Struggling to prove that it has stabilized its business model, Covered California rebuffed criticism from industry leaders burned by their Obamacare experience, while a new state report called the exchange’s own practices and plans into question.

Most recently, Covered California fired back at charges that it shared responsibility for hundreds of millions in losses incurred last year nationwide. “In a blistering critique, Covered California’s executive director, Peter Lee, said UnitedHealth Group Inc. made a series of blunders on rates and networks that led to a $475 million loss in 2015 on individual policies across the country,” NPR reported. “The company estimates a similar exchange-related loss of $500 million in 2016.”

“Lee, a staunch defender of the health law and a former official in the Obama administration, has tangled with UnitedHealth in the past. He knocked the company for sitting out the launch of Obamacare in 2014, then welcomed UnitedHealth into Covered California for 2016.”

Leveling off

The company’s tortured relationship with California’s health exchange culminated in an analyst conference call where CEO Stephen Hemsley warned UnitedHealth “can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.” Observers interpreted the call as a signal that other insurers were getting nervous about the health exchanges’ prospects for self sustaining.

Analysts have tangled over the likelihood that Covered California’s numbers have already begun to plateau — that is, add participants at around the same rate as the previous year. “Despite Covered California’s $29 million marketing campaign to publicize the exchange, many uninsured Californians continue to say they can’t justify paying for health insurance, even if they have to pay a large fine for remaining unprotected,” according to the San Jose Mercury News, which suggested numbers could come in just 100,000 above the previous enrollment period. “The exchange set a goal of enrolling 295,000 to 450,000 Californians who had never bought insurance through the exchange before.”

Audited

Even the state’s own auditor, Elaine Howle, has joined the fray with a sobering judgment on the stability of Covered California. In a report that calls the exchange “high-risk,” the auditor noted that its business model must now shift away from Washington subsidies, increasing the pressure to make up the difference by taking a cut of sales. “Federal funding will expire this year,” Capital Public Radio noted. “That will leave Covered California to rely solely on revenue from health insurers. The amount they pay is dependent on how many people enroll in insurance plans through Covered California.” The exchange has applied a charge of $13.95 each month on each plan it sells. “The audit says, with limited data from the program’s short history, it’s hard to know if Covered California’s enrollment projections will be correct,” according to CPR.

The auditor also focused attention on the issue of competition. It “criticized the exchange for not sufficiently justifying its decision to award a number of large contracts without subjecting the contractors to competitive bidding,” as CNBC reported. “The audit found that 9 of the 40 justifications for sole-source contracts the exchange issued ‘were insufficient’ according to the policy adopted by the exchange’s own board.” According to the Sacramento Bee, Howle questioned the exchange’s spending habits:

“Without competition between prospective firms, the health insurance exchange couldn’t be assured its contractors were the most qualified — or cost-effective — auditors said. They cited the example of the agency’s third-largest overall contract, a marketing and outreach pact with Weber Shandwick for nearly $134 million.”

Expanding the exchange

Officials have set their sights on increasing enrollment by upping the public profile of the state exchange, which has struggled in years past to fully connect with potential customers. “There are 750,000 California residents without insurance that are eligible for Covered California,” according to CBS San Diego, with an estimated 2.2 million uninsured Californians eligible for subsidized coverage through either Covered California or Medi-Cal. According to the Los Angeles Times, the total population of uninsured Californians sat at around 4 million. “Of those, officials estimate that 1.4 million would qualify for Medi-Cal, the state’s Medicaid program for low-income residents.”

This time around, added the Times, an informal goal has been set to sign up 295,000 to 450,000 more residents over the three month enrollment period. “We want to make sure all uninsured Californians know that financial help is available to help people buy health insurance and that they can join thousands of Covered California consumers who are getting the care they need when they need it,” said exchange chief Peter Lee, as CBS San Diego noted.

Hoping to avoid service problems that plagued the exchange in previous enrollment periods, Covered California has also moved to staff up its telephone operators. “The scramble is on for up to 500 temporary call-center workers to answer questions and help enroll consumers,” the Sacramento Business Journal reported. “Virginia-based Faneuil Inc., in partnership with InSync Consulting Services in Roseville, won a $12 million contract for the business early this month.” Last year, however, the size of that contract hit $14 million.

