Against California High Speed Rail by Mark R. Powell

California Rail Authority and Senators Question the Legality of the Revised 2012 Business Plan

State Senators ask Legislative Counsel and Rail Authority asks Attorney General to Comment on Legality of the Business Plan.
Senator Joseph Simitian, Chairman of Budget Subcommittee, and Senator Mark DeSaulnier, Chair of the Policy Committee on Transportation wrote to the Legislative Counsel, Ms. Diane Boyer-Vine on April 18 in search of an opinion on the legality of the Authority’s Revised 2012 Business Plan.  The entire body of their letter reads as follows:

On April 12, 2012 the California High Speed Rail Authority adopted a “business plan” for the statewide high speed rail project.  We are writing to ask your office to review the adopted plan and advise us as to whether or not the plan is legally compliant with the provisions of Proposition 1A, as approved by the voters in November 2008.” [Note 1]

This letter was brought to light at the April 18 Senate Hearing on High-Speed Rail. [Note 2] As Senator Simitian put it at the hearing, if the Business Plan is found to be not in compliance with Proposition 1A, then “we can save ourselves a lot of time and conversation”. [Note 3] California High Speed Rail Authority Chairman Dan Richard, who was being questioned at the time this letter was revealed, responded by saying that the Authority was concurrently seeking a legal opinion from the Attorney General’s Office on this same issue.

According to a member of Senator Simitian’s staff, the senator will likely make public the Legislative Counsel’s opinion when it is received.  That opinion is expected to be delivered one to two months from now.  The senator’s diligent work in trying to be an honest broker and his level of transparency in his pursuit of the truth is refreshing and commendable.  One hopes the Authority will be similarly transparent with the public regarding the Attorney General’s opinion of the Business Plan.

A look at the law behind Proposition 1A, Assembly Bill 3034 (the law), and a reading of the recently approved Business Plan reveals many issues where legality is in doubt.  This article highlights only a few issues.

Environmental Clearances
The Business Plan calls for the Initial Operating Segment to run from Merced to San Fernando via Fresno, Bakersfield, and Palmdale. [Note 4] The law requires the Authority’s funding plan, which is integral to the Business Plan, to certify that “the authority has completed all necessary project level environmental clearances necessary to proceed to construction”. [Note 5] In fact, four separate project level Environmental Impact Reports (Merced to Fresno, Fresno to Bakersfield, Bakersfield to Palmdale, and Palmdale to Los Angeles Union Station) need to be completed and certified at both a federal and state level before the Authority can truthfully claim to possess the “necessary project level environmental clearances”.  Currently, the Merced to Fresno and Fresno to Bakersfield EIR’s exist in draft form.  EIR’s for the Bakersfield to Palmdale and Palmdale to Los Angeles Union Station segments have yet to be issued even in draft form. [Note 6]

 

Funding Plan
The law requires that no later than 90 days prior to the submittal to the Legislature and the Governor of the initial request for appropriation of proceeds of bonds, the Authority shall have approved and submitted to the Director of Finance, the Peer Review Group, and the policy committees with jurisdiction over transportation matters and the fiscal committees in both houses of the Legislature, a detailed funding plan for that corridor or a usable segment thereof. The plan shall include, identify, or certify to the following:

• The sources of all funds to be invested in the corridor, or usable segment thereof, and the anticipated time of receipt of those funds based on expected commitments, authorizations, agreements, allocations, or other means. [Note 7]

This requirement is restated again in the law where the funding plan is described as one that:

•  identifies the sources of all funds to be used and anticipates time of receipt thereof based on offered commitments by private parties, and authorizations, allocations, or other assurances received from governmental agencies.  [Note 8]

 

Moreover, the law requires that the Authority not be the judge of the adequacy of their plan. The law requires a report or reports, prepared by one or more financial services firms, financial consulting firms, or other consultants, independent of any parties, other than the authority, involved in funding or constructing the high-speed train system, indicating that:

• construction of the corridor or usable segment thereof can be completed as proposed
• if so completed, the corridor or usable segment thereof would be suitable and ready for high-speed train operation,
• upon completion, one or more passenger service providers can begin using the tracks or stations for passenger train service,
• the planned passenger train service to be provided by the authority, or pursuant to its authority, will not require operating subsidy, and
• an assessment of risk and the risk mitigation strategies proposed to be employed. [Note 9]

In fact, the Authority has no funding plan other than to hope for federal dollars far in the future or their dream that Cap and Trade fees will materialize by the 10’s of billions of dollars and be appropriated by the legislature to the high-speed rail project.  The weaknesses of the funding plan would be more obvious if the Authority had complied with the law’s requirement to have a financial plan prepared by an independent financial consulting firm.  The Authority has been using the services of  KPMG, a large accounting and financial consulting firm and is about to exhaust the current $2.5 million contract.  In early April the Authority’s staff recommended increasing the contracted amount with KPMG to $8.75 million and recommended that the Authority Board authorize the Acting Chief Executive Officer to negotiate a contract amendment.  [Note 10] Unfortunately, for all the money spent on this contractor, KPMG has not issued a financial plan and KPMG’s name can be found nowhere on the recently issued Business Plan.

