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.

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.

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.

Fitch believes that U.S. high speed rail (HSR) networks and other regional rail solutions are likely to proceed despite the difficulties faced by proposed projects in California and Florida. We expect, over time, options such as HSR to become a necessary part of the modern transportation network. However, financing and implementation measures should reflect the size and scope of such undertakings.

Societal and practical factors are creating incentive for HSR networks. Ideas around driving less have entered the mainstream and are sometimes at odds with basic transportation needs. State and federal spending on transportation has not kept up with needs, while interstates (particularly in land-constrained regions) have seen an increase in congestion that requires expensive highway expansions.

Over the short term, the HSR project in California is likely to struggle under the weight of state cuts and a voting public that will continue to feel the effects of the economic downturn, as did Florida. We believe that good ideas are being proposed in many parts of the country, but they will face significant difficulties absent thoughtful long-term planning and recognition of the true life cycle costs of these projects.

Breaking HSR projects into smaller subprojects will increase the likelihood that they are completed on time and within budget constraints. Plans need to include subsidies that run beyond the startup phase, as these projects are rarely (if ever) profitable from their origins. Clear funding from the federal and state levels is necessary given their regional scope. We believe that bipartisan support is critical, since the lengthy implementation periods and funding needs will cross multiple election cycles.

Over the short term, securing the considerable political and public support for HSR and other rail solutions is much more important than beginning the work on them.

One wonders if members of the California State Legislature are reading this. They ought to. Fitch isn’t going to just make this up as a favor to Jerry Brown. Fitch’s analysis is that high speed rail has a bright future for fundamental reasons, implying that it will potentially represent a good investment – but only if governments provide long-term, sustained political support.

Fitch is also calling out legislators, indicating that their focus on the project’s details is missing the point. What’s needed from the legislature isn’t nitpicking but a strong, lasting political commitment to solving any problems with the project so that it can move forward. State Senators like Joe Simitian and Alan Lowenthal, of course, have shown no interest in solutions and are spending their time working to undermine the project even though each of them are termed out of the legislature at the end of this year.

Governor Jerry Brown, at least, understands the need to continue moving forward on high speed rail:

“We’re pushing forward,” Brown said. “We’re going to build, but we’re not going to be stupid … We’re going to be very careful and build incrementally as we go.”

He said, “A lot of people want to turn off the lights. I’m not one of them. We’re going to build, we’re going to invest, and California is going to stay up among the great states and the great political jurisdictions of the world.”

Fitch gets it. Governor Brown gets it. President Obama gets it. Let’s hope the legislature gets it too, rather than following Scott Walker down the path of ruin.

Roelof van Ark, chief executive officer of the California High-Speed Rail Authority, announced this afternoon that he is quitting, the latest setback for the state’s beleaguered campaign to build a nearly $100 billion rail network in California.

His resignation, announced at a board meeting in Los Angeles and effective in two months, comes at a critical point for the project, with rail officials bidding for Legislative approval to start construction in the Central Valley this fall….

Van Ark cited personal reasons for his resignation.

“I need to focus myself more on my family, and maybe some other interests,” he told board members. He said he may continue on the project as a consultant.

Van Ark used his resignation announcement to reiterate his support of the rail authority’s decision to start construction in the Central Valley, controversial because it is far from California’s population centers. The administration signaled no change of course.

Is this really a setback? I’m not entirely sure. Van Ark was, from all I have seen and heard, a good leader for the project. It’s definitely a loss and not something I would prefer to see. It will also produce some challenges as a transition unfolds. But that’s not the same thing as a “setback.”

What this does indicate is that the momentum to combine the Authority and Caltrans under a Transportation Agency may be stronger than we realize, and Van Ark may have felt his role in such an agency would be smaller. No matter the actual reason, if the Authority is indeed combined, then they will actually get access to a lot more expertise than they currently have. So while the loss of van Ark is going to cause problems, there is a path forward to provide insight and expertise to the Authority.

Van Ark’s departure comes alongside two other staff departures. Deputy Director Dan Leavitt is leaving the Authority, as is Rachel Wall, the Authority’s press secretary.

Additionally, changes are underway at the CHSRA board:

Minutes after van Ark’s announcement, Tom Umberg announced that he is stepping down as chairman of the rail board, though he will remain a member of the board. Umberg is to be replaced next month by Dan Richard, an adviser Gov. Jerry Brown appointed to the board last year.

The chairmanship rotates regularly so I don’t see this as a negative in any way. In fact, if anything it may strengthen Governor Brown’s hold on the board.

Many media outlets will spin this as a negative for the project, but that’s a reflection of their growing levels of pessimism. Objectively there’s just no way to know what the impact will be since we haven’t seen yet where the project goes from here. New blood isn’t a bad thing – it’s been an intensive couple of years for the project and that has probably taken its toll on staff. There’s something to be said for brining in fresh people who also have a background in HSR projects, rail planning, or transportation planning more generally. That’s no slight against current or former staff, to be clear. Van Ark, Leavitt, and Wall have done excellent work.

