Jerry Brown Defends Cap-and-Trade Plan, Proposes Infrastructure Funding Plan

Jan 13th, 2014 | Posted by

Today was an eventful day for Governor Jerry Brown and his efforts to fund the California high speed rail project. First, he defended his proposal to use $250 million a year in cap-and-trade revenues for high speed rail:

Just so you know, Governor, I’m not one of these Twitter-holics (despite what the numbers might show). I’m with you that it’s time to get this done rather than think about instant gratification.

Here’s a transcript of the governor’s remarks on the topic from the Sac Bee:

“I’ve looked at the law surrounding AB 32 and the cap-and-trade,” the Democratic governor told reporters in Fresno. “I believe it’s legal, my lawyers believe it’s lawful. It’s a very appropriate source of funding.”

Some environmentalists have criticized the use of cap-and-trade money for rail, saying other projects could reduce greenhouse gas emissions more immediately.

“Yes, it’s long-term,” Brown said. “But we aren’t all, you know, Twitter-holics that have to have instant gratification after 140 characters. We can take a few years and build for the future, and that’s my sense here, that I’m coming back to be governor after all these years. … It’s been on my list for a long time, and I think we’ve got to get it done. And we do need that funding, and it’s legal, and I hope the Legislature will support it.”

Over the weekend, the Sac Bee editorial board endorsed Brown’s plan to use cap-and-trade funds for HSR, rightly noting that it’s an essential part of the state’s work to reach the 2050 CO2 reduction goals and that the California Air Resources Board already included it in their investment plan.

One Sacramento leader who is not quite as sold on the cap-and-trade plan is Senate President Pro Tem Darrell Steinberg:

Steinberg: “That’s what the administration I think has to answer, if the cap and trade revenue fits into an overall credible funding plan I’m open to considering it. But standing alone, it doesn’t make sense to me, unless we understand how we’re actually going to get from the southern part of the valley to Southern California.”

Steinberg isn’t throwing cold water on the idea, so his comments shouldn’t be read with too much concern. But he should understand that the cap-and-trade funds are key to unlocking a new funding plan, that without those funds there’s really no way to get to a funding plan that works in the absence of Congress.

Speaking of funding plans, today Governor Brown announced his 2014 Infrastructure Plan and it includes some information about high speed rail. And I emphasize the word “some”:

The Plan assumes $25.6 billion will be available from various funds including federal funds, Cap and Trade funds, Prop 1A bond funds, and other sources to help accomplish the Authority’s goals over the next five years.

That’s the sum total of the description of how HSR will be funded. In other words, it’s not very detailed. And it’s not really intended to be. The real document that matters will be the revised HSR business plan, due this spring. That will help answer the question of how to fund HSR in the Tea Party era as well as address the legal requirements of the Authority laid down in the recent lawsuit brought by Kings County.

  1. John Nachtigall
    Jan 13th, 2014 at 20:34

    Let’s assume it is legal and will be passed.

    250M is not nearly enough. As I explained in the previous 2 blog posts, it will take 70+ years to build the IOS using bond money, the existing federal grant and 250M a year. Bump it to 1 billon of year and it will still take 22 years assuming they keep the 8 billion already promised. That’s 2036 and it assumes way more than can reasonable be expected from cap and trade.

    This fiction is further reinforced by the infastructure plan that assumes 25 billon is funding from Unnamed sources. How many times do the Feds have to say no before they stop assuming they are going to get fed money? I get it, you hate the tea party, they are evil, blah, blah, blah. But they are not going anywhere anytime soon, especially thanks to the ACA disaster which is just energizing the base, So it’s at least 2 more years and maybe more of GOP control of the House which equals no fed money. Move past the 5 stages of grief to acceptance for the good of everyone.

    If HSR never gets built then the cap and trade money is just wasted, which is why some are wary of spending it on HSR. They need a comprehensive funding plan that provides 5 billon a year to meet th 2020 goal. Where is that money going to come from, because .25 billon a year is an order of magnitude off.

    joe Reply:

    It’s the 2014 budget, not the revisted HSR funding plan. You’re getting confused.

    In the 2014 Budget Jerry Brown plans to spend 250M for HSR and establish a reoccurring payment with cap and trade funds. Of course that’s actually 250M + 250M from Prop1A or 500M per year.
    It’s the 2014 budget.

    I’m so old I can recall HSR has too much money to spend by 2017.
    Rail requires high-speed spending
    The state would have to pull off a $6-billion feat in 5 years or risk losing federal funds for the bullet train. blah blah bah.

