In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

So this is an outrage — not because America is A-OK, but because these people are in no position to pass judgment.

Embarrassingly, S&P was found by the White House to have been $2 trillion off in its financial calculations. But instead of not going ahead with the downgrade, S&P did so anyway, citing political factors, primarily Republican unwillingness to let the Bush tax cuts expire.

The downgrade may not have much actual effect on US finances. Last week’s market downturn saw a flight to safety, including US treasuries. US credit default swaps hadn’t been affected, and overall the markets seem to believe that US debt is perfectly fine. Despite the hype, it’s unlikely that the downgrade will have a hugely negative impact on federal finances, and borrowing costs will likely remain low.

That’s not to say there’s no problem here. The downgrade doesn’t change the basic facts on the ground in Washington DC – that the House of Representatives is controlled by a group of insane radicals who are absolutely determined to gut federal spending, and Senate Democrats along with the White House are either unwilling or unable to stop them. In fact, the stock market’s decline last week was largely due to concerns with the impact of the austerity plans adopted by Congress in order to raise the debt ceiling, along with concerns at austerity-induced problems in the eurozone.

Those problems aren’t new, and the Republican House has had its eye on HSR funding ever since it came to power in January. The downgrade doesn’t change any of that. It might put additional pressure on Congress to cut more spending – even though S&P said the problem was an unwillingness to raise taxes – but the Republicans will use any excuse they can find to press for HSR funding cuts.

What about the downgrade’s impact on California? Last week there was speculation that HSR was first on the chopping block in the event of further austerity in California:

Even though construction of California’s 800-mile high speed rail project is scheduled to begin next year, a lot of questions remain. Moody’s senior economist Eduardo Martinez said that he thinks the project is a prime target for a funding cut.

”High speed rail is not universally accepted in this country, or in California in its current form. There are a lot of concerns with cost overruns,” said Martinez. “And in the Bay Area alone there are a lot of concerns over pathways – whether it’s going to go through the Peninsula or the East Bay. So that makes it a prime target.”

This is nonsense. Nothing is universally accepted in this country. And we know that majorities of Californians support HSR, as does the state legislature. HSR funding survived brutal rounds of austerity in Sacramento in the last four years, so it’s hard to imagine why things would be any different now.

Martinez’ argument is based on the conventional wisdom that in a recession, you cut rather than spend and invest. That may hold sway right now in the House of Representatives, but it hasn’t exactly held in California, as HSR funding’s popularity and survival shows. Future federal cuts, which are coming regardless of a downgrade unless Obama and Senate Dems decide to stand up to House Republicans, could force further austerity in California, but because political leaders in Sacramento understand the need to spend money on infrastructure to create jobs, HSR doesn’t seem a very likely target at all.

What about the impact on the state’s ability to sell the Prop 1A bonds? Treasurer Bill Lockyer was busy concern trolling about the project in June, complaining about the business plan and ridership projections. But he acknowledged that because Prop 1A are general obligation bonds, selling them would be a breeze:

Lockyer said he initially presumed that “we would go to market with a high-speed rail bond;” that is, bonds tied to the bullet train project.

“I was worried that if I had to sell a pure high-speed rail bond, that the uncertainties, the (issues of) revenue stream and passenger volume and fare box revenues were so unsettled that no investor would want to take that risk,” he said.

Actually, the rail bonds are to be “just a vanilla general obligation bond, backed by the state’s credit,” Lockyer said. Thus, they pose no special marketing problems.

He speaks from experience. California has a low bond rating, with several downgrades in recent years. But Lockyer has had no trouble selling debt on the market. Demand for California bonds remains strong.

That’s because the state constitution mandates that bondholders, along with schools, have first claim on tax revenues. Default is essentially not an option.

Overall, then, it’s hard to see the US credit downgrade having any impact on the HSR project. It doesn’t change the fact that we have a serious problem in Congress, it won’t erode public or political support for the project in California, and it won’t make it difficult to sell Prop 1A bonds to start construction in the Central Valley next year. Rating agencies are of questionable value anyway, and the primary loser of the downgrade may be S&P’s reputation.

Look, this country need to rebuild itself. We are still living off the Eisenhower era and off the Roosevelt era when they built the thousands of bridges and the thousands of government buildings and the roads, the highway system and all of those things. What’s the new thing that we’re building? We haven’t built anything in decades. We need a high speed rail. We need new infrastructure. We need to think about it because we have countries like China and Europe that are very fast gaining on us and surpassing us. So we got to get our act together and really make this country kind of live in the 21st century, not be with the infrastructure in the 20th century.