Responses to van Ark’s resignation have started coming in. First up is Tom Umberg:

“With admiration, I would like to thank Mr. van Ark for his service to California and the high-speed rail project. The announcement of his resignation will resonate throughout the State. His energy, passion and dedication to this critically important project are a testament to his character and his professionalism. We are extremely lucky to have his continued counsel and advice as we move to implement high-speed rail in California. I remain grateful for his professionalism and friendship.”

Assemblymember Cathleen Galgiani also offered her thoughts:

“I am grateful to Mr. Van Ark and Chair Umberg for their tireless efforts and tenacity during the most critical early stages of taking High Speed Rail from a vision, to reality, bringing us “high-speed jobs” with the start of construction in September 2012.

“We have always known there would be challenging circumstances building the nation’s first high-speed Rail system, particularly when it requires being sensitive and responsive to diverse communities, with varying needs along the entire 800 mile stretch of the project all at once. Mr. Van Ark and Mr. Umberg have worked with stakeholders to address everything from whether “wind speed” from the train will affect bee pollination in agricultural areas, the importance of respecting sacred sites and Native American burial grounds near the Grapevine, the value we place on involving small emerging business enterprises during the engineering and construction contracting process, building the first public private partnership of this scope in California, and navigating the political turbulence associated with building the nation’s first High –Speed Rail system. I have deep respect and owe my deepest gratitude to both Mr. Van Ark and Mr. Umberg.”

Governor Brown has been a vocal supporter of the project, and last year and appointed two advisers, Dan Richard and Mike Rossi, to the rail board. Board Member Richard will serve as the new Chair of the Authority Board.

“Today represents a turning point for the Governor to put his stamp on the project. I am pleased that his long-trusted Advisor, Dan Richard, has been chosen to succeed Chair Umberg, and I am confident that Governor Brown will put his full resources behind the success of High Speed Rail. I remain committed to working with Governor Brown, and Chair Richard to move this project forward and put California’s economy on a fast-track to recovery with “high speed jobs.”

I am writing to express my strong support for your plan to move the California High Speed Rail Authority into a Transportation Agency under your Administration’s direction. I encourage you to act swiftly to address the high speed rail project’s problems, which I fear will put more than $3.5 billion in Federal funding at risk if not addressed.

Deploying the expertise and resources of CalTrans towards this effort over the next six months – in direct cooperation with the California High Speed Rail Authority – could permit a rapid reassessment of the route, decisions regarding the stages of construction, and substantial progress on acquiring right of way, in order to expedite the beginning of construction by the Federal government’s Fall 2012 deadline.

…As I have discussed with you previously, putting this project on a steady path to success would demonstrate that California remains capable of building big projects, putting thousands of our citizens to work, and leading the nation. I am concerned that our state’s future would be greatly hindered if this project either failed to get off the ground, or failed to be completed. I have spoken to Transportation Secretary Ray LaHood about the importance of utilizing CalTrans’ expertise, and we both agree that your leadership in this area could improve prospects for success.

Feinstein and Brown have been allies before (and Feinstein officiated at Brown’s 2005 wedding to his wife, Anne Gust) so this is likely a show of support more intended for state legislators than the governor, though it’s easier to just write to one governor than 120 legislators. Still, it’s significant that Feinstein weighed in on this and her words will carry weight in Sacramento, particularly since she is one of the state’s most powerful politicians. It will force legislators to give serious consideration to the concept, and make it harder for them to dismiss the consolidation proposal. And adding Ray LaHood’s imprimatur to the concept just makes the argument even more compelling.

Perhaps just as importantly, Feinstein also addressed the Peer Review Report in her letter:

The California High Speed Rail Peer Review Group’s recent report, which failed to endorse state funds for the California High Speed Rail project until further steps to reduce project risk are taken, vividly identifies the need to act quickly. As you know, without the Legislature’s approval of this appropriation, more than $3.5 billion in Federal funding competitively awarded to California would be at risk. Specifically, the Group called for the Authority to:

* select an initial operating segment as soon as possible,

* include a deployment plan for electrified high speed trains with positive train control systems,

* further develop the business plan to address risk and cost issues,

* involve the private sector in project design,

* increase project management capacity,

* subject demand forecasts to greater scrutiny, and

* “reduce the risk to the state of a stranded project” by investing initial funding in the segments that currently serve significant train ridership (San Jose to San Francisco and Anaheim to Los Angeles).

I find it very hard to debunk some of the Group’s key conclusions. But I also believe that many of the concerns could be addressed quickly with a concerted effort under your leadership.

The first five of these make sense to me and are, from my perspective, uncontroversial and sensible. I don’t quite know what she means by “subject demand forecasts to greater scrutiny” – an independent peer review (by a different group, not by the authors of the report Feinstein references) did indeed subject the ridership forecasts to greater scrutiny and found the forecasts to be sound. I continue to be confident that further review will only reconfirm that conclusion but at some point this gets to be ridiculous.

