Sunday, May 2, 2010

The State Auditor Reports:

Highlights from the official State Auditors report follow below.
Official State Auditor Report on the High-Speed Rail Authority:

It Risks Delays or an Incomplete System Because of Inadequate Planning, Weak Oversight, and Lax Contract Management


Our review of the High-Speed Rail Authority (Authority) revealed the following.

*The Authority's 2009 business plan estimates it needs $17 billion to $19 billion in federal funds. However, the Authority has no federal commitments beyond $2.25 billion from the American Recovery and Reinvestment Act of 2009 (Recovery Act), and other potential federal programs are small.

*The Authority's plan for spending includes almost $12 billion in federal and state funds through 2013, more than 2.5 times what is now available.

*The Authority does not have a system in place to track expenditures according to categories established by the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, its largest source of committed funding.

*The Authority has not completed some systems needed to administer Recovery Act funds, for example, a system to track jobs created and saved.

*Some monthly progress reports, issued by the Authority's contracted Program Manager to provide a summary of program status, contain inconsistent and inaccurate information.

*Authority staff paid at least $4 million of invoices from regional contractors received after December 2008, without having documented written notification that the Program Manager had reviewed and approved the invoices for payment.

*The Authority paid contractors more than $268,000 for services performed outside of the contractors' work plans and purchased $46,000 in furniture for one of its contractor's use, based on an oral agreement contradicted by a later written contract.


The Legislature created the High-Speed Rail Authority (Authority) in 1996. State law charges the nine-member Authority with the development and implementation of intercity, high-speed rail service. According to state law, the entire network, from Sacramento to San Diego, is intended to be complete by 2020. In November 2008 voters approved the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (Proposition 1A), providing $9 billion for construction of a high-speed rail network (program).

Although the Authority's 2009 business plan contains the elements required by the Legislature, it lacks detail regarding how it proposes to finance the program. For example, the Authority estimates it needs $17 billion to $19 billion in federal grants. The business plan, however, specifies only $4.7 billion in possible funds from the American Recovery and Reinvestment Act of 2009 (Recovery Act) and a few other small federal grants. According to its communications director, the Authority has no definite commitments from the federal government other than Recovery Act funding, which actually amounted to $2.25 billion when awards were announced in January 2010. The program risks significant delays without more well-developed plans for obtaining or replacing federal funds.

Further, the Authority's plan relies heavily on federal funds to leverage state bond dollars through 2013. Proposition 1A bond funds may be used to support only up to 50 percent of the total cost of construction of each corridor of the program. The remaining 50 percent must come from other funding sources. Thus, the award of up to $2.25 billion in Recovery Act funds allows for the use of an equal amount of state bond funds for construction, for a total of about $4.5 billion. However, the Authority's spending plan includes almost $12 billion in federal and state funds through 2013, more than 2.5 times what is now available. Additionally, creating a viable funding plan may be a challenge as matched funding for the least expensive corridor eligible for Recovery Act funds-Los Angeles to Anaheim-amounts to $4.5 billion, while projected costs total $5.5 billion. Barring additional non-Proposition 1A funding, the Authority may have to settle for a plan covering less than a complete corridor. The Authority must decide relatively quickly which corridors will receive federal funds. Its chief deputy director says it must prepare funding plans by spring 2011 in order to meet federal deadlines.

The Authority's plans for private financing include a revenue guarantee that needs further specification, but it is working to improve its approach to risk management. According to the 2009 business plan, the Authority expects private investors to supply $10 billion to $12 billion, but also indicates these investors will require a minimum revenue guarantee from a public entity. The Authority's financial planning consultant has addressed concerns raised by the Legislative Analyst's Office that this might be a prohibited operating subsidy; however, details on how much the revenue guarantee may cost or who might pay it are scant. Additionally, the 2009 business plan provided little detail on how the Authority would manage risk in general, but the Authority is planning to improve risk management for the program.

