School officials want you thinking how to spend millions, but not how they’ll get it

Survey says? Whatever they want it to say.

Under the guise of measuring public opinion, Santa Ana school officials are trying to shape it – and they’re using taxpayer dollars to pay for it.

In April and May, Santa Ana Unified School District officials papered the city with mail that looks like a poll. The direct-mail campaign included questions about how residents would spend $479 million to “support high quality instruction, repair deteriorating facilities, provide modern science labs, replace failing heating and ventilation systems, and replace portable classrooms.”

Officials asked the questions in anticipation of a district-wide vote on a multi-million-dollar bond. On a 4-1 vote last month, the district’s board of trustees placed the bond on the November ballot.

State law allows government officials to communicate nonpartisan information, but not to engage in politicking.

“This mailing was neither a scientific survey or a poll or mere educational outreach,” said Will Swaim of the California Policy Center. “It was a push poll, an attempt by Santa Ana Unified officials to persuade voters, and that would be illegal under state law.”

A push poll is meant to promote a political message under the pretense of collecting public feedback.

The Santa Ana survey is part of a broader trend in California politics. “It’s now common for local officials seeking tax increases or bond issues from voters to hire campaign consultants on the fiction that they will provide unbiased information to the voting public,” said veteran political commentator Dan Walters.“These consultants conduct polling to determine which angles of proposals are most attractive to voters, write the measures to stress those popular features and then produce literature and ads to trumpet those selling points.”

On first glance, the Santa Ana mailing looks like an actual survey. The front page states, “Santa Ana Unified School District wants to hear from you.” On the second page, respondents are told that “developing a plan for the future of our schools should be a community-driven process.”

But the “survey” strongly implies that the bond is essential – and that it’s so likely to succeed at the polls in November that voters should start thinking about how they’d like to spend hundreds of millions of dollars.

These millions will come from Santa Ana residents and businesses – a fact the district downplays.

A bond is a loan that will be repaid by local taxpayers over a period of years. Public officials have priced the November bond all over the map – from $479 million when they first launched it, they soon raised the price tag to $518 million. More recently, without explanation, the district announced the bond was $232 million. None of those numbers include interest payments that will double the cost to taxpayers. The district is still paying off two previous bonds.

“Santa Ana’s campaign strategy is a little like sending your kids a bill in January for all the toys you gave them in December,” said Swaim. “Everybody’s excited to think about spending. It’d be great if district officials told their residents about the costs to individuals and businesses.”

One of the first things respondents saw on the April-May survey was a message in capital letters: “Improving the Quality of Local Schools.” The accompanying note from the district superintendent emphasizes the district’s pressing need for more cash.

Further, the survey asks respondents to rank their priorities on bond spending. The menu of options ranges from upgrading classrooms and repairing deteriorating roofs and electrical systems, to replacing failing heating and ventilation systems.

Critics say the district’s approval of every proposed teacher pay raise and rising pension debt is consuming so much money that almost nothing is left for facility maintenance or hiring new teachers. Hence, the November bond.

“Santa Ana can ill afford another tax increase,” says Art Pedroza, a Santa Ana resident and publisher of the website New Santa Ana. “Our residents include many seniors on fixed incomes and young families struggling to survive. This latest bond measure will raise their cost of living.

“Ultimately this bond measure is a gift to the unions at taxpayer expense.”

Kelly McGee is a Rhodes College (Memphis) graduate and CPC journalism intern.

AFSCME’s push for rent control proves the importance of the Janus union-dues ruling

How the Los Angeles Unified School District spent its summer vacation

LAUSD schools open in two weeks after having had the July from Hell.

The Los Angeles Unified School District is heading into the new school year after something less than a whiz-bang summer. The follies began with a report revealing that the predicted 2017 graduation rate of 80 percent didn’t quite hit the mark. In reality, it was 76.1 percent because the state’s Department of Education changed its definition of “graduate” after a federal audit questioned the accuracy of California’s method of figuring out who really completed high school. Using the old formula, students were counted as graduates if they transferred to adult education programs to earn their diploma or passed a high school proficiency exam. But now they are more honestly considered dropouts. The value of a diploma had previously gone south after the district decided in 2015 to pad its numbers with “credit recovery classes” – allowing students to take frequently useless crash courses on weekends, holidays, etc. Additionally, the demise of the California High School Exit Examination in 2016 gave the false impression that grad rates were improving.

Of course, none of this should be at all shocking, as earlier this year California’s school rating system showed that 52 percent of LAUSD’s schools earned a D or F in English language arts, 50 percent earned a D or F in math, and just 40 percent of all students graduate college or are career ready.

At the same time, the education advocacy organization Parent Revolution released a report which showed that in LA’s 44 lowest-performing schools, 46 percent of their teachers were not evaluated at all from 2014 to 2017. (In the 2016-17 school year alone, 70 percent of teachers working at those 44 schools were not evaluated, “even though only 27 percent of students at those schools were proficient in English language arts and only 20 percent were proficient in math.”)

The LA school board also took a hit. Ref Rodriguez, one of the four reform-minded board members, was forced to resign after pleading guilty to a felony count of conspiracy and four misdemeanor counts for making contributions in another person’s name during his 2014 campaign board run. Although Rodriguez escaped prison time, he did have to vacate his board seat. Given his strong pro-charter school stance, that’s good for the education establishment, but bad for kids. While the board could pick a temporary successor, considering the new 3-3 split, getting a majority to agree on anyone will be difficult. The board will probably call for an election to fill the vacant seat, but it’s doubtful that will happen before next spring.

There was, however, some good news…for some students. At the same time the district has been scandalously neglecting its least capable students, the school board decided that principals at bottom performing schools would not have to hire “must place” teachers who have either been deemed ineffective or were bumped due to the state’s archaic quality-blind seniority system. While that sounds like a much needed improvement, it really is a zero-sum game since the unwanted teachers will now be foisted on all the other schools. LAUSD school board vice-president and rare right-thinker Nick Melvoin saw through this sham and said that the same logic should apply to all students. But Melvoin knows well that districtwide hiring practices must be negotiated with the teachers union. Speaking of which….

The United Teachers of Los Angeles is talking strike. Starting two years ago, UTLA president Alex Caputo-Pearl threatened not only to call for a teacher walkout, but ominously to unleash a “state crisis” on California. Well, looks like crisis time is on the horizon. In a July 24th press release, UTLA submitted its “Last, Best and Final Offer” to LAUSD and demanded a “48-hour response from the district.” The union said that the 2 percent ongoing salary increase, an additional one-time 2 percent bonus and a $500 stipend for materials and supplies offered by the district was “insulting.” The union then trotted out all the usual bogeymen, blaming unaccountable charter schools, pro-privatization ideologues and new school superintendent Austin Beutner for the district’s woes.

But union kvetching aside, Beutner just may be the right man for the job. While UTLA whines that he is a “billionaire investment banker, not a teacher,” his status as a businessman is a good thing. He is dealing with a school district whose unfunded liability for retiree health benefits has risen to $15.2 billion, up from $13.5 billion in 2016. As CALmatters Jessica Calefati reports, LAUSD could be “just two years from financial ruin.” Nick Melvoin added, “We’re in a death spiral.”

Speaking recently to LA business leaders about the deficit, Beutner posited, “By 2021, if we haven’t changed things appreciably, we will be no more, and that reckoning will not be pretty.”  While Beutner didn’t say what would follow the apocalypse, Dan Walters writes that there will be political pressure, particularly from the teachers unions, for a taxpayer-funded state bailout.

The summer has turned out to be long, hot and horrible for the country’s second largest school district, and the fall and winter aren’t looking any brighter. Students and taxpayers will remain collateral damage for a system where unaccountable bureaucrats and the teachers unions run the show.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

California’s Transportation Future, Part Four – The Common Road

With light rail, high speed rail, and possibly passenger drones and hyperloop pods just around the corner, it’s easy to forget that the most versatile mode of transportation remains the common road. Able to accommodate anything with wheels, from bicycles and wheelchairs to articulated buses and 80 ton trucks, and ranging from dirt tracks to super highways, roads still deliver the vast majority of passenger miles.

As vehicles continue to evolve, roads will need to evolve apace. Roads of the future will need to be able to accommodate high speed autonomous vehicles. They will also need to be smart, interacting with individual vehicles to safely enable higher traffic densities at higher speeds. But can California build roads competitively? How expensive are road construction and maintenance costs in California compared with other states in the U.S.? How can California make the most efficient use of its public transportation funds?

PHYSICAL VARIABLES AFFECTING CONSTRUCTION COSTS

The Federal Highway Administration maintains a cost/benefit model called “HERS” (Highway Economic Requirements System) which they use to evaluate highway construction and highway improvement projects. One of the products of HERS is the FHWA’s most recent summary of road construction costs, updated in 2015. Its findings reveal both the complexity facing any cost analysis as well as the wide range of results for similar projects.

For example, on the FHWA website’s HERS summary page, Exhibit A-1 “Typical Costs per Lane Mile Assumed in HERS by Type of Improvement” data is presented in nine columns, each representing a typical project category for which the FHWA analyzes costs. They are: “Reconstruct and Widen Lane,” “Reconstruct Existing Lane,” “Resurface and Widen Lane,” “Resurface Existing Lane,” “Improve Shoulder,” “Add Lane, Normal Cost,” “Add Lane, Equivalent High Cost,” New Alignment, Normal,” “New Alignment, High.”

The FHWA then break their results in each of the nine project categories into two broad groups; rural and urban. Within each of those two groups, they offer the subgroups; “Interstate,” “Other Principal Arterial” (these two are combined in the “Rural” group), “Minor Arterial,” and “Major Collector.” This creates seven cost groups, each of which are then further split. For “Rural” categories, they split into “Flat,” “Rolling,” and “Mountainous.” For “Urban” categories, they split into “Small Urban,” “Small Urbanized,” “Large Urbanized,” and “Major Urbanized.”

To make a long story short, and to state the obvious, “cost per lane mile” is never one number. The FHWA’s HERS table, which itself is a reductive, arguably arbitrary summary, there are 252 distinct cost per lane mile estimates, 24 per project category. And within these nine categories, the range of costs is dramatic.

According to the HERS analysis, adding a new lane to an interstate on flat terrain in a rural area costs $2.7 million per lane mile. To do the same thing in a major urbanized area costs $62.4 million per lane mile, more than twenty times as much. Even minor projects display wide ranges in cost. Resurfacing an existing lane of a principal arterial in a flat, rural area costs $279,000 per lane mile. To do the same in a major urbanized area costs $825,000 per lane mile, three times as much.

The fact that topography, existing usage and population density affect road construction costs isn’t news. But the wide variation in costs that result from these physical variables compounds the other major factor affecting road construction costs, which is the political and economic environment of the states where projects occur. As will be seen, the FHWA compiles state by state data on road construction. This data, however, is apparently not sufficient to allow the FHWA to produce a HERS summary showing costs per lane mile by state.

EXAMINING FEDERAL DATA ON ROAD EXPENDITURES BY STATE

The FHWA Office of Highway Policy Administration does issue a highway statistics report, updated annually, that provides valuable per state data on highway mileage and transportation budgets. Their 2016 report is available but incomplete (still missing key tables such as “Disbursements by States for Highways”) so the 2015 report is still the most current. These tables are uniformly formatted and downloadable.

California’s Spending per Mile vs. Condition of Roads

An excellent analysis of FHWA data is produced every year by the Reason Foundation. Earlier this year they released “23rd Annual Highway Report,”ranking each state’s highway system in 11 categories, including highway spending, pavement and bridge conditions, traffic congestion, and fatality rates.” Highlights from this study can offer insights into how efficiently California is spending its highway dollars compared to other states through using the following logic: How does California rank in terms of how much it spends per mile, compared to how California ranks in terms of the condition of its roads.

Overall California is ranked 43 among the 50 states “Total Disbursements per mile.” California is ranked 41 in “Capital & Bridge Disbursements per mile,” 47 in “Maintenance Disbursements per mile, and 46 in “Administrative Disbursements per mile.” In terms of road condition, California is ranked 33 in “Rural Interstate Pavement Condition,” 45 in “Urban Interstate Pavement Condition,” and 46 in “Rural Arterial Pavement Condition.”

There’s not too much you can conclude from that in terms of efficient use of funds. Among the 50 states, California appears to be at or near the bottom 10% in spending per mile of road, and also in pavement condition.

In terms of cost-efficiency, among all states, this data suggests California is in the middle of the pack.

How Centralized Are California’s Road and Highway Agencies?

Within the FHWA data an interesting finding is the great variation between states in road mileage under state administration vs. road mileage under other administration – mostly cities and counties, but also federal. Only a few states, mostly the larger western states, have any significant mileage administered directly by the federal government – Alaska 14%, Arizona 22%, Idaho 16%, Montana 16%, New Mexico 16%, Oregon 28% and Washington 11%, and Wyoming 13%. Most all other states have low single digit percentages of roads administered by the federal government. The national average is 3%. California, only 6%.

State administration of road construction is higher, but still relatively low. The national average is 19% of road mileage administered by state agencies. California’s is significantly lower than average, at only 8%. Altogether, nationally, 78% of road mileage is administered by local agencies, mostly cities and counties. In California, 87% of road mileage is administered locally.

Before inferring too much from this fact, that road construction and administration is overwhelmingly ran by local agencies, FHWA funding data is useful. The data shows that total funding for roads in California in 2015 was $19.0 billion. Of that, 44% ($8.3 billion) was for “Capital Outlay,” which refers to new roads, new lanes on existing roads, new bridges, and bridge upgrades. The national average is 47% of all road spending on capital.

More to the point, the CalTrans budget in 2015 was $10.5 billion. According to the California Office of Legislative Analyst, that “includes $3.9 billion for capital outlay, $2 billion for local assistance, 1.8 billion for highway maintenance and operations, and $1.7 billion to provide the support necessary to deliver capital highway projects. How much of that was reported to the FHWA as part of the total $8.3 billion spent on capital? Certainly the $3.9 billion “for capital outlay.” Probably the “$1.7 billion to provide the support necessary to deliver capital highway projects”? What about the $2.0 billion of local assistance? For capital projects, it appears that between $5.6 billion and $7.6 billion of the total spending of $8.3 billion came from CalTrans.

