Report: Strip power from California rail authority

Legislative Analyst's Office urges shifting project to Caltrans, reconsidering Central Valley as starting point for proposed line

California's proposed high-speed-rail system is facing potentially crippling threats from looming federal deadlines and weak oversight by the agency charged with building the project, the state Legislative Analyst's Office concluded in a new report.

The scathing report, which the nonpartisan office released Tuesday morning, recommends stripping the California High-Speed Rail Authority of its decision-making powers and giving the California Department of Transportation (Caltrans) oversight over the increasingly controversial project. The Legislative Analyst's Office also concluded that the rail authority's business plan remains deeply flawed; that most of the revenues the agency is banking on to fund the new system are unlikely to materialize; that the project will cost far more than the rail authority's official estimate of $43 billion; and that the rail authority's decision to begin the line in Central Valley is a "big gamble" based on "faulty assumptions."

The report, titled "High-Speed Rail Is at a Critical Juncture," comes as another major blow to a project that voters approved in November 2008 but that has since been plagued by financial uncertainty and scathing criticism from communities along the proposed route. While previous audits had also highlighted flaws in the rail authority's business plan, ridership assumptions and day-to-day operations, the new report goes a step further and argues that the state Legislature should reject the rail authority's funding request for the next fiscal year and halt the project altogether unless federal deadlines are renegotiated and the governance structure for the project is revamped.

"We have concluded that the current governance structure for the project is no longer appropriate and is too weak to ensure that this mega-project is coordinated and managed effectively," the report states. "These changes in governance need to be made soon, in our view, because HSRA has already begun the process to move toward the award of multi-billion dollar construction contracts for the project."

Eric Thronson, the analyst who wrote the report, presents several alternatives to the existing governance structure, which consists of nine appointed board members, a handful of paid staff members and hundreds of consultants. The project, Thronson wrote, could be shifted to Caltrans, an agency with far more oversight and expertise in transportation projects, or moved to a newly created state department dedicated to high-speed rail. Thronson argued in the report that the existing structure gives the rail authority too much autonomy and not enough accountability to the Legislature or the governor.

"The considerable autonomy," Thronson wrote, "does not ensure that the board keeps the overall best interests of the state in mind as it makes critical decisions about the project."

Under the current system, he noted, board members aren't required to have "specific expertise" relating to management of a major construction project. He also pointed out that the agency's board members are not subject to direction by the executive branch or the legislative confirmation process.

"This relative lack of accountability to either the executive or legislative branches creates a risk that the board will pursue its primary mission -- construction of the statewide high-speed rail system – without sufficient regard to other state considerations, such as state fiscal concerns," he wrote.

Of the two proposed alternatives, the report leans in favor of shifting the project to Caltrans. The report recommends that the Legislature pass a bill in the current session making the switch.

The new report also backs up recent claims by rail watchdogs that the rail authority's estimated $43 billion price tag for the rail system is far too low. The segment between San Francisco and Los Angeles, Thronson wrote, is "likely to cost much more." He estimated the cost of the project to be about $67 billion, echoing a similar estimate that was issued in February by the Palo Alto-based group Californians Advocating Responsible Rail Design.

Palo Alto officials have also grown increasingly skeptical about the rail authority's official projection of the rail line's costs. The city had sent the rail authority a letter in March asking for an updated estimate but did not receive a response.

The rail authority currently has about $5.5 billion on hand in state and federal funds for construction of the rail line and is banking on future contributions from the federal government, private investors and local agencies to help pay for the system. These assumptions are overly optimistic, the new report argues.

The rail authority's 2009 business plan estimates that the project will obtain between $17 billion and $19 billion in federal funds. So far, it has received $3.6 billion, and the Republican majority in the U.S. House of Representatives has opposed making additional appropriations for high-speed rail.

"The HSRA indicates that without additional significant federal support beyond that provided to date, the project cannot be completed," the report states. "Given the federal government's current financial situation and the current focus in Washington on reducing federal spending, it is uncertain if any further funding for the high-speed rail program will become available."

