[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
A REVIEW OF THE CHALLENGES FACING CALIFORNIA HIGH-SPEED RAIL
=======================================================================
(113-49)
HEARING
BEFORE THE
SUBCOMMITTEE ON
RAILROADS, PIPELINES, AND
HAZARDOUS MATERIALS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 15, 2014
__________
Printed for the use of the
Committee on Transportation and Infrastructure
Available online at: http://www.gpo.gov/fdsys/browse/
committee.action?chamber=house&committee=transportation
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
------ 7
Subcommittee on Railroads, Pipelines, and Hazardous Materials
JEFF DENHAM, California, Chairman
JOHN J. DUNCAN, Jr., Tennessee CORRINE BROWN, Florida
JOHN L. MICA, Florida DANIEL LIPINSKI, Illinois
GARY G. MILLER, California JERROLD NADLER, New York
SAM GRAVES, Missouri ELIJAH E. CUMMINGS, Maryland
SHELLEY MOORE CAPITO, West Virginia MICHAEL H. MICHAUD, Maine
CANDICE S. MILLER, Michigan GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana ALBIO SIRES, New Jersey
BOB GIBBS, Ohio JANICE HAHN, California
PATRICK MEEHAN, Pennsylvania ANN KIRKPATRICK, Arizona
RICHARD L. HANNA, New York, Vice ELIZABETH H. ESTY, Connecticut
Chair PETER A. DeFAZIO, Oregon
DANIEL WEBSTER, Florida MICHAEL E. CAPUANO, Massachusetts
THOMAS MASSIE, Kentucky NICK J. RAHALL, II, West Virginia
ROGER WILLIAMS, Texas (Ex Officio)
TREY RADEL, Florida
SCOTT PERRY, Pennsylvania
BILL SHUSTER, Pennsylvania (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ v
TESTIMONY
Panel 1
Hon. Zoe Lofgren, a Representative in Congress from the State of
California..................................................... 4
Hon. Kevin McCarthy, a Representative in Congress from the State
of California.................................................. 4
Hon. Loretta Sanchez, a Representative in Congress from the State
of California.................................................. 4
Hon. Jim Costa, a Representative in Congress from the State of
California..................................................... 4
Hon. Doug LaMalfa, a Representative in Congress from the State of
California..................................................... 4
Hon. David G. Valadao, a Representative in Congress from the
State of California............................................ 4
Panel 2
Karen Hedlund, Deputy Administrator, Federal Railroad
Administration................................................. 24
Dan Richard, Chairman of the Board, California High-Speed Rail
Authority...................................................... 24
Alissa M. Dolan, Legislative Attorney, American Law Division,
Congressional Research Service................................. 24
PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
BY WITNESSES
Hon. Zoe Lofgren, prepared statement............................. 59
Hon. Kevin McCarthy, prepared statement.......................... 63
Hon. Loretta Sanchez, prepared statement......................... 69
Hon. Jim Costa, prepared statement............................... 74
Hon. Doug LaMalfa \1\
Hon. David G. Valadao, prepared statement........................ 76
Karen Hedlund:
Prepared statement........................................... 78
Answers to questions for the record from the following
Representatives:
Hon. Jeff Denham, of California.......................... 86
Hon. David G. Valadao, of California..................... 90
Hon. Corrine Brown, of Florida........................... 94
Dan Richard:
Prepared statement........................................... 97
Answers to questions for the record from the following
Representatives:
Hon. Jeff Denham, of California.......................... 109
Hon. Roger Williams, of Texas............................ 110
Hon. Corrine Brown, of Florida........................... 133
Alissa M. Dolan:
Prepared statement........................................... 135
Answers to questions for the record from Hon. Corrine Brown,
a Representative in Congress from the State of Florida..... 150
----------
\1\ Hon. Doug LaMalfa did not submit a prepared statement for the
record.
SUBMISSION FOR THE RECORD
Karen Hedlund, Deputy Administrator, Federal Railroad
Administration, response to request from Hon. Corrine Brown, a
Representative in Congress from the State of Florida, for the
letter from the Office of the Governor of the State of
California, confirming that pending changes in the structure of
California State government will have no effect on the existing
legal obligations of the California High-Speed Rail Authority
or the State to the Federal Railroad Administration, November
29, 2012....................................................... 48
ADDITIONS TO THE RECORD
Shelli Andranigian, on behalf of the Andranigian family, written
testimony for the record....................................... 154
Alain C. Enthoven, William C. Grindley, William H. Warren,
Michael G. Brownrigg & Alan H. Bushell, Reports and Litigation
on Aspects of the California High-Speed Rail's Finances \2\
----------
\2\ William C. Grindley submitted for the record the reports by
the team listed above which document their review and analysis
of the financial risks of the planned California high-speed
rail project. The reports are available online at http://
www.sites.google.com/site/hsrcaliffr.
[GRAPHIC] [TIFF OMITTED]
A REVIEW OF THE CHALLENGES FACING CALIFORNIA HIGH-SPEED RAIL
----------
WEDNESDAY, JANUARY 15, 2014
House of Representatives,
Subcommittee on Railroads, Pipelines,
and Hazardous Materials,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:08 a.m. in
Room 2167, Rayburn House Office Building, Hon. Jeff Denham
(Chairman of the subcommittee) presiding.
Mr. Denham. Ladies and gentlemen, the subcommittee will
come to order. First, let me welcome our distinguished
witnesses and thank them for testifying today. This is the
second hearing this session of Congress that I have held on a
hearing on California high-speed rail since I became chairman
of the subcommittee.
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.
First, 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.
Second, 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 will note that the 2014 omnibus appropriations bill
released yesterday includes no funding for high-speed rail, the
fourth straight year no monies have been provided. It is clear
that the Federal Government will not be the source of more
funding.
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.
I do want to thank Mr. Richard, who is here this morning,
for being open and transparent with this subcommittee on the
Authority's activities. While we may agree or disagree about
the viability of the project, he has displayed professionalism
in all of our discussions. However, I have many concerns about
how the FRA is reacting to these recent setbacks, and what it
is going to do to protect billions of taxpayer dollars.
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.
I note, however, that I originally wanted to have this
hearing in December. Ms. Brown and I had discussed that. There
were some logistics challenges with Mr. Szabo at the time. We
also had a rail catastrophe that I know took some extra
attention. So I agreed to delay this hearing for 3 weeks, give
plenty of time for schedules, give plenty of time to have the
promise of this information brought to this committee. But, as
you can see here today, Mr. Szabo was unable to make it. While
I understand Deputy Administrator Hedlund is quite
knowledgeable, I am disappointed but not overly surprised that
the Administrator could not attend.
So, here we are now. And I will ask the same questions I
asked a month ago. Hopefully the Administration has had time to
prepare and actually give us straightforward answers to
straightforward questions. 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.
I look forward to discussing these important issues with
the witnesses.
I would now like to recognize Ranking Member Corrine Brown
from Florida for 5 minutes to make any opening statement she
may have. Ms. Brown?
Ms. Brown. Thank you. I know that California's high-speed
rail program is important to the chairman, and this
subcommittee certainly has a responsibility to provide
oversight of federally funded rail projects. But this is the
third hearing that we have held since December 2012 on
California high-speed rail, yet we have not had one hearing
this Congress on rail safety.
At the same time, we failed to reauthorize the National
Rail Safety Program, which expired at the end of fiscal year
2013. Several Members of Congress have written letters to the
committee requesting a hearing on rail safety, particularly
given the recent tragedies. Protecting our community and
citizens from harm should always be the top priority for
Congress. To that end, I am hand-delivering this letter to you
today, Mr. Chairman, from all of the Democratic members of this
subcommittee, requesting a hearing on rail safety as soon as
possible. We urge you to promptly consider this request.
As for the hearing today, like many States, including my
home State of Florida, California is struggling to meet the
transportation needs of its citizens. According to the U.S.
Census Bureau projection, the population of California will be
close to 60 million by the year 2050. This explosion in
population will result in the crippling of California's already
aging public transportation infrastructure.
California's 170,000 miles of roadway is the busiest in the
Nation. As a result, the statewide costs at this time in fuel
waste and transportation congestion is estimated at $18.7
billion annually. Travelers on California's interstate system
is increasing at a rate five times faster than capacity. This
is a formula for disaster, and everyone that has driven in
California's major cities knows this all too well.
Looking at air travel, the busiest short-haul air market in
the country is between Los Angeles and San Francisco, with 100
daily flights and more than 5 million passengers, annually.
This is larger than the New York and Washington, DC, markets.
In fact, the L.A.-San Francisco air route is one of the most
delay prone in the Nation, with approximately one out of every
four flights delayed by about an hour.
What is the solution to the congestion? According to the
California High-Speed Rail Authority, to achieve the same
capacity as the San Francisco-Los Angeles high-speed rail
system, California will need to construct 2,300 new lane miles
of highway, 115 additional gates at California airports, and
four new airport runways. The estimated costs for these
improvements is $1.14 billion over the next 20 years, which is
equivalent to $170 billion with inflation. This is four times
what it would cost to develop a planned high-speed rail system.
We are going to hear some complaints and reasons why high-
speed rail should not be developed in California.
Unfortunately, we are not going to hear about any solutions for
addressing the congestion disaster that is facing California in
the very near future. This high-speed rail project will help
the environment, reduce congestion, and create jobs.
Now, I hope that during today's hearing the Members who
opposed the development of high-speed rail in California will
help us with details as to how they intend to finance this $170
billion in improvement for the State.
With that, I want to welcome today's panelists, and I am
looking forward to hearing their testimony. I yield back the
balance of my time.
Mr. Denham. Thank you. And I would just respectfully remind
Ms. Brown that this committee has already agreed to hold a rail
safety hearing. We would actually be holding that hearing right
now, today, but the ranking member had asked me to hold off on
the high-speed rail hearing that we were supposed to have 3
weeks ago. So, we look forward to scheduling that together, and
I hope staff recognizes that, as well.
I would like to again thank our witnesses here today. We
have two panels today. Our first panel is with Majority Whip
Kevin McCarthy, Representatives Zoe Lofgren, Loretta Sanchez,
Jim Costa, Doug LaMalfa, and David Valadao. After receiving
testimony from our first panel, we will proceed to our second
panel of testimony.
I ask that unanimous consent that our witnesses' full
statements be included in the record.
[No response.]
Mr. Denham. Without objection, so ordered. Since your
written testimony has been made part of the record today, the
subcommittee would request that you limit your oral testimony
to 5 minutes.
Ms. Lofgren, welcome to the committee. Thank you for
joining us.
TESTIMONY OF HON. ZOE LOFGREN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF CALIFORNIA; HON. KEVIN MCCARTHY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA; HON.
LORETTA SANCHEZ, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF
CALIFORNIA; HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF CALIFORNIA; HON. DOUG LAMALFA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA; AND HON. DAVID G.
VALADAO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF
CALIFORNIA
Ms. Lofgren. Thank you, Mr. Chairman and Ranking Member
Brown, for allowing my colleagues to appear before you today.
As chair of the California Democratic Congressional Delegation,
which is the largest, most diverse delegation in the Congress,
comprised of 38 Members, I am here to reaffirm our strong
support for the California high-speed rail project. And that is
because our economy improves, and our population--as our
population grows, our transportation infrastructure is falling
further behind.
As many of us know, the transportation infrastructure is
already in very serious need of upgrade in California. And
California's skies are blue, our air corridors between San
Francisco and L.A., as mentioned by the ranking member, is the
busiest in the country. Our congestion is high. And we know
that the lost time and fuel wasted in California traffic costs
Californians an estimated $18.7 billion each year.
As we watch our population grow--and the estimate is, as
Ms. Brown has said, we will have 51 million people by the year
2050--we know that we need to have the capacity to move people
north, south. And without the high-speed rail project, it has
been estimated that we would need to build over 4,000 new
highway lanes, 115 airport gates, and 4 new runways, just to
keep up with the demand. And we know that is just not possible.
So, the California high-speed rail project is the largest
and most ambitious infrastructure project of our time. When
completed, it is going to be able to provide the transportation
solutions that our State needs.
Now, Californians, including folks in my home district in
San Jose, are going to see immediate benefits from this
project. It invests $1.5 billion in the Caltrain modernization
program, which will replace Caltrans diesel trains with
electric trains on the Peninsula Corridor. And, according to a
recent economic impact report by the Bay Area Council, a
premium business group in the bay area, the project will create
over 9,500 jobs, with over 90 percent being in the bay area.
The Bay Area Council also says that the high-speed rail will
increase our State's bottom line. The State and local revenues
will see an increase of $71 million during the construction
phase. And we also know, from this business group, that
neighborhoods near Caltrain will see an increase in property
value by as much as $1 billion.
As good stewards of the environment, Californians, by and
large, also agree that we must make critical infrastructure
investments that connect our communities and reduce carbon
emissions, while keeping our economy strong. Electrifying
Caltrain will make its operation quieter, reduce air pollution
by 90 percent, and lower energy consumption by 64 percent,
because its electric trains are less noisy and more cost-
effective to run.
Now, despite the overwhelming arguments for the need and
benefits of high-speed rail, the project, as we know, has
detractors. And its first days, the project had a rocky start,
before the current management team was put in place. And that
led some to say the project was too large, or others disputed
the high-speed rail project's business plans, and the like. And
that is why I joined Chairman Denham in asking the GAO, the
independent, nonpartisan auditors, to conduct a thorough review
of the high-speed rail project and its cost estimates, the
project's funding plan, and passenger ridership and revenue
forecasts.
And, last spring, the GAO came back with its report and
gave the California High-Speed Rail Authority high marks for
its cost estimates, ridership estimates, and funding plan. The
GAO also made some noteworthy observations, saying that the
greatest challenge before California's high-speed rail project
is not whether it can be done, but whether it will be funded,
particularly on the Federal level, in order to attract much-
needed private investment. That certainly continues to haunt
the project, because investors question whether the Federal
support will be there in the future.
It is also one of the reasons why the California High-Speed
Rail Authority's very realistic and responsible business plan
is building the project in phases. However, based on
experiences in other countries, and positive ridership
estimates by the GAO, it seems likely that the private sector
will invest in the project if it is allowed to move forward.
It will take both public and private support at all levels
to make high-speed rail in California a reality. The people of
California, as been noted, have already voted in support of it,
and taxpayers' dollars have already been invested in it,
including $3.3 billion in Federal grants. And just this week,
Governor Jerry Brown announced his State budget, pledging $250
million in cap and trade revenues for high-speed rail, while
laying out continued funding for the project in the following
years.
