On April 27th, the Senate Transportation Committee held an informational hearing on the latest version of the California High-Speed Rail Authority’s business plan. Continuing the Authority’s persistent rejection of reality, Authority CEO Ian Choudri claimed that everything remains hunky-dory.
We haven’t seen this level of denial since the Monty Python dead parrot skit.
Fortunately, after Choudri’s testimony, other witnesses, who recognized that the parrot was indeed dead, provided a starkly different perspective. Reports from both the Legislative Analyst’s Office and Office of Inspector General correctly noted that several portions of the business plan are inconsistent with existing statutory law. Even worse, there is no pending legislation that would even come close to bringing the project into compliance.
A major point of contention raised at the hearing was the lack of transparency over the Authority’s plan to change the locations of the planned stations in both Bakersfield and Merced. The alteration would significantly decrease the ridership benefits with the existing plan.
But an even more controversial element of the plan was the assumption that local revenue from “tax increment financing” would be available to the Authority. Tax increment financing is a method of paying for a development or project by grabbing the additional property and sales tax revenue generated by its completion, the “increment” above the level of revenue that was previously collected.
The assumption that local governments would cede that revenue to the High-Speed Rail Authority is based on fantasy and, even if proposed as legislation, would create an alliance between taxpayer advocates who have opposed the project from the beginning and local government interests who have jealously protected their local tax revenue against raids from the state.
Other concerns expressed by the LAO include:
“Assumes other entities will construct portions of the scope, such as the entire segment between San Jose and Gilroy (estimated at between $2 billion and $5 billion) and significant Los Angeles-to-Anaheim segment infrastructure (over $7 billion).”
“Assumes Legislature Makes Statutory Changes. Assumes the Legislature will make various changes to statute aimed at expediting project delivery, reducing costs, facilitating financing, and increasing the agency’s flexibility. The Draft Plan discusses conceptual ideas for such changes, which include; California Environmental Quality Act (CEQA) Exemption for Electricity Generation and Grid Interconnections; Streamlined Environmental Permitting; Encroachment Permitting Authority; Priority for Court Resources; Third-Party Streamlining, Such as Requiring Binding Timelines for Reviews; and Changes to Help Facilitate Borrowing Against Greenhouse Gas Reduction Fund (GGRF).”
While the lack of legislative authority is an important issue, the fundamental problem with the project remains exploding costs and lack of money. Budget analysts testified that the state lacks the necessary funds to even complete the initial 171-mile Merced-to-Bakersfield segment, which is currently projected to cost $34.76 billion and target a 2033 completion date. The financial outlook worsened following the loss of $4 billion in federal grant money.
The reaction from members of the Senate Committee was hostile. Even Democratic Senator Catherine Blakespear, a long-time supporter of the project, was aghast. “Well, this is a disaster. I mean I am such an enthusiast for rail, and I really want this to be successful, and just hearing these things makes it seem like we’re proceeding on a wing and a prayer. Basically, that we don’t have a way to finance it, we have changes to the plan, we don’t know what’s actually going to happen, and we don’t have accurate information.”
This column has reported on California’s high-speed boondoggle for almost two decades. Our original predictions about the abject lack of viability have been proven regrettably accurate. But since then, in the intervening years, others have come to accept what we knew in 2008. Even the former chairman of the High-Speed Rail Authority, respected independent Quentin Kopp, has excoriated the project as it has morphed into something wholly unrecognizable from what the voters approved.
But now that the Authority envisions tapping into “tax increment financing,” it has unnecessarily created another adversary – local governments.
Add this to the list of reasons why the project should be terminated – and the sooner, the better.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.