Voters approved $9 billion in bonds for the new system in 2008 when they passed Proposition 1A. The new report estimates that if the state were to sell all the rail bonds, the total principal and interest costs for repaying the debt would be $18 billion to $20 billion.

Thronson also criticized the rail authority's decision in December to begin construction of the San Francisco-to-Los Angeles line in Central Valley -- a decision that was driven largely by input from the Federal Railroad Administration. Given the possibility that the entire rail line will never be fully completed, the Legislative Analyst's Office report urges further consideration of other segments as possible starting points, including San Francisco-to-San Jose, Los Angeles-to-Anaheim and San Jose-Merced.

A high-speed rail system at any of these three segments could provide "greater benefit to the state's overall transportation system even if the rest of the high-speed rail system were not completed," Thronson wrote.

"Largely as a result of these federal deadlines and requirements, HSRA decided in December 2010 to begin the construction of the statewide system within the Central Valley," the report states. "This decision by HSRA, however, represents a big gamble that additional monies will eventually become available from federal government or other sources to connect the Central Valley line to other major urban areas of California."

The Legislative Analyst's Office report recommends that the Legislature rejects the rail authority's 2011-12 budget request for $185 million for project development and appropriate only $7 million for the agency. The money would be used to identify the top two options for beginning construction based on criteria such as cost, "statewide benefit of a particular segment," estimated ridership and revenue potential.

Roelof van Ark, the CEO of the rail authority, issued a statement in response to the report saying the LAO's recommendations will be "thoroughly reviewed in the context of our mandate to operate under the provisions of Proposition 1A." He also said he believes the project has been "successful thus far because it has strived to operate more like a private business than a typical government bureaucracy."

"I hope to work with the Legislature to come up with solutions that benefit all Californians and allow us to move forward with the successful completion of the state's high-speed rail system -- and we hope that this report at least encourages healthy discussion towards that goal," van Ark said in the statement.


Like this comment
Posted by Duke
a resident of Old Mountain View
on May 10, 2011 at 8:23 pm

All I want to know is if there are any municipal bonds involved in this story?

Like this comment
Posted by Morris Brown
a resident of another community
on May 10, 2011 at 8:45 pm

Eric Thronson has put out a video on YouTube expaling the report

(4 minutes)


Web Link

Like this comment
Posted by Hardin
a resident of Cuesta Park
on May 11, 2011 at 9:18 am

A rule of thumb in successful project management is to invest heavily in upfront planning in the design phase of a project to define scope, line up funding, and prepare contingency. This has been glossed over by the authority to chase Federal dollars, which other states are wisely declining, given the economic climate and risk level at this time.

Every project, is governed by two metrics for success: On Time (Schedule Control), and On Budget (Cost Control). These are fundamental tenents in project management. You don't get to choose which one you abide by, both are required. It appears that the HSR authority is willing to sacrifice the latter, for the former, and in doing so, validates the conclusions of the Legislative Analysts' Office that the authority is unqualified to continue managing this project.

Mass transit is a one strategy we need to support for a green future. However, this attempt has been poorly planned, and is now being poorly executed, and requires a reboot.

Like this comment
Posted by Alex M.
a resident of Willowgate
on May 11, 2011 at 2:28 pm

Actually Hardin, projects have three metrics, not two: cost (being on bugdet), schedule (finishing on time), and performance (meeting or exceeding the requirements in the project scope). In reality, you get to pick only two. Poor planning an execution (which I agree has been the standard here) will guarantee failure on all three counts.

Like this comment
Posted by Hardin
a resident of Cuesta Park
on May 11, 2011 at 3:32 pm

I find Mr. van Ark's comments rather telling:


Roelof van Ark, the CEO of the rail authority, issued a statement in response to the report saying the LAO's recommendations will be "thoroughly reviewed in the context of our mandate to operate under the provisions of Proposition 1A." He also said he believes the project has been "successful thus far because it has strived to operate more like a private business than a typical government bureaucracy."



