Denham’s Oversight Hearing on High Speed Rail: “We Could Build 20 Dams for That Price!”

A federal transportation subcommittee—on Railroads, Pipelines, and Hazardous Materials—held a hearing on high-speed rail that wasn't as hostile as its chair seemed to promise

Phased implementation of California high-speed rail. Source: California High-Speed Rail Authority 2018 Business Plan
Phased implementation of California high-speed rail. Source: California High-Speed Rail Authority 2018 Business Plan
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Judging from the opening remarks by Congressman Jeff Denham (R-Turlock), the federal hearing on high-speed rail in California seemed like a set-up for grandstanding hostility. Denham complained of the project’s growing price tag, saying its “confusing” business plans “are clearly not grounded in reality.” The original bond measure, he claimed, promised California voters that a high-speed rail connection between Los Angeles and San Francisco would be completed by 2020 and cost only $33 billion. For the record, the bond did not claim it would cost only $33 billion).

“This is a poster child for mismanagement,” he railed. Denham had called for a federal audit of the California High Speed Rail Authority (CAHSRA), he said, because it has consistently missed deadlines and run into cost overruns, changed its plans, and reduced its promised scope of service. “There is no reason to believe that anything with regard to this project will go according to plan.”

“We’ve got other issues in California,” he said, and “a fraction of [the money invested in high-speed rail] could have solved our water crisis, with the same jobs–some would argue, with more jobs.”

Later in the hearing, Congressman Doug LaMalfa (R-Richvale) expanded on this notion. “We could build twenty dams for the price of what we’re spending on high-speed rail,” he said–as if money were the only thing holding California back from building dams everywhere.

But it was clear that other Congressional members on the panel take a slightly different view of state infrastructure investments.

Congressman John Garamendi (D-Davis), while wanting to better understand plans to finance the project, said he was excited about the economic impacts it has already had, including the jobs it has produced. The completion of the first segment in the Central Valley will bring important benefits to communities there, he said.

“California didn’t become the fifth largest economy by chance,” he said, pointing to other state investments in infrastructure, transportation, and education. “We’ve got things to do, places to go, and we need people to build it.”

Brian Kelly, current CEO of CAHSRA and former head of CalSTA, the agency that oversees CAHSRA, gently pointed out that CAHSRA has met all of its federal funding deadlines. And, although funding has not been procured for two of the trickiest (and most expensive) segments, there is enough money to complete several key parts of the ambitious project, with immediate local benefits.

Denham questioned Kelly sharply about the differences between Prop 1A, the voter-approved bond that got high-speed rail project going, and the current business plan. What is the reason for delays, Denham wanted to know, and where will future funding come from?

Kelly started to refer him to Chapter 4 of the CAHSRA business plan, but was interrupted before he could elaborate. “Is it labor?” asked Denham. “No,” said Kelly.

“Is CEQA the holdup? Are we done with environmental review?”

“No, we are not,” said Kelly. “We had some requirements to quickly spend federal dollars, and so got into [early] construction before we had all the right-of-way and third party agreements finished.”

“If the state [can] waive CEQA for stadiums . . . streamlining could be done if this were a real priority,” said Denham. “The rest of the nation would like to hear what you are doing about that.”

Kelly began to respond, but Denham cut him short and moved on. . . to Garamendi, who asked Kelly to finish his response.

Kelly said that the Authority has asked the federal government to assign responsibility for review under NEPA—the National Environmental Policy Act—to California. Because NEPA requires its own process to comply with federal funding rules, agencies are basically forced to go through the environmental review process twice–once for the federal government and once for the state. Giving the state authority to handle the NEPA process at the same time as CEQA could cut the amount of time for review considerably, said Kelly.

Combining NEPA and CEQA has been done, for example, to build highways.

“We have a request before the administration,” said Kelly, “and we’re waiting for approval.”

Denham was busy talking to someone else and didn’t seem to hear the response.

