California HSR, spoiled brat politics, and bad hardball

Attention Conservation Notice: HSR supporters have undermined their own vision through their cynical lack of faith in voters and democratic process. Yeah, democracy is tedious. And you don’t get what you want when you want it. That’s the price.

For those of you who have been watching the California HSR saga, the Superior Court Judge Michael Kenny issued his second ruling in the Kings County Lawsuit filed earlier this year. To recap, the lawsuit alleged multiple things (and since I’m not a lawyer, I will probably mess this up, but here goes)

1. The state does not have a finance plan that satisfies Prop 1a passed in 2008, which the first link of statewide HSR system (520 km if I remember right), and that link would operate without taxpayer subsidy. (Whose idea was it to put THAT in the initiative? Yes, HSR systems make money around the world; but they usually do so after government eats most of the early capital cost risks and babies the systems along in their early years. Is that really so wrong, when you think about it? Isn’t one of the roles of government to absorb risk?)

2. The “blended system” plan that came about after the CHSRA was forced to admit the real costs of the proposed high speed rail system isn’t what Prop 1a promised voters. (The cost estimates went from $32 billion at the time of the vote, which was laughable, to $43 billion, and then, after much dusting up with People Who Can Do Math the far-more-accurate $83 to $117 billion, which caused an outcry, which caused them to rescope the project to the blended system, resulting about $76 billion. This rescoping is going to bite them, too. Yeah, I know, but keep up, would you?)

3. And therefore, the state is not allowed to spend out of the $9 billion of bonds that Prop 1a authorized, which also means they can’t spend from the federal pots of money they obtained either.

Sigh. That’s only on Part 1. Part 2 of the lawsuit will be argued in 2014, when they take on whether the blended system on the table captures what voters were promised. As it stands now, plenty of people are annoyed; what they voted for was a high speed rail system. They didn’t vote for a proposition that builds HSR in the central valley and then improves Caltrain and Amtrack in the big urban markets. The revised cost estimates made some folks furious; the revised construction plan annoys plenty of others who note that the resulting system is not likely to be particularly high speed. (It would be higher speed than now. Does that help?)

So the Judge heard arguments in June and issued his first ruling in favor of King’s County and Fukuda in November, but he gave the Attorney General time to make arguments for why the state should be allowed to spend out those resources. Again, I’m not a lawyer, but my sense would have been that this precise moment, having lost, would have been a good time to grovel and scramble to find a potential source of funding to fix the gap. Instead, the Attorney General tried to argue that the court does not have the authority to make a decision, aka as “you’re not the boss of me,” and that the right to determine whether funds may be spent resides with the legislature.

Last week, the judge issued his final decision, and it’s not good for HSR: the state can’t spend 1a money, and they can’t enjoin Federal money. Since they’ve already spent about $1 billion, Californians are on the hook for that anyway.

Reporting on Kenny’s ruling has been, generally, petulant, like Kenny is a mean meany mean pants who is capriciously throwing up obstacles to a great vision.

Only he’s not. The judge is enforcing the terms of the ballot box initiatives supporters wrote and voted for.

From the beginning, the supporters of the project have overemphasized what damage criticism might do–note their continued flouncing around about the Hyperloop, which is the least of their problems at this point–and underemphasized the possibility that, in managing and using criticisms that arise, voters might still be brought around to understanding–and perhaps event wanting–public infrastructure of this scale and scope. Instead, they pursued assumed the worst of voters–that voters are spoiled brats incapable of signing on to a vision unless it was tarted up with unrealistic promises about how the projects work. I have said it a million times on this blog: I think voters would have been open to persuasion, even if it took longer than supporters wanted. Instead of trusting the democratic process, project supporters did everything they could to subvert it. In politics, William Galston once noted, one does occasionally have the obligation to play hardball. But here? Now, the procedural tide has turned on them, and they will have no choice but to go back to the very voters they have trusted so little–and whose faith in the project they have done much to undermine.

New CalHSRA director to make $365,000 year to help the TEA Party illustrate the back scratchy life of technocrats

Brilliant Sol Price MPP alum Teddy Minch sent this little gem along today from the Modesto Bee: California high-speed rail director to earn $365,000.