Even though I may agree that government bureaucracy is a hindrance to efficiency and effectiveness, Mr. van Ark appears to be openly hostile to the idea of government oversite. And considering where the dollars are coming from to fund this project, I would suggest that Mr. van Ark not bite the hand that feeds him.

Considering the "success" he is referring to, he really needs to elaborate on this, since his performance has been dismal, as compared to projects conducted in the private sector, and considering the amount of critical 3rd party analysis regarding outcomes so far.

It goes without saying that if he had been hired by a private company instead of the state for this project, he'd be looking for a new job by now.

Like this comment
Posted by vkmo
a resident of Cuesta Park
on May 11, 2011 at 6:46 pm

High Speed Rail is a very worthwhile project, and its construction shouldn't be impeded.

Like this comment
Posted by Hardin
a resident of Cuesta Park
on May 12, 2011 at 9:08 am

"High Speed Rail is a very worthwhile project, and its construction shouldn't be impeded. "


And I'd like to eat bacon and eggs every morning for breakfast.

Focusing on an ideal (HSR) and ignoring the execution of it leads to failure, and unintended consequences. With the dollars in question for this project, and the State's finances in shambles, it is not enough to just "wish" for something to happen, without putting in careful thought how to achieve it successfully.

There's risk taking, and then there's stupidity.

Like this comment
Posted by tommygee54
a resident of Rex Manor
on May 12, 2011 at 3:11 pm

Just think, if we do not get HSR built, then we deserve more clogged freeways, more cars on these freeways, and perhaps more airports in our state...etc. And the HSR saysayers will say, 'wow are freeways are still clogged---why?'
That is what I call progress...

Like this comment
Posted by curious
a resident of Cuesta Park
on May 12, 2011 at 3:49 pm

tommygee54, just think if against all odds they do manage to get something built we will get what we have now because no one will ride this. Why should anyone use this thing when it will cost far more than an airplane for one and than driving for a family.

Of this we can be sure: this will cost the CA taxpayers many more $billions. The most they will ever build will be the train spur to nowhere in the Central Valley. I am sure the people of Chowchilla and Visalia will like it.

Like this comment
Posted by LAResident
a resident of another community
on May 12, 2011 at 4:28 pm

I travel to China a lot and the high-speed rail line there is fantastic.

However, as much I would love to see one here in CA, I just don't see it happening. Palo Alto and other cities are already fighting it for various reasons. There will be so much political infighting and NIMBY action that I think there is a good chance this will die on the vine.

Plus, if CalTrain is underwater, I find it hard to believe that this will be self-sustaining.

I would love to see it, but I'm not holding my breath.

Like this comment
Posted by Seer
a resident of Old Mountain View
on May 13, 2011 at 12:24 am

For the millionth time: Caltrain has NOTHING to do with HSR. Nothing. Just because the two systems may share a right-of-way for a small portion of the HSR line, they neither compete nor offer redundant travel, nor can the financial success or failure of Caltrain be used to predict HSR's results. The simple reason is that HSR is built for long-distance trips, Caltrain for short ones. So Caltrain's financials have as much to do with HSR's as they might with air travel or ocean liners. The only possible relationship they can have is that caltrain would make a great feeder for passengers looking to take HSR on a longer trip. With only two stations along the peninsula in the proposed HSR design (to keep HSR speeds up to a reasonable level that guarantees a 2.5HR LA travel time from SF) there is no redundancy with Caltrain.

I agree that the California HSR authority should be relieved of duty if it cannot execute the Prop 1A mandate. Yes, the HSR is expensive and yes, finding the money will be hard, but the necessity and practicality of HSR is already well-demonstrated around the world and questioning it here is nearly as ridiculous as questioning whether planes can fly. With fuel costs predicted to reach $20/gallon or higher by the time the HSR is completed, today's foxhole financial analyses comparing trip prices to cars or planes make no sense at all. To compare these trip costs makes the repeatedly proven-false assumption that the future will be just like the past. We all know that isn't the case.

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