CDAWG @ PALA

OCTOBER 8 , 2014

LANCE CHRISTENSENREASON FOUNDATION

The Future of High-Speed Rail in California:

An Introduction—Full Disclosure2

Bachelor of Arts, Brigham Young UniversityMaster of Public Policy, Pepperdine UniversityCalifornia Senate Fellow, CSU SacramentoBudget Analyst, Department of FinanceLegislative Director, Senator Tom McClintockFiscal & Policy Consultant, Senate Republican

Caucus Pension Reform Project Director, Reason

FoundationPater familias, married to a Bakersfield native with

3 energetic boys & a tiny girl

Free Minds, Free Markets

Reason Foundation advances a free society by developing, applying, and promoting libertarian principles, including individual liberty, free markets, and the rule of law.

Reason Foundation produces respected public policy research on a variety of issues and publishes the critically-acclaimed Reason magazine. Together, our top-tier think tank and political and cultural magazine reach a diverse, influential audience, advancing the values of choice, individual freedom and limited government.

And it is there that I direct the Pension Reform Project.

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TINSTAAFL4

Or…TINSTAAFHSR5

Going to California

I posit that California is the Zeppelin—Either it flies and takes the country with it…

…or it crashes & burns the whole country down.

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And trains are not impervious to crashes…

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The faster they go, the bigger the wreck.

Just ask China.

High-Speed Rail Authority8

Established by SB 1420 (Kopp, Chapter 796, Statues of 1996)

Ratified by voters in Proposition 1A—November 2008 general election—for the purpose of directing the development and implementation of high-speed train service in California.

HSRA has a nine-member board, five appointed by Governor to four year terms, are not subject to Senate confirmation.

HSRA 2014 business plan draft map9

Map includes:Already existing rail lines

in California, slated to receive upgrading during the project’s duration (e.g. Amtrak Surfliner)

Completed length of the rail line.

A more realistic map would show the actual high-speed rail sections.

http://reason.org/blog/show/california-high-speed-rail-2014-bus

A more direct map10

The goal was to build a high-speed train

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HSRA’s plan today is dramatically different than plan presented to the voters in November 2008.

Voters agreed to a system that would: Cost $33 billion to construct (state’s portion being $9 billion in

general obligation bonds) Up & running by 2020 providing service between San Francisco and

Los Angeles Faster and cheaper than what is currently available from the airlines Make a profit in its first year of operation Have 39 million passengers per year by completion.

All in the name of better transportation & saving the environment.

But it’s going to be a high-cost train12

Today, the HSRA’s plan is predicted to cost at least twice that, but more likely upwards of $100 billion. First phase of the project won't even be completed by

2020Ridership assumptions have been criticized by

virtually every unbiased analyst as hopelessly unrealistic

Less than 15% of the money for construction (best case scenario) has been identified

System will require long-term subsidies, likely sucking up virtually all the state's cap & trade revenues

Simply a violation of the voter's trust.

Looking to the Feds13

In January 2010, HSRA received an American Recovery and Reinvestment Act grant of $2.25 billion to aid in the development of the Phase I project. Of that amount: $400 million is for constructing the basement of the new Transbay

Terminal in San Francisco to accommodate high-speed trains. $1.85 billion is for purchasing right-of-way, constructing track,

signaling systems, and stations, and completing environmental reviews and engineering documents for the Los Angeles/Anaheim segment, the San Francisco/San Jose segment, the Fresno/Bakersfield segment, and the Merced/Fresno segment.

2nd Round: $1.3 billion 3rd Round: $300 million from funds declined by Florida. HSRA & FRA jointly selected 1st segment from near Fresno to near Bakersfield.Between federal funds, state bond funds, HSRA has committed about $5.7 billion for the Central Valley project. As a condition of the ARRA grants, the HSRA must complete construction by September 30, 2017.

Not if they have anything to say about it14

New House Majority Leader Kevin McCarthy, R-Bakersfield, has vowed to "do all that I can to ensure not one dollar of federal funding goes to boondoggles like [California's] high-speed rail." 

Similarly, Rep. Jeff Denham, R-Modesto, told the Register, "Until I see a viable business plan for high-speed rail in California that is fiscally sound and supported by private dollars, I will continue to hold the rail authority accountable to the voters and ensure no additional federal tax dollars go to this project." 

http://reason.org/blog/show/ca-bullet-train-no-plan-little-mone

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Analysis: 2014-15 Governor’s Proposed Budget

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New record spending levels in total state spending ($240 billion), GF spending ($106.8 billion).

GF spending is $10.5 billion higher than current budget act level.

Legislative Democrats desire to spend several billion more than the Governor.

Local schools will benefit from state's new revenues since budget provides increase of more than $6 billion to K-14 education for 2014-15, assuming legislative Democrats keep the promises made to the voters when they campaigned for Proposition 30.

Proposes to pay off $11 billion in debt, which is a very good start.

There is no “budget surplus” for new state spending; unfunded liabilities exist.

-Budget Briefs, Senate Republican Fiscal Office, “Highlights & Analysis of the Governor’s

2014-15 Budget,” January 2014

Budget Sets Record High for State Spending17

General Fund spending hits $108 billion, eclipsing the pre-recession peak of $103 billion.

