobier Reply:

    So what? Independent Utility is something from the ARRA funds… AB 3034 just says usable segment, which It would be.

    Besides it’s not just buying the track, the roadbed, the row, It’s also buying the land, all of which can be used by HSR once fleshed out, paying for someone to build It and that means jobs.

    (f) “Corridor” means a portion of the high-speed train system as
    described in Section 2704.04.
    (g) “Usable segment” means a portion of a corridor that includes
    at least two stations.

    Article 2. High-Speed Passenger Train Financing Program

    2704.04. (a) It is the intent of the Legislature by enacting this
    chapter and of the people of California by approving the bond
    measure pursuant to this chapter to initiate the construction of a
    high-speed train system that connects the San Francisco Transbay
    Terminal to Los Angeles Union Station and Anaheim, and links the
    state’s major population centers, including Sacramento, the San
    Francisco Bay Area, the Central Valley, Los Angeles, the Inland
    Empire, Orange County, and San Diego consistent with the authority’s
    certified environmental impact reports of November 2005 and July 9,
    (b) (1) Net proceeds received from the sale of nine billion
    dollars ($9,000,000,000) principal amount of bonds authorized
    pursuant to this chapter, upon appropriation by the Legislature in
    the annual Budget Act, shall be used for (A) planning and engineering
    for the high-speed train system and (B) capital costs, as described
    in subdivision (c).
    (2) As adopted by the authority in May 2007, Phase 1 of the
    high-speed train project is the corridor of the high-speed train
    system between San Francisco Transbay Terminal and Los Angeles Union
    Station and Anaheim.
    (3) Upon a finding by the authority that expenditure of bond
    proceeds for capital costs in corridors other than the corridor
    described in paragraph (2) would advance the construction of the
    system, would be consistent with the criteria described in
    subdivision (f) of Section 2704.08, and would not have an adverse
    impact on the construction of Phase 1 of the high-speed train
    project, the authority may request funding for capital costs, and the
    Legislature may appropriate funds described in paragraph (1) in the
    annual Budget Act, to be expended for any of the following high-speed
    train corridors:
    (A) Sacramento to Stockton to Fresno.
    (B) San Francisco Transbay Terminal to San Jose to Fresno.
    (C) Oakland to San Jose.
    (D) Fresno to Bakersfield to Palmdale to Los Angeles Union

    Joey Reply:

    It’s not a question of whether it’s legal or not. It’s a question of practical application. In the scenario you mentioned, that is, that nothing gets constructed after the ICS, or the event that funding for the rest takes a very long time to appear (and I make no claims about the likelyhood of either scenario) the ICS will constitute a massive waste of money.

    VBobier Reply:

    Yer forgetting about Caltrans owned, Amtrak managed Amtrak-California, AC could use the tracks, speeding up It’s service, so no It’s not a massive waste of money, It’s an investment in the future.

    Joey Reply:

    I maintain that whatever minimum amount of use Amtrak California could get out of the tracks constitutes a colossal waste of resources.

    VBobier Reply:

    In other words You believe no one rides trains, yeah right.

    Joey Reply:

    I believe that 6 slow runs per day does not constitute adequate utilization of high-speed trackage.

    adirondacker12800 Reply:

    The utilization doesn’t have to be adequate. Also “adequate” is subjective.

    J. Wong Reply:

    As a supporter of HSR I have to admit that the cost/benefit ratio of using the ICS for Amtrak isn’t very high so if in the end we’re forced to use it as such, then yes, it would be a waste of resources. That said, we’re a ways from being forced to use it for Amtrak, if ever, so I wouldn’t worry about it.

    joe Reply:

    J. Wong, a waste of resource compared to what?

    We have hypothetical and actual choices. There are a marvel comics universe of hypothetical choices. reality fails. to compete with them.

    Actual choices are to build or not build. To spend ARRA funding and have jobs and some utility in a deep recession or austerity.

    Nathanael Reply:

    Useful cite, VBobier. Thx.

