On Thursday I discussed remarks made by CHSRA Board Chair Dan Richard about the upcoming revision to the Business Plan, remarks that suggested urban areas were going to play a greater role than earlier thought. While I never assumed Richard was suggesting that the Authority was going to abandon the Central Valley Initial Construction Segment, my post did include a discussion of why it would be a bad idea to do so anyway.

As it turns out, Richard remains strongly supportive of starting in the Valley:

“There are a number of people who would be just as happy to give that money back, and there are people who would say, ‘Let’s take it out of the Valley and put it in other places,’ but I oppose that,” said Richard, who acknowledged that he was originally skeptical about building first in the Valley.

“This is the place to start building.”

I strongly agree. The Central Valley is part of the key missing link in connecting Los Angeles to San Francisco via train. Building there makes sense not only because it’s flatter and cheaper, but also because closing that gap helps bring high speed rail much closer to reality in a way that building in urban areas alone never will.

Yesterday Ed Goldman of the Sacramento Business Journal wrote about his meeting with CHSRA Board Chairman Dan Richard – and he includes an interesting hint about the revised Business Plan that Governor Jerry Brown wants to see:

I ask him if the new-and-improved business plan that Gov. Jerry Brown wants on his desk any minute now will have any surprises in it. “Yes, there’s a very big surprise,” Richard says, calmly removing his classes and rubbing his eyes. And that is…? “I think it will surprise everyone that we’ve actually listened to our critics for a change,” he says with a fraction of a smile. About what, specifically? “We simply can’t ignore urban areas when we build this thing,” he says.

Cryptic, no doubt, but potentially significant. What exactly is Richard saying here? Critics of the project may hope he’s saying that the money will be moved from the Central Valley Initial Construction Segment to the ends of the route, investing only in upgrades to existing rail service that could at some future time be used by high speed trains.

That is what Senator Alan Lowenthal has been gunning for since at least 2009, and it would mean essentially abandoning the high speed rail project. While upgrading urban rail is a very good idea, high speed rail’s promise is connecting Los Angeles to San Francisco via the Central Valley, providing a new form of transportation that can give travelers an alternative to flying and driving that they don’t have. It’s a choice that, as we’ve seen around the world, will likely prove very popular with Californians, create jobs, and provide a significant economic boost by saving money on oil.

If building better urban rail in SF and LA is the key to getting intercity high speed rail, well, wouldn’t that have happened by now? Metrolink has been around for 20 years. The Pacific Surfliner (originally the San Diegans) have been operating since the late 1970s. The passenger rail service now known as Caltrain has been in operation for nearly 150 years. Those are all very valuable, successful services that can and should be improved. But they haven’t helped produce statewide high speed rail.

That’s because the problem is the gap between SF and LA. The main gap lies between Bakersfield and Palmdale through the Tehachapi Pass. But even if that were closed, a lot of new track still has to be laid in the Central Valley and through the Pacheco Pass to connect the Bay Area metropolis to the SoCal metropolis.

In short, the key to California high speed rail is track in the Central Valley. Starting there makes sense because once that gap starts to get filled in, then you get the political momentum to connect that track to the Bay Area and to SoCal.

If you do it the other way around, however, and build better tracks in SF and LA, you do nothing to address the gap problem. Instead you’re deferring it to an uncertain future. Worse, by caving to the “omg you can’t build in the middle of nowhere” bullshit, you’re actually making it harder to eventually close the gap because the precedent has been set that building outside the urban areas isn’t a good idea.

There are other practical problems too. Could high speed service within the Bay Area or SoCal generate a profit? Neither the Surfliners, Metrolink not Caltrain do so. Nor should they have to, as the purpose of passenger rail is to connect people rather than make money. But Prop 1A forbids a state operating subsidy and more significantly, one of the political arguments against the Central Valley section is that it won’t attract enough riders to be successful. Never mind the fact the CHSRA has no intention to just operate a Central Valley-only system; the Initial Operating Segment would connect either to the Bay Area or SoCal.

But an urban-only rail system would have an even more difficult time generating ridership to be profitable. That’s because the universe of choice riders is likely much smaller. Around the world, in places like Spain, many of HSR’s riders switched from planes. And in California, spending less than 3 hours on a train from SF to LA would be a far more attractive option than spending 6 hours in a car, unable to use one’s digital devices.

