…False Promises, Self-Denial, and Public Deception
Almost 20 years have lapsed since California Senate Continuing Resolution 6 (SCR 6) [Note 1] gave birth to the Intercity High-Speed Rail Commission in 1993. The Commission’s mission:
“ (Be it) Resolved that construction commence on a Los Angeles to San Francisco Bay Area High-Speed Ground Transportation Corridor by the year 2000, and that by the year 2020, high-speed ground transportation service be operating between Sacramento, the San Francisco Bay area, the Los Angeles area, the San Bernardino/Riverside area, Orange County, and San Diego.”
And how was this to be paid for? SCR 6 contained the answer.
“(Be it)Resolved that the financing plan include, but not be limited to, all of the following:
(1) Construction, operation, and maintenance by a private entity utilizing private funds.
(2) Use of state general obligation bonds.
(3) Use of revenue bonds backed by incremental increases in gasoline tax to pay principal
and interest, with a schedule for sale of bonds and a schedule for each incremental
gasoline tax increase.
(4) Use of airport funds to the extent that the new network would eliminate the need for
(5) Identification of potential alternative public funding
Yes, the Rhodes Scholars in our Sacramento Legislature would have used new gasoline taxes and existing airport tax receipts to pay for a railroad that was to run on electricity.
To commence construction by the year 2000 and to have the statewide system complete by the year 2020 was certainly a tall order. Fortunately, not much in the way of plans was produced by the Intercity High-Speed Rail Commission. Unfortunately, the same legislator, Judge Quentin Kopp, who penned SCR 6 in 1993 also authored Senate Bill 1420 in 1996; The High Speed Rail Act [Note 2]. This new law terminated the Intercity High-Speed Rail Commission on January 1, 1997 in favor of a new body, the High-Speed Rail Authority (the Authority), which Judge Kopp would later serve on as Chairman when he was termed out of office. The Authority’s mandate was to:
“..prepare a plan for the construction and operation of a high-speed train network for the state, consistent with and continuing the work of the Intercity High-Speed Rail Commission, and to submit that plan to the Legislature and the Governor, or to the voters of the state, for approval, except as specified. The bill would terminate the authority on December 31, 2000, unless that plan has been so approved by that date.”
The ball fell in Times Square and December 31, 2000 came and went with no high-speed rail plan being submitted either to the legislature or to the voters for approval. The Authority did develop a plan prior to their drop-dead date of December 31, but it was never submitted for approval to anyone. Remnants of the 2000 Business Plan and its accompanying Financial Plan can still be found on the Authority’s website today [Note 3] [Note 4]. The Business Plan looks much like we see in today’s plans; a mainline connecting San Francisco and Los Angeles through the Central Valley with spurs connecting to Sacramento and San Diego. The accompanying “Ridership and Revenue Study” [Note 5], is ambitious (to be kind), but not science fiction like the later study by Cambridge Systematics [Note 6].
The real difference between 2000 and today is that in 2000 the Authority’s Financial Consultant actually produced a Financial Plan. The 2000 Financial Plan was remarkable for its honesty. It projected a cost of $25 Billion in 1999-dollars and called on Californians to pay upfront for this infrastructure built for Californians. The mechanism, either a ¼ cent sales tax increase for 20 years beginning in 2000 or a 10 year ½ cent sales tax increase commencing in 2006. The real spending would begin in 2006 with start of construction and begin winding down in 2016 with the completion of the system. The plan envisioned profits beginning is 2016 that might make it possible to end the 1/4 cent sales tax two years early (if that had been the chosen funding option). Clearly, the plans were optimistic in terms of expected costs, years required to build the system, and ridership/profitability. Still, they did include a mechanism to pay for the projects expected costs.
Politics of Delay and Deferral in the New Millennium
Today we know our politicians do things differently. They promise to defer the sacrifice of today’s Californians by funding only a small amount of high-speed rail with General Obligation Bonds (of up to 40 years in duration) while calling on Americans in the other 49 states to fund the remainder of their high-speed rail dreams.
In September 2000 Assembly Bill 1703 (Florez), High Speed Rail Service, [Note 7] was enacted extending the life of the Authority until December 2003. With still no plans put forward for approval the Authority was made a permanent fixture in California politics with the enactment of Senate Bill 796 (Costa), High Speed Rail Authority, on September 19, 2002 [Note 8]. That same day, Senate Bill 1856 (Costa), the Safe Reliable High-Speed Passenger Train Bond Act for the 21st Century [Note 9], was also enacted. It is this bill that first proposed the issuance of $9.95 billion in state general obligations bonds as seed money for a high-speed rail system with the Authority tasked to:
“..pursue and obtain other private and public funds, including, but not limited to, federal funds, funds from revenue bonds, and local funds”…
While the door was still left open for sales tax revenue bonds to partially fund the system, clearly the emphasis was on obtaining federal support for the project.