The Authority also needs to improve its oversight and administrative controls. State law creates a peer review group (review group) to assess the Authority's plans. Most significantly, the review group is to issue an analysis and evaluation of the viability of the Authority's funding plan for each corridor of the program. As of February 2010, however, only five of the group's eight members had been appointed, limiting the expertise available to the Authority. Moreover, according to our legal counsel, the review group is likely subject to the Bagley-Keene Open Meeting Act (Meeting Act), although the Authority has received informal advice to the contrary. Nevertheless, the review group's work could be voided if this issue is not resolved.

Additionally, the Authority lacks systems to comply with state law regarding bond funds. According to state law, only up to 2.5 percent ($225 million) of its portion of bond funds from Proposition 1A may be used for administration and only 10 percent ($900 million) may be used for planning, environmental review, and preliminary engineering (preconstruction tasks). According to its fiscal officer, the Authority is unsure how it will classify the expenditure of bond proceeds and does not have a system for tracking expenditures by category. Until such a process is in place, the authority cannot report accurately on its expenditures and risks running out of bond funds available for administration or preconstruction task costs. This is a serious problem because it is set to have spent $168 million of the $1.1 billion in bond proceeds authorized for these purposes by the end of fiscal year 2009-10.

Contractors accounted for 95 percent of the program's total expenditures over the past three fiscal years. Although the Authority generally followed state requirements for awarding contracts, its processes for monitoring the performance and accountability of its contractors-especially the entity that has been contracted to manage the program (Program Manager)-are inadequate. The Program Manager's monthly progress reports, a primary document summarizing monthly progress on a regional and program level, have contained inaccurate and inconsistent information. For example, the July 2009 report indicated that the regional contractor working on the Los Angeles-to-Anaheim corridor had completed 81 percent of planned hours but had spent 230 percent of planned dollars. In addition, although the progress reports described actions taken or products created, they did not compare those actions and products to what the contractors promised to complete in their work plans. The work plan for a consultant the Authority recently hired to oversee the Program Manager does not include a review of the monthly reports.

The Authority does not generally ensure that invoices reflect work performed by contractors. According to the chief deputy director, the Program Manager should review each regional contractor's invoice to ensure that the work claimed actually has been performed and then notify Authority staff whether the invoice should be paid. The chief deputy director further stated that staff should not pay invoices without notifications. However, Authority staff paid at least $4 million of invoices from regional contractors received after December 2008-when the Authority's fiscal officer says she was informed that such notifications were required-without documenting notification. The Authority only recently adopted written policies and procedures related to invoice payment. However, those policies and procedures do not adequately describe its controls or their implementation.

Finally, the Authority made some payments that did not reflect the terms of its agreements, risking its ability to hold contractors accountable for their performance. For example, it spent $46,000 on furniture for its Program Manager's use based on an oral agreement, despite the fact that its written contract expressly states that oral agreements not incorporated in the written contract are not binding. The written contract requires the Program Manager to provide its own furniture, equipment, and systems. Additionally, the Authority paid a regional contractor more than $194,000 to subcontract for tasks not included in the regional contractor's work plan and paid the Program Manager $53,000 for work on Recovery Act applications, which was also outside the Program Manager's work plan.


To ensure that it can respond adequately to funding levels that may vary from its 2009 business plan, the Authority should develop and publish alternative funding scenarios that reflect the possibility of reduced or delayed funding from planned sources. These scenarios should detail the implications of variations in the level or timing of funding for the program and its schedule.

To plan adequately for private investment, the Authority should further specify the potential cost of revenue guarantees and who would pay for them.

In order to respond effectively to circumstances that could significantly delay or halt the program, the Authority should ensure that it implements planned actions related to risk management.

To avert possible legal challenges, the Authority should ensure that the review group adheres to the Meeting Act or seek a formal opinion from the Office of the Attorney General regarding whether the review group is subject to this act.

To ensure that it does not run out of funds for administrative and preconstruction tasks prematurely, the Authority should track expenditures for these activities and develop a long-term spending plan for them.