Now, given the environmental benefits, both short term and
long term, using cap and trade funds for this project is very
appropriate. And our delegation would like to commend Governor
Brown for his leadership on high-speed rail.
We know high-speed rail can work in America if it is given
a chance to succeed. As the GAO noted in its report, several
private consortiums were preparing bids for a high-speed rail
project in Florida before that State's Governor pulled the
plug. And, as recently as January 9th, the Washington Post
reported that Japan is seriously interested in developing a
high-speed rail line between Washington and Baltimore,
Maryland, even offering to foot half of the projected $8
billion it would cost to build.
You know, our global competitors aren't holding back on
their high-speed rail infrastructure. And that is because,
around the world, high-speed rail has been shown to be an
effective, popular, and profitable mode of transportation. When
it comes to transportation, I believe the United States should
be second to none. It was solid investments in infrastructure
that helped make the 20th century the American century. And
California's high-speed rail project can help continue that
kind of success for our country in the century to come. I thank
the chairman and the ranking member for the opportunity to
testify today. And I yield back my time.
Mr. Denham. Mr. McCarthy, welcome to our committee.
Mr. McCarthy. Thank you.
Mr. Denham. You may proceed.
Mr. McCarthy. Well, thank you, Mr. Chairman, for holding
another important hearing on California high-speed rail, and
for allowing me to testify today.
I have expressed my opposition to the California High-Speed
Rail Authority's deeply flawed business plan, which is not what
California voters approved in Proposition 1A back in 2008, and
I do so again today. I continue to have serious concerns with
the Authority's finances, and how they plan to come up with the
tens of billions of additional funds needed to complete the
project.
To date, the Authority has never provided a satisfactory
answer, and continues to move forward with this project. My
colleagues and I even commissioned the Government
Accountability Office to audit the Authority's plan. And GAO
also expressed concerns about the Authority's funding sources,
public and private. Not one additional cent has been identified
for this project. In fact, the Authority recently lost its
largest source of funds when a Sacramento County Superior Court
judge prohibited the Authority from spending State funds on
this project, because they are violating the requirements set
by Prop 1A.
That leaves the Authority with just little over $3 billion
in Federal tax dollars to waste while they come up with new
schemes to get State funds like cap and trade, not to mention
one of the original requirements for spending these Federal
funds was that the State matches every Federal dollar it
spends, a requirement the State now looks unable to ever meet.
The Authority's business plan and funding sources for high-
speed rail project were questionable from day one. The real
concern here is the prudent use of billions of taxpayers'
dollars, which the Authority has proven time and again that
they are unable to be good stewards of.
In addition, I know many on our side of the aisle were
disappointed by the Surface Transportation Board's decision
last year to approve the first segment of this project. I
disagree with this decision, and believe the STB should have
reviewed the project in its entirety, rather than an
unprecedented segment-by-segment piecemeal fashion. At least
the STB refused to approve the second segment of this project
until environmental documentation is complete. This is just
another example of how the California High-Speed Rail Authority
continues to bend the rules and seek exemptions to ram through
high-speed rail because they believe they know what is best for
Californians.
Mr. Chairman, the Authority has yet to break ground for the
high-speed rail project, but they have already dug themselves
in a hole, and are wasting the public's money. Since approving
Prop 1A, California voters have turned on this project, because
they now see it for the boondoggle it is. The Authority has not
dealt with the Central Valley communities in a meaningful
manner, has failed to properly plan this project, and has
failed to secure any additional funding. If the Authority
cannot prove to us and this committee that California high-
speed rail is viable, what makes them think they can build it,
much less operate and maintain it?
I call again for an end to the Authority's current plan for
California high-speed rail, and that is not one more Federal
dollar is spent on this boondoggle. Thank you for your time
today. I yield back.
Mr. Denham. Ms. Sanchez, you may proceed.
Ms. Sanchez. Thank you, Chairman Denham, thank you Ranking
Member Brown, and to the Members who are here today. I
appreciate this opportunity because this, I believe, is
instrumental to the economic recovery for California. This is
bold, it is big, and, in other words, this is Californian.
When the Spanish settled California, they built 21
missions, each a day's ride apart by horseback, to connect our
State. They did that because they knew commerce was important
for the future of California. And we are the economic engine of
the United States. When we built the aqueduct, it too cost
money. But it moves water up and down California.
When Governor Pat Brown built the UC system, it gave
accessibility of education, higher education, to Californians.
These are bold, they are big. And this project is just as
important to California. It is probably our best project to get
us out of this real recession we have felt for so long.
There are a couple of realities in California. Our
unemployment rate is still stuck at over 8 percent. And we have
some of the worst traffic congestion in the Nation. High-speed
rail moves both of those points. In the first 5 years of
construction alone, this will support 100,000 new construction
jobs, in particular in the areas where we need our people to
work. And it is estimated that there will be over 1 million
indirect and direct jobs related to that in my area, in the Los
Angeles metropolitan area. Or, as I say, where we dream and
build big in Anaheim, California.
The project will move forward because there are funds.
Let's talk a little bit of Proposition 1A and just what
happened. The court has not issued an injunction against this
project, nor have the recent rulings prohibited the State from
selling bonds. In any major project--and remember the
background that I come to this Congress with, transportation
and infrastructure financing. And, believe me, you can ask
people in California. As a financier, there were many times I
stopped big projects and told them they had to wait their time
until the financing was correct. So I am not afraid to do that.
But this is the time for this project. I believe that the
Authority has worked very hard to put together a finance plan
that will work for Californians.
I want to also say that we have to think about how we move
right now from southern California to northern California. You
either have to drive--and when I was young--and I admit I used
to speed a little bit more than often--it would take me about
5\1/2\ hours to get up to San Francisco from Anaheim. That was
a--well, that was about midnight, when there was nothing on the
highway, on that ``5,'' not dillydallying along our beautiful
coast. I just went up to Ventura, what used to take maybe 2 or
2\1/2\ hours to go, and today it takes about 3 or 4 hours to
get there. So to San Francisco, I imagine it is much more than
the 6 hours I typically think.
As a private pilot in my former life, I know what it felt
like to be at Orange County John Wayne Airport, and have all
the major commercial airlines get in front of me and wait and
wait with the propeller turning, spending fuel and time as I
rented that plane. So, this whole idea that somehow our air is
going to continue to get us out of this congestion problem is
just not true, let alone--excuse me, for those who are in San
Francisco--the weather you have there means that many times
those of us who are trying to fly into your beautiful city just
don't get there.
This is an important project. It is important for jobs. It
is important for our economy. And I urge you we all need to
work together to make this a reality. Thank you, Mr. Chairman,
for your time.
Mr. Denham. Thank you, Ms. Sanchez.
Mr. Costa, you may proceed. Good morning.
Mr. Costa. Thank you. Good morning, Mr. Chairman and
Ranking Member Brown, and the members of the subcommittee.
Thank you for taking the time and allowing me to testify before
you today.
As we all know, building major infrastructure projects are
never, ever easy. And the oversight of these projects are
necessary and appropriate. And, therefore, this committee's
work is appropriate. But that is also why I joined Chairman
Denham, along with many of our colleagues, Republicans and
Democrats alike, in asking the Government Accountability
Office, the Government's independent watchdog, to audit this
project.
After more than a year of review, the GAO reported that the
Authority followed best practices in each of the areas they
studied. Ridership, revenue, cost estimates, and the analysis
of the economic impact of the people, and this project have all
been examined by the GAO. And they are--their information is
there for all of us to read.
In fact, the GAO's report shows that the California High-
Speed Rail Authority, over the last 2 years, has taken stock on
a number of the comments that were made, and some of the
criticisms that, Mr. Chairman, you and others and myself have
made. They have listened and they have responded. And that is
why they have come out with a new business plan that has
created this blended approach.
Therefore, I think things are beginning to move on the
right track. But there are still challenges that remain,
clearly. But this is not unique to this project or any other
major project. We know that building infrastructure in this
country is challenging. It is so difficult to get anything
done, whether we are talking about water, whether we are
talking transportation or education.
But yet today, in California, we are living off the success
that our parents and that our grandparents made. In the 1950s
and the 1960s they were multitaskers. They not only invested in
what is one of the world's great education systems, but they
invested in one of the world's greatest water systems, and they
invested in the transportation system, because they thought we
could do those critical things that were necessary. When
President John Kennedy came to Los Banos in 1962, 51 years ago,
he said, ``We are investing in these water projects because we
believe in the future of America.'' And it doesn't matter what
part of the country we are talking about, we ought to be
investing for all Americans.
When California sought to build the State water project,
guess what? It faced lawsuits. Guess what? It faced funding
challenges. Guess what? It had opposition. Does that mean that
the folks in those days, in the 1950s, said, ``Well, gee, we
got lawsuits, we got opposition, we got funding challenges,
maybe we shouldn't pursue this great water project''?
Our forefathers knew that maybe the water wasn't quite
necessary then, but they knew future generations of
Californians would need water in the next century. Today we
find ourselves water short. So what did they do? They buckled
down, they worked together, and they built the largest, most
complex water system that the world has ever seen. We ought to
be doing the same thing, working together.
I am hopeful today that we can focus on those legitimate
challenges facing California high-speed rail, and that we can
work together to deal with the challenges in this project and
make it work.
I also hope we can stick to the facts, you know. I mean the
facts are the facts. We can all have our version of the
politics; we get that. But the facts are that California has 38
million people today living there. And by the year 2030 we will
have over 50 million people. And we are behind on the
investment in our transportation infrastructure, we are behind
on the investment in our water infrastructure and our education
system.
So, to accommodate the future growth of California, we
should be investing in all of the above. High-speed rail is a
part of that response. In 2008, Californian voters approved of
this construction of this system, a system that would address
our intermodal transportation system, including our airports
and our highways. From the time the first shovel hits the
ground later this year, the project will be a true economic
game-changer. We have too many unemployed workers, not only in
the San Joaquin Valley, but throughout California. Many of them
are being trained for the thousands of jobs this project will
create.
During this subcommittee's last field hearing in
California, in Madera, we saw many hard-hats in that room,
people in the audience looking for good-paying jobs. We ought
to be working together for these Americans sooner, rather than
later.
Now, the impacts to agriculture have been well stated, and
I am very, very, very focused on that. The major investment in
our State's transportation network cannot and will not come, in
my view, at the expense of San Joaquin Valley's agricultural
sector. Yes, there will be impacts. But, like any
transportation system, there are impacts. We have just expanded
Highway 99 between Congressman Denham's district and mine, from
Merced to Chowchilla. Guess what? It has taken 1,200 acres of
land. It has impacted prime agriculture. But we accommodate it,
and we paid for that, and we mitigated for that, just as we
must for high-speed rail.
As a third-generation farmer who continues to farm today, I
fight every day on behalf of farmers and growers to preserve
their businesses and our valley's way of life. I reject the
idea that investing in our State's transportation network means
that we cannot invest in our State's water infrastructure. We
can do it today, just like they did it in the 1950s and the
1960s.
California can afford to invest in our water and our
transportation because the success of our State in the next 30
years depends upon both. That is what our parents and that is
what our grandparents did.
Mr. Chairman, and for others who are naysayers on this
project, I wonder, I just wonder out loud what you might have
said to that great American President, that great Republican
American President, Abraham Lincoln, in the middle of the Civil
War in 1862, when he decided boldly to build a rail system
across the Nation. ``Well, gee, Abe, maybe we ought to wait
until the Civil War is over. Maybe we can't figure out how to
fund this.'' You know, maybe that is what we ought to do. But
President Lincoln was bold and he was visionary. And he
understood that the Nation needed to not only--to end this
conflict, the Civil War, but he also needed to invest in
America.
The California high-speed rail project does face
challenges, but it is no reason to kill the project. For those
who oppose this project, give us your plan. Tell me, tell
everybody else how you are going to build more freeways in
California, how you are going to build more airports in
California, and how you are going to mitigate for the impacts
of those communities with those airports and those additional
freeways. And how are you going to provide the subsidies to pay
for the expansion of those airports and the expansion of those
freeways? Because subsidies are directly related to that
infrastructure.
With thousands of jobs for California and the valley on the
line, let's use today's hearing as an opportunity to exchange
ideas on how we can best invest in California's infrastructure
as an example on how we need to invest in America's
infrastructure, because that is what this subcommittee ought to
be about, and that is what we ought to be about in Congress,
working together to invest in America's future. I thank you for
your time.
Mr. Denham. Thank you, Mr. Costa.
Mr. LaMalfa?
Mr. LaMalfa. Thank you, Mr. Chairman, committee members,
for the opportunity to weigh in on this issue, one we have
worked on a lot in California.
You know, you would have to pose the question, 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. This here is a much more
select group.
Indeed, 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. There is no possible
way.
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.
We heard claims on what it would cost. 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.
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 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 is only 8 million people that use
airlines between those two towns. And so we are going to
replace that with 32 million riders? There is only 31 million
riders that use Amtrak nationwide, in the 48 States, per year.
High-speed rail in California is going to surpass that?
We have got some pretty phony numbers operating on this
thing. And we are still seeing that taxpayers are going to be
footing the bill federally and at the State level, paying back
those bonds.
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? And what are the benefits going to be
to global warming, or climate change, or whatever that is?
Now, 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.
We saw the folks that got stuck in Antarctica the other
day, trying to explore the ice sheet down there. They felt bad
because they had to get rescued because there is too much ice,
and so they had to--decided they had to offset their carbon
footprint of getting rescued by the helicopters, and so they
are going to go plant trees somewhere in Australia or New
Zealand to offset that.
Or I saw an article last night. 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. Indeed, when I saw
that--you know, there is a term in Hollywood, ``jump the
shark.'' I think this project really jumped the shark when we
started saying we are going to plant trees to offset carbon
when it is supposed to be all about offsetting carbon some time
in the future.
We are at a point that we will need to assess what our
priorities are, as a Nation, for our budget, for our spending.
At a time--we had a budget deal the other day that is cutting
dollars to retired veterans. We are going to go tell the people
of this country or people of California that this is a project
that is worthy of their goals? All the other things we are
having to deal with? Food stamp program, whatever.
We are looking at this still at this point, when we are $55
billion short of the funding to do what is now an illegal plan,
we need to really take a strong look at putting the brakes on
it here in Washington, DC. And, as I hope, Californians will
see the opportunity to re-vote on this project by a ballot
initiative that is underway right now.
