Monday, September 15, 2008

Prop 1A Endorsements: The Good, The Bad, and The Stupid

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

First, the good news. The California transit and environmental community is beginning to unite around high speed rail and Proposition 1A. Last week the board of the Transit Coalition, based out of Southern California and usually focused on improving Metrolink and Metro Rail, unanimously voted to endorse Prop 1A. One of the major statewide rail advocacy groups is about to finalize its Yes on 1A endorsement, and tomorrow we expect one of California's leading environmental groups to announce its strong endorsement of 1A as well. Apologies for the lack of specificity on the latter endorsements, but the specifics are embargoed until tomorrow, when you'll see much more detail and analysis from me.

We already knew that the CA Chamber of Commerce opposed Prop 1A, for reasons that are backward and nonsensical - after all, we already used part of the state's bond capacity in 2006 to pay for "other priorities" such as new freeway lanes. Time for passenger rail to get its share, a share that will reduce congestion and promote economic growth.

That was the "bad" endorsement. The stupid, "wow this makes no sense" endorsement against Prop 1A comes from the Media News Group of papers, which includes the Oakland Tribune and the Contra Costa Times. Their arguments are full of the usual HSR denier claims - it's as if they turned the editorial page over to Martin Engel for a day. Nowhere in the editorial is global warming mentioned, nor energy independence, nor the airline crisis. And on many of their points, they are just plain wrong. The Media News Group editorialists clearly don't know the first thing about the project, and should have remained silent instead of speaking out against the project from a position of profound ignorance.

Some of the most egregious examples:

But the costs, now estimated to be at least $43 billion, are excessive and likely to be far higher before the project is completed.

Does anyone who has followed the saga of the Bay Bridge debacle really believe the high-speed rail system will cost less than $60 billion, or $80 billion?

This is the usual argument from the anti-government crowd, that any government infrastructure project will inherently be so far over budget as to be not worth it at all. But here they show their willful ignorance. The Big Dig and the East Span of the Bay Bridge involved first-of-their-kind engineering that caused the costs to soar. Stupid political meddling - the Massachuetts Legislature in the first case, the mayors of San Francisco and Oakland in the second - also helped drive up costs. But the editorial ignored the numerous passenger rail projects around the country that have come in on time and on budget, including urban rail such as LA's Metro Gold Line extension and Seattle's Central Link light rail.

Further, while some cost overruns are inevitable with the declining dollar and rising construction materials costs, these are likely to be on the order of one or two billion. The 50% to 100% cost increase projections that the editorial throws out there are not only lacking evidence, but lacking credibility.

Besides, the timing couldn't be worse. California has many far more pressing needs. The state faces a huge budget shortfall, a weakening economy, a home foreclosure mess, a drought and the need to expand its reservoir system and repair levees.

Moreover, California's highways are among the worst in the nation. A recent study by the Reason Foundation found that California leads the nation in congestion and ranks among the worst on cost-effectiveness in spending on roads.

We are 48th in the condition of urban interstates, 41st in rural highway conditions and 44th in state highway performance and money spent on maintenance.

Wait a minute. I thought the editorialists just got done telling us how bad government infrastructure projects were. Now they want us to give government the green light to build dams and freeways? The editorialists' hypocrisy is laid bare.

As to the economic problems, high speed rail is a solution to those problems. If job losses are the concern, wouldn't the editorialists support a project that will create 160,000 construction jobs and an estimated 450,000 long-term jobs? If finances are their concern why are they ignoring the Green Dividend and leaving billions on the table? I'm all for rebuilding existing freeways, but why don't we stop the construction of new roads and lanes and rechannel that money into rehabbing what we've already got?

High speed rail will also help solve congestion problems in the Bay Area and Southern California by providing fast commuter service. The grade-separated lines will also allow commuter rail services like Caltrain and Metrolink to achieve faster speeds and quicker travel times - further reducing congestion.

Additional money is expected to come from a federal government that simply does not have it. Backers of the train also believe there will be billions in private investment. Really?

This is perhaps the most blatantly ignorant part of the entire editorial. It never ceases to amaze me how newspaper editorial pages believe that the same practices fact-checking and adherence to basic journalistic standards they enforce on every other page don't seem to apply to the editorials. We have strong indications of interest from members of Congress and from one of the presidential candidates. As to private enterprise, at the June CHSRA Board Meeting a group of potential investors explained the results of their survey of private backers, showing strong levels of interest from the private sector.

