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 shifting cost figures on California’s High Speed Rail and what it should teach people about project development

Many, many folks have sent me this press statement from the new California HSR chief, Dan Richards, discussing how a new plan will lower the costs from the estimated $100 billion released last year. Some have sent it to me with a “hah ha you’re wrong! The train is totes affordable” kind of way, while others have sent it in a “This dude is blowing smoke–I can’t wait to see the rationales” kind of way.

The shifting cost estimates. Ho boy. Where to start? There’s every possibility that the train will cost more or less than $100 billion. There’s a reason why, when I had my students estimate the costs in 2008, that their quick estimates ranged from $80 to $110 billion–there are a lot of assumptions that go into any given cost calculation.

I was relieved to see the $100 billion from the CALHSR folks last fall not because I want the project to die, per se, but because I think it’s important for the public to really grapple with the costs, which are going to be significant. It’s a great, big, complicated project with a lot of moving parts. So everybody who does this kind of work in California saw the $32 to $43 billion originally shown to voters–particularly as the proposition these figures accompanied practically promised a full HSR system–as deeply, deeply problematic to the democratic process and the project’s accountability to voters. It’s entirely possible that a project that costs $100 billion has far and away enough benefits to justify the costs. But in my rulebook, you can’t go voters with a ridiculously low cost estimate. Perhaps I am naive, but I think voters would have approved a nickel increase in the gas tax for the HSR, which would have solved a lot of the financial problems plaguing the project—and prevented the cloud that the HSR agency now operates under. Why should anybody believe any of their cost figures given the vast shifts?

Richards sounds like a much better leader for this project than California has ever had before:

“I don’t think we’ll be able to look (the Legislature) or the public in the eye and tell them that we have any greater clarity about the funding today,” Richard said. He did, however, defend estimates that enough passengers will ride the train to turn a profit.

It’s entirely possible for HSR to turn a profit once taxpayers have eaten all the capital costs. He’s right about that. If HSR around the world (and a lot of airports) have proved anything, it’s that.

As it is, Richards could be right: there are two key changes in the plan that could very well shave quite a bit off project cost. The first has been the little-discussed but very important–plan to seek more funding from cities rather than expecting more money from the Feds. By putting localities on the hook for funding, the impulse to demand a station when it makes no sense diminishes, and some of these places that expected to get aboard the Federal gravy train will have to make very hard choices about whether they can pony up funds for stations. That is all to the good for the project, even if the localities themselves stand to lose out. Also, it’s a lot less fun for neighbors to scream for every mitigation under the sun if they know that they are paying for those side-payments, along with their neighbors, rather than Uncle Sam/Sugar Daddy paying for the sprinkle-covered sound walls and underground links.**

The second change concerns the subtle shifts in some of the ground work in southern California–some promised double-tracking for existing services. Doing that could mean pretty big, fast benefits to those regions.

Finally, they could shave a lot of money (yes, billions) off that project cost by simply aiming for getting to the SFO Bart station rather than trying to get into downtown San Francisco. People are going to transfer to BART anyway, and it’s a simple BART trip to downtown from SFO. It’s a worthy amendment even if property owners downtown don’t want it.

**This question about underground links is the biggest wildcard in the cost equation, and anybody who has worked in California for awhile has to know it. I mean, hell, in Los Angeles, we’re grappling with communities that are outright demanding we put FREAKING LIGHT RAIL underground. Do you know how much that costs? And who can blame these communities? Why not demand that? But what that concession does to project costs is substantial.And it’s only a matter of time before the HSR also becomes subject to that demand. And then we’ll see costs absolutely spiral upwards, if we do get there. But I think we will get there if current construction politics are any indicator.

(My apologies for typos, I’m really sleepy today.)

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.

The LA Times floats fluffiest Op-Ed on HSR I have ever seen

LA Times continues on with the mighty tradition of journalistic opinion today:

a) find some material that seems to hold an opposite opinion of yours;
b) do not waste your precious time actually reading that material;
b) write Op-Ed reacting what you think the material says, and
c) then go ahead to publish it to great applause from your choir.

Thus this Op-Ed appeared in the LA Times a few days ago: Keeping California’s Bullet Train on Track.

It begins:

California’s proposed bullet train took another shot this week when an independent review panel issued a report concluding that the project wasn’t financially viable. This followed negative reviews from the state auditor, the inspector general, the legislative analyst and the UC Berkeley Institute of Transportation Studies.

Ok, that’s just dumb. The Op-Ed goes on to be even fluffier. But let’s start with the point that:

Infrastructure projects aren’t movies.

There’s no Ebert-style Thumbs Up-Thumbs Down in these reports.

Let’s take them one by one, going backwards.

UC Berkeley ITS did not say “Cancel the project.” Nope. They said the method for forecasting ridership wasn’t particularly sound or state-of-the-art. And that we should revisit those ridership figures. OOOOooooo! A negative review! Clearly meant to KILL OUR WONDERFUL TRAIN!!!

The Legislative Analyst’s office’s problem in two reports, boils to that, without further commitment from California taxpayers or the state legislature, the train we are building puts the state on the hook for running the train in a small-market area of the state for an indefinite period. MEAN MEAN MEAN! HOW CAN THEY BE SO MEAN AND NOT LOVE OUR TRAIN?

The Inspector General noted, like the great big meany mean pants that they are, that the California High Speed Rail Authority should clean up its act and stop handing out million-dollar contracts to their buddies without proper documentation. BUT DON’T THOSE PEOPLE LOOOOOVE OUR TRAIN? WHY SHOULDN’T THE CALHSR AGENCY JUST SPEND MONEY WITHOUT OVERSIGHT SINCE THEY ARE GOING GET US OUR WONDERFUL TRAIN?

The Peer Review Committee mainly just echoed the points made by the Legislative Analyst’s office: that is, unless we find more money to build service to the large market areas of the state, we’re going to have a Central Valley train that will have trouble posting revenues to cover its operating costs. WILL THE HATERS NEVER CEASE HATING?

Nobody, not one, said “kill the train.”

This project has always been more imperiled by the fuzzy brains of its friends than the harsh words of its supposed enemies.

How about this: if the Central Valley link is going to make money hand over fist, then float revenue bonds rather than general obligation bonds. Simple change. Then we’ll have a market test of how sound the business plan and whether those pointy-headed experts are so wrong about these financial issues.

But then it’s easier to shadowbox with pretend enemies than actually deal with real financial problems.

Should California return its High Speed Rail money?

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.