True General Fund program spending also hits a record $119 billion after accounting for fund shifts & other accounting maneuvers, which is $11 billion higher than last year.

Total state spending (from all fund sources) is $254.4 billion – nearly $25 billion above previous record of $230 billion.

Relative to Governor’s budget plan, final budget agreement increases baseline state spending by about $900 million & reduces amount of debt repayment by $700 million.

-Budget Briefs, Senate Republican Fiscal Office, “Highlights & Analysis of the Governor’s 2014-15 Final Budget,” June 2014

Overstaffing means overpaying18

Caltrans’ Overstaffing Diverts $500 million from Local Streets and Roads. Budget provides $1.7 billion & 9,894 FTE positions for Capital Outlay Support Program within Caltrans despite a Legislative Analyst’s Office report that indicated the COS Program is overstaffed by 3,500 positions at a cost of more than $500 million annually.

Lance’s comment: Don’t think this won’t happen to HSRA…

A Blank Check for High Speed Rail19

Enacted Budget includes:$250 million in Cap & Trade funding for HSR

project in 2014-15.

Allocates 25% of future Cap & Trade revenues, beginning in 2015-16 continuously appropriated.

Hundreds of millions of dollars spent annually on HSR without future votes of Legislature.

Passing Debt Burden to Future Generations20

Pays down “wall of debt” by $10.4 billion, about $700 million less than Governor’s original plan.

What can Brown do for you?

Obfuscate, according to David Crane in a recent Bloomberg article:“Just as California’s budget wasn’t fixed in 2000 or 2007, it isn’t fixed in 2014. In fact, even though revenue, taxes and fees are higher now than they were the last time California reported a balanced budget, in 2007, state spending on most state services is lower. Spending on welfare, universities, courts and parks is down more than 20 percent because spending on employee salaries, pensions, retiree health care, debt service and Medicaid is up more than 20 percent.”

http://www.bloombergview.com/articles/2014-04-13/how-jerry-brown-hoodwinks-reporters

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California ranks…

39th in Forbes Best States For Business 2013 47th in 2014 ALEC-Laffer State Econ Competitive

Index47th in CNBC’s 2013 Top States to Do Business48th in Tax Foundation’s 2014 State Business Tax

Climate Index50th in USA Today’s 2013 Best and Worst Run States50th in Chief Executive’s 2013 Best & Worst States

for Businesshttp://www.alec.org/wp-content/uploads/RSPS-CA-14.pdf, http://www.cnbc.com/id/100824779,

http://www.usatoday.com/story/money/business/2013/11/22/best-worst-run-states/3671359/, http://chiefexecutive.net/best-worst-states-for-business-2013, http://www.forbes.com/best-states-for-business/, http://

taxfoundation.org/sites/taxfoundation.org/files/docs/2014%20State%20Business%20Tax%20Climate%20Index.pdf

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Economic forecasting a little glum

“Water isn't the only drought in Los Angeles. Los Angeles, Detroit and Cleveland share the dubious distinction of cities with the weakest job growth since 1990. That’s a shocking club for Los Angeles to be a member of. Many of the problems the city currently faces would be less severe if employment and city revenues had been growing more rapidly.”

UCLA Anderson Forecast for the Nation, State and L.A. April 2014

http://uclaforecast.com/uploads/events/2014/April/ebrochure_April2014_laacc.html

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CA vs. TX – who wins?

Katy Grimes of the Flash Report writes:“Apparently California is ‘leaking’ businesses… as if businesses and middle class families are dribbling away, or just accidentally seeping into other states. But according to Jon Coupal of the Howard Jarvis Taxpayers Association, more than 50 companies have relocated or expanded in Texas in the last year and a half.”

http://www.foxandhoundsdaily.com/2014/05/californias-business-leakage-becoming-deluge/

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Speaking of Texas25

The Big Texas Plan to Copy Japan's High-Speed Rail Success

Texas Central Railway intends to build a Houston-Dallas line with private money.

The link will provide a 200-mile-per-hour bullet train as soon as 2021.

http://www.citylab.com/commute/2014/06/the-big-texas-plan-to-copy-japans-high-speed-rail-success/372984/