Yes, one of those was Lehman Brothers, which just went belly-up. But they weren't the only ones to indicate interest. Companies from SNCF to Alstom to Goldman Sachs all submitted statements of interest. In fact, the current financial crisis actually makes HSR a more attractive investment for capital - instead of being stuck in increasingly precarious financial instruments, or dependent on rapidly fluctuating commodity prices, HSR provides a stable and reliable source of return on investment. Rafael explained this very well in a comment from yesterday's open thread, which deserves to be put on the front page:

paradoxically, institutional investors may now be more - rather than less - interested in the opportunity afforded by California's HSR project.

Since no-one really knows when the US housing market will stabilize, lenders will be reluctant to pump more money into it for quite some time. Meanwhile, falling house prices and a low savings rate mean that US consumers will be keeping their wallets closed, which will depress stocks. On the other hand, US treasury bonds generally feature low yields.

As an investment, HSR should fall in-between these extremes of risk and reward, which makes it an attractive proposition for institutional investors. However, CAHSR still needs to make that case in a prospectus.

Exactly. Back to the editorial:

Making matters worse, Union Pacific Railroad has told the state's High-Speed Rail Authority it won't sell its rights-of-way for the planned 700-mile bullet train network.

The Authority never counted on that ROW. The plan was always to follow the UP route, up to but not over the ROW itself.

Even if the $43 billion were on hand, it would be a colossal mistake to spend it on a high-speed rail system that is likely to cost riders more than airline service and have the same security issues as airports.

More important, the number of potential riders simply does not justify the costs. The money would be far better spent on highways, schools, reservoirs and levees.

The current estimate is that a ticket on HSR from SF to LA will cost around $55. You can't get that cheap a ticket on the airlines unless you buy early and get a really sweet deal. Further, it is highly unlikely that airfares will remain where they're at. The airline crisis is already driving carriers to raise fares and fees, cut back on flights between LA and SF, and in some cases go out of business entirely. As oil prices continue to rise it is likely that airfares will cost MUCH more than an HSR ticket.

As to "number of potential riders" the editorial gives no specifics here, but soaring ridership on California passenger trains should suggest the silliness of that particular argument.

Not content with being in a deep hole, the editorialists keep on digging:

California already has a huge bond debt to pay off and certainly cannot afford to add tens of billions debt on such a questionable project.

The only kind of "good" bond debt is infrastructure bond debt, where money is borrowed to build infrastructure that lasts beyond the life of the bond, creating long-term value and spurring economic growth. HSR certainly fits that model. Should we not have built the bay bridges during the Depression? Should we not have built the State Water Project during a recession? The nonpartisan Legislative Analyst already determined the budget can afford Prop 1A. So what exactly are these editorialists talking about?

One might think by now that the high-speed rail plans for construction, operation and investment have been worked out in great detail with considerable confidence in their success. Even after spending $58 million over a decade in planning, that is decidedly not the case.

Yet voters are being asked to finance the fantasy of duplicating a 200-plus mph rail system like the one in Japan or France through the Central Valley.

But those plans ARE worked out in great detail - or do the editorialists not know how to read an EIR? Their use of "the Central Valley" is a deliberate attempt to mislead readers - the HSR line will run through much of the Bay Area and Southern California as well. There are plenty of low-population rural spaces the French TGV runs through as well, same with the Spanish AVE - California's proposed system compares quite favorably to those successful trains.

Embarking on this rail system would be highly questionable at any time, but it is particularly irresponsible now. California is in financial trouble and is in need of massive investment on a number of far more important projects.

We trust voters will place reality ahead of fantasy and soundly reject Prop. 1A's Boondoggle Express.

California is in financial trouble because we misinvested our money on a deluded and ultimately failed attempt to prolong the 20th century. The surest way to dig our financial hole deeper is to ignore environmental, energy, and economic realities and refuse to invest in the only transportation system that can thrive in 21st century conditions. We need massive investment in passenger rail if our cities and our economy is to thrive.

We trust voters will place reality and facts ahead of ignorant nonsense and soundly reject the Media News Group's stupid editorial. Instead voters will embrace Prop 1A, embrace high speed rail, and embrace the future.


Anonymous said...


4 pages in a Word document and 1800 words. Please try to keep your comments shorter -- we only have some much time to devote to this issue.

Anonymous said...

What?? The Reason Foundation is against the project? Maybe we really should think twice about high speed rail. God knows they would never be against any sensible transit project.