Under further questioning, Kelly said that financing was and “is the single most important challenge of this project, from day one.” Voters, through Prop 1A, provided $9 billion, which at the time was estimated to be about one-fifth of projected total costs, he said. The original idea was that the federal government would provide about a third of the money, the state about a third, and private investors would kick in the rest.

So far the federal government has contributed about $4 billion, under Obama’s stimulus package–nothing has come from the current administration, and Denham has actively opposed any federal money for the project. Private investors won’t be expected to come on board until the project has moved further along.

“We are approaching it in a building block way,” said Kelly. “We don’t have all the funding right now. Our plan is to use the money we do have to build as much as we can to create a usable service where we can.”

That means focusing on separate segments. The early investments are in the Central Valley, where bridges and viaducts for high-speed rail are already being built; and on “bookend investments” in the Bay Area, where Caltrain is being electrified, with plans to extend service to Gilroy, and in Southern California. There, CAHSRA is partnering with other agencies on upgrades to Union Station and several rail grade separation projects. All of these early investments will bring immediate improvements for local rail transit.

That leaves two remaining, unfunded pieces: a tunnel through the Pacheco pass between the Central Valley and Gilroy and another through the Tehachapis from Bakersfield going south.

Denham and La Malfa tried to drill down into this funding gap, seeing it as a fatal flaw in the project, but others testified that this is a common way to handle large projects. Garamendi pointed out that the President is poised to sign a reauthorization of the National Defense Act, which has no secure funding source for many of its provisions. “It’s an ongoing issue, year by year, going forward,” he said.

CAHSRA has estimated that eighty percent of the funding for phase 1—the build-out between L.A. and San Francisco—has already been secured, including federal funds, the Prop 1A bond, and estimated proceeds of about $750 million annually from cap-and-trade. “That’s a whole lot better than we’re doing for a plan to replace our Navy,” said Garamendi.

Denham wanted to know what kind of leverage the federal government has over the project—what could it do to ensure the state met its obligations, he asked Calvin Scovel, the Inspector General, who is conducting the audit.

The answer was fourfold: the FRA could suspend any as-yet-unspent funds; it could use administrative funds to apply against any missing state match; it could apply the Debt Collection Act of 1982; or it could suspend or debar CAHSRA from participation in any grant programs. “That would require a finding that the Authority was not a responsible agency,” said Scovel.

Mark DeSaulnier (D-Contra Costa) pivoted the question to ask Lou Thompson, Chair of the California High-Speed Rail Peer Review Group, to outline possible actions the state could take.

First, it could just stop now. “And . . . that’s not a good idea,” agreed DeSaulnier. “What’s the next option?”

“They could finish what they’re building now—that would protect against any federal claim. It would not provide much value to the state,” said Thompson.

A third option would be to finish work on the “bookend” projects in addition to the Central Valley work, which would bring more benefits, he said. And a fourth option would be “for the legislature and the governor to recommit to the project—to say that we really want to do this, even in the face of uncertainty.”

“That’s precisely what the U.S. Congress did on the reauthorization act for the Navy,” said Garamendi. “Even if the money’s not there yet, the commitment is.”

And without that commitment, it’s hard to manage any large project. “You have to restructure your commitments and take risks you shouldn’t have to take,” said Thompson. “If the state wants to do this, they should recommit to it.”

43 thoughts on Denham’s Oversight Hearing on High Speed Rail: “We Could Build 20 Dams for That Price!”

  1. 90% of our water goes to Farmers who grow food and alfalfa that mostly gets exported. We don’t have a water problem if you put cities before Farmers. Desal won’t solve our traffic issues, and neither will dams.

  2. CA State Auditor report 2018-108 is due out in October, and they are auditing its rampant mismanagement, corruption and shady funding… That report will be the dagger in the heart of Jerry’s $150 BILLION Choo Choo to Nowhere

  3. Exactly. The economic benefits are so high that even poor countries like Uzbekistan are expanding their high speed rail.
    Although I think Spain may be exceeding their ability to pay for the loans and need to pause construction until they’ve caught up a little.
    In Denver’s case, I agree that the extra money from development around the station should be put into the Northwest Rail. Delays only cause inflation to raise the cost. If they’re doing it, do it as quickly as possible.