The State of California’s role in total spending on road transportation is also reflected in the budget allocations in that year for the California Highway Patrol, $2.4 billion, which is included in the FHWA’s total for California, under “Law Enforcement” ($3.4 billion). It is possible, if not likely, that the state’s $1.1 billion for the Dept. of Motor Vehicles is included either in the Law Enforcement or Administration categories in the FHWA data, or allocated between them. Finally, the finance charges – interest payments and debt retirement totaling $1.5 billion – are not coming out of the budgets for the state’s transportation agencies, but some percentage of that total is paid by the state. Altogether it is likely that the State of California directly funded about $12 billion, roughly 63% of the $19 billion spent on road construction and administration in 2015.

Based on funding data, state agencies clearly play a central role in constructing and maintaining California’s roads.

California’s Spending per Lane Mile vs. Percentage of Lane Miles in Urban Areas

An interesting alternative way to get at how efficiently California uses its public transportation funds is to evaluate based on the expanded variables of total lane-miles instead of state administered road mileage, and total spending on roads by all public transportation agencies instead of just Caltrans. The rationale for using lane-miles relies on the assumption that it is more costly to build a mile of six lane highway (three lanes in each direction) than a mile of two lane road, meaning that lane miles provides a more meaningful denominator, if the numerator is total public spending on roads. The rationale for examining spending by all public transportation agencies relies on the assumption that many, if not most of the political and economic factors that govern road construction costs in California are common throughout the state, having the same effect on construction costs regardless of the funding source.

Using FHWA data on lane miles and total spending by state to calculate spending per lane-mile, California was found to average $43,999 in total spending per lane-mile. This ranks California 42 among all states. The national average is $25,474 in transportation spending per lane-mile. Put another way, for every dollar that, on average, is spent to build and maintain a lane-mile in the nation as a whole, California spends $1.73. This suggests that California is not spending its transportation funds nearly as efficiently as the most other states, but without considering other variables this is a misleading statistic.

One of the largest factors determining cost per lane-mile is urbanization. This is clearly evident in the previously mentioned FHWA website’s HERS summary page, Exhibit A-1 “Typical Costs per Lane Mile Assumed in HERS by Type of Improvement,” where costs per lane-mile are uniformly higher in urban areas, and in some cases far higher. As noted earlier, “According to the HERS analysis, adding a new lane to an interstate on flat terrain in a rural area costs $2.7 million per lane mile. To do the same thing in a major urbanized area costs $62.4 million per lane mile, more than twenty times as much.”

The idea that road construction costs more in urban areas can be attributed to several interrelated factors: Land values are typically greater in densely populated areas. Construction challenges are greater in urban areas where it is more likely that existing structures may have to be acquired and demolished to permit road construction or widening. Labor costs are typically higher in urban areas. Urbanized regions also are likely to have more local restrictions on development, leading to more costly permitting processes and higher fees. There are other key factors influencing road construction costs – for example, climate and topography – but urbanization is easily quantifiable and likely the most significant of them.

For this reason, the following chart includes not only spending per lane-mile by state, but also includes the percentage of lane-miles, by state, that are in urban areas. Here, California distinguishes itself as one of the most urbanized states, having 59% of its lane-miles within urban areas. The national average, by contrast, is almost half that; only 31% of the nation’s lane miles are located in urban areas. Tracking these two rankings, spending per lane-mile and percentage of urban lane miles, permits an illuminating comparison. If one assumes there is a correlation between cost per lane mile and percentage of lane miles in urban areas, then how a state ranks in one should be similar to the how it ranks in the other.

Six states conform exactly to this assumption. Utah, for example, is the 24th most expensive state to construct roads per lane-mile, and it has the 24th most rural percentage of roads. Similarly, Illinois has a $/mile rank of 34, and it has a rural road % rank of 34. Texas, Pennsylvania, New Jersey, and the District of Colombia all have $/mile rankings exactly equal to their rural road % ranking. Five more states have a deviation between their $/mile rank and their rural road % rank of only one. California’s is only two – it is ranked 42 in its cost per lane mile, making it quite expensive relative to most states, but it is ranked 44th in its percentage of lane-miles in rural areas, meaning it is one of the most urbanized states.

The final set of columns on the chart, on the right, show a score for each state based on the rural road percent ranking less the $/mile ranking. If the score is negative, that means the state spending on lane miles ranks better (less per mile) than its rank based on its percentage of rural lane-miles. In other words if the score is negative, that means the state is spending less per lane mile than one might expect based on their level of urbanization, and if the score is positive, the state is spending more per lane mile than one might expect based on their level of urbanization.

Once again, California is in the middle of the pack.

Spending per Lane-Mile by State; Percentage of Urban Lane-Miles by State
(Source: Federal Highway Administration, 2015)

If one assigns any credence to these rankings, it presents interesting questions. Why is it that states like Georgia and Tennessee, which are relatively urbanized, are among the top performers in terms of being able to cost-effectively construct and maintain their roads? In the case of Tennessee, it isn’t as if they’ve neglected their roads, they are in the top ten in all three FHWA measurements of pavement condition. Georgia’s scores on pavement condition put them in the middle among states.

In some of the poorly ranked states, topography and climate may be factors. Alaska, the one of the least urbanized states nonetheless is one of the most expensive states to build and maintain roads, which should come as no surprise. Most of the states with low scores have harsh climates.

A final note regarding California – while it shows a high correlation between its cost per lane-mile and its level of urbanization, it does not score well in the three pavement condition indexes; 33 out of 50 for rural interstates, 45 out of 50 for urban interstates, and 46 out of 50 for rural arterial roads.

California can do better.

OBSERVATIONS AND RECOMMENDATIONS

Federal data indicates that while California scores poorly compared to other states in terms of road conditions, California also spends less than other states in terms of expenditures per lane mile. Considered in isolation, those two facts only suggest that California is using its transportation funds no more and no less efficiently than the average state. While federal data also indicates that California, overall, spends nearly twice as much per lane-mile as the national average, California is also more heavily urbanized, and normalizing for that reveals again that California is being roughly as cost effective in its use of transportation dollars as the average state.

When factoring in the condition of California’s roads, however, which are near the bottom in pavement condition indexes, California is not using its transportation dollars as well as it could.

Anecdotally, literally everyone surveyed – and we talked with representatives from dozens of agencies, research firms, and transportation agencies – agreed that per mile road construction costs are higher in California than most other states. But the federal data we had access to does not offer documentary proof of that, and Caltrans, despite numerous attempts, could not produce data on per mile construction costs that could be compared to national averages.

The lack of transparency, the complexity, and the subjective nature of any resulting analysis makes it difficult to assert with any certainty where California falls relative to other states – it is either somewhat below average, or far below average, but making that call requires a level of evidence and clarity that is simply not available. Ultimately it does not matter where California falls in that continuum, because regardless of how efficiently California spends their public transportation funds per lane mile of new or upgraded roads, there are ways to improve. The following recommendations were heard repeatedly, from contractors, trade associations, and researchers familiar with the topic. The first two in particular:

(1) Reform CEQA

CEQA, or the California Environmental Quality Act, is a “statute that requires state and local agencies to identify the significant environmental impacts of their actions and to avoid or mitigate those impacts, if feasible.” While the intent behind CEQA is entirely justifiable, in practice it has added time and expense to infrastructure projects in California, often with little if any actual environmental benefit. An excellent summary of how to reform CEQA appeared in the Los Angeles Times in Sept. 2017, written by Byron De Arakal, vice chairman of the Costa Mesa Planning Commission. It mirrors other summaries offered by other informed advocates for reform and can be summarized as follows:

  • End duplicative lawsuits: Put an end to the interminable, costly legal process by disallowing serial, duplicative lawsuits challenging projects that have completed the CEQA process, have been previously litigated and have fulfilled any mitigation orders.
  • Full disclosure of identity of litigants: Require all entities that file CEQA lawsuits to fully disclose their identities and their environmental or, increasingly, non-environmental interest.
  • Outlaw legal delaying tactics: California law already sets goals of wrapping up CEQA lawsuits — including appeals — in nine months, but other court rules still leave room for procedural gamesmanship that push CEQA proceedings past a year and beyond. Without harming the ability of all sides to prepare their cases, those delaying tactics could be outlawed.
  • Prohibit rulings that stop entire project on single issue: Judges can currently toss out an entire project based on a few deficiencies in environmental impact report. Restraints can be added to the law to make “fix-it ticket” remedies the norm, not the exception.
  • Loser pays legal fees: Currently, the losing party in most California civil actions pays the tab for court costs and attorney’s fees, but that’s not always the case with CEQA lawsuits. Those who bring CEQA actions shouldn’t be allowed to skip out of court if they lose without having to pick up the tab of the prevailing party.

(2) Restructure Caltrans

Caltrans currently outsources only about 10% of its work. Despite repeated attempts to legislate changes that would require Caltrans to use contractors to lower costs, no action has been taken. In a report prepared in 2015 by state senator Moorlach, the failure of California’s legislature to implement reforms is described: “In previous administrations, Governor Schwarzenegger pushed for an 89/11 ratio and could not achieve it. Even Governor Brown proposed a reduced ratio that was rejected by the Legislature.”

By maintaining permanent engineering staff instead of contracting, whenever projects are concluded these engineers are often idle until another project comes along. The Legislative Analyst’s Office in 2015 reported that there were 3,500 of these positions created for programs that have expired, requiring an extra $500 million each year.

The advantage of contracting out engineering work isn’t merely based on more efficiently allocating personnel to projects to avoid down time. When Caltrans does the designing, then puts the project out for bids, the contracting companies have to conduct redundant design analysis in order to prepare their bids. This also contributes to increased costs which are passed on to the taxpayer as well as extra time. In moving to a system where Caltrans just specifies the project goals and lets the contractors prepare competitive bids based on in-house designs, the taxpayer saves time and money. Ways to restructure Caltrans might include:

  • Immediately increase the ratio of contracted work from 10% to 20%.
  • Permit the headcount of in-house engineers at Caltrans to reduce through retirements and voluntary departures, systematically increasing the ratio of contracted work as the number of Caltrans in-house engineers decreases. Set a goal of at least 50% contracted work within five years.
  • Abolish the current requirement that the state legislature has to approve any projects that are contracted by Caltrans instead of designed in-house.

(3) Decentralize and Innovate

On the FAQ page for Elon Musk’s Boring Company, the following innovations are proposed to lower the cost of tunneling by a factor of between 4 and 10: (1) Triple the power output of the tunnel boring machine’s cutting unit, (2) Continuously tunnel instead of alternating between boring and installing supporting walls, (3) Automate the tunnel boring machine, eliminating most human operators, (4) Go electric, and (5) Engage in tunneling R&D. More generally, on that FAQ page the following provocative assertion is made: “the construction industry is one of the only sectors in our economy that has not improved its productivity in the last 50 years.”

How can California use public transportation dollars to nurture innovation that will deliver more people to more places, faster, safely, for less money? One way would be to nurture competition by nearly eliminating Caltrans. Why should one state agency control nearly two-thirds of the funds for road construction and maintenance in California? Why not reduce Caltrans to a couple dozen administrators to handle federal regulations and direct federal funds and move all road work, expansion and maintenance to the counties? The counties can conform to a general state plan, but there’s no reason to have a state bureaucracy any more when the counties can be challenged to be more efficient, effective and non-duplicative in their work.

Imagine the innovation that might come out of Santa Clara County, where stretches of roadway could be immediately prioritized to add smart lanes where autonomous cars – including mini-buses and share cars – can operate safely at much higher densities and speeds. Imagine the innovation that might come out of Los Angeles County, where entire transit corridors could have congestion greatly relieved because thousands of cars are being swiftly and safely transported from point to point in underground tunnels. Imagine the innovation that might come out of San Francisco, where congestion pricing completely eliminates their chronic gridlock, or out of Orange County, where private investors team up with public agencies to use roboticized equipment to perform heavy road construction at a fraction of the cost for conventional processes?

Why not decentralize transportation management in California and turn the counties into laboratories of innovation?

(4) Expand Into the Vastness of California

It is an accident of history that California is so densely urbanized. Most metropolitan regions on the east coast, developed gradually over three centuries or more, have thousands of square miles of spacious suburbs, and tens of thousands of even more spacious expanses of moderately settled lands on the edges of remaining wilderness areas. California, in stark contrast, has nearly 18 million people residing in greater Los Angeles and over 7 million people residing in the greater San Francisco Bay Area. If you add residents of the San Diego region and Sacramento regions, you account for 32 million out of a population of 39 million. And yet all of California’s urban areas, the most densely urbanized in the nation, only constitute five percent of its 163,696 square miles! The math is compelling – you could settle ten million people in four person households on half-acre lots and it would only consume 1,953 miles. Double that for roads, parks, commercial and industrial space, and you are still only talking about urbanizing another 2.4% of California’s land. The idea that we cannot do this is preposterous.

The cost of infrastructure, roads in particular, is much higher in urban areas. So why not expand along the nearly empty Interstate 5 corridor, creating new towns and cities that are spacious and zoned to never become congested? Why not upgrade I-5 to accommodate high speed smart vehicles that provide nearly the speed of high-speed rail, while preserving the point-to-point convenience that only a car can offer? Why not expand along the entire fringe of California’s great Central Valley, where currently thousands of square miles of cattle rangeland are being taken out of production anyway? Why not build more roads on this raw land, bringing down the cost both for roads and the homes that will be built around them?

(5) Change the Conventional Wisdom

California’s policymakers have adhered increasingly to a philosophy of limits. Urban containment. Densification. Less energy use. Less water consumption. Fewer cars and more mass transit. But it isn’t working. It isn’t working because California has the highest cost of living in the nation. Using less energy and water never rewards consumers, because the water and energy never were the primary cost within their utility bills – the cost of the infrastructure and overhead was the primary cost, and those costs only go up with renewables. Cramming home construction into limited areas not only destroys the ambiance of existing neighborhoods, but simply cannot increase the supply of homes enough to lower the cost.

There is a completely different approach that would cost less and improve the quality of life for all Californians. Without abandoning but merely scaling back the ambition of new conservation and efficiency mandates, free up funds to build safe, generation III+ advanced nuclear reactors. At the same time, construct desalination plants on the Southern California coast, enough of them to supply the entire Los Angeles basin with fresh water. Instead of mandating water rationing for households, put the money that would have been necessary to retrofit all those homes into new ways to reuse water and capture storm runoff.

Paying for all of this wouldn’t have to rely exclusively on public funds. Private sector investment could fund most of the energy and water infrastructure. Water supplies could be even more easily balanced by permitting water markets where farmers could sell their water allotments without losing their grandfathered water rights. If the permit process and mandated design requirements were reduced, builders could carpet former cattle ranches with new homes, sold for a profit at affordable prices.

