Senate Hearings Reveal the Weak Case for High-Speed Rail

I testified for the first time before a state legislative committee on Tuesday. My main takeaways: The argument in favor of High-Speed Rail is catastrophically weak, and parking near the State Capitol is awful.

My testimony did little to persuade Senate Transportation and Housing Committee members. They ultimately killed SB414, a bill that would have given Californians the right to vote again on a rail project that has, since the first statewide ballot measure in 2008, gone through more style changes than Lady Gaga.

In a supermajority Democratic Senate, the chances for State Senator Andy Vidak’s (R-Hanford) bill were dismal. About as dismal as the chances of finding parking near the State Capitol. No kidding: All metered parking spaces and paid parking lots were fully occupied on Tuesday afternoon, obliging me to park in a two-hour zone 10 blocks from a three-hour legislative proceeding. There were a few free spaces in several lots near the Capitol, but those are available only to state employees and monthly permit-holders.

And somehow that dire parking situation seems, like High-Speed Rail itself, a perfect illustration of state government’s antipathy to cars, or its inability/unwillingness to provide adequate public services, or both.

The committee, chaired by Sen. Jim Beall (D-San Jose), ran in businesslike fashion. Senators reviewed about 10 bills that day, giving proponents and opponents reasonable time to express themselves before voting to move the legislation along or kill it.

On the downside, some senators walked in and out of the hearing. Particularly disturbing was the fact that committee Vice Chair Anthony Cannella (R-Ceres) walked out before the High-Speed Rail bill came up and remained out of the room for the entire discussion. He also did not cast a vote.

With Republicans uniting in opposition to the bullet train, it is disappointing to see a leading GOP legislator ducking this issue. In Washington, D.C. earlier this year, all 14 House Republicans asked Transportation Secretary Elaine Chao to defer action on a federal grant to Caltrain because of its association with high speed rail. At the hearing, Republican Senators Patricia Bates (Laguna Niguel), Mike Morrell (Rancho Cucamonga) and Ted Gaines (El Dorado) spoke out forcefully against the project.

Several Capitol watchers said Cannella abstains on High-Speed Rail because his engineering firm, Northstar Engineering Group of Modesto, gets business from the High-Speed Rail Authority. Because of the business relationship, Cannella seems to believe that voting on HSR is a conflict of interest.

A listing of HSR contracts I reviewed does not mention Cannella’s company, but it may be a subcontractor. Assuming that Cannella has a business relationship with HSR, two thoughts come to mind: (1) the senator should feel free to vote against the bullet train because he would not financially benefit from such a vote, and (2) maybe he should step off the committee. As a principal of a firm that handles civil engineering projects, his commercial interests may conflict with many bills coming before the Transportation and Housing Committee.

California’s finances would be better served by a committee member who is unconflicted and willing to demand accountability from HSR.

I was one of three to testify on behalf of SB 414 (and so against HSR), along with James Janz, attorney and president of the Community Coalition on High Speed Rail, and David Wolfe, legislative director for the Howard Jarvis Taxpayers Association. (My testimony is below.)

Speaking up for the High-Speed Rail project, Jeremy Smith (State Building and Construction Trades Council) and Sara Flocks (California Labor Federation) said HSR creates good-paying jobs and business opportunities in the Central Valley.

But if the real goal of High-Speed Rail isn’t great transportation so much as good jobs, the state could almost certainly come up with other make-work projects that don’t inconvenience Central Valley commuters, destroy farms and waste so much money on a system that is unlikely to be completed. Widening roads, laying more fiber-optic cable and digging holes and filling them up again could also provide jobs and contracts without so much waste.

For Committee Chair Beall (who also happens to be the sponsor of SB1, the road-tax increase), the decision came down to funding. He called a representative of the High-Speed Rail Authority and led her through the list of funding sources. She confirmed that the authority has already spent almost all of the $3.5 billion in federal matching funds it had been granted. Of this amount, $2.6 billion has yet to be matched by the state – and if California does not issue at least $2.6 billion of HSR bonds and spend that money, it will have to return the federal funds.