    John Nachtigall Reply:

    The Feds let them “pre-spend” the fed money so they would not lose it. A parting gift from LaHood. I am confident they would mess up spending the money if they had it, but that is not the problem at hand. The problem is they don’t have enough money

    StevieB Reply:

    Enough money for what exactly?

    John Nachtigall Reply:

    The IOS. 30 billion assuming no overruns. What the law would call the first usable segment as defined by the authority itself

    joe Reply:

    Or cost under-runs. The current construction contract is just under 1 B yet was estimated in the plan to be up to 1.8B.

    CAHSRA has more than enough money to build at a very fast rate to 2017. So much cortics complain they have too much money.

    The legal ruling – define a useable segment and identify funding sources – is fixable with a word processor. Make the segment smaller and/or identify more funds. It’s dungeon and dragons, not engineering.

    Elizabeth Reply:

    It is only under $1 billion because a number of items ended up being taken out of scope and contracted for separately.

    By our calculation, about $600 million has been taken out but is still being spent.

    This includes $50 million allowance for hazardous waste,$200 million for Caltrans to do 2 miles of route, $50 million for pge for utility relocation, etc etc

    I have never seen a large public project where the agency was providing regular updates to the board on the total cost, except for this one. It should be unacceptable.

    Joe Reply:

    Total cost isn’t necessisrly the same as the project’s estimated planned cost and received bids. Would you say the reason the bid was below cost is because they changed the scope to rig the bid?

    And to the hundreds of millions of dollars you listed?

    I think this is a non sequitur to the fact the bid came in below estimate.

    What’s the total annual cost of our presence in Iraq? That isn’t kept in one budget either. I think it is unusual to expect a single, all inclusive total.

    What watchdogs want to monitor, account and include in project costs are not the same as project’s real cost and real responsibilities.

    If Brown travels to a HSR meeting, is that trip supposed to included in project costs?

    Elizabeth Reply:

    I am stating

    1) You cannot compare the bid on a contract which only has part of the work with an original estimate that included all of it.

    2) There should be an easy to digest list of contracts related to CP1 somewhere on the CHSRA’s website. There is not. Something like this

    John Nachtigall Reply:

    ok joe, then it will all be over exciting. By summer they will have fired up the word processor, changed the defined IOS, identified all funding for said IOS, and broke ground.

    Should be an exciting time for supporters.

    Of course, I may remind you that Jan 2014 was supposed to be an exciting time also. The court was going to have ruled that the Tos suit was meritless, the ground was supposed to have been broken on construction, the Tea party was going to get thrown out in the 2012 elections and the feds were going to supply an unlimited amount of money, and the approval of Xpresswest was going to have happened to link it with the proposed HSR.

    That worked like a charm. I think the HSR Crystal Ball may need further calibration

    Joe Reply:

    They are proceeding – it’s very exciting to all the opponents that failed to stop work, failed to invalidate contracts. They are agitated and the 500M annual proposed by Brown has not once been called a victory by the opposition. Not one informed opponent is mocking that funding stream.

    michael allen Reply:

    2013 was the driest year on record for the Bay Area and most of Central California. Rainfall totals are coming in 20%, 30%, or 40% the previous record lows. Without precendent. This is what runaway climate change looks like. People who ignore (or deny) this reality are putting their children and grandchildren at great risk.

    michael allen Reply:

    And I might add, the next few years are very likely to contain as many if not more nasty weather surprises from climate change. And with each on of these events, the political support for reducing CO2 emissions via a carbon tax and dividend, cap and trade, bullet trains, etc etc. will only grow. We are probably at the lowest point on public support for more investment in green energy, green infrastructure, and green fiscal policies.

    joe Reply:

    Even the a simple scenario, same precipitation with warmer temps would reduce available water from snowpack accumulation and snowmelt. More snow would fall as rain and not runoff. And if we could have the same snowpack with earlier snowmelt, that would also be a problem. The State’s reservoirs were designed to fill and drain for a specific, later in the year, snow melt pattern.

    Studies now show, both: less precipitation, less snowfall.–ucs061413.php
    “The mountains won’t receive nearly as much snow as they used to, and the snow they do get will not last as long,” Hall said.

    What’s causing this drought is the Ridiculously Resistant Ridge

    VBobier Reply:

    John Nachtigall you are right, California needs to stop thinking they’ll get more Fed money, not when Repubs in Congress shut that flow of money down cold, so we’re on our own, orphaned as it were, Gov Brown and the Legislature needs to understand that. Will cap and trade be enough? It’s too early to say yes or no, as cap and trade is just starting out, from what I understand the $250 Million is just for 2014 with more in 2015 at a different amount, what amount? That’s unknown right now.