CONCLUSION

This is the final segment of a four part excursion into California’s transportation future. In each section the same themes emerged: It isn’t just what gets built to serve future Californians, it’s how cost effectively the money is spent. Innovation and regulatory reform – CEQA in particular, but also repealing SB 375, AB 32, and related anti-growth legislation – together have the potential to lower the cost of infrastructure, transportation in particular, by at least 50%.

California’s current policies have stifled innovation and created artificial scarcity of literally every primary necessity – housing, energy, water and transportation. Each year, to comply with legislative mandates, California’s taxpayers are turning over billions of dollars to attorneys, consultants and bureaucrats, instead of paying engineers and heavy equipment operators to actually build things.

The innovation that persists despite California’s unwelcoming policy environment is inspiring. Right here are the pioneering companies that will deliver flying cars, commercial access to outer space, breakthrough modes of transportation such as hyperloop and urban tunnels. Right here are the companies that will deliver self-driving cars, cars on demand, high-speed smart cars. These things will happen within a time frame that is, by the standards of human history, breathtakingly short. And with the right assortment of pro-growth policies in place, more of them will happen right here.

California’s transportation future cannot be predicted with any certainty. If the past few decades have taught us anything, it is that innovation routinely delivers products and solutions that nobody could have possibly imagined. But it is a reasonably safe bet that the common road is the most useful mode of transportation infrastructure for which public policy can risk public funds. A flat surface where wheeled conveyances of every conceivable design can all travel from point to point, clean, smart, versatile, sustainable, and fast.

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Edward Ring co-founded the California Policy Center in 2010 and served as its first president.

California’s Transportation Future, Part One – The Fatally Flawed Centerpiece

California’s Transportation Future, Part Two – The Hyperloop Option

California’s Transportation Future, Part Three – Next Generation Vehicles

REFERENCES

[1] Federal Highway Administration – Highway Economic Requirements System

[2] Office of Highway Policy Information – Highway Statistics 2015

The FHWA’s annual highway statistics report is actually a series of tables, uniformly formatted and downloadable as Excel files. For this report, the following tables were downloaded and consolidated:

[2-A] Selected measures for identifying peer states

[2-B] Disbursements by States for highways

[2-C] Length by ownership

[2-D] Estimated lane-miles

[2-E] Disbursements by States for State-administered highways

[2-F] Total disbursements for highways, all units of government

[2-G] Estimated lane-miles by functional system

[3] Reason Foundation – 23rd Annual Highway Report

[4] California Office of Legislative Analyst – The 2015-16 Budget: Transportation Proposals

[5] California Office of Legislative Analyst – The 2014-15 Budget: Capital Outlay Support Program Review

 

The SAUSD Song Remains the Same

1999: Kelly Rowland, LaTavia Roberson, Beyonce Knowles and LeToya Luckett, of Destiny’s Child, perform at the Woodlands Pavilion at Jump Jam. Santa Ana Unified was asking taxpayers to pay its unplayable bills. (AP Photo/Houston Chronicle, Steve Campbell)

It’s 1999, and Bill Clinton is one year removed from his affair with Monica Lewinsky becoming public. Destiny’s Child is a hit with its single “Bills, Bills, Bills,” and the San Antonio Spurs have won the NBA championship. Meanwhile, the Santa Ana Unified School District (SAUSD) is proposing a $145 million bond measure to fund the construction of 13 new schools, replace portables with permanent classrooms, and renovate facilities.

The measure passed. A few years later, it was revealed the district hadspent $450 million building just five schools instead of the 13 promised.

Flash forward to 2008. The New York Giants beat the undefeated Patriots, Katy Perry is on top of bubblegum radio with the hit single “I Kissed a Girl,” Barack Obama becomes the first African American president – and SAUSD is pushing forward yet another bond, Measure G.

Almost a mirror image of Measure C, that bond was also successful. An independent auditor says Measure G funds were handled more responsibly than Measure Cfunds. But there’s still this weirdness: The $200 million generated by Measure G targeted precisely the same problems that were supposed to have been corrected under Measure C – the replacement of portable classrooms with permanent buildings, and implementing upgrades to facilities throughout the district. Both bonds won’t be paid off until 2040. That’s three more decades of higher taxes.

Now it’s 2018. Donald Trump is president, the Houston Astros are the defending World Series champs – and there’s another SAUSD bond measure. Depending on which day you talk to district officials, the proposed November 2018 bond measure would raise either $479 million, $518 million or, most recently, $232 million. The purpose of this new bond? You guessed it: fix deteriorating roofs, upgrade older schools, and, yes, replace portable classrooms with permanent ones.

In 19 years, SAUSD has proposed three bonds at a cost of more than a billion dollars (counting interest) – and is still unable to fix those portables or maintain its other facilities. At the same time, they have told state officials their facilities (the very facilities they say are in need of an upgrade) are good or even exemplary. In the meantime, government union-backed trustees have ignored official warnings of a looming financial crisis.

The country has changed so much since 1999, but not the SAUSD. There’s clearly a problem in Santa Ana that more tax dollars won’t fix.

Kelly McGee is a Rhodes College graduate and a journalism intern at California Policy Center.

The dust has cleared, so it’s time to analyze Janus based on reality rather than rhetoric

Before they called their schools ‘deteriorating,’ Santa Ana officials called them ‘exemplary’

Call it a tale of two school districts: The Santa Ana Unified School District (SAUSD) is sending out conflicting messages regarding the status of its schools: their facilities are amazingly good — unless they’re amazingly bad.

According to the School Accountability Report Cards (SARCs) posted on the SAUSD website, all of the district’s high schools are in “good” or even “exemplary” shape. But in promoting a bond measure on the November ballot, district officials say they’re struggling with “deteriorating systems.”

SARCs are state-required reports meant to provide parents and community members with an update of local school facilities. Schools are rated on such safety measures as fire hazards, structural integrity, overall cleanliness, and electrical/water systems.

SAUSD rated six of their 10 high schools “exemplary,” and declared the other four “good.” Yet the SAUSD Twitter account paints a different, very bleak picture. In promoting a $479 million bond measure on the November ballot, the district says its campuses are plagued by failing heating and ventilation systems, aging portable classrooms, and “deteriorating systems.”

SAUSD Tweets: Our schools are terrible.

Further, surveys sent out by the SAUSD to potential voters ask respondents to rank priorities in spending money from the proposed bond: upgrading classroom facilities, repairing deteriorating roofs and electrical systems, replacing failing heating and ventilation systems, and other measures. That catalogue of collapsing structures fails to match with the SARC reports in every way possible.

The surveys are part of a high-priced campaign managed by TBWB, the district’s bond consultant. They’re intended to excite voters about the potential of state-of-the-art facilities becoming a reality in the district.

SAUSD parents and community members need to know the truth behind these contradictions. The schools are either in exemplary condition or deteriorating. Or perhaps they’re deteriorating in exemplary fashion.

Kelly McGee is a Rhodes College graduate and a journalism intern at California Policy Center.

 

 

Water Rationing Laws Exemplify the Malthusian Mentality of California’s Legislators

As reported in the Sacramento Bee and elsewhere, on May 31st Gov. Jerry Brown “signed a pair of bills Thursday to set permanent overall targets for indoor and outdoor water consumption.”

After pressure from the Association of California Water Agencies and others, the final form of these bills, Assembly Bill 1668 by Assemblywoman Laura Friedman, D-Glendale, and Senate Bill 606 from state Sen. Bob Hertzberg, D-Los Angeles, offers water districts more flexibility in enforcing the new restrictions. But the focus of AB 1668, limiting indoor water use to 50 gallons per resident per day, is a step too far. Way too far.

There’s nothing wrong with conserving water. But urban water consumption in California is already low, and squeezing even more out of Californians will be costly and bothersome without making much difference in the big picture. Here is a table showing California’s overall water consumption by user:

Total Water Supply and Usage in California

As can be seen, in a state where total human water diversions total around 65 million acre feet (MAF) per year [1], in 2010 residential customers only consumed 3.7 MAF [2, 3]. According to more recent data obtained by the Sacramento Bee from California’s State Water Resources Control Board, by 2017 the average California resident consumed 90 gallons per day, which equates to around 4.0 MAF per year. Slightly more than half of that is for indoor water, which means that on average, Californians are already consuming less than 50 gallons per day per resident!

So why the new law? We must immediately rule out the desire to save significant amounts of water. On average, Californians are already in compliance with the new restrictions on indoor water consumption, meaning only a minority of households, those over the new cap, will be forced to reduce consumption. And while AB 1668 also mandates individual “water budgets” for outdoor water consumption, even if they cut all outdoor water use by another 20%, that would only save 400,000 acre feet. But at what cost?

THE COST TO FURTHER REDUCE INDOOR WATER CONSUMPTION

Here is a fairly recent analysis of what it costs to implement comprehensive indoor water savings [4]:

Cost to Retrofit a Home to Reduce Water Consumption

That’s a lot of money. But why? How many households are still “overusing” water, if the average consumption is only around 50 gallons per day?

For what it would cost Californians who are not taking their clothes to the laundry mat, who prefer to wash their dishes in the sink, who are not willing to stand under shower heads that cannot rinse soap out of long hair, who don’t want to purchase side loading dishwashers because it hurts their back to load and unload them, how much water will actually be saved? And how does one “overuse” indoor water? Doesn’t it flow down to the sewage treatment plant, where these plants release all that water back into the streams and aquifers, or even in some cases pump the water back uphill to be reused by residents?

THE COST TO FURTHER REDUCE OUTDOOR WATER CONSUMPTION

For outdoor water use, the solutions are even more draconian, and, of course, are disproportionately aimed at people who happen to live in homes with yards. People with lawns where their children play, people with trees that provide shade, people with aesthetically pleasing hedges that offer privacy, people with who love to grow flowers and vegetables – people who love living things. In the short run, these people will be visited by water agency bureaucrats, who will assign a “water budget.” How much will that cost, forcing local water agencies to reach out individually to 12.5 million residential property owners?

In the long run, the costs to manage outdoor water use will get much higher. Every home will need to have two meters, one to measure indoor water use, one to measure outdoor water use. These meters, increasingly, will be “smart,” able to monitor time-of-day use in anticipation of variable pricing depending on when you water. (Don’t water your plants after 9 a.m.!) And eventually, first in new construction, and later in retrofits, every home will have two sources of water supply – one pipe to provide potable water for indoor use, and a separate pipe to provide marginally less potable reclaimed water for outdoor use.

This is epic folly. These conservation measures, as described, are going to cost consumers tens of billions of dollars. When fully implemented, the total annual savings might be around 500,000 acre feet. That’s less than one percent of California’s total human water diversions for agriculture, the environment, commercial, industrial, and residential use.

And not one dime of this money will be instead paying for water treatment, water storage, or desalination projects that could add millions of acre feet to California’s annual water supply.

THE ALTERNATIVE TO THE MALTHUSIAN MENTALITY

Thomas Mathus was an English cleric and scholar living in the early 19th century who developed the theory that global population increases exponentially, while global production increases arithmetically. His theory, and the eventual collapse of civilization that it implies, has enjoyed lasting and ongoing influence. In California, it found its earliest expression in a 1976 speech by Gov. Jerry Brown, who announced that we had entered an “era of limits.” For over forty years now, Governor Brown, and like-minded environmentalists and the politicians they’ve influenced, have embraced the Malthusian vision. But there is an alternative.

One of the most thoughtful and bipartisan visions to counter the Malthusian mentality is offered by the so-called EcoModernists, who in April 2015 published the “EcoModernist Manifesto.” The powerful premise they offer to confront the Malthusians is this: “Both human prosperity and an ecologically vibrant planet are not only possible, but inseparable. By committing to the real processes, already underway, that have begun to decouple human well-being from environmental destruction, we believe that such a future might be achieved. As such, we embrace an optimistic view toward human capacities and the future.”

The devil is in the details, of course. What “real processes” are they referring to? One of the authors, Michael Shellenberger – who just ran as a Democratic gubernatorial candidate in this week’s primary – offers concrete examples. Shellenberger, who runs the nonprofit “Environmental Progress” in Berkeley, is a progressive Democrat. And yet he strongly advocates nuclear power, desalination plants, and permitting suburban housing developments on California’s vast tracts of cattle rangeland.

There is a convergence possible here, of pro-growth progressive Democrats joining independent voters and Republicans to embrace ecomodernism instead of malthusianism. In practical terms, this would mean rejecting rationing of water, energy, land and transportation, and instead investing in infrastructure for the 21st century.  In ideological terms, it would mean rejecting environmentalist extremism rooted in pessimism in favor of economic growth rooted in optimism.

THE HIDDEN AGENDA OF CALIFORNIA’S MALTHUSIANS

California’s voters have not questioned Malthusian policies, partly because they’ve been oversold the environmentalist agenda, and partly because too many of them have been convinced that nothing matters more than the color of their skin or the consequences of their gender. As a result, leftist oligarchs have been left free to consolidate their interests. Water rationing is just one manifestation of policy-driven artificial scarcity. This Malthusian policy also informs suppression of energy development, land development, and sensible investment in road and freeway upgrades. Public money is diverted to preposterous projects such as high-speed rail, while private investment in energy and housing is proscribed to exclude all but the wealthiest players. And those politically connected billionaires then make outrageous profits when their products – energy, utilities, housing – are produced at constant costs but sold at scarcity driven sky-high prices.

The reason Malthusian ideology constitutes the conventional political wisdom in California has little to do with the environment. It has to do with power and profit. These spectacularly wealthy special interest billionaires have coopted politicians, mostly Democrats, to spew the rhetoric of environmentalism and identity politics because it makes them richer, at the same time as it has made everyone else poorer. Everyone knows that California has the highest cost-of-living in the United States. But less understood is where all that money is going. It is going into the pockets of left-wing billionaires. To ensure government complicity, government unions get their cut, in the form of staggeringly over-market rates of pay and benefits.

POLICIES SHOULD NURTURE ABUNDANCE, NOT ENFORCE RATIONING

Permanent water rationing sets a horrific precedent. It also is just the wrong way to solve water scarcity. Let farmers sell their water to cities without losing their grandfathered water rights. For that matter, reform the water rights that allow farmers to buy water for next to nothing. Invest in more surface and ground storage to harvest storm runoff. Build desalination plants on the coast of Los Angeles County – BIG ones like they use in the Middle East, producing millions of acre feet per year – using less energy than the Tehachapi pumps.

