Thursday, October 2, 2008

LA Times Endorses Yes on Prop 1A

NOTE: We've moved! Visit us at the California High Speed Rail Blog.

The largest newspaper in the state has come out in favor of high speed rail:

There's something undeniably alluring about a bullet train -- the technology is so powerful, the speed so breathtaking, it makes quotidian trips seem exotic. Perhaps that's why proponents of Proposition 1a, which would authorize $9.95 billion in bonds for a high-speed rail line connecting Northern and Southern California, think it would be wildly successful. They predict the line could draw 117 million riders a year by 2030, compared with 3 million now taking the high-speed Amtrak train in the densely populated Northeast. And they say it will turn a billion-dollar profit by then even as it keeps ticket prices remarkably low.

The projections by the measure's opponents, led by the libertarian Reason Foundation in Los Angeles, are much less sanguine and more persuasive. If voters approve Proposition 1a, it seems close to a lead-pipe cinch that the California High-Speed Rail Authority will ask for many billions more in the coming decades, and the Legislature will have to scrape up many millions of dollars in operating subsidies.

And yet, we still think voters should give in to the measure's gleaming promise, because it's in their long-term interest. Weaning travelers from gas-powered, road-choking cars is critical to the state's health and competitiveness. A high-speed rail line would not only provide a cleaner and faster alternative to automobiles, it would encourage transit-friendly development.

The measure isn't as big a risk as it would be if the state were footing the entire bill. The "backbone" segment from Los Angeles to San Francisco is projected to cost $33 billion, with about 75% from federal and private sources. Until those funds are secured, the state won't issue most of its bonds. If the line never gets built, the state's losses will be well under $2 billion. That's not too much to wager on a visionary leap that would cement California's place as the nation's most forward-thinking state.


I could do without the citation of the Reason Foundation study that we thoroughly discredited here. It is far from a "lead pipe cinch" that the Authority will ask for "many billions more" - and it is highly unlikely that they'll need ongoing operating subsidies.

But what I find so interesting about this editorial is their argument that even if the discredited Cox-Vranich study were right, HSR is still worth doing. They are absolutely right that "weaning travelers from gas-powered, roads-choking cars is critical to the state's health and competitiveness." I would add airlines to that as well, something we have to develop an alternative to anyway.

The editorial also nails it at the end - if the matching funds don't come through, then we don't issue the bonds, California loses at most $2 billion, and we survive just fine. The LA Times editorialists saw right through all the baseless, factless, nonsensical claims that HSR will cost us upwards of $100 billion and instead focused on this state's dire need for just such a system to revive our economy and improve our environment.

The LA Times should be congratulated for shifting public focus to the "gleaming promise" of high speed rail. It is the most important infrastructure project this state has considered in 50 years. We will be kicking ourselves very soon if we reject Prop 1A. The LA Times gets the big picture. About time someone in the media did.

28 comments:

Rafael said...

Minor quibble: CHSRA projects ridership of 65-95 million per year for 2030, depending on how the price of gasoline and jet fuel develops. Even so, that's an ambitious target for a date just 12 years after the starter line opens.

The 117 million figure relates to theoretical system capacity.

Rafael said...

Update: Senate approves HR 2095 by 74 to 24. It will now proceed to the president. He has expressed misgivings but I doubt he will veto this when he himself is asking for a $700 billion emergency package for the financial markets.

See this post for a discussion of what this bill might mean for California.

anonymous said...

Rafael:

Since the project here in California is looking for at least 9 billion from the federal government, I don't understand why HR 2095 which will fund 1.5 billion over 5 years for the whole country is such a big deal.

California certainly is not going to get all of even that small amount.

Rafael said...

@ anon @ 5:39am -

CHSRA will need around $33 billion for the starter line, so the total needed from the feds is more like $11 billion. The strategy should be to get the cities and counties HSR will serve to chip in $2-3 billion and bundle that with the $9 billion from prop 1A as "in-state taxpayer contributions".

The HSR provisions in HR2095 were tacked on fairly late in the game, for the sake of upgrading the Amtrak-owned NEC rather than the proposed California system. However, all 11 corridors are eligible.

Why shouldn't California ask for a down payment based on this bill, which will disburse funds between 2009 and 2013? No-one ever said the matching funds had to be secured all at once and, getting some money from the feds soon is better than not getting any. Attracting private investors was always going to be even harder, so a pay-as-you-go approach may be appropriate at this early stage.

Even HSR proponents want to see some evidence that CHSRA can deal with the thorny issues of the FRA waiver, ROW acquisitions and project-level EIR/EIS processes before committing the bulk of the construction funding. Note that AB3034 makes the actual appropriations of prop 1A funds part of the annual budget circus.