    VBobier Reply:

    Yer welcome Nathanael.

    Donk Reply:

    I’m obviously a HSR supporter. But come on, lets not pretend that we ever really want the ICS to be used by Amtrak. I will buy this point though, just for the sake of the independent utility argument.

    Also, if I was on the peer-review panel and my ass was on the line for this, I might also call to question whether the whole thing will ever get funded. But my ass is not on the line, only my tax dollars, and I am willing to bet my tax dollars on it.

    Tom McNamara Reply:

    I think if Peer Review Group does have its ass on the line at all, but members of it do back in their day jobs.

    In fact, given that most of them appear to be Schwarzenegger appointees from Southern California (and I’m not just talking about Will Kempton) that would explain a lot. The 2011 Business Plan is basically Metro cutting a deal with the MTC and leaving SANDAG and OCTA out in the cold.

    (It’s funny too, since the current Metro boss is former OCTA boss Art Leahy who was replaced there by…wait for it… Will Kempton who was Schwarzengger’s Secretary of BTH.)

    Tom McNamara Reply:

    CORRECTION: *I think the Peer Review Group doesn’t have its ass on the line at all, but members of it do back in their day jobs…*

    Rick Rong Reply:

    @Tom McNamara: Where did you get the idea that “most of them appear to be Schwarzenegger appointees”

    Actually, four of the eight members are appointed by the Treasurer and the Controller, both of whom happen to be Democrats. However, there appear to be two vacancies. According to the Peer Review Group’s web site, of the six existing members, two are appointees of the Treasurer and one is an appointee of the Controller.

    Tom McNamara Reply:

    I said “most of them appear to be”. If 4/6 = most in your book than I wasn’t far off.

    Secondly, the Southern California bent is undeniable.

    Rick Rong Reply:

    Of the six actual members, three are appointed by Democrats and three by persons who were in turn appointed by the former governor. Where do you get “4/6”?

    Tom McNamara Reply:

    I meant, if you thought most was say, 5 out of 8 or 6 out of 8 then I understand why you thought I was off base. But if you would consider 4 out of 6 “most” then I wasn’t far off given that 3 of six appear to be….

    Rick Rong Reply:

    Okay then, using your math, as between the two of us, most of us are right, and you are wrong.

  3. StevieB
    Jan 3rd, 2012 at 23:53

    The review committee is chaired by Will Kempton, chief executive of the Orange County Transportation Authority. There is potential for conflict of interest as the review talks of the risk of Central Valley construction and reducing risk by allowing Caltrain and Metrolink to administer their segments. Electrification and track changes for Caltrain services. Grade crossings and other track changes for Anaheim to the San Fernando Valley.

    Tom McNamara Reply:

    It’s not a conflict of interest, it’s that if you remember the flap over the “incompatible offices” rule, apparently it doesn’t apply to the Review Groups. So you can stack these with your choice of circular firing squads. Of course SANDAG and OCTA are thinking it’s time to grab the HSR money because they don’t like their chances with the federal reauthorization looming in March.

    It’s still all silly season. When you don’t adjust the gas tax in 20 years, your pot of money is bound to run out….

    Nathanael Reply:

    “Potential” for conflict of interest? There *IS* conflict of interest; Orange County has already made it clear, through asinine public statements, that they don’t want money spent on rail if it’s gonna be spent outside Orange County, on something other than ARTIC.

  4. adirondacker12800
    Jan 4th, 2012 at 00:10

    Do you assume that the federal government will never spend another dime on high speed rail again and call it a day?

    Getting to fund raisers in Manhattan is a PITA. They’ll be spending more money on HSR or HSR-lite.

  5. Jerry
    Jan 4th, 2012 at 00:48

    Did any “peer” group ever review the spending of a trillion dollars on the war in Iraq??

    nslander Reply:

    Sure- its called the Office of Special Plans. But that’s irrelevant, as scrutiny of national spending priorities is applicable only to matters chosen exclusively by white conservatives.