So, Mr. Chairman, I do appreciate the time, and I hope this
committee will keep delving into this issue and the falsehoods
that have been used to sell this to what was at the time a very
optimistic votership back in 2008.
So I thank you for your time, and I yield back.
Mr. Denham. Thank you, Mr. LaMalfa.
Adam, can you close the door?
Mr. Valadao, you may proceed.
Mr. Valadao. Chairman Denham, Ranking Member Brown, and
members of this subcommittee, thank you for the opportunity to
testify before you today. As a lifelong resident and taxpayer
in California's Central Valley, I have watched the proposed
California high-speed rail project transform over the years. 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.
Every single day I hear from constituents of California's
21st Congressional District who are opposed to, and worried
about, California's misguided high-speed rail project. They say
the project spends too much money, delivers too little on its
promises, and threatens their very livelihoods. Constituents
located in the path of the project complain about the lack of
information provided to the landowners, and the sheer fear they
are sacrificing their dreams and hard work for a project that
is not feasible.
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. For many, this farmland is
their home, and the proposed high-speed rail project will
impact countless families. All of this with very little benefit
to my constituents in the Central Valley.
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.
California's taxpayers simply cannot support a
multibillion-dollar boondoggle. To date, the State has been
unable to uphold its promise and provide matching funds for the
Federal dollars. As this committee continues to weigh the pros
and cons of California's high-speed rail project, it is
important to consider the trade-offs for this project. Every
one of our constituents makes trade-offs when they manage their
family budget, and our Government should operate no
differently.
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.
There was a time when California led the world in
technological advancement and innovation. Unfortunately, the
California high-speed train project is anything but innovative.
California's high-speed rail proposal relies on old technology
that is on its way to being phased out. Meanwhile, across the
globe, America's competitors are already well on their way to
developing the next generation of high-speed rail technology.
Today, innovation is increasingly being performed overseas
by foreign workers and inventors. At the same time, the United
States continues to lag behind in many measures of worldwide
educational achievement. We will continue to lose our advantage
to foreign nations if we do not educate our young people. When
the State of California chooses to spend taxpayer money on
high-speed rail, they are choosing not to invest in education,
our children, and our future.
Last October, the State of California was ordered by a
Federal judge to free over 9,600 inmates by the end of 2013.
The reason? California has been unable to provide the funding
necessary to stop overcrowding in prisons and keep dangerous
criminals behind bars. I think many of our constituents would
agree that public safety is among the most basic of Government
functions. Simply put, if California cannot afford to keep
convicted criminals behind bars, it certainly cannot afford to
build a needless billion-dollar train project. When the State
of California chooses to spend taxpayer money on high-speed
rail, they are also choosing to put the safety of my
constituents' families and communities in jeopardy.
The California High-Speed Rail Authority continues to
pursue this project with only 4 percent--$3 billion out of $68
billion--of the funding necessary to achieve the largest
infrastructure project in the country. To continue to pursue
high-speed rail in California is to spend billions of dollars
we don't have on a project we don't need. California high-speed
rail comes at a tremendous cost to taxpayers while providing no
benefit to my constituents. The project will destroy homes and
businesses throughout my district and divert precious tax
dollars away from far more pressing issues, like expanding our
water infrastructure, protecting our communities, and ensuring
access to quality education for our Nation's young people.
The greater cost is to the entire Nation, as the public
will continue to watch the Authority squander billions in
pursuit of a dream they cannot achieve. Now, more than ever,
the Central Valley must come together to make their voices
heard, and oppose this wasteful project.
I will continue to uphold my promise to my constituents and
oppose the California high-speed rail project. I look forward
to working with you, Chairman Denham, and members of the
subcommittee, to make sure this wasteful project is held
accountable to the taxpayers.
Mr. Denham. Thank you, Mr. Valadao. Out of respect for each
of our witnesses, I know you all have busy schedules. If you do
need to go, we fully understand. But, at Ms. Brown's request--
she has requested that we do one round of questioning. So,
again, if you do need to leave, that is understandable. But if
you do have time to stay and answer a question from panel
members, we would appreciate that, as well.
Let me start by--it frequently comes up: Do you like having
a new train in California or not? That has never been the issue
here. The issue has been from a Federal perspective of can you
afford a project that continues to grow out of control, and
what is the business plan. And, from a California perspective,
what are your priorities? Sixty-eight billion dollars, if that
is the true number, if it doesn't grow any further, could
rebuild our entire water infrastructure. Now, those of us that
represent California's Central Valley, we know how important
water is.
Rebuilding our entire water infrastructure? The Federal
obligation for every water project that is being proposed
today, and every highway project in California, expanding all
of that, and still having money left over for aviation
infrastructure. I think we would actually even have money left
over for education and public safety in the process. We are
talking about a minimum of $68 billion. It is about priorities.
We have some real needs in California. Our schools are
falling behind, our public safety is a big issue, with people
leaving prison early, and certainly our infrastructure is
falling apart. This is about our priorities.
Lots always talk about relieving traffic. This is not a
commuter rail. This is going from L.A. to San Francisco. There
is a reason that the comparison to this is the price of an
airline ticket. This would be nice to have. But 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? It would be nice, but maybe
out of control.
I just have one question for one Member. Mr. LaMalfa was in
the State legislature, as I was, when this was being put
together, while we were debating it, we were voting on it, and
certainly saw the guarantees and the promises that were made
within this. And it is my understanding that you did, while you
were in the assembly, present a bill on--going back before the
voters. This had changed many times.
I would just ask you to explain what your reasoning for
wanting to bring this back to the voters was, and what was in
your legislation.
Mr. LaMalfa. Yes, thank you, Mr. Chairman. In the State
senate I offered two bills that had to do with high-speed rail.
The first one was called Senate Bill 22 to merely put a pause
on high-speed rail spending, planning, eminent domain, what
have you, until a true plan could be brought forward. Because
there wasn't a plan that really articulated true costs. We saw
all the pie-in-the-sky numbers. The year after the 2008 vote,
where it was claimed $33 billion, 1 year later the price was
adjusted up to $42 billion in 2009. The voters at that point
had already been sold a bill of goods. So, my proposal was to
say just put a pause on any spending until a true plan, stem to
stern, could be developed.
Then my later bill was Senate Bill 985, which, at the time,
at the--after the November hearing in 2011, the price of the
high-speed rail had been adjusted upwards of $98.5 billion
during that mark I mentioned. So that bill was to place it
simply back on the ballot in front of the voters, asking the
people of California, ``Would you like to still go through with
this plan, in light of all the other challenges we face, with
public safety, with law enforcement, with fire, with our school
system, prisons,'' whatever, you name it.
And so, I thought those were worthy efforts to ask again
the voters of California that. And an assemblyman out there is
proposing that bill again, Assemblyman Gorell down in Santa
Barbara.
So, I hope that the legislature would deem to place it on
the ballot or go the initiative process. But I thought it was a
very important question, to re-ask at that time, since the
numbers had gone up so dramatically for the project. After that
November 2011 hearing, indeed, there was a scramble to try and
re-adjust the numbers. That is why the project was re-adjusted
to now incorporate Caltrain and local infrastructure in the bay
area and in southern California, so that it is now a San Jose
to North L.A. County high-speed rail, and utilizing with other
ones, which is illegal under Prop 1A.
So, those were the efforts that we tried at, but California
Legislature being what it is, they are still hell-bent on doing
this project as-is.
Mr. Denham. Thank you, Mr. LaMalfa. Ms. Brown?
Ms. Brown. Thank you. And thank you, Mr. Chairman, first of
all, for agreeing to schedule the safety hearing workshop, or
hearing, which is important to all of the Members, both
Democrats and Republicans.
Let me just say that we in the Congress have dedicated $8
billion, period, for high-speed rail. There is not another
Member in Congress that has given more to the California
project than I--$1 billion. So you have my money. My Governor
sent it to you. You all competed for it and won. So I have
already given $1 billion. Thank you.
Now, as I travel around the world, everybody is moving
ahead of the United States and investing in rail. We started
the rail system, and now we are the caboose. And they don't use
cabooses any more. Seventeen billion dollars, Saudi Arabia.
China, $300 billion. And we are fighting.
I mean, California is the most progressive and--I visit you
all constantly. And let me just tell you. Talking about
driving, I don't even want you, Ms. Sanchez, to even carry me
around in the traffic. It is so scary. We have got to find a
way to compete and be a leader in transporting people, goods,
and services. Can you respond to that? Because I haven't heard
any way, any discussion as to how we are going to be
competitive with the rest of the world.
And someone mentioned other countries. Let me tell you--
they want to participate. I mean you--the French, the Chinese,
the Italian. They are constantly calling. They want to partner.
Yes, ma'am?
Ms. Sanchez. Well, I hope you were thinking that you didn't
want me driving you around in my car because of the traffic,
not because of my driving skills.
Ms. Brown. Both.
[Laughter.]
Ms. Sanchez. So, several things. The first is while this is
not a commuter line, per se, the fact of the matter is, for
example, plenty of people go from Anaheim into downtown L.A.
today on train. I imagine if we could get faster speed, there
would be even more who would do that.
The biggest problem for us, coming from the south of L.A.,
is getting through L.A. to get to the other side. This is where
we hit traffic, not 3 hours of the day, but all day, every day,
everywhere, any way, et cetera. So that would be a big deal,
when someone is talking about how many stops you have. We don't
need a lot of stops, but we certainly would love to have a
faster way to get across L.A.
Even if we could do that by air, by the time you go up in
the air, and you go that short distance, and you come down in
the air, I mean, you are spending 3 hours or 4 hours, at least,
doing that. In particular, having to be at the airport, TSA, et
cetera.
So--and remember that since we had that crash of a big
liner and a little liner over Cerritos in our area, as a pilot,
I would tell you that we have very limited air space going on.
It is a very trafficked air space. And, again, fog in
Sacramento, the situation in San Francisco, we need to move our
people.
And let me end with this. I told you we were the economic
engine. Given any day, any year, we are anywhere between the
fifth and the eighth largest economy in the world. I am
astounded, because I had not heard Mr. Costa's number of we
have 38 million people today. I know that. But if we are going
to have 50 million people by 2030, this is a major problem. And
we cannot build wider roads through our places.
In the El Toro ``Y'' intersection, which is, I think, the
widest freeway at least in California, you can--I am told you
can see it from the moon. When you are up in a spaceship, you
can actually see my highway down there. So we need to get this
going. It needs to happen. We need to move our people. And
there are plenty of people who are afraid to fly, who are--
don't have the time to drive, who I know we could get on that
train to go up to San Francisco, and 2\1/2\ hours later be
there, eating some great seafood.
Mr. Costa. With the time remaining, let me quickly just
indicate that the comments you made about the busiest, highly
used air traffic corridor in the country, San Diego--I mean Los
Angeles-bay area is true. But the comments that the chairman
made about taking the $68 million--billion dollars, excuse me--
and applying that to the other systems, I mean, the seven
airports that we talk about are all built on postage stamps.
You are not going to expand them. And the cost of the eminent
domain and that--the freeway, it is the same thing. The
corridor is the cost of those freeways.
You are talking about impacts to communities in the valley,
which are real, and we need to mitigate for, but they are
magnified tenfold when you talk about expanding those same
freeways in the urban areas. And all the lawsuits and all the
opposition that we see that has been concentrated in the last
several years toward high-speed rail, I can guarantee you will
be similarly used for some of the same reasons, trying to
expand those airports for noise and for traffic, as well as for
those freeway systems. And that is why you need an integrated,
multimodal approach that uses our road systems, our air
systems, and our rail system.
And we are going to have to invest in all these areas, like
our parents did, in water and education. We share those goals.
Mr. Denham. Thank you, Mr. Costa. Mr. Webster.
Mr. Webster. Well, thank you, Mr. Chairman. I don't usually
get engaged in somebody else's food fight.
[Laughter.]
Mr. Webster. But I do have a question. Is there a neutral
party that could tell me about the two lawsuits, and what the
implication of those judgments were?
Mr. Denham. Mr. Webster, that is going to be the next
panel.
Mr. Webster. Oh, that will be the next panel. All right,
so, great. Well, thank you all for coming today, and it has
been very interesting.
Mr. Denham. Mr. DeFazio?
Mr. DeFazio. Thank you, Mr. Chairman. I was pleased to hear
you announce at the beginning of the hearing that you had
agreed to schedule hearings on rail safety. And we haven't had
a real hearing on rail safety for 3 years now. The last one
that was held in the last Congress by the Republican majority
was one against regulations and rules that might bring about
more safety.
So, I am pleased to hear that. I specifically asked for
hearings on the DOT 111 tank car, which has been identified
since 1992 as inadequate to withstand a rollover, crash, or
derailment. It was news to everybody on this side, it would be
news to the ranking member, the ranking member of this
committee, to the--our chief of staff on our side, and to me,
that the hearing had been agreed to and scheduled. But I am
really pleased to hear that. Maybe someone knew that we were
all going to bring up this issue, or a number of us at this
hearing, and it got scheduled just before the meeting.
As to the subject at hand, the chair made a point about how
much this would, you know, compare to the rest of our
investments in transportation in America. And, you know, I
would agree that it is a challenging number. If there is going
to be substantially more Federal investment, given the dearth
of Federal investment--in fact, Federal investment in
transportation in this country is going to drop by over 90
percent, absent a new funding source and reauthorization by
October 1st. So it would be even more of a contrast.
But I think the point that was made--and I will ask a
couple Members from there--but, I mean, if you are moving 8
million passengers by plane--I have spent 27 years on the
Aviation Subcommittee--I am not aware of any way to enhance the
capabilities or capacity, absent the building of a new airport
somewhere between L.A. and the San Francisco area. I am just
wondering, with the expected increase in the California
population, I expect that number will go up substantially. How
are you going to accommodate that?
Somehow, third-world, developing countries, you know, are
able to build high-speed rail systems, but we just can't. We
are the United States of America. We can't maintain our
bridges, we can't build high-speed rail, we can't compete in
the world economy, we can't move our people efficiently. What
the heck? What happened to America and our vision?
Mr. Costa, would you address--can you address that? How
else are we going to deal with moving these people back and
forth?
Mr. Costa. Well, I think there is only really one way that
we did it, and that is creating the integrated, multimodal
system that has worked in other parts of the country, both
developed countries, in Europe and Japan, as well as in
developing countries, as you mentioned, places in Asia and
elsewhere.