Because, you know, Californians don’t hate this project or agency enough yet, we have to make it even more hated by making sure the director of the train wreck makes about 4.5 times the median family income. The CalHSR Director needs to make $1,000 a day to explain to you why this massively expensive project will benefit unemployed Californians by eating up the state’s debt limit while its schools experience cut after cut after cut after cut. If I were him, I’d demand quite a salary, too, because that much spinning every day takes a toll on a guy.

So let’s deconstruct this sock in the eye blow by blow.

First off, I respect and like Jeff Morales. He was, I believe, the Director of Caltrans when I was in grad school at UCLA. I remember being pretty impressed by his self-promotional and agency-promotional way of presenting to the public “the New Caltrans”, which wasn’t some tired, old highway department, but instead, a new and improved public agency that was going support our new dreams of urban trolleys and whatnot. He has a fine ability to make a photo op out of just about everything. He’d drunk the New Urbanist Kool-Aid in a major way, and why not, really, since no other ready-made models of urban development have been able to make peace between the developers and the environmentalists the way New Urbanism and all its variants have. The guy had a job to do in a public agency, and this model offered a way out of anti-growth politics when anti-growth politics was still relevant (i.e. before the crash).

Here’s where the TEA Party folks find grist for their mill.

It’s a truth universally acknowledged that the smart types like Jeff Morales, who are good at retail politics (part of their job as agency heads, after all) figure out who all the money people are–that’s why they get the jobs they do. Once they leave public agencies like Caltrans, they are super, super valuable to the consulting firms like Parsons Brinckerhoff, where Morales went, because it becomes what we in the business rather vulgarly call ‘the sugar t*t connection.’ It’s a money pipeline. You get to play insider baseball because you know everybody in the agency awarding the consulting contracts by their first names. You were an awesome boss back in the day, right? When he’s angling for contracts, half the people making decisions about those contract owe him their jobs. So, of course, PB gets the nod. Guys like Morales are pure gold to consultants.

Now, Morales is going to jump back to head another agency. This move is fooling precisely nobody:

“An outside observer could be excused for thinking the CEO’s job is to grease payments for Parsons Brinckerhoff,” Tolmach said. “As capable as Mr. Morales is, this is just another negative reflection on the project of inside dealing.”

The argument for Morales is that he knows how to get stuff done in California. Which isn’t easy. They’re right. But $365,000?

California HSR as Ballot Fraud? I’ve been wondering about that….

An Op-Ed in the San Jose Mercury News got rather pointed:

The latest end-run tactic by the train’s chief engineer, Gov.
Jerry Brown, would have California’s Legislature suspend its
tough environmental laws so the state could put this pet
project on the — pardon the pun — fast track.

Never mind that every independent analysis has been highly
critical of it.

Never mind that the High-Speed Rail Authority’s own peer
review group said it was terribly flawed.

Never mind that the nonpartisan Legislative Analyst’s Office
said even the new, new, new and improved incarnation still is
not nearly “strong enough” and relies on “highly speculative”
funding sources. That is bureaucratese for “not a snowball’s
chance in hell of finding the money to pay for it.”

Never mind that the state’s projected budget shortfall is now
greater than the total budget of 39 states and that the debt
service on the sale of these rail bonds would create another
fiscal chasm to be filled by another cockamamie budget

Never mind that the new, new, new plan bears so little
resemblance to the one voters approved that going ahead with
it now borders on ballot fraud.

Never mind that poll after poll — including a USC
Dornsife/Los Angeles Times poll released June 2 — has shown
that a strong and growing majority of voters does not want the
state to proceed with the project.

Nope, none of that matters. Casey Jones is at the controls of
his legacy project, so reason and fiscal prudence have been
abandoned on the far side of the turnstile.

We say all this despite having supported high-speed rail when
it was on the ballot in 2008. Rail is important to America’s
future, and we know the first steps toward any visionary plan
face hurdles and may require leaps of faith.

But back then nobody foresaw the economic plunge that still
leaves California mired in budget deficits. We lost faith in
the original board and its planning and construction team.
Then last year, an updated plan with wildly higher costs for a
smaller system sent us leaping to the sidetrack. (Oopsie, did
we say $45 billion? We meant $98 billion. No, no, wait, $68
billion. Well, you know, around there. Did we say San Diego
and Sacramento would be included? Um, our bad, they’re not.)

How can anyone believe a word of what comes from the
High-Speed Rail Authority now?