http://www.cmta.net/mpowered_blog.php?id=266

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California Academic Performance Index (API) * California Access for Infants and Mothers * California Acupuncture Board * California Administrative Office of the Courts * California Adoptions Branch * California African American Museum * California Agricultural Export Program * California Agricultural Labor Relations Board * California Agricultural Statistics Service * California Air Resources Board (CARB) * California Allocation Board * California Alternative Energy and Advanced Transportation Financing Authority * California Animal Health and Food Safety Services * California Anti-Terrorism Information Center * California Apprenticeship Council * California Arbitration Certification Program * California Architects Board * California Area VI Developmental Disabilities Board * California Arts Council * California Asian Pacific Islander Legislative Caucus * California Assembly Democratic Caucus * California Assembly Republican Caucus * California Athletic Commission * California Attorney General * California Bay Conservation and Development Commission * California Bay-Delta Authority * California Bay-Delta Office * California Biodiversity Council * California Board for Geologists and Geophysicists * California Board for Professional Engineers and Land Surveyors * California Board of Accountancy * California Board of Barbering and Cosmetology * California Board of Behavioral Sciences * California Board of Chiropractic Examiners * California Board of Equalization (BOE) * California Board of Forestry and Fire Protection * California Board of Guide Dogs for the Blind * California Board of Occupational Therapy * California Board of Optometry * California Board of Pharmacy * California Board of Podiatric Medicine * California Board of Prison Terms * California Board of Psychology * California Board of Registered Nursing * California Board of Trustees * California Board of Vocational Nursing and Psychiatric Technicians * California Braille and Talking Book Library * California Building Standards Commission * California Bureau for Private Postsecondary and Vocational Education * California Bureau of Automotive Repair * California Bureau of Electronic and Appliance Repair * California Bureau of Home Furnishings and Thermal Insulation * California Bureau of Naturopathic Medicine * California Bureau of Security and Investigative Services * California Bureau of State Audits * California Business Agency * California Business Investment Services (CalBIS) * California Business Permit Information (CalGOLD) * California Business Portal * California Business, Transportation and Housing Agency * California Cal Grants * California CalJOBS * California Cal-Learn Program * California CalVet Home Loan Program * California Career Resource Network * California Cemetery and Funeral Bureau * California Center for Analytical Chemistry * California Center for Distributed Learning * California Center for Teaching Careers (Teach California) * California Chancellors Office * California Charter Schools * California Children and Families Commission * California Children and Family Services Division * California Citizens Compensation Commission * California Civil Rights Bureau * California Coastal Commission * California Coastal Conservancy * California Code of Regulations * California Collaborative Projects with UC Davis * California Commission for Jobs and Economic Growth * California Commission on Aging * California Commission on Health and Safety and Workers Compensation * California Commission on Judicial Performance * California Commission on State Mandates * California Commission on Status of Women * California Commission on Teacher Credentialing * California Commission on the Status of Women * California Committee on Dental Auxiliaries * California Community Colleges Chancellors Office, Junior Colleges * California Community Colleges Chancellors Office * California Complaint Mediation Program * California Conservation Corps * California Constitution Revision Commission * California Consumer Hotline * California Consumer Information Center * California Consumer Information * California Consumer Services Division * California Consumers and Families Agency * California Contractors State License Board * California Corrections Standards Authority * California Council for the Humanities * California Council on Criminal Justice * California Council on Developmental Disabilities * California Court Reporters Board * California Courts of Appeal * California Crime and Violence Prevention Center * California Criminal Justice Statistics Center * California Criminalist Institute Forensic Library * California CSGnet Network Management * California Cultural and Historical Endowment * California Cultural Resources Division * California Curriculum and Instructional Leadership Branch * California Data Exchange Center * California Data Management Division * California Debt and Investment Advisory Commission * California Delta Protection Commission * California Democratic Caucus * California Demographic Research Unit * California Dental Auxiliaries * California Department of Aging * California Department of Alcohol and Drug Programs * California Department of Alcoholic Beverage Control Appeals Board * California Department of Alcoholic Beverage Control * California Department of Boating and Waterways (Cal Boating) * California Department of Child Support Services (CDCSS) * California Department of Community Services and Development * California Department of Conservation * California Department of Consumer Affairs * California Department of Corporations * California Department of Corrections and Rehabilitation * California Department of Developmental Services * California Department of Education * California Department of Fair Employment and Housing * California Department of Finance * California Department of Financial Institutions * California Department of Fish and Game * California Department of Food and Agriculture * California Department of Forestry and Fire Protection (CDF) * California Department of General Services * California Department of General Services, Office of State Publishing * California Department of Health Care Services * California Department of Housing and Community Development * California Department of Industrial Relations (DIR) * California Department of Insurance * California Department of Justice Firearms Division * California Department of Justice Opinion Unit * California Department of Justice, Consumer Information, Public Inquiry Unit * California Department of Justice * California Department of Managed Health Care * California Department of Mental Health * California Department of Motor Vehicles (DMV) * California Department of Personnel Administration * California Department of Pesticide Regulation * California Department of Public Health * California Department of Real Estate * California Department of Rehabilitation * California Department of Social Services Adoptions Branch * California Department of Social Services * California Department of Technology Services Training Center (DTSTC) * California Department of Technology Services (DTS) * California Department of Toxic Substances Control * California Department of Transportation (Caltrans) *

Welcome to California!28

The running of the trains29

Do due diligence Evaluating tenuous claims about state’s

infrastructureEngineering & bureaucratic failuresGreening of sprawlCarbon intensive energy usageCap and trade duplicityBonded debtLegal liabilities

California High Speed Rail: An Updated Due Diligence Report

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Reason Foundation’s report warned HSRA plans issued prior to & during 2008: Were inaccurate, misleading and not in compliance with California statutes.  Authority’s financing plan overstated projected revenues and private financing, and

understated capital requirements and operating subsidies needed from taxpayers.  Subsequent independent studies and new Authority documentation have proven

virtually every characterization in Reason’s 2008 Due Diligence Report to be accurate or understated. 