And yet Arnold’s real legacy for HSR is much less golden. He continued to delay the vote for the $10 billion in HSR bonds well beyond the original 2004 date. That may have worked out to HSR’s benefit, since 2008 saw a gas price spike that proved the need for high speed trains and saw the election of a very pro-HSR president, but that wasn’t anything Arnold intended to happen. Instead he spent the intervening years attacking the CHSRA’s funding and putting the project in significant jeopardy.

Even today, with Prop 1A approved and the first federal funds having been awarded, it’s clear that Arnold Schwarzenegger has damaged HSR in some very important ways. The CHSRA’s lack of funding earlier on meant it never could do the kind of massive public outreach that could have ensured that some of the current problems over design and implementation were dealt with earlier on. While the claims of the NIMBYs that the CHSRA did no public outreach whatsoever on the project prior to 2009 are simply wrong, more ought to have been done, but without money the CHSRA couldn’t do it. Instead of fighting the governor and the legislature to keep the lights on in 2007, staff could have instead been out talking to residents, local governments, and potential HSR riders about the project.

Still, the CHSRA is working to overcome that handicap, and since 2008 Arnold has been more help than hindrance to the project. The question we now face here in 2010 is whether his successors will do the same.

Jerry Brown is likely to be the only Democrat running for governor in 2010, and as you all probably know, has been governor before (elected in 1974, reelected in 1978). Like all governors elected prior to 1990, he is exempt from term limits, so he can run for a third term. He has a history with high speed rail – during his governorship he was a strong supporter of HSR, despite opposition from some powerful state legislators. In 2003 Richard Trainor published an article on Brown’s HSR efforts, a fascinating if incomplete read. Brown, with the help of one Mehdi Morshed, rushed a bill through the legislature in late summer 1982 to create an HSR system with Japanese contractors, exempt from CEQA and Coastal Commission review.

1982 was Brown’s last year as governor. That year he ran for US Senate and lost to Pete Wilson. By 1983 anti-HSR forces, led by the Southern California Association of Governments, began attacking the HSR project. They tried to debunk the ridership studies using a “white paper” produced by the city of Tustin (my hometown – sorry!) and authored by Trainor. Soon thereafter, without support from Brown’s successor, Governor George Deukmejian, and with only weak support in the legislature, the HSR project collapsed.

Nearly 30 years later, California’s HSR project has not only been revived, but is stronger than ever. It has $10 billion in voter-approved bonds, over $2 billion in initial federal funding, and is very nearly finished with the full set of environmental reviews (when the CHSRA was created in 1996, the project was not exempted from CEQA). Initial construction is just two and a half years away.

Jerry Brown would be very well poised to come in and provide leadership and institutional support that the HSR project desperately needs. It’s likely that he would not only support it but would work to see it properly and effectively implemented. CHSRA might get new board members (Arnold Schwarzenegger appointed the majority of its present membership) or it could be folded into an executive branch department that Brown would oversee.

Brown isn’t an officially declared candidate yet, though he is definitely going to run for governor, so he hasn’t yet taken a position on the project. As Attorney General, his office has been supportive of the project, and backed the CHSRA’s controversial position on the Transbay Terminal project studies last September.

Brown is still espousing a vision of “elegant density” for California’s future, as he did 30 years ago, a vision that was never really implemented after the Reaganite turn politics took in the 1980s, but a vision that holds urban density and mass transit at its core. There is every reason to believe Brown will continue to support HSR today.

His likely November opponent is Meg Whitman, a Republican and a former eBay CEO. She appears to be a more openly right-wing version of Arnold Schwarzenegger, and seems to believe that advocating for higher unemployment is a winning campaign strategy. So far she has made no public statements on high speed rail, so guessing her position is going to be rather difficult. She wants to slash state spending, but then so did Arnold Schwarzenegger and he ultimately backed HSR. Whitman does not appear to be an anti-rail ideologue, but she does live in Atherton, and might well share some of the NIMBY attitudes of that city’s leadership. It’s possible she would continue Arnold’s support of the project, but it’s equally possible she wouldn’t. Definitely worth watching closely.

We have a clearer picture of where the other Republican candidate, Steve Poizner, stands: he opposes it:

Based on his remarks about our deficit and debt service I asked him for his opinion on the CHSRA High Speed bullet train especially in light of the fact that we have neglected our transportation infrastructure. Steve said he is a frequent flyer on Southwest Airlines and that all factors considered “he opposes the project.”