Within urban areas, however, the choices are different. Nobody flies between SF and San José. A bullet train connecting those two points could save you 30 minutes over driving (perhaps more at rush hour) but that’s not as great a savings over driving between SF and LA. Perhaps there would still be enough riders to pay the operating costs of urban HSR, and I’m willing to be convinced if there are ridership projections indicating that’s the case. But based on what I can see, it doesn’t look promising.

In short, moving the money to the urban areas looks to be more risky than the current plan.

Now it’s not at all clear that’s what Dan Richard was intending to say. The federal government hasn’t signaled a willingness to move its share of the funding away from the Central Valley. And Richard may have been indicating a desire to fund upgrades to rail in the urban areas, perhaps with the $950 million in Prop 1A earmarked for rail systems that connect to HSR. That’s a good idea.

Prop 1A requires a federal or private match for any of the $9 billion that is directed to HSR, but perhaps the CHSRA has found a way to spend some of that money in the urban areas while also proceeding as planned in the Central Valley. I would be quite strongly supportive of this too.

But as of right now, it doesn’t seem like moving the money out of the Central Valley entirely makes any sense. I hope that’s not what Dan Richard has in mind. We will find out soon enough.

Back in April 2010 the State Auditor released a report that was unfairly critical of the California High Speed Rail Authority. The State Auditor argued that California was uncompetitive for federal funds (as it turned out we won half of the $8 billion in HSR stimulus funds) and ignored the then-Democratic Congress’ interest in finding long-term funding for high speed rail. Further, the State Auditor held the CHSRA responsible for these things, even though they have no control at all over what Congress does.

In 2011 a Republican House did gut HSR funding, but again this was not the CHSRA’s fault. But in a new report the State Auditor continues to hold the CHSRA responsible for Congress’ failures on funding transportation policy. The result is yet another flawed report from a State Auditor who does not appear to have a strong grasp of transportation funding.

Although the Authority has secured funding for the Initial Construction Section (construction section)—the first portion of the program—the program’s overall financial situation has become increasingly risky, in part because the Authority has not provided viable funding alternatives in the event that its planned funding does not materialize. In its 2012 draft business plan, the Authority more than doubles its cost estimates for phase one of the program, to between $98.1 billion and $117.6 billion. Of this amount, the Authority has secured approximately $12.5 billion to date. The success or failure of the program consequently depends upon the Authority’s ability to obtain between $85.6 billion and $105.1 billion by 2033.

So the Authority gives itself 21 years to get as much as $85 billion from the federal government (although they will need much less – once an Initial Operating Segment is open, private money will step up to the plate). They’ll obviously need money sooner than that, and while this present Congress isn’t likely to give it, this present Congress is not going to last beyond the end of this year. Democrats continue to dominate the generic Congressional polls, a key indicator of their growing chances to reclaim the House in November. So the chances of the Authority getting more federal funding in the near future are not nearly as bleak as critics imagine.

The State Auditor doesn’t explain any of this. Instead they continue to bash the project as “risky”:

In its 2012 draft business plan, the Authority identifies the federal government as by far the largest potential funding source for the program, yet the plan provides few details indicating how the Authority expects to secure this money. Further, the plan does not present viable alternatives in the event that it does not receive significant federal funds. In fact, one of the funding options the Authority characterizes as an alternative is not yet approved for use on high-speed rail projects. Although it is possible that the Authority may obtain the necessary funding to move forward with the program, it risks significant delays or the inability to proceed if it does not.

The problem is that this isn’t unique to high speed rail. Many transportation projects, like BART to San José, rely on getting federal funds that they’re not guaranteed to receive.

But we can make a bigger point. If Republicans prevail in November, winning the Senate and the White House in addition to the House, one could then say that pretty much everything the State of California does is “risky” since federal budget cuts could undermine virtually every service and program currently provided by the state, from schools to parks to roads. The State Auditor isn’t really telling us anything useful here.