So, the fact is transportation experts have studied these
challenges with densities for a long time, and they know that
there is not one silver bullet. You have got to use all of the
technologies. And for those who--I have spent a lot of time on
this stuff. Making reference toward high-speed steel on rail as
an old technology, let me tell you. They are fifth generation
of steel on rail. These trains have gone on regular corridors
in France and Germany as fast as Maglev, 350 miles an hour they
have been clocked. The Germans and the Japanese, I think, are
very smart people. They have developed both technologies,
Maglev and steel on rail, and they have chosen for themselves
to be the most cost effective steel on rail for their needs and
for the foreseeable generation or two.
And the fact is that, if we want to be smart about
investments, at the end of the day--and you hit the nail on the
head, Congressman DeFazio--we have got to, on a bipartisan
basis--and this subcommittee is, I think, where it starts--
figure out a strategy on how we are going to fund America's
infrastructure for transportation. We can't do it with fairy
dust. We have got to do it with some practical, commonsense
means on how we are going to invest in every region of America.
And it costs money; guess what?
That is what our parents did. That is what our grandparents
did. They invested. They knew it cost money, and they were
willing to make those kinds of investments. I mean, otherwise,
we are just playing to the public. Well, we have to have this,
we have to have that. But, no, we don't--I don't want to--it is
unpopular, politically, to talk about how you pay for these
things.
Mr. Denham. Thank you. Thank you, Mr. Costa. And I would
just remind Mr. DeFazio that Florida is not a third-world
country. Texas is not a third-world country. They are just
doing high-speed rail much cheaper, and with private investors.
Mr. Duncan?
Mr. Duncan. Well, thank you, Mr. Chairman. I have been in
another hearing, so I was going to reserve my questions to the
panel. But since you all are still here, I will just very
quickly mention that 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?
Ms. Sanchez. Mr. Duncan, I think, again, that the second
panel, as quickly as you can get to it, will be the technical
people who will go through the plans, et cetera.
Mr. Duncan. That----
Ms. Sanchez. From both the Federal and the Authority.
Mr. Duncan. That same article said 52 percent of the
Californians were against this, and with some undecided, so
that there was a minority in favor. What do you say about that?
Ms. Sanchez. Mr. Duncan, I would just say that I am from
Anaheim, California. There were many cities that were
approached before we built Disneyland. Nobody wanted it,
because they thought it was pie in the sky. We built it in
Anaheim. It is the number one icon in the world.
I will tell you that Anaheim is currently building--it is
in construction, it is probably 75 percent done--the regional
transportation hub which will house the end of the high-speed
rail. We will have that finished in this year. So when people
say, ``People don't want it,'' I am going to tell you we not
only want it in Anaheim, but we have put our money--we have
built the cart ahead of the horse, if you will, because we
truly believe that we need this project in California.
Mr. Duncan. Do you all want to say anything?
Mr. LaMalfa. Mr. Duncan, thank you. I have lived this thing
in the State legislature since 2010. And, as a farmer, I would
also speak that my colleagues that live down in the valley--Mr.
Valadao could attest to--their lives are going to change a lot,
their cities, their way of life, because they are going to have
this thing running through there that is 70 feet wide, changing
their access to normally rural roads that are now going to have
to have overcrossings every half a mile or 2 miles, or whatever
they deem they are going to spend on them.
So, a farmer with a tractor no longer just crosses a road.
He has got to go several miles with a low-speed tractor to move
his equipment back and forth to his fields that are now being
sliced into small--maybe 12-acre--parcels and ribbons that way.
But to get back to your question on cost, 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.
And so, if you want the real numbers of a legal Prop 1A
project, you are somewhere north of $100 billion. And so we are
not just 55 short, we are 80, 90 short, or more.
Mr. Duncan. Almost all of these major projects, and
especially true of Federal medical programs, they always
lowball the cost on the front end, and then the costs just
explode after a time.
Yes, Mr. Valadao?
Mr. Valadao. The one comment that has been made quite often
is that they don't know or they don't expect more money to come
to California. 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. And that is
what my biggest beef with this project is right now.
Mr. Duncan. All right----
Mr. Valadao. Thank you.
Mr. Duncan [continuing]. Thank you very much.
Mr. Denham. Mrs. Napolitano?
Mrs. Napolitano. Thank you, Mr. Chairman. And I have been
listening to all the debate and the concerns that they have. I
must point out that most of the voters that vote for these
things are in southern California. I would say two-thirds of
the voters are there. Most of the impact that is against it is
in northern California. So southern California really has a
great deal of interest in what is going to happen to be able to
move people. You have got L.A. County with 12 million people.
That is almost a third of the voters in the whole State.
But we do need faster transportation in the North. I was in
the Sacramento Assembly. And, Loretta, I hate to tell you, but
I made it in 4\1/2\ hours to Sacramento from L.A.
Ms. Sanchez. Oh, yes--San Francisco.
Mrs. Napolitano. Right. Well, and it is--it was one of
those things when you travel, and there is nobody else on the
road, or one or two cars, your foot gets a little heavy.
But there are concerns. There have been concerns with the
Councils of Government in the areas where I am, in my former
district and my new district, in regard to being able to work
with them. And they have been addressing--the Authority has
been addressing the concerns directly with the CoGs. So--and we
are moving forward on those, because there are issues that they
have. And it isn't the funding. It is if it is going to take
away from the funds for local transportation projects, that is
one of the main concerns that my Councils of Government have.
Now, that put into perspective, as Loretta was saying, we
need to be futuristic in California. We are a donor State to
the rest of the Nation in many areas. And so, if we are not
going to be able to help move people or move goods, then we are
not helping our State move into and keep the position we have.
As Loretta said, when I was in the State legislature, it was
the fifth world's largest economy. I think we have dropped a
few.
But most of the concerns that we have are not going to be
addressed by us speculating, until we know whether or not--and
we will hear from the other panel, the upcoming panel, is
whether or not they are already making inroads to be able to
get outside investors to come in and help do, as in other
areas.
Now, I understand--and I agree, Mr. Denham--there are great
projects in other countries. But, guess what? The Government
owns the land. Here, it is either privately owned or railroad-
owned. And so, you have a lot of contentious litigation,
whatever. But we must move forward.
And I would like to give Loretta a chance to be able to
expound more, because I could represent L.A. County sort of,
kind of, but you, in Orange County, you have a lot more.
Ms. Sanchez. Well, remember that we have an airport, John
Wayne, which is at capacity. Some people would like to see--
that is the airport, if you have ever been to it, where, when
you take off, you take off like this, because our residents
don't want to hear the noise.
So, we have a lot of limitations. We also have a lot of
growth: 80 percent of the new trips that are going to be
generated out of LAX are actually coming from South Orange
County. I know this because we had to fight for a second
commercial airport that never happened, for example. I have
been through these wars.
People are working. They are building companies in Orange
County. They have got to go up to the Silicon Valley, they have
got to go and get financing, et cetera.
Currently, however, the Authority is working with local
agencies. For example, in Anaheim, where we will use the same
rails that we currently have, we have this problem called grade
separations, or lack of, where you stop the traffic because the
train is going by. Well, you know, they are investing in making
sure that we are making grade separations. Cars will either go
under or will go over where the track is. So we are already
going to see some help, with respect to the way people move.
And this is one of the costs that is being borne by the
Authority.
Mrs. Napolitano. Well, one of the other concerns is that
the cost to the ridership. And I have always been of the
opinion it should be available to all residents that need to
use it. Now, how we work it out, I think it is important for us
to be able to understand that this is--one of the points that
has to be taken up and discussed and addressed is the cost of a
ticket. Because if it is going to be more than airfare, then it
is something that we need to be able to--allow others to be
able to have access to that form of transportation. The choice
should be for everybody.
Ms. Sanchez. Congresswoman, certainly the cost is a concern
to all of us.
I will say that when I go into L.A., if I can, I do take
the Metrolink that we have, which, if you are a commuter, you
can buy a set of tickets that makes it lower, et cetera. And
you would--it is amazing, because, first of all, the people who
take the Metrolink are surprised that the congresswoman is
taking the Metrolink. It is a great way to travel up to L.A.
But secondly, I am surprised that it is not people with
suit--with briefcases, et cetera, necessarily, that other
people who 2 or 3 days a week commute into L.A., who I would
say are not professionals as people typically think these
commuter rails handle, are taking the trip. So we have made it
manageable for many of them.
Mrs. Napolitano. Thank you, ma'am. Thank you, Mr. Chairman.
Mr. Denham. Thank you. Mr. Williams?
Mr. Williams. [No response.]
Mr. Denham. Thank you. Ms. Hahn?
Ms. Hahn. Thanks. I think--and I will take a pass on a
question, just because I think we need to get to the second
panel. But, Mr. LaMalfa, where did ``jump the shark'' come
from?
Mr. LaMalfa. Jump the shark is a saying that is a----
Ms. Hahn. Where did it come from?
Mr. LaMalfa. Grew out of ``Happy Days.''
Ms. Hahn. Very good.
Mr. LaMalfa. During the end of the----
Ms. Hahn. Which episode?
[Laughter.]
Ms. Sanchez. Number 31, second season.
Mr. LaMalfa. Fonzie, wearing a leather jacket while water
skiing, jumping a shark.
Ms. Hahn. OK, fifth season, that is right. But, by the way,
it was a phrase that meant to show a decline in a series, which
was not the case for ``Happy Days.'' So, really, that phrase
was not used properly, which I also don't think we ought to use
about the high-speed rail project. And I hope to hear from that
on the next panel. Thank you.
Mr. Denham. Well, thank you, Ms. Hahn. I am sure that will
end up in Politico today.
[Laughter.]
Mr. Denham. And certainly thank each of the Members for
spending a little extra time with us this morning. Obviously,
this is a very important issue, not only for California, but
for the Nation. And so, we appreciate your time this morning.
I would now like to welcome our second panel of witnesses:
Karen Hedlund, Deputy Administrator of the Federal Rail
Administration; Dan Richard, chairman of the board of the
California High-Speed Rail Authority; and Alissa Dolan,
legislative attorney, Congressional Research Service.
I ask unanimous consent that our witnesses' full statements
be included in the record.
[No response.]
Mr. Denham. Without objection, so ordered.
Since your written testimony has been made part of the
record, the subcommittee would request that you limit your oral
testimony to 5 minutes.
Welcome. And, Ms. Hedlund, you may proceed.
TESTIMONY OF KAREN HEDLUND, DEPUTY ADMINISTRATOR, FEDERAL
RAILROAD ADMINISTRATION; DAN RICHARD, CHAIRMAN OF THE BOARD,
CALIFORNIA HIGH-SPEED RAIL AUTHORITY; AND ALISSA M. DOLAN,
LEGISLATIVE ATTORNEY, AMERICAN LAW DIVISION, CONGRESSIONAL
RESEARCH SERVICE
Ms. Hedlund. Chairman Denham, Ranking Member Brown, and
members of the committee, thank you for this opportunity to
speak with you today.
The high-speed and intercity passenger rail program is the
largest grant program for passenger rail in our Nation's
history. And it supports more than 150 projects in over 32
States. We are focused on executing high-quality projects that
deliver tangible value for the taxpayers.
And California's high-speed rail project, like all of our
projects, has received a very high level of scrutiny and
oversight that reflects our good stewardship of Federal
funding. The project has made significant progress, and
continues today to move forward. The design-build contract for
construction package one was awarded in August. Right-of-way is
currently being acquired. Final design is progressing. And we
anticipate utility relocation and building demolition to begin
this winter, with significant construction activities to begin
this spring.
As we address the project's short-term challenges, it is
important for us to also recognize the fundamental reality that
the Authority's phased approach is consistent with how major
infrastructure projects have been designed and constructed,
both here in the United States and around the world. Each
interim stage is projected to be self-sustainable on an
operating basis. Each interim stage is projected to generate
enormous public benefits. And by doing it this way, the
Authority, the State, and stakeholders are in a position to be
highly adaptable to challenges and changing conditions.
Furthermore, the data driving our decisionmaking progress
reveals a clear need for California to move forward. Our data
justifies the project's need. It identifies rail in California
as the mode of opportunity.
And lastly, it foretells pretty ominous consequences,
should the State fail to act. Choosing to do nothing is
choosing to allow the producer of more than 10 percent of
America's GDP to be paralyzed by clogged roads, by overwhelmed
airports, and by rapidly diminishing air quality, all as, by
2050, the Central Valley population doubles and the State's
overall population, as has been mentioned, swells to 60 million
people.
On the other hand, to build transportation capacity,
California needs an alternative to high-speed rail. As has been
previously mentioned this morning, this would require building
4,300 miles of new lanes of highway, 115 additional airport
gates, and 4 new airport runways. It is not only considerably
more expensive; in many cases, geographic constraints would
make it impossible.
High-speed rail is a necessary part of California's
response to its mobility and transportation challenges. It will
deliver tremendous transportation capacity and, at the same
time, reduce greenhouse gas emissions. It will spur economic
development and create thousands of jobs and, at the same time,
relieve pressure and reduce wear and tear on our Nation's most
congested highways and airports.
The challenges this project faces, including some of the
opposition, are nothing new. Critics of the Golden Gate Bridge
called it an upside-down rat trap. Some engineers believed the
towers would never stand. They dismissed the whole thing as
impossible to build. Meanwhile, as the project got close to
breaking ground, opponents filed more than 2,300 lawsuits to
stop it. And that was before the Environmental Protection Act.
Some question the revenue sources. Some even grasped at the
issue of how the bonds would be used. In fact, later,
historians would write that building the bridge was the easy
part. The hard part was breaking ground. But, ultimately, the
project did break ground, and during the Great Depression, at
that. Can you imagine anyone today saying it would have been
wiser not to build it? Can you imaging anyone today--can you
imagine, today, if tens of thousands of drivers each day lacked
a direct crossing into one of America's signature cities?
We have an opportunity to not only absorb these great
lessons from the past, but to reclaim them as an essential
feature of the American identity, and to accept our
responsibility to do for future generations what previous
generations have done for us. We will continue to work with the
Authority as it updates its business plan, conducts
environmental analysis, and develops a project we believe is
critical to both California's future and to America's future.
And I look forward to discussing with you today how we can
agree to work together to move this project forward. Thank you.
Mr. Denham. Thank you, Ms. Hedlund.