The last bullet point of hers is the most troubling. She is clearly suggesting that the money be moved from the Central Valley to the endpoints. She didn’t say that the White House or LaHood agreed with this approach, but if Feinstein is going down that path then it certainly raises the possibility that the Obama Administration may indeed give in and allow the money to be moved.

I am not sure that would be a good idea. We’ve tried the path of investing in existing systems in those locations and while it’s helped build ridership, it also hasn’t done a damn thing to generate momentum to close the system gap between Bakersfield and Los Angeles. Folks like Paul Dyson have correctly been advocating for closing that gap for years now, but I have to believe the problem is the incremental approach.

If they’re only going to fund investments in urban areas, then what they are doing is a de facto investment in local rail service. It will be seen as such and won’t do anything to generate political momentum to provide the intercity connections that the Central Valley Initial Construction Segment – and a Bay Area to Valley or Valley to LA Initial Operating Segment – would provide. Building in the Central Valley, however – as part of an Initial Operating Segment that connects either to San José or LA – helps fill the gap and build on the promise of intercity rail.

It’s not quite clear what Senator Feinstein is after here. Maybe she wants the other changes and is less focused on where the ICS is located. But it’s worth making a stand for the Valley as the beginning of construction. The jobs impact will be the most significant there, but crucially, it will also help fill in the missing link needed to connect the regions of California – like a high speed rail project should.

Reaction was swift, and split. Some HSR critics, who believe that trains should bypass major population centers, welcomed the move. Palmdale didn’t, filing suit to block a Grapevine alignment. They claimed, accurately, that Prop 1A listed Palmdale as a stop. And LA County Metro came out for preserving the Palmdale alignment, arguing that it would serve more riders and make the most economic sense.

Well, the CHSRA report is out, and Palmdale will be pleased – the report concludes the Grapevine/I-5 alignment isn’t a good one and that the choice of Palmdale should stand:

Overall, most of the factors that led the Authority and FRA to select the Antelope Valley corridor in the 2005 Program EIR/EIS to be carried forward are not substantially changed. The Study confirms that the Antelope Valley alignments have fewer potential environmental impacts, enhanced by the selection of alignments more closely following SR 14 and avoiding the Santa Clara River. The advantage of the Antelope Valley alignments with regard to seismic risk is similar, but the advantage on the amount of tunneling and constructability issues are much reduced and the I-5 alternative could be somewhat less costly. The Antelope Valley alignments still offer greater connectivity and accessibility. The Antelope Valley alignments also have greater opportunities for alignment variations through the mountains to avoid impacts to environmental resources reducing risk, have less growth inducing impacts on urbanized land and farmland conversion, would provide service to the fastest growing area of Los Angeles County, and have strong stakeholder support. Taken together these findings reinforce the Authority and FRA decision of the 2005 Program EIR/EIS selecting the Antelope Valley alignment for further study.

Some specifics on the above:

Tunnel Length – In the 2005 Program EIR/EIS, the Antelope Valley corridor had 13 miles of tunnel while the I‐5 corridor had 33 miles. After project‐level preliminary engineering the Antelope Valley alignments now have 29 miles of tunnel and the conceptual engineering developed in the Study for the I‐5 corridor has 31 miles. The length of tunnel is now comparable for both corridors….

Alignment Length and Travel Time – The 2005 Program EIR/EIS concluded an I‐5 alignment would be 33 to 36 miles shorter in length and provide travel time savings of 10 to 12 minutes compared to an Antelope Valley alignment. The Antelope Valley alignments are now up to five miles shorter than envisaged at the Program stage while the Study I‐5 alignments are now longer, diverging from the Antelope valley alignments east of Bakersfield. The Study finds that the I‐5 alignment would now only be 23 to 25 miles shorter. The analysis of the current Antelope Valley alignments and the I‐5 alignments shows that, because of this additional length, the longer steep gradients and the sharp curves needed in Santa Clarita and Tejon Pass, the travel time saving is on average likely to be only three to five minutes. This is substantially less than the anticipated length and travel time advantage in 2005 and confirms the decision to drop the I‐5 corridor from further consideration….

Seismic – The 2005 Program EIR/EIS concluded that the I‐5 corridor would have considerably higher seismic issues than the Antelope Valley corridor. Project‐level studies for the Antelope Valley have resulted in alignments that cross the San Gabriel fault (which has a low probability of rupture and a small predicted movement) in tunnel. However, the I‐5 corridor remains more seismically active than the Antelope Valley corridor, paralleling the San Gabriel fault for 20 miles, and passing through the intersection of the Garlock and San Andreas faults. The topography of the Tehachapi Mountains restricts the feasible alignments to the Tejon Pass. This restriction results in a potentially feasible alignments crossing through the intersection of the San Andreas and Garlock faults. The Study has confirmed that the seismic risk for the I‐5 alignment is still greater than for the Antelope Valley alignments.