Keeping subsidies central

Subsidized care has emerged as a centerpiece of Covered California’s effort to get and keep new enrollees. Officials believe that widespread public ignorance around subsidies has limited signups. “One of the biggest hurdles,” Lee told the Sacramento Bee, “is that more than a third – 36 percent – of uninsured Californians don’t realize they’re eligible for financial subsidies, according to a recent survey. That compared with 84 percent of uninsured who were aware of the existing federal tax penalty for going without health care coverage.”

But the vast majority of plans have already benefitted from subsidies. “Covered California has 1.3 million consumers, about 90 percent of whom receive subsidies to help cover their premiums,” the Times noted.

Underscoring the disruptive effect of the often libertarian sensibility behind auto innovations, the controversy has pitted Republicans against wealthy coastal elites and Democrats against the automakers pushing the industry toward a zero-emissions future.

Republican populism

The problems started with the handsome benefits granted by the Golden State to buyers of lower-emissions vehicles, whatever their earning power. “Hundreds of Californians with household incomes of $500,000 or more have collected state subsidies for buying electric and hybrid cars under a program that is criticized as a taxpayer handout to the wealthy,” the Los Angeles Times reported:

“State regulators, in response, are restricting the subsidies to Californians who earn less than $250,000 or couples taking in less than $500,000. But that standard is also under fire from some lawmakers and anti-tax activists, who ask why subsidies worth up to $5,000 are given to people who can already afford the cars.”

According to some Republicans, the giveaway reflected the willingness of Democrats to shower privileges on the wealthy if their spending habits reflect liberal ethics.

Burgeoning business

But the electric car industry has also come under fire from the other side of the aisle — for taking advantage of pricey state programs designed to subsidize companies with outsized economic potential.

Last year, Tesla raked in $15 million in credits — a hefty share of the $150 million in total divided up among 212 companies — “drawing criticism about whether the electric car manufacturer deserved the money,” according to the Sacramento Business Journal. This year, the Journal noted, legislators signed off on $200 million for the so-called California Competes program, which chooses winners based on “employee wages and the industry’s importance to the California economy,” among other factors.

The economic stakes, already high for Tesla and a recovering California, have recently been ratcheted even higher: Tesla competitor Fisker has inked a deal returning the once-bankrupt luxury electric car company to California shores. Bought up last year by the China’s Wanxiang Group, Fisker “signed an 11-year lease worth an estimated $30 million” in Riverside County’s Moreno Valley,” the Times reported, “giving California its second electric car manufacturing plant after Tesla’s Fremont factory.

What’s more, a low-profile new entrant into the electric car market has announced the possibility of a California headquarters of its own. Gardena’s Faraday Future said “it’s scouting several locations for a new factory, fueling speculation about a state tax-credit race similar to last year’s push for Tesla’s gigafactory,” the Journal reported. “The company hopes to announce a location for a manufacturing plant sometime in the third quarter of 2015, and would bring cars to market in late 2017,” according to a spokesman.

Environmental pressure

Adding to the sense of chaos, the big climate change bills headed to the Assembly have activated opposition from lawmakers who find themselves caught in the ideological crossfire — or opportunistically seeking a quick serving of pork for their constituents. “Some moderate Democrats, charging ‘coastal elitism,’ say the bills will harm the middle-class families they represent in the Central Valley,” the San Jose Mercury News observed; “others are trying to shake down legislative leaders for handouts that benefit their districts.”

The legislation, added the Mercury News, would put gasoline-powered vehicles in the crosshairs — “cutting petroleum use by cars and trucks in half over the next 15 years and slashing greenhouse gas emissions to 80 percent below 1990 levels over the next 35 years.”

The electric car companies, of course, have an interest in seeing standards rise. As the Wall Street Journal recently noted, Tesla has pushed to ensure Sacramento’s mileage and emissions regulations could become “even more stringent,” while laboring “to keep other auto makers from loosening regulations in California.”

The county has done business with each of the top 10 recipients of local and state subsidies in California, records show.

Tesla received $20 million in tax breaks and other subsidies to locate a plant in California

The practice is common, although hardly in violation of any rules. But across the state, groups that have received breaks are getting deals to do business, with taxpayers effectively signing two sets of checks to some of the largest, well-capitalized companies in the world.

Oracle received a contract in 2011 for project management software to monitor L.A. County’s $40 million transit and highway expansion project. Oracle has also received $7.5 million in tax breaks and subsidies in the state since 1996.

In the city of San Diego, subsidized vendors included Time Warner, which had a cable internet contract in 2014, as well as software maker Oracle and defense behemoth Northrop Grumman Systems, which had contracts in 2012.