Mr. Richard?
Mr. Richard. Thank you, Mr. Chairman. Chairman Denham,
Ranking Member Brown, members of this committee, I am pleased
to be here today to discuss the status of the California high-
speed rail program, our progress to date, and our prospects for
the future.
Mr. Chairman, the subject of this hearing is a review of
the challenges facing California high-speed rail program. I
think what you have heard this morning from your colleagues and
from Ms. Hedlund is that the kind of challenges we face are not
new. We certainly do have challenges. We have engineering
challenges, we have the challenge of protecting our
environment, farmland, riparian zones, species, communities.
And we have, as all major infrastructure projects have, funding
challenges and some legal challenges, as well.
And, of course, this is not the first massive
infrastructure project to face tests like these. As has been
said, the generations before us built this country in the face
of even greater uncertainties. And I would note, Mr. Chairman,
that a project that you know better than anyone is of vital
importance to our State, the California water project, which
has provided sustenance to our farms and agricultural sector in
the Central Valley, was highly controversial. It passed the
legislature in California by a single vote. The Bay Area Rapid
Transit System, where I once served as a director, similarly
barely came into existence, again by a one-vote margin. But
today it provides essential transportation service, and its
replacement value was recently estimated at $30 billion.
My point is that these monumental infrastructure projects
are difficult, contentious, belittled, fought, and questioned.
And, yet, in retrospect, in virtually every case, we have
determined that they are undoubtedly worth the struggle. We
feel that way about the California high-speed rail project.
This project is much more than a train. In addition to meeting
rapidly growing transportation needs, high-speed rail will
bring untold economic and environmental benefits to communities
throughout our State.
In approving the program, the California Legislature
unleashed $13 billion of statewide transportation modernization
improvements that are all tied to the high-speed rail program,
but reach into every portion of our State. In places like
Fresno, Palmdale, and other cities, we see already local
leaders envisioning revitalized downtown areas, anchored by the
high-speed rail transit hubs. In fact, we anticipate creating
as many as 20,000 construction jobs during each of the first 5
years of the project. And once operational, the initial
operating segment will directly employ at least 1,300 workers.
Mr. Chairman, we have made tremendous progress towards
delivering these benefits to Californians. Our design-build
contractor is firmly ensconced in the downtown historic Fresno
area, bringing 65 full-time jobs to that region, already. They
are currently focused on acquiring properties and equipment,
finishing design work, doing utility relocation, archeological
work, permit finalization, and geotechnical surveying.
And, since the last time I appeared before this
subcommittee, we have strengthened our agreements with the
Merced and Madera County Farm Bureaus for the protection of
agricultural lands, with the San Joaquin Regional Rail
Commission for improving the ACE Train service, which is vital
to central California and with the California Department of
Veteran Affairs for employment of veterans and the utilization
of veteran-owned businesses. We want the benefits of this
program to reach every Californian.
I know this hearing will address some recent developments,
including a November California State court opinion, and we
will be prepared to discuss those. But I can say to you that in
concert with our Federal funding partners, we will address
these matters expeditiously, maintain the momentum of the
program, and we will continue to meet our matching fund
obligations.
At the same time, the committee should note that, to date,
approximately $100 million of State funds have already been
spent, and that we anticipate fully participating in this
project with the Federal Government for the entire amount that
was appropriated.
Mr. Chairman, you also know that last week Governor Jerry
Brown released his new budget for the coming year. And, in so
doing, he included a proposal to allocate revenues from the
State's new cap and trade greenhouse gas emission program to
the California high-speed rail program. We believe this $250
million in the coming fiscal year, if approved, will portend a
long-term, sustained effort, which combined with the bond funds
and the Federal funds, can help us build all the way to the
gates of Los Angeles within a decade, and that will change
things dramatically.
Finally, I would like to thank you again for the
opportunity to provide the committee with an update.
And I would like to close with these words from Governor
Brown, as he described his commitment to the California high-
speed rail project. And he said--and I quote--``No big project,
whether it was the Golden Gate Bridge, Transcontinental
Railroad, or the Panama Canal, was free of very strong
criticisms, skepticism, and attack. That goes with the
territory. This is a big project. It was started by my
predecessor,'' the Governor said, ``something that I proposed
and talked about when I was Governor the last time. There is no
doubt that California will have millions more people coming to
live in this State. Many of them will live in central
California. We cannot add more freeway miles, particularly when
we already saw 331.8 billion vehicle miles traveled last year.
We need alternatives. And transit and high-speed rail are part
of that mix. And the program that I have set forth,'' said the
Governor, ``strengthens the local rail, the commuter rail
between San Francisco and San Jose, and in the southern
California area. It reduces greenhouse gases. It ties
California together. The high-speed rail serves all these
functions, and that is why I think it is in the public
interest.''
Mr. Chairman, we look forward to continuing to work with
the subcommittee and all stakeholders to ensure that the
Nation's first true high-speed rail system is built correctly,
cost effectively, and in the best interest of the Nation's and
California's taxpayers. Thank you, sir, and we look forward to
answering questions from the committee members. Thank you.
Mr. Denham. Thank you, Mr. Richard. And I would also say I
appreciate when we had talked back in December, you asked me to
delay this hearing, as well. I asked you to make sure that you
could be here today. You did, and I appreciate that.
And would just also remind you, Mr. Brown's--I believe in
his comments, because next year's budget he is anticipating $20
billion coming from the Federal Government to fill that funding
gap. That is in his--we would have that up on the screen, but
our screen, I guess, is broken. So we will hand that out to
others. Thank you.
Ms. Dolan, you may proceed.
Ms. Dolan. Thank you. Chairman Denham, Ranking Member
Brown, and members of the subcommittee, my name is Alissa
Dolan, and I am a legislative attorney in the American Law
Division of the Congressional Research Service. I thank you for
inviting CRS to testify today regarding the legal issues
associated with challenges facing California high-speed rail. I
will be discussing two recent California Superior Court cases
and specific provisions of the cooperative grant agreement that
exists between FRA and the California High-Speed Rail
Authority.
The first case I will discuss is Tos v. California High-
Speed Rail Authority, which is a suit that was brought by Kings
County, California, and two taxpayers who reside therein. The
plaintiffs alleged that the Authority's funding plan did not
comply with the statutory requirements contained in Proposition
1A. Specifically, the statute requires that the funding plan,
one, identify the sources of funds for the corridor, or usable
segment thereof, defined in the plan as the initial operating
section, or IOS; and, two, certify that all project-level
environmental clearances needed to proceed to construction have
been completed.
The court ruled in favor of the plaintiffs on these claims.
It held that the funding plan did not comply with Prop 1A
because it only identified funding sources for a portion of the
IOS, and did not certify that all environmental reviews for the
IOS had been completed. The court issued a writ of mandate,
ordering the Authority to rescind its approval of the plan. It
appears as though the Authority will have to approve a new
funding plan that identifies sources of funds for the entire
IOS, and certifies the completion of all environmental
clearances before the Authority can proceed towards spending
bond proceeds.
The court also noted that this case had no direct bearing
on the Authority's ability to expend Federal funds, which are
not governed by Prop 1A.
The second case is a validation claim that was brought by
the Authority and the High-Speed Passenger Train Finance
Committee, a body that was created in Prop 1A to approve the
issuance of bonds. In this claim, the Authority and the
committee sought to validate the committee's March 2013
approval of the issuance of Prop 1A bonds. A successful
validation claim would prevent future suits that challenged the
legitimacy of the bonds.
In this case, the court refused to issue a validation
judgment, because the Finance Committee did not provide
substantial evidence that it complied with the statute
requiring it to decide that bond issuance was necessary or
desirable. The court found no evidence in the record to support
the Finance Committee's decision. The record contained no
explanation of how or on what basis the committee decided that
bonds were necessary and desirable in March 2013, and no
summary of the factors that were considered.
Therefore, the court denied the Authority and the Finance
Committee's request for validation. By statute, they have 30
days to file an appeal. However, representatives of the State
have signaled that they will seek to restart the validation
process, in order to obtain a validation judgment before
issuing Prop 1A bonds.
Finally, I will discuss the cooperative agreement that
governs Federal grant funds awarded by the FRA to the Authority
under the American Recovery and Reinvestment Act, or ARRA.
Under the ARRA agreement, the Authority must provide matching
funds that cover approximately 50 percent of the project costs.
The agreement does not require these funds to come from a
specific source, but recognizes that the Authority plans to use
Prop 1A bond funds.
Currently, the agreement allows the Authority to spend
Federal money without concurrently providing the required
matching funds. This advanced payment method expires on April
1, 2014, or at the time of a Prop 1A bond sale, whichever is
earlier. After that date, Federal funds will only be available
via reimbursement for expenses already incurred. Since the
current agreement requires the Authority to begin spending
matching funds in April 2014, it does not appear that the
Authority's failure to obtain bond proceeds or secure other
matching funds has led to a violation of the cooperative
agreement at this time.
The agreement also establishes FRA's rights if a violation
or anticipated violation of the agreement occurs. The FRA may
choose to suspend or terminate all or part of the grant funding
provided under the agreement under several circumstances,
including if the Authority violates the agreement, or if the
FRA determines that the Authority may be unable to meet the
contributory match percentage, and complete the project
according to schedule.
Additionally, under these circumstances, the FRA may also
require the Authority to repay all or part of the funds it has
received.
This concludes my prepared statement. Thank you for the
opportunity to appear before the subcommittee, and I will be
happy to answer any questions you may have.
Mr. Denham. Thank you. Ms. Hedlund, back in December I had
a discussion with Mr. Szabo, I had a discussion with Mr.
Richard about holding this hearing. We obviously wanted to hold
this hearing in December, after the court ruling on November
25th. I understand that this hearing held in December, with the
catastrophe with Metro North, would have been untimely.
So, out of professional courtesy, after the request from
Ms. Brown, we delayed this hearing to accommodate everybody's
schedules, and give plenty of time to answer questions and
provide staff information that we detailed out in several
letters. Now, that has put this committee behind. We obviously
wanted to have a rail safety hearing already. We wanted to have
it today. We will still plan on having a rail safety hearing. I
want to make sure all of our Members know that.
But we asked you for specific information. I sent a letter
December 12th asking for information that Mr. Szabo and I
discussed on the phone call that he would provide, not only
answers to my questions, but he would provide invoices. Four
weeks later, we didn't have any of the questions answered, we
didn't have any of the invoices. And now he can't be here
today.
So, we sent another letter, again, asking for those
invoices. We have had staff make multiple phone calls on these
invoices. Now, this is an administration that the President
said, ``We are the most transparent and ethical administration
in U.S. history.'' It doesn't say we are the most transparent,
except for FRA. And yet we can't get invoices?
Do you have these invoices?
Ms. Hedlund. Yes, sir, we do. But let me first state, on
behalf of Administrator Szabo, he very much regrets not being
able to be here today. Frankly, he understood the safety
hearing was going to be yesterday, and would have been
available yesterday for that hearing. Today he has both
business and personal issues that he needed to deal with.
Mr. Denham. And your testimony is more than fine today. I
know that you are very knowledgeable, you are very capable. We
respect your expertise. But whether it is Szabo or you, we
expect answers. This committee expects the cooperation to have
those invoices presented to it.
Ms. Hedlund. Mr. Chairman, we wanted to have further
conversations with your staff about the least burdensome way we
could respond to----
Mr. Denham. You have had 4 weeks to work on that. We could
have had those conversations. And certainly, if it is boxes of
invoices, we would have been able to accommodate that over the
holiday break. I think there was some staff that had plenty of
extra time, with such a long break.
Ms. Hedlund. It was over the holiday. But be that as it
may, we have provided your staff with significant information
with respect to all the invoices that were paid since the
decision came down. We have provided a breakdown of all
invoices that have been paid from the inception of this
project----
Mr. Denham. The $275 million that has been spent so far, we
have received invoices on?
Ms. Hedlund. No, you have received a breakdown, by task
order, of the amounts that have been spent, both by the
Authority and by FRA----
Mr. Denham. Is there a reason that we can't see specific
invoices?
Ms. Hedlund. Sir, we are more than happy to meet your
demands, and--but we would like to----
Mr. Denham. You haven't met them to date. We have had 4
weeks to work on this. And if there is specific information
that you need from our committee, we have had 4 weeks to work
on it. We have had phone calls. Mr. Szabo and I have exchanged
several phone calls, and we provided several letters. If there
is any question on what we are asking for, whether it is you
and I or whether it is staff, I would assume that those
questions can be answered, so that we can get these invoices in
a timely manner.
Ms. Hedlund. I think we should work with you on how we
provide you the information that we have that you have asked
from us. We are committed to being completely transparent.
There is nothing that we have to hide, or that the Authority
has to hide. We are trying to get----
Mr. Denham. That is the real question. What are you hiding?
This is--the administration--the President has said several
times, ``This is the most transparent administration in the
history of our country,'' yet it has been 4 weeks, several
phone calls, and a couple of letters, and we have still not
received any invoices.
In fact, what we have received, over the $275 million to
date that has been--that has come in, we got that information
from our Democrat counterparts. Now, I appreciate--this is a
bipartisan committee, and we are working together. But what are
you hiding that we have to get information--do you only share
transparency--let me see one of these other quotes. ``My
administration is committed to creating an unprecedented level
of openness in Government.'' Only with Democrats. No, it
doesn't say that. It says, ``My administration is committed to
creating an open--unprecedented level of openness in
Government.''
The most transparent administration in history, not just to
Democrats, but to both, to--a bipartisan committee of Congress,
yet we can't get these invoices. When will we have these
invoices? That is the question.
Ms. Hedlund. We will discuss that with your staff, and talk
about----
Mr. Denham. What do we need to discuss? Is there a reason
that we can't send somebody over to pick up invoices today?
Ms. Hedlund. I do not know, sir. I can't answer that
question. We are talking about a process of turning over
information. We need to have further discussions----
Mr. Denham. You have had 4 weeks. How much more time do you
need before we can send somebody over to pick up information?
Ms. Hedlund. We will talk to your staff about how we can
turn over the information you are looking for.
Mr. Denham. A week?
Ms. Hedlund. I can't tell you.
Mr. Denham. A month?
Ms. Hedlund. I----
Mr. Denham. This is the most transparent Government in our
U.S. history.
Ms. Hedlund. We agree----
Mr. Denham. Do you need 2 months? How much time do you need
to have our staff go over and pick up invoices?