Water is life. People should be able to use as much water as they are willing to pay for, and if they are required to pay a slight premium for overuse, that can fund investment in more water infrastructure. But the law as written will impose punitive fines for overuse. For less money than the cost of implementing water rationing, Californians could experience water abundance. From fragrant lawns to a rejuvenated Salton Sea, to not having to choose between taking a shower or doing the laundry, Californians can enjoy a better quality of life.

We don’t have to live in a society defined by Malthusian struggle. We can create abundance of water and energy in ways that are largely if not completely decoupled from environmental harm. Conservation has its place but when it is the only solution and is not accompanied by increasing supply it reveals its hidden agenda: Greed for money on the part of the firms that manufacture the instruments of conservation, greed for power on the part of the politicians that enforce conservation, and a contempt for the aspirations of ordinary people on the part of environmentalists who have let their principles run amok.

Nobody should have to submit to monitoring of how they use water and submit to punitive fines if they use more than their ration. The idea that everyone has to submit to draconian restrictions on their water use is ridiculous. It comes from a Malthusian mentality that is admirable in moderation and tyrannical in the extreme.

REFERENCES

Permanent Water Rationing is Coming to California, January 17, 2018

Increasing Water Supply Must Balance Conservation Measures, February 21, 2017

California’s Misguided Water Conservation Priorities, August 27, 2016

FOOTNOTES

(1) Total Precipitation in California during wet, average, and dry years:
California Water Supply and Demand: Technical Report
Stockholm Environment Institute
Table 2: Baseline Annual Values by Water Year Type and Climate-Scenario (MAF)
http://sei-us.org/Publications_PDF/SEI-WesternWater-CWSD-0211.pdf

(2) California water use by sector:
California Water Today
Public Policy Institute of California
Table 2.2, Average annual water use by sector, 1998–2005
http://www.ppic.org/content/pubs/report/R_211EHChapter2R.pdf

(3) California urban water use by sector:
California Dept. of Water Resources
2010 Urban Water Management Plan Data – Tables
Download spreadsheet “DOST Tables 3, 4, 5, 6, 7a, 7b, & 7c: Water Deliveries – Actual and Projected, 2005-2035”
http://www.water.ca.gov/urbanwatermanagement/2010_Urban_Water_Management_Plan_Data.cfm

(4) Cost for water efficient appliances:

Water Saving Potential of water-efficient appliances (Source: USGS)
https://water.usgs.gov/edu/activity-percapita.php

California Water Plan Update 2013 Chapter 3 – Urban Water Use Efficiency
http://www.water.ca.gov/calendar/materials/vol3_urbanwue_apr_release_16033.pdf

Cost to purchase and install various water-saving appliances:

Cost (including installation) for a tankless water heater
https://www.bankrate.com/personal-finance/cost-of-tankless-water-heater/

Cost (including installation) for a water efficient dishwasher
https://www.consumerreports.org/cro/news/2015/04/dishwashers-that-save-water-energy-and-money/index.htm

Cost (including installation) for a water efficient clothes washer
ps://www.homeadvisor.com/cost/kitchens/install-an-appliance/

Cost (including installation) for a low flow toilet
https://www.remodelingexpense.com/costs/cost-of-low-flow-toilets

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Formerly bankrupt Stockton is fiscally healthy again, but offers warning to others

Retiring California teachers will earn more than working teachers in 24 states

More than 900,000 current and former public school teachers are covered by the California State Teachers’ Retirement System (CalSTRS). The pension system has $210 billion in net assets. It will need all of it and more, since it holds only 63.7 percent of the funds necessary to pay all those teachers what they are owed. Legislation over the past few years has increased contributions to CalSTRS in order to address this shortfall.

It is difficult for the average person to grasp expenditures of hundreds of billions of dollars. So let’s look at how much money is disbursed to the average retired teacher.

CalSTRS reports that the average monthly benefit it paid was $3,831. That comes to $45,972 a year. That is hardly a fortune, though it is much superior to what Social Security would pay a similarly situated individual. California teachers do not contribute to Social Security while working at public schools and receive no Social Security benefits for that time served when they retire.

But that amount is a little misleading. California teachers are vested in the pension system after five years. Almost one-third of those receiving benefits from CalSTRS taught for fewer than 20 years. Eight percent taught for fewer than 10 years. Their payout is lower and thus reduces the average.

The $3,831 average also includes payments to surviving spouses and partners of covered teachers. A teacher can choose a reduced pension payment that also covers a spouse or partner for the rest of his/her life. This also affects the overall average.

Fortunately, CalSTRS computed the average benefit paid to the 12,247 California teachers who retired in 2017. Demographically, they better match what we picture when we speak of retirees. Their average age was 63.3, with 24.6 years in the pension system. Their average annual final salary was $90,324.

CalSTRS paid that average retiree $53,700 this school year. That is higher than the 2017-18 average salary for working teachers in 24 states, according to National Education Association estimates.

As with all comparisons, it is easy to debate this from both sides. Some will say the CalSTRS pension payouts are too high. Others can counter that it illustrates how poorly paid teachers are in those 24 states. What is the right mixture of salaries and pensions when spending limited funds? How does the demographic composition of the teacher workforce affect their desire for better salaries over better pensions, or vice versa?

These are complex and intertwined questions. Let’s hope our politicians and school administrators consider all the angles when they make funding and staffing decisions.

This article originally appeared in LA School Report.

How Big Tech Monitors Our Lives and Manipulates Our Minds

Google knows where you live, how you earn a living, what you do for fun, and who your friends are. And it wants to know more.

An internal company video obtained this week by The Verge reveals the company’s plans for total data collection, in which “Google helps nudge users into alignment with their goals, custom-prints personalized devices to collect more data, and even guides the behavior of entire populations.” Titled the “Selfish Ledger,” the video envisions a world in which Google’s artificial intelligence programs harvest data from its users. If Google doesn’t know your weight, its Selfish Ledger will 3D-print one.

Hop on the scale, fatty.

From pixel-tracking and shadow banning to restricted viewing and content filtering, Alphabet, Amazon, Google and Facebook hold a terrifying power to restrict dissenting opinions, engineer behavior and control our lives. These all-knowing tech companies already implement information controls that censor political thought.

Google maintains an unbreakable 90-percent monopoly on worldwide search results. That dominance has inspired a growing number of conservatives to call for the federal government to use anti-trust laws to break up the tech oligarchs. Perhaps it’s time that the Anti-Trust Division in Department of Justice take a long hard look at Silicon Valley monopolies and do its job to protect Americans.

Right now, Google helps advertisers, marketers and “third-party creatives” setup their own covert surveillance operations to harvest user data. With pixel tracking — the practice of embedding a tiny one-pixel-by-one pixel image in an email — anyone can identify when, where and how you accessed your email.

But the future is even more disturbing. Amazon has filed patents that would allow its Echo devices to listen to its users’ conversations. How exactly does trust-busting stop this surveillance?

“The Soviet Union could only have dreamed of such manipulative power,” writes Allum Bokhari, senior technology correspondent at Breitbart News, a frequent target of tech censorship. “No other organization in history has had the power to shape opinion, control public discourse, and influence democratic voters.”

Censorship seems ingrained in Silicon Valley culture and manifests itself in many forms. The most brazen: directly deleting dissenting reviews. Last year, Amazon came under fire for deleting nearly 900 one-star reviews of Hillary Clinton’s book, “What Happened.” Meanwhile, conservative book authors have been complaining about Amazon’s mass deletions of favorable reviews for their works.

If Facebook doesn’t like your politics, it can censor your speech by limiting the audience – even when people have subscribed to your content. Last September, pro-Trump online commentators Diamond and Silk began noticing their videos weren’t reaching their 1.4 million Facebook followers. Ignored for months, the pair were eventually told that their content was “unsafe to the community” and therefore subject to restrictions.

“This decision is final and it is not appealable in any way,” wrote Facebook, which has a two-thirds market share of global social media use, to the sisters.

Just as devastating as direct censorship, Facebook and Google can alter their algorithms in ways that decrease traffic for conservative outlets. Right-leaning Rare.us once generated 22.5 million unique visitors, but was knocked out by changes to Facebook’s News Feed algorithm. When conservative radio host Dennis Prager started gaining millions of views for his PragerU video series, Google-owned YouTube responded by placing age restrictions on its content.

Earlier this year, Project Veritas exposed Twitter’s shameful practice of shadow banning conservative speakers. Users under a shadow ban continue to post content unaware that it’s not being delivered to the public. The company has doubled down on this content restriction, announcing a new policy that will hide all tweets from “trolls and harmful users.”

If all else fails, tech giants retain the right to deny you service. Rep. Marsha Blackburn discovered last fall that her pro-life views were not allowed on Twitter. This month, Google stopped all ads in advance of an Irish referendum on the country’s constitutional amendment recognizing the equal rights of the unborn. Pro-life campaigners say that has hampered their ability to communicate directly with voters.

Remember two decades ago when Google promised to always provide users with unbiased and objective content? Even three years ago, Google still claimed to adhere to its “Don’t Be Evil” manifesto. At least, they’ve dropped that pretense.

“We understand if this is disturbing,” Google’s X subsidiary said in a response to the Selfish Ledger video. “It is designed to be.”

For the explosive growth of power by the new tech oligarchs it is time for the anti-trust division of Department of Justice to review these Monopolies with serious anti-trust consideration.

Shawn Steel, a former California Republican Party chair, is California’s committeeman for the Republican National Committee. This article originally appeared in The Daily Caller.

California’s Transportation Future, Part Three – Next Generation Vehicles

The next generation of vehicles will transform transportation in several fundamental ways. What is coming will be as revolutionary in our time as the transition from horses to horseless carriages was over a century ago. Some increments of this dawning revolution are already here in realized products. Electric drivetrains. Collision avoidance systems. Self-driving cars. Cars on demand. Aerial drones. Nearly all of the enabling technology for this dawning revolution is already here. Artificial intelligence. Visual recognition and sensor systems that use radar, sonar and LIDAR laser scanning. Mapping capabilities. GPS. Data collection. Memory chips. Communications systems. And every one of these technologies, along with investment capital, more than anywhere else, is concentrated in California.

As this revolution unfolds, our conception of what constitutes vehicular transport will change. Many vehicles will be modular and reconfigurable. On the road surface, the wheeled chassis, or “skateboard,” will contain the essentials to power and navigate the vehicle. Depending on the duty cycle, a skateboard chassis may be small, only capable of carrying a two passenger cabin, or small freight payload. Other skateboards will range in size from those capable of carrying a sedan or SUV sized passenger unit, all the way to the largest versions which, with freight or passenger units attached, would weigh up to 80,000 pounds.

Even more variation will be present in the passenger modules. An SUV sized passenger module, for example, might hold 6-8 passengers like a mini-bus. Or it might be a conference room or an office where a group of passengers could conduct work while being transported. Or it might be a sleeper unit, a rolling hotel room, where a lone passenger or a family or work crew would sleep while en-route to their destination.

Perhaps even more amazing are the aerial modules that are coming. A passenger module may arrive at a staging area on a wheeled chassis, where an aerial drone will attach itself to the top of the passenger module at the same time as that module is released from the skateboard chassis. In an automated, seamless process, the occupants will then be flown beneath this drone to their intended destination.

SELF DRIVING VEHICLES

All of the above is happening with surprising rapidity. Dozens of partnerships between major automakers and the technology partners they need to complete this process have already been formed and continue to be formed. San Francisco based Uber is working with Volkswagon and Nvidia, a major chipmaker and world leader in visual computing. Uber is also working with Toyota to develop self driving cars. Silicon Valley based Tesla continues to test “full self-driving hardware,” competing with Google spin-off Waymo, also located in Silicon Valley. Another credible Silicon Valley self-driving car startup is Aurora, which as reported by the San Jose Mercury earlier this year, is “formed by one-time heads of autonomous car projects at Google parent Alphabet and Tesla [and] will develop self-driving electric vehicles with Volkswagen and Hyundai Motor.”

Not to be excluded, Silicon Valley heavyweight Apple is confounding critics who claimed they might find achieving their business model of vertical integration too challenging to include vehicles. According to a March 2018 report in Fortune, referring to testing in California, “with 45 cars on the road, Apple is now testing more vehicles than its top rivals. Tesla, for instance, has 39 permits. Uber has 29 permits, according to the report. Alphabet’s Waymo had more than 100 permits in June 2017 and has 24 now.”

According to the same report, “Apple is now second behind General Motors’ Cruise company, which has 110 self-driving car permits in California.” The GM owned company, Cruise Automation, is headquartered in San Francisco. GM’s strategy? According to The Street, GM intends to “deploy self-driving taxis in dense urban environments to take passengers from point A to point B. Rather than a one-time sale of the vehicle, the automaker can milk hundreds of thousands of dollars in revenue per vehicle.” And in that same report, Ford’s strategy is “using a new vehicle capable of carrying both people or items. The unit will run a hybrid engine and operate about 20 hours per day.”

The Mercedes F 015 “Luxury in Motion” Self-Driving Concept Car

The above photo of the Mercedes F 015 “Luxury in Motion” Self-Driving Concept Car provides a glimpse into just how much vehicular travel is going to change. Note that the dashboard and control surfaces, including an almost vestigial steering wheel, are on the right side of the compartment. The front seats are swiveled to face the rear seats, turning the area into more of a lounge or conference room than a traditional vehicle compartment. The presumption is that most of the time the car will be self-driving, allowing the passengers to pursue many of the same sedentary activity options in the vehicle that they might pursue outside the vehicle.

When it comes to major automakers and high-tech corporations, it’s hard to find a company that’s not getting involved in autonomous vehicles. A March 2018 report in TechWorld attempts to catalog all of them – some not already mentioned above include Rinspeed AG, a Swiss automaker teamed up with Samsung; Volvo, teamed up with Uber; Chinese internet giant Baidu’s self-driving vehicle platform Apollo, which includes vehicle hardware, software and cloud data platforms to help others in the autonomous cars industry; Intel, which bought Israel-based driverless car technology firm Mobileye, in partnership together with BMW; Audi in partnership with graphics cards maker Nvidia; the list goes on.

Convinced yet? Driverless vehicles are coming. They are coming in myriad forms and will employ myriad business models. Stepping to the curb and using your phone to dial up a robotic ride, any type of ride, to any destination, will become commonplace. Scheduling personalized transportation services in advance will become routine. Ownership models will become more diverse. Individuals will own cars, but so will automakers, transit agencies, taxi services; who will own these cars of the future and to what purpose is only limited by one’s imagination.

