High-Speed Rail Needs More Oversight, Audit

February 1, 2016 By Morris Brown 3 Comments

high speed rail trainThe Jan. 27, 2016, Assembly Budget Subcommittee hearing labeled “Oversight of High Speed Rail” turned out to be anything but a hearing on oversight.  (Video of Hearing)

The hearing, prompted by pressure from Republicans when an explosive LA Times article reported the Authority had failed to include and ignored cost increases predicted by its prime contractor, Parsons Binkerhoff (PB), while the 2014 business plan was developed and published.

The cost increase predicted by the PB report was about $9 billion, a 31 percent increase for the Merced to Burbank segment.  The report also showed an overall increase of about 5 percent for the whole Phase I of the project, with a net increase of about $3.5 billion to the baseline project for the San Francisco to Los Angeles segment.  Indeed the 2014 business plan, simply incorporated the 2012 business plan cost estimate of $68 billion. 

Reading the staff report prepared for the hearing, it was easy to predict the result of the hearing. The staff report included “cut and paste” excerpts from the Authority’s business plan, but no such excerpts from the LA Times’ article.  The only speakers were to be from the Authority, Dan Richard (Chair) and Jeff Morales (CEO).  From the Authority’s Peer Review Group Lou Thompson appeared.

Thus the whole hearing was setup to be a “white wash” of the issues the Times’ article raised.

Richard spent about 10 minutes telling the world (again) how well run and open the Authority has been in carrying out this project.

Then Morales gave his input, essentially seeking to discredit the Times’ article by claiming the PB report included going all the way to Burbank whereas the comparison cost routing would stop at Sylmar (about 16 miles shorter in distance). Morales claimed about $4.5 billion of the cost difference was due to the PB report extending the segment to Burbank. Claiming this extension would cost $4.5 billion to go only 16 miles on level surface when a corridor like the San Fernando road could be used, is simply not believable. The other $4.5 billion of the PB projected cost increase was simply discarded by the Authority by claiming elimination of elevated structures in the PB estimate with building on berms would save this $4.5 billion.

This brings up the question of why pay PB to produce cost estimates, when the Authority can just claim we will build the segment differently and substitute our own costs? All of this testimony from Morales came without his producing any data for his testimony, since all of this is labeled “DRAFT.”

The Authority surely needs more oversight. Lou Thompson echoed this need in his testimony. The Authority resists additional oversight with all its might.

Morales had written the Chair of the Joint Legislative Audit Committee a letter in which he was opposed to the approval of an audit of the Authority proposed by Senator Andy Vidak.

Let me give you a personal example for this need.

I commented on the need for an audit of the Authority previously. Since that article was published, additional information has appeared.

The reply from the Authority on Sept. 18, 2015, to my public record request of Sept 8th 2015, stated:

The June 30 Funding Contribution Plan (FCP) is expected to be posted in the near future.When it is available, it will be posted to the following website:  http://www.hsr.ca.gov/About/Funding_Finance/funding_agreements.html

The June 30 FCP was indeed finally posted on Jan. 21, 2016. That is about 4.5 months after my request. But what is really interesting is an inspection of the FCP reveals it was produced on July 28, 2015 (see the properties snapshot of the FCP) the FCP was available well before my initial request. Public Record Requests are mandated by law to be filled within 10 days, not 4.5 months later.

Los Angeles Times reporter, Ralph Vartabedian, has authored another article since the Jan. 27 committee hearing. It explains a lot.

The High Speed Rail project is the largest such endeavor in the nation. It needs more oversight and it needs an audit from the non-partisan State Auditor now. It is time for the Democratic  legislative leadership and the Authority to stop denying such an audit.

 is a resident of Menlo Park and Founder of DERAIL, a grassroots effort against the California high-speed rail project.

Originally published by Fox and Hounds Daily

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CA High Speed Rail Continues to Fail in Search for Private Investment

October 16, 2015 By Morris Brown 9 Comments

High Speed RailAt the last High-Speed Rail Authority board meeting, on Oct. 6, a presentation was given by CEO Jeff Morales, who had been ballyhooing that 36 private party organizations had responded to the Authority’s “Request for Expressions of Interest” invitation which was sent out a couple of months ago.

Mr. Morales would have you believe that there is now intense interest on the part of private investors to become a part of the project. Private party funding was always envisioned to be a major source of capital to build the project, along with Prop. 1A bond funds, and federal government grants. According to Morales, the now approved addition of state funding from cap-and-trade funding in the amount of around $500 million per year, was going to push private investors to invest their funds, which they had been thus far, now about 8 years into the project, been unwilling to contribute.

Well the board discussion of these responses clearly did nothing to convince the board that such funding was on the horizon.

Director Rossi, made the flat-out statement, “The section that pertains to finance … there is absolutely nothing new in all the conversations we have had since day one.”

Chair Dan Richard was more reserved, saying another source of funds (around $20 billion) would be obtained from the operating profits generated from operation of the train. His optimism is pretty amazing. Operation of the many HSR around the world has shown only two systems, a line in Japan with ridership of 150 million passengers per year, and a line in France, operate without a subsidy, much less generate profits.

Richard added, that to get private funding, “two ways either you give them a guarantee or they see enough ridership history that they’re willing to take that risk and we’re not there yet and what I’m seeing from these proposals does not put us there yet in terms of a revenue concession model that adds twenty billion dollars of new money that we’ve estimated could be supported from the projected revenues of this project we’re getting in that direction but we are not there yet so I just want to be careful because when people start to sit down …”

The project has become a nightmare. Original cost estimates of $32 billion for Phase I from San Francisco to Anaheim have now grown to $68 billion, not including Anaheim at the southern end. The Authority is also proposing to share the use of CalTrain tracks in the north, rather than the needed for safety and speed, fully dedicated and grade separated tracks everywhere. The Federal government, once counted on to contribute $12 to $15 billion, after its initial grant of about $3.2 billion, has said no more funds from us.

The key to any private party investment would be a guarantee their investment would be secure, and any failure of the project would result in the state repaying them for any capital they have lost. Thankfully, when Prop. 1A was drafted, such a guarantee was forbidden.

Now being again rebuffed by the private sector, at what point is this project going be abandoned? The sooner the better.

The video of this discussion can be viewed here.

 is a resident of Menlo Park and Founder of DERAIL, a grassroots effort against the California high-speed rail project.

The article was originally published by Fox and Hounds Daily

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