HT to Ken Orski

The end of gaslight politics? The Unruh Institute/LA Times Poll results

Here is the story from USC News.

Overall, 55 percent of California voters said they want another chance to weigh in on whether the state should borrow money for high-speed rail, agreeing with the statement that “the plan for the project has changed, the total costs have increased and there are doubts that high-speed rail can actually turn a profit.”

In contrast, 36 percent of voters said they should not be asked to go back to the ballot box, agreeing with the statement that “a new vote could halt any planned construction, and even though the plan has changed, the intent is the same, voters have already committed funding and the project will finish earlier than projected.”

I don’t know how you fix this mess. There are people in the state who really believe in the project and think the money will be found somewhere, and cost escalations don’t mean much to them. They don’t want to vote again because they got their way–barely–on the first vote.

But the first vote was based on a set of straight up lies to voters about how much the project was going to cost. The ballot box initiative claimed Californians were getting 520 km of high speed rail and the $10 billion was going to be a quarter or a third of the amount needed to get there.Read More »

More logical fallacies, some public finance, and putting money where your train is

The CALHSRA response to their Peer Review Panel’s finding that the Central Valley portion of the California HSR project is not finically feasible:

“While some of the recommendations in the Peer Review Group report merit consideration, by and large this report is deeply flawed, in some areas misleading and its conclusions are unfounded. …Although some high-speed rail experience exists among Peer Review Panel members, this report suffers from a lack of appreciation of how high-speed rail systems have been constructed throughout the world, makes unrealistic and unsubstantiated assumptions about private sector involvement in such systems and ignores or misconstrues the legal requirements that govern construction of the high speed rail program in California.”

Or, as my four year-old neighbor girl who is Never Seen Without Tiara says: neener neener.

Yesterday, I covered the logical fallacy known as “slippery slope” arguments. Today, we’ll cover the logical fallacies known as “Argument From Authority” and “Ad Hominem.” The first is the chest-beating: “we are the experts in high speed rail, so we’re right” (argument from authority) and “those other people, blesstheirhearts, ain’t as smart as we is” (ad hominem).

Ever since the Peer Review Group came out with their report, I’ve had to hear one person after another explain about how HSR makes money “all over the world.” Great. You know what? Restaurants all over the world make money, too. But other restaurants go bankrupt, too. The fact that we haven’t seen HSR bankruptcies around the world during a pretty bad downturn makes me suspect that their profits come from creative accounting with lots of hidden subsidies thrown in because intercity transport markets of other kinds have bankruptcies, consolidations, and service suspensions rather routinely because of financial problems.

Nobody–not even the CHSRA–thinks the Central Valley links are going to generate an operating surplus. You need the large market areas of Los Angeles and San Francisco to do that, and I’m not convinced that even then we’d get surpluses–but it’s not impossible or laughable that we would, particularly if taxpayers eat all the costs of construction.

The bottom line is always in the financing, if you know where to look:

General obligation bonds encumber California taxpayers with the debt service for the bonds. Revenue bonds encumber the project itself: these are paid off with the revenues from the project.

If you always make money with HSR–that is, if your service actually generates an operating surplus— why did Prop 1A to fund high speed rail in California specify general obligation bonds rather than revenue bonds?

Why? Either:

a) you think the project can make money, and you want to give a gift to your concessionaire buddies by having taxpayers eat the capital investment costs; or
b) you know full well your project will never generate a surplus that can pay off the bonds.

Either way, troubling.

The political gamble for the HSR markets outside the Central Valley

I talked about the fluffy op-ed from the LA Times the other day, and how they cavalierly conflate various criticisms into one straw man argument that anybody who dares point out the problems are all just short-term haters.

Most annoying in the original Op-Ed is this assumption:

The same phenomenon is already happening in Boston, home of the nation’s most expensive transportation project. The Big Dig highway tunneling scheme was a political catastrophe a few years ago, what with mistakes that prompted severe delays and caused the price tag to skyrocket. Although the Big Dig is nobody’s idea of the right way to build infrastructure, Bostonians are now reveling in a downtown park built on what used to be an expressway, and a tangled traffic mess has been unsnarled. In a few more years, the headaches will probably have been forgotten.