Northrop Grumman has cleaned up there; the $593,388 in city contracts over the past three years came as the company has received $429 million in subsidies statewide.

CalWatchdog compared local government vendor data to the numbers gathered by the subsidy watchdog group Good Jobs First. By the group’s tally, state and local subsidies in California topped $2 billion in recent years, with information focused on the period since 2012 plus some awards back to the mid-‘90s.

The state subsidies list is dominated by heavyweights: Walt Disney, Comcast, Anschutz Company, Viacom, Time Warner, Virgin, Lockheed Martin, Samsung, Northrop Grumman and Oracle.

Most of the top 10 can be found among the Fortune 500, a ranking based on revenues. California taxpayers helped get them there, through breaks, allowances, training allotments and delays on taxation. (Voice of San Diego did a good assessment of California’s many subsidy programs last fall.)

In exchange, the body giving the break, be it the state or a municipality, hopes for employment and tax revenue that will put it ahead of the game. Job creation mandates are sometimes part of the deal — that is, upon the creation of a number of jobs, the subsidy is given. Major corporations have teams that work full-time on such equations.

California ranks lower than most with regard to size and scope on a statewide basis.

“Although California has often been on the losing end of interstate job piracy, the state generally does not offer major state subsidy packages to individual companies,” according to a report by Good Jobs First. “And contrary to the norm, it has only a few programs of any significance.”

Often found near the bottom of rankings for business climate, the state has had a mixed experience with subsidies.

Subsidy programs in Tennessee and Texas were used to woo Nissan and Toyota, once a major part of the state’s proud auto company portfolio, away from California. Those were the highest-profile moves among a number of corporate headquarters defections from California in the past 10 years.

The state recently passed legislation to give $330 million worth of inducements to get the entertainment industry back, after losing business to the growing number of states with film incentive programs.

Even by handing over government contracts to the already-subsidized companies, incentives are a gamble.

The state’s glaring example of unintended consequences has been with Tesla, which in 2010 received a package of incentives worth $20 million when the company took over part of the empty NUMMI auto manufacturing plant in Fremont.

An article at the time by the San Francisco Business Times noted, “Gov. Arnold Schwarzenegger said the deal for NUMMI was made possible by tax incentives and credited Treasurer Bill Lockyer for finding available incentives.”

The party was disrupted in May, when it was revealed that Tesla was benefitting from $4.9 billion in government subsidies across the U.S., including those from California. It is considered by many an outsized allotment for an industry – electric vehicles – that has no solid base at this point.

At the same time, there have been winners.

The California Valley Solar Ranch developed by NRG Energy was granted a property tax break by San Luis Obispo County worth $14 million, and is now performing above expectations, generating up to 4 percent more than the 600,000 kilowatt hours a year that were projected.

Steve Miller can be reached at 517-775-9952 and avalanche50@hotmail.com. His website is www.Avalanche50.com

Water subsidies are the focus of much controversy in California, with farmers commonly bearing much of the blame. The waters can be cleared a little by examining two positions held by David Zetland, a well-known water economist, currently at Leiden University in Holland. Among other things, he previously was an instructor at the University of California, Berkeley, teaching Environmental Economics and Policy.

1.The mirage of water subsidies

In an interview, Zetland said:

“Consider these facts:

“Farmers pay $20 per acre/foot of water (that’s an acre of land covered a foot deep in water).

“A single person consumes 1/8 of an acre/foot per year.

“A single person pays $1000 per acre/foot of water.

“Farmers own 75% of the nation’s water supply.

“Moving water from agriculture would increase water supplies for urban dwellers, at a market-appropriate price. Some farmers, for example, can make more money selling water than farming low-value crops like alfalfa, hay, or cotton. The water they own would be put on the market, and consumers, other farmers, industries, businesses, etc. would compete for that water in an auction. Of course, a bidding war for water is likely to increase prices – and higher prices will signal that water should be treated as a precious resource….

“The food supply would shift to higher value crops (less alfalfa and more broccoli). Food prices would go up, but they would reflect the true cost of growing food, not the subsidized cost from unsustainable practices.

But how are such alleged subsidies calculated?  They are calculated as the difference between the cost to maintain the water system and the spot market price for water by auctions in summer months during droughts.

