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?
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
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…
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?
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.
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.
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:
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 megabus.com, offered the following statement to Suite101 Budget Travel:
“Due to ridership growth trends, megabus.com no longer serves the West Coast. We take megabus.com to different markets and try to create positive ridership trends and if we can’t we move on to new markets. As megabus.com’s service continues to thrive in the Midwest and the Northeast megabus.com 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:
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.
I was on On Point with Tom Ashbrook talking about High Speed Rail. Go listen.
This LA Times cover story yesterday describes the activities of California Republican Representative Jeff Denham (Atwater) and Kevin McCarthy (R-Bakersfield), who hope to claw back the money already awarded from the Feds–about $3 billion. It’s not just a clawback–it seems from the story they’d like the money reallocated to highways for the Central Valley.
I suspect the proposal has quite a bit of support, even among some Dems, as the consequences would be obvious: more money for us!
I think at this point that Brown has to get a credible commitment out of the legislature for the remaining funds, or else the money should revert–but not with a fat earmark for the Central Valley. And they have to find a way to get credibility back for CalHSR.
It would be a bit ironic, and not in a good way, if the hsr project, which has been justified largely on its contributions to environmental improvements, wound up acting as the budgetary compost for a ton of highway projects. Ouch.
Here are some of my comments in a story about the new HSR cost estimates in a story by David Futch of the LA Weekly.
I heard from Yonah Freemark yesterday and he took me to task for being too sarcastic yesterday, too dismissive with how I represented his writing and arguments, and not reading his points carefully enough.
He’s right. I am often too sarcastic, and I am sorry that I let my incredible frustration with the HSR politics in this state fall on Freemark. He is, in general, a fantastic writer and his blog, the Transport Politic, is a great resource.
I still think he is a) making the wrong argument here and b) being a bit of diplomatic enabler for the pro-HSR world with the points he emphasizes in the piece. And I’m still annoyed by circle graphics. He told me his representation is accurate, and I believe him, of course, but I still hate circle graphics, bubble charts, etc, etc in general.
But I was too bombastic, which means he himself didn’t get a fair read and I made him into a whipping boy for people who just line up behind CalHSR no matter what that agency does. I shouldn’t have done so, and he was right to be annoyed with me.
So let’s see if I can do this without being as grouchy or sarcastic as I was yesterday (it’s going to be hard because I’m grouchy every day.)
1. Freemark’s first point was that $98/74.5 billion is a small fraction of total GDP and a (roughly) third of what we spend on Caltrans.
My point about why this is bad liberal logic: The conservative response to such statements is not “oh, HSR doesn’t really cost that much.” Their response, and perhaps it is the right one, is likely to be “Holy cow, we need to cut Caltrans!”
When liberals bring up relative spending amounts, they are trying to get people to see the priorities implicit in the budget numbers.
SO while Freemark is trying to help people make sense of the sticker shock from the new business plan, there’s a “preaching to the choir” aspect to it. People who have supported this project from the beginning just think it’s worth it. They see it as the future of infrastructure, they see it as trying to build for the next 100 years.
For those of us who do not think this project should be the priority, the relative spending argument falls flat. What we hear in this discussion is: we spend too much on Caltrans, so you want us to go ahead and spend too much on HSR, too. Huh?
(I’m not actually convinced we spend too much on Caltrans, btw. I’d need to think that through more, but it’s what the relative spending arguments translate to.)
And as long as we’re talking about this: imagine what we’d have for public transit if we’d spent what we’ve spent on DARPA all these years. We’d have Wallace and Grommit style transit that picks you out of bed in the morning, dresses you, fixes you a healthy breakfast, props your news reader in front of you, glides you into the bathroom, and whisks you away to your work with nary a stop, transfer, or fare.
But if you value the military and don’t value transit, there’s no problem here, right?
2. Gabriel Rossman points out in the comments: to me the really interesting public choice model of CA HSR is how they’re deliberately building a commitment trap, both in terms of laughably low cost projections just long enough to get the plebiscite through and in terms of how they’re building the easiest (and most useless) leg first.
I didn’t talk about this because I’ve talked about it here before, but Rossman hits the nail on the head with public choice.
This is the major reason why there was so much heat in my tone yesterday. I am very annoyed, even with well-intended writers I genuinely respect like Freemark, and with the train advocacy world in general, given their response to the new business plan.
The California HSR political machine doesn’t deserve their fidelity at this point. The politics have been deeply cynical and self-serving. CalHSR advocates may say that this project is “for all of us,” but that agency’s leadership has schilled the project for years with a deliberately low price-tag. They pooh-pooh’d critics who pointed out there’s no way that such a large project is going to cost less than $90 billion, only to turn around and finally admit it—but, of course, those critics were only right because not enough money has fallen from the sky for us to get started faster. People who are generally supportive of transit and rail investment like Freemark have spent years in good faith discussing the project as a clear public good based on diddled cost estimates. They should have had chance to make a case for the project on solid ground from the beginning instead of constantly having to do backflips and contortion acts with every new dodge and sleight-of-hand from the agency.
This is one reason why I think all of us–even those of us who might support such a project–should be furious at this point. They have undermined our ability to thoughtfully and ethically deliberate the role we want for HSR–if any–in our state. They have behaved exactly the way critics of government predict government agents behave when they serve themselves rather than us. And I don’t buy the excuse that the public can’t handle the truth or has to be gulled into doing what’s right.