PASSENGER DRONES

If the world of self-driving cars is just around the corner, then just down the street, also set to arrive sooner than expected, are passenger drones. And again, most of the major players are operating in California. Uber has formed “Uber Air,” or Elevate, to develop aerial transportation systems. Google has two companies, operating in stealth, Cora, and Kitty Hawk. Also active in California are the companies Aurora, in partnership with Boeing, and Vahana, in partnership with Airbus.

Cora’s experimental electric powered “Air Taxi” –
takes off like a helicopter, flies like a plane

An interesting company based in Santa Cruz is Joby Aviation. While over a $130 million in financing and over 120 employees isn’t all that much so far, Joby Aviation appears to be a serious contender. Investors include Intel Capital, Toyota AI Ventures, JetBlue Technology Ventures, and Capricorn Investment Group. Despite being one of the most secretive startups in a sector where stealth is the rule, not the exception, an excellent report on Joby’s progress was published by Bloomberg earlier this year.  From a remote test station deep in the mountains of California’s central coast, the Bloomberg reporters were given a ride. From the article: “Powered by electric motors and sophisticated control software, the taxi performs like a cross between a drone and a small plane, able to zip straight up on takeoff and then fly at twice the speed of a helicopter while making about as much noise as a swarm of superbees.”

This is fascinating stuff. Apparently most “air taxis” (or “sky cabs”) being developed are powered by electricity, and in many respects are just enlarged versions of the drones now commonly used by hobbyists and photographers. Joby Aviation intends to build an aircraft with a range of 150 miles on a single battery charge, carrying up to four passengers. They would travel at relatively low altitudes to avoid having to pressurize the cabin. They expect to be “100 times more quiet during takeoff and landing than a helicopter and near-silent during flyovers.”

LAND/AIR HYBRIDS

No discussion of the imminent revolution in vehicle transportation is complete without considering the possibility of travel by land and by air in the same passenger module, with a separate wheeled module for land travel, which detaches from the passenger module when it is lifted airborne by a flight module. As reported earlier this year in Electrek.co, Audi and Airbus are working on just such a solution. The following two images are from a visualization of this futuristic transportation option prepared by Italdesign in partnership with Audi and Airbus.

Aerial drone/electric car hybrid concept –
passenger module prepares to detach from land module

 

Aerial drone/electric car hybrid concept –
passenger module now attached to flight module

THE HYPERLANE OPTION

If the Hyperloop might represent the fastest conceivable mode of land based travel, then, similarly, the “Hyperlane” might represent the fastest conceivable mode of travel by autonomous wheeled vehicles on a flat road surface. The hyperlane concept was conceived by UC Berkeley graduate students, Baiyu Chen and Anthony Barrs, who proposed the hyperlane concept in 2017 as their winning entry in the Association of Equipment Manufacturers “Infrastructure Vision 2050 Challenge.” AEM’s 2017 challenge to entrants was to present concepts to “support high-speed transportation by the year 2050.”

As reported in Fortune, “The duo’s idea was to construct a ‘Hyperlane,’ or a single platform the size of four interstate lanes that would run parallel to pre-existing highways in order for self-driving cars to travel at high speeds with no chance of getting into a jam. …’we realized we could remove the tracks and deploy new, emerging technologies like autonomous vehicles.'”

Whether the Hyperlane is a dedicated four lane highway, elevated over existing highways on existing right-of-ways, or additional specialized lanes similar to the HOV lanes we’ve already got, emerging automotive technologies support safer, denser traffic at higher speeds. Electric traction motors not only have extraordinary torque which delivers impressive acceleration, they also have a wide functional RPM range, zero to 20,000, far greater than combustion engines. Back in the 1990s, a prototype version of the now legendary General Motors EV1 was clocked at 183 MPH. The current crop of electric vehicles have top speeds that are deliberately limited by software; the Chevy Volt tops out at 100 MPH, the Tesla Roadster at 125 MPH, and the Tesla Model S at 130 MPH.

Using dedicated lanes for high speed vehicular travel has been tried already. The fast lanes on the German autobahns easily qualify. If you’re driving 120 MPH in the fast lane on the autobahn, you’d better watch your rear view mirror, because if a car traveling 160 MPH crashes into your rear end, it’s your fault. German drivers obey strict rules, the most critical of which is slower drivers must always yield to faster drivers by moving promptly into the slower right lanes, and faster drivers must never pass on the right. And it works. The fatality rate on the autobahn is much lower than on the United States interstate system.

THE CASE FOR CARS

The conventional enlightened policy wisdom is that driving cars on roads is an obsolete way for millions of people to travel. Policy driven alternatives, costing billions each year, include light rail, high-speed rail, trolleys and bike lanes. In support of these policy alternatives, “transit villages” are zoned, along with “densification,” based on the theory that if more people live near mass transit stations, and, in general, if more people live and work in smaller urban footprints, there will be less need for people to own cars.

To explore the costs and benefits of densification and urban containment goes beyond the scope of this report. But the primary problems currently inherent in relying on cars to fulfill the requirements of mass transportation – low speeds, unsafe, congested roads – are all being solved through innovation. With upgraded roads and updated driving laws, modern cars can sustain speeds as fast or faster than California’s proposed high speed rail. And there are a variety of ways that the new innovations that are transforming vehicular travel will increase safety and relieve congestion.

Private sector funding:

With minimal government investment, the private sector is creating connected and autonomous vehicles, completely redefining the car. The enabling technologies draw from diverse industries, resulting in consortiums that bring together participants from sectors including automotive, semiconductor, telecommunications, smart phones, aerospace, robotics and AI. One challenge is ensuring that the makers of this next generation of vehicles incorporate common standards.

To navigate the roads without a driver, self-driving cars rely on vehicle to vehicle (V2V) and vehicle to infrastructure (V2I) communications. The Michigan-based Center for Automotive Research, (CAR) with a mission ” to educate, inform and advise stakeholders, policy makers, and the general public on critical issues facing the automotive industry,” has produced several recent reports evaluating what they call “intelligent transportation systems.” In their 2017 report “Planning for Connected and Automated Vehicles,” they define V2V systems as “wireless communication between vehicles, such as safety warnings and messages.” They define V2I systems as “wireless communications between vehicles and the infrastructure, such as a system that connects a vehicle to cellular towers for navigation purposes.”

As the technology matures, several industry associations are working to harmonize standards for intelligent transportation systems, nationally and globally. In CAR’s 2016 report “Global Harmonization of Connected Vehicle Communications Standards,” they explain how interoperable communications systems in vehicles are necessary to resolve the following questions:

  • Which entities communicate and to whom (e.g., vehicle, pedestrian, roadside infrastructure, central servers)?
  • Which message set is used within the communication?
  • What media and channel allocation is used (e.g., 5.9 GHz)?
  • What application is implemented and how?

Private entities supported by industry are funding this effort and working closely with the U.S. Dept. of Transportation as well as with most states. Just a few of the major organizations involved in this effort include the International Organization for Standardization (ISO), ASTM InternationalSAE International, Institute of Electrical and Electronics Engineers (IEEE), National Transportation Communications for Intelligent Transportation System Protocol (NTCIP), American National Standards Institute (ANSI), European Committee for Standardization (CEN), European Committee for Electrotechnical Standardization (CENELEC), and the European Telecommunications Institute (ETSI).

In April 2018, as reported in the industry publication Transport Topics, two of the most prominent associations involved in setting standards, the Institute of Electrical and Electronics Engineers and the American Center for Mobility announced they have signed a memorandum of understanding with the  to help accelerate development and deployment of voluntary technical standards for connected and autonomous vehicles.

Lower costs to the consumer:

To some extent, the fact that consumers will spend less for transportation is a function of the convergence of increasingly automated manufacturing, the availability and superiority of new composite materials to replace expensive steel, global competition, and progressively lower costs for software, chip sets, sensors and other high-tech components. Moore’s law is alive and well, and doesn’t just apply to semiconductors. But lower costs and more options for consumers of transportation will not only result from ongoing advances in manufacturing, they will also result from the rollout of a variety of new business models that offer a variety of new modes of transportation.

The disruptive impact of Uber, a ride hailing service that has challenged the taxi industry to its roots, is an early example of what is coming. Uber and its competitors are already testing autonomous vehicles, something that will become common. These driverless taxis will cost less to ride, since there won’t be a driver. Similarly, privately funded “micro-transit” services will offer mini bus services based on a connectivity and AI driven dynamic awareness of consumer demand and road conditions, offering shared rides based on aggregating riders who are boarding and exiting the mini bus along routes that are optimized to move the most passengers the fewest miles in the lowest amount of time.

Ride sharing, the 21st century version of picking up a hitchhiker, will also become a more viable option than ever. For example, participants in many ride sharing services will be members, vetted in a manner similar to the vetting that occurs with the hosts and the occupants of Airbnb properties. The advantage for the vehicle owner, of course, is a having a paying passenger join them on their commute, with the added benefit of becoming eligible to drive in carpool lanes.

Car sharing, where the user takes over a vehicle, is similar to a conventional car rental. The differences are a reflection of the new technologies. For example, using their smart phone or other connected device, consumers will order a car, and within minutes the driverless vehicle will arrive wherever they are. The car can be rented by the hour, or per day, or for a longer period. The price includes fuel and insurance costs.

Also on the way are mobility services, online aggregators of all transportation options. These mobility services will offer consumers transportation options tailored to their preferences. A consumer will be presented with a variety of ways to reach their destination, ranging from a single vehicle going point-to-point to a collection of travel legs utilizing public and private transit services.

The sheer variety of these emerging transportation options, primarily funded by the private sector, suggest that there will be vibrant competition for the consumer, driving down prices. Another significant factor in lowering prices is the fact that in general, the transportation services being offered will involve multiple riders on each vehicle, spreading the per-mile costs over more people, lowering per-mile costs for each of them.

Less traffic congestion:

The ability of next generation vehicles to create cost-incentives for individuals to opt out of purchasing their own cars will reduce the number of cars competing for space on congested roads. It will also reduce the demand for parking spaces and parking garages. This will be accomplished in a variety of ways. Through ride hailing, ride sharing and micro-transit services, fewer cars will be used to deliver the same number of commuters from bedroom communities to urban centers. Through sharing of self driving cars, an early commuter may arrive at their destination, but the car itself will immediately drive itself to the nearest next consumer, transporting them to their destination instead of taking up a parking space for the rest of the day. Mobility services will present consumers with customized options, resulting in compelling incentives for them to opt out of purchasing a car, or a second car.

The other way 21st century vehicles will alleviate traffic congestion is because as semi-autonomous vehicles – for example, collision avoidance systems which are already standard on most new cars – and fully self-driving vehicles become widely adopted, the safe distance between vehicles will shrink, as will the safe speed for vehicles. The adoption of next generation vehicles will mean that the same network of lanes and roads will be able to deliver more people. Michigan’s  Center for Automotive Research, in their 2017 “Future Cities” report, depicts how in the long term, once autonomous cars are fully adopted, urban boulevards may be reconfigured with narrower lanes and fewer lanes, without compromising mobility.

Autonomous Cars – Same Road Capacity With Narrower and Fewer Lanes

PREPARING FOR NEXT GENERATION VEHICLES

It appears likely that the technologies for next generation vehicles, operating on roads and in the air, will mature faster than our ability to develop policies and infrastructure to accommodate them. This is particularly difficult since autonomous vehicles will not suddenly displace conventional manually controlled vehicles on our roads, but will share the roads with them for many decades. But the encouraging possibility with next generation vehicles is that the public infrastructure necessary to support them is relatively limited compared to the transit solutions that currently consume huge allocations of public resources.

For example, establishing uniform standards for autonomous vehicles is being actively coordinated and funded by the major automakers and aerospace companies, along with other private sector participants. The role of the state and federal departments regulating highway travel and aviation is vital, but will not consume significant funds compared to the cost of major infrastructure investments.

In the case of aviation, next generation solutions, ranging from passenger drones today to the supersonic electric airplanes that are likely tomorrow, are virtually all designed for vertical takeoff and landing, meaning that expensive airport runway infrastructure does not require expansion in order to accommodate them.

Similarly, autonomous land-based vehicles are designed to operate at higher speeds in closer proximity to each other, reducing the need to increase road capacity. Moreover, the emerging business model for next generation vehicles strongly incentivizes consumers to forego purchasing their own car, opting instead for ride hailing, ride sharing, car sharing and micro-transit services, which also reduces the number of cars sharing the road. These new mobility solutions will also reduce demand for parking spaces and parking garages, taking further pressure off of infrastructure requirements.

It may be that for urban areas, the impact of next generation vehicles combined with the contributions from aerial transportation options, combined with congestion pricing, will mean that the only road investment necessary within urban centers is to maintain and upgrade existing roads. For major intercity connector roads, highways and freeways, however, important policy decisions loom. Because as it is, these roads are not designed or maintained in a manner sufficient to allow next generation vehicles to reach their potential.

The implications of this are profound. Next generation vehicles, in all sizes and configurations, have the potential to replace most if not all proposed mass transit solutions both for intercity and long-range travel. The maximum safe and sustainable cruising speed of a modern electric vehicle is conservatively pegged at 120 MPH. Vehicles of the future will not only be configured similarly to conventional cars and SUVs, they will also be mobile hotel rooms, entertainment lounges, offices, conference rooms, and buses of all sizes, offering countless levels of services. On properly designed and maintained roads, there is no reason these vehicular solutions cannot replace literally all current or proposed modes of surface based transit, certainly including high-speed rail but probably including light rail as well.

Policymakers have a choice. They can recognize that private industry is creating new ways to travel on land and in the air. They can cooperate to develop uniform standards and updated laws to expedite this transformation. They can revise zoning laws, redirect funding priorities, and invest in new roads and communications infrastructure. Or they can neglect road construction and instead continue to build public mass transit systems that offer dubious prospects of ever solving growing transportation bottlenecks.

Elon Musk’s Boring Company is a privately funded transit solution that transports private vehicles point-to-point underground, moving them on and off surface streets with elevators. On the Boring Company’s FAQ page, focused on ways to dramatically reduce the costs of tunneling, a provocative assertion is made: “The construction industry is one of the only sectors in our economy that has not improved its productivity in the last 50 years.”

The next installment in this series will explore the implications of this assertion. What would it take to improve productivity in the heavy road construction industry? There has been a healthy public discussion regarding how much it will cost to build California’s high speed railroad. But how much does it cost to build roads in California? How much would it cost not only to catch up on all the deferred maintenance on California’s roads, and upgrade them incrementally, but to actually build new roads, north to south and coast to mountains, engineered for the cars of the future?