However, in California 95 percent of water is purchased by long-term water contracts and 5 percent by water auctions and water transfers.  If all water were exposed to the spot market daily, or even monthly, the agricultural economy would collapse and social unrest would result.  This is because farming requires large expenditures to purchase or lease land and equipment, to buy seed, fertilizers and prepare the ground in advance of growing a crop.  Additionally, the municipal bond market would collapse if the huge costs to build dams, reservoirs and aqueducts had to be paid for from water sales in the spot market instead of long-term contracts.  Modern water systems would cease to exist.

The solution to such situations where huge upfront costs need to be spread out and paid back over long periods of time is a water contract.  There is an active, mature market in water contracts in California.  Water contracts make the water supply reliable and affordable.

The low locked-in price in a 25-year-old water contract compared with the high price for water at drought auctions is not a subsidy.  This would be like saying the difference between the high value of a home with a 30-year mortgage at a low 4 percent interest rate and value in an all-cash sale with no mortgage today is a subsidy.  If all homebuyers had to pay all cash for homes, the real estate market would collapse.  This is what happened to home values in the 1930’s Depression as loan financing became unavailable.  The same is true for water.

2. The facts about All-In-Auctions for water.

Another popularized concept bandied around about pricing water for droughts is called an “all-in” or “all-pay” auction. According to Investopedia’s definition it is:

“An economic and game theory concept in which participants place silent bids on a particular item. Unlike a standard auction, all-pay auction has everybody pay for their bid, regardless of whether they win the item being sold. Of course, in a standard auction, the highest bid wins the item.”

In all-in auctions, overbidding typically occurs and sellers can expect to get more than fair market value. (Zetland himself provides a good description of the concept in this video.)

In Nov. 2012, Zetland published a paper, “All-in-Auctions for Water.” The abstract:

“This paper proposes a novel mechanism for reallocating temporary water flows or permanent water rights. The All-in-Auction (AiA) increases efficiency and social welfare by reallocating water without harming water rights holders. AiAs can be used to allocate variable or diminished flows among traditional or new uses. AiAs are appropriate for use within larger organizations that distribute water among members, e.g., irrigation districts or wholesale water agencies. Members would decide when and how to use AiAs, i.e., when transaction costs are high, environmental constraints are binding, or allocation to outsiders is desired. Experimental sessions show that an AiA reallocates more units with no less efficiency that traditional two-sided auctions.”

However, such a system recklessly would collapse agricultural markets and create water anarchy. The entire food chain to everyone’s dinner table would be interrupted.  If they have to buy water in a spot auction market each month or year, farmers would not be able to borrow money to buy or rent land; to buy farming equipment, seed and fertilizer; and to pay upfront labor costs for land cultivation

In such a system, the volatile price of water would interrupt repayments by farmers to the U.S. Bureau of Reclamation for the capital costs to construct the federal Central Valley Project.  Moreover, farmers and cities both would have to pay for water they might not receive in an all-in auction.

All-in agricultural water auctions would squeeze out lower-valued uses of water, as for growing feedstocks such as alfalfa, low-value crops such as melons and tomatoes, and wildlife refuges.  How could dairies produce milk products, cattle ranches produce protein, or biomass power plants produce electricity if there was no water for feedstock, cattle or corn ethanol production?

Markets

However, regular markets (not All-in-Auctions) are an essential drought management tool that could expanded from the 5 percent of the water market they now serve. Doing so would help redistribute water from the haves to the have-nots during a drought.

Bottom line: newfangled auctions are not necessary. With reasonable modifications, current markets and contractual markets are adequate.

But Tesla demanded — and won — so many breaks from the state of Nevada that the deal is an affront to any true believer in free-market economics. This is from the Chronicle:

Nevada won the fierce, five-state competition to host Tesla Motors’ planned $5 billion battery factory by offering a package of tax breaks and credits that could be worth $1.2 billion over the next 20 years, according to terms released by state officials Thursday. … Tesla won’t have to pay sales tax for 20 years. The company also won’t have to pay real property, personal property and modified business taxes for 10 years.

The size of the deal and the scope of the tax breaks makes this feel more like South Korean crony capitalism — the government in Seoul is a de facto partner of conglomerates like Samsung and Hyundai — then American capitalism.

But as Dan Morain points out in his Sac Bee column, this is increasingly common:

Nevada is simply following a trend. The Washington, D.C.-based nonprofit organization, Good Jobs First, tracks such giveaways. Tennessee gave Volkswagen $554 million in incentives. Mississippi gave a $1.3 billion package to Nissan in 2000. Oregon gave $2 billion in incentives to Intel.