    Tom McNamara Reply:

    Actually it’s called Congress…but it’s not as if the GAO could independently verify the presence of WMD in Iraq…..

    nslander Reply:

    Even if it had the power to prove a universal negative, the burden does not automatically shift to Congress generally, or the GOA specifically. Instead, it abdicated its responsibility to Curveball, er, the Executive Branch. But I digress…

    Pecos Reply:

    Yes. My peers in the public sector, who consists of everyone not in the US congress and Senate, reviewed the idea, thought it was a bad idea, made their opinions known, and Mr’s Cheney and Rumsfeld decided to go ahead with the “project” anyways. Now if our government only did the same with a good idea…

  6. Donk
    Jan 4th, 2012 at 00:55

    Its nice to see the Authority fight back on their own. Before it seemed that they would just sit there with their thumbs in their butts while everyone criticized them, or worse, sick Quentin Kopp or the PR Firm on them.

    I wonder if any of the newspapers will publish any of these quotes from the Authority. Na, what do they know? They will probably defer to HSR “supporters” Alan Lowenthal and Elizabeth Alexis like they always do.

    VBobier Reply:

    Alan Lowenthal, Some supporter, I’ve seen more support in women’s bras than He has.

    Mike Reply:

    It’s interesting, and telling, that the only REAL supporters who are coming out in defense of the authority are organized labor. I think this tells us everything that we need to know about what the political dynamic will be in the California Legislature: lots of hand-wringing and chest-pounding, but ultimately the California Democrats responding to the marching orders from their good friends in the labor movement.

    Nathanael Reply:

    Honestly? One hell of a lot better than taking orders from bankers, like the US Senate Democrats do. At least the labor movement wants to employ people in well-paid jobs; the bankers want to defraud and bankrupt people.

    Mike Reply:

    No slight to organized labor intended; my point is simply that it seems to be the case that critiques of the project no longer matter. What matters is that the largest and most influential constituent group of the majority party wants to see HSR built in California. Which is actually the same point that you made below.

  7. morris brown
    Jan 4th, 2012 at 04:28

    Like a deeply wounded animal, the Authority has released an eight page letter in response to the Peer Review report


    This is in addition to the one page press release they sent out as well.

    There is a very good video from ABC-KGO-TV on this issue

    J. Wong Reply:

    Ha, ha, Morris, animals are most dangerous when wounded. Look out! Here comes HSR!

    joe Reply:

    NSF requires a review of reports, this panel would have be wise to asked for anonymous expert commentary – iit could have easily seen the out of scope legal advice.

    STAGE 4. Report Review
    As a final check on the quality and objectivity of the study,
    all National Academies reports—whether products of
    studies, summaries of workshop proceedings, or other
    documents—must undergo a rigorous, independent exter-
    nal review by experts whose comments are provided
    anonymously to the committee members. The National
    Academies recruit independent experts with a range of
    views and perspectives to review and comment on the draft
    report prepared by the committee.

    The review process is structured to ensure that each report
    addresses its approved study charge and does not go beyond
    it, that the findings are supported by the scientific evidence
    and arguments presented, that the exposition and organiza-
    tion are effective, and that the report is impartial and objective.

    Each committee must respond to, but need not agree
    with, reviewer comments in a detailed “response to review”
    that is examined by one or two independent report review
    “monitors” responsible for ensuring that the report review
    criteria have been satisfied. After all committee members
    and appropriate National Academies officials have signed
    off on the final report, it is transmitted to the sponsor of the
    study and is released to the public. Sponsors are not given
    an opportunity to suggest changes in reports. The names
    and affiliations of the report reviewers are made public
    when the report is released.

    Arthur Dent Reply:

    The Authority bitch slaps Will Kempton with that letter. Watching from the sidelines, labor union promoters get excited and sell tickets to The Big Fight.

    The unions know this isn’t an either-or choice between HSR or HWs. It’s both or HWs, and naturally they want both. They won’t go down without a knockout fight. Taxpayers get stuck with the bill.