Rob Dawg said...

Even HSR proponents want to see some evidence that CHSRA can deal with the thorny issues of the FRA waiver, ROW acquisitions and project-level EIR/EIS processes before committing the bulk of the construction funding.

I disagree. The entire thorny issue of r-o-w "acquisition" as you call it has been assiduously avoided by HSR proponents. UPRR has been absolutely clear of their position and every honest student of the problems in some locations expects the State Supreme Court if not the Fed SC to become involved. We all agree that there isn't enough money to accede to their demands.

Morris Brown said...

One of the weaknesses in Prop 1A is that it only requires 1/2 of the funds for construction of a segment to come from sources other than the bond money.

So even though everybody talks about 1/3 coming from bonds, 1/3 from Federal sources and 1/3 from private equity, to complete the project, pieces of the project can be built using only 1/2 from other funds, not 2/3. This is in addition to the fact that 10% of funds can be spent without matching funds for studies and ROW.

Getting the Feds to parcel out relatively small amounts of money, means that small segments can be built. This to me suggests the large possibility of what is called a skeleton system might be the end result. This was covered in Part o 8 o f the Cox - Vranich report. (page 122 -)

Now, I don't think even Robert would be happy with a project that ended up say building only a route from Gilroy to Palmdale, even though Gilroy is the closest station he will ever see, while living in Monterey.

More likely is a possibility mentioned in the LA Times endorsement, that we spend $2 billion of taxpayer dollars, and get nothing at all back for these dollars. They find that acceptable. A couple billion here and there, who cares? They say its worth the risk. I say it isn't

Anonymous said...

From: http://www.dailynexus.com/article.php?a=17218

State To Vote on $10 Billion Train Prop.

Schwarzenegger, Environmentalists Support Bill; Economists Hesitate
By Kristin Ferrell / Staff Writer

Published Tuesday, September 30, 2008

Issue 6 / Volume 89


Jarrick Goldhamer / DAILY NEXUS

Environmentalists argue that a highspeed rail from Los Angeles to Sacramento and San Francisco will be healthy for the environment, but economists argue its financial irresponsibility. The highspeed rail would be approved for $10 billion in bonds, costing taxpayers $19.5 billion.
Enlarge this image


Jarrick Goldhamer / DAILY NEXUS

Come November, Californians will have to decide whether a high-speed rail system - one that could travel from Los Angeles to San Francisco in just over two and half hours - is worth $10 billion in state funds.

If passed, Proposition 1A, which will be on the ballot this November, would allow the state to issue $10 billion in bonds towards a $40 billion infrastructure project that would see a high speed rail system built up and down California. The tracks would stretch from Los Angeles to Sacramento, with service to San Francisco.

The train would not pass through Santa Barbara, however, as plans have it taking the central route through Bakersfield and Fresno instead.

Environmental groups have hailed the project as a step forward, but economists, including professors here at UCSB, have warned against the possible consequences of issuing bonds of that amount - especially when the state is suffering from a deficit and the country’s financial markets are facing the possibility of a recession.

Governor Schwarzenegger - who announced his strong endorsement of the legislation after delaying its appearance on the ballot in both 2004 and 2006 - signed the bill last month, ensuring that it will be put to a vote in November.

According to California High Speed Rail Authority reports, the new bullet trains would be capable of a maximum speed of 220 miles per hour. The Authority advertises that the train will have an expected trip time from San Francisco to Los Angeles of 2 hours and 40 minutes and expects it to carry some 100 million passengers per year by 2030.

In the Sierra Club’s statement of endorsement for the bill, authored by Stuart Cohen of the Transportation and Land Use Coalition, the group cited various environmental and economic potential benefits for the plan.

“Building HSR in California will reinforce our cities as the hubs of our economies, promote sustainable land use, significantly reduce global warming pollution and get commuters off congested roads and out of crowded airports,” the statement read.

While few critics of the plan contest the need for infrastructure improvements in the state, many argue that the bill will swamp an already struggling state budget with too much additional debt.

According to Kirk Lash, a real estate economist and member of UCSB’s Economic Forecast Project, such a large loan may be a risky move for the state, particularly in light of the uncertainty in the banking sectors brought on by the slew of recent major bank foreclosures.

“This is a $10 billion bond measure, but the railway authority says it will cost $40 billion to construct,” Lash said. “That means three-fourths of the funding has to come from the federal government and from private investors. With that said and with the current financial situation, it could be difficult to sell those bonds.”

According to Lash, this may force the state to sell its bonds at a higher interest rate, saddling taxpayers with more debt that the bill currently predicts.