  2. michael allen
    Jan 13th, 2014 at 21:49

    Bravo Governor Brown! The Bullet Train has the potential (if it connects well with other other mass transit) to persuade many people to GIVE UP THEIR CARS. And if we are to dramatically reduce transport CO2 emissions, millions of people worldwide will need to GIVE UP THEIR CARS. High Speed Rail, TOD, and other well integrated mass transit (including perhaps future driverless electric car/taxi rentals) are the way to do this. And, the idea of taking AB32 funds away from the Bullet Train to subsidize more electric cars is ridiculous. We need fewer cars, not more!

    John Nachtigall Reply:

    How is HSR going to cause anyone to give up their cars. It is for medium length trips. You still need a car to get around town and to work every day

    Observer Reply:

    But a good well planned, coordinated system consisting of both HSR/intercity and intracity transport along with well planned, walkable communities can reduce CO2 emissions – and yes even reduce car use. There are people who are vehemently opposed to this type of thing. Just like there are too many couch potatoes, there too many car potatoes.

  3. morris brown
    Jan 14th, 2014 at 03:16

    No money for HSR in the just release new

    FY 2014 Omnibus – Transportation, Housing and Urban Development Appropriations

    (page 2….

    Rail – The Federal Railroad Administration is funded at $1.6 billion, a decrease of $34.6 million below the fiscal year 2013 enacted level. The bill expands oversight and includes policy reforms for Amtrak to ensure the best use of tax dollars – such as requiring overtime limits on Amtrak employees to reduce unnecessary costs, and prohibiting federal funding for routes where Amtrak offers a discount of 50% or more off normal, peak fares. No funding is provided for High Speed Rail.

    John Nachtigall Reply:

    In other shocking news, the sky is blue, the earth is round, and if you melt dry ice you can’t swim without getting wet

    Elizabeth Reply:

    That is so odd. I read in the just released DOF investment plan that the feds are giving california $17ish billion in 2015 for hsr. It must be true, right? We don’t have government officials in official government documents making up very specific sounding numbers (see bottom page 8) that have no basis in reality whatsoever.

    Robert, there must be some part of you that is a good government person. It is these kinds of absurd documents that cause people to lose confidence in the institutions which we need.

    Stephen Smith Reply:

    The 5-year infrastructure document assumes that ALL of the HSR spending or receiving (I can’t tell) will be in 2015-16.

  4. Brian_FL
    Jan 14th, 2014 at 07:16

    Off Topic but News!

    I just saw on the Siemens website today a job posting for a Commercial Project Manager based in Sacramento, CA to work on the All Aboard Florida project.

    As an educated guess, it would appear likely that AAF has selected Siemens for the rolling stock supplier based on this bit of information. I cannot confirm this as AAF has been very quiet about their selection process. But good news for CA and Siemens if this represents what I think it does!

    Observer Reply:

    Good catch. Good for Florida, good for California. I wonder if the selected trains will be capable of both 125mph and 200mph.

    Brian_FL Reply:

    From what I know the train sets will be diesel (DMU?) and limited to 125mph maximum operation. The last I heard was single level coaches with a diesel locomotive on each end. Perhaps the recent Siemens-Cummins announcement for a new Tier4 Diesel capable of 125mph operation has a role in this.

    Joey Reply:

    Turbine engines might allow 150 or so, but that’s not what AAF is looking at.

    jonathan Reply:

    Gas-turbines on good track (not crappy US-freight track, beaten out of gauge by flat wheels on poorly-maintained freight cars) can do ~200 mi/hr. TGV 001, the gas-turbine predecessor of the TGV Sud-Est, exceeded 300 km/hr … 175 times, sez Wikipedia.

    adirondacker12800 Reply:

    the gas turbine trains that ran in the US could and did do 125/200. Not often but they did.

    Ted Judah Reply:

    Sounds like AAF is buying train sets that meet FRA requirements and would likely fit for either Tri Rail or Amtrak’s purposes….

    Brian_FL Reply:

    Update: as of 7pm EST the job notice was removed from Siemens website. Most likely AAF requested it be removed. As FECI/AAF is normally a very private and discrete company, I am pretty sure this posting was a mistake on the part of Siemens. But I am pretty confident that the proverbial cat is out of the bag. At this point, it is just a matter of confirmation from AAF.

    swing hanger Reply:

    I reckon the Siemens position is for managing the locomotive end of the rolling stock project. As far as the passenger coaches, Siemens AFAIK has nothing FRA-compliant in their catalogue (nor do they have a history of supplying such rolling stock to the “unique” US market), though certainly they have the engineering chops to build one.

    swing hanger Reply:

    Anyway, hopefully the total trainset design will be more BREL HST rather than Bombardier LRC in terms of success and longevity.

