Wednesday, August 13, 2008

Does Ashburn Deserve Cheers or Jeers?

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

AB 3034 finally passed the Assembly today on a 54-15 vote. The bill is NOT going to be sent to Arnold Schwarzenegger immediately, though, in hopes that a budget deal will be reached by Saturday.

AB 3034 would have been sent to the governor sooner had Senate Republicans not blocked its passage for several weeks, and Bakersfield Republican Roy Ashburn was the central figure in the delay. This blog was extremely critical of Ashburn for these delays. But were we wrong to do so?

Lois Henry is a columnist for the Bakersfield Californian and an ardent HSR supporter. In her column today she suggests Ashburn's actions were actually GOOD for HSR:

Here I was all set to blast State Sen. Roy Ashburn, R-Bakersfield, for letting politics get in the way of progress, when common sense and fiscal responsibility got smack in my way.

His, not mine....

Being the jaded gal I am, I chalked up his apparent Luddite ways to his plans to run for the Board of Equalization when he’s termed out in 2010. No one has a prayer of winning that office with out the blessing of the Howard Jarvis Taxpayers Association and I’d just seen an editorial in the Orange County Register by the Jarvis group repeating Ashburn’s points nearly word for word.

Ah HA! I thought. This is just Ashburn feathering his future nest by dumping on the constituents in his current nest. The first phase of the 800-mile train corridor, after all, would be built from Bakersfield to Merced, giving us access to clean rapid transit before the rest of the state.

What the heck was Ashburn thinking?

Actually, he was thinking about making sure this project comes to fruition responsibly by not getting caught up in the emotion and instead sticking to facts.

I think Henry's first instincts were right - Ashburn was posturing for the Howard Jarvis Association in what will likely be a spirited contest for the Board of Equalization seat. But Henry thinks Ashburn was actually trying to do HSR a favor. Problem is, a close examination of her defense of Ashburn reveals some holes in the case:

Facts such as the High Speed Rail Authority’s business plan was last updated in 2000 and they didn’t plan to do a new one until October, meaning anyone voting absentee might not have a chance to dig into the particulars until after their ballot was cast. Under the fix Ashburn advocated, the business plan must be updated by Sept. 1.

But if Ashburn was genuinely interested in an updated business plan, why did he wait until July to demand one? He had plenty of time to call for it - AB 3034 was introduced way back in February. He had plenty of time to make his wishes known. Further, his delay meant that the production of a new business plan was also delayed. If he really wanted to give voters the opportunity to "dig into the particulars" shouldn't he have ensured that the bill got passed quickly, so that the Authority could produce the most complete and accurate document possible? Ashburn's delay has jeopardized even the Sept. 1 deadline, since AB 3034 still isn't signed by the governor.

Henry goes on:

And facts such as, under the existing proposition, the authority could stick its hand in the cookie jar and spend that $10 billion willy nilly with little or no oversight. Under Ashburn’s amendments, the authority must request money through the budget process, which means a lot more public scrutiny.

I did not realize that was part of AB 3034 - and I am not pleased. Far from a positive move, this could be an *extremely* bad change. Requesting money through an annual budget process is guaranteed to drive up the cost of the project and delay construction. Instead of the Authority releasing funds as contractors need it, to suit a proper and efficient construction schedule, they have to wait on a state budget process that is ALWAYS late. It also makes it difficult for the project managers to plan construction since they can't count on the money always being there. Worse, this makes it possible for politicians to stick their own hands in the cookie jar and mess with the way money is spent, causing inefficiencies and politically-motivated bad spending choices.

If Ashburn merely wanted to give, say, an independent commission the ability to disburse the money that'd have been one thing. But what makes him think politicians who haven't solved the state's budget crisis for 30 years are going to be effective stewards of HSR bond money?

It's difficult for me to see Ashburn's move here as beneficial for or in the best interests of the HSR project. Few things are more likely to cause delays and cost overruns than an annual budget appropriation.

Henry explains that she isn't convinced by some of Ashburn's other arguments:

I’d vote for the proposition either way. California must solve our ever worsening air and traffic conditions. But I’m glad Ashburn is asking some tough questions and keeping an eye on the bottom line.

I do disagree with Ashburn’s take that the authority has only a vague idea of how the train would operate, its ridership numbers, proposed fares, alignment and technology.