These are all significant factors and they make clear that the Antelope Valley route, through Palmdale, is comparable to or superior to the Grapevine alignment. The Palmdale route is safer, with similar tunnel lengths and with a travel time penalty that is much less significant than initially thought.

But it’s the capital cost and ridership analyses that are going to grab the most attention:

Capital Cost – In the 2005 Program EIR/EIS, the cost for the I‐5 corridor was estimated at $6.58B, while the cost of the Antelope Valley corridor was estimated at $6.46B. During preliminary engineering, the relative cost of the Antelope Valley alignments has increased in part to avoid and reduce impacts. The Draft 2012 Business Plan cost estimate for the Antelope Valley alignment (between Bakersfield and Sylmar) is between $15.0 billion and $15.5 billion. A risk adjusted capital cost estimate for the I‐5 alignment allows for mitigation, avoidance and contingency amounts, and reflects the differing levels of design development between the I‐5 and Antelope Valley corridors. The risk adjusted cost estimate is $15.1 billion. Like the 2005 Program EIR/EIS, the Study concludes that the cost of an I‐5 alignment would be of a similar magnitude to the Antelope Valley alternatives….

The Study also evaluated operational aspects, including ridership, operating costs and maintenance costs that were not compared qualitatively in the 2005 Program EIR/EIS. The Study’s ridership analysis has shown that the loss of Antelope Valley commuters for an I‐5 alignment reduces the anticipated number of riders by approximately two million annually (5%) and ridership revenue by about $50 million per year (2%). The shorter I‐5 route length is expected to reduce operations and maintenance costs, also by about $50 million per year. As a result, the net cash flow for the I‐5 and the Antelope Valley alternatives would be similar.

So they argue that the costs are basically a wash. That’s a big difference from the claims last summer that the Grapevine alignment could save up to $4 billion over a Palmdale route.

Some critics have charged that the risk adjustment that staff used was somehow illegitimate. The base cost estimate for the Grapevine route is $13.5 billion, and the risk adjusted estimate is $15.1 billion. The nearly $2 billion difference is accounted for by determining the impact of community feedback:

The risk adjusted cost for the I-5 alignment accounts for the potential increase in costs of construction methods in Santa Clarita based on future community involvement. For example, wherever the representative alignment is elevated above existing ground levels in developed areas, the risk adjusted cost estimate assumes a viaduct will be required, rather than an embankment.

This is a reasonable thing to assume, and the Authority’s experience on the Peninsula shows the importance of including such risk assessments. After all, the I-5 route actually has greater impacts on future as well as existing development than the Palmdale route.

Significantly, and perhaps because of those impacts, most communities and stakeholders along the Grapevine/I-5 route were either opposed to or lukewarm at best about that option – whereas communities and stakeholders along the Palmdale route backed that choice:

During outreach on this Study, most of the stakeholders consulted expressed a preference for the Antelope Valley alignments in order to meet the community needs of the residents in Palmdale and Lancaster. Local residents, businesses, elected officials and regional organizations have emphasized the importance of the high-speed rail system serving the Antelope Valley. Stakeholders that have confirmed their support for the Antelope Valley alignment and urged that the I-5 alignment not be considered further include Los Angeles County Supervisor Michael Antonovich and Kern County, the cities of Arvin, Tehachapi, Lancaster and Palmdale, and the community of Rosamond. The Tejon Ranch Company oppose the I-5 alignment. The Center for Biological Diversity oppose the I-5 alignment due to the potential impacts on the Wind Wolves preserve. There has been very little support for an I-5 alignment by stakeholders in the Antelope Valley and Santa Clarita. The City of Santa Clarita has concerns that the potential impacts of an I-5 alignment on the city would be much greater than the impacts from an alignment via Palmdale, although they recognize the opportunity that the I-5 alignment provides for a possible station location in Santa Clarita and the benefits this would bring. The Los Angeles Metropolitan Transportation Authority (Metro) recognizes the opportunity for connectivity and increased mobility through the Antelope Valley.

Some comments to yesterday’s post on the blog, discussing this report, expressed frustration that the Authority would not simply blast through Tejon Ranch or find some way to buy them out. Others were frustrated that the Authority staff designed the proposed alignment assuming the route would run east-west through Bakersfield, rather than passing on the western edge of the city.

Those comments seem more focused on justifying the Grapevine alignment by any means necessary. The east-west alignment through Bakersfield is already decided. More significantly, what the Authority is saying here is that community stakeholders prefer the Palmdale to the Grapevine alignment, and that should play a factor in the decision.

This is in keeping with recent Authority decisions, such as proposing a West Hanford route or agreeing to a blended proposal on the Peninsula. The Authority may have had a reputation, fueled largely by project opponents, in 2009 of being obstinate and unwilling to listen to public feedback. After having undergone a change in both staff leadership and board leadership, the new Authority is much more responsive to community concerns, as well as focusing on finding ways to save money without compromising the system’s safety or usefulness.