Cost-prohibitive: Full Phase 1 system that had new rail lines dedicated exclusively to high speed trains into San Francisco and Los Angeles, with “blended” system (slow train-speed and shortened lines) continues to use ridership & train-speed data from the Full Phase I system in its original plan in its analysis of the blended plan’s viability.

Current plans are now identified as “Phase 1 Blended,” which HSRA estimates will cost as much as $63.2 billion in 2011 inflation-adjusted dollars ($78.0 billion in year-of-expenditure dollars) with the only sources of funding being $9 billion in California Proposition 1A general obligation bonds and $3.5 billion in federal grants.

-Joseph Vranich and Wendell Cox; Project Director: Adrian T. Moore, Ph.D.; April 2013 http://reason.org/files/california_high_speed_rail_report.pdf

Jaw-Droppingly Shameless31

HSRA, high-speed rail promoters repeatedly claim that it will cost the state more to expand highways and airports if the rail system isn’t built. The assertion is that such alternatives to high speed rail would cost $171 billion to expand highways & airports. Mother Jones stated that HSRA’s “unrealistic estimates of what the alternatives to high speed rail would cost” are “jaw-droppingly shameless.” It added: “There’s not even a pretense here of providing a reasonable, real-world traffic estimate that could be used to project the cost of alternative infrastructure. A high school sophomore who turned in work like this would get an F.”

-Joseph Vranich and Wendell Cox; Project Director: Adrian T. Moore, Ph.D.; April 2013 http://reason.org/files/california_high_speed_rail_report.pdf

Where is HSR profitable?32

So far, little private sector interest. With a dubious & panned business plan, it is unlikely any private company would invest in this line.

To date, there are only two profitable high speed rail lines:1. Japan (Osaka-Tokyo)2. France (Paris-Lyon)3. Japan (Hakata-Osaka) breaks even 

U.S. is not Japan or Europe33

Others point to successful high-speed rail lines in Western Europe & Japan, but forget: Those countries were built high-speed rail because conventional rail

travel was already busting at the seams. Different spatial structures developed around walking & mass transit. When Tokyo-Osaka line was built, fewer than 25% of driving-age

residents owned a car. Current car ownership rate in California is over 85%.

Passengers are willing to take high-speed rail in those other places because travel times are competitive with cars or planes.

When HSRA decided California's system needed to serve the Central Valley, the 2 hour, 40 minute trip that voters were promised from Los Angeles to San Francisco turned into a four hour odyssey, which would be much slower than air travel - even factoring in getting to the airport, security and other delays.

http://reason.org/news/show/californias-bullet-train-no-plan-no

Again, LAO disagrees with HSRA34

Legislative Analyst’s Office:Alternative Cost Estimate Overstated. The draft business plan compares the estimated $99 billion to $118 billion cost of constructing high-speed rail with an estimated $170 billion cost of adding equivalent capacity to airports and highways. This comparison is very problematic because $170 billion is not what the state would otherwise spend to address the growth in inter-city transportation demand. HSRA estimates that the high speed train system would have the capacity to carry 116 million passengers per year but their highest forecasted ridership is significantly less than that amount—44 million rides per year (roughly 40% less than capacity).

Highway Lane Miles Exaggeration35

HSRA claims a need to add six lanes on parallel highways (three lanes in each direction) to equal the capacity of the high speed rail line.

Problems: Exaggerating Train Capacity: HSRA uses a train size of more than twice as

many seats as it intends to operate in 2040 (1,000 seats instead of 450 seats). Correcting this exaggeration reduces the actual capacity by 55%.

Exaggerating Train Frequencies: HSRA used more trains with more capacity in its capacity analysis than it actually plans to perate in 2040. Correction of this exaggeration would reduce the revised capacity by another 87%.

Exaggerating Highway Construction: HSRA claims that it would be necessary to add the high speed rail capacity in duplicate (the longest being the parallel SR-99 and I-5 routes in the San Joaquin Valley). Each route segment would require an additional six lanes. Correction of this exaggerated build capacity on only one highway (since there will be only one high speed rail line) would reduce the revised capacity by another 41%.

-Joseph Vranich and Wendell Cox; Project Director: Adrian T. Moore, Ph.D.; April 2013 http://reason.org/files/california_high_speed_rail_report.pdf

Airline Capacity Exaggeration36

HSRA concludes that equivalent airport capacity would cost $30.3 billion (2011$) assuming substantial terminal, runway expansion based upon an average airplane capacity of 70 passengers.

This capacity is far below current average capacity for airlines in California according to Authority’s own Ridership & Revenue Forecasting Memorandum: Final Technical Memorandum83 where Table B-1’s average capacity of airliners whose destinations are within California is 135.84.

For HSRA to concurrently publish documentation with such radically different data (a nearly 50% understatement in the average airliner capacity) is concerning & is the type of inconsistency that would not be expected from a state agency with a multi-million dollar annual budget.

Current airport capacity can accommodate demand expected in next 25 years.