Senate Bill 1856 was the precursor to the bill that eventually resulted in high-speed rail bonds being put to the voters in November 2008 and so it is worth mentioning its highlights:
• The issuance of $9.95 billion in 30-year general obligation bonds , $9 billion of which would be used in conjunction with available federal funds for the purpose of funding the planning and construction of a high-speed train system.
• The initial high-speed train network linking San Francisco and the Bay Area to Los Angeles will serve as the backbone of what will become an extensive 700-mile system that will link all of the state’s major population centers, including Sacramento, the Bay Area, the Central Valley, Los Angeles, the Inland Empire, Orange County, and San Diego, and address the needs of the state.
• The initial network from San Francisco and the Bay Area Bay Area to Southern California could be in limited operation by 2008.
• The initial segments shall be built in a manner that yields maximum benefit consistent with available revenues.
• After the initial investment from the state, operating revenues from the initial segments and funds from the federal government and the private sector will be used to pay for expansion of the system.
• At a minimum, the entire 700-mile system described in the High-Speed Rail Authority’s Business Plan should be constructed and in revenue service by 2020.
• The bill would provide for the submission of the bond act to the voters at the general election on November 2, 2004.
These points seem to make it clear that the intent of the legislature was the complete planning, funding, and construction of the Los Angeles to San Francisco “backbone” of the statewide system and then to use the expected profits to help fund the remainder of the system. This point is made clearer later in the bill, Article 2, which reads in part:
Article 2. High-Speed Passenger Train Financing Program
2704.04. (a) It is the intent of the Legislature by enacting this chapter and of the people of California by approving the bond measure pursuant to this chapter to initiate the construction of a high-speed train network consistent with the authority’s Final Business Plan of June 2000.
(b)“Nine billion dollars ($9,000,000,000) of the proceeds of bonds authorized pursuant to this chapter, as well as federal funds and other revenues made available to the authority, to the extent consistent with federal and other fund source conditions, shall be used for planning and eligible capital costs, as defined in subdivision (c), for the segment of the high-speed train system between San Francisco Transbay Terminal and Los Angeles Union Station. Once construction of the San Francisco-Los Angeles segment is fully funded, all remaining funds described in this subdivision shall be used for planning and eligible capital costs, as defined in subdivision (c), for the following additional high-speed train segments without preference to order:
A) Oakland-San Jose.
(C) Los Angeles-Inland Empire.
(D) Inland Empire-San Diego.
(E) Los Angeles-Irvine.
Revenues generated by operations above and beyond operating and maintenance costs shall be used to fund construction of the high-speed train system.”
Once again, the “backbone” of the system was to be the segment connecting San Francisco and Los Angeles and if consistent with the 2000 Business Plan it would not be built piecemeal, but would be funded and built for immediate operation of profitable high-speed trains.
Readers may remember that the “Safe, Reliable High-Speed Passenger Train Bond
Act for the 21st Century” did not appear on the November 2, 2004 ballot. Instead, the legislature passed and the governor signed SB 1169 (Murray) the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century” on June 24, 2004 [Note 10]. It is worth noting that this bill was signed into law 131 days prior to the November 2 election thus meeting the 131 notice provision in California Election Code (Section 9040). Senator Murray’s bill amended the existing law to change the date for voter approval to November 7, 2006. Restated once again were the following assertions:
(b) The initial high-speed train network linking San Francisco and the bay area to Los Angeles will serve as the backbone of what will become an extensive 700-mile system that will link all of the state’s major population centers, including Sacramento, the bay area, the Central Valley, Los Angeles, the Inland Empire, Orange County, and San Diego, and address the needs of the state.
(e) After the initial investment from the state, operating revenues from the initial segments and funds from the federal government and the private sector will be used to pay for expansion of the system.
The same drama was played out again on June 27, 2006 with the governor’s signing of Assembly Bill 713 (Torrico), the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century”[Note 11] which changed to date for voter approval to November 4, 2008. The Authority’s Statewide Program Environmental Impact Report was completed during these delays with the legislatively mandated expectation that the initial segment from San Francisco to Los Angeles would be the “backbone” of the statewide system.
One obvious question to ask is, “Why all the delays?” The author of Assembly Bill 713, Torrico, gave as his reason:
“the state’s ongoing budget deficits and precarious financial condition have diminished its ability to undertake …long-term and costly transportation projects.” [Note 12]
The state’s finances were in bad shape in the summer of 2006. California is continually in bad financial shape. However, California’s financial picture only worsened in the ensuing two years with the collapse of real estate prices, surging unemployment, and the beginning of “the great recession”. And it was on August 26, 2008, a full two months after the deadline for putting a measure on the November 4 ballot that the governor signed SB 3034 (Galgiani) the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century” [Note 13]putting a new version of the bond act on the ballot. The new bill largely mirrored the previous bills, but it did include some new provisions to help assure voter approval. Among those provisions were:
• A requirement that the Authority submit a new Business Plan by September 1, 2008.