*   *   *

This article is the 3rd in a series on California’s transportation future. The first installment was “California’s Transportation Future, Part One – The Fatally Flawed Centerpiece,” published in April 2018. The second installment was “California’s Transportation Future, Part Two – The Hyperloop Option,” published in May 2018. Edward Ring co-founded the California Policy Center in 2010 and served as its president through 2016. He is a prolific writer on the topics of political reform and sustainable economic development.

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California’s Transportation Future, Part Two – The Hyperloop Option

In July 2012, Elon Musk sat down for a “fireside chat” with Sara Lacy, founder of the PandoDaily website. In between discussions of Paypal, Tesla, and SpaceX, 43 minutes in, Musk unveiled his idea for the “Hyperloop,” a new transportation technology that “incorporates reduced-pressure tubes in which pressurized capsules ride on air bearings driven by linear induction motors and air compressors.”

The concept wasn’t new. Hyperloop concepts have existed for nearly 200 years. Small scale “pneumatic railways” were actually built in Dublin, London, and Paris, mostly as a novelty, as far back as the 1850’s. In 1910, American rocket pioneer Robert Goddard proposed a train that would go from Boston to New York in 12 minutes. Goddard’s design advanced the technology, replacing wheels with magnetic levitation of the passenger capsule inside a vacuum-sealed tunnel.

Musk’s “Hyperloop Alpha” study was released by a joint team from SpaceX and Tesla in August 2013. This 58 page study remains an excellent investigation of the financial and engineering feasibility of Hyperloop technology. The concept is relatively simple. Passengers and freight travel in “pods” or “capsules,” through a tube that has had all the air pumped out, eliminating the friction of air resistance. Moreover, these pods ride on electromagnets, repelled away from the inner surface of the tube, eliminating the friction of wheels. Not only would these electromagnets keep the pods levitated off the inside surfaces of the travel tube, but through “linear induction,” they would provide the force to propel the pod through the tube. Most proponents claim these innovations make speeds feasible in excess of 700 MPH.

A system like this, assuming there were nonstop service, could deliver passengers from San Francisco to Los Angeles in around 30 minutes. From the Hyperloop Alpha report, here is the route a Hyperloop system could take in California:

“Hyperloop Alpha” – The Original Proposed Route Connecting SF to LA

The Hyperloop Alpha study was released as an open source document, and none of the companies currently developing Hyperloop systems are directly affiliated with Musk or his companies. Since 2013, at least three noteworthy companies have emerged. Each of these companies have developed substantial technical changes to the design imagined in Musk’s Hyperloop Alpha study. And sadly, despite two of them being headquartered in California, none of these companies are currently proposing a system to connect San Francisco to Los Angeles.

THE MAJOR HYPERLOOP CONTENDERS

Virgin Hyperloop One, founded in 2014, is based in Los Angeles. They have over 300 employees and have raised over $295 million in investment capital. The company was rebranded in October 2017 after receiving a significant investment from Virgin Group founder Richard Branson. In May 2017 they began testing a Hyperloop system on a 500 meter “development loop” built in the desert north of Las Vegas. Regarding next steps for the company, a spokesperson for Virgin Hyperloop One claimed “we’ve already seen ground-breaking commitments in India, UAE, Saudi Arabia and the U.S.” He said construction of the Mumbai-Pune route in India could begin as early as 2022 and be completed in less than five years for passenger operations.

Virgin Hyperloop One’s 500 meter long “DevLoop” in the Nevada Desert

Hyperloop Transportation Technologies, or “HTT,” founded in late 2013, is based in Culver City in the Los Angeles area. They claim to have over 800 collaborators located all over the world who are working mostly in exchange for stock options.  While HTT uses crowd sourcing and is crowd funded, they have developed proprietary technology. An HTT spokesperson reached for comment said “The model is tricky to define. It isn’t open source, we call it ‘open collaboration.’ We don’t disclose our patents and schematics, we have signed contracts and non-disclosure agreements. But this way qualified candidates can be found worldwide and can contribute their talents in exchange for stock options.”

A Harvard Business School case study on HTT had this to say about the company’s prospects using this business model: “Rather than employees, HTT has invited over 800 people to contribute a minimum of 10 hours per week in exchange for future equity. Everything from recruitment, incentives, culture, technology, and intellectual property controls are handled with the idea that a community can work together to solve a global problem (transportation) by ‘turning a collective passion into a vision and the vision into a reality.’ The open question is how this approach will fair as the organization moves from design to delivery.”

Apparently so far HTT’s novel approach to financing and recruitment is working, because in April 2018 they announced construction of a kilometer-long test track near its R&D center in France near Toulouse. In addition to being headquartered in California with a test track underway in France, HTT has entered into government partnerships to perform feasibility studies and testing in Slovakia, India, as well as in the U.S. states of Ohio and Illinois. HTT also has impressive commercial technology partners including AECOM, Ansys, and Oerlikon.

Hyperloop Transportation Technology’s full-scale tubes are transported to French test site 

Another entrant in the Hyperloop industry is Transpod, founded in 2015, based in Toronto with satellite offices in Italy and France. In 2018 they announced plans to build a half-scale, 3 kilometer test track in France. Transpod president Sebastien Gendron, reached by phone, said construction would start this summer. He expected it to be ready for tests to begin within a year, or by Spring of 2019. He stated the decision to go at half-scale was based on a need to finalize the technology based on the results of the testing.

The designs Transpod are exploring are illustrative of the variations in the engineering solutions being developed at these three main competitors. Gendron explained that to reduce the cost per kilometer of tube, a major factor is the type of magnetic levitation. “We are developing technology to keep 80-90% of the levitation system on the vehicle itself,” he said. This would eliminate the need for expensive permanent magnets powered up for the entire length of the corridor. Like his counterparts at Virgin One Hyperloop and HTT, Gendron was reluctant to explain further details of their proprietary technology.

Hypothetical Hyperloop Station (artists rendering from Transpod)

WILL HYPERLOOP WORK AND IS IT SAFE?

A rather caustic attempt to debunk Hyperloop technology was released in July 2016 by Phil Mason, a British scientist and videoblogger who has nearly 800,000 subscribers to his YouTube channel. His video, entitled “The Hyperloop Busted!,” has gotten over 1.5 million views, and takes a dim view of Hyperloop technology. Some of Mason’s criticisms are valid but obvious, and not deal killers. In particular, that Hyperloop systems will cost more than claimed by proponents, and that Hyperloop systems will use more energy than claimed by proponents. Mason is almost certainly correct in these criticisms, but they don’t necessarily kill the argument for Hyperloop transportation solutions. How much more will they cost? How much more energy will they consume? Other concerns merit more attention.

For example, Mason claims that current designs for lengthy Hyperloop routes don’t take into account thermal expansion of metal tubes that are literally hundreds of miles long. When reached for comment on this challenge, a Hyperloop One spokesperson said “We have successfully built a test track in the Nevada desert which is the perfect environment to test the impact of temperature changes upon the Hyperloop tube as temperatures range from over 100F to below freezing. The DevLoop tube experiences daily movement due to expansion and contraction of the steel during temperature swings. To accommodate this movement, we have designed proprietary structural systems into the DevLoop columns to allow for this movement which allows the tube to expand and contract without causing structural damage to the tube, vacuum, and other supporting mechanisms. As systems get longer, we are confident that we can build a flexible, strong, affordable, safe system that can endure a multitude of weather conditions given our testing experience in the harsh climate of the Nevada desert.”

Until systems get longer, it is difficult for Hyperloop proponents to muster convincing arguments that it will be absolutely safe. Depressurizing a tube several hundred miles long is a major engineering feat requiring a lot of energy, as is constructing a tube that long that is capable of structurally withstanding depressurization. There are many unanswered questions.

How will passenger pods exit the main Hyperloop route and switch onto sidings to board and disembark passengers at intermediate stops? How will pods airlock themselves to exit points at the station without letting air into the tube? Since these pods will be traveling at very high speeds, packing almost unimaginable kinetic energy, how certain can operators be that a pod might never bump into the inside of the tube? Wouldn’t a minor “bump,” at high speed in a narrow tube, result in a catastrophic collision, rupturing and depressurizing the tube and likely killing not only the passengers in the colliding pod, but all the passengers in all the pods transiting the tube as they encounter a wall of air?

THE TUNNELING OPTION

One of the strongest arguments for Hyperloop systems, should they function as planned, is that implementing them uses less space. Hyperloop systems can be put onto pylons, elevating the tubes so they don’t disrupt activities on the ground below them, whether that is farmland or the median of a divided highway or freeway. Hyperloop tubes can also be buried underground, enabling them to establish routes through densely populated cities.

It may be that the first use of Hyperloop technology will be within urban areas, where the space advantage they offer constitutes a more decisive argument for investing in a system than the maximum speeds they might achieve on longer routes. It may be the technology can be perfected at lower, safer speeds. Elon Musk, who is not directly involved with any of the companies vying to build the first Hyperloop systems, has founded The Boring Company, where he hopes to apply the same aggressive innovation to tunneling technology as he has applied to rocketry with SpaceX.

If SpaceX challenges NASA in the field of rocketry, The Boring Company faces a similarly entrenched competitor in the German firm Herrenknecht AG. Founded in 1975, its massive factory nestled along the Rhine, this multi-billion dollar company sells tunneling systems – sophisticated snakelike machines that can be over 1,000 feet long – all over the world. Herrenknecht TBMs (tunnel boring machines) dug the 35 mile long Gotthard Base Tunnel under the Swiss Alps in 2009, the longest and deepest tunnel in the world. Today, most of Herrenknecht’s TBMs are digging subways in urban areas, primarily in the Middle East and Asia. For more on Herrenknecht and tunneling technology today, read “The Long Dig” (New Yorker, 2008), or watch this fascinating animation of an operating TBM.

Tunneling, like blasting payloads into low earth orbit, is extremely expensive. But The Boring Company claims tunneling costs can be dramatically reduced. On The Boring Company’s FAQ page, the following innovations are proposed: (1) Triple the power output of the TBM’s cutting unit, (2) Continuously tunnel instead of alternating between boring and installing supporting walls, (3) Automate the TBM, eliminating most human operators, (4) Go electric, and (5) Engage in tunneling R&D, “the construction industry is one of the only sectors in our economy that has not improved its productivity in the last 50 years.”

Apparently tunneling, whether for Hyperloop pods, or just electric powered “skates,” has the attention of the Los Angeles City Council, which in April 2018 approved a CEQA exemption so The Tunneling Company can immediately begin digging a 14 foot diameter, 2.7 mile long tunnel through the heart of West LA. The Boring Company believes they will complete this tunnel in 9 months. Don’t laugh. SpaceX is now routinely reusing first stage rocket boosters, an achievement that eluded NASA for decades. And imagine how long it would take LA Metro to complete the same project.

According to The Tunneling Company, tunneling using conventional methods costs about $1.0 billion per mile. But the current standard for a one-lane tunnel is approximately 28 feet. By placing vehicles on a stabilized electric skate, the diameter can be reduced to less than 14 feet. The area of a 14 foot diameter circle is 615 square feet, whereas a 28 foot diameter circle has an area of 2,463 square feet, exactly four times as much. If Musk is correct that a 14 foot tunnel – which just happens to be the diameter of the tunnel he’s been approved to dig in Los Angeles – is a viable size for mass transit, he’s just brought costs down by 75%. If other proposed innovations are successful, The Boring Company may reduce tunnel costs from $1.0 billion per mile per lane to $100 million per mile per lane. As shown in this animation, electric “skates” can carry cars through these tunnels at speeds of 120 MPH, using elevators to move them down to the tunnel and back up to the roads.

THE FUTURE OF HYPERLOOP TECHNOLOGY

The pace of innovation clearly makes a case that California’s high speed rail project could end up being obsolete before it’s even completed, at staggering expense. But can the same be said for the Hyperloop? What are the emerging competitors to Hyperloop?

Within urban areas, where transportation challenges remain most acute, tunnels underground don’t have to move people at 700 MPH through zero PSI to constitute breakthrough improvement. They can use proven, much safer technology, such as electronic skates that transport cars through tunnels at normal air pressure. Traveling from the San Fernando Valley to downtown Los Angeles takes about 15 minutes if you’re going 120 MPH. You don’t need to go faster.

Between urban areas, there is a clear case for Hyperloop as a superior competitor to high speed rail. Assuming the safety issues and remaining technical challenges can be overcome, it is probably cheaper to construct, and it’s much faster. But these are big ifs. And even if Hyperloop can compete with high speed rail, that’s a low bar. What about conventional air travel? Can Hyperloop construct a network of zero PSI tunnels that connect every major city in California, the way, for example, Southwest Airlines does today?

And at what point does Hyperloop itself become obsolete, unable to cost-effectively compete with new innovations? When the energy density of batteries descends to under 400 watt-hours per kilogram (the best are currently already packing about 300 watt-hours per kilogram), high-speed electric planes become feasible. Because these planes would not have air-breathing jet engines, they could ascend to 60,000 feet where the thinner air offers less resistance, allowing them to travel at supersonic speeds using less energy. And because these planes could be designed like the V-12 Osprey, with rotating engine nacelles, they could take off and land vertically, eliminating the need for airport runways.

One big problem with Hyperloop, ultimately, is same problem with any rail transport. You can only go where the rails – or tubes – go. And only very specialized vehicles can go onto these rails, or into these tubes. Roads, on the other hand, can accommodate anything with wheels. The air, an even more versatile transportation medium, can accommodate anything that flies.

The next article in this series will examine advances in small scale transportation innovations. Advanced vehicles designed for roads and for flight. These new technologies will deliver passengers and freight at high speeds, with ranges that reach from the fringes to the center of large urban areas. It may be that embedded rail or tunnel technologies only make sense in the most densely packed urban cores, or along heavily traveled transportation corridors.

It makes sense to come up with high speed options to connect California’s North Central Valley to the Silicon Valley, or to connect California’s South Central Valley to the Los Angeles Basin. To connect the Silicon Valley to Los Angeles does not make sense for high speed rail, because it doesn’t go fast enough to compete with jets. Whether or not Hyperloop technology provides any of these solutions depends on whether it can indeed reduce the costs significantly below high speed rail, at the same time as it delivers safer, much faster transportation than high speed rail. It also depends on what other high-tech transportation solutions are on the way, using those most versatile of all transportation technologies, wheels and wings.

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This article is the 2nd in a series on California’s transportation future. The first installment was “California’s Transportation Future, Part One – The Fatally Flawed Centerpiece,” published in April 2018. Edward Ring co-founded the California Policy Center in 2010 and served as its president through 2016. He is a prolific writer on the topics of political reform and sustainable economic development.