Thank god he isn’t likely to even make it out of the Republican primary – the last thing we need in government is someone who thinks that because Southwest has regular flights right now between SoCal and the Bay Area, we don’t need HSR. As we’ve repeatedly explained here, Southwest’s fares will rise along with everyone else’s in the coming years, and besides, door-to-door HSR is comparable in travel time to flying. In other heavily traveled air corridors, such as the Northeast Corridor or Madrid-Barcelona, HSR has been able to take as much as half the market share and generate profits in the process.

Poizner not only doesn’t understand that fact, he also is convinced that California has too much debt and that the answer is to delay the sale of authorized bonds, including Prop 1A. In short, he seems to be an HSR denier’s dream. Unfortunately for them, he isn’t likely to get anywhere near the governor’s office.

So the 2010 gubernatorial election will come down to Jerry Brown, a known and long-time HSR supporter, and Meg Whitman, whose views on the topic are totally unknown. I don’t know whether HSR will play a role in the campaign or not, but I believe it is to Brown’s benefit if it does. I’ll keep you all updated on how the gubernatorial race impacts HSR – and vice versa – between now and November.

It would be particularly unfortunate if high speed rail went down that path. And it’s entirely unnecessary. Voters approved the project route and $10 billion in state bond funding at the November 2008 election. Voters didn’t sign off on every single element of project design, nor should they have to do so. Infrastructure design should not be done by the ballot box (look how well setting tax policy by ballot initiative has worked out for us!). It should be done by a professional staff with public oversight and public engagement.

Unfortunately, some folks think otherwise. An op-ed by Thomas Elias in yesterday’s Mercury-News uses the new fare estimates as an argument for holding another vote on high speed rail. He begins:

It would not be surprising if voters who read the latest report of California’s High Speed Rail Authority feel more than a little bit bait-and-switched.

Really? Because the fares might change, it’s a “bait-and-switch”? That’s the most absurd thing I’ve ever heard. Do people claim that air travel is a bait and switch because some are charging for bags?

Most of that was envisioned in the proposition voters approved. But the latest fare forecast was not. As presented in 2008, fares were to run about $55 one-way between Los Angeles and San Francisco, designed to be competitive with airfares that now often hover just under $60, even though cheaper ones can occasionally be found.

But the new plan calls for a one-way charge of $105, about 83 percent of the $125 the rail authority predicts airfares will run in 2035. That near-doubling of prospective fares would reduce expected ridership by almost one-third. In short, as much fun as high-speed trains are to ride, they would probably never be affordable for vast numbers of Californians.

First off, as we’ve discussed endlessly here, it’s actually very difficult to find a $60 fare from SF to LA on short notice, even if you can it doesn’t take you from downtown to downtown, the travel time is about as long door-to-door, and finally, anyone who thinks that airfares will still be $60 in ten years’ time is out of their minds. Rising oil prices will ensure the cost will be much, much higher.

But in any case, that’s not a matter for the voters, and it’s not a sign that the project is flawed, damaged, or somehow different than what we expected. The issue of what the fares should be is important, but it can and will be addressed through activism as well as legislative oversight and action. Going back to the ballot over this is pointless and unnecessary.

Meanwhile, no change is anticipated in the $647 million annual cost of repaying interest and principal on the bonds. That money will be paid not just by riders and residents of areas the project might serve, but also by non-riders and residents of the vast portions of California who would have to travel as much as several hundred miles just to glimpse a high-speed train zip past. From the moment the first of the bonds are issued, repaying them will become a higher priority for the next 30 years than any state program except public schools.

Actually, most Californians would live within 30-40 miles of an HSR station once the system is fully built out to Sacramento and SD, with many being much closer. Most others will have passenger rail feeder services. Maybe if you live in Lake Tahoe or Eureka you might not see this up close, but most Californians will be able to make use of these trains.

More importantly, they’ll be able to make use of the savings on the cost of driving to vacation destinations within the state, the savings to the state budget from reduced demand for freeway and airport expansion.

And then there are the environmental questions. Cities such as Menlo Park and Atherton are already fighting a plan for an above-ground line dividing their cities along the route between San Jose and San Francisco, where 31,000 riders daily are expected to enjoy commute times of 31 minutes or less. At the time of the vote, the route was known; not the notion of a 15-foot divider splitting many cities on the Peninsula. The need to widen existing rail rights-of-way, spawning likely eminent domain takeovers of an as-yet-unknown number of homes, was also not advertised.