  4. “All HSR operating costs are supposed to be paid by the trains themselves” yes, that is the long range objective,.
    The key word here is “operating” and is referenced in prop1 as
    “(J) The planned passenger service by the authority in the corridor or usable segment thereof will not require a local, state, or federal operating subsidy.” If RTD can pay off loans and operations for commuter trains and bus lines through leases there is no reason to think CAHSR can’t at least pay for operations.

  5. That depends on what you mean by “operations.” All HSR operating costs are supposed to be paid by the trains themselves, although at a minimum the trains will have to be extended to San Jose at least. SF to LA would generate a lot more revenue.
    If you mean that no subsidies are required for people to operate their own vehicles on the freeway, that’s true; although some would count the related social expenses like smog related illness, lost productivity from congestion and the military costs of keeping the oil flowing into America and wonder how much the drivers are paying directly on that.
    But the Highway Fund only pays for construction and maintenance costs; and lately has required extra money from the general funds to cover those costs.
    But operating costs also include law enforcement and safety patrols, routine cleaning, emergency and medical services and storm recovery. As one philosopher said, the fact that snow falls from the sky doesn’t mean that snow plows do as well.
    Frankly, I think we’ve overbuilt our freeways. We can’t really afford to properly maintain what we have, and a lot of it is reaching it’s design service life and will need a major rebuild soon. I think we should dedicate the trust fund to maintenance and repair,and any new construction should come out of the general funds so the politicians will have to take responsibility for what they do.

  6. I’m not talking infrastructure, that is a whole different animal. Operations need not be subsidized which is what I’m referring to and is what CAHSR refers too. All transportation infrastructure, whether airports, highways or bike lanes, has required extensive subsidies.

  7. That’s actually a fairly good idea.
    Spending on transit is dwarfed by the huge amount we spend on highways and in 2007, according to the Federal Highway Administration, all dedicated revenues collected for the highways only accounted for 52% of the total cost of the highways system. So if we privatize all the highways it’ll eliminate a massive burden on the taxpayers.
    In the meantime, since intercity rail is still doing well, we should hurry up and finish the high speed rail project to minimize the cost due to inflation.

  8. Believe what you will, but increasing subsidies isn’t going to save transit industry from the inevitable collapse. They can do one of two things, privatize it, which the public employee unions would never allow or audit it and shut down it’s least used lines.

    The reason transit is falling apart is as simple as analytically possible.
    One: it only carries People. Roads
    have the advantage of carrying both passengers and freight and cargo and parcels and packages and commodities and postage.
    Two: Roads can handle more abuse than rail, If your road is crumbling or
    cracking……so what you can still drive on it if YOUR RAIL IS CRACKED
    OR Rusting you’re in a heap of trouble.
    Three: I wont argue that cars are 100% safe, but Compared with the safety or security or Comfort of riding a car,
    Crime, sexual harassment, graffiti, unpleasant odors, poor hygiene,
    invasions of privacy and depraved acts like beatin off and defecation,
    are common on metro systems throughout the world. LA Metro is now installing full body scanners on all it’s metro stations..
    Four: The industry has seen a 50-percent decline in worker productivity since it was municipalized;The industry spends more money than ever before to carry fewer people than ever before and ridership is still declining
    Five: The Poor don’t need transit anymore; the “poor” or at least how we define poverty in the US by median income, most of them have a car or access to one. Census data indicates that only about 4 percent of American workers live in households with no cars, and most of them don’t take transit to work either.