-Joseph Vranich and Wendell Cox; Project Director: Adrian T. Moore, Ph.D.; April 2013 http://reason.org/files/california_high_speed_rail_report.pdf

The Creator disapproves37

Former-Senator Quentin Kopp, creator of the High-Speed Rail Authority (HSRA), strong proponent of Proposition 1A in the November 2008 elections in LA Times on April 16, 2013:

"The cunning progenitors of this plan have expropriated bond money to improve commuter rail [for use in the high-speed system]. [But] high-speed rail can only operate on dedicated track, separated not shared. [Legislators] don't have the guts to stand up and say to their constituents, 'We're one state and the voters in this one state agreed to it.' [The current plan] was adopted under political pressure, toadying to the wealthy people of Atherton, Menlo Park, Palo Alto and Burlingame, best characterized as NIMBYs, who fear losing their palatial properties and fear noise, which is ironic because high-speed rail trains make less noise than diesel. Their plan would electrify Caltrain [the San Francisco Peninsula commuter system] to operate at a speed up to 125 miles per hour. That is the reason for the raid on Proposition 1A [bond funds]. And if you give money to a Northern California commuter rail, politically you have to match it for Southern California. Those factors led to the dismembering of high-speed rail, the sorry spectacle of the first alleged usable segment, which is not usable, 130 miles from Merced to Bakersfield, which will now be built as conventional rail! To operate profitably, or without any taxpayer subsidy, you must operate, at peak hours, about 10 high-speed trains per hour. If you share the tracks with the commuter system, you can't do that. HSR wouldn't be able to run more than two trains per hour, [although] the HSR authority claims it might be able to run four per hour."

Spinning—or melting—their wheels38

From Bakersfield Californian, September 27, 2014Tehachapi Mountains or the Grapevine have steep grades, would require extensive tunneling and viaducts, both of which would be very expensive.Newly released progress reports engineering firm URS Corp. sent the rail authority in fall 2013 raise concerns about a stretch of more than 4 miles southeast of Tehachapi near Oak Creek Road where the mountain grade is greater than 3.5 percent. That exceeds HSRA's self-imposed limit of 3.5 percent average grade for sections measuring about 4 miles.The challenge is going down a steep mountain.Dan McNamara, high-speed rail expert for Texas-based Fluor Corp., said a bullet train going sharply downhill needs to be able to stop within a reasonable distance in case of emergency. That means a fast train would have to slow down considerably to avoid overtaxing its brakes, otherwise the wheels will melt.

http://www.bakersfieldcalifornian.com/local/x167886582/High-speed-rail-faces-tough-climb-over-Tehachapis

Progress for sure!39

No matter how hard they try, 19th century bureaucrats still have a hard time implementing 19th century technology in the most innovative state in the world.

Where Cali Grows Green40

“The bigger problem with this [subsidized] spending is that it went against the economic tides. Last year Mr. Obama boasted that America would soon have 40% of the world’s manufacturing capacity in advanced electric-car batteries. But with electric cars still a rounding error in total car sales, that capacity is unneeded. Many battery makers are struggling to survive. Makers of solar panels face cheap competition from China, while natural gas from shale rock has undermined the case for electricity from solar and wind. As for high-speed rail, extensive highways, cheap air fares, and stroppy state and local governments make its viability dubious. A $3.5 billion grant to California may come to nothing as the estimated cost of that state’s high-speed rail project runs out of control.”

—“End-of-Term Report,” The Economist, Sept. 1, 2012

Greenhouseeffectglobalwarming climatechangechaosweirding…

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Issues of leakage, gaming & enforcement for cap and trade overwhelm system

Transportation fuels under the cap January 2015RPS 33% by 2020 now a policy realityDifficulty implementing low carbon fuel standardTailpipe emissions move forwardAlternative energy subsidies continue to hemorrhage

incubated projects to other states (Tesla, anyone?)SB 375 local air quality standards continue to pop

[Un]Intended Consequences of SB 37542

Goal: “Preferred Growth Scenario”SB 375 (Steinberg, Chapter 728, Statutes of 2008) Requires each metropolitan planning organization to adopt a sustainable communities strategy in its regional transportation plan to serve as the blueprint.

Result: Transit oriented communities in the Central Valley, Tehachapis? Really?

Mega Transit or Mega Sprawl?43

Ethan Elkind (Associate Director of the Climate Change and Business Program, with a joint appointment at UC Berkeley School of Law and UCLA School of Law)

“[I]f Governor Brown really wants to leave a legacy for future generations, he should ensure that high speed rail does not exacerbate the sprawl, traffic, and environmental degradation that led made many voters to support the system in the first place.”

http://legal-planet.org/2012/02/29/stopping-high-speed-sprawl/

Not all environmentalists heart HSR?44

In the debate on Senate Bill 901 (Vidak, 2014) that would have cut bond funds on high-speed rail on April 22, 2014, Katherine Phillips from the Sierra Club detailed how HSR will not improve GHG or criteria pollutants now or in the immediate future.