Worthwhile things seldom come without cost or sacrifice. That was as true in ancient times as it is now; pharaoh Sneferu, builder of Egypt’s first pyramids, had to try three times before he got it right, with the first two either collapsing under their own weight or leaning precipitously. But who remembers that now? Not many people have heard of Sneferu, but his pyramids and those of his successors are wonders of the world.

Where to start? First, ask the rest of Massachusetts how much they love the Big Dig because it delayed all of their projects for decades. Even in Boston, there are very nice subway projects that were set back for decades because of the Dig. I’ve always been one of the few defenders of the Big Dig–it started out well-intended justice project–but let’s not be stupid. If they wanted the park area back, they could have just taken the freeway down, been done with it, and saved everybody billions upon billions.

And then, the pyramids? We’re comparing the train the pyramids? Who wrote this Op-Ed? An intern?

I guess pyramids are kind of a good analogue because they were also at the time generally useless, very costly legacy monuments who gained value basically as a tourist curiosity thousands of years later (there is evidence that wealthy Roman toured them) rather than serving a practical function. That is, the pyramids’ main value was political rather than its ostensible function.

The main thrust of the Op-Ed is that pointy-headed experts don’t understand the politics of HSR, which will deliver HSR to the coasts despite all you haters because the train is backed by Little Advocates That Can. Once everybody sees the shiny train in the Central Valley, voters will clamor for theirs and reach into their wallets again for “their share” of the HSR pie.

And there’s a chance the Op-Ed is right on this point at least. Certainly, we’ve seen plenty of rail projects built, particularly suburban systems, based on these types of envy politics.

However, there are plenty–plenty–of orphaned megaprojects out there. Rick Perry’s Trans-Texas Corridor project. The Gravina Bridge (the Bridge to Nowhere. Remember that?) About a dozen pod car systems.

Sure, politics carries the ball on lots of rail projects. But there are plenty of stumpy little links of abandoned lines that became too politically difficult to carry forward. Cherrypicking examples of things that did get done doesn’t negate the history of things that never got done.

Is MegaBus a High Speed Rail alternative or a ridership canary?

This post is a quickie from economist Mary Parry, and I’m not sure if I am being fair to what he is actually saying here, but this is what he says:

Megabus is a great example of a competitive, flexible, low-cost (sometimes free), consumer-driven, market-based solution to inter-city transportation that has thrived without any government subsidies, tax breaks or taxpayer funding. Contrast that alternative to government transportation options like Amtrak and high-speed rail proposals that are the opposite: non-competitive, inflexible, high-cost, politician-driven, and not market-based, requiring massive amounts of taxpayer funding and subsidies.

He starts out with talking about Megabus’s free ticket promotions, and says that Amtrak has never given away tickets. Not sure if they have, but regional metro agencies do so routinely as a matter of promoting their service. I’m not sure that matters all that much.

The real question is whether Perry is right in that MegaBus would be a good alternative to building billions of HSR in California.

If you look at the information in the CAHSRA business plan (pdf link), despite all the ballyhoo about “taking cars off the road”, most of the market capture of other high speed rail companies comes from airline travel:

Voila Capture119

Yes, the car mode share shrinks, but the air mode share really shrinks. It would be really interesting to if there were Megabus type services in parallel with European HSR and what happened to those businesses when the HSR got built.

Remember that it is possible for total car usage to go up if aggregate travel demand goes up, even as mode share shrinks. So we might not be taking cars off the road, but putting fewer cars on the road in the future than if we didn’t provide the HSR. Those are somewhat things analytically.

However, Megabus had a West Coast Line they closed in 2008. Here’s why:

When asked for a comment, Dale Moser, president and COO of, offered the following statement to Suite101 Budget Travel:

“Due to ridership growth trends, no longer serves the West Coast. We take to different markets and try to create positive ridership trends and if we can’t we move on to new markets. As’s service continues to thrive in the Midwest and the Northeast looks forward to the possibility of returning to the West Coast should there be adequate demand.”

So the California Business Plan is predicting a lot of passengers by 2040:

Voila Capture120

So currently the LA to SF corridor does not have sufficient demand for MegaBus service for the company to keep it rolling. But it does have sufficient demand to make a HSR company $2 billion (am I reading that right?) in revenue in another 30 years.

Proponents will tell me that HSR is so much better than MegaBus that the services are simply not comparable. I’m not sure what to think here.