Almost all of that has been ironed out in painstaking detail, according to documents on the authority’s Web site and according to Mehdi Morshed, executive director of the authority.

That should be a clue that Ashburn really doesn't have the project's best interests in mind. Looking at this in whole - raising objections at the 11th hour, demanding a new business plan and then blocking the bill that would provide it, turning a smooth project funding process into something chaotic and dependent on a broken state budget process, and then demonstrating a lack of knowledge about the HSR operating details - all suggests that Ashburn actually was trying to block HSR, and that the amended AB 3034 isn't as great for the project as Henry believes.

We'll see what happens with AB 3034. Either way we, like Lois Henry, will be voting for Prop 1(A). But the issues she raises suggest some of the battles we will have to face after we win that vote. If you thought this blog was going away on November 5th...heh. Not gonna happen. We'll still have plenty of work to do.


Anonymous said...

Robert..smell the Coffee..Ms Asburn has set this all knows that Arine has to kill HRS.
Now ..when are we going to get The YES ON PROP-1 going?

Rafael said...

@ robert -

the most recent version of AB3034 is actually quite convoluted with regard to what portion of the bond CHSRA is permitted to spend at which time and when offers of private investment may be accepted
(emphasis added):

(b) (1) Net proceeds received from the sale of nine billion
dollars ($9,000,000,000) principal amount of bonds authorized
pursuant to this chapter, upon appropriation by the Legislature in
the annual Budget Act, shall be used for (A) planning and engineering
for the high-speed train system and (B) capital costs, as described
in subdivision (c).
(2) As adopted by the authority in May 2007, Phase 1 of the
high-speed train project is the corridor of the high-speed train
system between San Francisco Transbay Terminal and Los Angeles Union Station and Anaheim.
(3) Upon a finding by the authority that expenditure of bond
proceeds for capital costs in corridors other than the corridor
described in paragraph (2)
would advance the construction of the
system, would be consistent with the criteria described in
subdivision (f) of Section 2704.08, and would not have an adverse
impact on the construction of Phase 1 of the high-speed train
project, the authority may request funding for capital costs, and the
Legislature may appropriate funds described in paragraph (1) in the
annual Budget Act, to be expended for any of the following high-speed
train corridors: [...]

This suggests that CHSRA will have a relatively free hand in spending bond money as it sees fit for the spine of the system but not other parts.

However, CHSRA will still have to go back to the legislature for appropriations each and every year. Since the total bond volume is fixed and reserved exclusively for HSR and HSR feeder services, it's unlikely that legislators will be able to divert these particular funds to completely unrelated pet projects.

Unfortunately, they could hold HSR appropriations hostage to getting those pet projects funded in the general budget. The usual you-scratch-my-back-and-I'll-scratch-yours. Moreover, process-related delays could present major problems all by themselves.

The gory details are hidden in section 2704.07, which spells out what CHSRA will have to do to get all its ducks in a row - i.e. present an updated business plan, ridership projections, third-party funding etc. It must do so each and every time it wants to break ground on one of the corridors itemized in section 2704.04, i.e. before awarding the construction contracts. Getting all that reviewed and perhaps modified will result in significant lead times.

Private investors in particular will be quite reluctant to commit funds to a long-term project whose execution can be held up every 12 months by politicians who want to grandstand or are preoccupied with the general budget.

In practice, therefore, I'd suggest the legislature get creative in how it interprets the oversight provisions in this bill. In particular, CHSRA should be asked to make its appropriation requests at least 9 months before the nominal state budget deadline. This gives the Director of Finance, the peer review board and the Governor's office plenty of time to make their recommendations to the legislature.

The Assembly and Senate can then approve actual appropriation of the already reserved bond funds months before the annual fracas over the general budget. In essence, a small fraction of the annual Budget Act would be passed well before the rest is dealt via a suitable vehicle. This special treatment would be justified by the following:

a) the funds for HSR are limited to those explicitly reserved by prop 1A/2008

b) the nature of the appropriations hurdle is highly technical and precisely circumscribed

c) the success of the entire project is predicated on obtaining matching funds from private investors. These will not materialize at all if the legislature needlessly saddles project execution with the risk of completely unrelated delays.

Anonymous said...

Senator Ashburn didn't simply "wait until July" to voice his concerns. He voiced them at the approriate time when AB 3034 was heard in the Senate Transportation Committee. The bill may have been introduced in February, but the Senate didn't hear it until it passed out of the Assembly -- the hearing was in July. And the Senate committee had only recently completed a thorough analysis of the current HSRA status and found deficiencies.