  8. Useless
    Jan 4th, 2012 at 09:22

    Canceling a financially non-viable HSR project is fine and is done elsewhere too.

    $10 billion Incheon-Pyeongchang HSR, a part of 2018 Winter Olympics bid infrastructure package, is canned. You will still be able to ride a non-stop express train from the Incheon airport to Pyeongchang via improved legacy tracks during the Olympic games, but the travel time will increase from promised 68 minutes to 93 minutes. The Korean government is investigating ways to shave minutes off the travel time to not anger the IOC.

    Tom McNamara Reply:

    Yeah…because building infrastructure only able to meet capacity during a two week sporting event (hello Qatar, Millennium Dome) is really the same as building infrastructure in time that can be used for said sporting event (hello Sydney Airport City Rail station, Athens Venzalos Airport, UCLA’s campus housing used for the 1984 Olympic village).

    Yeah the L.A. Coliseum hasn’t gotten any use since 1932, none at all…

    thatbruce Reply:

    Recent management of it not withstanding.

    Nathanael Reply:

    London’s been very clever with its 2012 “Olympics” transportation package, all of which was stuff which they needed to do anyway.

    Tom McNamara Reply:

    Don’t get me started about Salt Lake City’s TRAXX system…

    Nathanael Reply:

    Luckily, California HSR is useful and financially viable.

  9. synonymouse
    Jan 4th, 2012 at 11:04

    It is becoming clear that Jerry Brown has made 2 decisions – he is going to be a big spender and welfare stater and hsr will define his political legacy. After the token gesture of eliminating redevelopment he has committed himself to allowing only welfare and tax expansion initiatives and measures and not worrying whether Stilt-A-Rail will become Moonbeams’s Nowhere to Nowhere Big Dig for the ages.

    He will oppose a re-vote on Prop 1A all the while pushing welfare increases. His fiscal restraint cover, mantle and mantra will be blown quickly and for good.

    synonymouse Reply:

    Forget to add it will be obvious that Brown is utterly the unions’ bitch.

    Peter Reply:

    I’m straining myself to recall which, if any, of your “analyses,” “predictions,” or “suggestions” have ever come to fruition. For example, your claim about “Mega-Meg” becoming governor, and then having her get drubbed by Brown?

    nslander Reply:

    Did he really predict Meg would win? Because doing so would cause most folks to re-calibrate their political radar. Or simply shut it down.

    Peter Reply:

    Let’s just say that he predicted it in typical synonymouse fashion, well-couched, leaving himself a way out.

    Tom McNamara Reply:

    Synonymouse predicted the apocalypse.

    Twice I think.

    VBobier Reply:

    And twice, at least, He’s been full of It.

    Nathanael Reply:

    You don’t really have a clue.

    As far as I can tell, Governor Brown is doing his best to keep the state functioning until the effects of the upcoming redistricting are felt. THEN we’ll see what he really thinks….

    synonymouse Reply:

    I always felt that Meg was very much the underdog. Her defeat proved that California is Democratic state completely. Ronald Reagan could not be elected in California today. That era is gone.

    Brown’s fiscal caution cloak is totally in tatters. The CHSRA meander scheme is a joke, a money pit, and Brown buys into it without reservation. Last of the big spenders.

    adirondacker12800 Reply:

    Today’s Republicans would look at Mr. Reagan’s record and refuse to nominate him. Imagine the gaul, raising taxes….

    VBobier Reply:

    Oh the Horror… ;)

    Tom McNamara Reply:

    Brown’s actually doing the right thing. He’s increasing spending on what should be statewide priorities and shifting local priorities back to counties and cities. He’s actually reversing the problems created when he was Governor the first time.

    The Carly’s, Meg’s, & Westly’s of the world honestly shouldn’t run for Executive office. And neither should the Schwarzenegger’s or Jesse Ventura’s. Unlike the private sector with its focus on quarterly reports, hype, and what looks good to Wall Street, in government you eat your own dog food (as tech people like to say) every stinking day.

    synonymouse Reply:

    A union stooge and a corporate stooge are still stooges

  10. Nathanael
    Jan 4th, 2012 at 12:47

    Bond issuance isn’t subject to the dreaded 2/3 rules, right?