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California’s Transportation Future, Part One – The Fatally Flawed Centerpiece

California’s transportation future is bright. In every area of transportation innovation, California-based companies are leading the way. Consortiums of major global companies have offices throughout the San Francisco Bay area, pioneering self-driving cars that consolidate technologies from not just automakers, but cell phone manufacturers, chip designers, PC makers, telecoms, and software companies. In Southern California from the aerospace hub surrounding LAX to the Mojave desert, heavily funded consortiums experiment with everything from passenger drones to hyperloop technologies to hypersonic transports. It’s all happening here. It’s wondrous.

Meanwhile, instead of preparing the roads for smart cars, or designing hubs that integrate buses and cars-on-demand with aerial drones and hyperloop systems, the centerpiece of California’s transportation future is a train that isn’t very fast, being built at what is probably the highest cost-per-mile in the history of transportation, which hardly anyone will ever ride.

There is a stark contrast between California’s private entrepreneurial culture, as reflected in the marvels of transportation engineering they are developing, and California’s political culture, as reflected in their ongoing commitment to “high speed rail,” in all of its stupefying expense, its useless grandeur, its jobs for nothing, its monumental initial waste, situated miles from nowhere. Exploring that stark contrast, its origins, the players, the projects, the problems and the solutions, will be the topic of this and subsequent reports.

HIGH SPEED RAIL – THE FATALLY FLAWED CENTERPIECE

The fatally flawed centerpiece of California’s transportation future, the “Bullet Train,” unfairly dominates California’s transportation conversation. Unfair not only because it represents a prodigious waste of public resources and an epic failure of public policy, but because in spite of the Bullet Train fiasco, California’s private sector is designing and building a transportation future for the world at dazzling speed. But before surveying the excellent progress being made elsewhere in the Golden State, it is necessary, yet again, to tick through the reasons why the Bullet Train is the wrong solution, in the wrong place, at the wrong time.

Fifty years ago, before air travel became affordable to nearly anyone, before you could fly from San Francisco to Los Angeles for less money than it would cost in gasoline to drive there in your car, rail travel might have made sense. But today, airfare is only about twice the cost of bus fare, with total air travel time a minute fraction of what the same trip would take on a bus.

Fifty years ago, before land values and environmentalist lawsuits rendered any capital project prohibitively expensive, building a high-speed rail corridor between San Francisco and Los Angeles might have made sense. But today, the latest cost estimates for the SF/LA route exceed $100 billion.

Unrealistic Projections

High speed rail makes sense for intercity applications in megapolises. For example, a high speed rail line connects three of Japan’s largest cities, Tokyo, Nagoya, and Osaka. Nearly all of this 300 mile corridor is urbanized – in all, over 70 million Japanese live in this region of Japan.

By contrast, just phase one of the California high speed rail project, linking San Francisco with Los Angeles, will be 520 miles long, connecting about 24 million people. This doesn’t pass the density test. Compared to a successful high speed rail system – which the Tokyo/Osaka system certainly is – the San Francisco/Los Angeles system would be nearly twice as long, and serve only about one third as many people.

Put another way, there are 233,000 Japanese, per mile, living along the Tokyo/Osaka route, whereas there are 46,000 Californians, per mile, living along the proposed San Francisco/Los Angeles route. That means there are five times as many potential riders on Japan’s centerpiece bullet train as there might be on California’s.

Low ridership isn’t just a consequence of insufficient population density, although that is a critical precondition. Low ridership also stems from impracticality. The California High Speed Rail Authority’s 2018 “business plan” is disingenuous on this topic. They claim that travel to and from the airport chews up time, yet ignore travel time to and from a high-speed rail station. Travel time to these stations, air vs. rail, are entirely offsetting. Then they claim time that boarding high speed rail is quicker than boarding an airplane. Why? A frequent air traveler has TSA Pre, and typically sails through check-in and security. And won’t security be in place for high speed rail? Of course it will. Boarding time – also entirely offsetting. Which brings us to the actual travel time.

The current projection according to the CA HSR 2018 business plan (ref. page 7) is three hours for nonstop service from San Francisco to Los Angeles. This is definitely a best-case estimate. As reported on March 18th in the Los Angeles Times, “Of the roughly 434 miles of track between Los Angeles and San Francisco, 136 miles — nearly one-third of the total — could have at least some speed restrictions.” This would include tunnels, sharp curves, all transits through urban areas, and, incredibly, shared track and shared right-of-way with conventional rail carriers.

It is going to take twice as long to travel from San Francisco to Los Angeles via high speed rail vs. an airplane. Let’s not forget there are three major airports in the San Francisco Bay Area – SJC, OAK, and SFO. Five major airports serve the Los Angeles area – LAX, ONT, BUR, LGB and SNA. And flights connect all of them to each other, all day, every day.

Perpetual Financial Drain

Even if you accept the official projections for California’s high speed rail, the financial projections are unlikely to attract private capital. The table depicted below uses baseline projections from the CA HSR 2018 business plan (numbers directly taken from the business plan are highlighted in yellow, with numbers in intermediate years, which were not disclosed in the business plan, arrived at by extrapolation) to construct a cash flow for the “Phase One” portion of the project, those segments connecting San Francisco to Bakersfield. All of the variables are taken from that document. Several generous assumptions are necessary to accept these projections. They are:

(1) The entire capital cost for construction of the Phase One system linking San Francisco to Bakersfield is $40.1 billion (ref. page 32, exhibit 3.2 “Summary of Cost Estimates by Phase and by Range”). This is crazy. It will probably cost half that just to bore a tunnel under the Pacheco Pass.

(2) Ridership on this segment will grow to 31.9 million fares per year by 2035. Assuming primarily commuter traffic, this assumes over 120,000 riders per day (ref. page 90, exhibit 7.1 “Ridership: Silicon Valley to Central Valley Line through Phase 1,” “Medium Ridership”).

(3) Incredibly, fare revenue will hit $1.86 billion by 2035. This assumes an average ticket price, in 2017 dollars, of $60. This, in turn, infers that the average commuter will be spending $1,220 per month to ride the bullet train (ref. page 90, exhibit 7.3 “Farebox Revenue: Silicon Valley to Central Valley Line through Phase 1,” “Medium Revenue”). This is perhaps the most far fetched of all assumptions made in the entire business plan. Imagine over 120,000 regular commuters spending $1,200 per month to ride this train, noting the fact that this sum would not include the additional costs virtually all commuters would incur to travel from their home to the HSR station, and then from the HSR station to their workplace, on both their outbound and inbound commute, day after day.

(4) Operations and maintenance for the train will be a mere $1.4 billion in 2035, then, after adjusting for 3% inflation, will only increase 11% by 2060 even though ridership is projected to rise from 31.9 million passengers in 2035 to 51.2 million by 2060 (ref. page 91, exhibit 7.5 “O&M Costs: Silicon Valley to Central Valley Line through Phase 1,” “Medium Cost Estimate”). This defies credulity. How will ridership increase by 61% between 2035 and 2060 while O&M costs only increase 11%?

(5) “Lifecycle Costs,” the capital reinvestment necessary to replace worn out rolling stock and other fixed assets, i.e. “capital rehabilitation and replacement costs for the infrastructure and assets of the future high-speed rail system,” as near as can be determined from the 2018 business plan, is estimated to only total around $5 billion between commencement of operations in 2029 and 2060, over 30 years (ref. page 91, exhibit 7.6 “Lifecycle Costs: Silicon Valley to Central Valley Line through Phase 1,” “Medium Lifecycle Cost”).

(6) In the analysis below, loan payments are deferred for up to ten years until rail operations begin in 2029. In reality, of course, payments begin as soon as the money is loaned. Notwithstanding that, the annual loan payments are calculated based on loan of $40.1 billion, a 30 year term, and 5% interest.

CALIFORNIA HIGH SPEED RAIL
CASH FLOW USING 2018 BUSINESS PLAN’S “BASELINE” PROJECTIONS, $=M

Taking into account these are – for the six reasons just stated – very optimistic projections, there remain problems with these numbers that would give any investor pause. For starters, there is a cumulative negative cash flow of $14 billion, representing the period up until 2039 when the system is projected to become cash-positive. This represents over 20 years of negative cash flow. Where will this $14 billion come from? Bear in mind it will be more than $14 billion, since payments on the loans commence when the monies are loaned, not when the system begins operations. Maybe some of it will come from “cap and trade” proceeds, although if so, it would consume nearly all of them. Would private investors step up?

The problem with that is if you review this best-case scenario, you can see that selling the future positive cash flow to finance the initial negative cash flow would yield an internal rate of return of 4.7%. While that’s not an impossibly low rate for a municipal financing, it is exceedingly low for a private financing subject to this level of risk. And what about the risk?

High Speed Rail Cash Flow Using Conservative Assumptions

The next chart shows a cash flow scenario for high speed rail, phase one, with key assumptions changed. Instead of costing $40.1 billion, it costs $49 billion, the “High” range of cost estimates as disclosed on the HSR 2018 business plan, page 32. Instead of an average ticket price of $60, a more affordable $30 price is used, based on the assumption that the average commuter will not be willing to spend more than $600 per month on train fare. As ridership grows by 60% between 2035 and 2060, operations and maintenance costs are escalated by 30% instead of only 11%. And instead of spending a mere $5 billion on ongoing capital investments between 2029 and 2060, that is doubled to a still paltry $10 billion. What happens?

CALIFORNIA HIGH SPEED RAIL
CASH FLOW USING ALTERNATIVE (CONSERVATIVE) PROJECTIONS, $=M

As can be seen on this alternative analysis, if ridership revenue is significantly lower than projected, and if – one might argue – realistic operations and capital budgets are projected, and, if one merely uses the HSR Authority’s own high estimate of capital costs, there is no financial viability whatsoever to this project. The internal rate of return formula basically blows up, which is what happens when you burn through $91 billion before having your first break-even year in 2059. The question instead becomes, what else might Californians have done with $50 billion? The other question raised by this more conservative financial scenario, more disturbing, is what if high speed rail never makes money? How many additional tens of billions will be required to subsidize its operation?

The problem with dismissing these more bleak financial scenarios is simple: this is the sort of analysis that any savvy investment banker would start with. Then they would ask questions. WHY do you think 120,000 people are going to be willing to spend $1,200 per month in train fares to commute, not even including their costs to get to and from the train station? WHY do you think you can increase ridership by 60%, but only increase operations costs by 11%? WHY do you think you can operate a $50 billion railroad, and only expect to reinvest ten percent of that amount in capital equipment over thirty years?

The “Monte Carlo” Method of What-If Analysis

Instead of confronting these questions in plain English, the high speed rail authority did what-ifs using a “Monte Carlo” analysis. Here’s how they describe this (ref. page 93):

“Breakeven forecasts measure the likelihood that farebox revenue is equal to or greater than operations and maintenance costs in a given operating year. The analysis works as though there are two large bags full of marbles, one with thousands of marbles each representing a potential operations and maintenance cost, with more of the marbles having values around the median cost estimate than around the extreme (high or low) values. The second bag of marbles contains potential revenue outcomes, again with more marbles with values around the median than the high or low outliers.

The breakeven Monte Carlo analysis simply “picks” one marble at random from the revenue bag and one marble at random from the cost bag, subtracts the number written on the cost marble from the one written on the revenue marble and records the value. The analysis then puts the marbles back into their respective bags and repeats the process thousands more times which builds a distribution of potential results and generates a degree of confidence (or confidence interval, expressed as a percentage) as to the likelihood of project breakeven.”

If anyone wonders why projects in California cost far more than they should, please consider the role of consultants. The variables governing success or failure for California’s high speed rail project are tangible. They require urgent debate by practical people. How much will it cost to bore a tunnel through the Pacheco Pass? How likely is it that Union Pacific will share their right-of-ways with high speed rail, and if so, how much will that reduce costs, and how much will that reduce the speed of the train along those segments, and why? What is the real cost of the many engineering and environmental studies, and how many of them are necessary? Why is it that so many other nations, from socialist Europe to fascist China, manage to build these systems for a fraction of what Californians must expect to pay?

These are the questions that require answers. Counting metaphorical marbles does not add value to the process, nor does it add credibility to the financial projections. These qualitative questions regarding California’s high speed rail project have not been answered, because perhaps they cannot be answered. But the reasons California’s high speed rail system is so staggeringly, prohibitively expensive, are not problems that are confined to the high speed rail project. They infect every infrastructure program in the United States, and especially in California. Identifying the reasons infrastructure projects cost far more than they should, along with exploring tantalizing alternatives to high speed rail, will be the topic of future reports.

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Edward Ring co-founded the California Policy Center in 2010 and served as its president through 2016. He is a prolific writer on the topics of political reform and sustainable economic development.

 

 

Local Voters Uphold Utility Tax in Sierra Madre

Voters in tiny, affluent Sierra Madre, three square miles of leafy neighborhoods nestled at the foot of the majestic San Gabriel mountains, had an opportunity earlier this week to repeal their utility tax. As reported in the San Gabriel Valley Tribune, by a margin of more than four-to-one, they decided to keep their tax.

Opponents of the utility tax repeal pointed out that Sierra Madre has very low per capita sales tax revenue (claiming 460th out of 481 California cities), and therefore depends on their utility tax. And in any case, the numbers are vanishingly small. Had Sierra Madre’s citizens voted to repeal their utility tax, it would have eliminated $2.6 million, or 24%, from the city’s annual revenue.

The real question facing Sierra Madre, and all of California’s cities, isn’t whether or not to repeal various local taxes, but how many new taxes to approve in the next few years. As documented by CalTax, every election cycle, hundreds of new local taxes are proposed, and they usually pass. For example, in November 2016, 224 new local tax increases were proposed, and 71% of them were approved by voters.

How these measures get approved by voters is nicely exemplified by the Sierra Madre ballot. Measure D, at the top of the ballot, presented the question to voters: “Shall the City of Sierra Madre adopt a measure repealing the City’s Utility Users Tax in its entirety?

But below Measure D on this ballot was Advisory Measure A, which read “If Measure “D” passes, repealing the Utility Users’ Tax and eliminating approximately 24% or $2.6 million of the City’s General Fund Revenues, should the City Council eliminate paramedic services, reduce and outsource police services and library services, reduce code enforcement, and fire suppression services, in addition to other reductions which will be required to balance the budget?

SIERRA MADRE SPECIAL ELECTION BALLOT – 4/10/2018

If that isn’t an anti Measure D campaign message masquerading as an “advisory measure,” then there’s a bridge for sale in San Francisco, and the moon is made of green cheese.