It is a ridiculous argument to say that he should have passed it sooner so that the Authority could have more time to complete its business plan. Are they incapable of working on it without a law commanding it in a timely manner? They don't need legislation to complete one.

Rafael said...

@ anon @ 9:50am -

... and Sen. Ashburn didn't need to wait for a formal hearing of AB3034 to warn CHSRA that he and others would insist on an updated business plan.

Your argument cuts both ways.

Rob Dawg said...

Is anyone going to be happy with a Sept Business plan? Clearly there will be some major cost increases and decreased expectation of Federal, local and private participation. On the plus side ridership is likely to revised upward.

Then there's the details. Will the price of Central Valley electrification be explicitly accounted for in this version? Will the 2000 timetable merely get 8 years added to it of will there be an acknowledgement that the Legislature is likely to stretch out the build phases?

Both sides are going to savage the Sept Business Plan.

Rafael said...

@ rob dawg -

an old Arab proverb seems to haunt all planners everywhere:

"He who speaks about the future lies, even when he tells the truth."

That said, I do hope CHSRA had the good sense to quietly begin the process of updating its business plan some time ago. If they don't start until the Governor signs AB3034 to force their hand, the update will amount to no more than rough estimates of the impact of construction cost escalation.

It is important to be realistic about that. The state senate report suggested the bond measure ought to have been raised to $13.3 billion just to compensate for inflation since 2002. The decision to stick with the original $9.95 billion may make it easier for the electorate to approve, but it will also mean matching funds - if they materialize - will be that much smaller. Perhaps CHSRA will resort to adding up all state, county and city contributions and try to persuade Congress and private investors to match this "in-state public funding", rather than strictly funds raised at the state level.

Still, if UPRR continues to refuse to sell part of its ROW, that may well have an additional impact on construction cost - especially in built-up areas. If CHSRA feels that it will not, the new business plan should include credible arguments for such cheery optimism.

Next, now that the route has been finalized, CHSRA should revisit the relevant ridership data in the context of expected future inflation, oil prices, GHG certificate trading, demographic trends, fare structures, etc. The most credible approach would formulate at least half a dozen scenarios of how California might possibly develop through 2030. That should yield number ranges associated with rough confidence intervals, not single numbers.

Both journalists nor the general public would likely latch onto those as either gospel or humbug. Both responses would be inappropriate. Instead, voters deserve a sense of the share of the ridership risk they are being asked to assume.

Brandon in California said...

I have not really given an updated/revised business plan much thought. At least not enough to comment on it prior to now.

With that said, an updated plan will obviously provide new information and revised figures. Whatever those updates and figures are, they will certainly be scrutinized. They will also likely be exploited by HSR naysayers.

Rob Dawg said...

Still, if UPRR continues to refuse to sell part of its ROW, that may well have an additional impact on construction cost - especially in built-up areas. If CHSRA feels that it will not, the new business plan should include credible arguments for such cheery optimism.

This is one of those good/bad issues. Understand, UPRR is playing a game they mastered much more than a century ago. If you ask me the answer is obvious; quietly suggest that Prop 13 might not apply to their land. Absent that they are negotiating. That's their job. They are supposed to do that as a fudiciary responsibility to their shareholders. CAHSRs problem is that UPRR is right. The r-o-w they are being asked to cede are worth far more than is being offered in the business plan.

A corollary; the municipalities are going to do their duty in most cases and won't be "donating" land they don't own for station infrastructure. Personally I think that's insane. Throw up a parking structure and rake in the money for but one issue but try to convince a cash strapped muni laying off police and fire that a parking lot is a good idea. Anyway, the business model is not going to look so good on these points (and Federal funding matches). Advocates better hope ridership projections are increased enough to make up the difference.

On a related note the Amtrak CEO said this morning on CNBC that no passenger rail anywhere makes money (operating costs). That's not good for the out year business model that promises an operating profit.

Anonymous said...

rob - The Amtrak CEO was referring to conventional passenger rail. Every HSR system that I am aware of makes a large operating profit. Even SNCF as an entire entity is currently making an operating profit: the magnitude of TGV profits is so huge that it actually more than offsets the big losses made by their commuter/low speed passenger rail. Fortunately CHSRA would not be saddled with subsidizing an unprofitable low speed system.