Watching CalHSR over the years, and their diplomatic enablers in the blogosphere, has been galling to me because it’s been like watching a comedy skit where there is a person dancing to the music and then the musicians start playing faster and faster and faster and while the dancer tries heroically hard to keep up. At some point, it’s obvious to everybody, the dancer should mutiny. The dancer tried to do his job; he tried to participate in the activity in good faith, and the musicians made his job impossible through their bad behavior.
Here’s the reality.
A) There will be no private investors willing to put money into the project until the taxpayers have eaten most of the construction costs. The private sector would love to help us build it (construction contracts, yay!) and they would love to run it once it’s built. That’s the private sector interest. Funding it? Not so much.
B) Building anything in California is expensive. It may be relatively less expensive to build in the Central Valley than along the coast, but it is still not cheap, not compared to places like Iowa where a Federal dollar goes a long way.
C) The Feds are not going to fund a significant portion of this project unless something radically changes. That means Californians are going to pay for almost all of the construction costs.
D) The price tag for construction is somewhere between $90 to $105 billion.
E) If we want it, Californians will have to forego $100 billion of other things. We could cut $100 billion out of highway funding. Or $100 billion out of education. Or $100 billion out of social programs. But that’s the price tag, and Californians have to face up to it. We could ask taxpayers to go without $100 billion of their own purchasing power and propose a new tax to pay for it. All of the above are possibilities, real possibilities, and that’s where the discussion should be.
There’s the choice. No sugar-coating. No contortions. No obfuscating. Do we want it enough or not? It’s not “oh, we can have this and private sector/the Feds will give it to us.” Nope. It’s just Californians, having to decide what they want. Do we want it or not?
(It’s still reasonable to say “yes” if I say “no.” But let’s give people the ability to say yes or no in an ethical deliberative process.)
Public choice is in the air, a little like fall for me.
Yesterday in planning theory class, one of my brilliant students brought up public choice economics, without calling it that, because it’s not something that makes its way into much undergraduate education (I think he went to Princeton, where such things do come up in undergraduate education).
My brilliant colleague, Peter Gordon, notes Tyler Cowen’s remarks about how about public choice economics is neglected in today’s macroeconomic debates.
Why such a neglected field? I’m not sure, other than things go in and out style in economics just like everything else. Back in the day when I was studying, urban economics and labor economics were unpopular fields, in favor of game theory and econometrics. Now at least urban economics has come back, along with public finance, as a sexy field.
Perhaps it is time for James Buchanan Renaissance, as certainly the ideas are very relevant to those who currently suspect government workers from enriching themselves at the expense of the public.
Anyhow, the basics for public choice are laid out actually pretty well in Wikipedia. I love how people have made Wikipedia better and better over the years.
So here are James Buchanan’s two brilliant books, which many students no longer read due to how old the books are. It’s a pity.
The Demand and Supply of Public Goods, first published in 1968.
Nonetheless, Buchanan is still out there, tearing things up. He recently starting taking his own profession to task over the 2008 crisis and their failures in dealing with it: Economists have no clothes.
If you read Peter’s blog, he’s nonplussed by my reactions to the announcement that HSR is now expected to cost $98 billion. Dear Peter always suspects me of being naive, but I did expect more of a reaction from supporters. Instead, it’s more of the same: the HSR is worth it, worth it, worth it, worth it, no matter what it costs. The Transport Politic embodies the response nicely. It has a supposedly convincing graphic that the state can afford the HSR project because–check it out!–the yellow circle representing the high speed rail project is such a tiny, tiny dot compared to the state’s entire product, and look! at how much bigger that big big big Caltrans dot is! According to this graphic, we’re just dumping money into to the auto-oriented bureaucracy*, so that by comparison, $98 billion for the train project seems absolutely reasonable.
Ok. First off, I hate circle graphics because they almost never accurately reflect proportions right. Does this tell us anything that a straight up pie chart wouldn’t? No it doesn’t.
And then there’s the assumption that a train project, because it costs less than one of the state’s biggest agencies, is actually a pittance, or not that expensive, after all.
Under this logic, we could invest $98 billion of tax money in strippers and call it effective public policy. Yay, us! We poured $98 billion–oh, excuse me $74.5 billion (cough)–into a hole in the ground, but it’s ok because it’s not as much we spend on other things! Wooooo!
Maybe the HSR project is, indeed, worth it worth it worth it worth it, but that graphic–oye–and that logic. Urk. Bad liberal logic in a nutshell.
So what does public choice theory have in it to explain the problem? Well, first, public choice theorists would note that the $286 billion wrapped up in Caltrans represents an ever-expanding bureaucracy where public managers have a strong motivation to expand their roles and powers. I think the average public choice theorist would argue that state departments of transportation have outlived their usefulness now that that interstate highway system has been built (I don’t think that, btw), and yet here they are, hanging on, continuing to gather resources because that is the motivation of the bureaucrat absent the profit motive: more power, more revenue, more things to command.
IOW, public choice theorists argue that with Caltrans, you are looking at the future of the California High Speed Rail Authority, which is already starting off on the “we’ve already taken billions to do very little but produce renderings and marketing plans” foot, with a $98 billion project. So that if it gets the funds to do that, it will simply continue to seek more and more rationales for its continued existence.
For the Cal HSR folks, they have no real choice–they were forced to own up to the reality of the finances at some point, after they spent years dithering, and now they must continue to the carry the banner for the project. Yes, it’s going to be wildly expensive, but look at how wonderful the trains are. Their jobs is to do their job, and their job is to try to get a train built.
*BTW, Caltrans spends a lot of its time and money focusing on transit support.