Of course, “responsive” to community concerns does not always mean “doing whatever some in the community want.” And that will continue rankle some people from wealthy Palo Alto NIMBYs to Kings County farmers. But the Authority is working hard to find ways to address potential impacts, and that’s a very good thing to encourage, even if it doesn’t please every critic.

Ultimately, the Palmdale alignment remains the better choice. It is much less risky than the Grapevine alignment, and Californians know to not downplay the risks of earthquakes. It also offers more potential for connectivity, allowing a connection to the DesertXpress project via a quick and easy to build link across the desert between Palmdale and Victorville. And it does offer the ability to carry two million more riders a year. After all, that’s the entire point of building high speed rail – to carry passengers.

So here’s a heads-up for staff and public officials at cities, counties and any other government agencies involved in construction projects: If you’re measuring job-years, say job-years. If you want to talk about jobs, then translate your job-year statistics before making public pronouncements. High-speed rail’s 1 million job estimate shrank under Mercury News reporter Mike Rosenberg’s scrutiny to about 60,000, once he’d parsed the methods, and the authority’s credibility, already shaky, took another plunge.

Watchdogs need to be on the alert, particularly when the public or legislators are going to vote on projects based in part on creating jobs.

Here’s my response: who cares?

Seriously. Why is this even an issue? 1 million job-years, 60,000 jobs, it’s a non-issue that obscures the fact that HSR will provide a badly-needed economic stimulus to the state. Maybe if California were functioning at full employment this might be a useful exercise. But with unemployment still above 11%, it’s absurd. The Authority was clear that it was speaking in “job-years” and while that term doesn’t really make sense to anyone but bureaucrats, it is a legitimate concept, as the Mercury News editorial notes:

Job-years is an excellent tool to calculate the amount of work needed to complete a project. A job-year is one year of work for one person; a new construction job that lasts five years is five job-years. It is a more precise measure because an individual job may last for six months or a year or forever.

So the Authority was using a more precise measurement, but because that number was far larger than another measurement, the anti-HSR Bay Area News Group paper had to attack it in order to make the Authority look bad:

In a weak economy like today’s, construction jobs are a factor to consider for projects like stadiums and transit systems. But the main consideration has to be the long-term value to the community, once construction is finished. What’s especially unfortunate about high-speed rail is that the real number of likely jobs, some 60,000, is substantial. Only because 1 million were touted is the rail authority’s credibility further damaged.

The only people who believe the Authority’s credibility is “damaged” by using what the Mercury News termed a “more precise measure” is the Mercury News. Most normal people don’t care. They understand that the jobs are “substantial.” More importantly, they understand that HSR provides clear long-term value to the community in the form of the ability to affordably and quickly travel from Santa Clara County to the other major metropolises of the state without having to depend on volatile oil prices.

Still, it’s worth continuing to push back against the Mercury News’ silly arguments. Writing at Fox and Hounds Daily, Michael Bernick, a former director of the California Employment Development Department defends the Authority’s approach to measuring jobs:

Recently, I reviewed ten projections associated with a range of infrastructure investments in California and the United States. The projections varied widely in the number and types of job years estimated for each $1 billion spent in investment. Some of this variance was due to the different types of infrastructure (water, transit, highway), and some was due to whether the jobs were in the region, state or nation. Yet even controlling for these factors, the estimates for direct construction jobs, indirect jobs (i.e. suppliers) and induced jobs (jobs created as project expenditures spread throughout the economy) yielded varied estimates for job years per dollar spent.

The California High Speed Rail Authority (CHSRA) estimates that the high speed rail construction will generate 6600 construction job years for each $1 billion spent. This falls roughly in the middle of the projections. Similarly, the CHSRA estimates that the project will create around 13,400 indirect and induced job years per $1 billion—which falls also around the middle of projections.

Bernick points out that the 2012 Business Plan was not always consistent, sometimes referring to “jobs” instead of “job-years” but that this small error can be corrected in the next revision. He also provides some good analysis of the impact of the jobs that the Central Valley project will create:

Using the estimate of 6600 construction job years per billion, the Central Valley Initial Operating Section (IOS) priced at $5.8 billion will create roughly 38,280 job years for construction-related direct employment. As the IOS will be built over a 5 year period, the number of workers employed at any time will fluctuate as the works ramps up and down. On average, using the Authority estimates, the IOS will be employing roughly 7000 workers at any time.

This employment will by no means “solve” California’s 11.3% current unemployment rate. However, two observations might be put forward on IOS employment impacts.

First, the number of these construction jobs dwarfs the construction jobs on all other highway and transit projects in California. Most of our highway and transit projects, even the larger ones, generate less than a hundred workers at any time; only a few projects even reach over a hundred workers at any time. High speed rail will generate more construction jobs than the current highway and transit projects in the Central Valley and nearby areas combined. The impacts will be greatest as the jobs can be targeted at construction workers in the Central Valley—where building trades unemployment has been over 25%-30% for the past few years.