    So we should be fine. The Governor is ready to get started building the rail system California needs, and the majority of both houses of the Legistlature will go along with it.

    Sobering Reality Reply:

    Bond issuance is subject to your bond rating. Without a sound financial plan you get a poor bond rating. The result of that is rediculously high interest or no one buys the bonds, either one kills the project. This program does not a sound financial plan. While teh state may issue bonds and the grant from the government may mean money, it’s gettign money beyond that that is the issue. Of the $65 billion, the expect $9 billion form teh state and $16 billion over time from teh FED. This leaves a shortfall of $40 billion in todays dollars. Its is the issuance of this $40 bilion in bonds that will be the larger problem because there is not enough operating profit to cover the cost of the $40 billion plus the $24 billion in interest over 30 years (an annual cost of $2.2 Billion), assumign no cost over runs.

    Then you have to consider the cost of building to San Diego ($20 billion plus interest) and Sacramento ($10-15 Billion plus interest). Ann anual cost to the system of $1.6 Billion.

    Now for some reality:

    Under the best case scenario, with San Diego in the system the best revenue scenaro is $2.7 billion a year.

    The O&D costs are in the neighborhood of $1 billion. This would, under the bext case scenario result in profits of $1.6 billion.

    Now here is the problem:

    The cost of debt (or capital investment) each year is $3.6 billion.

    Hence, the system will run annual debt of $2 billion. It is this $2 billion in deficit that is the problem. And this is in unadjusted dollars. By 2040 (assuming build out is complete) that $2 billion will be about $4 billion a year in unfunded liabilities for HSR.

    Money is not free.

    adirondacker12800 Reply:

    so let me see if I have this right. 20 year bonds they issue in 2012 will stiil be making interest payments in 2040?

    Sobering Reality Reply:

    30 year bonds.

    Sobering Reality Reply:

    They are issuing 30 year bonds. The $9 billion isn’t really the issue given thats on the state budget. Its what comes after that is the issue. Anything beyond the $9 billion and whatever they get from the FED (they expect $16 billion over time) has to be financed, be it bonds or otherwise. It is the cost of financing everything else that is the larger issue because the Revenue less the O&M each year is not enough to pay down that level of debt that will be incured in buildign this, not even close. It’s $2 billion a year short. That’s why the cost increase, and lack of sound long term funding is such a concern for everyone right now.

    If you’re a finance person, you’re shitting yourself looking at this. If you’re in finance and you’re not shitting yourself, you’re incompitent.

    Clem Reply:

    These are GO bonds, and the quality of the HSR finance plan, or lack thereof, has no bearing on the bond rating–other than possibly slightly tarnishing the bond rating of the entire State.

    Sobering Reality Reply:

    You keep thinking that.

    Sobering Reality Reply:

    Again, I’m not talking about the $9 billion. I’m talking about what comes after when they really need to spend.

    Clem Reply:

    Maybe we can discuss that when the time comes. In the meantime you could give us your expert analysis on the financing of BART to San Jose, which costs more than the entire HSR ICS.

    Sobering Reality Reply:

    No, we do need to talk about that right now. That’s what you aren’t getting.

    I really don’t give a shit about BART or what you think makes it relevant to the ICS of a $100 billion train system.

    thatbruce Reply:

    Its the same state issuing the bonds. Its a competing transit agency after the same limited pot of funding. Worse, its another agency that’s semi-captive, in terms of design/build, to the same entities that are consulting to the CAHSRA.

    joe Reply:

    How much is money?

    The Feds can sell ten year bonds at 1.94%. And the US was downgraded by the highly inaccurate, we-cannot-be-sued-because-it-is-free-speech bond rating agencies.

    At 1.94%, Investors are basically paying the US to hold their money.

    Sobering Reality Reply:

    California is not the FED and a crappy business plan like this will net you junk bond status at a 4-6% rate.