About the EIR and UP ROW, An earlier post suggested that certain portions of the alignment in the LA area depended on those UP tracks. Is that not the case?

Anonymous said...

Robert, in all honestly, its really not necessary to search every trivial article you can find critical on the subject in the state of California and refute their claims point by point. Just post the basic idea.

Focus on presenting new points and reactions to events. Its not necessary to reiterate the same ideas.

Rafael said...

Folks, it's Robert's blog. He can post as verbosely as he likes. Just read today's post diagonally if its contents look familiar to you. Plenty of people (incl. a few journos) are only now developing a serious interest in the project and won't dig through the archives for their Cruickshank fix (thx for the quote, btw).

A few comments if I may:

a) even after the legislative soap opera that was AB3034 at the state level, there is unfortunately still plenty of scope for local politicians and interest groups to add a lot of cost to this project by forcing engineering change orders. Those are where construction companies make their money.

The only way to keep a lid on things is to do a solid job of the segment-level detailed EIR/EIS planning, secure the ROW before breaking ground and then not stop until the job is done. Easy to say, hard to do if you have to go back to Sacramento for actual appropriations every year.

b) SF to LA for $55 one-way was the estimate given in the ridership analysis and based on year 2005 dollars. The numerical amount will be higher in 2018 because of inflation.

I know Quentin Kopp said that would be the numerical amount in 2018 but it won't be. He's a big-picture wheeler-dealer kind of guy. Don't rely on him for your nitty gritty.

c) airlines are in a funk because oil is so much more expensive now than it used to be. It's now down by a third from its peak, but only because the US economy is in a recession that looks set to get nasty. This will depress core demand in the US and the supply risk premium on the price of oil - OPEC will mothball some production capacity to maximize its revenue.

Ergo, jet fuel prices will come back down in the months, perhaps years to come. Unfortunately for US airlines, so will ticket sales as consumers and businesses cut back on non-essential travel.

Gas prices should also come down eventually. Let's hope those who have switched to commuting by train stick with it and spend the savings on keeping up their mortgage payments. Every little bit helps.

Of course, once the US finally puts the mortgage mess behind it (could take a while yet), demand for oil will go back up and so will its price. Renewable electricity may be a relatively expensive way to run trains, but at least its price is not subject to such wild gyrations. For infrastructure, boring is good.

Robert Cruickshank said...

Thanks, rafael. I am used to having a "read more" tag, as we have at Calitics, so sometimes I can get a bit verbose. But folks can skim if they like and read closely if they like. I am working on implementing a "read more" feature, as you can see right now.

Rafael said...

@ anon @ 3:34pm -

there's a lot of confusion about the terms "route", "corridor", "ROW", "tracks" and "alignment". Let me try to clarify them.

In the context of HSR, "route" refers to roughly where the trains will run in-between the endpoints of the line. It reflects fundamental decisions, such as Grapevine vs. Tehachapi and Altamont vs. Pacheco.

Zoom in to "corridor" and you're talking about the fairly wide stretch of land several hundred feet wide on either side of an existing major tranportation artery. This is used to assess the impact on wildlife, cultural artifacts etc.

"ROW" (right of way) refers to a narrow strip of land inside the corridor that is owned by either the state of California or a private railroad. It is dedicated to the construction of future transportation capacity, which is why its owners may exercise eminent domain to acquire additional land required for the construction of turnoffs, stations etc. Yes, Congress has delegated limited powers of eminent domain to selected private companies deemd to serve the greater public good, e.g. freight railroads and utilities.

"Tracks" refers to actual gravel and steel inside a ROW.

Now, the EIR/EIS that CAHSR has sent off to FRA defines the corridors that will be used for the HSR route. Ideally, the Authority would like to buy part of existing ROWs to lay its own, brand-new tracks.

However, to do so it must first persuade the current owners (e.g. UPRR) that the additional traffic will not cause safety problems and then pay a king's ransom for the land. That's assuming the owner is prepared to sell at all or can be legally forced to do so.

Plan B is to buy land adjacent to the ROW but still within the corridor. This involves dealing with a much larger number of landowners, possibly tearing down additional buildings, moving roads and/or constructing rail flyovers etc. CAHSR has glossed over this, but in truth it would be significantly more involved, disruptive and possibly expensive than plan A.

Unsurprisingly, the freight railroads are not at all keen on selling any part of their ROW. They know just how hard it is to acquire and want to retain the option of expanding their own capacity at some point in the future. This is especially true in the portions of the HSR route that are relatively near to the LA, Long Beach and Oakland harbors.

