Out of Control Policy Blog

The Detailed Concerns of the CA HSR Peer Review Group

As my earlier post pointed out, this week the California High-Speed Rail Peer Review Group issued its report to the state legislature on the Funding Plan for the project.  Bottom line: they recommend the state stop spending money on the project, and the High Speed Rail Authority is darn upset about it.

Since the Peer Review Group report is curiously still not available on their website (but you can email them for a copy) I thought a summary of their analysis would be useful.  Here, concisely as I can, are the key points, with some commentary.

1. "[I]t is hard to seriously consider a multi-billion dollar Funding Plan that offers no position on whether [the first operating section should be from almost Bakersfield to almost San Jose, or from Fresno to almost LA]."

2. The first section to be built will not be "a very high-speed railway (VHSR)" capable of operating at top speeds.  "Therefore it does not appear to meet the requirements of the enabling State legislation." "The [first section] will not be electrified, and thus cannot serve as a high-speed test track for the future VHSR rolling stock."

3. "The only clear remaining basis for the [first section] is that it can serve as a vehicle for the use of Federal money that has specific deadlines."

4. "The fact that the Funding Plan fails to identify any long term funding commitments is a fundamental flaw in the program." "The CHSRA has also made it clear there will be no private sector interest in the project until the full public sector role is defined and funded, which means that significant private funding will not be available for many years."  "The legislature could, of course, rectify this by enacting [a new tax or fee]. Lacking this, the project as it is currently planned is not financially 'feasible'."

5. "[W]e do not think that the current description constitutes a 'feasible' business model for a number of reasons." (bullets paraphrase)

  • The draft business plan relies on 'illustrative' concepts not decisions by the CHSRA.
  • There is no identified funding for the plan presented.
  • The biggest risk is system integration, but the plan requires all integration to happen very late in the project.

6. "We have repeatedly said that we do not believe that the current approach to project management, with the CHSRA's staffing, salaries and procurement controlled by California public agency rules, will suffice if the project gets fully underway and the CHSRA has to suddenly manage a construction effort larger than that currently managed by Caltrans."(emphasis added)

7. "Unfortunately, despite a strong recommendation from this group, the demand forecasts remain an internal product of the CHSRA and its internal peer review panel. The forecasts have not been subjected to external and public review, and many of the internal workings of the model. . . remain unclear."

8. "Capital cost estimates for the system have been steadily rising in every Business Plan." "The reasonableness of the capital budgets would be improved by development of a risk-based, cost-loaded construction schedule that makes a more explicit attempt to allow for a broad range of outcomes in cost and schedule."

9. "[T]he decision to put the entire initial effort into the Central Valley maximizes the risk to the State if no significant funding appears after the initial Federal contributions."

10. "In our judgment, a finding of feasibility in the Funding Plan would require that the following assumptions be found reasonable:" (bullets paraphrase)

  • The first section can be completed within budget and on time despite a lack of construction experience, managerial resources, and potential delays from lawsuits.
  • The $24-$30 billion still needed to connect the first section to either San Jose or San Fernando valley when the state is the only likely source, and is broke.
  • That the cost once up and running will be on budget, ridership will be close to estimates, and an inexperienced CHSRA can manage all the tricky integration issues.
  • All these same things will be true of adding the next part of the system, including another $14-$35 billion.

"[O]ur experience with [other HSR projects in the US and around the world] strongly suggest that each of these assumptions alone is slightly optimistic, and taken together, strongly so."

Conclusion of the Peer Review Group "[W]e cannot overemphasize the fact that moving ahead on the HSR project without credible sources of adequate funding, without a definitive business model, without a strategy to maximize the independent utility and value to the State, and without the appropriate management resources, represents an immense financial risk on the part of the State of California."

Any rational person reading this must have profound reservations about the plan the CHSRA has for this project.

My takeaway is that the current plan:

  • Is focused mainly on keeping the current federal funding and keeping the project moving, even if doing so in the Central Valley jeopardizes the rest of the project.
  • They have no idea whatsoever where the money to build an actual functioning HSR line will come from, and no real prospects.
  • All signs point to the need for California taxpayers to fork over billions more in new tax money to keep this project going.
  • CAHSRA does not have the capability to execute the full project and won't listen to people who point that out.
  • Everything about the project hinges on the ridership estimates, and they won't let the public see all the details. What are they hiding?
  • The plan is full of hope and short on certainties or well thought out ways to deal with uncertainties and of well-managed risks.

The project still looks like a gigantic, risky boondoggle, and it is time to stop it before it consumes more money we don't have.

Adrian Moore is Vice President, Policy


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