Wednesday, June 24, 2009

Sen. Lowenthal Defends Himself

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

by Rafael

In a spirited op-ed piece in the Modesto Bee, Sen. Alan Lowenthal (D-Long Beach, pictured left) defends himself against earlier accusations ("Quit playing high-speed politics") that he was engaged in a "power grab" to prevent the use of prop 1A(2008) funds to construct a central maintenance facility for the HSR network somewhere in the Central Valley.

Lowenthal's claims his beef is not with the location of the maintenance site but something more profound: CHSRA's 2008 Business Plan, which he considers unsound. He notes that prop 1A(2008) only provides $9 billion of the $34 billion price tag he estimates for the entire starter line and that CHSRA has not yet actually secured the balance from non-state sources, i.e. Congress, local counties and cities and private investors. It also does not spell out contingency plans for coping with the possibility that the required funding will never materialize in full.

While claiming to be an ardent supporter of the HSR project, the State Senator has in fact taken a fiscally conservative stance: the state contribution should not be used for component projects such as a dedicated high-speed test track and maintenance facility that will only prove useful if and when HSR actually enters service in California - an outcome that is obviously contingent on securing all necessary funds for constructing the starter line. The whole public-private partnership concept allows CHSRA to remain rather more independent of financial oversight by the state legislature than is typical for a major public works project. Encouraging noises from Congress and the Administration are not enough to get this railroad built and as for private investors, those will come to the party late if at all. In other words, Lowenthal is a risk-averse pessimist who sees the glass as currently 3/4 empty.

Perhaps not as coincidentally as he would have us believe, spending the state funds conservatively implies priority for component projects at either end of the starter line. Orange County politicians, including Anaheim mayor Curt Pringle, insisted on tacking the LA Union Station to Anaheim ARTIC section onto the starter line to ensure at least a section of the BNSF Transcon line along highway 91 gets fully grade separated sooner rather than later. The ports of LA and Long Beach provide roughly one in seven jobs in the LA basin, so freight rail is a big deal both locally and at the state and federal levels. Note that the state-sponsored ACE project to eliminate or improve UPRR's grade crossings in the San Gabriel Valley is already underway.

Note that the Fullerton-Anaheim section is too narrow for quad tracking, so no more than 2-3 HSR trains per hour (each way, PDF p14) will actually serve Anaheim station.

By contrast, CHSRA has thus far taken an approach long favored by planners: build broad political support for the concept, accumulate funding contributions and proceed on the assumption that the balance will be forthcoming. Eventually, the sum already invested becomes so large that it makes more sense to finish the project than to scale back its ambitions or cancel it altogether. Once that tipping point is firmly on the horizon, negotiations with private investors will get down to brass tacks. In other words, the CHSRA board is a group of optimists who see the glass as already 1/4 full, with prospects for more brighter than ever.

This also explains why CHSRA want to prioritize not just the contentious SF peninsula but also the Central Valley test track and associated central maintenance facility: it anticipates these will be needed to secure the all-important "rule of special applicability" required before its engineering staff can pre-qualify vendors of proven, specialized HSR equipment and draw up a shortlist. If the history of HSR projects elsewhere in the world (e.g. Taiwan) is any guide, there will be significant political wrangling over manufacturing jobs etc. that CHSRA may want to stay out of.

On a related note, Susan A. Fleming, Director of Infrastructure Issues at the non-partisan Government Accountability Office released a statement to Congress yesterday underlining that FRA has a vision for HSR but not yet have a well-defined strategic plan or organization for developing it nationwide, beyond the disbursement of already-approved ARRA funds. In particular, she pointed out that $8 billion ($9.5 billion if you include the earlier PRIIA act) represents just a fraction of the federal funds needed to build the California network's starter line, never mind anything else. Implicitly, she questioned the wisdom of using short-term stimulus funds on HSR before Congress has decided to reorganize USDOT and allocate tens of billions in additional funds. To create lasting value for federal taxpayers, HSR must be elevated to a strategic shift in policy. Currently, the numbers suggest merely a make-work effort in the short term.

Fortunately, the next surface transportation bill outlined earlier this week would address the concerns GAO has raised. The snag is that this bill is still quite far from the President's desk.

13 comments:

Fred Martin said...

Lowenthal's concerns are sound. The wishy-washy 2008 Business Plan would never pass muster in private capital markets. Where is the "private" investment in the public-private partnership?? I just see private firms wanting public funds to build it.

HSR should actually amount to an effective transportation system, not some dream-icon that doesn't work.

By contrast, CHSRA has thus far taken an approach long favored by planners: build broad political support for the concept, accumulate funding contributions and proceed on the assumption that the balance will be forthcoming. Eventually, the sum already invested becomes so large that it makes more sense to finish the project than to scale back its ambitions or cancel it altogether. Once that tipping point is firmly on the horizon, negotiations with private investors will get down to brass tacks. In other words, the CHSRA board is a group of optimists who see the glass as already 1/4 full, with prospects for more brighter than ever.

Rafael, do you honestly think this is a good strategy? It may work in a purely Machiavellian political sense, but it is not sound planning that will produce a good transportation system. It's the recipe for massive boondoggles. Smart planners actually conduct sober analyses, assessing and managing risk to deal with contingencies. They don't rely of magical hope.

Is Lowenthal labeled as an "HSR Denier" because he seeks to deal with fiscal and political reality, not dreams?

NONIMBYS said...