Ms. Hedlund. There are thousands of documents, sir.
Mr. Denham. How about every invoice over $100,000? How many
documents is that?
Ms. Hedlund. I have no idea.
Mr. Denham. I assume that is a smaller amount. Is there any
reason why the FRA can't put together every invoice over
$100,000?
Ms. Hedlund. I--you know, the invoices that we get from the
Authority are a combination of invoices that they get from
their contractors.
Mr. Denham. Look, I am not concerned with the combination--
--
Ms. Hedlund. That is why----
Mr. Denham. I am not concerned where they are, or what is
in them. What I am concerned about is an agency that is hiding
information from Congress. We are a congressional committee
that is overseeing this project, and you cannot provide us
information.
Ms. Hedlund. Sir, we are committed to give you all the
information that you----
Mr. Denham. So when can we get this information?
Ms. Hedlund. I can't say that today, exactly what it will
take for us to provide the information that you are seeking.
But we will certainly be as cooperative as possible.
Mr. Denham. Well, you have not been cooperative. You have
not given us the information over the last 4 weeks. That is
what this committee will be demanding, is--at least in the
short term--every invoice that is over $100,000.
My time is expired. I now--Ms. Brown?
Ms. Brown. Thank you. Mr. Richard, I am interested, since
you have a billion of my dollars from Florida, to tell us what
we can do to expedite the process in getting the project done.
For example, we have had lots of discussions about one stop
permitting. What can we do to help you and assist you?
I mean, obviously, the Congress, you know, even this
committee, we are on various tangents. My goal is to make sure
that we have true--we have high speed. And there is a
discussion about what is high speed. But when I go to Europe, I
can go 200 miles from downtown Paris to other European capitals
in 1 hour and 15 minutes. And that is the goal, to move people,
goods, and services.
You know, the Congress is on a different kind of tangent,
obviously. So can you tell us what we can do, as a Congress, to
help you all?
Mr. Richard. Congresswoman Brown, first of all, thank you
very much, both for your support and for that question.
And you are right. In Europe and those places where you've
traveled, they are true high-speed trains. I know there has
been some commentary on whether that is what we are building,
but that is what we are building: a high-speed train that will
go more than 200 miles an hour and be fully electrified and
clean, and so forth, exactly what the people of California and
the people of the United States want to see.
To answer your question directly, I know that this is a
controversial project. But if we can find ways to come together
and talk seriously about this project and what its objectives
are, to the extent that the private sector sees that there is
an ongoing commitment, both from the State of California and
the Federal Government, that will accelerate private-sector
money into this project.
I know the chairman has been very concerned, as has been
the concern of all Members, to see if we can find a way to
leverage public dollars with private-sector dollars. Madam
Ranking Member, we estimate that $20 billion of private-sector
dollars would be coming into our project, based on the revenues
that would be generated. That is a lot of money. What they are
waiting to see is the first piece of this built and a
commitment going forward.
In fact, just yesterday, at our monthly meeting of the
California High-Speed Rail Authority, a representative of one
of the largest infrastructure builders in the world, from
Spain, stood up and said, ``We see what Governor Brown is doing
with his commitment of money from cap and trade. This type of
long-term commitment is creating excitement and generating more
and immediate interest on the part of the private sector.''
So, Madam Ranking Member, I really believe that if we can
come together around this project, we can achieve these
objectives of leveraging public dollars with a lot of private-
sector money.
Ms. Brown. Thank you. Would you like to respond and explain
the Federal role in making sure that we are spending taxpayers'
dollars properly? Do you want to expound on that? I mean----
Ms. Hedlund. We engage in all of our projects in extensive
oversight and monitoring of the expenses. We do detailed
reviews, desk reviews, on-site reviews. And every single
payment, reimbursement, that we make to a grantee is subject to
audit. So, even if, after the fact, some question is raised
about the propriety of a specific expenditure, we can recapture
that.
Ms. Brown. CRS, do you want to respond, as far as
taxpayers' dollars are concerned?
Ms. Dolan. I will decline to answer any questions that deal
with policy. So I think, as--from the legal standpoint, you
know, the FRA's relationship to the Authority is set out in the
cooperative agreement, and they have certain rights under that
agreement. And as far as the way that that agreement is
written, the FRA has the responsibility at this point to make
decisions on how to proceed.
Ms. Brown. OK. I wasn't aware that I was asking you a
policy question. But let me just make a statement: I think
that--and I have said it before--I think certain Members in
this body need to run for Governor of California, need to run
for the State legislature in California or the State senate in
California. We have a bigger role here. We are interested in
California, but we are interested in the entire country. Yes,
interested in how we can move our country forward.
We are stuck on stupid. We are not investing any money.
Eight billion dollars, not a dime--and proud of it--not a dime
for high-speed rail. But when I go to other places, they are
moving forward. They are moving forward. And we are left
behind. I am talking about third-world countries moving ahead
and leaving us. Third-world countries have intermodal airports.
I mean, I don't understand why we don't understand the
importance of moving people, goods, and services. We are
becoming a third-world country, while we sit here and argue
about nickels and dimes.
Mr. Denham. Mr. Webster?
Mr. Webster. Thank you, Mr. Chairman. Mr. Richard, which
segment--OK, I don't know much about California, except just
somewhat where the cities are. Which is the segment that you
are building first?
Mr. Richard. Congressman, first of all, we would welcome
you to come visit and see what we are doing. The segment that
we are actually building first is in the Central Valley of
California, but simultaneously we are making investments in our
urban areas in San Francisco and Los Angeles. We are building
the spine of the system in the Central Valley. This is an
intercity rail system, and so it is going to connect the great
regions of our State.
Mr. Webster. So how long is that segment?
Mr. Richard. The segment that we are building will be 130
miles through the Central Valley, and that will go from north
of Fresno, which is right in the center of that region, to
Bakersfield, which is in Congressmember McCarthy's district.
Mr. Webster. What is the projected passenger travel per
day, or----
Mr. Richard. So, Congressman, this gets into the issue of
how we are building in a stair-step fashion.
Mr. Webster. Well, just in this segment. I am just--if we
are talking about the----
Mr. Richard. Right. That segment is what we have the funds
to build today. And that is not going to be a segment where we
are going to be able to start full high-speed rail service.
So, what we are going to do in the interim is to upgrade
the existing Amtrak service on that segment while we clear the
environmental process and put the funding package together to
get to the next segment, which is over the mountains to a
community of Palmdale, right at the edge of the Los Angeles
basin. That is where I think we will be able to start to
operate.
I will tell you that it surprises a lot of people, but,
today, three of the top five Amtrak ridership corridors are in
California. And the Central Valley segment where we are
building right now is the fifth most used Amtrak corridor, with
more than 1 million trips per year. So there is substantial
ridership in those communities. And as we move to transition up
to high-speed rail level service, we expect to see, ultimately,
between that area and Los Angeles, about 2.2 million trips,
just in the first year, to start, as we get into the Los
Angeles basin. So it is significant.
Mr. Webster. So, what I--I just heard a lot of numbers
flying around here, 8 million passengers, you know. What kind
of--I just want to see what kind of impact it was going to have
on the traffic, air traffic, even the bridge that was
mentioned. That has----
Mr. Richard. So----
Mr. Webster [continuing]. 60,000 cars a day on it. You
know, is that going to--that is certainly a different kind of
project than this. This would be far less than that, as far as
people moving. I am just trying to get an idea.
So--but that is not going to be high speed. It eventually
will. Is that what you are saying?
Mr. Richard. Yes, sir. Absolutely. As the GAO noted, when
it was asked by several Members to review our project, a
project of this size can only be built in phases, and that is
what we are doing. Our approach is to make sure that each phase
is usable, as we build it. Then, as additional phases are
added, the whole system gets better and better and better.
But our Central Valley in California right now suffers from
tremendous traffic and serious environmental issues. The air
basin is very bad there; 21 percent of the kids have asthma. It
is actually one of the poorest areas of our State, in addition
to having some of the great wealth from our agribusiness
communities. And this is an area that has been left behind in
investment in California for years.
So, our first $6 billion--half from Federal funds, half
from the State--targeted to that area, is going to have
immediate benefits in terms of employment, air quality,
transportation, and mobility. And it is the spine of the system
that we are building that is ultimately going to connect the
entire State.
Mr. Webster. What does the ridership produce, as far as
operating cost, in just that segment?
Mr. Richard. Under our bond act, Congressman, we are not
allowed to operate high-speed rail with a subsidy in
California. And that is the crux of the issue.
Because everywhere in the world, once high-speed rail is
built, it generates enough money to operate without needing a
public subsidy. And our projections are that we will be able to
do that, too. Not on that first segment, which is why we will
probably use it for upgraded Amtrak service. But as we get over
the mountains to Palmdale, and to connect to L.A., we believe
we will be able to start operating without a public subsidy. In
other words, our high-speed rail will cover its costs, and that
will trigger further private-sector investment that will help
build out other portions of the system. So that is the approach
we are taking.
Mr. Webster. Thank you very much.
Mr. Richard. Thank you, sir.
Mr. Denham. Thank you, Mr. Webster. Mrs. Napolitano?
Mrs. Napolitano. Thank you, Mr. Chairman. It is really
interesting to hear some of the information. But I--Mr.
Richard, what--because I know there is going to be some grade
separation improvements. And, as I have mentioned before in
this subcommittee, that in my area there were 54 grade
crossings, and only 20 are going to be separated. So some of
the investment is going to be in helping the communities be
able to deal with the impact it would have on its traffic. And,
of course, you are talking about improving the infrastructure
of the rail lines, which, of course, have been sadly in need.
We talk about not funding infrastructure repair, that we are so
back--and bridges and dams and railroads, and all of that.
So, all of that said, I think we need to have more
information from the Authority to the general public about the
benefits it brings, besides being able to do the connection and
the choices of travel for folks and eventually into the L.A.
area.
We talk about Palmdale, going into Palmdale. How--what is
the connection between there and Los Angeles?
Mr. Richard. Congresswoman Napolitano, in the first phase,
part of the appropriation from the California Legislature is to
upgrade the Metrolink line from Los Angeles to Palmdale. So
there will be near-term improvements in that service. That
service right now has about 1.2 million riders per year. As you
know, it is very well-traveled. We will be improving the travel
time, straightening part of the track, and doing grade
separations there. Those things will provide immediate benefits
for the Metrolink service between Los Angeles and Palmdale.
Mrs. Napolitano. Well, I am not opposed to the high-speed
rail, at all. I just want to be sure that the communities that
I represent, and the rest of the county, is aware of the plans
that the Authority has for the area, and how the impact is
going to be on those communities, themselves. And I think I
shared that with you, and I hope to be able to continue working
on that.
Ms.--I would yield to Ms. Brown.
Ms. Brown. First of all, I would like to make some breaking
news. I would like to clarify that the Democrats on this
committee, members or staff, are not getting any information
that the Republicans have not been getting. I want to be clear:
We have not gotten any information.
Secondly, for the Deputy Secretary, in light of the two
recent court decisions that we have heard about this morning,
is the Authority currently meeting its obligations to FRA, or
are there any violations of the agreement?
And my second question, have either one of these lawsuits
stopped the projects?
Ms. Hedlund. Thank you, Ms. Brown, for giving me an
opportunity to clarify that issue. As our learned counsel from
the CRS has pointed out, the Authority is not in violation of
the cooperative agreement as a result of its inability to
access bond funds at this time. The Authority is in the process
of developing a plan to address concerns raised by the court in
pursuing supplemental funding sources, and you have heard the
chairman of the Authority today, that they are committed to
meeting their matching fund obligations under this agreement.
With our Federal investment secured by strong protections
in our grant agreement, we are working with California on a
path forward that best serves the interests of the American
people. And with these strong protections in place, any
premature adverse action on the part of the Federal Government
would not serve the taxpayers' interest, because it could delay
project delivery and cause the Authority to incur substantial
contract damages and other costs that could needlessly increase
the ultimate cost of the project to the taxpayers by millions
of dollars.
Ms. Brown. You want to add to that, Mr. Richard?
Mr. Richard. Yes, Congresswoman. I want to reaffirm what I
said before. We are meeting our obligations. We will continue
to meet our obligations.
When we negotiated this last grant agreement amendment with
the Federal Government, it allowed us to access Federal funds
ahead of State funds. And I would like to emphasize that was
just good business. The Congress, in its wisdom, set a deadline
on the use of the stimulus money of September 2017. We were
facing a situation where, in order to use the Federal funds in
time, we were going to pay about $180 million of acceleration
fees to our contractor to get them to go faster. We have saved
that money now, because of the cooperation and the work that we
have done with our Federal funding partners. It was good
business.
But, at the same time, Ms. Hedlund and her colleagues
negotiated a very strong agreement that went through all kinds
of ``what-if'' questions. They anticipated that there might be
a problem like this. The agreement, by its terms, says the
State intends to pay back the difference with bond money. But
if they can't, there will be other monies, and other monies,
and ultimately, Federal protections, as was described by Ms.
Dolan.
So, we feel that the Federal taxpayers are fully protected.
The State of California recognizes its obligation to match the
Federal commitment. We are doing so, and we will continue to do
so.
Ms. Brown. Thank you, sir.
Mr. Denham. Thank you, Mr. Richard. Mr. Williams?
Mr. Williams. Thank you, Mr. Chairman. And I want to thank
all of you for being here this morning. Appreciate it.
I am from Texas. I am a business guy for 42 years, and I am
a big believer in the private sector. I think the private
sector is the biggest, the best partner anybody can have. And
they get it done right, much better, in most cases, than the
Federal Government.
But just last week Secretary Foxx was in my State, in San
Antonio, announcing an agreement between the Federal Railroad
Administration, TxDOT, and the Central Texas Railway, to
prepare two environmental studies that will lay the groundwork
for high-speed rail between Dallas/Fort Worth and Houston. And
I must tell you, I personally look forward to seeing the
results of that Department's work, and--with our State, on the
project.
Now, in preparing for this hearing, I was struck by the
stark difference between the work that has been done in Texas
and that that you describe that is being done in California.
Most glaring to me is the private-sector involvement. In Texas,
I understand there is a lot of private-sector interest and
backing, but I don't see any of that, that you are talking
about. You have touched a little bit on it, but we don't see
any of that in California.
So, Mr. Richard, I would direct this, my first question, to
you. How much private-sector money do you have in hand for all
this project? Now, I heard you talk a little bit about that.