“Unfortunately, it is common to see subsidies of this size,” Leigh McIlvaine, a research analyst for Good Jobs First. “There seems to be a perception on behalf of companies that they should be paid by the public sector to finance that growth. It is looking like an entitlement.”

California lawmakers are not shy about opening the treasury to help companies. They approved $420 million in tax breaks this summer for Northrop Grumman and Lockheed Martin, on condition that they build new bombers in California.

Milton Friedman: Big biz a foe of free market

I get the argument that Tesla is a unique company, and that Northrop and Lockheed are fairly unique as well, so the argument that these government gifts are hugely unfair to their rivals isn’t as apt as it when it’s made about tax breaks given to specific companies in more competitive industries. But at some point, I share Milton Friedman’s concerns, as noted by the Heartland Institute in 2012, about government and industry acting in synch.

Friedman exemplified the generous spirit behind the desire for free markets: they benefit the less-wealthy by leveling the playing field, allowing people to succeed on their merits instead of through political power bought with big money. Friedman had nothing but contempt for crony capitalism and the use of government to suppress market competition, although he was too polite and good-natured to express that feeling in any way but through sound economic arguments.

Friedman himself put this sentiment another way in a 1977 article for Reason magazine:

The two greatest enemies of free enterprise in the United States … have been, on the one hand, my fellow intellectuals and, on the other hand, the business corporations of this country.

Maybe it’s pointless to worry about this six years after the federal takeover of the banking system, General Motors and Chrysler during the financial crisis, but there’s something really ominous about big government partnering with and/or propping up certain favored big businesses.

The initiatives they work on then become, in the lexicon of 2008, “too big to fail.” It’s not hard to imagine Nevada moving from tax breaks to direct subsidies if the Tesla “gigafactory” struggles to live up to its billing and needs help to survive — taxpayer help.

That is, much, much more taxpayer help.

So how about we let others join in the fun? What do the mainstream media have to say about my key three points?

Their conventional wisdom is a lot closer to my deep skepticism than to Richard’s rosy scenarios, that’s for sure.

Point 1: There are not nearly adequate funds available to complete the $68 billion project in the way promised to voters in 2008 who approved Proposition 1A, giving the bullet train $9.95 billion in state bonds as seed money.

As Politico reported on Feb. 8, this is already a huge legal obstacle based on Prop. 1A’s language — not a distant headache on the horizon.

Judge Michael Kenny ruled that the state could not sell future bonds to finance the first leg of construction until they redid the business plan to specify sources of funding “that were more than merely theoretically possible.”

As for the $250 million in cap-and-trade funds Gov. Jerry Brown secured for the rail project this fiscal year, as Associated Press noted on Jan. 14 …

It also is just a tiny fraction of the overall price tag for high-speed rail, currently at $68 billion.

And as the L.A. Times reported on Feb. 28, this appropriation is deeply unpopular with environmentalists — and it offers …

… significant legal risks. The state law that set up the limits on greenhouse gases and the cap-and-trade system calls for investments that will reduce emissions by 2020 to the levels that existed in 1990, some experts say. The state’s nonpartisan Legislative Analyst’s Office, noting the bullet train would not be in operation until after 2020, has questioned the legality of using the cap-and-trade funding  for rail construction.

As for Dan Richard’s claim that significant private financing is just around the corner, I await Dan naming a single company that would have any interest in partnering with the state of California on a multibillion-dollar project without revenue or ridership guarantees, which are banned by Prop. 1A. Dan won’t be able to because there aren’t any.

As for the notion that the federal government might foot nearly the entire bill for one state’s extremely expensive project –as some CA bloggers hope  — I can’t cite an MSM piece saying that’s not true, because it’s not even something the MSM considers in the realm of human possibility.

And, no, it’s not just those evil House Republicans who oppose further federal funding than the $3.5 billion the project has gotten so far. Patty Murray, the Washington Democrat who is now chair of the Senate budget committee, came out as an opponent of federal funding for such projects in 2011.

Point 2: The legal challenges the project faces because of Prop. 1A restrictions are likely to be impossible to overcome.

Judge Michael Kenny didn’t just say that before construction began, the state has to have $31 billion in hand to build a “viable” first operating segment of 300 miles that could make money even if the full system was never completed. He said the state had to complete environmental reviews for all 300 miles. It’s not even one-tenth complete, with only 27 miles having clearances.