“Essentially, we’re going to loan $10 billion, and the taxpayers are going to have to pay back $19.5 billion,” he said. “But with the current financial markets, those interest rates could very well be higher.”

The bill faces especially strong criticism in light of a recent 200-page Due Diligence Report issued by the Reason Foundation, a nonpartisan public policy research group. The report, which studied California demographics, transportation statistics and comparable high speed rail systems in Europe and Japan, challenged the plan’s projected ridership, costs, safety standards and convenience, and found vast discrepencies between its own projections and those asserted by the High Speed Rail Authority.

In a press release accompanying the report, Adriance Moore, Ph.D, vice president of the Reason Foundation, said that the projections put forth by the HSRA were infeasable and would likely lead to additional financial liabilities for the state.

“The current high speed rail plan is a fairy tale,” Moore said. “The proposal suggests these high speed trains will be the fastest ever; the most-ridden ever; the cheapest ever; and will convince millions of Californians they no longer need to drive or fly. Offering up a best-case scenario is one thing, but actually depending on all of these miracles to happen simultaneously is irresponsible public policy.”

Proponents of the bill have responded to the findings of the Due Diligence report with skepticism. Greg Larson, spokesperson for Yes On 1A, maintained that the authority’s projections were based on solid empirical data and challenged that the Reason Foundation was biased in its interpretations of the data.

In response to concerns about issuing such large bonds in a time of heightened financial insecurity, Larson said that voters should consider the long-term benefits of the infrastructure project.

“This is a long term investment - much like California invested in its network of universities, that have made it a leader in science and education, and its extensive waterways and aqueduct systems that bring water to the verdant central valley,” he said. “All the things that have made California a powerful state have required large, long-term investments.”

Rafael said...

@ morris brown -

CHSRA can't spend a dime of the prop 1A money without the say-so of the 2/3 of the California legislature. While it's true that AB3034 set a legal minimum of 50% matching funds from non-state sources, politicians are free to hold CHSRA's feet to the fire on raising more before they may proceed.

You seem to think that everyone involved is hellbent on throwing taxpayer money out of the window by laying tracks to the middle of nowhere and then hoping that more money will rain down like manna from heaven.

Brandon in San Diego said...

I don't think Morris actually intends to debate his concerns here. The same with anons that copy/paste articles.

No, there intent is to snare waundering persons visiting this board and steer tehm into a no position.

Morris Brown said...

@Rafael

The legislature analyst on oversight says the following with regards Prop 1A funds:

The measure requires accountability and oversight of the authority's use of bond funds authorized by this measure for a high-speed train system. Specifically, the bond funds must be appropriated by the Legislature, and the State Auditor must periodically audit the use of the bond funds. In addition, the authority generally must submit to the Department of Finance and the Legislature a detailed funding plan for each corridor or segment of a corridor, before bond funds would be appropriated for that corridor or segment. The funding plans must also be reviewed by a committee whose members include financial experts and high-speed train experts. An updated funding plan is required to be submitted and approved by the Director of Finance before the authority can spend the bond funds, once appropriated.

Now for sure Prop 1A (AB-3034) is a much better law than Prop 1 was; that is the only reason why senators like Asburn voted for it.He didn't have to votes to get Prop 1 delayed and so he took the rational course of action, get a revised bill.

Now you may be right that 2/3 vote will be necessary for these funds to be spent; If that is what "appropriated" means -- does it mean that these funds must pass through the same hoops as any spending legislation. I hope indeed that is what it means.

But money lying around to be spent without having to justify it use (after all passage of Prop 1A justifies it use), will hardly gain much scrutiny in my estimation.

So even the LA Times endorsement worries that around $2 billion might be spent without any desired result. They say its worth the risk. I think they are wrong.

nikko pigman said...

@rob

this is bugging me so I'm going to address it.

"
I disagree. The entire thorny issue of r-o-w "acquisition" as you call it has been assiduously avoided by HSR proponents. UPRR has been absolutely clear of their position and every honest student of the problems in some locations expects the State Supreme Court if not the Fed SC to become involved. We all agree that there isn't enough money to accede to their demands."

Ok, the CAHSR line won't even be shared with UPRR. It will run parallel but it will not share the tracks. It won't even use the same ROW. So UPRR's objections are irrelevant.

Rob Dawg said...


nikko pigman said...
@rob
"The entire thorny issue of r-o-w "acquisition" as you call it has been assiduously avoided by HSR proponents. UPRR has been absolutely clear on their position ..."

Ok, the CAHSR line won't even be shared with UPRR. It will run parallel but it will not share the tracks. It won't even use the same ROW. So UPRR's objections are irrelevant.