This is particularly important given that Central Valley Republicans like Jeff Denham, Devin Nunes and Kevin McCarthy have been trying to argue that the HSR money should go to freeway projects in the Valley instead. What Bernick points out is that HSR will create more jobs for the money than a freeway project would. And of course, HSR would cover its own operating costs, unlike a freeway, as well as not contribute to pollution, traffic, sprawl, and fossil fuel dependence.

Second, even more than the direct employment, if the Authority’s Small Business Plan currently under consideration is properly structured, the Central Valley economy will benefit from developing an expertise in high speed rail construction. The Central Valley segment is the first segment to be built in the United States. Businesses, including environmental, design, and construction management—that work on this first segment will be positioned for work on other segments in California and throughout the country, possibly the world.

In other words, the Central Valley would get to develop a high speed rail industry, helping to diversify the region’s economy. That’s a significant boost too, especially given the region’s ongoing and severe economic woes.

The Mercury News doesn’t seem to care much about this, focusing instead on a distinction its own editorial seems to acknowledge is small, to attack the high speed rail project for using a metric the Mercury News admitted was actually more precise.

I’m not sure what their approach adds to the discussion in California over high speed rail, jobs, and stimulus. But it does reveal a disturbing belief among the Mercury News editorial writers that playing “gotcha!” is somehow more important than helping the state to economic recovery.

As part of a measure to consolidate state agencies and departments, Brown proposed creating a Transportation Agency, including the Rail Authority, the Highway Patrol and the departments of Transportation and Motor Vehicles, among others.

Tom Umberg, chairman of the Rail Authority board, said in a prepared statement this afternoon, “We embrace the reorganization proposal as it provides additional support and the necessary resources to support this project.”

The new Transportation Agency would also include the California Transportation Commission, which plays a key role in deciding which projects get state funding. From what I can tell, the new agency would not necessarily compromise the current powers of the Authority. It would create a new reporting relationship, but Governor Brown has already put his stamp on the Authority board with his new appointments. It’s entirely possible that the CHSRA could benefit from staff assistance in other parts of the proposed Transportation Agency, but that’s entirely speculative and depends on what an org chart would look like.

As a concept, this seems perfectly fine and workable. It’s hard to say more without knowing the details, and those will surely be fleshed out in the weeks and months to come.

The legislature has had its own ideas for how to move the CHSRA around in recent years, but this is part of a much more sweeping reorganization of state government and not driven by the high speed rail project alone. At this point it’s much too early to tell what the legislature thinks of this plan, and reports are that most legislators are not in any hurry to work on this budget.

They typical state budget process, for those of you who either don’t know or got sidetracked by the years of late budgets under Arnold Schwarzenegger, is that the governor proposes his budget in January. It gets discussed, debated, studied and analyzed. There is then a “May Revise” that comes out in early May, based on newer estimates of state tax revenues, that is much closer to the final document that the legislature is to then approve by June 15. The legislature could always delay approving the budget as they did in 2007, 2009, 2009 and 2010, but in 2011 they learned they would lose their paychecks (under Prop 25, passed in 2010) and so they passed an on-time budget. I would assume they will do so again in 2012.

In short…we’ll see what happens to this Transportation Agency proposal. There’s a long way to go between now and June 15.

While discussing his budget today, Gov. Brown also commented on the recent Peer Review Report that suggested the state delay the project. From the Sac Bee article linked above:

Brown told reporters today that some of the objections raised by the group “were not that well founded.”

“I’m of the view that this is a time for big ideas, not shrinking back and looking for a hole to climb into,” he said. “I think we’ve got to move forward.”

That’s a good assessment of where things stand. On that note, take a look at Peter Calthorpe’s excellent op-ed in the San Francisco Chronicle explaining the reasons why California needs high speed rail to meet the economic and environmental challenges of the 21st century.

CA High Speed Rail Authority Responds to Peer Review

Their core conclusions:

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’s conclusions, which would be premature at best, would place at risk $3.5 billion of federal funding for High Speed Rail currently in hand for the project and undermine extensive outreach efforts on the part of the Authority to develop greater integration with regional rail systems.

Consequently, the Authority believes this report does not provide a sound basis for critiquing the Authority’s Finance plan, nor for the public policy choices facing the Legislature.

It’s a strong defense that, as far as I can tell, is rooted in sound evidence and analysis. Since the core of the Peer Review Group’s assessment that the legislature should not release Prop 1A bonds was uncertainty about federal funding, it’s worth quoting in full the Authority’s powerful deconstruction of that argument:

The Committee states that “The fact that the Funding Plan fails to identify any long term funding commitments is a fundamental flaw in the program.” In so stating, the Committee attempts to set a standard that is simply not used for any other transportation program. By this measure, none of the unconstrained regional transportation plans of any transportation authority should be pursued. No project, in our experience, has fully identified funding sources for the entire project at this stage and it is both unfortunate and inappropriate for the Committee to apply this test only to high speed rail.