This is from the Hanford (CA) Sentinel’s reporting on Feb. 4:

Kenny also ruled that the Authority needed to complete environmental analyses for the segment before construction begins.

As for Richard’s confidence in the bullet train’s lawyers, as the Sentinel notes, the legal team instead looks more like the Keystone Kops:

Kings County opponents celebrated the [August 2013 and November 2013] rulings as at least partial vindication, but Authority officials said the project was proceeding on schedule and implied that the rulings were a minor inconvenience.

In the appeal [filed in January], the Authority argued just the opposite.

“The trial court’s approach to these issues cripples government’s ability to function. … Action by this court is urgently required to avoid compromising the Authority’s ability to build the system quickly and economically, as intended by the Legislature and the voters,” the appeal states.

And keep in mind that in Silicon Valley, rich cities have basically vowed to block related construction forever using NIMBY tactics. These tactics have a long history of winning in California — especially when you have very skilled attorneys with very deep-pocket clients.

Point 3: What the state proposes isn’t even high-speed rail.

Because of fears of just the sort of corner-cutting we’re now seeing, Prop. 1A required that the bullet train get from downtown Los Angeles to downtown San Francisco in no more than two hours and 40 minutes. But under the governor’s “blended” plan using regular rail from San Francisco to San Jose and from the northern edges of the L.A. exurb to downtown L.A., that means about 100 miles of the trip will be at conventional train speeds and 410 miles at bullet-train speeds.

If you make the generous concession that the conventional trains will go 100 miles at 100 mph, taking 60 minutes, and if you have transfer times of five minutes for each of the train switches, that means the bullet train will have to cover 410 miles in 90 minutes, going 273 mph, to comply with the 160-minute limit in state law.

I repeat, 273 mph. I repeat, 273 mph. I repeat, 273 mph.

That’s average speed, not top speed.

Nevertheless, Richard says that’s not going to be a problem. He says …

“… the independent Legislative Peer Review Group looked at the planning and concluded that at present, our design would allow for that trip to occur in 2 hours and 32 minutes.”

What does the MSM say? Even though I have never seen a piece that breaks down the math of the CHSRA’s claims as I did above, most journos are very skeptical, and so are many experts, as this L.A. Times piece from March 27 notes.

But there’s another wrinkle here. In his response to my original post, Richard seems to take the 160-minute provision of Prop. 1A seriously. But as the L.A. Times reported on June 9 of this year, the rail authority is trying to play semantic games to get out of the obligation — because it’s an obligation it can’t meet:

Dan Richard, chairman of the authority, said the state would deliver a system that meets all legal requirements of the ballot measure.

“We are not trying to parse words and hide behind legal technicalities,” he said.

But critics and opponents, including some key players from the project’s past, say the rail authority is trying to circumvent the basic intent of the protections because the existing plan for the Los Angeles-to-San Francisco line can’t meet them.

The unusual specificity of Proposition 1A has been cited by bullet train promoters and critics to bolster their positions. And both sides have put the language and procedures set out in an 8,000-word piece of legislation underlying the ballot measure under an interpretive microscope. One example: Does a requirement to “design” the train so it can travel from L.A. to San Francisco in two hours and 40 minutes mean the state has to provide such service?

“This bond issue was extraordinary,” said Quentin Kopp, a former state senator, state court judge and former chairman of the rail authority, when the restrictions were written. “I can’t recall any general obligation bond issue that incorporated legal provisions to the extent this one does.”

In Kopp’s view, the state legislation and subsequent ballot measure were a conscious effort by the Legislature to place binding safeguards on the biggest infrastructure project in California history.

Rep. Alan Lowenthal (D-Long Beach), a former state senator who wrote many of the restrictions, said: “We didn’t put them in as guidelines…. It was really clear what we wanted.”

In 2008, 160 minutes meant 160 minutes in California. In 2014? Well, that’s open to debate.

I look forward to Dan Richard’s response to my response to his response to my response to James Fallows. Will he argue again that I’m a “rabid” bullet-train hater? Or will he concede that “rabid” though I may be, I’ve got the MSM generally on my side?

If he says the MSM is with him, Dan should offers specifics, and not just boosterism from the edit page of the Fresno Bee.

We shall see.