To ensure that Authority staff receive relevant information on the program's status, they should amend the program management oversight consultant's work plan to include a critical review of progress reports for accuracy and consistency. Authority staff also should ensure that the Program Manager revises its progress reports to include information on the status of promised products and services.

To determine if it is paying invoices that accurately reflect work performed, the Authority should ensure that staff adhere to controls for processing invoices. For example, staff should not pay invoices from regional contractors until they receive notification from the Program Manager that the work billed has been performed, or until they have conducted an independent verification.

To ensure that it does not misuse public funds and can hold contractors accountable, the Authority should adhere to the conditions of its contracts and work plans, and make any amendments or modifications to contracts or work plans in writing.


The Authority raised concerns about the report title but agreed with our recommendations and outlined actions it is taking or plans to take to address them.

The Riverside Press Enterprise summed it accurately in its editorial about the report titled "Rail Sinkhole"

Tuesday, January 19, 2010

Media Background Links

Presentation to the Senate Budget Subcommittee #2 on Resources, Environmental Protection, Energy and Transportation on January 19, 2010,0,5941984.column

Column by LA Times veteran Sacramento observer George Skelton.
Summary:  Payments on bond borrowing are becoming uncomfortably high, crowding out funds for universities, healthcare, parks -- and all the other government services being slashed these days.;col1

Oakland Tribune story on how the high speed rail bond measure got onto the ballot.
Summary: Just pay $1 million to the right people.
$9 million PR Agency contract conflicts.
Summary: They almost got away with it.

A sobering analysis of the facts by highly respected experts who have studied high speed rail systems around the world.
Summary: “Even if high-speed rail attracted everyone who drove and flew between the Los Angeles basin and the San Francisco Bay Area during the year 2007, it would amount to only eight million passengers per year, nowhere near the numbers projected by the California High Speed Rail Authority, explained CEE professor Mark Hansen. But even that estimate is optimistic. HSR would be extremely unlikely to capture most current air travelers due to lack of transportation connectivity in most California cities and regions.”
Column by Dan Walters of the SacBee.
Dan Walters is a columnist with the Sacramento Bee and an expert on California politics. He has been a journalist for more than 40 years, working almost exclusively for California newspapers. He has written more than 6,000 articles about California and its politics, and his column now appears in more than 50 California newspapers. His articles have also appeared in The Wall Street Journal and the Christian Science Monitor, among other publications.  He is also the founding editor of the California Political Almanac, and co-author of The Third House: Lobbyists, Money and Power in Sacramento, a book on lobbying.
Editorial in the San Diego Union-Tribune.
Summary: “Advocates said annual ridership would be so enormous – 117 million – that the project would become massively profitable and would have vast environmental and traffic benefits by getting tens of thousands of polluting vehicles off the state’s roads. Ridership would be so voluminous that economies of scale would hold the cost of trips from Los Angeles to San Francisco to just $55 and that 450,000 non-transportation-related jobs would be created as a result.

There was just one problem: The ridership figure that was central to all these claims was seemingly invented out of whole cloth. The entire Amtrak system, which has more than 500 destinations in 46 states, has but 26 million passengers a year. The 117 million estimate was also vastly inflated from rail advocates’ own initial estimates – almost certainly because an honest estimate would have been a harder sell.”
Two UC Berkeley experts have completed the first comprehensive environmental life-cycle assessment of automobiles, buses, trains, and aircraft in the United States. Their report directly and dramatically contradicts the claims of the High Speed Rail Authority about the environmental benefits of high speed rail.

