Void in Leadership Continues for California High-Speed Rail

High Speed RailFour months after then-California High Speed Rail Authority Chief Executive Jeff Morales told authority board members he was moving on and two months after Morales made his decision public, the agency overseeing the state’s $64 billion bullet train project hasn’t settled on his successor.

In 2012, four months after Chief Executive Roelof van Ark abruptly left following two stormy years, Morales already had the job. This time around, the same speedy selection process seemed likely. The RT&S transportation industry website reported after Morales’ decision was announced in April that the board was likely to have his replacement approved before Morales’ final day of June 2.

But the CHSRA board met in closed session on the succession issue on May 10 and June 14 without reaching a decision. The rail agency’s number two job – deputy chief executive – has also been vacant since Dennis Trujillo left in December.

The empty slots atop the CHSRA power structure come at a critical time.

According to a federal report prepared under the Obama administration, the state’s high-speed rail project is already seven years behind schedule and on its way to having a 50 percent cost overrun on the $6.4 billion, 118-mile first segment now being built in the Central Valley.

The project also continues to face legal challenges which argue that it violates the terms of Proposition 1A, the 2008 ballot measure providing $9.95 billion in bond seed money for the project. The rail authority has won most recent judgments. But opponents remain confident they eventually will prevail because of a 2014 state appellate court ruling that held the project still was subject to a financial “straitjacket” that would require it to show short- and long-term financial viability without public subsidies before the project could significantly proceed. The project’s struggle to attract private investment shows that at least in the private sector, there are many doubts that the bullet train could operate successfully without such subsidies.

Obama administration rules could haunt project

But the election of Donald Trump as president in November also has led to a huge new headache for CHSRA. All 14 California House Republicans have urged Transportation Secretary Elaine Chao to reverse Obama administration actions that loosened federal rules to give California access to about $3 billion in federal dollars for the project.

Rep. Jeff Dunman, R-Turlock, and his colleagues have focused their harshest fire on a 2012 decision that gave the state the go-ahead to spend about $200 million in federal funds but not have matching state spending. The decision went against longstanding Washington precedent.

Withdrawing all federal funding could also be justified by citing the Obama administration’s 2009 regulations for projects that were to be paid for or partly paid for with money from the economic stimulus bill passed a month after President Obama took office. The Federal Railroad Administration rules said projects that didn’t demonstrate “reasonableness of financial estimates” and “quality of planning process” would get no funding.

That’s the same agency which recently concluded the project was seven years behind schedule and on course for a 50 percent cost overrun on its initial segment

The California High Speed Rail Authority board’s next meeting is July 18 in Sacramento.

This article was originally published by CalWatchdog.com

Why Aren’t Unions Fighting California’s Bullet Train Boondoggle?

Photo courtesy of Jon Curnow, flickr

Photo courtesy of Jon Curnow, flickr

Back in 2008, voters in California approved Prop. 1, a statewide initiative to spend “$9 billion for building a new high-speed railroad between San Francisco and Los Angeles.”

Total cost, $9.5 billion. Remember that?

Quoting further from the original initiative’s ballot language:

Bond Costs. The costs of these bonds would depend on interest rates in effect at the time they are sold and the time period over which they are repaid. The state would make principal and interest payments from the state’s General Fund over a period of about 30 years. If the bonds are sold at an average interest rate of 5 percent, the cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year. Operating Costs. When constructed, the high-speed rail system will incur unknown ongoing maintenance and operation costs, probably in excess of $1 billion a year. Depending on the level of ridership, these costs would be at least partially offset by revenue from fares paid by passengers.” (ref. UC Hastings Scholarship Repository, Propositions, California Ballot Propositions and Ballot Initiatives)

Over time, fantasy always yields to reality.

The most recent reputable estimate of high-speed rail costs come from an in-depth special report published last month by the Los Angeles Times, entitled “$68-billion California bullet train project likely to overshoot budget and deadline targets.”

The title of that special report says it all. California’s high-speed rail was sold to voters for an amount that is at least seven times less than our most recent estimate of costs, and if the author of the LA Times special report is to be believed, it is very unlikely this project will come in for a total cost under $100 billion.

