House 113-49. January 15, 2014. A review of the challenges facing California high-speed rail. House of Representatives.
[ Excerpts from the 166 page transcript of this House hearing ]
Jeff Denham, California, Chair. I think the question that every member of this committee needs to see and understand is the $55 billion that is still needed is more than we spend on infrastructure across the entire Nation. So is every member of this committee, every Member of this Congress willing to give up the money for their State for California to expand a rail system that goes from L.A. to San Francisco, may not relieve our traffic congestion?
In 2008, the voters of California approved a $9.95 billion ballot measure, Prop 1A. I was serving in the State senate at the time, and voted in favor of this proposition because of the guarantee to taxpayers it would be fiscally responsible, and not need an ongoing subsidy.
What was sold to voters was a $33 billion project that would receive equal parts of financing from the State, Federal Government, and private investors. Since that vote, as costs have skyrocketed and the outcomes of the project have remained in flux, I have consistently called for the California High-Speed Rail Authority to develop a viable plan that accepts economic and budgetary realities.
Sadly, after 5 years, we are nowhere closer to that viable plan, nor have any construction jobs been created, even though the premise for the Recovery Act was to create jobs immediately.
In fact, in November the project received two new setbacks in the California State court system:
- The courts found that the California high-speed rail funding plan did not comply with Prop 1A. Those requirements were identified as $26 billion needed to build the entire 300 miles of rail between Merced and San Fernando, and that all environmental clearances be completed for the entire initial operating segment.
- The courts found that California High-Speed Rail Authority did not provide sufficient justification for the issuance of $8.6 billion in Prop 1A bond funds. Those bond funds were to be the source of the State match for the $2.55 billion the Federal Government has provided to this project through the Recovery Act. Therefore, as of now, California does not have the funding in hand to begin supplying the State match for the Recovery Act grant, and the Federal Railroad Administration’s grant agreement with California requires the first State match, that payment, due on April 1.
In this hearing I want to hear from the Authority about how they are going to resolve these deficiencies, where the total $26 billion will come from, and how they complete the environmental reviews for the entire 300 initial operating segments.
I also want to understand how the Authority believes that Governor Brown’s proposal to use revenue from California’s cap and trade program to support the project is constitutional, since independent observers have stated that the high-speed rail program is not an eligible use for those revenues.
After the rulings, I sent a letter to the FRA on December 12th with a number of commonsense, simple questions. The Administration sent back this letter that basically states, ‘‘Everything is fine. Nothing has changed.’’ They didn’t answer a question, and staff has basically refused to provide the data that we feel is necessary to conduct proper oversight.
Further, despite the loss of matching funds, FRA has continued to reimburse California for spending on the project. We need to understand what FRA has reimbursed California to date, including since the adverse rulings, and how much matching funds California is required to contribute to the project. Under FRA’s grant agreement, the Administration has the ability today, right now, to suspend reimbursements until the California High-Speed Rail Authority presents a viable plan to identify a new source of the required State match. Given so much uncertainty around this project, why wouldn’t FRA take the prudent step to hold off spending more taxpayer dollars until they are satisfied that California has remedied these legal setbacks? If the Administration continues to march down this same path, operating as though it is business as usual, then I am prepared to take my own action through legislation to force FRA to act in a more prudent fashion. Frankly, after 5 years filled with cost overruns, lawsuits, lost promises of immediate job creation in the valley, and reduced expectations, unless they can come up with a viable plan that meets the requirements of Prop 1A, I believe it is time to end this project.
Doug La Malfa, California. The voters of California in 2008 were told that this would be a $33 billion project, up to $45 billion if you add a spur to Sacramento and one to San Diego. Those two have been long since abandoned in this project. And the price ballooned at that hearing we had in November of 2011 in the State senate to just under $100 billion.
So what did the audit folks think about that, what the voters were sold when they were originally told $33 billion? So, the Governor revised the plan down to $68 billion, utilizing transport in the bay area and Los Angeles. Now, I can understand why those folks would want to have their areas enhanced with electrifying Caltrain, I am sure that is a good thing. It is not the domain of high-speed rail to be doing so. This revised plan is not even legal under Proposition 1A, because it doesn’t deliver a true high-speed rail all the way from San Francisco to all the way to downtown Los Angeles. So, in time, this will be exposed.
In order to afford to ride high-speed rail, it would have to be subsidized per ticket in the true cost of operating it, or someone is going to have to pay probably $300 per ticket to ride it from L.A. to San Francisco, or vice versa, in order to sustain itself. It is not going to meet the mark of matching airline ticket prices.
What is the utility of this project? It is being compared to a lot of other important infrastructure projects in the history of California, or in the history of the Nation. I think nobody would dispute the interstate system or California water project, the Federal water project. Other comparable issues have been very useful to many Californians and many Americans. We have heard some pretty grand claims on what it would provide for California. The Authority at one time was trying to claim a million jobs for Californians. We had a hearing in the State legislature on it, finally pinned them down, said they meant a million job years, which might translate to approximately 20,000 jobs during the time it is to be built.
So, we have to ask ourselves here today, as a Federal body, are we being good stewards of Federal tax dollars with the $3-plus billion of stimulus money that is still captured for this plan, as well as telling State voters that your investment of $9-plus billion in State bonds, which have to be paid back in a two-to-one ratio—is this a good investment for you, for a plan that no private investors want to come in on? We can see that a forward-thinking project like the Maglev, perhaps, running from DC to Baltimore, has already attracted Japanese investors as a possibility. High-speed rail is using 18th-century technology. It is steel wheels running on a rail. It might go faster if it is not stopping in every burg up and down the valley in order to gain the votes of those legislators to put high-speed rail on the ballots. Indeed, how many true high-speed rail end-to-end trains are going to be run, or will be able to run, at 220 miles per hour on this project?