IF his concerns are driven by a small group in PaloAlto/MenloPark then he is not a "friend" of this project..His actions seem to point to that.Its another matter totally when someone like him throws up road blocks and demands..As having every cent in the account before we even break ground...and he knows that is never done with anything else..

Spokker said...

Meh.

looking on said...

Raphael writes:


In other words, the CHSRA board is a group of optimists who see the glass as already 1/4 full, with prospects for more brighter than ever.


Hardly Raphael. The CHSRA board is controlled by Kopp and Diridon. Kopp working for the interests of San Francisco and Diridon working for the interests of San Jose.

The deceit put forward by these guys is really amazing. The business plan was never produced by the Authority before the election, even though it was demanded in AB-3034. When they produced a business plan, the LAO says it is not nearly sufficient.

The vision that this project will somehow gather the needed funds because they will have spent so much -- that further requests can't be refused, will fail on this project. It will fail because of the immense size of the project.

This is no 4 billion short Bay Bridge project. This will be a $50 billion short project minimum.

There will be no private funding for this project. That's pie in the sky nonsense. How long do you think the rest of the country is going to stand by, while any Congress tries to send huge sums of money to California, while short changing them.

Brandon in San Diego said...

Lowenthal is either dumb, or his efforts and explanations is subterfuge.

But let's be honest... the strategy put forth by the CHSRA was 1 part logic and 1 part politics. It was marketed as a method to get Valley support for November's election, but also had logic behind it with the establishment of a section of high-speed track committed to testing trains for higher speeds.

I think it is needed, but not 100% must-have critical. And an ounce of strategy in purchasing rolling stock can minimize risk from acquiring incompatible trains/cars.

Lownthal's argument skips the fact that the test track would become 'revenue' once the Valley goes 'online' and North-South serice is established. It's not a component. Thus, Lowenthal's efforts could really be an effort to begin regional services first, and close the gap later.

Additionally, Lowenthal darn well knows how transportation projects are funded, particularly mega projects. It takes different entities to step forward and commit funding. Not all funding is identified and secured before the first spade of dirt is turned. He knows that.. and being overly critical of that fact/process is... as I said above, either dumb or subterfuge.

Rafael said...

@ Fred Martin -

my objective was to describe where, IMHO, Sen. Lowenthal and CHSRA are coming from. While Robert Cruickshank has labeled the Senator and others as "HSR Deniers" on occasion, I have never applied that moniker to anyone.

As for deciding which position - the pessimistic or the optimistic one - makes more sense, my view is that it's still too early to tell. To date, the sums actually spent have been small so let's see how USDOT handles the awards of ARRA/PRIIA funds, if Congress passes a surface transportation bill with substantial additional funding for HSR nationwide etc.

That said, it is fair for the state legislature to insist on some financial contingency planning before any prop 1A(2008) funds for actual construction are appropriated. AB3034 does provide plenty of safeguards, but CHSRA has not yet executed the transition from political advocacy to commercial-grade management. The latter entails scenario-based planning to manage financial and other risks. It's not yet clear if the present CHSRA board is willing and able to execute such a transition. Worst case, some board members will have to be replaced.

However, we're nowhere near major construction just yet and IMHO Sen. Lowenthal is jumping the gun to some extent by assuming the worst. Support for HSR is at unprecedented levels in both Congress and the Administration, so let's see to what extent that translates into actual federal investment in the project over the coming months.

CHSRA says it's looking for $12-16 billion from Washington. If it can secure $3-$4 billion in ARRA/PRIIA funds and the President signs a surface transportation bill along the lines proposed earlier this week by the middle of next year, there is good reason to remain optimistic.

@ looking on -

don't blame Kopp and Diridon for the fact that other board members have not been more outspoken in public.

jim said...

"Hardly Raphael. The CHSRA board is controlled by Kopp and Diridon. Kopp working for the interests of San Francisco and Diridon working for the interests of San Jose."

good. I want someone in san francisco's corner.

Alon Levy said...

Jim, the problem with Kopp is that he represents his own interests, not those of San Francisco's 799,999 other residents.

Anonymous said...

Raphael writes:

Support for HSR is at unprecedented levels in both Congress and the Administration .........


My view is that you throw free money in the wind, everybody will try to get as much as they can. It is all about the money, not about support for HSR..

lyqwyd said...

Anon @7:51 AM

The Ballot measure passed before any money was available from the government, Obama is definitely in favor of HSR, many of his staff are in favor of HSR, after last years gas spike, a huge number of American's realize that HSR is important.

The support is real, which is why the dollars are starting to be committed to HSR.

Anonymous said...

It would be unwise to count on federal stimulus funds over the long range.

There are too many variables - state of the economy, inflation, and politics are amongst the obvious. Already polls show the electorate is concerned about stimulus deficits.

Don't forget mundane stuff like strikes. If people have to drive because of a BART strike some are going to conclude we need freeway alternatives to keep the unions in line.

lyqwyd said...

nobody is counting on federal stimulus funds on an ongoing basis, that's a onetime deal that won't be around again. Fortunately the CAHSR was never planned with that as a requirement, it just comes as an unexpected source of funding at the perfect time for the project.

Alon Levy said...

Anon, France has frequent rail strikes, but no similar sentiment for highways as a way to keep unions in line (and no, public sector union are no more popular in France than in the US). After all, highways can be shut down, too, if truck drivers go on strike and block all the roads.