But what do you have on hand now that shows you are
aggressively going after the private sector?
Mr. Richard. Congressman, thank you for that question about
the private sector. Let me just say, sir, that this is actually
a part-time job for me, being the chair of the California High-
Speed Rail Authority. It is sort of a full-time part-time job.
In fact, I have spent much of my career in the private sector,
including infrastructure finance. And so I share your view that
the private sector brings innovation and efficiency.
And, indeed, our business model for high-speed rail in
California anticipates that it would be operated by the private
sector. This is not going to be a public-sector railroad. Our
business model is to have initial investment, and then to
auction the rights to the private sector to come in and build
and operate on that system. They would be the operators. That
is a model that has been used successfully around the world. I
am sure that that is what they are looking at in Texas. So we
are going to follow that model.
Sir, we have had extensive conversations, not only with
private-sector entities in this country, but with sovereign
funds and private-sector builders and operators from around the
world. There is no question there is going to be extensive
private-sector involvement in California high-speed rail. The
only question, Congressman, is when. Our view is, as we talk
with them--and we would be happy to share this with you and
your colleagues--that they want to see certain things first.
It is a question of how they price the risk. If we bring
them in too early, it could be very costly for us. If we can
effectively use public dollars first and show a ridership base,
then we have got something much better to sell to them, and we
can generate a lot more private-sector dollars.
So, we think that we are working very well with the private
sector. I would like to point out that when Governor Brown
appointed me, he also appointed a fellow named Mike Rossi, who
was the former vice chairman of Bank of America. Mr. Rossi sits
on the board of Cerberus and other financial companies. He has
extensive finance experience. Together, we have laid out an
entire financial approach to this project that we think will
maximize private-sector involvement.
We don't have those dollars in hand today, but that is
because we believe that it is proper to use the Federal
stimulus dollars first, and then lever up the private-sector
dollars afterwards.
Mr. Williams. Well, with that in mind, as--what I
understand, as I have listened to this, even before the
stimulus money came out, you all turned down an offer from the
private sector to help build this project. Can you explain that
offer? And can you speak on why it was turned down?
Mr. Richard. Congressman, I am aware of the situation you
are referring to. It predated my time on the California High-
Speed Rail Authority. But what I understand was that a company
that has operated the French railroad, SNCF, made a proposal at
one point to the California High-Speed Rail Authority to simply
take over the project. It is also my understanding that that
offer did not come with any dollars attached to it. They just
said, ``You know, we can come in and take this over.''
To me, that would basically be the same as saying, ``Well,
why don't we let Airbus come in and run our airports?'' I'm not
quite sure that the jetways would fit the Boeing airliners at
that point. So we wanted to have an open-source project. We
didn't want to turn it over to just one company, particularly
when there was no financial commitment associated with that
proposal. If they had brought dollars to the table, it might
have been a different conversation.
But that is my understanding of the history, sir. And, if
you are interested, I am happy to provide more information.
Mr. Williams. I think you should provide that information,
let us see that.
Mr. Richard. I would be happy to do that, sir.
Mr. Williams. And also, talking about the model in Texas, I
note that the Texas Central has been speaking with STB
throughout their process, to ensure that they check all the
boxes they need to, and they don't get hung up anywhere.
You all, however, didn't apply for the necessary STB
authority until after Chairman Denham asked you to look into
it. Is that correct?
Mr. Richard. That is absolutely correct. We had thought
that we did not need to go to the STB until we started
operations. Upon assuming the chairmanship of this
subcommittee, Chairman Denham told us that he did not agree
with that view. We told him that we respected that position,
and we immediately went to the Surface Transportation Board to
put the question to them. They determined that we were under
their jurisdiction, and we have proceeded apace since then. But
you are absolutely correct, Congressman.
Mr. Williams. Well, you think if you discussed it with them
before, and supposedly applied on time, that you would not have
had to ask for approval to be--to have the process affected?
Mr. Richard. Congressman, my understanding is that once we
applied, the application went through the normal process at the
STB.
A few months ago, for the next leg, we asked the Surface
Transportation Board if they wanted to bifurcate our
application and deal with the transportation issues first and
the environmental issues second, in order to meet time
schedules. They told us they didn't feel the need to do that,
that they felt that their process would work just fine, and we
accepted that judgment.
Mr. Denham. Thank you, Mr. Williams. Ms. Hahn?
Mr. Williams. Yield back.
Ms. Hahn. My turn already? It is only 2 hours. So it is 2
hours into this hearing. Pretty much everything has been said.
But everything hasn't been said by everybody, so I am going to
say it. And, as co-chair of the California High-Speed Rail
Caucus, I am a strong supporter of bringing high-speed rail to
California.
We are behind the rest of the world. China has built more
than 6,000 miles of high-speed rail track since 2008, and is
investing more than $100 billion in high-speed rail. Japan and
France have also made substantial investments. In California,
our transportation system is at its limit. Our highways are
jammed. L.A. to San Francisco is the second busiest air route
in the country, and faces constant delays because of their
weather. We need another option, and I think that is what high-
speed rail is for California.
It is true that the Authority has had a lot of challenges.
It needs to quickly and effectively and--address, so that we
can ensure that this project moves forward. I hope that, at
some point, we can begin to talk about the serious impact that
this project is going to have on some of the communities, and
how we might mitigate that. But let's not pretend that these
challenges are insurmountable, and that we haven't faced
similar challenges before. Everybody has been talking about it.
The great California water project, which, by the way, when
it was introduced, only passed the legislature by one vote. And
today, it provides drinking water for more than 23 million
Californians annually. Nobody is going to question that.
The New York Times talked about when the Golden Gate Bridge
was in development, it had 2,300 lawsuits before it was built.
So, again, nobody is discussing whether or not that project was
worthwhile.
I believe this is worthwhile. When we talked about 15
million residents residing in California, you know, I hope that
these are the kinds of projects we are dreaming about and
thinking about and planning for.
I was disappointed one of my fellow California Members, Mr.
Valadao, was more interested in dealing with the population by
building more prisons. You know, I don't think that is the
future of California. I think we need to be innovative and big
thinkers. And you know, with the jump the shark comment, you
know, we both had knowledge of ``Happy Days.'' The problem is
that episode was in the fifth season. It went on for 11 more
seasons. So, even the way people use that comment to describe a
project that is declining, or that is relying on gimmicks to
keep attention on it, was used improperly. I think we are in
season 1 of the high-speed rail, and I think we have got at
least 11 seasons that are going to be strong and problematic.
And I hope we, as Californians, can come together and talk
about the problems, and talk about the solutions. And I hope,
Mr. Denham, your line of questioning is more about tough love
than, you know, about shaming and punishing a project that I
think will mean a lot to California. And I think we ought to be
fighting together to bring Federal resources to California, not
trying to oppose Federal resources.
So, Mr. Richard, a couple things have been talked about.
You have been accused in this hearing of having phony numbers
with your ridership and your business plan and your financing.
Can you address some of that?
And also, one of the things I am interested in is the
Governor's proposal to offer the $250 million in cap and trade.
Is that legal? What does our legislative analyst say, whether
or not we can use that? Is $250 million even close to what we
are going to need to fill the gap? And how do we plan to fill
the gap in this project, which I think is one of the greatest
projects that we have seen in this country in a really long
time?
Mr. Richard. Well, Congresswoman Hahn, thank you for those
comments and questions. Let me just quickly address the issue
on the use of the cap and trade money.
The Governor did propose in his recent budget to use cap
and trade money for high-speed rail. But this has been talked
about for several years. In fact, going back to the
commencement of the greenhouse gas reduction program by the
California Legislature, early on, the California Air Resources
Board put out a scoping plan, talking about the types of
strategies they would have for meeting the target reductions.
California high-speed rail was included in that early scoping
plan. So, from the very beginning, the Air Resources Board saw
this project as having major benefits for helping us meet our
goals of reducing greenhouse gas emissions to 1990 levels.
Now, it is true that the legislative analyst of the
California Legislature came out this week and said that they
thought that this was not necessarily consistent with the law,
I think the term they used was a ``legally risky strategy.''
But the problem with that conclusion is that it was based on
two assumptions, both of which are not correct.
The first assumption was that the legislative analyst
assumed that there wouldn't be benefits before the year 2020,
as contemplated by the law. But, in fact, there will be
tremendous benefits. Because of our cooperative agreements, we
are going to be electrifying the Caltrain commuter rail system.
That, itself--and that is going to be in place by 2018 or 2019
and reduce 18,000 tons per year of carbon emissions
immediately, just for that train system there.
The second assumption was that we would generate greenhouse
gas emissions during construction. As far as construction in
the Central Valley goes, we are committed--and we are required,
under the environmental processes--to a zero impact
construction. The equipment that is being procured right now is
called Tier 4 equipment, which has the lowest possible
emissions. We have required the contractor to recycle all
steel, all concrete, to take care of all those materials, so
that they don't go into landfills. And landfills themselves
generate greenhouse gas emissions.
My point is there are immediate and durable benefits that
are being provided through this program.
Mr. Denham. And we will be having a couple more rounds.
Ms. Hedlund, I appreciate that in all efforts for it to be
transparent, you will be providing those invoices. Our staff
looks forward to having those conversations and getting those
in a timely manner. But let me ask you a little more about the
lawsuit and what is happening right now with California, as it
pertains to our Federal tax dollars.
So, is it accurate that FRA has not changed any policy or
procedures related to the grant since the court ruling?
Ms. Hedlund. We have not--I think that is accurate. We have
not made any change to the grant agreement since the court
ruling.
Mr. Denham. So even though a court has made the decision
that there is no State match at this time, FRA is not taking
any separate precaution on Federal tax dollars?
Ms. Hedlund. I would not agree with your characterization,
sir, of the court's decision. The court decision--and I am a
little reluctant to discuss a litigation to which we are not a
party, but you have been advised by counsel to the CRS--the
court decision did not say that the funds would never be
available. It said that the Authority has to----
Mr. Denham. It said ``currently,'' which----
Ms. Hedlund. They----
Mr. Denham [continuing]. Is your responsibility, watching
over the taxpayer dollars. You have a fiduciary responsibility
to make sure that, under the Antideficiency Act, that you are
going to receive your 50 percent match coming back. So,
currently----
Ms. Hedlund. I don't----
Mr. Denham [continuing]. The court decision has said--so
the question is, have you made any changes? And who has
actually made this decision? Did it go up to DOT? Is the White
House aware that the FRA is not making any changes in its
current procedures?
Ms. Hedlund. We are in discussions with the Authority about
their plans to continue to meet their obligations under this
agreement. They have not failed to meet their obligations. As
far as we can determine to date, they have said they will
continue to meet their obligations. And so, we are going to
continue to talk to them about this.
Mr. Denham. Ms. Hedlund----
Ms. Hedlund. But we have not made a decision.
Mr. Denham. A court has made a ruling. Today, currently,
there is no State match. Now, the courts have said Prop 1A
cannot be used, the $9.95 billion cannot be used under the
current system. And April 1, $180 million is going to be owed
back, by your numbers, by your request, on that State match.
So, I understand the Governor has been very creative, $250
million for the cap and trade dollars. But as I served in the
State legislature, that vote has to be done by the legislature
at the end of the fiscal year. Most of the time they are late,
meaning July or August. How do they meet the April 1st
deadline, if it is even constitutional to do cap and trade, and
if both liberals and conservatives in the legislature agree
that cap and trade dollars should be used for this process? We
are still talking August versus April.
Ms. Hedlund. I would suggest you address that question to
Mr. Richard. We do recognize that acts of the legislature, that
they are subject to appropriation, as is my next paycheck.
Mr. Denham. My concern is this does not seem to be raising
any red flags.
Ms. Hedlund. We are very concerned about it, sir, and that
is why we have been engaged in discussions with the Authority
about their plans.
Mr. Denham. So who made the final decision to continue to
spend the dollars? Is that something that Mr. Szabo makes on
his own? Is that something he takes to Secretary Foxx? Is it
something Secretary Foxx takes to the administration?
Ms. Hedlund. We have not made a determination that they are
in violation of their agreement. And so, we have continued to
make those payments in the ordinary course.
Mr. Denham. Ms. Dolan, do you think that they are in
violation?
Ms. Dolan. I think, under the terms of the cooperative
agreement as it stands at the moment, two things happen on
April 1st. They may no longer take advantage of an advanced
payment method, and can only be granted Federal funds under a
reimbursement method. And, according to the funding
contribution plan, as it exists in the cooperative agreement,
funds starting in April of 2014 until, it appears from the
chart, April of 2015 will be spent solely from the matching
funds the State provides, instead of the ARRA funds, as an
effort to ``catch up'' on the contributory match percentage
that they are required to have.
So, at this point, considering that those contributory
match funds are due in April of 2014, it doesn't appear that
they have violated the agreement right now, as it stands.
Mr. Denham. So, given the November ruling, does the FRA
have the right, under the grant agreement, to suspend payment?
Do they have the right to be able to suspend payment to the
California High-Speed Rail Authority if they so choose?
Ms. Dolan. So, under Section 23 of the grant agreement, the
FRA has several options for suspension and termination of the
cooperative agreement if any number of circumstances exist. One
of those possible circumstances is if the FRA makes a
determination that the grantee will not be able to meet the
contributory match percentage that is required under the
agreement.
So, if the FRA determined that the Authority would not be
able to meet the contributory match percentage, then under the
agreement they would have the option to suspend or terminate
funding.
Mr. Denham. Thank you. I do have a followup question on
that, but my time has expired.
Ms. Brown?
Ms. Brown. Thank you. You know, I have been here for 22
years, and I guess this is the first time I have ever seen
anybody go after money for their State. I mean this is really
breaking.
But my question has to be that if California is temporarily
prevented from selling bonds because of the recent lawsuit, are
there other ways California can meet its obligations?
Mr. Richard, you mentioned that we--you saved us $188
million. Can you expound upon that?
Mr. Richard. Well, thank you, Congresswoman. I think it is
important to note that Governor Brown came into this project
when it was already underway. It had been started by his
predecessor and had been supported by many Governors over the
years. In fact, even when he was President, President Reagan
spoke to the Japanese and said, ``We are going to be building
high-speed rail in California, just like you folks have here,
in Japan.'' So this has been something that California has been
looking at for many, many years.