Summary: “While many consider high-speed rail an environmental silver bullet for transportation in California, Arpad Horvath, Associate Professor, Department of Civil and Environmental Engineering and Director of the Consortium on Green Design and Manufacturing, punctured those assumptions. "Our transportation decision-making is based on atrocious environmental data," he told the audience. Decisions about which transportation modes are greenest must be made not only the basis of tailpipe emissions, but rather, a total life-cycle assessment of the various modes. These must include manufacturing of the vehicles themselves, their required infrastructure, and the fuel used to power them. High-speed rail will produce some 10 million metric tons of carbon dioxide per year during its construction, said Horvath. It will need to run very full trains almost immediately to offset the emissions expended in building tracks, stations, rail cars to "compete environmentally" with air or road travel. In addition, if the train's electricity is produced by coal-fired or natural gas-fired plants there will be substantial, harmful emissions produced until cleaner, alternative fuel sources, such as wind power, are available for use. The bottom line, he said, was high-speed rail "only outperforms other modes if there is a very high passenger load or a very clean energy source, neither of which is assured at the moment."

Opposition to high speed rail is growing everywhere.
Summary: “The brainchild of public agencies in four states — Arizona, Colorado, Nevada and Utah — the rail alliance believes "the future mobility of people and freight in the West depends on high speed rail lines." Yet in supporting this dubious thesis in their opening press conference, officials misstated so many elementary facts as to cast doubt on whether they'd studied the issue at all.”
Foreign Suitors Lining Up for U.S. High-Speed Rail Payday
Summary: “Still, most of the work that lies at the heart of the systems would be done outside the United States, with the firms simply revamping existing technology to meet the needs of the U.S. market, said Gary Schulman, who leads Booz Allen Hamilton's government transportation consulting business. "They'll assemble them here, but of course the engineering will be done back in the homeland," he said.”

Sunday, December 20, 2009

Rotten Apple Alert

Rod Diridon, a member of the CSHRA board has called on the boards new $9 million PR agency to stop misinformation spread by a “few rotten apples.”

At a recent board meeting, Mr. Diridon said the following, verbatim:

"Second is, and I'll use as an example again one area, but I have an idea that its occurring in other areas too, misinformation is causing serious media relations problems in the mid-Peninsula Atherton, Menlo Park, Palo Alto area especially. That misinformation coming sometimes from in-advertently our own staff, but then again it's being presented by opponents, blatantly providing false information to the media and then having no correction. No information being provided that would counter that misinformation and I think you related to that earlier.

So would you relate to those two examples, not those two specific cases but those examples as kind of in the weeds detail, that you really need to be on immediately, so that it doesn't, the kind of thing are like a sore that festers, or the rotten apple in the barrel, if you would like to use another example. And you got to get that apple out of the barrel immediately and please figure out a way and let us know at some time in the future and call us individually or give us a report on how you would be creating kind of flying squads of emergency response to nip those problems in the bud. You want to avoid them if you can but if you can't avoid them you need to have a way of countering them immediately so that, misinformation isn't allow to float around, its corrected. So please consider that as early tasks."

Cutting through the grammatical confusion, here is what he is saying:

1. He is accusing people in Atherton, Menlo Park and Palo Alto of generating misinformation that is causing serious media problems.
2. Although this misinformation comes from some of the media inadvertently, it is not being corrected and therefore becomes an immediate task for the new public relations company, Ogilvy.
3. This misinformation is coming from opponents who blatantly provide false information to the media.
4.The false information is not being countered by CHSRA information, which, presumably, is not false. This correction must become Ogilvy's first assignment.
5. Although this process is at an "in the weeds" level of detail, it needs to be addressed immediately, because it becomes like a sore that festers.
6. Switching metaphors, Mr. Diridon refers to people who raise issues about high speed rail as the rotten apple in the barrel. He says that Ogilvy has to get that rotten apple out of the barrel immediately.
7. Having given this assignment to Ogilvy, he calls for them to figure out how to do this - get the rotten apple out of the barrel -- and report to him (and others) individually, presumably not during a public board meeting.
8. Mr. Diridon calls for Ogilvy to create flying squads with emergency response capability to nip those problems in the bud.
9. He points out that misinformation must not be allowed to float around without being corrected.
10. He considers this one of the first tasks for this $9 million contracted PR firm.

We agree. Misinformation needs to be corrected!