Exactly. HSR cannot share track space. In practice it cannot even share right of way without elaborate exclusivity protections.

UPRR owns much of that land. Owns, you know the same level of right that the framers of the Republic gave to individual freedoms. Like it or not UPRR is absolutely entitled to protect their position and the CAHSRA has ignored that aspect of their business model. Near two decades of rail owners satying they won't donate and still CAHSRA pretends outright donation is part of their business model.

nikko pigman said...

Ok, there must be some sort of hole in the internet because it sounds like you didn't even read my statement.

They will not share the same ROW.

There's a difference between running parallel to a track and running on the ROW. Look at most of the highways built in this nation. They are built parallel to railroad lines but not on the same ROW. It's the same concept, build it parallel but not on it. And no, the tracks will not be 10 feet away from the UPRR ROW. UP doesn't own that.

Morris Brown said...

@nikko pigman

What you don't seem to understand is you don't do an EIR on a route you will not be able to use.

San Jose to Gilroy is certainly one segment with this problem. Now Kopp can keep saying that the lawsuit is without merit, but legal experts that have gone over the document say the Authority is in big trouble on the EIR.

They are going, at a minimum, need to acquire a ROW apart from the UPRR ROW and they are going to have to do a new EIR on that portion. They have many others problems also, but that one sticks out like a sore thumb.

CEQA suits when the plaintiffs win, normally require the all costs including attorneys fees be paid to the plaintiffs. The authority better budget for new EIR work and payment of fees.

That's is certainly one of the very strong claims against the EIR in the lawsuit that has been filed. The EIR is defective and it will have to be redone, on routes on which they can't use.

無名 - wu ming said...

given the fact that UP got its ROW in the first place by the federal government granting the land in exchange for their building a public good, it's not really reasonable to go all extreme property rights about their trying to block HSR on that ROW. eminent domain would be pretty cut and dried, i would think, given the popular support (if 1a passed) and the self-evident public good of building transportation infrastructure that serves most of the state's urban centers, in a state whose legislature has explicitly said that reducing carbon is also a public good in its own right.

the ROW issue is a paper tiger. UP's bargaining, they have a weak hand to block this, if it passes in november.

Brandon in San Diego said...

No, I believe UPR has a pretty darn good case to retain their property. They are not a mom and pop buisiness and their system is vital to the country. Emminent domain is not a viable strategy.

But, I believe CHSRA and UPR will come to the table and discuss areas of mutual concern and where they can advance the others efforts.

UPR certainly needs improvment in their system to improve access, provide effecient operations, and maintain safety. Sidings, additional track, grade separations, switches and signalling are things on their capital improvement list throughout the state.

CHSRA will need some of their ROW, either at grade or below or above.

An example how CHSRA could help UPR is with a bridge crossings. If CHSRA and UPR are in the same corridor and cross a river.... but UPR only has one track when 2 or three are needed.... CHSRA could be the lead agancy charged with constructing a wider bridge enabling both UPR and HSR trains. In turn, maybe UPR provides critical ROW needed for CHSRA elsewhere.

Stuff like this happens all the time. UPR ROW is not a fatal flaw. They are a stakeholder and will work with others.

What we heard from UPR was very very likely posturing and advanced negotiating efforts. That's all.

Morris Brown said...

Well from an article just published , with the headline

Gov. Schwarzenegger asks Treasury for $7B loan

we read this nice little tidbit.

California State Treasurer Bill Lockyer issued a statement a day earlier saying because of the national financial crisis, California “has been locked out of credit markets for the past 10 days.

And here we are with Prop 1A on the ballot asking voters to put the State further into debt with a 9.95 bond measure. Sure make a alot of sense at this time doesn't it?

Robert Cruickshank said...

There you go again, morris, taking one piece of evidence and using it to make a totally unrelated point that just so happens to be anti-HSR.

The credit crunch is not expected to last for 10 years. If it does, of course, you should be happy - we could authorize as many bonds as we want to, but we would sell none of them, and the state budget isn't affected.

Brandon in San Diego said...

^^^ Something pertinent to keep in mind... the situation cited by Lockyer represents a short-term event... reflecting the economic problem faced by Wall Street; not the long-term solvency of the state.

The Schwarzenegger statement was as much a statment to California representatives in DC to vote for the rescue plan.

As an aside, the LAO's office stated months ago that the State has the financial capacity to issue additional bonds... that the state's debt to income ratio was manageable. Just b/c Wall Street is having problems coming up with the funds does not mean California does not have the shoulders to carry the weight...