See the video here (starting at 00:55:30): http://calchannel.granicus.com/MediaPlayer.php?view_id=7&clip_id=2043

One point twenty one gigawatts45

According to the Energy Commission’s Almanac for 2012:

“With generally low hydroelectric availability in 2012, natural gas generation in California increased by 33 percent to 121,716 GWh, an increase of 30,000 GWh over the previous year…The loss of electric generation from SONGS alone accounted for approximately nine percent, or 18,000 GWh, of California's total in-state generation. The SONGS outage reduced nuclear generation in California by about 50 percent. These two factors, lower in-state hydroelectric availability and the SONGS outage, were the primary reasons for the 33 percent increase in natural gas generation in 2012.”

http://energyalmanac.ca.gov/electricity/total_system_power.html

Carbon intensive transportation46

While the goal of high-speed rail is to displace travelers from carbon-intensive modes of transportation, like cars and planes, HSRA’s plan glosses over the facts: Cars will continue to become cleaner & more fuel efficient. Tens of thousands of acres of farm land will be fallowed to

provide for the train’s necessary rights-of-way. Replacing crops with concrete eliminates a valuable carbon sink

in the Central Valley where emissions are of particular concern. There has been little review of carbon intensity for all electricity

generated to move these trains, much of it done before SONGS was permanently mothballed.

Despite assurances that wetlands will be restored & trees will be planted to offset rail system’s emissions, it will be challenging to make system carbon neutral, let alone significantly reduce carbon emissions.

Is HSR really mitigating GHGs?47

HSRA estimates that the rail system will reduce GHG emissions by 4.3 million metric tons by 2030, with an additional one million metric ton reduction annually thereafter. A 2010 study by researchers at UC Berkeley concluded that it would take 71 years for HSR system just to negate emissions that will be created by the system’s construction alone. Even HSRA’s own analysis indicates that once the high-speed rail system is operational, it would contribute a relatively minor amount of emission reductions to the state at best.

Color the LAO skeptical48

The LAO is also skeptical of the plan to use cap and trade revenues.

“…the IOS would not be completed until 2021 and Phase I blended would not be completed until 2028…given the project’s timeline, it would not help achieve AB 32’s primary goal of reducing GHG emissions by 2020.”

“…an independent study found that – if the high-speed rail system met its ridership targets and renewable electricity commitments – construction and operation of the system would emit more GHG emissions than it would reduce for approximately the first 30 years.”

Reduce GHG Emissions, Not Raise New Revenue49

Previous years’ AB 32 bills prematurely anticipated & distributed auction revenues with insufficient information about potentially serious economic, legal and environmental impacts. The purpose of cap and trade is to reduce GHG emissions, not raise billions in new revenue for state coffers. The legislature intends to spend revenues despite their poor understanding of the serious impacts of program cost-effectiveness and emissions leakage.

Original AB 32 Debate50

AB 32 Joint Author & Speaker Fabian Nunez said on the final Assembly Floor debate, 8/31/2006:

“The intent of the fee is for program administration and costs only, and I have a letter to the journal to specify that and I’m willing to give you my word here today that next year I’ll introduce the bill, if necessary, to make sure that happens in order that I get your support on this bill.”

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Asm. Dan Logue Contends52

In a January 30, 2012 op-ed to the Sacramento Bee, Assemblyman Dan Logue wrote a compelling argument against moving forward with a cap and trade auction. In part, he stated:

“Yet the governor is moving full steam ahead with AB 32, with the new twist of using some of the revenues it will raise to pay for the state's past spending mistakes. I believe this is in direct violation of the state constitution and the will of the people.”

Senator Pavley agrees…53

Senator Fran Pavley (original and joint author on AB 32) drafted SB 31 (2009) and SB 1572 (2012) on cap and trade indicating that she doesn’t believe that CARB has authority raise revenues in auction. Her bills demonstrate legislative intent where there is ambiguity.

She also responded to Logue’s column on 2/2/2012, saying…

“It's not often that Logue and I agree.”54

“But in his recent opinion piece on AB 32, California's clean, secure energy law, he makes a simple point worth restating: carbon pollution fees must be used to reduce carbon pollution. 

“The California Supreme Court, in Sinclair Paint v. State Board of Equalization, found that the California Constitution forbids unrestrained spending of polluter's fees. The Legislature must craft a narrowly tailored plan to use those fees to cut carbon pollution in a manner creating jobs and protecting homeowners, small businesses and industry.” 

AB 32 Auction Not Necessary55

In a August 2012 response to a request by Democratic Assemblyman Henry Perea of Fresno and Senator Michael Rubio of Hanford, Mac Taylor, the Legislative Analyst’s stated:

“An allowance auction is not necessary to meet the AB 32 goal of reducing GHG emissions statewide to 1990 levels by 2020.”

So why are we doing this, again?

$$$

Bond Sales Upheld for HSR56

Despite acknowledging that the HSRA’s plan did not resemble Proposition A on the 2008 ballot, the Fresno Bee reported on August 1, 2014: Appellate Justices Vance W. Raye, Ronald B. Robie and M. Kathleen

Butz ordered Sacramento County Superior Court Judge Michael Kenny to OK the issuance of bonds from Proposition 1A, the $9.9 billion high-speed rail bond measure approved by California voters in 2008.

Kenny had ruled in November that the state's High-Speed Passenger Train Finance Committee -- a five-member panel of the state treasurer, finance director, controller, transportation secretary and chairman of the California High-Speed Rail Authority -- authorized the issuance of bonds without any substantial evidence that it was "necessary or desirable" to issue the bonds immediately.

http://www.fresnobee.com/2014/07/31/4049535_appeals-court-approves-bond-sale.html?sp=/99/217/&rh=1#storylink=cpy

Disclaimer: I am not an attorney57

Though a recent ruling gives the state permission to sell the bonds, counsel for the plaintiffs note that the ruling doesn't give High-Speed Rail Authority permission to actually access the money until they produce another business plan.