  5. Minivet
    Jan 14th, 2014 at 08:53

    I support HSR and get a lot of out your blog, but I want to point out that the LAO has elaborated (not sure if it did before) in its analysis of the new budget why it is concerned about the legality of using cap-and-trade revenue for HSR.

    Their concern is not as simple, as you have suggested previously, as that meeting the 2020 target is the primary purpose of AB32 and therefore fee revenue must be devoted to that. Rather, they say that under other legislation, the revenue might qualify as a “mitigation fee” which would put stricter constraints on how it can be used. I don’t know if that’s true – the governor’s office certainly disagrees – but it’s not just a matter of what the AB32 text dictates. Also they said it’s a legal opinion not from them, but from the Legislative Counsel.

    See, page 38.

    Robert Cruickshank Reply:

    This concern exists with any use of the cap-and-trade revenues, whether it’s HSR, electric cars, whatever. The Legislative Counsel has their view, and the Attorney General has hers. If this does wind up in court I would expect the state to prevail given that this is the way AB 32 was written and that AB 32 was upheld in a voter referendum in 2010. AB 32 and the cap-and-trade system were both crafted with this Sinclair nexus test in mind, so while the LAO is obviously going to keep concern trolling this project, I’m not worried.

  6. Tony D.
    Jan 14th, 2014 at 09:06

    Look, I’ve become very skeptical over this project because of funding issues just like the next guy. That said, it appears that those who are against Cap and Trade funds being used for HSR are already against HSR period! What else are they going to say? Environmental groups? Most likely want ALL Cap and Trade funds for their pet projects and nothing else.

    At first glance it looks like using Cap and Trade for HSR is legal and will go forward; despite what the usual naysayers say. Bond monies will soon flow, construction on the IOS will soon commence and Caltrain will get electrified. Here we go and enjoy the ride, wherever it may take us…

    Observer Reply:


    Paul Druce Reply:

    That said, it appears that those who are against Cap and Trade funds being used for HSR are already against HSR period!

    That would be remarkably incorrect.

    Tony D. Reply:

    How so?

    Alon Levy Reply:

    Because Paul is pro-HSR, I’m pro-HSR, Drunk Engineer is pro-HSR, the Sierra Club supported 1A.

    Travis D Reply:

    Paul and Drunk Engineer are pro HSR? In what universe?

    I’ve seen nothing but derision from them for HSR.

    Jon Reply:

    They support HSR in the same way as the rope supports a hanged man.

    Elizabeth Reply:

    hsr chsra 2012 biz plan

    I supported Prop 1a

    Elizabeth Reply:

    html fail

    hsr is not equal to chsra 2012

    Alon Levy Reply:

    In one in which Paul looks at rest-of-world HSR lines and concludes that they are profitable and California HSR is likely to also be profitable, and Drunk Engineer complains about road projects and derisively comments that they never go through the same scrutiny as HSR.

    Hell, Richard is pro-HSR, although I think he voted against 1A on “they’re all corrupt” grounds.

    Ted Judah Reply:

    HSR was born free, but everywhere is in chains…. The problem with US transportation is that American engineers who are obsessed with creation and perfection, have to deal with utilities that are obsessed with obsolescence and coercion….

    Alon Levy Reply:

    The problem with US transportation is that for decades there was an active policy of destroying cities and destroying transit in order to build auto-oriented roads, and now it’s hard to reverse it because of lots of veto points and extreme construction costs.

    Stephen Smith Reply:

    The problem with US transportation is that American engineers who are obsessed with creation and perfection…


  7. BigNoel
    Jan 14th, 2014 at 10:39

    What I want to know is when is the deadline to place a ballot measure on the ballot? There is all this noise about an Assemblyman who wants a ballot measure to overturn Prop 1A. The deadline for turning in over 500 thousand certified signatures to the Secretary of State is June 26, 2014 for the November 4th election. But before that you can start asking for signatures you have to file with the Secretary of State your intent to qualify a ballot measure. I think but am not sure the deadline for doing that was September of last year. I think the earliest such a measure could go to the voters would be 2016. By then the construction in the Valley will be over had done.
    I don’t think this is a serious proposal but an attempt to get publicity to wipe up the base. But the media eats it up fails to do their job to investigate before they report.