In the mean time, I sure hope that Fallows talks to Ralph Vartabedian of the L.A. Times or Mike Rosenberg of the San Jose Mercury-News or to former Democratic state Sens. Quentin Kopp, Alan Lowenthal or Joe Simitian. When that happens, he will see that it’s not just blowhard libertarian bloggers who believe the bullet train is a debacle.

It’s lots of people — including many of the project’s original true believers.

Never mind that I have an unlisted home phone number.

“This is an urgent call from  DowntownArena.org,” the message said. The caller claimed “Out-of-towners” are trying to stop the arena.

“The arena will provide $157 million annually, and create 4,000 jobs. This is an exciting time in Sacramento history,” the caller said. 

“This is Michael Ault, president and CEO of the Downtown Partnership. We need your help,” the caller said. “Stop the dishonest petition collectors.”

“If you believe you’ve been deceived into signing one of these petitions, please call immediately.”

Never mind that I have an unlisted home phone number.

The organizers behind downtownarena.org, a group pressuring taxpayers for a multi-million dollar government subsidy to build the Kings a new stadium in downtown Sacramento, apparently illegally called more than 110,000 Sacramento households this weekend as part of a disinformation and intimidation campaign to dissuade residents from voting on the deal which will cost the people of Sacramento more than three-quarters of a billion dollars over the next four decades.

Well, I never… $908 million by taxpayers for an arena?

I’ve never seen anything like the tactics used by DowntownArena.org. Their desperation proves there is a huge amount of money in this deal… taxpayer money.

The city’s gross spending is exactly why the arena deal needs a vote of the people. The arena deal, led by Mayor Kevin Johnson, has suffered from a lack of public debate, dubious financial numbers from the city, along with a growing public subsidy, and last-minute legislation by Sen. President Pro Tem Darrell Steinberg, D-Sacramento, to let the stadium avoid a real environmental impact review.

The publicly funded arena is being supported and pushed by labor unions and local government groups:

• IBEW Local 340
• National Electrical Contractors Association (NECA) of Sacramento
• Sacramento Regional Builders Exchange
• Associated General Contractors
• Building Owners & Managers Association (BOMA) of Sacramento
• Carmichael Dave & #HereWeBuy
• Greater Sacramento Urban League
• Associated Builders & Contractors (ABC) of Northern California
• Sacramento Metro Chamber of Commerce
• Sacramento Downtown Partnership
• Ironworkers Local 118
• Sacramento Central Labor Council
• Northern California MCA
• Associated Plumbing & Mechanical Contractors (APMC) of Sacramento
• R Street Partnership
• Midtown Business Association
• Sacramento Hispanic Chamber of Commerce
• Sacramento Asian Pacific Chamber of Commerce
• Sacramento Convention & Visitors Bureau

Anyone in Sacramento who received the robo-call and wants to file a complaint, can call the Public Utilities Commission at 1-800-649-7570, or online at https://appsssl.cpuc.ca.gov/cpucapplication/

By Chris Reed

There’s a double-whammy targeting the bullet train on the op-ed page of Friday’s U-T San Diego newspaper.

First House Majority Whip Kevin McCarthy, R-Bakersfield, tees off on the state’s assumption that federal dollars will cover most of the cost of the project.

“CHSRA’s reliance on additional dollars from a cash-strapped federal government nearly $17 trillion in debt is naive and misguided at best. As GAO correctly concluded, ‘HSIPR grant program has not received funding since 2010 and that the future funding proposals will likely be met with continued concern about the general level of federal spending, the largest block of expected money for the California project is uncertain.’

“And that’s not even the whole story. The plan still depends on $13 billion from private investment – not a single dollar of which has been committed. This is assuming the $68.4 billion price tag remains unchanged, which is questionable since GAO found that CHSRA’s project plan lacked detail about risk assessment and post-construction costs of running the rail, noting the omissions could lead to ‘increased risk of such things as cost overruns, missed deadlines, and unmet performance targets.’”

Think tank: Ridership numbers still grossly exaggerated

Then Reason Foundation’s Wendell Cox and Joseph Vranich take a close look at the rail authority’s number-crunching and find some huge problems.

“CHSRA claims that most train riders will be attracted from their cars. However, driving with the family or even driving alone will be less expensive than taking the train. In Europe, despite gasoline prices that hover between $8 and $9 per gallon, relatively small numbers of drivers choose high-speed rail over their cars. Based upon the international experience in luring drivers out of their cars and onto trains, we project that the California rail system’s ridership will fall 65 percent to 77 percent short of CHSRA’s claims.