As we know, this is absurd – these cities are already divided by the Caltrain corridor. It makes little difference whether the rails are at-grade or supported by a concrete wall. These issues had been known on the Peninsula in particular before November 2008; even if they had been shouted from the rooftops, it’s likely Prop 1A would still have passed.

Anyone who’s ridden the high-speed trains of France, Spain, Belgium, England and Japan knows how comfortable and convenient and enjoyable they can be. But given the revised fare structure and accompanying ridership estimates, it’s fair to wonder whether they should be partially funded in California by tax money from millions of people who may never ride them.

Of course, those trains are ALL partially funded by public tax money. So are most of our airports, freeways, and other roads. Thomas Elias almost certainly drives daily on roads I have never used and will never use in my lifetime. But I still derive economic benefit because those roads enable him to work, to spend money, to grow the economy. Same thing with police and fire services, schools, on and on. HSR will function in exactly the same way, creating new economic activity and savings that will benefit even those who never once ride the train.

Another question is whether all this is worth it in order to get the flashy transport system that would result and the approximately 600,000 high-paid new jobs the new report says bullet trains would create. Those issues will hang over this plan from now until the system actually opens.

Once again we see the HSR deniers claiming that California doesn’t need job creation. It must be nice to live in their world, a world where jobs are plentiful and no family is sitting over the dinner table freaking out about how to pay their bills because both breadwinners have been laid off and can’t find new work in a state with 12% unemployment.

All of which means it might be wise for the Legislature, which put last year’s Proposition 1A on the ballot, to submit the plan revisions to another statewide vote.

Which is entirely unnecessary. And if Elias is really concerned about state finances, he might want to think twice before advocating this goes back to the ballot – I cannot imagine California’s credit rating will fare well if rating agencies see voters repudiating state debt that they earlier approved.

I have no doubt that if we did go back to the ballot that HSR would again be approved. But there is no need to waste the time and money on doing so. HSR deniers cannot accept the fact that they lost, that the public rejects their views, and that Californians want high speed trains. So they find ways to try and undo the voters’ verdict through other means.

The fact is that Californians want high speed rail and approved high speed rail at the ballot box. Subsequent issues such as fares and exactly how the railway gets built will be hashed out through the usual planning process – you know, the one that built the airports and roads and aqueducts and bridges that California relies on to thrive.

Faster rail travel between Los Angeles and San Francisco hardly ranks in the top of any sensible list of state priorities. Nor do the latest projections surrounding a bullet train project evoke confidence that the scheme will work as promised. And cash-strapped California has better uses for its public money.

This is a typical way of attacking HSR: claim it doesn’t really matter, and say we have other priorities for our money. The P-E doesn’t seem to realize that the summer of 2008 oil price spike ever happened – or that oil prices are rising right now. Apparently economic recovery, energy independence, and global warming aren’t really priorities either. One wonders what the P-E thinks ARE genuine priorities.

The state should defer selling the nearly $10 billion in high-speed rail bond funds voters approved in 2008, as California already faces a dangerously growing debt burden. And state officials should refuse to put any more of taxpayers’ money toward an enormously expensive project of dubious utility.

This is the new line of attack on HSR – that the state’s debt burden is too high so we shouldn’t sell the Prop 1A bonds. This is a pretty stupid move, since HSR generates new economic value – new jobs, new tax revenues – that help pay off the bonds AND ease the state’s financial burden over time. The only reason to not spend the HSR bonds is if you think the current recession is a good thing and ought to be as prolonged as possible.

It’s entirely possible to have both HSR and schools. Well before Prop 1A passed, California suffered from a 30-year long structural revenue shortfall. We had set our tax rates artificially low out of a belief that it was the only way to generate economic growth (which was obviously wrong). Even if we don’t spend the HSR bonds, we need to raise taxes to protect the services that generate new jobs and economic opportunity. So the HSR bonds aren’t the problem, but they ARE part of the solution. Besides, if the editorialists really wanted to target bonds that don’t create lasting value or address deeper problems, they might look at the billions in highway bonds approved in the Prop 1B bond in 2006, or the $11 billion in bonds to subsidize water waste that’ll be on the November 2010 ballot.

The California High-Speed Rail Authority’s latest business plan, released last month, offers new reasons for concern. The price tag of the Los Angeles to San Francisco line jumped to $42.6 billion, a significant increase over the $33.6 billion cost the agency offered in 2008. Proposed ticket prices also spiked, from $55 to $105.

And yet the P-E omits key information: the price tag increased only because of federally-mandated shift to “year of expenditure” accounting; the cost in 2008 dollars only went up by $1 billion to account for a tunnel in Anaheim. The P-E also did not mention that even under the higher prices, it’s still likely to be cheaper than airfare from SF to LA in 2020, and that the system is projected to cover its own costs anyway.