High-speed rail was sold to voters back in 2008 in roughly the same way pension benefit enhancements were sold to naive politicians back around 1999. In both cases, the decision makers were told it would cost next to nothing. Isn’t this called fraud? To sell a good or service to a consumer at a given price, then come back and demand ten times as much money?

Payments on these construction costs will be paid from the California state general fund, and based on a $100 billion total cost and a 5.0 percent interest rate, that comes out to $166 per year per California resident. Not that much? Unimpressed? Put another way, based on roughly 6 million taxpaying households in California (about half of California’s 12 million households pay no taxes; their sales tax burden is largely offset by the earned income tax credit), construction of this train will cost $1,084 per taxpaying household per year.

Do you want to pay $1,000 per year for a project that will not alleviate California’s transportation challenges one bit? A project that will lose money forever? A project that will use up massive amounts of capital that could be deployed to achieve literally dozens of other huge and vitally needed infrastructure objectives?

This is where California’s labor leadership, by continuing to support high-speed rail as a centerpiece project, are showing how out of touch they truly are with the average working family. Because they are unwilling to fight for major infrastructure investments that would improve the quality of life and lower the cost of living for all Californians; improvements to existing rail, upgraded roads, state-of-the art natural gas and 5th generation nuclear power stations, reservoirs and aquifer storage projects, upgraded sewage treatment plants to produce potable water, and much, much more. If California’s labor leaders care about all workers, they will find the vision and courage to fight for these useful amenities, instead of promoting high speed rail.


High Speed Rail CEO Jeff Morales made $477,760 in 2014

A legitimate role for government spending is to make strategic investments that reduce costs for basic necessities. That is what makes a nation prosperous. That is a proper use of public funds. Artificially inflating the costs for energy, water and transportation – which is the current policy of California’s government, abetted by big labor in this state – is a crime against the people of California.

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Ed Ring is the executive director of the California Policy Center.

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

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.

esident 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

High Speed Rail Strategy – START to Build it and They Will Come!

The High Speed Rail project found its way into three of the five panels in the Public Policy Institute’s all-day State of Changeconference Wednesday. At the end of the day, you understood the High Speed Rail authority’s strategy to gain support  for the project – START to build it and they will come!

In an opening discussion, Nancy McFadden, Executive Secretary to Governor Jerry Brown, said that the need for High Speed Rail is more important now than when voters initially passed the bond in 2008 moving the project forward. She cited the governor’s pledge to reduce carbon emissions and the need to move people around the state that will have 50 million residents by 2025.

Acknowledging but brushing aside obstacles facing the bullet train she said litigation was going well, the Federal government came through with money and the legislature approved cap-and-trade funds to get the project started.

However, this funding is not nearly enough. It appears that Republicans controlling Congress have no interest in continuing funding for the train. No private investors have stepped up to take up a share of the costs promised voters when the High Speed Rail bond was on the ballot. While the cap-and-trade funds are a steady revenue source that can be leveraged with borrowing, there is still a big funding gap for the project.

Jeff Morales, chief executive officer of the High Speed Rail project, argued in a later panel that the funding would arrive. He said the message from the High Speed Rail authority to Washington is “leave us alone” for two years. In other words, the project has the resources to get the project started and then he expects Washington would get on board once they see progress.

Clearly, advocates for the project believe that once the project is started there will be no stopping it.

McFadden said when people see the project is being built they will support it. Morales called the project an investment in both California and its people. He noted that 30-percent of the contracts will go to small businesses in the area and that in a few years, “Everyone in the Valley will know someone involved in the program.”

He said that regional chambers of commerce and all large city mayors supported the project.

Morales argued that the two tracks being constructed would substitute for 2,500 of highway lane miles that would be needed to transport people around the state in the future. But that assumes the predictions on ridership are accurate. Experts have questioned not only the ridership projections, but also the projected ticket costs per rider and the speed in which the rail authority says it will take the bullet train to cover the distance between Los Angeles and San Francisco.

Assemblyman Rocky Chavez offered a different perspective on the train in a third panel discussion. He said the train was actually in your garage. Advancing technology will see electric, driverless cars running on the roads moving along together like a train, he said. Referring to the building of the High Speed Rail, he added,  ‘and you don’t need to rip up farmland.’

Train advocates are not about to wait for that future. Not when the strategy appears to be start putting down the track and see if anyone can stop them.

This article was originally publish on Fox and Hounds Daily