Beall’s conclusion: SB414 must be defeated and the project must continue or else we’ll have to return $2.6 billion.

There was little debate, and no one said what seems obvious. First, if California had a better relationship with the federal government and was willing to consider scrapping HSR, perhaps it could negotiate a deal under which the state would be required to return less money or perhaps none at all. After all, President Trump claims to be a dealmaker.

Second, since there is insufficient funding to complete the entire line from San Francisco to Los Angeles, it’s better to return $2.6 billion rather than waste tens of billions more on what could well turn out to be a train to nowhere.

Throwing good money after bad? Keeping people busy? If that’s all the pro-HSR forces have, they may not survive Gov. Brown’s exit from the stage next year.

My Testimony

Senator Beall, Senator Cannella, members of the committee:  thank you for giving me the opportunity to address you today. My name is Marc Joffe, and I am the Director of Policy Research at the California Policy Center. I am speaking today in favor of Senate Bill 414, which would give California voters an opportunity to determine whether the California High Speed Rail project should continue.

More than a decade ago, High Speed Rail Authority officials compiled a cost-benefit model that won the approval of the Bush Administration, Governor Schwarzenegger and California voters. In the years that followed, we have learned several things that affect the calculations the Authority made back then.

First, California’s population is growing more slowly than previously expected. In fact, the Census Bureau recently reported that Marin County’s population declined between July 1, 2015 and July 1, 2016, while both San Mateo and Santa Clara Counties experienced net out-migration. When it made its state population projections back in 2004, the Department of Finance predicted that California would have 55 million residents in 2050; DoF’s now forecasts only 49 million.

The state’s stagnating population casts further doubt on authority ridership projections, which have been disputed by independent researchers. Particularly striking is the comparison between forecast HSR ridership and actual ridership we see in Amtrak’s Northeast Corridor. HSR’s median 2040 ridership projection of 40.7 million passengers per year is more than triple the current ridership of all Amtrak services between Boston, New York and Washington, DC – including both Acela and lower speed trains. The northeast corridor’s service area is more densely populated, has more population overall and has a century-long tradition of intercity train travel. It would thus appear that Northeast Corridor ridership is at best a ceiling, rather than a floor, for potential HSR ridership.

Second, the system will not be able to transport passengers from San Francisco to Los Angeles in two hours and forty minutes, as promised in the 2008 ballot language. By embracing the blended system – an understandable cost saving measure – the Authority must accept maximum speeds well below the desired 220 miles per hour along existing rights of way.

Third, hybrid and plug-in electric cars have become more popular than originally imagined. With California planning to migrate to a mostly zero-emission vehicle fleet by mid-century, the climate change benefits of high speed rail will be much less than originally anticipated. Indeed, it may be many decades – if ever – before HSR emission savings offset the greenhouse gases being generated by the system’s construction.

Finally, estimated construction costs are now much higher than those provided to voters in the 2008 Voter Guide. Instead of $45 billion to create a truly statewide High Speed Rail system we are now looking at $64 billion to just build the segments connecting Los Angeles and San Francisco. Untold additional billions would be needed to add service to Sacramento and San Diego.

Aside from these changes – and, in part, because of them – the financing picture for High-Speed Rail has become cloudy. The odds of the Trump administration providing more funding are close to zero, private investors have not stepped up and cap-and-trade revenues are coming in well below forecasts. If the state is serious about completing this project, it will need to issue tens of billions in additional bonds beyond those authorized in Proposition 1A.

Recently, California Policy Center inventoried public agency obligations across our state, including bonds, pension obligations and retiree medical care obligations. We found that these debts amounted to $1.3 trillion – more than half of California’s Gross State Product. Layering additional bonds on top of this wall of debt can reasonably be regarded as unfair to our children and other future residents of this state.

Given all that has changed since voters narrowly approved Proposition 1A in 2008, I believe that we need to revisit the cost benefit model on which HSR is based. By giving voters another chance to vote on High Speed Rail, as provided for in SB 414, you can allow this necessary re-evaluation to occur.