  8. John Burrows
    Jan 14th, 2014 at 12:03

    The 2014 Infrastructure Plan may assume that $25.6 billion will be available over the next 5 years, but as of now $7.9 billion has actually been appropriated.

    My record for predicting the future has been way less than perfect, but I will still make a guess that by the end of 2019, CAHSR will have between $10.9 billion and $16.5 billion in available funding.

    If we get $250 million per year from cap-and-trade and nothing else comes along, there would, with a 50% match from Prop 1-A funds, be $3 billion to add on to the $7.9 billion for a total of $10.9 billion. If the cap-and-trade amounts increase over the next 5 years and if we find enough other funding to match all of the remaining Prop 1-A funds, then we add on $8.6 billion for a total of $16.4 billion—But I don’t see how we can plan on more than this amount being available within the next 5 years.

    With the money that we do have we should be able build the 174 miles between Merced and Bakersfield and start running those 125mph diesels. Completion of this backbone doesn’t bring high speed rail to California, but by the end of 2019 we could have well over a million trips per year being made on these higher speed San Joaquins.

    In the event that in the near future additional CAHSR funding comes in dribbles, the actual operation of a 174 mile segment at 125mph speeds may become crucial to the whole project. It might be that for a number of years this segment is all we will have and how well it operates will be vital to what happens next. If these higher speed trains become popular and if ridership spikes, then I would think that high speed rail in California would move forward quickly.

    Tony D. Reply:

    So there’s possibly a $9.2 billion shortfall between what the Governor put out and your calculations. Any idea where that funding would come from? (anyone?)

    Jon Reply:

    There’s $850m in cap and trade revenue in the current budget, and a $250m allocation to HSR. The annual cap and trade revenue is expected to climb towards $8bn/year from 2015.

    If the amount of money spent on HSR rises proportionally, the $9.2bn shortfall will be closed in a few years.

    John Nachtigall Reply:

    your proposal is not compliant with prop 1a. Specifically the IOS must be suitable for HSR operations

    H) The corridor or usable segment thereof would be suitable and ready for high-speed train operation.

    and before you say it, a 125 diesel does not qualify

    (d) High-speed train” means a passenger train capable of sustained revenue operating speeds of at least 200 miles per hour where conditions permit those speeds.
    (e) “High-speed train system” means a system with high-speed trains and includes, but is not limited to, the following components: right-of-way, track, power system, rolling stock, stations, and associated facilities

    so no dice…sorry

    John Burrows Reply:

    The successful operation of 125mph diesels over 174 miles of Initial Construction Segments might
    make private investors more willing to jump in and might also help to change public perception of the project.

    I don’t know that there is a 5 year time limit on having all of the funding on hand for the IOS. If close to $16.5 billion can be pinned down and if there are a number of ways in which the remaining $8.5 plus billion can be raised, then I would hope that Judge Kenny will give the green light. And if he can be convinced that the successful operation of diesels in the San Joaquin Valley will increase the prospect of obtaining the remaining funding even further—We will find out soon.

    John Nachtigall Reply:

    Successful diesels might make private investors jump in or it might not, but it is a moot point. And there is no time limit at all, take all the time you want to identify all the funds, but wait to build with the bonds until all those funds are identified.

    Those are direct quotes from the law. They are required to build an HSR system, not a fast diesel train system. It’s directly in the law and was put there specifically to avoid what you are advocating which is to build some half ass system that is not HSR.

  9. Travis D
    Jan 14th, 2014 at 14:19

    This issue with The Sierra Club reminds me of The Life Of Brian. People’s Front of Judea vs Judean Peoples Front.

    I once got into it in college with Greenpeace when I confronted them on why they would not support a nuclear power program that would reduce our dependence on coal and natural gas. They wouldn’t hear of it! It was solar and wind for them and they wouldn’t entertain any other ideas even if they achieved their supposed goals.

    Sometimes these activist groups get so caught up in advancing their own specific vision that they lose sight of what they are supposed to actually be fighting for.

    Richard Mlynarik Reply:

    Sometimes these activist groups get so caught up in advancing their own specific vision that they lose sight of what they are supposed to actually be fighting for.

    Damn straight! Parsons Brinkerhoff, Tutor-Saliba, GE actinides, and gutting CEQA.

    Attention citizens: get in line with the true way to achiveve “supposed goals”!

    Ted Judah Reply:

    Try explaining to fiscal conservatives how economic growth, not personal responsibility, is how you shrink the welfare state….

    adirondacker12800 Reply:

    .welllllll.. people who are making a living wage don’t need food security subsidies or heating assistance or rent vouchers or…

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