• The establishment of a peer review group to “evaluate the authority’s funding plans and prepare its independent judgment as to the feasibility and reasonableness of the plans, appropriateness of assumptions, analyses, and estimates, and any other observations or evaluations it deems necessary.”
• The $9.95 billion in General Obligation bonds issued to partially fund the system were extended in maturity from 30 years to up to 40 years thereby reducing the yearly payments associated with the ballot measure.
• All the prejudicial language describing the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century” was maintained along with all the provisions for bypassing California Election Code which prohibits prejudicial ballot wording along with one new proviso. That is, SB 3034 also contained wording allowing it to be put on the ballot even though the statutory deadline for notifying the Secretary of State 131 days in advance of the election had long passed.
So why after years of delay, supposedly due to the poor financial condition of the state, was the bond measure rushed onto the ballot during a time when the state’s financial situation was getting even worse?
One Bite at the Apple
There is an old adage, “sometimes you get just one bite at the apple”. Could it possibly be that with the Democratic Party finally looking to win big in November and with Liberals poised to turn out in big numbers for Candidate Obama, that internal polling conducted by the Authority showed that the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century” promising everything (safe, reliable, low cost tickets, paid for mostly by others and Californians’ payments spread out over 40 years, overseen by an “Independent Peer Group” of experts, etc.) might just pass if rushed onto a ballot riddled with prejudicial language nearly a decade in the making, and with little time for opposition to form?
We all know the results, a narrow victory for the proponents of high-speed rail which to this day the Authority lamefully refers to as a “mandate”.
Three years later the false promises, self-delusion, and deceit practiced by the legislature and the Authority are resulting in the inevitable day of reckoning.
Their “backbone” of the system, which was to be the initial construction segment from Los Angeles to San Francisco and which was to be profitable and help fund the build-out of the entire system, is now defined as “from somewhere north of Fresno to somewhere north of Bakersfield” and is a “backbone” over which no trains can operate or even be tested. This will certainly lead to lawsuits rightly asserting that bond funds cannot be used for this purpose.
The promise of a large role for the Federal Government in providing necessary funding has disappeared into a ballooning federal deficit.
Promised private funding has been, and remains, nonexistent.
End of the Line
And yet this monstrosity of a project is still backed by the Authority and by the Governor. Perhaps after spending nearly 20 years pursuing a project, the backers cannot admit it was always a bad idea. Perhaps it was worth investigating, but now the results are in. High-Speed Rail will not work for Californians. Many of the historical backers of this project (Costa, Florez, Galgiani) hail from the Central Valley where the current “great recession” is more akin to “the Great Depression” and perhaps they just want jobs for their unemployed construction worker constituents.
More likely, these politicians have simply lost sight of their own purpose…to provide thoughtful governance irrespective of the outcome of any specific project. Like the prisoners of war in the movie, The Bridge on the River Kwai, who came to take such pride in the railroad bridge they built that they forget they had built it for the enemy, our politicians have lost sight of the bigger high-speed rail picture which is the financial destruction of the state and the destruction of the homes, businesses, farms, and families now in the path of high-speed rail.
Statements made in this article are supported by footnotes shown below. Original source documents can be obtained by clicking on the highlighted notes imbedded in the article.
All bolding and underlining in the article is emphasis added by the author and is not found in the source documents.
Note 1 Senate Continuing Resolution 6 for the Year 1993
Note 2 Senate Bill 1420 (Kopp and Costa) in 1996; The High Speed Rail Act
Note 3 2000 Business Plan
Note 4 2000 Financial Plan
Note 5 Charles River Associates Ridership and Revenue Study
Note 6 Cambridge Systematics Ridership and Revenue Study
Note 7 Assembly Bill 1703 (Florez), High Speed Rail Service
Note 8 Senate Bill 796 (Costa), High Speed Rail Authority
Note 9 Senate Bill 1856 (Costa), the Safe Reliable High-Speed Passenger Train Bond Act for the 21st Century
Note 10 Senate Bill 1169 (Murray) the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century”
Note 11 Assembly Bill 713 (Torrico), the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century”
Note 12 Budget Backgrounder – California Budget Project, page 9, Is High-Speed Rail in California’s Future?
Note 13 Senate Bill 3034 (Galgiani) the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century”
Note 14 2008 Business Plan
Note 15 Draft EIR Modesto to Fresno, Chapter 5
Note 16 Draft EIR Fresno to Bakersfield, Chapter 5
Note 17 Peer Group Report
Note 18 Legislative Analyst’s Office