Rob Dawg said...

mike said...
Every HSR system that I am aware of makes a large operating profit.

Name it. Sure ain't SNCF. SNCF was specifically singled out for their claim of operating profit being accounting trickery.

Anonymous said...

The reason Alexander Kummant (Amtrak CEO) makes those statements is because he is trying to justify the annual subsidy of Amtrak despite accusations by some conservatives that it is unprofitable and therefore should not exist in its current state (whether that means reform for better or worse or complete liquidation). His argument should not necessarily be applied to HSR.

About passenger rail profitability in general, I would argue against that. I don't know anything about SNCF or DB, but I do know that the English rail system has been privatized (all though the tracks are still government owned). I'm not sure if these companies necessarily make a profit or if they are paid with interest to run these trains by the government.

One thing I do know for sure is that the Northeast Corridor (which is a quasi high-speed rail operation and a heavy duty passenger rail corridor) makes a regular profit, as does the Auto Train. There's another Amtrak corridor service somewhere that breaks even in the midwest I think.

Rob Dawg said...

The Northeast corridor like the rest of Amtrak books annual state subsidies as passenger revenue.

Anonymous said...


SNCF is not a HSR system, it is a national railway. There is cross-subsidization of many, many low speed and commuter services. TGV makes tons of operating profits. Shinkansen has been making profits for a long, long time. Taiwan HSR was making operating profits within the first 12 months even though average fare is only around $25 US.

Are you sure that you're not conflating operating profits with total profits? (i.e. profits after accounting for the cost of capital) For sure HSR won't be profitable enough to repay its total cost of capital at market interest rates. (What transportation system can? Possibly freight rail...certainly nothing else.) But there is simply no reasonable scenario in which it doesn't earn operating profits. Even if ridership is only half of projections and operating efficiencies per train hour are no better than Amtrak, they'll still make hundreds of millions per year easily, more likely one-billion-plus.

Anonymous said...


You had better got back and learn something about economics. Your last post is just as false as was your post in an earlier thread that 60 feet was enough ROW for a 4 track system.

Brandon in California said...

For giggles I ran some numbers on the portion of Prop 1 funding that would be provided to existing rail operators, i.e. LA MTA that operates heavy rail (Subway/Red Line) or light rail services.

Of the $950 million for non-HSR activities, $760 million will be made available. And, it would be based on a formula comprised of annual ridership, track miles, and vehicle miles operated. It's specified in AB 3034 and previous versions.

It took some spreadsheet work and a little digging for information. I used the National Transit Database FY 2006 figures. Only a couple agencies had their FY 2007 figures available. A single year was used for consistency.

I also added in NCTD's Sprinter service that just started; however, it remains to be seen that that service would be elligible. Nevertheless, it made up less than 1% of the total. No big deal.

A dislaclamer, instead of using 'all vehicle miles' I used 'revenue' vehicle iles. The difference is deadhead miles.... err, pullout from depot to where service begins/ends. - Should be no big deal.

The results:

Agency & Service Prop 1 Funding
ACE $24,953,910
LA Heavy Rail $49,295,276
LA Light Rail $65,805,707
LA Metrolink $133,406,304
Sac RTD $30,437,632
SD MTS Trolley $59,378,027
SD NCTD Coaster $15,013,845
SD NCTD Sprinter $5,754,044
SF BART $246,716,744
SF Cable Car $8,099,595
SF Caltrain $41,247,490
SF Muni $56,348,179
SJ VTA $23,543,247
Total $760,000,000

I apoligize in advance if the alignment confuses the message.

Brandon in California said...

By amount of funding:

Agency & Service Prop 1 Funding
SF BART $246,716,744
LA Metrolink $133,406,304
LA Light Rail $65,805,707
SD MTS Trolley $59,378,027
SF Muni $56,348,179
LA Heavy Rail $49,295,276
SF Caltrain $41,247,490
Sac RTD $30,437,632
ACE $24,953,910
SJ VTA $23,543,247
SD NCTD Coaster $15,013,845
SF Cable Car $8,099,595
SD NCTD Sprinter $5,754,044
Total $760,000,000

Rafael said...

@ brandon m. farley -

where did that $760 million figure come from?

Anonymous said...


LOL. One of the top three economics departments in the world saw fit to give me a PhD in economics, so I'm pretty confident that I have a firm grasp of the subject. ;-)

Please post a credible cite showing that one of the three systems I mentioned does not currently generate an operating profit.