    Clem Reply:

    You really think that borrowing a few tens of billions (amounting to less than a percent of California’s five trillion budget over the next 30 years) will earn us a junk bond rating?

    Sobering Reality Reply:

    No it’s the funding beyond the ICS that is the problem. You may not want to consider that right now, but people had the same “worry about it later” attitude toward the housing market in the last decade. Didn’t work out too well did it? Furthermore junk ratings have to do with the business plans vailidity.

    thatbruce Reply:

    That’s the rating on the bond series however, not the state’s rating as a whole (unless the state decides to pour far more than any of the projected HSR costs into great big paved holes in the ground).

  11. synonymouse
    Jan 4th, 2012 at 13:26

    Don’t remember predicting the apocalypse. I do think computers powerful enough to predict real time human behavior considerably better than the coin-toss are just around the corner. Game changer for those with access to the best ones.

    synonymouse Reply:

    Really did enjoy “Limitless”.

  12. Emma
    Jan 4th, 2012 at 15:31

    Well I wouldn’t be too surprised if we failed to meet the ARRA funding deadline. This authority is trying really hard up to a point where I think the project should be split in half so that at least one part of the project can survive: Of course I’m talking about the The LA-SD section through LOSSAN at 180 mph.

    Of course the embarrassment of dropping the last big and viable HSR project would be huge, but that shouldn’t stop city governments to continue to be ambitious about connecting large cities through rail instead of expensive highway expansions. $100 billion, be it in 2033 dollars or not still doesn’t resonate with me because we all know that this cost hike is the result of inefficiencies, CHSRA having no spine and apparently clueless people drafting hundreds of miles of railway above or under grade as if this project was the idea of a kindergarten student.

  13. Reality Check
    Jan 4th, 2012 at 15:58

    Morris Brown’s neighbor Martin Engel: Letter: Get rid of Caltrain and bring in BART

    D. P. Lubic Reply:

    And thank you, Reality Check, for your responses to Engel about BART’s technology not necessarily being the best choice for this job, and for pointing out the grade-separation requirements for an automated, third-rail transit line.

    I declare, most of the HSR critics, with some exceptions here (yes, Clem, Richard, Alon, a few others) are total idiots about railroads. . .

    Reality Check Reply:

    Careful. Don’t conflate HSRA critics with HSR critics.

    This can get more than a little tricky, however, since clever outspoken HSR critics pass themselves off as merely being HSRA critics or “process” watchdogs … or even as “supporters” with (endless) “concerns.” Of course, thanks to the HSRA, there are, in fact, many legitimate process problems and seemingly endless concerns to be had — many of which can be (and surely are) held by both HSR backers and HSR foes …

    D. P. Lubic Reply:

    This is just what I was talking about when I mentioned Clem, Alon, and even Richard. All of them, I believe even Richard and Synonomouse, would love to see rail come back, would love to see a modern, useful, high-performance alternative to driving (heck, Syn apparently even shares my enthusiasm for steam trains!)–and when they have criticisms, they are at least founded in some decent knowledge of the subject (although Syn and Richard are, in my opinion, a bit too abrasive here, on this site). On the other hand, fellows like Engel, and Morris, well, I wonder if they are like the little old grandmas who think we are all about “choo-choos” or something, or else they are like the 19th century farmers, early in the railroad age, who thought trains were the ruination of the nation, that they were evil, that they were devil wagons. . .heck, what am I saying, we have people who talk like that now!

    Jonathan Reply:

    Synonymouse would definitely be happy with a Steam resurgens or a steam excursion railroad.
    I’m not sure how happy he’d be with acutal 21st century European HSR trainsets.

    synonymouse Reply:

    Of course, I’d be happy so long as the trainsets look decent, nothing like BART cyclops monstrosities. Painted bright, no tarnished aluminum.

    Clem Reply:

    This is turning into a personal vendetta for our friend in Menlo Park.

    synonymouse Reply:

    I know nothing of the various parties and personalities in PAMPA but I do sense a lot of anger and frustration. I always suggested that a scorched earth last tactic would be to summon BART Vader.