Still, the P-E continues its misleading attack:

The rail authority touts the new numbers as more accurate, but even those figures seem to contain a large share of wishful thinking. Amtrak’s entire national network, with thousands of miles of track and more than 500 destinations, only carried 27 million passengers in 2009. Yet the rail authority thinks the state bullet train would carry 13.5 million riders a year when it started service a decade from now.

As we discussed in yesterday’s post, the comparison between long-distance Amtrak and HSR is flawed. The P-E doesn’t mention train distances, speeds, and frequency of service. If they had, they’d see that the Acela generates operating surpluses and in Southern California, the Pacific Surfliners, hampered by slower speeds and sharing with freight and Metrolink (which has priority over the Surfliners), still generate very high ridership. The proper comparison is not between California HSR and Amtrak, but between California HSR and other global HSR systems. Apparently the P-E has no clue that these other systems exist – if they had they’d see that they all have no trouble generating high ridership or revenue.

The agency’s financing plan calls for $17 billion to $19 billion in federal funding — though the plan also notes that such funding does not yet exist. And just where a federal government with a burgeoning deficit and massive long-range unfunded promises would find that money is far from clear.

Between $3 and $4 billion of that will come this month. So there’s still around $15.5 billion left to find. Congress has approved $2.5 billion a year in HSR funding, which is a start – it won’t meet our needs, but shows that Congress is serious about HSR. The Transportation Bill this year is where the real HSR money will come from – but instead the P-E prefers to peddle discredited deficit concerns, even though most economic observers agree that if we emphasize cutting the deficit over spending to grow the economy, the economy will slide deeper into recession.

The finances also call for $10 billion to $12 billion in private funding. But the plan admits that private investment is unlikely without a strong infusion of public funding. And private investors will want the public to shoulder most of the risk — which suggests that if costs climb even higher or funding falls through, state taxpayers would be tapped for the balance.

The issue of who bears the risk IS an important one. Which is why the public funding share ought to be much greater. But then the P-E opposes that too, so as with most other anti-HSR editorials, they’re throwing stuff against the wall to see what sticks.

But California cannot even afford the $9.95 billion bond measure from 2008, much less any extra costs. Repaying the state’s prodigious borrowing will soon consume 10 percent of the state’s general fund, and yearly debt payments could hit $10 billion — more than the state will spend on prisons or higher education this year. The state also faces years of annual budget deficits in the $20 billion range.

And yet the costs of doing nothing aren’t zero. If we don’t spend $10 billion on HSR bonds, we may spend $80 to $160 billion on expanding freeways and airplanes – which in turn will force us to spend more money addressing the effects of all that carbon emitting. But then when you believe the status quo works just fine and can be extended indefinitely, as the P-E does, I guess you don’t have to worry about those costs.

And repaying the rail bond would cost the state nearly $20 billion over the next three decades, for a project whose purported benefits would only hit far in the future. Yet California cannot even handle its existing transportation network. The state has a $40 billion gap through 2018 in funding required to operate and maintain state highways.

The “purported benefits” include immediate job creation, which California desperately needs, more than anything else. We are not in a position to turn down all the new jobs HSR would create, not with a 12% unemployment rate. Ironically, that “gap” in funding is a function of the fact that state highways do not pay for themselves, never have, and have never been expected to do so. California either has to put up toll booths on every public road, or raise taxes to fund the maintenance.

Advocates claim that high-speed rail offers the right approach for the future. Perhaps. But in the present, California has limited funds and huge demands for public investment — and far more crucial needs than faster trains.

Perhaps this argument might have made sense in 1985. But not now. Anyone who thinks California doesn’t need HSR and its jobs right here, right now is not paying attention to this state’s dire economic crisis. And as a struggling newspaper, the P-E should know this more than most others.

Last week the state had a successful sale of bonds, and yesterday the pooled money investment board gave CHSRA the $29.1 million it needed to keep working through the end of June:

California’s financially strapped high-speed rail project has received an infusion of $29 million to get it back on track through the middle of the year…

That led most of the private consultants who were performing engineering and environmental reviews to stop working because they weren’t being paid, said Mehdi Morshed, the rail board’s executive director.

He said the treasurer’s decision to issue commercial paper to provide the $29 million was “excellent news.”

“We’re finally back to work again,” he said.