At the end of the day, the project is looking more and more viable as an economic stimulus project. We're fortunate that such a stimulus effort comes in the form of a capital project rather than subsidizing services. HSR is an investment with tangible benefits to the public for decades.

Rob Dawg said...

Robert
California does not have a liquidity problem, it has a solvency problem. That is certainly fair game when discussion a large public expenditure. Do you follow COPs and RANs? I do and it is ugly. While things will get better it is conceivable that only $8b may be available for HSR after expenses, insurance and agency distributions. Nothing worthwhile is ever easy but sometimes events overtake plans.

Robert Cruickshank said...

Rob, I do follow these credit markets as well and I am fully aware of the problem governments are having selling bonds right now.

That's the key. Do you really believe this is going to be a long-term problem? That no bonds will be able to be sold for several years? That's the only situation in which HSR would be imperiled. Lockyer is right that this is a temporary situation. It is not unusual for a bond sale to be delayed for various reasons.

The US as a whole - as an economy, a society - faces a solvency crisis. That's one of the reasons I became such a strong supporter of high speed rail. It's a part of the solution to that solvency crisis. We need to build an economy based on an infrastructure that is not dependent on oil.

Our dependence on oil is the cause of the solvency crisis. When oil prices broke $3/gal in 2006 the housing market began to contract as a result. We need a long-term solution to restore solvency to our state, and to do that we need to do things like build high speed rail.

It is directly analogous to the infrastructure projects undertaken in this state during the Depression. Boulder Dam, the bay bridges. It worked in the 1930s and it can work today.

Rubber Toe said...

All, the Yes on 1A web site now has a store open! They have bumper stickers, yard signs, shirts, and other items. I just bought 40 stickers and 10 yard signs. Check it out at:

http://www.cafepress.com/Yeson1A

RT

Rob Dawg said...

Do you really believe this is going to be a long-term problem? That no bonds will be able to be sold for several years? That's the only situation in which HSR would be imperiled. Lockyer is right that this is a temporary situation. It is not unusual for a bond sale to be delayed for various reasons.

The problem is trifold. First a downgrade is likely. Second any delays will increase costs. Third it is not temporary. Debt service in out years are likely substantially higher than projected now in our ancient business plan.

It is extremely unusual for for debt instruments to be delayed due to the inability to find a market. If we push the second $2b out to 2011 money issues are likely to kill the project leaving us with $950m in local improvements and $1b in planning and legal and r-o-w but no dirt moved.

If we need a $7b payday loan from Uncle Sugar and the monthly sales revenues for Aug are as low as I suspect lots of worthwhile programs are going to be affected.

Morris Brown said...

@Robert

You write:

It is directly analogous to the infrastructure projects undertaken in this state during the Depression. Boulder Dam, the bay bridges. It worked in the 1930s and it can work today.

As a historian I suggest re-read and understand much more about the depression and what worked and what didn't

As a point in fact the WPA programs in the early 19 thirties did help. But by the late 19 thirties the country was failing again. What changed the economy was not the WPA projects and their brethren, but the start of World War II.

The dogma you write is just doesn't stand the test of history.

Robert Cruickshank said...

The reason for the "Roosevelt Recession" in 1937-38 was that FDR actually pulled back on some of his public works spending. Only when government spending was massively increased after 1939 - for the war - did we make it out.

As you noted, the public works projects did significantly ease the Depression once they got going around 1933-34. This chart shows the significant gains in employment after 1933, owing partly to the stimulus effect of public works.

Further, public works projects during the Depression like the bay bridges, like Grand Coulee Dam, were not just make-work projects. They were designed to provide long-term prosperity so that when the country got out of the Depression, we could sustain growth.

And it worked. We would not have had the massive economic boom that we did after 1945 without things like the bay bridges, the electricity from the dams, etc. Same with high speed rail. We will not have sustainable economic growth in the 21st century without it and other projects like it.

You're so busy protecting your slice of the 20th century that you give no thought or care to those of us who will have to live through at least the first half of the 21st.

Spokker said...

California is in a crisis?! What else is new? *rolls eyes*

My old textbook from my US Government 101 course (it also had a major component on California government) is even titled CALIFORNIA IN CRISIS.

My God, when the hell do we build California High Speed Rail, or anything, if California can't be in a crisis when we do it?

Anonymous said...

You're so busy protecting your slice of the 20th century that you give no thought or care to those of us who will have to live through at least the first half of the 21st.

This sums up everything about these people and many things wrong with this country.

Arjun said...

I think the key is that these trains transport riders' cars as well (like the Eurostar trains in Europe). Without this, people will like continue to use their cars to drive back and forth in order to be able to get around once they reach their destination.