Some of the State Auditor’s concerns border on the absurd:

Further, the Authority’s 2012 draft business plan still lacks some key details about the program’s costs and revenues. In particular, only within the business plan’s chapter about funding—more than 100 pages into the plan—does the Authority mention that phase one could cost as much as $117.6 billion, whereas it uses one of its lower cost estimates of $98.5 billion throughout the plan. Moreover, neither of these cost estimates includes phase one’s operating and maintenance costs, yet based on data included in the 2012 draft business plan, we estimate that these costs could total approximately $96.9 billion from 2025 through 2060. The Authority projects that the program’s revenues will cover these costs but it does not include any alternatives if the program does not generate significant profits beginning in its first year of operation. Further, the plan assumes, but does not explicitly articulate, that the State will not receive any profits between 2024 and 2060, because private sector investors will receive all of the program’s net operating profits during these years in return for their investment.

The State Auditor doesn’t examine the rising cost of oil or other globally successful HSR systems (virtually all of them, including the Amtrak Acela, cover their own operating costs), simply assuming that the system will somehow have trouble, unlike all the other HSR systems, in covering its costs. If the State Auditor still thinks gas will be at $4 a gallon 50 years from now they are simply delusional.

As to the state not receiving any profits, well, unfortunately that’s by design. But that isn’t a problem for the HSR project, since Prop 1A mandates that the state not subsidize its operations. That’s a moronic and stupid rule, but it is also a rule the system can meet. If the system covers its own costs, as global evidence suggests it will, then the state faces no obligations and if private sector investors get all the profits, that’s stupid but not necessarily a financial problem from the state’s perspective.

The State Auditor makes their own anti-rail biases clear in the way they attack the ridership studies by innuendo:

The accuracy of the Authority’s estimates of the program’s profits depends upon its ridership projections, which are thus fundamental to private investors’ interest. The ridership model the Authority presents in its 2012 draft business plan assumes an average ticket price of $81 and projects that passengers will take a total of 29 to 43 million annual trips by the completion of phase one. However, when the Authority’s chief executive officer commissioned a ridership review group to independently assess the ridership projections, he handpicked the group’s members, which may call into question the independent nature of their assessment.

OK, this is simply bullshit. If the State Auditor cannot actually find technical fault with the ridership recommendations or the peer review of those numbers, they have no business impugning the peer review group or Roelof van Ark for putting it together. This kind of baseless attack has no place in an official report such as this.

The report goes on to make a number of recommendations regarding contract oversight and those are all well and good. But it is frustrating to see the State Auditor continuing to hold the CHSRA responsible for Congress’ failures, and their unfair attack on the peer review of the ridership numbers is a particularly ridiculous move that shows their inherent biases.

In a move that should surprise precisely nobody, two right-wing Republicans – State Senator Doug LaMalfa and former Congressman George Radanovich – have apparently filed an initiative to repeal high speed rail at the November 2012 election.

The “Stop The $100 Billion Bullet Train to Nowhere Act” is currently pending at the Attorney General’s office, awaiting a title and summary before it can be circulated for signatures. The key question is whether LaMalfa and Radanovich have any money to pay for signature gathering to put this on the ballot – it would cost at least $2 million to gather the 800,000 or so signatures required and given that there is not a lot of time to do so, with most other paid signature gatherers busy on other pending initiatives, they’ll need deep pockets if this were to have a chance at all of making the ballot.

My guess is, as of right now, that LaMalfa and Radanovich don’t actually have the money. They’re filing an initiative in hopes that someone will step up and fund it for them. This is not so different from when LaMalfa helped file an initiative to repeal AB 32 in 2010 – once he filed it right-wing and oil company money flowed in to put it on the ballot as Prop 23. But Prop 23 went down in flames in November 2010, suggesting that Californians support green jobs and sustainable projects and have little interest in following Republicans down a path of oil dependency and ruin.

LaMalfa is also running to replace the retiring Wally Herger in Congress, so this may be a bid for national attention and potentially national money in his run for Congress. As we know, House Republicans are vehemently anti-rail, as they are currently in thrall to their oil company donors (such as the Koch Brothers), so this could be LaMalfa’s attempt to prove to a national audience that he is just as wingnutty as Jeff Denham, Kevin McCarthy, and the other yahoos in the California Republican caucus.

Unless funding materializes to actually put this on the ballot, I’m not going to worry about it. Still, it is a good reminder for HSR advocates that the opposition feels emboldened, and believes that Californians really would be willing to sacrifice their future on the altar of right-wing dogma. Now would be as good a time as any to push back hard in defense of high speed rail and in defense of California’s future.