    I also wonder if Kopp and Diridon’s obvious hostility to PAMPA wasn’t due to some long simmering political and/or personal feud. They tried to screw the Peninsula over but good but bent over for the likes of Chandler and Disney and the Palmdale real estate racket.

    But Mr. Engels should also be aware that Lord Vader’s henchman is that same ol’ PB.

  14. Reality Check
    Jan 4th, 2012 at 16:44

    Pro-HSR Dems also call for GAO study of CA HSR project:
    GOP, Democrats have competing visions of Calif. rail study

    This week, Costa and 10 other House Democrats — eight from California — countered with their own competing study recommendations. The Democrats, in essence, urged investigators to consider questions that might make California’s project look better.

  15. Emma
    Jan 4th, 2012 at 17:48

    Can someone explain to me why the EIRs take so ridiculously long? I have no knowledge on how they work and who is responsible for them. All I know is that they are ridiculously time-consuming while property values continue to rise. We already have enough problems.

    Why do you need an EIR when you purchase that land? Can’t you do anything you want with that land?

    Why do you need an EIR when there you build HSR right next to a highway or an existing rail corridor for which an EIR has already been filed?

    Why can’t green projects get some kind of exemption from the EIR to save time?

    It’s not like the train is going to crash California condors and btw. are all species worth saving when you know that another species will easily fill in the niche? Not to mention that 99% of all species that ever lived on earth have gone extinct.

    One more question: Aren’t there companies that can make EIR’s for you in a more efficient, quicker manner?

    Emma Reply:

    yes I’m all for environmental protection. But it can’t be that the regulations are so complicated that they halt projects that actually protect the environment.

    Richard Mlynarik Reply:

    One more question: Aren’t there companies that can make EIR’s for you in a more efficient, quicker manner?

    Sure. CEQA-o-matic. $0.99 from the iPhone App Store(tm).

    Emma Reply:

    Well there are firms that do lobbying, there are firms that helping you out in court, so why shouldn’t there be a firm that handles bureaucratic matters like this one which is causing headaches to so many.

    Richard Mlynarik Reply:

    Emma, those are precisely the sort of people who are doing this. Mehdi Morshed didn’t write 30k pages (or whatever it is) of DEIR documentation by himself.

    It’s mostly boilerplate, as those of us who have (completely pointlessly) read dozens of such documents know. The good stuff is either buried deeply, or completely hidden. (Just ask the nice CARRD ladies about that!) Firms DO specialise in preparing environmental documents and filling in the blanks (and not filling in the incriminating goodies) in the boilerplate. And they DO bill for it, handsomely.

    Look at the sections labelled “Preparers” and you’ll see the tip of the iceberg of who is involved, at least on the record.

    It seems you’re heading down the path of “if only an Efficient Corporation (rather than the dumb ol’ gubmint) undertook this task everything would be more better-faster-cheaper!”

    That’s a nice fairy tale about how capitalism and competition and contracting might work, and it might be how things work on Alternate Universe Earth, but what we see today is the result of firms that “handle bureaucratic matters” … and do they ever handle them.

    Emma Reply:

    I want government-owned corporations be they foreign or not that have experience with HSR handle this. Not private corporations. I think it’s not even in the interest of the private enterprise to build this since they are always out for short-term profits. But state-owned companies build things because of long-term benefits.

    Emma Reply:

    If it was for me, I would rather have the whole project start from scratch with people who have expertise in building HSR.