The Committee attempts to distinguish the high speed rail project because it does not have a “dedicated funding source” such as the Highway Trust Fund or Airport Improvement Funds. This analogy ignores the fact that the High Speed Rail project has funding in hand for the Initial Construction Segment, which even the Committee admits will have independent utility if constructed. Furthermore, the mere existence of a dedicated funding stream is no guarantee that any specific project or program will be funded. By this metric suggested by the Committee, Interstate 5 would not have commenced construction, despite the presence of the Highway Trust Fund.

This is a pretty good point. And it holds true of most other transportation projects in California. Take the BART to San José project. It is, in fact, not fully funded. Construction is underway on the Warm Springs extension, which I will guess won’t generate enough riders to pay the cost of operations on the extension (and to be clear I do not care whether or not it does; transit service should not based on 100% farebox recovery). The extension from there to Berryessa is, according to my read of the VTA site, not yet fully funded and depends on a New Starts grant application. The extension from there all the way to downtown San José is largely unfunded, and the recession’s impact on sales tax recepts forced VTA and BART to build only to Berryessa for the time being. The BART to San José project has a LOT of critics, but Santa Clara County voters have twice rejected those criticisms and shown their support at the ballot box and with their tax dollars. I am certain that this project is going to happen, regardless of the questions raised, the costs, and the funding shortfalls, because the public has repeatedly said they want it built.

The Authority continues:

Nor does the Committee recognize that the President has proposed that high speed rail be provided a dedicated funding stream in the reauthorization of the Surface Transportation Act. Accordingly, the High Speed Rail program is not significantly different in terms of its funding at this stage than are other major infrastructure initiatives.

Moreover, the suggestion that the high speed rail project be placed on hold because there is not a “dedicated funding source” ignores the clear mandate of the Legislature and the people of the State of California pursuant to the provisions in the Proposition 1A Bond Act (Act). Under the Act, $9 billion of bond proceeds were approved to initiate the construction of a high-speed rail system using these State bond monies as matching funds with other private or public funds, including federal funds. The CHSRA has now secured $3.5 billion in federal matching grant monies that have no cost to the people of California so that the mandate of the Act can be met. Nowhere in the Act is there a requirement that any particular amount of non-State matching funds be committed prior to the initiation of the start of the high-speed rail project. Nowhere in the Act is there a requirement that the project must be funded using a “dedicated funding source.” Future non-State match funding will be pursued by the CHSRA to progress the project beyond the Initial Construction Section in the Central Valley. Any delay in proceeding with the Initial Construction Section at this time will result in the loss of the existing $3.5 billion in federal funding and will likely jeopardize the possibility of any future federal funding for a California high-speed rail system.

The Committee fails to assess the risks of not proceeding with the program at this juncture. Those risks include the irretrievable loss of $3.5 billion of federal funds, the potential elimination of state funds, the impact on regional rail systems of the loss of $950 million in funding for “interconnectivity” which are tied to progress on the high speed rail development, the inevitable increase in costs of eventual high speed rail connection through California as a result of inflation, population growth, etc., the loss of economic opportunity and technology development. These risks are present and real and represent lost opportunity of enormous cost and lasting consequence.

The statement “Further, the ICS will not be electrified, and thus cannot serve as a high-speed test track for future VHSR rolling stock3” is misleading. The Authority never intended to use an un-electrified ICS as test track. Furthermore the foot-note (3) is also misleading to the public, as the AAR’s test track at Pueblo, CO cannot be used to test true high-speed rail systems as it does not have the capacity to test at 250 mph, although the mention of this facility in this report seems to indicate that this may be possible.

So this is a pretty thorough refutation of the Peer Review Group’s claims about the funding situation. And they fire back pretty strongly at the Peer Review Group’s contention that the ICS violates Prop 1A:

The Committee Report, after stating that it would not comment on legal questions pertaining to Initial Construction Section, then proceeds to do so and arrives at the wrong conclusion, by stating that:

“…the ICS as planned 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 appears not to meet the requirements of enabling State legislation.”

The Committee has no legal competence to enable it to make such a statement and the Authority rejects this assertion. Attorneys for the Authority and others elements of the State of California, as well as attorneys for the Federal Railroad Administration, have reached the opposite conclusion and are fully comfortable that the Initial Construction Segment is complaint with the state bond measure. It is also noteworthy that the legislative author of the bond measure has embraced this view as well.

Will the authors of the Peer Review Report, led by Will Kempton, acknowledge their error and walk this part back? I hope so.

The Authority’s defense of their business model practices is similarly strong, and calls into serious question the Peer Review Report’s assumptions about how to operate HSR systems:

The Committee complains that building the ICS or IOS without private operator involvement is not a “feasible” business model and states:

“Without input from the final private sector participant regarding route alignment and station location, the future value of the HSR concession/franchise may be greatly diminished and less attractive to potential private sector participants. In other words, the private sector needs to be brought into the process much sooner than currently planned.”