  9. Although paratransit services are the most expensive to operate per passenger mile. We don’t run them to save money; we run them because the handicapped can’t use regular buses very well.
    While I admire your diligence in cherry picking data for your arguments, I think it would be stronger if you used more examples. Since you quote Antiplanner (Randall O’Toole of The Kato Institute) you may be limited by what he has to offer, but there are plenty of specific cases. Just in LA, there’s Metrolink, which has been losing ridership steadily due to poor service. At little or no extra cost they could improve on time performance and rearrange their schedules to ease transfers. Currently the trains are each operated as an independent entity rather than part of a system, and it’s depressing ridership and increasing the need for subsidies.
    If you use Caltrain, you have to ignore the six years of solid growth and only focus on the last two years when the trains have become so crowded that the passengers are starting to look for alternatives. They have been trying to electrify the line for the last few decades so that they can run electric multiple unit trains and increase capacity to handle the extra riders.
    Houston might be a bad example of the superiority of buses. While the ridership has increased since they shifted from mostly a hub and spoke system to more of a grid, so riders can reach their destinations quicker and with fewer transfers, that change didn’t require a lot of extra spending, so it would undermine your argument that cities have to spend huge subsidies to attract more riders.
    The LA subway is a good exception, but I would recommend staying strictly away from LA’s rail services as a whole, since the extension of the Expo line as seen their ridership exceed the 2030 projections. Overall, ridership is embarrassingly strong on the LA rail network.
    The hard part is that CAHSR is a long distance corridor, like a really fast Amtrak. Amtrak’s numbers have been going up, overall.
    The real problems with transit use are far more complex than some might think.
    But in the end, the most direct comparison would be with the high frequency corridor services of the Pacific Surfliner and the Acela, and the trends there show strong demand.

  10. Except that the subsidies to the long distance routes are only documented on Amtrak’s opaque spreadsheets, where the corporate overhead, including payments on bonds for the NEC infrastructure, is distributed among the routes by route length rather than resources used. So the Texas Eagle is paying nearly 5 times as much to rebuild a bridge in Baltimore as a train on the NEC is. And the Eagle is dividing the cost over 14 trains a week, counting both directions separately. The Sunset Limited, running three times a week, is dividing it’s share of rebuilding the NEC among 6 trains a weak total. Services on the NEC are dividing their much smaller share among 15-20 trains a day.
    This makes the long distance trains look less profitable than they are while artificially lowering the total costs of the NEC.
    If you strip out the corporate overhead and just count the costs of the route and train, the Auto Train, Palmetto, Silver Meteor, Silver Star, Lake Shore Limited and Empire Builder are all producing a profit on the route, indicating that the long distance trains themselves are net revenue generators.

  11. Buses account for most of the transit ridership numbers nationwide, when you take out New York, rail transit serves very few. When agencies slash transit provisions they do so at the expense of cheap buses. But if you want real data… Ridership on the Los Angeles subway is declining rapidly — 13% in the last four years.
    The Federal Transit Administration released June 2018 data revealing that the transit industry has now experienced four straight years of ridership losses. June 30 was the end of the fiscal year for most transit agencies, and ridership has fallen in every fiscal year since 2014. Nationwide, the total decline since 2014 was 7 percent, but declines in many urban areas were much larger: 29% in Memphis; 27% in Charlotte; 26 % in Miami; 25 % in Albuquerque; 24 % in Cleveland; 22 % in St. Louis; 21 in Milwaukee, Sacramento, and Virginia Beach; and 20% in Los Angeles.

    No matter how much resources or money you commit it’ll never be enough to meet their expectations or demands. Give em five billion they’ll want ten, give em ten they’ll want twenty…It doesn’t matter how many billions of dollars we spend on transit failures, transit supporters will claim it isn’t enough. EVEN MORE, while some transit systems have cut service, others that increased spending still saw ridership losses. Increasing subsidies is not gonna save transit. Having lost most of the low-income market, transit agencies have focused on getting middle-class workers out of their cars. From 2010 to 2016, the fastest growth in transit commuting was among people who earn more than $75,000 a year. Do we really need to subsidize their commutes? The chief demographic transit was originally meant for, the Poor, the
    Handicapped, the elderly and children. Paratransit services have largely
    outmoded collectivist transit approaches of taking care of the elderly
    and handicapped by offering door to door service. Attracting high income people means building transit in high income
    areas which still costs taxpayers Billions but serves very little use
    because ……….THERE AREN’T THAT MANY OF THEM to patron. Once again they
    overlook in the areas that need transit the most.