We’re probably going to have to have this fight again in June, when the state tackles an $8 billion shortfall (which could be larger if the initiatives on the May 19 ballot fail). Let’s hope that we see some true political leadership this time from Sacramento in support of this project.

The California High Speed Rail Authority’s budget for the current fiscal year, which ends in June, included $29 million from the sales of high-speed rail bonds authorized by voters in November. But because of the state budget crisis, the credit crisis and the poor market for bonds, the state treasurer has not sold any of the rail bonds.

That’s left the rail authority without cash at a time when Californians are eager to see the 800-mile fast train system built. At an authority meeting Thursday, officials said they had halted payments on engineering and design contracts in progress and are holding off on awarding new contracts.

“Unfortunately, I have quite a backlog of bills that need to be paid, but no money to pay them,” said Carrie Pourvahidi, deputy director for the authority.

The article is a bit misleading on this. The credit crisis and the poor market for bonds are part of the issue. But the state budget crisis is THE central issue. The crisis has led Treasurer Bill Lockyer to refuse to try and sell authorized bonds, and led the Pooled Money Investment Board to stop all infrastructure spending. To the extent that the market for California bonds isn’t good because of the budget crisis, it’s because the bond markets are concerned that the state may default on its debts.

And why is that a possibility? Because Republican politicians – from legislators to Arnold Schwarzenegger – continue to block a budget solution. I usually try to keep my more partisan comments to Calitics but we cannot escape the fact that it is Republican obstruction alone blocking a solution. Democrats have compromised far more than the media reports – agreeing to nearly $8 billion in spending cuts that have their labor allies VERY angry with them. Speaker Karen Bass agreed to most, but not all of Arnold’s demands on cutting environmental and labor protections. But Arnold vetoed the Democrats’ solution, and Republicans refuse to budge.

That won’t stop HSR deniers from using this manufactured budget crisis to blame HSR. They’ve done it before – when the CHSRA wasn’t funded as a result of the summer budget delay, pushing back the release of the 2008 Business Plan, HSR deniers said it was a sign the CHSRA was a flawed agency unfit to manage the project. It is likely we will see the HSR deniers use thus cash crunch story for the same purposes.

Arnold has proposed giving the CHSRA the funding they need:

On the other hand, the governor’s early state budget proposal for the 2009-10 fiscal year includes $123.8 million for high-speed rail, just a half million dollars short of the agency’s request.

But if he keeps blocking budget deals, this doesn’t really matter. If consultants and engineers are let go, they may decide to take their expertise elsewhere in the country or in the world, and we will not easily replace them.

The big picture involves conservative anti-government ideologies. One reason the HSR deniers oppose the project is they refuse to accept that government can plan and implement this kind of project effectively, even though HSR has been successfully built by governments around the world. By starving government of revenue they are able to “prove” their case with a self-fulfilling prophecy. They opposed Prop 1A and HSR, so they starve the Authority of funds and then say “oh wow they can’t manage money!”

California Republicans need to recall their Constitutional obligations to this state and provide it with a balanced budget that protects Constitutionally-guaranteed services – and respects the will of the millions of Californians who voted their endorsement of HSR by approving Prop 1A on November 4.

America has failed to invest in its infrastructure for the past 50 years, and the bill is coming due. The situation is reminiscent of the ancient Roman Empire, which grew strong because of its advanced aqueduct system, but which fell into decline when that feat of engineering tumbled into disrepair. We’re in danger of repeating that history, but it’s not too late to fix the problem if we take decisive action now….

None of this makes sense in America. It doesn’t make sense that in the greatest country on Earth we still rely on trains that go the same speed as they did 100 years ago, so our shipping times and commutes are longer than other countries….

In 2008 alone in California, we’ve committed more than $10 billion dollars in infrastructure investment, which will create at least 200,000 jobs over the life of that investment. And when our state unemployment rate has broken 8 percent, that kind of investment has a profound effect.

That last bit is a reference to Proposition 1A and high speed rail, although it’d have been nice had Arnold actually said that openly. But that’s a quibble compared to the hypocrisy of this article.

Why do I say hypocrisy? I fully agree with everything I just quoted. The problem is this is another example of our governor’s penchant for greenwashing – go tell the national media how awesome you are but back at home, help destroy the state.

You see, despite Arnold’s claims to be an infrastructure builder, he has instead helped create a state budget crisis so severe that earlier this week the Pooled Money Investment Board voted to halt ALL infrastructure projects in California – immediately. 200,000 workers face unemployment as early as January 1.

Arnold could have avoided this had he agreed to a Democratic budget plan sent to him by the Legislature yesterday. Instead he announced his intention to veto the solution and consign the state to another indefinite deficit.