It is not going to meet the goals. It is not going to meet the cost goals. We heard some creative ridership numbers posed in the past by the Authority. There might be 32 million riders, and it is going to replace the airplane riders from S.F., to L.A., vice versa. There are only 8 million people that use airlines between those two towns. And so we are going to replace that with 32 million riders? There are only 31 million riders that use Amtrak nationwide, in the 48 States, per year. High-speed rail in California is going to surpass that?
So, we can only identify $13 billion of real funding so far to go into this project. By Governor Brown’s estimate, it would be $68 billion. Where is the other $55 billion going to come from to build this thing?
The Governor’s proposal was to divert $250 million from California’s new cap and trade into this project. That is not fulfilling the goal of whatever cap and trade is, because high-speed rail won’t be operable for at least 30 years to replace and start on the positive side on reducing CO2. In the meantime, they are going to be constructing it, using heavy equipment to build the project.
In California, because of all the CO2 emissions that are going to be happening during the 30 years of construction, they proposed they are also going to plant thousands of trees to offset the CO2 output from its construction. So we are not going to realize benefits any time soon to the CO2 equation of this project.
David G. Valadao, California. I have watched as the estimated costs of this project have ballooned tens of billions of dollars more than was promised to the voters in 2008. I have watched as the California High-Speed Rail Authority has invented a plan that takes thousands of acres of farmland out of production and destroys hundreds of homes and businesses throughout our communities.
The current path, which is constantly changing, calls for the tracks to cut across the entire length of the San Joaquin Valley through some of our Nation’s most productive farmland. Fields will be cut in half, fertile ground will be taken out of farming, and production will suffer.
While estimates of the project’s price tag continue to escalate, I find it increasingly difficult to reconcile the tremendous cost of the project with the limited benefits it provides to my constituents and to all taxpayers in California, as a whole. When California voters approved the project in 2008, they were told the project would cost $33 billion, and burden would be shared equally between State and Federal Governments and private investors. Since then, cost estimates skyrocketed to over $90 billion for a fully operational high- speed rail line, and nearly $70 billion for a new blended line that is only high speed some of the time.
When the State of California chooses to spend the taxpayers’ money on high-speed trains, they are forced to set aside other priorities. This year, California faces a drought that leaves the availability of clean, high-quality water in jeopardy for families and farmers. At the same time, California’s aging water infrastructure is struggling to keep up with demand from a growing population. When the State of California chooses to spend taxpayer money on high-speed rail, they are choosing to neglect addressing our valley’s water crisis, and they are choosing to jeopardize water availability for over 30 million Californians.
Mr. DUNCAN. a few weeks ago there was an article in the Washington Times saying that estimated cost has gone from $33 billion to $68.5 billion. Does anybody know how much this is going to cost us? Are these cost estimates going to keep going up? That same article said 52 percent of the Californians were against this, and with some undecided,
Mr. LAMALFA. Indeed, it was sold to the voters as a $33 billion project for the San Francisco-to-L.A. line. A year later, it was revised to $42 billion, after the voters had already left. When we had the hearing in September—excuse me, November 2011, they finally admitted it was a $98.5 billion project to do the legal project, true high speed from San Francisco all the way to Los Angeles, or vice versa. So, the modified project, to get the cost down and not scare everybody so much, did reduce to $68 billion. But that means it is not a true high speed from San Francisco all the way to L.A. They are going to use Caltrain, they are going to pay to help electrify that track in the North and do other infrastructure in the South. So, the real number, for a legal Proposition 1A project, is somewhere around $100 billion as an old estimate. With inflation, who knows where it is: 120, 130, 150? We see how these things go.
Just ask the Bay Bridge what that cost.
Mr. VALADAO. No one disagrees that L.A.-San Francisco has horrible traffic. From a Central Valley perspective, it doesn’t make any sense why you would start the project in the Central Valley, if L.A.’s traffic is so bad. I have no problem with helping fix the traffic in L.A. Do something there, spend the money there. Getting from where I live in Hanford down into L.A., if I wanted to get on Amtrak today, or if they built the high-speed rail, it would stop in Bakersfield. I would get off the proposed rail project, get on a Greyhound Bus, go over the Grapevine, then go into L.A. There is no connection there, there is no rail there. You would think we would start by filling in some holes in our current system with newer technology, versus building a train literally right next to an existing train that we already have and we already lose money on. It just doesn’t make any sense. If you are hell bent on spending money and building rail, start somewhere where we actually need rail.
Mr. DENHAM. There is a $20 billion hole [in funding to fill to have a high-speed electrified track that goes around Palmdale and to San Fernando Valley. So, either you have to come up with that $20 billion to comply with the court, or you have to comply with Prop 1A, which says, if you are redefining that usable segment, that usable segment cannot operate with a subsidy, and it cannot operate outside of high speed.
So, you are saying that this construction segment will not be high speed, it will not be electrified, it will just be a second Amtrak, which I know Mr. McCarthy, if he were still here, has huge issues with having two Amtraks that stop in his district and you get on a bus on both of them to go over Tehachapis. So, if it is not high speed, because it is not electrified, and it is running a subsidy, how does that initial construction segment comply with Prop 1A? My concern is that we build another Amtrak that stops in Bakersfield, and the rest of the Nation looks at California and says, ‘‘You just spent $6 billion,’’ and it is decades, if ever, that this thing ever gets accomplished.