Perhaps a fitting place to start is by fact checking statements by the CSHRA and members of the CHSRA board. In innumerable speeches, press releases and even in the most recent business plan, (Page 67) the CHRSA compares the price of a $105 HSR ticket to driving by using $118 as the cost to drive between Northern and Southern California. Yet the CHRSA’s own research found that the average number of occupants per car traveling between North and South was 2.6 people. So the actual, factual, not misrepresented comparison is $276 for HSR rail tickets (2.6 people X $105) compared to $118 for the car. And that does not take into account that a large majority of people traveling from North to South via HSR would need to rent a car once they arrive at their destination. Here are the facts from the CHSRA’s own research.  Page 2-f-1

“The No Project Alternative (see Chapter 2) defines an intercity highway system represented by the interstate and state highway facilities in the geographic area serving the same intercity travel markets as the proposed high-speed train system. These highways are illustrated in Appendix 2-A of the Program EIR/EIS. In order to assess the magnitude of the demand to be served by this intercity highway system, the total intercity demand is first converted to total vehicle trips. This is accomplished by dividing the total annual intercity demand between major city pairs throughout the study area by an average auto occupancy factor (number of people per auto) to generate annual vehicle trips.

An average vehicle occupancy rate of 2.40 passengers per vehicle was assumed which is based on the independent ridership and revenue forecasts prepared for the California High Speed Rail Authority.1 This estimate assumes a weighted average of work and non-work trip average vehicle occupancy rates of 1.9 and 2.6, respectively.
The California High Speed Rail Authority is basing their financial plan on attracting 41,000,000 passengers per year according to the Dec. 2009 update to the plan.

Here is a reality check on their projections.

The Northeast Corridor from Boston to Washington DC has nearly twice the population of the San Francisco to San Diego Corridor. The Northeast attracts 20% more tourists. And in stark contrast to most California cities, the Northeast Corridor also has cities with actual city centers meaning that when you arrive at the train station you are close to hotels, offices and other places people want to visit.

Yet the entire Northeast Corridor with 2,600 trains operating daily generated a total of 9,946,027 passengers in FY 2009.  In other words, the California High Speed Rail Authority expects to transport 4-times as many passengers as the 2,600 trains in the densely packed Northeast Corridor.

You can download the press release from Amtrak at this link: Amtrak Posts Second-Best Ridership in History

Some more interesting facts in the Amtrak press release:

“As the nation’s intercity passenger rail operator, Amtrak connects America in safer, greener and healthier ways. Last fiscal year (FY 2009), the railroad carried 27.2 million passengers, making it the second-best year in the company’s history. With 21,000 route miles in 46 states, the District of Columbia and three Canadian provinces, Amtrak operates more than 300 trains each day—at speeds up to 150 mph—to more than 500 destinations. “ The 27.2 million number includes Amtrak’s operation of state-supported corridor services in 15 states and for four commuter rail agencies.

To summarize, the California High Speed Rail Authority expects their service between Northern and Southern California to transport nearly twice as many people as traveled on the entire Amtrak national system in FY 2009.

Thursday, September 3, 2009

They Want Help?

The High Speed Rail "outreach" team wants citizens to offer positive suggestions and to help the Rail Authority. I'm not sure why they think anyone who actually understands the destructive goal of High Speed Rail will help. But in the spirit of cooperation, I've volunteered to save the Authority thousands of dollars by doing some PR writing. They have a huge $9 million PR budget so this little ditty would have cost them at least $250K.

On Board Announcement #1

Attention Passengers. Our next stop is Redwood City Station. This train is traveling at 110 MPH so please remain seated until the train comes to a complete stop at Redwood City Station. Once the train stops immediately grab your suitcase, kids, lunch and backpack and rush for the doors because this train only stops for 90 seconds. Yes, 90 seconds, so get ready to move and I mean MOVE. You are authorized to use whatever means are needed to squeeze past embarking passengers. Please note that High Speed Rail personnel will collect any belongings left behind and store them in the lost and found at the next station. We hope you don’t have anything fragile in your lost items because we have to throw them out the window for collection by station staff since we only have 90 seconds in the station.

