Why High-Speed Rail Should Be Audited Before Caltrain Receives Federal Funds

California Democrats are up in arms because a $647 million grant from the Federal Transit Administration (FTA) to Caltrain for system electrification has yet to be provided.  They blame the 14 California House Republicans in D.C. who all signed a letter January 24, 2017, saying simply this:  no further money should be provided, until California High Speed Rail submits to a comprehensive audit.  Secretary Chao promptly ordered (February 17) that the requested grant issue be “deferred” until the President’s budget was submitted.  While Democrats and California mainstream media tried to draw a false distinction between Caltrain electrification and HSR, the two are hopelessly intertwined as I explained in a previous article.

Mainstream media also ignored or downplayed the serious irregularities associated with the processing of Caltrain’s grant application.  The Obama FTA submitted it to Congress (as required) at the very last minute (2 days before Trump inauguration) when there is the usual chaos and confusion associated with a change in administrations. The Acting FTA Chief promoting the grant, Carolyn Flowers, took a job at AECOM – a Caltrain contractor – two weeks after submitting the grant to Congress  Fortunately, Sec. Chao was confirmed soon enough as head of DOT to arrest the progress of the grant on its slippery path through the bureaucracy.

Immediately, the howls of protest arose against the heartless Republicans who had signed the January 24, 2017 letter.  But let’s examine the rationale behind that request for an audit and how reasonable it was, and is.

The California HSR project started in November 2008, when voters approved Proposition 1A establishing a $9 billion bond measure which included rigid restrictions on project administration and protections for taxpayers funding it.

Today, nine years later, not one inch of track has been laid.  Initially, the voters were told that the project would cost $33 billion; it was anticipated that about 1/3 would come from the bond; $10 billion from the feds; and the remaining money from enthusiastic private investors eager to invest in a winner.

Status of the funding?  The HSR Authority has not been able to access the $9 billion in bond funds because they could not satisfy the rigid protections established by the legislature when they put Proposition 1A together for the voters. On the federal front, although the Obama administration initially gave the HSR project $3.5 billion, later, Congress became so disgusted with the waste and incompetence of the Authority that, in 2015, they said NO MORE federal money for the project at all. And, nine years after its approval, no private investor has expressed interest. Why?  Because the project is a financial loser.

One reason is that project costs have soared.  As noted, the initial cost was represented to be $33 billion; four years ago, the Authority said that it would cost $64 billion, and that was only to get from SF to LA, ignoring the other 40% of the 800-mile project (San Diego, Inland Empire, Sacramento, and Oakland).  Many experts say that today, the project will probably cost between $100 and 150 billion!

Note that the 4 year old state estimate of $64 billion (only for part of the project) has not been updated; nor have the voters ever received an update from the Authority on what the total statewide project will cost.  This, despite the existence of a statute saying that every time the HSR Authority gives a report to the legislature (and they love to give such reports and have done so numerous times), they must reveal the up to date costs for the total statewide project (see Public Utilities Code, sec. 185033).  For, what topic is of more interest to voters approving a public works project than what the current cost estimates are.  Witness the scandal of the Bay Bridge.   This statute (P.U.C. 185033), nine years old, has never been complied with.  So much for up to date info for the voters.

Financial scandals?  Yes, indeed.  In 2012, the Authority had a report from its own general contractor revealing that the estimates for getting over the Tehachapis and San Gabriel Mountains on the way to LA was $9 billion short. This report was concealed from the voters and the state for 25 months until the truth was revealed in a whistleblower article in the Los Angeles Times, and then the Authority refused to release the info until pressure was brought by Congress and even the Democrats in the State Legislature.  And recently, the Federal Railway Administration (FRA) revealed in a confidential report that the one segment that the Authority wants to start work on was going to cost 50% more than the estimate!

The history of audits is interesting.  In the early days, the State Auditor was severely critical of the project; then as financial mismanagement and project mismanagement and incompetence reared their ugly heads, the GOP in the state legislature requested audits.  The Democrats refused to oblige.  A Fresno Assembly Member (Jim Patterson) then introduced a bill to “increase oversight” of the HSR project; this bill (AB 2847 [2016]) was supported by many Democrats and the bill passed.  But then the Authority importuned Governor Jerry Brown, to veto it, which is promptly what he did.  So much for transparency and the vaunted progressivism of the Golden State and its enlightened leaders.

So, how unreasonable does it look today for California Republicans, the governing party in the House, to say that BEFORE any more federal money (the FTA grant) is given to California HSR, there should be a comprehensive federal audit?  If ever a public works project needed checking it is California HSR.  But the coverup and the lack of investigation simply continues.  This is not good government.  It smacks of corruption and cronyism.  There is a woeful lack of money for this project; it has no potential for success; other areas of the country are better candidates for federal money (the Northeast Corridor and Acela); California HSR is on life support; it is time to pull the plug.  An audit will show exactly why.  Waste no more on this boondoggle!