This conclusion is extremely simplistic and displays a lack of knowledge of the realities of private finance for such complicated projects. It is also not supported by any experience throughout the world for a project of this magnitude, of which we are aware.

As this canard has been reiterated by the Committee, it is worth a response in detail. Let’s compare the experience in other successful High Speed Rail systems:

• In Japan the network and the operations were built and funded by the Public sector (Ministry of Transportation). At a much later date they privatized the operations.

• In Germany and France the Ministries of Transportation decided on the routes and the funding, then turned to infrastructure companies (DB-Netz and RFF) responsible to build and own and operate the infrastructure (including some PPP components); they have associated operators (DB and SNCF), but they all are government- associated companies. Neither of these systems is thus operated by private operators.

• In Spain, when they decided to introduce HSR, they did their own designs (and still continue to do so today), and subsequently the AVE service was introduced on the lines being operated by Renfe. This is similar to having Amtrak being involved and operating the system in the end. But this has not resulted in a private operator.

• Companies such as Virgin Rail who operate on existing infrastructure in the UK, as the infrastructure was there and the government decided to farm out the operations as a concession.

• The latest example in Italy, where NTV will be operating HSR trains on existing infrastructure, supplying trains and depots, but having had no input into the system designs.

While it may make a good sound bite in theory to have a private operator on board from the start, it is neither practical nor feasible. There is also no example of this being done successfully anywhere in the world. The one case where a government turned to full privatization of HSR from the outset occurred in Taiwan, which experienced many problems as a result, and was much reduced in size compared to the California program.

Indeed it is a problem to decide on an operator too early. Choose a German company and you are most likely tied into German technology for the entire project; the same is true for French or Japanese operators. This eliminates all competition at a later date.

It is also the case that the California High-Speed Rail Authority will be “selling” a concession to a private operator, giving them the right to operate and maintain the system. In doing so, the Authority will be seeking the best deal for California. Entering into such an agreement too early in the process will lead to lower revenues from the concession company, as private investors seek to discount the amount to reflect the risk of revenue variability.

As this is a system for the people of California, the basic alignment is laid down by law (Prop 1A) and the major stations are determined. So it will not be possible for an operator to change these basic parameters. Furthermore the process is driven by CEQA and NEPA which again is not the strength of international operators. So, although international operators are important to consult (and many provided favorable peer review of our Operations & Maintenance Plans), it is simply wrong and not feasible to suggest that those operators must be brought in at this point.

To the extent the Committee can point to a comparable circumstance where what they recommend has been put into practice, the Authority will gladly review and consider alterations to our approach. Until then, we believe the Committee demonstrated its lack of understanding about how high speed rail has been built throughout the world.
Finally, we note that one of the promising U.S. opportunities for private participation in high speed rail development was in Florida, where a number of infrastructure companies were expressing interest in the Florida program on the very day when the Governor of that state announced he was returning federal funding. The resulting loss of confidence from the private sector was striking. The Committee’s report, if embraced by the Legislature, will similarly dampen enthusiasm of private investors to look to California.

In short, the Peer Review Report’s assessment of the role of private investment is deeply, fundamentally flawed and lacks basic knowledge of the California situation and comparable HSR systems. That’s unforgivable for a group that is intended to bring expertise to the subject.

In fact, the Peer Review Report’s criticisms most closely resemble the deeply uninformed and flawed criticisms that came from the Legislative Analyst’s Office. It’s almost as if someone in Sacramento was shopping around bad analysis, in an attempt to destroy the HSR project, and getting people like the State Auditor, the LAO, and now the Peer Review Committee to bite. But surely those independent bodies would never fall for analysis so deeply flawed. And surely nobody would ever actually try that strategy. Isn’t that right, Alan Lowenthal?

The Peer Review Report generated a lot of media coverage indicating that the HSR project’s financing was in trouble. Will the Authority’s convincing and thorough demolition of that report get the same coverage?

Hah, of course it won’t. That’s because most media outlets aren’t really interested in reporting the facts. They’re interested in going after things that fit their preconceived narratives. In this case, the narrative is that nobody rides trains, trains are expensive, government isn’t honest, and the public is getting fed up. So the Peer Review Report fits the narrative and gets a lot of coverage. The Authority’s response doesn’t fit the narrative and will get hardly any coverage, especially since the media is not willing to treat the Authority as a credible voice. They’re the ones on the witness stand, so to speak, so nothing they say can really be trusted – according to most reporters.

And so it goes. Once again, the facts are on our side. But we also know that’s not sufficient. The public needs to be engaged on the values of the project. Californians want trains. As we saw in Santa Clara County, that desire can easily trump the naysayers. And it can do so statewide and in the state legislature. Let’s hope it does.