  12. Two weaknesses in American politics: First, the assumption that a current data point is an eternal absolute. No, a current data point is a current data point and a short term movement is not a Universal Law.. Transit, both bus and rail, fluctuate as any trend does. Today’s movement is not tomorrow’s, nor is it a constant throughout the country. Places like Houston that have revamped their transit show an increase. Places that have cut back services have seen a decrease. It’s almost like patronage depends on whether the supplier has anything to sell!
    Second is the idea that government can only do one thing at a time. It is possible to deal with rail transit on one hand and water supplies on the other. Both at the same time.
    It’s easier to do when we’re building high speed rail than when we’re spending twice as much money on the equivalent capacity in highways and air port construction.
    Double bonus when the HSR requires leveling only a third the number of homes and businesses as a freeway or airport expansion, thus killing off less of the economy during construction. With HSR we’ll be able to build a lot more dams and desal plants than we could if we build more highways instead.
    And while I’m sure you’d much rather spend 9-12 hours crowded into a cramped, jostling, noisy bus than stretch out in a smooth, comfortable train for three hours, you aren’t going to do it for a dollar.
    Thaty’s a marketing scam—Sorry, I mean “scheme”. The first seat sold on the bus is a dollar, then the second and third go up sharply. On Greyhound they charge anywhere from $20 for the times nobody wants to ride to $43 for the most desirable express bus. Your chances of being the one person on the bus to actually get the dollar ticket are very slim.
    By the way, transit ridership overall is down but rail transit is up, so you’re advocating getting rid of the successful transit and replacing it with the mode everyone is fleeing. This is a common problen when policy decisions are made based on hysterical emotionalism rather than actual data.

  13. “from it’s death spiral.” What amount of increased subsidy could teach you how to spell “its”?

  14. No amount of increased subsidies can save the transit industry from it’s death spiral. The Federal Transit Administration released June 2018 data revealing that the transit industry has now experienced four straight years of ridership losses. So why pour money into a sinking ship

  15. Denham only has a few week left to parade his ignorance on the public stage. He’s going to get clobbered by his opponent in November.

  16. What’s more important, stable drinking water supply or some stupid choo choo train….when buses cost a dollar to ride….

  17. But that still leaves us with the growing population which will need expanded transportation options if we want to have a strong economy to pay for desalinization plants.
    To replace the HSR we need to spend $150-200 billion on highways and airports. How many fewer desalinizaton plants can we build if we spend an extra $50-100 billion on highways?

  18. Prop 1A says that no public money will be used for operations. It doesn’t say that no public money will be used for upkeep and construction.
    JR Kyushu is a private, for profit company whose losses were subsidized by an investment fund the government assigned it at privatization while it became independently profitable. After the “train to nowhere” (the shinkansen from Kagoshima to Shin-Yatsushiro) began service JR Kyushu became profitable and returned the investment funds, being listed on the stock exchange. Since the line was extended to Fukuoka to connect directly to the Sanyo Shinkansen, profits have reached 44 billion yen, as of March, 2017.
    As for population density, the quotes always seem to be about California as a whole, but the real density is the density along the route. The San Joaquin Valley floor has a density slightly greater than France, but concentrated heavily on the 99 highway corridor, which has a density comparable to the Sanyo Shinkansen.
    The Sanyo Shinkansen is, of course, operated by another private, for profit company; JR West. In 2017 they reported profits of 176.3 billion yen, 67.8% from transportation. Of that, 51.1% was from the shinkansen.
    So we do have the density along the route to cover the operating costs, as proven by other areas that have similar densities and profitable HSR.