Your last post is just as false as was your post in an earlier thread that 60 feet was enough ROW for a 4 track system.

Yes, this is true in that both are true and can easily be verified by anyone with an Internet connection and an understanding of Google's search engine and maps.

Brandon in California said...

I have reviewed language in previous version that make up Prop 1 right now that spoke to a formula breakdown of who/where non-HSR funding would be apportioned.

I reviewed AB 3034 (the 8/6/08) last night for the same. See this link:

AB 3034 - version 8/6/08)

Hopefully my html was right!

Go to pdf page 17 (doc page 93). See line 34 near bottom of page.

Essentially, the bond mesure breakdown is:

$9 billion for HSR
$190 million for intercity rail
$760 million for rail operators

Brandon in California said...

Harry & Mike,

Could your difference of opinions really be over semantics?

I note, it is my belief that voters and our legislature have the objective that the CHSR system would generate operating surpluses.

That is correct, right?

But, voters and the legislature believe/feel that all costs should be taken into account.


It looks to me that the French SNCF system meets that objective if, and only if, the cost of owning/maintaining the tracks are born by another organization.


I think this is an interesting topic and has crossed my mind previously because it relates to PPP's. Or, Public Private Partnerships.

As I recall, it's been discussed that the private sector could purchase the tracks and lease them back to the operator. The leasing costs to the operator become part of the operating budget while lease payents to the private sector investor go to managing the tracks and any of their debt.

Additionally, the private sector investor gets tax credits that should not be dismissed as being nominal and not worth the investment.

I look forward to the busniess plan and vetting this topic further.

Rafael said...

@ brandon m. farley -

ah, I see what you mean now. By "rail operator", you were referring to commuter rail operators other than Amtrak California. Thx for clearing that up.

I'd still like to see an itemized list of how these funds will be spent and how that spending will specifically improve access to the future HSR service. So far, it looks as if all of these operators, Amtrak included, will be permitted to interpret the concept of "HSR feeder service" very loosely.

While it does make sense to upgrade the existing services in the near term, doing so also creates an excuse for the road lobby to raid the transit funds in the regular state budget. Giving with one hand while taking with the other is not an acceptable strategy for dealing with growing transit demand.

Brandon in California said...

By rail operators I was referring to public transit operators that provide fixed-guideway service on rails. That does not include Amtrak or the Caltrans administered intercity services.

By the way, the other $190 million will go to Caltrans, it looks like, for capital improvements to corridors that they administer intercity services. But, I believe they contract with Amtrak to run some of those services... and along rails that Amtrak already operates along.

Examples would be the LOSSAN corridor from San Diego up to San Luis Obispo or the Joaquin from Folsom area into Oakland or San Jose. I am sketchy on the latter.

About what what public transit rail operators would do with those funds... that is not going to be spelled out anywhere between now and Nov 4th. Planned projects would likely be embedded in operator Capital Improvment Plans already, or maybe they'd come up with new projects dependant on, and intended to be complimentary to, what the legislature or California Transportation Commission, or CHSRA develops as guidelines. ... I suspect.

Anonymous said...

Oil fell to its lowest price in three months Friday, briefly touching the $111 level after the dollar muscled higher and OPEC predicted the world's thirst for fuel next year will fall to its lowest point since 2002.
The article from AP, suggests that "
Oil fell to its lowest price in three months Friday, briefly touching the $111 level after the dollar muscled higher and OPEC predicted the world's thirst for fuel next year will fall to its lowest point since 2002."

So now in spite of what has been written here regarding always expanding needs for oil nad
constantly rising oil prices, we will be headed back 7 years in consumption.

YOu raise prices enough and the market reacts. By the time the project would ever get built,
autos coming off the line will be at 40 GPH and above. The project proposed savings in CO2
and less fossil fuels burning, will prove to be bogus. The state will be saddled with operating losses and
debt service payments for generations to come.

The project has no merit. Its time to get the word out. Don't take what available funds can be had which would go to mitigate existing traffic and congestion, and spend
them on this ill conceived project.

Brandon in California said...

The price of oil is based on supply and demand. Users got whalloped over the past few months and demand for driving autos has taken a holiday of late.

Ironically, users increasingly used alternative transportation as we have seen rail and other transit use spike.

Your argument has no merit.