Litigation will certainly continue until first rail is laid, & likely thereafter.

Here are a few more lawsuits58

John Tos; Aaron Fukuda and County of Kings v. California High Speed Rail Authority; (Sacramento Superior Court Case No. 34-2011-00113919)

Town of Atherton v. California High-Speed Rail Authority; (Court of Appeal, Third Appellate District, Case No. C070877)

CHSRA Validation Action; Sacramento Superior Court Case No. 34-2013-00140689; (Court of Appeal, Third Appellate District, Case No. C075668)

Before the Surface Transportation Board; Finance Docket No. 35724(SUB No. 1); CHSRA-Construction Exemption

Coffee-Brimhall LLC v. California High-Speed Rail Authority; (Sacramento Superior Court Case No. 34-2014-80001859)

County of Kings v. California High-Speed Rail Authority; (Sacramento Superior Court Case No. 34-2014-80001861)

County of Kern v. California High-Speed Rail Authority; (Sacramento Superior Court Case No. 34-2014-80001863)

First Free Baptist Church of Bakersfield v. California High-Speed Rail Authority; (Sacramento Superior Court Case No. 34-2014-80001864)

Dignity Health v. California High-Speed Rail Authority; (Sacramento Superior Court Case No. 34-2014-80001865)

City of Bakersfield v. California High-Speed Rail Authority; (Sacramento Superior Court Case No. 34-2014-80001866)

City of Shafter v. California High-Speed Rail Authority; (Sacramento Superior Court Case No. 34-2014-80001908)

TRANSPORTATION SOLUTIONS DEFENSE AND EDUCATION FUND v. California Air Resources Board and CHSRA as a real party in interest; (Fresno Superior Court Case No. 14CECG01788)

High-Speed Train Robbery59

California Officials Dread Rail Project Trial:“The $68 billion high-speed boondoggle may not comply with its legal promise.”-Steven Greenhut 4/25/14, http://reason.com/archives/2014/04/25/california-officials-dread-rail-project

Wall of Debt—How Much?

It all depends on who & when you ask.

Opinions and assumptions vary, but the total unfunded liability obligation in the state, combining local obligations, as well spans between $132 billion (without pension & retiree healthcare costs) and $872 billion (considering most pension & retiree healthcare costs).

http://www.bizjournals.com/sacramento/news/2013/09/06/californias-current-debt-load-132.html

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A big, but conservative, estimate, still

California Policy Center’s Ed Ring’s rough estimate of CA’s real “Wall of Debt”: $34.7 billion for short-term borrowing by state $30 billion for short-term borrowing by local cities, counties & agencies $80.7 billion for State General Obligation Bonds $177.6 billion for Local General Obligation Bonds $28 billion for Trust Fund Loans $181.2 billion for unfunded retirement, health care liabilities (CalPERS &

CalSTRS participants only) $90 billion for unfunded retirement & health care liabilities (independent

pension plan participants) $250 billion impact of lower investment returns on retirement pension

funds

Grand total: $872 billion, or $23,000 per California resident, or $87,000 per California household.

http://unionwatch.org/how-big-is-californias-wall-of-debt/

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Debt: Truth in Accounting

“According to analysis by Truth in Accounting, California does not have enough assets available ($104.4 billion), to pay the state's bills, ($343.4 billion). The difference between assets and bills is $239 billion. That debt divided by the number of taxpayers reveals California's per-taxpayer burden of $22,100 in 2012.”  

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Debt: CalTax

CalTax found: California has $443

billion in total quantifiable state & local debt & unfunded liabilities.

Local governments owe more than $144 billion on borrowing & unfunded liabilities, not including K-12 school districts, unfunded liabilities for local retiree benefits.

The financial obligation equates to more than $11,600 per Californian (U.S. Census Bureau, Quick Facts).

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LAO: Prioritizing $340 billion in liabilities

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“A central tenet of public finance holds that expenses should be paid for during the year that they are incurred. In some cases, however, the state has taken actions that allowed it to provide services without at the same time paying for their full costs, creating a liability that must later be addressed. This report provides an overview of $340 billion of the state’s key liabilities—that is, debt, deferred payments, and other liabilities that will affect the state’s financial health in the future.”

http://lao.ca.gov/reports/2014/finance/liabilities/addressing-california-key-liabilities-050714.aspx

Debt: Unfunded Retiree Healthcare

http://www.cacs.org/ca/article/86

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Mountain of Debt is “immoral”66

Dr. Lawrence McQuillan of the Independent Institute: “The overwhelming majority of the state’s long-term liabilities are for pension and healthcare benefits for government workers after retirement…Most of the debt is deferred compensation for government services consumed in the past, and for which future generations will never receive any benefits. Also, future generations will be stuck with debt they never agreed to (or voted for), the purest form of ‘taxation without representation.’”