Anonymous said...

Depending on what happens in the next few days or weeks on Wall Street, the whole idea of any possibility of the voters passing Prop 1A may be moot.

California is about to pass a budget with severe cuts in spending and some "hocus-pocus" financial book nonsense to make it appear the State has a balanced budget as required by the constitution.

If the market really "tanks", Prop 1A will go down in flames period.

At this stage, with oil prices having come down dramatically, Robert's "we must have this project of California is doomed" will have no traction with the voters. Only the "diehard" rail advocates will be voting for the project.

The lawsuit has considerable merit, especially on the San Jose to Gilroy segment. Unless UP relents, and that does not seem at all remotely possible now, they will have to re-do a major section of the EIR, because the Judge is going to rule that present portion invalid -- that seems certain. Then as Rafael says, if they are going to stick with Pacheco, they will have to also somehow buy up land for a new ROW and get an EIR approved for the new position of the route.

What you have here is a clear case of lousy management. You have management by politicians rather than rail / transportation experts. Remember, Diridon for all his bluster, was and is a politician. If I'm not wrong he was a County supervisor for 20 years. Kopp spent the bigger part of his professional career in the State legislature.

The project has been completely miss-handled. I feel almost certain, even if somehow Prop 1A passes, the legislature is going to take the agency into another part of government, where they can control it. I don't know if that is a good way to go or not, but it will rid the project of those two.

Spokker said...

We built the Hoover Dam in the midst of the Great Depression didn't we?

Anonymous said...

"Even if prop 1a passes" Well it polling a yes vote in the 60 percent range...Why do you think this is going to wildly reverse?
And if you read SFgate last week
there were hunders of pro-comments
if anthing its the old Mccain type railfans that are voting no...not the general public

Robert Cruickshank said...

spokker, we not only built Hoover Dam, we built both the Golden Gate and the SF-Oakland Bay bridges, the Grand Coulee Dam and Bonneville Dam, the Central Valley Water Project, the Tennessee Valley Authority dam project, and on and on and on.

Someone mentioned oil prices. They *always* fluctuate and usually drop in September and October. That happened last year as well. But the long-term trend is unmistakably upward, the fundamentals driving the oil market still point upward, and we're insane to forget about spring's huge spike just because fall is bringing temporary relief (and really, is $3.75 a gallon "relief"? hardly).

Anonymous said...

Well Robert, are you now morphing this project into, what is a WPA project; if so then please write a column in that direction.

I have been under the impression this was a project to provide HSR between LA and SF as its prime objective.Is its prime objective now changing to one of providing jobs?

Please keep in mind, our State is supposed to have every year a balanced budget. The State doesn't have the power to decide to run deficits like the Feds do, which allow the Feds to create and fund infra structure projects, go to the moon, fund research in science and health, fund wars and what ever else they deem necessary, regardless of whether they have a balanced budget or not.

Now I don't think I would call these times, anything like the 1930's, but maybe you do. If you do, then you better go back and read some more about the 1930's.

This project was supposed to be about providing an alternative method of travel between LA and SF/San Jose in its initial stages. The current leadership has used political power to morph it into a developer's and land speculator's dream.

Just take a look at Prop 1A language. You see that funny, sticking out like a sore thumb statement, "there shall not be a statoin between Merced and Gilroy"?

What's gong on here? Why is this language here? Its here because sometime earlier a station really was planned in the Los Banos area. Why was a station planned there? Ask Diridon? The CHSRA had on its payroll a paid consultant, who owned a dairy farm at that location. Amazing !!

Anonymous said...

I think Morris brown should stop posting under anonymous!

Anonymous said...

Morris uses his name anonymous is Martin Engel

luis d. said...

Yeah, Martin Engel used to post under his name here at the start of this blog under his own name.

NOW, he's nowhere to be seen in this blog but since has turned into this anonymous fellow spewing garbage, b.s, and missinformation! Not to insult pro-HSR anonymous posters who "get it" and not the rabid train hater named Martin Engel, one of a few.

Morris Brown, at least you have the guts to post under your own name even though I am sure some of your posts are under anonymous to protect your reputation!

Spokker said...

"I have been under the impression this was a project to provide HSR between LA and SF as its prime objective.Is its prime objective now changing to one of providing jobs?"

It can do both.

And the Los Banos station is gone. They removed it. They listened to you.

Anonymous said... this somewhere beside this board ..that nobody reads except pro-hst and those old bags in Menlo Park