  16. peninsula
    Jan 4th, 2012 at 17:57

    Yes, these pro labor puppets feel that labor’s pet program has been slighted and very very frustrated because the following were apparently not consulted for their approval of the federal testimony/ investigations so far:
    Galgiani – California Cheerleader in Chief for CHSR/Big Labor Unions
    LaHood – Federal Cheerleader in Chief for Obama’s US HSR/Big Labor Unions
    Koppleman – Hired CHSRA ‘expert’ to provide top-secret review of the ridership study

    Along similar vein, its very instructive that CHSRA’s first and main complaint item in response to the Peer REview report this week starts with the ENORMOUS complaint that the peer review group did not CONSULT with CHSRA for CHSRA’s opinions/instructions on the peer review report. In other words – CHSRA is PISSED because for once an INDEPENDENT “peer review group” is acting INDEPENDENTLY and not being spoon fed the ‘right answers’ by the CHSRAs disinformation team. They didn’t get, (or finally refused to go along with) the memo. How dare they!

    Jack Reply:

    Heaven forbid you ask clarifying questions from the group you are reviewing! The peer review group states they can’t recommend funding because their questions are not answered with respect to future federal funding, outside-review of ridership estimates, and a disagreement with where the project is starting.

    All of which could have been cleared up by a 20 minute phone call;
    “Hey, Rolan, this is Will; just wanted to know if you think there will ever be any more funding for HSR. … Oh you think not this year, but there is a good shot in 2013 once the dem’s take back the house. kthxbye!!”

    This is a hit piece by OCTA because they want ANA-Bako first; plain and simple. To not even make the attempt, or give a couple days courtesy to the authority by giving them a heads up…

    Criminal just criminal…

    Paulus Magnus Reply:

    You mean the single most useful and important section first?

    Spokker Reply:

    OCTA wants to close the gap between Los Angeles and Bakersfield? Those guys are EVIL and CORRUPT.

    Richard Mlynarik Reply:

    The Koch Brothers done it.

    Reality Check Reply:

    As I mentioned earlier, Kempton did emphatically state (to applause) in his remarks on the new HSRA business plan at the November 2011 TRAC conference in LA that he wanted to see the gap closed first.

    peninsula Reply:

    Right. Way to not read the letter for yourself.

    Their issue is not that they ‘have an unanswered questions about future federal funding’. In fact, their letter doesn’t have any questions in it all for the authority. Their issue is that the authority has premised their ‘funding plan’ on a draft, non-credible, not complete, and unsubstantiated business plan, and that they have instead based their ‘funding plan’ on pure hypothetical nonsense . In other words they’ve built their ‘funding plan’ on the cotton candy foundation of the bogus business plan.

    And by the way, if the authority can answer the question (in a quick 20 minute conversation) of where the future funding sources are, then why didn’t they put it in the business plan? It’s because the flip answer ‘good shot of more money in 2013 – once (monkeys fly out of our butts) IS ALREADY IN the business plan, and the review group didn’t ‘question’ that answer, but rather they rejected it outright as a legitimate answer.

    joe Reply:

    Congress has to pass annual federal budgets and Congress has the power to pull back funding, Their is no guarantee that any funding for any project in future years.

    Sobering Reality Reply:

    ^ This.

    If they plan of the FED writing them a check each year to pay for this bit by bit, my kids will be dead before it opens.

    joe Reply:

    Jack; i agree that the peer review group (the review process) should include a step that let the CAHSRA comment on to clarify areas of disagreement or ambiguity.

    This typically happens for National Academy advisory and review panels. It protects the process and panel from embarrassments, commenting on areas outside their expertise, and arguing facts. In this case, the panel’s political and legal advice.

    peninsula Reply:

    The CHSRA has a billion pages of EIR and as many pages of business plan as their little minds can dream up to comment, clarify – to their hearts content. Plus they’ll have plenty of opportunities to stand up and testify in state capital, federal capital, and even in court. Plus don’t forget all the multi-millions of dollars worth of PR they’ve availed themselves of so far – so ‘clarity’ should not be an issue at all for CHSRA at this point.

  17. bay area commuter
    Jan 5th, 2012 at 07:49

    Its pretty simple really. The original bond passed by Californians requires a fiscally sound plan to initiate construction on the project before issuing bonds and its the peer group’s job to determine this. But what we have here instead is the personal philosophy of individual politicians making that choice which is explicitly what the terms in the bond where made to avoid.

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