http://blog.independent.org/2014/02/03/californias-immoral-mountain-of-debt/

Reason wrote in 2005

The Gathering Pension Storm: “An ominous storm cloud is gathering across the horizon as American governments try to pay for the lucrative pension promises made to their employees. And these clouds are not just over a few skies. They are virtually everywhere. Government employee pension systems across the nation are in crisis.”

http://reason.org/news/show/the-gathering-pension-storm

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Massive Unfunded Liabilities

From The Press-Enterprise, 5/4/14: Governments’ Quandary: “Increased pensions costs that are crowding out services.” “We wish there were a fast way out of this dilemma, but there isn’t. Because city dollars are fungible, even a Hemet tax increase might end up going just to pensions instead of to more cops on the street.”

http://www.pe.com/opinion/editorials-headlines/20140505-editorial-fight-crime-without-raising-taxes.ece

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Filing for bankruptcy69

While there are many reasons that municipalities file for bankruptcy, high on the list are high pension costs that are very difficult to rein in.

Just ask:San BernardinoStocktonVallejoDesert Hot Springs

Pension costs are exploding70

Dimensions of the Pension Crisis71

Skyrocketing costsFailure to meet obligationsLiability and riskLoss of public trust

LAO on Prop 30 & Pension Payments

When Proposition 30 (2012) was proposed, it was meant to send more dollars directly to K-12 and college classrooms, as Governor Brown promised. Instead, billions of dollars will go to pay massive liabilities in CalSTRS, which the legislature refuses to otherwise pay (increase estimated at $4.5 billion a year if payments were to begin now).

http://reason.org/news/printer/teachers-pensions-rob-students-taxp, http://www.arc.asm.ca.gov/budgetfactcheck/?p_id=472

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The Screwed Generation?

“Over the past five years, the millennial generation (born after 1983) has been exercising greater influence over the economy, society and politics of the country, a trend that will only grow in the coming years. So far, they’ve leaned Democratic in the voting booth, but could the lousy economic fate of what I’ve dubbed ‘the screwed generation’ lead to a change?“…Since 2008, the percentage of the workforce under 25 has dropped by 13.2%, according to the Bureau of Labor Statistics, while that of people over 55 has risen by 7.6%. Among high school graduates who left school in 2009-11, only 16% had full-time work in 2012, and 22% worked part time although most sought a full-time job.“These trends are likely to continue and could worsen, according to the U.S. Department of Labor, particularly for workers between 20 and 24. Today even a college degree guarantees increasingly little in terms of social uplift. Tuition debt is nearing $1 trillion; the percentage of 25-year-olds with school debt has risen from 25% in 2004 to close 40% in 2012. Average indebtedness amongst borrowers has grown 70% from $15,000 to nearly $25,000.“Besides a tepid economy, the millennials confront paying off huge public debts, much of it due to the generous pensions of boomer public employees. This constitutes what economist Robert Samuelson has labeled “a generational war” in which the young are destined to be losers in the ‘withering of the affluent society.’” Joel Kotkin, http://www.foxandhoundsdaily.com/2014/04/turn-screwed-gop-shot-wooing-disgruntled-

millennials/

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King of the tracks for a day?

Cal Lutheran economist Bill Watkins told the State Senate: “As you go from a growing population to a shrinking population, unless you have huge increases in productivity, there’s one generation at least that’s going to have a lower standard of living than their parents.”When asked what he would do if her were “master of the universe,” he responded that when they consider legislation and “look at how it impacts opportunity. You need to create an opportunity economy.”

http://www.vcstar.com/news/2013/apr/15/bill-watkins-offers-unusual-advice/#ixzz2QfEppBq4

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Pournelle's Iron Law of Bureaucracy

In any bureaucratic organization there will be two kinds of people: those who work to further the actual goals of the organization, and those who work for the organization itself. Examples in education would be teachers who work and sacrifice to teach children, vs. union representative who work to protect any teacher including the most incompetent. The Iron Law states that in all cases, the second type of person will always gain control of the organization, and will always write the rules under which the organization functions.

http://www.jerrypournelle.com/reports/jerryp/iron.html

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Wrong plan, wrong place, wrong time76

If California ranks so poorly in all these other areas, how do we expect that they are going to do high-speed rail right?

Just ask former State Senator Joe Simitian (D, Palo Alto):"There are billions of reasons why none of us should simply go along with the program."

https://www.youtube.com/watch?v=Y84yYaQvYRs

Maybe there is still hope?77

California could build a workable high-speed rail network without spending a king's ransom.

How?

Take existing routes in demand, like Los Angeles to San Diego & Sacramento to San Francisco & upgrade those lines so they could accommodate high-speed (125 mph) trains. These could support higher rates that would produce revenues that could be folded into development of future segments.

Must be incorporated into a seamless transportation network; stations in major metro areas must be connected to transit systems that actually work.

Must be proven to make money, convince the private sector to not only invest, but develop and run the system, taking all the risks and reaping all the rewards. It’s not viable now since the private sector does not plan for its development, but stands in line for handouts.

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Thanks for the ride79

Lance ChristensenDirector, Pension Reform Project

(916) 220-2728lance.christensen@reason.org

@reasonreformhttp://reason.org/pensionreform