Why you may ask do we only stop for 90 seconds? Well the ballot proposition that authorized high speed rail in California requires that we travel between San Francisco and Los Angeles in no more than 2:40. If we’re lucky there will be no delays and we will be exactly on time giving you a full 90 seconds to gather your belongings and depart the train. On the other hand, if we are delayed we may have to reduce the time spent in stations. In that event we have signed a contract with the "Survivor" edition of America’s Funniest Home Videos to cover what we called “expedited disembarkation's.” Cameras will tape your departure and we expect that the revenue from these video rights and re-runs will cover most incremental costs including but not limited to non-reimbursed medical expenses, loss of wages, loss of belongings, etc. We do hope you purchased the optional High Speed Rail Passenger Insurance policy which reimburses you for all losses connected with expedited disembarkation's.

Have a great day and thanks for riding with California High Speed Rail.

Monday, August 31, 2009

Contempt of Congress

Public trust in Congress has reached a new low dropping below 50% for the first time since Gallup started polling on this question in 1972. To better understand this disturbing fact, one simply has to look in our backyard. Congresswoman Anna Eshoo’s crude manipulation of her “Town Hall” meeting on High Speed Rail may explain why the majority of Americans distrust Congress. Billed as an informational meeting, Eshoo’s Town Hall more resembled a time-share sales session where gullible potential buyers get the hard sell. Eshoo ensured that facts would remain obscured by not allowing citizens to interact with her panel. Citizens had to submit questions in writing and could not follow-up when panelists responded with evasion, half-truths and outright misrepresentations. Her staff selected the questions to be asked and many never were asked. One question asked how the State of California would be able to pay for the $45 billion rail system. Eshoo asked Executive Director of the High Speed Rail Authority Mehdi Morshed to respond. His answer was clear, unequivocal and just plain wrong. He stated the approved bond issue would provide $9 billion while the Federal government would provide $8 billion with private investors providing the balance. The $8 billion number for federal money is a blatant misrepresentation. The Federal Government has allocated $8 billion over five years for high-speed rail projects for the ENTIRE country. The ability to ask follow up questions would have illuminated this mistake or perhaps led to the clarification that California was awarded the entire national budget. Another critical question was how many homes on the Peninsula would be taken and demolished via eminent domain. Again, Executive Director Morshed responded that he was unaware any homes or property were needed to increase the size of the right way. A follow-up question might have asked if it was possible to build a grade separated, four-track system within the existing right of way while continuing to operate both Cal Train and Union Pacific freight service? Given that the existing right of way is barely wide enough for the four tracks, some experts have said it would be impossible to build the grade separation in phases within the right-of-way while the current train services continued. Most likely, a shoofly or detour track would have to be built on land acquired via eminent domain. A shoofly track, if required, would widen the right of way by 50-60 feet and require the destruction of hundreds of homes. Morshed is an engineer by training and should have been able to address this vital question in greater detail.

Equally disturbing was Eshoo’s attempt to stifle public participation by holding the meeting in an inappropriately small venue. Hundreds of people were forced to sit outside the meeting room and could barely hear the proceedings. Others simply left when it was apparent that there was no room to sit and no ability to see the material presented. Eshoo’s explanation that it would have cost $10,000 to rent the Fox Theatre was disingenuous at best. There are numerous public auditoriums in local schools that would have been honored to host the Town Hall. Indeed, Stanford alone has 10 auditoriums that could comfortably accommodate 500 people and, given Eshoo’s great success in delivering large amounts of Federal research money to Stanford, would probably have been happy to help out.

I am not sure what disturbs me the most. The hard-sell, hardball tactics of the High Speed Rail Authority or the contempt for the most basic principles of democracy by our elected leaders.

Tuesday, May 12, 2009

Once Upon A Time in California

Once upon a time there were four men who built a railroad.

They were tough men who let nothing get in their way. They lied, threatened and intimidated to get their way. They were called the "Big 4." Their friends called them the Robber Barons. Who was it that said history repeats itself once every century?