Corridors and Usable Segments
The law contains a list of “corridors” [Note 11] and defines “usable segments” as a portion of a corridor containing at least two stations. [Note 12] Nowhere in the law is a corridor mentioned linking Merced to San Fernando.  Minimum travel time requirements are mentioned for seven corridors including San Francisco to San Jose (30 minutes), San Jose to Los Angeles (2 hours 10 minutes), and San Francisco to Los Angeles Union Station (2 hours 40 minutes). [Note 13] The law requires that the high-speed train system meet these required times.  The Authority’s decision to build a “corridor” other than one described in the law may therefore be seen as illegal in two respects.  It is not an allowed corridor in the first place and trains traveling on it meet none of the time requirements spelled out in the law.

Achievable Operating Headway
“Headway” refers to the time between successive trains, a measure of frequency of service.  The law requires the high-speed train system to be capable of achieving headways of 5 minutes or less. [Note 14] The Authority’s Business Plan shows no headways of “5 minutes or less”. [Note 15] In the new “blended approach”, where high-speed trains will share track with Metrolink in the LA Basin and Caltrain in the Bay Area, it may be impossible to meet the headway criteria.  Therefore, using rail bonds to upgrade and electrify Caltrain tracks connecting San Francisco to San Jose may be outside the requirements of the law.  Additionally, the Initial Operating Section extending from Merced to San Fernando will likely use Metrolink track from Palmdale to San Fernando and encounter the same difficulty in meeting headway times.

The seriousness of this problem in both the Bay Area and the LA Basin is unclear because the San Francisco to San Jose, Bakersfield to Palmdale, and Palmdale to Los Angeles Union Station EIR’s, have yet to be released, even in draft form.  Only when clearances are obtained for the actual alignments will the issues associated with Metrolink and Caltrain trains sharing track with high-speed trains become fully apparent making it possible for engineers to calculate the achievable headways.

The law was carefully drawn up to protect taxpayers by requiring that all environmental clearances be on hand, all necessary construction funds be secured, and system performance assured before bond money would be released to begin construction on a corridor or usable segment of the high-speed rail system.  The Authority’s current Business Plan may be seen as falling short of all of these safeguards.  Concerned Californians will anxiously await the findings of the Legislative Counsel, the Attorney General, and others who will be weighing in on these same issues including the Peer Review Group, the Legislative Analyst’s Office, and the State Auditor in the coming months.  However, lawyers merely render opinions.  In the end it will likely take a lawsuit brought before a judge to make the final call as to whether the Business Plan is legal.

Factual statements made in this article are footnoted below and can be accessed by clicking on the note shown in the body of the article.

 

Footnotes:

Note 1:  Transcript of conversation with member of Senator Simitian’s staff, April 25, 2012

Note 2:  Video of Senate Hearing on High-Speed Rail conducted April 18, 2012; 13 minutes 20 seconds into video.
http://www.youtube.com/watch?v=zTprb4gEbnM&feature=youtu.be

Note 3:  Video of Senate Hearing on High-Speed Rail conducted April 18, 2012; 14 minutes 25 seconds into video.
http://www.youtube.com/watch?v=zTprb4gEbnM&feature=youtu.be

Note 4:  Revised 2012 Business Plan, Executive Summary, page ES-13, Exhibit ES-3 Summary of Each Phased Implementation Section
http://www.cahighspeedrail.ca.gov/assets/0/152/431/1a6251d7-36ab-4fec-ba8c-00e266dadec7.pdf

Note 5:  Assembly Bill 3034, Article 2.  High-Speed Passenger Train Financing Program, Section 2704.08, paragraph (c)(2)(K)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

Note 6:  California High-Speed Rail Authority website, Library, Project Sections link
http://www.cahighspeedrail.ca.gov/CHSRTemplate_STDwoBannerwsearch.aspx?pageid=8507&ekfxmen_noscript=1&ekfxmensel=eeb11f839_11_12

Note 7:  Assembly Bill 3034, Article 2.  High-Speed Passenger Train Financing Program, Section 2704.08, paragraph (c)(2)(D)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

Note 8:  Assembly Bill 3034, Article 2.  High-Speed Passenger Train Financing Program, Section 2704.08, paragraph (d)(1)(B)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

 

Note 9:  Assembly Bill 3034, Article 2.  High-Speed Passenger Train Financing Program, Section 2704.08, paragraph (d)(2)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

Note 10:  Staff memo regarding Item #5 to be considered at the Authority’s April 2012 Board Meeting, Approval of Amendment to KPMG Contract
http://www.cahighspeedrail.ca.gov/WorkArea/DownloadAsset.aspx?id=12020

Note 11:  Assembly Bill 3034, Article 1.  General Provisions, Section 2704.01, paragraph (f)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

Note 12:  Assembly Bill 3034, Article 1.  General Provisions, Section 2704.01, paragraph (g)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

Note 13:  Assembly Bill 3034, Article 2.  High-Speed Passenger Train Financing Program, Section 2704.09, paragraph (b)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

Note 14:  Assembly Bill 3034, Article 2.  High-Speed Passenger Train Financing Program, Section 2704.09, paragraph (c)
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_bill_20080826_chaptered.pdf

Note 15:  California High-Speed Rail 2012 Business Plan, Ridership and Revenue Forecasting, Appendix F Details of Model Run Assumptions and Outcomes
http://www.cahighspeedrail.ca.gov/assets/0/152/302/404/6c626292-2189-49de-8ff1-a16cc8401f1d.pdf

One Response to California Rail Authority and Senators Question the Legality of the Revised 2012 Business Plan

  1. Harriett says:

    Hi, yes this article is actually pleasant and I have learned lot of
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