  19. Who subsidizes the already built freeways and maintains them, you guessed it the taxpayer as they have no toll and are free to use! Why place HSR on a different footing? They were also built with tax $!

  20. The primary network makes money because lines have liberty to rent space near stations. Paris to Lyon is another example that doesn’t lose money. Even NEC uses excesses to subsidize its needy brethren routes.

  21. A quick search finds this:
    “The sole reason why Shinkansen plying the Tokaido route make money is the sheer density—and affluence—of the customers they serve. All the other Shinkansen routes in Japan lose cart-loads of cash, as high-speed trains do elsewhere in the world. Only indirect subsidies, creative accounting, political patronage and national chest-thumping keep them rolling.”

    Of course California will never have that kind of population density.

    See also this: and this:

  22. Who is going to drive all of those buses? Also, a train can carry 20+ times as many people as a bus… they are more efficient and comfortable for travel that is longer than a few miles.

  23. I know this is a parody from the Onion, but the technology isn’t far fetched
    BIgger, wider tires, lower center of mass and non stop service with a dedicated lane, you can cover the 383 mile distance in less than 5 hours .

  24. Too true, and how does that help the general population in the USA get about on a day to day basis.? Answer, not at all. They stay stuck in “freeway” jams, freeways also paid for by tax $.

  25. Keep wasting money on weapons and really help the general public in the USA! Plus who pays for the “freeways” yes you guessed it the taxpayer!

  26. You mean that a 250mph train does not exist in the USA. Lots of other lands have them though, even India does now! USA is so backwards!

  27. False. Japan doesn’t subsidize their lines. Even Denver’s union station is designed not to require subsidies for assoicated public transit. CAHSR just needs to license station real estate appropriately which would inturn avoid the need for public subsidies.

  28. All those other countries built their HSR systems with public money and subsidize them after they are built with more public money. The problem supporters of the California project have: the 2008 Proposition 1A included the promise to voters that no public money would be used to subsidize the project if/when it’s built, that those using the system would pay for it.

    Governor Newsom will have to cancel that dumb project when the next recession hits.

  29. Compelled like the Pentagon started F-35 and F-22 assembly without completed designs or testing. Or the $100 billion spent on an orbiting space camp.

  30. “We Could Build 20 Dams for That Price”
    I wonder if we can float the subsequent river made from these damns?
    Maybe a raft can do 25 mph from SF to LA?

  31. Totally dumb idea, sure a bus will go 250mph in the same comfort level as a high speed train.

  32. Busway lanes, ya right a bus can go 250mph, not! That’s an idea from 1965, not 2018!!

  33. That Denham is a negative dude to say the least, as other industrial lands build HSR the USA looks to all the negatives with transpiration improvements. I hope the door knocks him on the bum as he is the one who closes it on something other lands have, eg UK had 125mph train in 1974 good grief! Let the USA stay stuck in 1960 with passenger rail!!

    He looks like a typical person who has never actually seen HSR in operation, so is not justified to comment on it.

  34. The commitment to build the Golden Gate Bridge was accompanied by a financial commitment of construction bonds that were paid off over the years using bridge tolls. The high-speed rail project has never had any comparable commitment, only the $9.95 billion in bonds accompanied by lies about future federal money and private investment.

    The annual interest payments on those bonds will be $647 million! Prediction: Governor Newsom will cancel the project when the next recession hits to avoid cutting vital services to the people of California.

    Supporters of this project—including the construction unions—relied on the anticipation that once this dumb project was started, the public would be compelled to keep throwing good money after bad so that the original investment won’t be wasted!
    See Megaprojects and Risk:

  35. “You have to restructure your commitments and take risks you shouldn’t have to take”
    Sounds like moral excuse making for gambling with public funds… For the same amount of money to build HSR for California they could build over 4,000 lane miles of dedicated busway lanes…or half that much and enough buses to run everyone in that corridor for the next century

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