It’s worth wondering why the pro-repeal campaign didn’t just try to reverse Sierra Madre’s recent utility tax increase, instead of calling for its total repeal. After all, that tax has been in place since 1993. But in 2016, Sierra Madre’s voters approved an increase in the utility tax rate from 8% to 10%. Rolling back that increase, which equates to about a half-million per year in additional tax collections, would not have broken the city’s finances. It could have been marketed for what it would have been – a way to pressure Sierra Madre’s elected officials to finally confront their escalating pension payments.

ALL NEW TAXES ARE TO PAY MORE FOR GOVERNMENT PENSIONS

Beyond any serious debate by now is the fact that payments to CalPERS by California’s cities are set to nearly double in the next six years, from a projected total of $3.1 billion in 2017-18 to over $5.8 billion in 2024-25. This is based on recent “Public Agency Actuarial Valuation Reports” issued by CalPERS actuaries for each of their participating agencies, summarized here by the California Policy Center.

In the case of Sierra Madre, this year they will pay $1.5 million to CalPERS, which is 13.8% of their total general fund revenues. By 2024, they will be paying CalPERS $2.2 million, or over 20% of their total general fund revenues.

One in five dollars of Sierra Madre’s tax revenue will be paying for pensions. And that does NOT include (1) any payments for other post-employment benefits, (2) any increases to those payments based on investments deciding not to perform as well in the next ten years as they have in the past ten years (imagine that), or (3) any additional payments if Sierra Madre happens to have issued “pension obligation bonds” in prior years. We didn’t look into this, but plenty of cities have succumbed to the temptation to borrow money to make their pension payments.

One possible source of relief for this comes in the form of the CalFire vs CalPERS case that is working its way through the California Supreme Court. There is a possibility that a ruling could undermine the “California Rule,” which to-date has been aggressively – and successfully – interpreted by government union attorneys to mean that pension benefits cannot be diminished, even for work not yet performed.

If the outcome of that case tilts in favor of reform, you might see this “advisory measure” on a local ballot, right beneath the next proposed tax increase.

HYPOTHETICAL SIERRA MADRE SPECIAL ELECTION BALLOT
(including “advisory measure” that proposes reducing pension benefits)

That would be the day. When immediately below a proposed tax increase, an “advisory measure” proposes to reduce pension benefits if the tax increase does not pass.

And that certainly would not be an anti-tax campaign message, would it?

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Support our troops? Support education choice for their kids

MOVE OUT: U.S. Marines at Camp Pendleton, California, preparing for deployment, Oct. 24, 2017. (U.S. Marine Corps photo by LCpl Anabel Abreu Rodriguez)

Among the many burdens we place on military families, there’s frequent re-location from one military duty station to another – one year you’re in North Carolina, the next in Southern California or Norfolk, Virginia or even Germany or Japan. These are not combat zones but some of the places the military send both the military member and his or her spouse and family. Part of that is requiring children of a military family to pack up and move their lives, including their ongoing education, to another state or even nation.

In California, there are 32 military bases of all four branches plus the Coast Guard with thousands of military families at each base. At Camp Pendleton alone there are 42,000 active duty military personnel serving on base – many, many of them with families that include school-age children.

Those children (and their parents) find themselves at the mercy of the local public school districts. Sometimes these schools are perform poorly – or are even rated “failing” year after year with no change in sight. Sometimes, the child has special education or other needs that the local school simply cannot take care of.

Like most states, California does not have school-choice options available for such military families. Here, the children of military families are stuck in the school that is simply nearest their parents’ military duty station.

Private school is rarely an option for low-paid military families – the tuition is simply beyond reach. Studies reveal that many times military families, faced with the prospect of placing their children in a school that does not meet their child’s needs, exit the military.

The resulting troop loss is no small matter. Taxpayers pay hundreds of millions of dollars to train military members in many different occupations. Mechanics (jets, trucks, tanks, etc.), doctors, nurses, pilots, special forces, supply or logistics specialists, etc., etc., etc. – all are vital to the national defense. When military members leave the service, our armed forces lose those members’ years of experience, leadership and the hundreds of millions of taxpayer dollars spent in training them. This places a significant burden on the military budget to replace those service members. In short our national security suffers greatly and this is costly to taxpayers.

There’s a proposal that will largely solve this problem. H.R. 5199 (introduced by Rep. Jim Banks, R–IN) and Senate version S.2517 (Senator Ben Sasse, R–NE) will amend the Elementary and Secondary Education Act of 1964. It is also known as the Education Savings Accounts for Military Families Act of 2018.

Under these bills, military families would be allowed to establish education savings accounts. It would transition Impact Aid funds the Federal Government already pays to local school districts for the education of military dependents into these accounts. Then the parents could choose the school of their choice – the best place for their child’s education needs. Private schools, parochial schools, private tutoring and even homeschooling expenses would be approved expenses under H.R. 5199. And if there is money left over at the end of the school year, it can be rolled over for the next year – or even for college. Funds not used by the time the child leaves the education system are paid back to the government and the educational savings account for that child is closed.

Just as in the current public school system, the money would follow the child; unlike the current California system, those funds would be allowed to follow the child outside of the public school system. Parents, not a Zip code, would determine educational choice for a child.

Educational Savings Accounts are already a proven success in providing a better education for children. H.R. 5199 will allow military families, including thousands of families stationed in California, the freedom to make the best choices possible for their children. This will likely be a major factor in whether many servicemen and women elect to stay in the military.

Congress members should co-sponsor and vote yes on H.R. 5199 or make this proposal part of the National Defense Authorization Act which is passed every year by Congress to fund our military.

Craig P. Alexander is an attorney and former U.S. Marine who serves as general counsel to the California Policy Center. His office is located in Dana Point, California and his practice includes insurance, commercial leasing, business contracts, the California Public Records Act and HOA law and litigation. He can be reached at Craig@CraigAlexanderLaw.com.

 

California should copy New Jersey’s union fund takeover, but with one caveat

Will the California Supreme Court Reform the “California Rule?” – Latest Update

Most pension experts believe that without additional reform, pension payments are destined to put an unsustainable burden on California’s state and local governments. Even if pension fund investments meet their performance objectives over the next several years, California’s major pension funds have already announced that payments required from participating agencies are going to roughly double in the next six years. This is a best-case scenario, and it is already more than many cities and counties are going to be able to afford.

California’s first major statewide attempt to reform pensions was the PEPRA (Public Employee Pension Reform Act) legislation, which took effect on January 1st, 2013. This legislation reduced pension benefit formulas and increased required employee contributions, but for the most part only affected employees hired after January 1st, 2013.

The reason PEPRA didn’t significantly affect current employees was due to the so-called “California Rule,” a legal argument that interprets state and federal constitutional law to, in effect, prohibit changes to pension benefits for employees already working. The legal precedent for what is now called the California Rule was set in 1955, when the California Supreme Court ruled on a challenge to a 1951 city charter amendment in Allen v. City of of Long Beach. The operative language in that ruling was the following: “changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages.

To learn more about the origin of the California Rule, how it has set a legal precedent not only in California but in dozens of other states, two authoritative sources are “Overprotecting Public Employee Pensions: The Contract Clause and the California Rule,” written by Alexander Volokh in 2014 for the Reason Foundation, and “Statutes as Contracts? The ‘California Rule’ and Its Impact on Public Pension Reform,” written by Amy B. Monahan, a professor at the University of Minnesota Law School, published in the Iowa Law Review in 2012.

Pension benefits, most simply stated, are based on a formula: Years worked times a “multiplier,” times final salary. Thus for each year a public employee works, the eventual pension they will earn upon retirement gets bigger. Starting back in 1999, California’s public sector employee unions successfully negotiated to increase their multiplier, which greatly increased the value of their pensions. In the case of the California Highway Patrol, for example, the multiplier went from 2% to 3%. But in nearly all cases, these increases to the multiplier didn’t simply apply to years of employment going forward. Instead, they were applied retroactively. For example, in a typical hypothetical case, an employee who had been employed for 29 years and was to retire one year hence would not get a pension equivalent to [ 29 x 2% + 1 x 3% ] x final salary. Instead, now they would get a pension equivalent to 30 x 3% x final salary.

Needless to say this significantly changed the size of the future pension liability. For years the impact of this change was smoothed over using creative accounting. But now it has come back to haunt California’s cities and counties.

Amazingly, the California rule doesn’t just prevent retroactive reductions to the pension benefit formula. Reducing formulas retroactively might seem to be reasonable, since formulas were increased retroactively. But the California rule, as it is interpreted by attorneys representing public employee unions, also prevents reductions to pension benefit accruals from now on. And on that question, in the case CalFire vs CalPERS, the California Supreme Court has an opportunity this year to make history.

Ironically, the active cases currently pending at the California Supreme Court were initiated by the unions themselves. In particular, they have challenged the PEPRA reform that prohibits what is known as “pension spiking,” where at the end of a public employee’s career they take steps to increase their pension. Spiking can take the form of increasing final pension eligible salary – which can be accomplished in various ways including a final year promotion or transfer that results in a much higher final salary. Another form of spiking is to increase the total number of pension eligible years worked, and the most common way to accomplish this is through the purchase of what is called “air time.”

Based on fuzzy math, the pension systems have offered retiring employees the opportunity to pay a lump sum into the pension system in exchange for more “service credits.” Someone with, say, ten years of service, upon retirement could pay (often the payment that would be financed, requiring no actual payment) to acquire five additional years of service credits. This would increase the amount of their pension by 50%, since their pension would now be based on fifteen years x 3% x final salary, instead of 10 years x 3% x final salary. To say this is a prized perk would be an understatement. How it became standard operating procedure, much less how the payments made were calculated to somehow justify such a major increase to pension benefits, is inexplicable. But when PEPRA included in its reform package an end to spiking, even for veteran employees, the unions went to court.

The spiking case that has wound its way to the California Supreme Court with the most disruptive potential started in Alameda County, then was appealed to California’s First Appellate Court District Three. The original parties to the lawsuit were the plaintiffs, Cal Fire Local 2881, vs CalPERS (Appellate Court case). On December 30, 2016, the appellate court ruled that PEPRA’s ban on pension spiking via purchases of airtime would stand. The union then appealed to the California Supreme Court.

An excellent compilation of the ongoing chronology of the California Supreme Court case Cal Fire Local 2881 v. CalPERS (CA Supreme Court case) can be found on the website of the law firm Messing, Adam and Jasmine. It will show that by February 2017 the unions filed a petition for review by the California Supreme Court, and that the court granted review in April 2017. In November 2017, Governor Brown got involved in the case, citing a compelling state interest in the outcome. Apparently not trusting his attorney general nor CalPERS to adequately defend PEPRA, the Governor’s office joined the case as an “intervener” in opposition to Cal Fire Local 2881. For nearly a year, both petitioners and respondents to the case have been filing briefs.

This case, which informed observers believe could be ruled on by the end of 2018, is not just about airtime. Because whether or not purchasing airtime is protected by the California Rule requires clarification of the California Rule. The ruling could be narrow, simply affirming or rejecting the ability of public employees to purchase airtime. Or the ruling could be quite broad, asserting that the California Rule does not entitle public employees to irreducible pension benefits, of any kind, to apply for work not yet performed.

One of many reviews of the legal issues confronting the California Supreme Court in this case is found in the amicus brief prepared by the California Business Roundtable in support of the respondents. A summary of the points raised in the California Business Roundtable’s amicus brief is available on the website of the Retirement Security Initiative, an advocacy organization focused on protecting and ensuring the fairness and sustainability of public sector retirement plans. An excerpt from that summary:

“The Roundtable brief asserts the California Rule has numerous legal flaws:

(1) It violates the bedrock principle that statutes create contractual rights only when the Legislature clearly intended to do so.

(2) It violates black-letter contract law by creating contractual rights that violate the reasonable expectations of the parties.

(3) It violates longstanding constitutional law by assuming that every contractual impairment automatically violates the California and Federal Contract Clauses.

(4) It lacks persuasive or precedential value. The Rule was initially adopted without anything resembling a full consideration of the relevant issues.

(5) It has been almost uniformly rejected by federal and state courts—including by several courts that previously accepted it.

(6) It has had—and will continue to have—devastating economic consequences on California’s public employers.”

Pension reform, and pension reformers, have often been characterized as “right-wing puppets of billionaires” by the people and organizations that disagree. The fact that one of the most liberal governors in the nation, Jerry Brown, actively intervened in this case in support of the respondent and in opposition to the unions, should put that characterization to rest.

If the California Supreme Court does dramatically clarify the California Rule, enabling pension benefit formulas to be altered for future work, it will only adjust the legal parameters in the fight over pensions in favor of reformers. After such a ruling there would still be a need for follow on legislation or ballot initiatives to actually make those changes.

What California’s elected officials and union leadership, for the most part, are belatedly realizing, is that without more pension reform, the entire institution of defined benefit pensions is imperiled. Hopefully California’s Supreme Court will soon make it easier for them all to make hard choices, to prevent such a dire outcome.

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Edward Ring co-founded the California Policy Center in 2010 and served as its president through 2016. He is a prolific writer on the topics of political reform and sustainable economic development.

REFERENCES

California Government Pension Contributions Required to Double by 2024 – Best Case
– California Policy Center

California Public Employees’ Pension Reform Act (PEPRA): Summary And Comment
– Employee Benefits Law Group

Allen v. City of of Long Beach
– Stanford University Law Library

Overprotecting Public Employee Pensions: The Contract Clause and the California Rule
– Alexander Volokh, Reason Foundation

Statutes as Contracts? The ‘California Rule’ and Its Impact on Public Pension Reform
– Amy Monahan, Iowa Law Review

Did CalPERS Use Accounting “Gimmicks” to Enable Financially Unsustainable Pensions?
– California Policy Center

Cal Fire Local 2881, vs CalPERS (Appellate Court case)
– JUSTIA US Law Archive

Cal Fire Local 2881 v. CalPERS, California Supreme Court, Case No. S239958 – Case Review
– Messing, Adams and Jasmine

Intervener and Respondent State of California’s Answer Brief on the Merits
– Amicus Brief, Governor’s Office, State of California

Amicus Brief of the California Business Roundtable in Support of Respondents
– Amicus Brief, California Business Roundtable (CBR)

RSI Supports California Business Roundtable Amicus Brief
– Summary of CBR Amicus Brief by Retirement Security Initiative

Resources for California’s Pension Reformers
– California Policy Center

 

 

 

Gas-tax repeal gets closer to vote as train spotlights state’s misplaced priorities