Rail Program In Deep Doo-Doo

MAY 24, 2011

You know a massive government program is in trouble when even its hand-picked “working group” of insiders starts crying foul. This is exactly what happened to the increasingly troubled California High-Speed Rail Authority (CHRSA) earlier this month.

Already suffering under the weight of critical activist groups, multiple state audits and a growing number of skeptical legislators, the rail authority took one on the chin from its own High-Speed Rail Independent Peer Review Group.

Created by Proposition 1A in 2008 (and not to be confused with the Ridership Peer Review Group, which was created much later), the Independent Peer Review Group consists of eight members (two positions are open) appointed by various state officials such as the state treasurer and the secretary of the Business, Transportation and Housing Agency.

Though formed way back in early 2009, the group didn’t release its first report until November 2010. The report was generally critical of the effort to build 800 miles of bullet trains at a cost of at least $43 billion.


On May 2 of this year, they fired off a six-page letter to CHSRA Executive Director Roel of van Ark that listed a whole lot of questions and criticisms. Though buried in the letter, the most important of these observations dealt with the project’s exploding cost.

“We believe the Authority is increasingly aware of the challenge of accurate cost estimating,” wrote Peer Review Group Chairman Will Kempton, the current CEO of the Orange County Transportation Authority and a former Caltrans director in a May 2, 2011 letter obtained by the Palo Alto-based Californians forResponsible Rail Design. “However, as the Authority stated, ‘[o]verall capital costs are trending upwards’.”

What’s more, Kempton says his group “does not yet see the establishment of a state-of-the-art cost estimating and budget management system that would permit immediate incorporation of actual experience as it emerges.” Since a mere 15 percent of the design plans have been completed so far, “this does not furnish a solid base for confidence in cost estimates, either for the estimated amounts or for the range of variation likely to be experienced.”

For that reason, Kempton urged the authority to “make every effort to state and qualify its estimates accordingly so that the public will understand that the $43 billion total is still avery preliminary estimate that could ‘trend upwards’.”

Translation: the $43 billion cost estimate stands nowhere near reality.

Another chilling finding from the Working Group was the rather cavalier way in which it states that, pretty much no matter what, the bullet train will not make any profit in its first years and will require some sort of public subsidy.

Support from Taxpayers

In fact, Kempton says the group believes it is “unreasonable” not to provide some kindof “support” to the project in its earliest years. “If the Legislature’s intent was that the entire project, at all stages, be financially profitable including payback of State bonds and all investment, then we agree with the Authority’s position that neither this project, nor any other HSR system (with the possible exception of the Tokaido Line in Japan and the Paris to Lyon TGV line) could meet this standard,” Kempton wrote. He apparently (and conveniently) forgot that profit at all stages was exactly the line fed to Prop. 1A bond voters back in 2008.

Kempton and his group also noted that rail authority staff is much too small to deal with so many contractors, right-of-way acquisition is going to be way more expensive than can be known at present and, of course, the authority needs to keep working on that ridership model — you know, the one that UC Berkeley transportation engineers said was bunk.

And Kempton also offered an unsubtle reminder that the rail authority needs to get some kind of final business plan — which should include a reasonably accurate cost estimate — by October 14 of this year. That so many years have gone by without such a document exemplifies the madness that hangs over the project, which will be either the largest capital works project or boondoggle in California history.

At this point, the latter looks most likely to be the case.

– Anthony Pignataro

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  1. Florez
    Florez 26 May, 2011, 23:13

    People, California is flat out broke, broke, broke. Teachers are picketing due to bad budget and projected terminations; parks are closing to save maybe $11 million per year; California is releasing 50,000 convicted felons to CA communities because we are BROKE and can’t build new prisons; our bond rating by Moody’s is WORST in the US, and we have $80 billion already owed for prior bond sales, and Stanford estimates CA’s unfunded pension/healthcare liabilties for California state workers at $500 Billion dollars. What part of broke don’t Democrats get? This train was never about, is not about, and will never be about emissions reduction, taking cars off the road, etc.

    This project is about da Money, and how much can be funneled to the California Labor Federation, union trades councils, connected “consultant friends” of the HSR Board, and how much power and influence can be wielded and spread around like candy when duped voters in California hand a bunch of un-elected politicians (i.e. CA’s HSR Board) billions in cash for their “friends”. Think about this: CAHSRA has a staff of six full time workers, but has entered into 610 “consultant contracts” already – the graft, fraud, corruption, and unaccountability for these 610 contracts has been happening already. Can six people really monitor 610 consultants? And, why are many of these consultants snatching up and purchasing (on the very cheap) large tracts of unused land, coincidentally in areas of CA where the train will be coming through?

    The project has already surpassed what was sold to the voters in 11/08, and should be ended for fraud: 1. $33 billion total cost (now estimated at $66 billion and rising); 2. CA’s total obligation $9 billion in bonds with no required CA operating subsidy once built (now CA on hook for all of it b/c federal gov’t stopped investing in project and NO private investors put in ANY money, so operating subsidies now required for private investment; 3. ticket price sold to voters as $50 one-way, now doubled to $105, and not a shovel has hit the ground yet, and the list of fraudulent misstatements goes on…

    Consider this regarding the inevitable construction cost overruns: 1. SF Bay Bridge originally estimated as only costing $1.5 billion to build, has now spent already $6.5 billion and project not completed yet; 2. Boston’s Big Dig estimated at $3.3 billion but ended up costing over $24 billion.

    If the CAHSR’s “current estimate” of $43 billion has cost overruns at the same percentage as these other Mega Projects (which always happens) then this project will likely cost around $213 billion to complete. Think of how many teachers could be retained and not fired, water infrastructure needs fixed, roads fixed, gas pipes inspected, prior bonds paid off, social services programs saved, and other CA needs fixed – versus a train from LA to SF that is slower and more inconvenient than a $50 ticket on Southwest, United, JetBlue, Virgin, American, Alaska, and the other 5 airlines that have many, many daily flights from SFO to LAX. What a fraud and waste of taxpayer dollars.

    And, for $6.5 billion about to be wasted on HSR in CA’s Central Valley, you don’t even get trains, electrification, rolling stock or a “usable segment” – just bare tracks, and ripped up farmlands that pre-existed this train by hundreds of years.

    Stop the madness now. State Senators/Assemblymen Joe Simitian, Alan Lowenthal, and Richard Gordon, you control the purse strings for this project, along with CA Treasurer Lockyer – please save California’s taxpayers, teachers, parks, and social service providers and don’t sell any CA bonds for this project, demand no operating subsidies, follow the LAO’s suggestions and end this boondoggle before billions are wasted on a Train to Nowhere.

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  2. bobby99
    bobby99 31 May, 2011, 23:34

    This high speed rail fiasco will continue onward because Feinstein, Blum and a small connected group will make money on another failed, socialist idea.

    Reply this comment

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