“With far fewer passengers, and not enough ticket revenue, someone else will have to pay to keep the trains running – the taxpayers of California. It will likely cost taxpayers between $125 million and $375 million each year to cover the train’s operating losses.”

What a bekerja tanpa bagaimanakah.

That’s the Malay term for “boondoggle.”

By Katy Grimes

Sacramento officials have lost all ability to reason, and instead are letting emotions and delusions of grandeur drive their decision over a downtown sports arena.

Arenas are nothing more that fields of schemes, and the joke is on taxpayers. And Sacramento is hardly a bastion of economic splendor. Despite some of the highest unemployment in the country, escalating business closures, widespread home foreclosures and short sales, and declining tax revenue, arena talks are all the rage in Sacramento.

Judith Grant Long’s data on full public cost of stadiums and arenas is groundbreaking. “Where most ‘stadium cost’ charts just rely on self-reporting by teams, Harvard researcher Long has actually attempted to calculate the public and private costs of every major-league stadium and arena in North America, including hidden subsidies like free land, lease breaks, and tax exemptions,” Field of Schemes Neil deMause wrote.

It’s as if the Mayor is so enamored of the idea of driving away from the car dealership in a new Maserati, he’s forgotten he can’t afford one.

Public outcry silenced

At a Tuesday evening city council meeting, deliberately packed by rowdy, t-shirt-wearing supporters who jammed the hearing room early, the council voted to approve the arena term sheet. Because the Kings’ thugs jammed the meeting, anyone who showed up even before the meeting start time was not only precluded from joining the meeting, they could not even sign up to speak. I could not get close to the meeting, and had to watch via live video feed.

The council vote was once again taken without concern for the lasting long-term impacts the deal could and very well may have on the city taxpayers. But that’s historic with Sacramento’s city council.

What the council voted on last night wasn’t the actual financing plan — it was a nonbinding term sheet. The city council will still need to vote at some point to formally approve the arena funds.

Rose colored glasses

Despite Mayor Kevin Johnson and City Manager John Shirey’s rosy and incontrovertible predictions of future economic growth from a new arena in downtown Sacramento, nearly every study done on cities with arenas shows not only minimal if any economic growth and job formation, but instead, arenas are usually is an economic drain on a city, resulting in higher taxes to subsidize and support the facility.

Gross financial understatements

According to Eye on Sacramento, a Sacramento-based public policy watchdog group, Sacramento’s “city staff has grossly understated the total public contribution to the arena. Instead of contributing $258 million, EOS estimates that city taxpayers will be contributing $334 million to the project, representing not 58 percent of the project cost, as claimed by staff, but 75 percent of the project’s cost (not counting subsidies provided by county government or future undetermined traffic infrastructure costs.)”

Sacramento’s previous arena deals have been totally discredited by the Sacramento Grand Jury  after voters refused to pass  Measures Q and R in 2006, which would have approved a quarter cent sales tax increase and directed the revenues to fund a new sports and entertainment facility.

“In an effort to obtain public financing, Sacramento City and County of Sacramento officials agreed to put the matter on the November 7, 2006, ballot as Measures Q & R” the Grand Jury wrote. “The ballot measures as written were a blatant attempt to avoid the provisions of Proposition 218 in that Measure R was listed as a general tax (requiring a majority vote) and Measure Q was for distribution of the monies from the tax. Combined, they would have represented a special tax requiring a two-thirds vote.”

Titled, “The Kings and City and County of Sacramento: Betrayal in the Kingdom?” the Grand Jury investigated the arena issue because they wanted to find out “if the City and County of Sacramento deceived their citizens regarding their dealings with the Kings.”

The answer was a resounding “yes.” Sacramento officials are still using these tactics.

The stinkin’ deal

The city is giving 3700 parking spaces at Downtown Plaza to the investors, which, according to EOS, have an estimated value of $57.8 million. But that’s not all. The city is also gifting to the investors of up to six sites for up to six digital billboards, which have a net present rental value of over $18 million.

The local mainstream media is so enamored of the idea of a big, shiny new arena they have ignored that the city’s financing plan is riddled with serious flaws, and grossly exposes the city’s general fund to potential liability.

EOS points out the deal “ties up the city’s TOT revenues, involves very high interest rates, is of a type (garage bonds) that are causing problems in other cities and involves the payment of over $80 million of additional interest in order to secure $24 million in lower payments in the first eight years of the bonds – a horrible deal for taxpayers.”