The state’s bond ratings are plummeting fast, but worse, without infrastructure projects in the works, it’s going to be very difficult to attract federal matching funds in Obama’s emerging stimulus package. If this budget mess – for which Arnold bears the primary responsibility right now – continues then it may become difficult for us to get HSR funds from Congress in 2009. It’ll become all too easy for HSR deniers to argue we don’t deserve or can’t even use the matching funds.

Arnold’s hypocrisy knows no bounds.

Specifically, the High-Speed Rail for America Act of 2008 provides $8 billion over a six-year period for tax-exempt bonds which finance high-speed rail projects which reach a speed of at least 110 miles per hour It creates a new category of tax-credit bonds – qualified rail bonds. There are two types of qualified rail bonds: super high-speed intercity rail facility bond and rail infrastructure bond. Super high-speed rail intercity facility bonds will encourage the development of true high-speed rail. The legislation provides $10 billion for these bonds over a ten-year period. This would help finance the California proposed corridor and make needed improvements to the Northeast corridor. The legislation provides $5.4 billion over a six-year period for rail infrastructure bonds.

The obvious question this raises is will this be enough? The entire bill looks to be around $23.4 billion, which would be enough to help finish the first phase from SF-LA-Anaheim. Obviously we’re not getting all of that, and being a Congressional bill other states and other Senators are going to want a piece of the pie – note that most of the co-sponsors come from the Northeast Corridor. But our project IS the farthest along, and is the best positioned to make use of this funding. Other states have a lot more ground to cover to be able to make use of these bonds.

In fact, my only criticism of this proposal – pending the actual bill details – is that the amount is not ambitious enough. $50 billion seems like a better funding level – instead of setting states and Senators against each other, $50 billion would help substantially seed a number of HSR projects around the country and build a true national system. This recession is deepening and significant stimulus is necessary to pull us out of it. Now’s the time to be ambitious, Senator Kerry. Think big, think bold. This bill is an excellent start, but let’s use the opportunity to build a truly national high speed rail project.

First and foremost, the dispute is a financial dispute. As Jones writes of Quentin Kopp’s basic attitude:

Kopp is more interested in stretching this $10 billion bond far enough to complete his project. So he’s bristling at efforts by the TJPA to ensure that it’s first in line for the money.

My initial take on this last week was that Kopp was trying to make it clear that the Prop 1A funds are no free for all, and Jones’s article supports that interpretation. Kopp explained his reasoning in a letter he wrote to the Transbay Joint Powers Authority on November 13:

Your staff continually seek to insinuate the Transbay Joint Powers Authority in activity which pertains strictly to the consummation of the California High Speed Rail Project. Your October 17, 2008 staff report declares that the total cost ‘of [your project’s] rail component is $2.996 billion.’ It then represents that $2,349,000,000 must be obtained for your project. Please do not attempt to secure California High Speed Rail Project funds to defray the enormous costs of the 1.4 mile ‘downtown rail extension.’ Such effort will not be welcomed by me. Moreover, as far as I am concerned, and I will so state publicly, the California High Speed Rail Project can, as necessary, utilize the terminal at Fourth Street and Townsend Street in San Francisco effectively and efficiently, and at a cost less than the aforementioned cost of your moving it.

As most of us agreed when this subject came up last week, while Kopp is technically correct that HSR could utilize the 4th and King terminal, the Transbay Terminal is a vastly superior solution. Jones quotes several unnamed “sources in the transportation world” who reach the same conclusion. And as I pointed out, the CHSRA board unanimously endorsed the Transbay Terminal as the preferred San Francisco HSR terminus, Kopp included. The Transbay Terminal’s consultants fully understand the importance of the downtown extension:

Adam Alberti from Singer and Associates, tells the Guardian that Kopp has his numbers wrong and that TJPA will only be seeking $700-$800 million in Prop. 1A funds for the extension (the rest would come from other sources), which is about the same amount as he said it would cost to renovate the Caltrain station to handle the millions of new passengers the trains would draw.

“The facility is being designed to be the northern terminus for high-speed rail,” Alberti told us. “Their business plan is predicated on it coming into Transbay Terminal.”

Translation: the TJPA feels confident that despite Kopp’s bluster, the CHSRA cannot and will not abandon the downtown extension. Eyeball to eyeball, they’re convinced Kopp will blink first.

Of course there’s more to this dispute than just finances. Kopp is upset with the director of the TJPA, Maria Ayerdi-Kaplan and Singer and Associates:

The letter also mocked the expertise of “your executive director, staff or publicity agents,” something Kopp went even further with a few days later when the Chronicle’s Matier and Ross brought the private spat out into the public (although they didn’t reference the earlier letter, which even Singer and Associates didn’t know about until today).

“I am not going to pay $2.5 billion to move a track 1.4 miles,” Kopp said in that article, going on to say Ayerdi-Kaplan “is annoying … and she and her flacks need to stay out of our hair.”

Jones thinks Kopp has a point:

Ayerdi-Kaplan has been inaccessible in recent years and has stumbled into unnecessary fights with the Mayor’s Office, members of the Board of Supervisors, and neighbors of the project. It’s also disconcerting that a public agency feels a need to hide behind one of the most expensive and controversial PR firms in the city. So there’s probably a bit more going on here than what Alberti labeled “a personality clash with Maria Ayerdi.”

Still, the downtown extension really is a key part of the HSR project’s success. We want the best transportation system possible and while HSR could survive losing the Transbay Terminal, it is immeasurably strengthened by having it.

As I concluded the last time we discussed this, the missing link is leadership. Neither Kopp nor Ayerdi-Kaplan seem to be providing it, instead engaging in a turf war that doesn’t do anyone any good. Both of them need to realize that they need each other to be successful. And it’s likely going to take outside pressure to make that realization stick.

There are any number of people who could provide that leadership. A certain San Francisco mayor with gubernatorial ambitions in 2010, for example. Or Senator Dianne Feinstein, herself a possible candidate for governor, someone who has the heft and relationships to help resolve this situation. Speaker Nancy Pelosi, yet another San Franciscan, would also be well positioned to help resolve this – especially if federal money can grease the wheels of a deal between the CHSRA and the TJPA.

We “alternative transportation geeks,” as Jones calls us, have a lot at stake here. The Transbay Terminal downtown extension project is too important to all of us to fall victim to such rivalries. Kopp needs to tone down the rhetoric, Ayerdi-Kaplan needs to construct better working relationships with Transbay partner agencies, and leading California politicians need to provide some leadership and not allow these folks to tear the project apart through internecine warfare. And we HSR supporters need to let everyone know that the project, and not the personalities, are what matter most.

Californians are leaving their cars, SUVs, vans, and trucks at home and riding trains instead in unprecedented numbers. Today, Caltrans and Amtrak reported a record-setting 5.5 million passengers rode California’s state-supported intercity passenger trains in federal fiscal year 2008….

In 2007-08, the Pacific Surliner carried more than 2.89 million passengers, a seven percent increase from the preceding year.

In Northern California, Capitol Corridor (Auburn to San Jose) trains carried 1.69 million riders, an impressive 16.8 percent jump from the previous 12 months. Meanwhile nearly one million passengers (949,611) rode the San Joaquins service (Bakersfield to Sacramento/Oakland). This past July, ridership shot up a whopping 32 percent over July 2007, rising above 100,000 for the first time. The Capitol Corridor and the San Joaquins ranked as the nation’s third busiest and sixth busiest lines, respectively.

Amtrak ridership in federal fiscal year 2008 increased to 28,716,407, marking the sixth straight year of gains and setting a record for the most passengers using Amtrak trains since the National Railroad Passenger Corporation started operations in 1971.

Some might cluck that this is just the product of the dramatic spike in gas prices that took place earlier this year and won’t last. While that did fuel some of this ridership growth, ridership on Amtrak California routes has been steadily growing since 2002. Amtrak itself has set ridership records every year since 2002. There is every reason to believe ridership will continue to rise.

That growing ridership reflects a growing awareness among Californians of the value of passenger rail, and that was reflected in last week’s election where most passenger rail proposals were approved by voters (Measure B in Santa Clara County, the BART funding plan, is still too close to call). In the article Eugene Skoropowski, managing director of the Capitol Corridor, noted that Prop 1B (passed in 2006) also intended money to be spent on rail expansion. Arnold Schwarzenegger’s Department of Finance delayed this, using a flawed audit to claim new cars weren’t necessary, but that has been reversed and new cars have been ordered.

We need to accelerate Prop 1A and Prop 1B rail funding. While we wait on federal matching funds for HSR – which we will press for in 2009 – California needs to wait for nobody to release the bond money for the other passenger rail projects that are awaiting funds. California legislators should make it a priority to spend that money as an infrastructure stimulus, as well as part of a long-term plan to grow rail in this state.

Record ridership is an opportunity to take passenger rail to the next level. Let’s make sure our legislators follow through on it.