When Governor Brown came in, this program did have a number
of challenges and a number of problems, which we've tried to
address. My background is in local transit. My colleague's
background is in finance. We tried to bring a businesslike
approach to this project. What that meant was that we wanted to
look at this in a way that business leaders would look at the
challenges and opportunities of a similar venture.
You know, Ms. Hedlund, before she had this position, was a
commercial attorney working on infrastructure projects. She
knows how to negotiate an agreement that has security
provisions in it. And I can tell you that when we sat down to
negotiate for months and months with the Federal Railroad
Administration, they went through, in chapter and verse, how
they were going to make sure that they protected themselves.
What the agreement says is that if we can, we will pay back
the money from our bonds. If we don't have the money from the
bonds, we will pay it back from other sources of State funds.
If all of that fails, they have the right, under Federal law,
to actually offset monies that would come to California. So
they have an agreement that you, as a Member of Congress,
should be happy about, because it protects the taxpayers of
Florida and every other State in the Nation, Federal taxpayers,
when it comes to California.
Now, our administration is committed to meeting its
obligations. Our hope is that, possibly by April, we will have
access to the bond money. But if we do not, the Brown
administration is committed to working with our Federal funding
partners to make sure that, under the grant agreement, we
continue to work in harmony to achieve the objectives. That is
what we are going to do.
Ms. Brown. Well, I surely hope so, because I am sure we
will be back here April 1 with another hearing. You know, we
are going to micromanage this project. You need to know that.
Deputy, are you comfortable that we are safeguarding the
taxpayers' dollars, particularly the billion dollars I gave?
[Laughter.]
Ms. Hedlund. We are absolutely comfortable that we are
safeguarding the taxpayers' dollars.
Ms. Brown. And do you need any authority from us?
Ms. Hedlund. We do not need any additional authority from
you to safeguard the taxpayers' dollars in this project.
Ms. Brown. I am, overall, interested in how to expedite
projects. I heard the person talking from Texas, which--I have
been out there five times. The flights between Houston and
Dallas, I mean, it is--I have sat on the runway for an hour.
And if they had a high-speed train, I could have been there.
And we just sit on the runway. And all of the local communities
are supportive of the project. But the problem was you didn't
have the support in the capital. And that is part of the
project. Where you have the local government's support, then
you don't have the people--the capital.
So, this is a project that has local and State support, but
you are having problems up here, with the Federal Government.
Not the Federal Government, but Members of Congress.
Mr. Richard. Well, Madam Ranking Member----
Ms. Brown. Republican Members of Congress, OK.
Mr. Richard. There are certainly people in California who
have concerns about the project. So I don't want to pretend
otherwise----
Ms. Brown. I was there. I mean I was there when the
Governor announced the--I was there for another meeting, so I
was there when the $100 million, $100 billion, or something--I
was there. So I have been there, over and over again, in the
congestion, in the traffic. I had a convention out there, it
was the worst one I ever had, because it takes all day to get
from one place to another. So there has got to be a better way
to get around.
Mr. Richard. Well, and on that point--and also, in response
to something that Congressman DeFazio said before--one of the
biggest supporters of the California high-speed rail project is
the head of the San Francisco International Airport. That is
because, right now, between San Francisco and Los Angeles,
which is the busiest short-haul air corridor in the country, 25
percent of those flights are delayed. They don't have any room
to expand the airport. And their view is they want to use their
runways and their gates for long-haul----
Ms. Brown. Long-haul.
Mr. Richard [continuing]. International flights. That is
the most effective use of that resource. So they have been very
strong supporters, and we have enjoyed the support of the
mayors of all of our biggest cities, the heads of the business
communities in all the major cities. We have a lot of support.
We do have detractors, but we have a lot of support.
Ms. Brown. Yes, sir.
Mr. Denham. Thank you, Mr. Richard. Mr. Mica?
Mr. Mica. Thank you. A couple of questions. Since we have
got pretty substantial Federal expenditure already in the
project, and this will be one of the biggest expenditures of
Federal funds for any infrastructure project, there is some--
there is now some uncertainty. I guess your superior court had
said that there are not funds available. Has the Governor made
a commitment? And that may be a temporary situation. If, in
fact, those funds are not available for California to come up
with its share, has he made a commitment to find the resources
to continue the project? Do you have a written--I mean or some
solid commitment?
Again, there--a quarter of a billion Federal funds has
already been spent. State has certain commitments. This is not
just the Federal project, but California's project.
Mr. Richard. Yes, Congressman Mica, and I am glad you made
that last point. The Federal Government has spent several
hundreds of millions of dollars on this project, already. But
so also has California. We have spent $400 million of our State
bond funds on this project to date. Of that, about $97 million
qualifies as matching funds under our agreement with the
Federal Government. But the other $300 million is money that we
spent, preparatory to that, to do environmental----
Mr. Mica. No, but both sides have spent money. My question
deals with----
Mr. Richard. Going forward.
Mr. Mica. Yes.
Mr. Richard. Going forward, Congressman, Governor Brown
just went to the California Legislature with his budget to put,
at least for the upcoming fiscal year, $250 million from our
new greenhouse gas emission program into high-speed rail. He
also indicated in his budget that he will be asking the
California Legislature to create a more permanent structure
around that, so that we have----
Mr. Mica. But right now the answer would have to be no, you
do not have a commitment, because he doesn't have the approval
of the legislature. He does have a proposal before the
legislature for both short term or interim, and then long term.
Is that the answer?
Mr. Richard. That would be my answer, sir.
Mr. Mica. OK. Well, you know, I am the strongest advocate
of high-speed rail in the Congress. Have been. I didn't think
they should start in California, with a stretch that--nowhere.
It can lead to somewhere. It has to lead to the bay area or it
has to lead to L.A.
Mr. Richard. Right.
Mr. Mica. Those are very expensive links, too. And in the
future we are going to end up with a high-speed train,
unfortunately, that does not serve substantial population
areas, nor does it connect in to fixed systems. And again, my
druthers would be to do the Northeast Corridor, where we have
the only right of way we own, Amtrak-substantial, that could be
eligible for that. So I see more and more money going into this
project. California has had incredible financial problems. I
think it is starting to come out of it. And we have no
commitment for the future.
The other question I have is I consider Amtrak our Soviet-
style train system. They are just--I mean their record, and we
keep pouring more money into losing propositions. But now I
understand Amtrak has a potential operational--or some
participation in the project. Can you describe that to me,
without me getting a prescription for depressant medication?
Mr. Richard. I can't guarantee that, Congressman. First, I
want to say that even though I understand that you have had
concerns about the California project, we recognize and respect
your leadership on high-speed rail.
We also believe that the Northeast Corridor is an essential
corridor for high-speed rail. So we don't see competition with
that program. In fact, we would love to work together with that
project.
On the question of Amtrak, as I was explaining before, to
one of your colleagues, we are starting in the Central Valley,
sir, and I would be very happy to talk about reasons why.
Mr. Mica. Do you have a relationship now, or an agreement
with Amtrak----
Mr. Richard. Yes.
Mr. Mica [continuing]. For service, or what?
Mr. Richard. Well, we--the most interesting agreement we
have with Amtrak is actually for the joint procurement of
locomotives for the----
Mr. Mica. Oh, that--oh, please. I am going to have to go
get a double dose of depressants. Their last locomotives were
the Acela engines. You know the history of that. They
misdesigned them, they were supposed to be tilt, so you could
get the speed, then--they spent so much money in the suit of
the acquisition almost as they did for the equipment. Then the
tilt trains were misdesigned so they were hitting--they could
hit the other trains. They had to put metal wedges in, so we
have never had them utilized to their full capability. Now they
are replacing them. That is another nightmare that I am
concerned about.
I would look at--to anybody except for Amtrak to--if you
are going to get into a locomotive operational or any kind of a
deal.
Mr. Richard. Well, I am happy I stumbled into that one,
sir.
But the thing I was going to say is that of the five
busiest Amtrak routes in the United States, three are in
California. The fifth busiest Amtrak route is in the Central
Valley of California. There are a million trips per year on
that segment. As we build to full high-speed rail, which will
accomplish what you said you wanted to see, connecting our
cities with high-speed, intercity service, we can, as an
interim step, upgrade that Amtrak service substantially.
Mr. Denham. Thank you, Mr. Mica. Mrs. Napolitano?
Mrs. Napolitano. Thank you. Thank you, Mr. Chair. And one
of the other things that I think we have heard--not heard as
much about is the system of payment, the fare system, and how
it can be made affordable for the nonprofessional people.
Then the next issue that I would like for you to maybe even
touch upon would be the safety issue, whether there will be the
positive train control type system to protect the general
public, the safety of the workers, the rail workers, the
conductors, et cetera. Would you address that, please?
Mr. Richard. I would be happy to. First of all, we are very
committed to make sure that this high-speed rail program
benefits all Californians. I had the opportunity recently to
travel to China with Governor Brown on his trade mission. We
rode the high-speed rail system in China. As you know, they
have built 7,000 miles of high-speed rail in China.
It was very interesting because there were levels of
service. In some of the cars, there were basically the workers,
who were moving back and forth between the cities. And I
understand in Japan this is true, as well. So this system has
to accommodate all of the community's needs for travel and
transportation, and we believe that it will.
Regarding our pricing structure, I took the Amtrak from
Sacramento to Fresno many times in the course of this effort.
The fare is $43. If we were operating high-speed rail today,
the fare to go all the way from Los Angeles to San Francisco
would be $81. So we think we are pretty comparable to the
Amtrak fare structure right now, and that is a very popular
system, especially with working-class folks in the Central
Valley.
On your question about safety, the California high-speed
rail system will be 520 miles in the first phase of fully
positive train-controlled track. It will be entirely subject to
positive train control. And, Congresswoman, our program is also
providing $180 million to upgrade the existing Amtrak service
in California, including the addition of positive train
control. So we are getting a jump on positive train control
through funding from the California high-speed rail program.
And on your final question about worker safety, I am happy
to say that we work very closely with the Teamsters,
Brotherhood of Locomotive Engineers. We are working to make
sure that what we are doing is going to meet those safety
standards. It is very important.
Mrs. Napolitano. Thank you, sir, for the answer. And I
would yield to Ms. Brown.
Ms. Brown. Thank you. I just want to mention and clarify
that Governor Brown sent a letter to DOT committing that the
State is to meet its obligations in the grant agreement. I
don't know, do you have that, Deputy?
Mr. Richard. Ms. Brown, I don't have that letter with me. I
am aware of that letter. That letter was part and parcel of our
negotiations with the Department of Transportation and what I
was saying before about their insistence that they have
security against our advance payments.
Ms. Brown. Deputy, are you all----
Ms. Hedlund. Yes, we have that letter, and we are very
gratified by that letter. Thank you.
Ms. Brown. And that letter--it meets your qualifications?
Ms. Hedlund. Yes.
Ms. Brown. OK.
Ms. Hedlund. Additional security.
Ms. Brown. Can you please submit that letter to the record?
Ms. Hedlund. Yes, we will do that.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T6279.008
Ms. Brown. Thank you. Thank you very much. I yield back the
balance of my time.
[Laughter.]
Ms. Brown. I yield back. And do you want your time back? I
yield it to Ms. Hahn, so we can finish.
You wanted a minute?
Ms. Hahn. Thank you. It is so surreal to be in this
hearing, literally. The voices behind me, if I didn't know
better, that voice sounds like a congressmember representing
any State but California. And the voice right behind me sounds
like, if I didn't know better, secretly lived in California,
not to mention gave up $1 billion from the State that she
represents to go towards this high-speed project. So it is just
really amazing to me that our California delegation is not
united together in trying to bring Federal resources to the
beautiful State of California, instead of trying to fight it.
So, my last couple questions are, you know, again, just
reiterate, Mr. Richard, how confident you are that the State
legislature will approve this $250 million and the cap and
trade dollars.
Also, I haven't talked a lot about jobs. You were accused
by one of our Members of being fuzzy on the jobs number. Once
construction begins, like to know how many jobs are we talking
about? And, of course, for those of us down in the southern
California area, even though the project is starting somewhere
else, can we count on some of those construction jobs to come
from Los Angeles, some of the communities that I represent?
And maybe talk about how Palmdale seems to be this tipping
point. And what does that mean for this project in the future?
Mr. Richard. Very quickly, Congresswoman, first of all,
yes, we hope that you will be seeing jobs in southern
California, as well, with a lot of the grade separations that
Mrs. Napolitano had talked about, and other things that we are
doing in southern California. We estimate that, during the
initial construction segment, there will be 20,000 jobs per
year for 5 years.
And Mr. LaMalfa was correct. Some people jumped on us
because we used the term ``100,000 jobs.'' That was basically
the same way that people have described these job estimates
historically. But we went and broke it down and said 100,000
jobs means 20,000 jobs a year for 5 years, which is a lot of
jobs in an area that has twice the unemployment rate of the
State, as a whole. The million jobs relates to the entire
build-out, which is 100,000 jobs per year for 10 years. So,
there is a lot of employment associated with this project.
I will be respectful of our California Legislature, so I
won't make a prediction as to how they would vote on cap and
trade. It would be inappropriate for me to do so. But I will
say that we are having conversations with environmental leaders
and others, and I think they are more comfortable, as they have
seen the Governor's entire program for use of the cap and trade
money, of which only 29 percent is not just for high-speed
rail, but also for rail modernization--$250 million for us, $50
million for rail modernization, $200 million more for clean
vehicles, more money for transit land use, more money for urban
forestry. So, as they are seeing the totality of the Governor's
approach to using the cap and trade funds, I think we are
seeing a lot of support.
Palmdale is emerging as a major hub. The mayor of Palmdale,
Jim Ledford, is a real visionary, and sees the benefit of high-
speed rail. And Palmdale could be the place where the Desert
Express connects from Las Vegas, if that project is built,
where high-speed rail connects into the Central Valley, and the
third leg reaches down into L.A., Anaheim. The mayor and the
civic leaders there already see what that could mean, in terms
of the revitalization of downtown and development in Palmdale.
Mr. Denham. Thank you. There has certainly been a lot of
questions to this Member, who is from California, on ``Why
wouldn't you just spend the money?'' Just give all the money to
California, $68 billion. Let's take some more money, 55--no,
let's take the entire transportation budget for the rest of the
United States, and just give it to California. You are from
California, why wouldn't you take it? Here is why. Here is my
concern.
Ms. Dolan, Mr. Richard testified a minute ago that FRA, the
Administration, the U.S. Government, if the Antideficiency Act
was not followed, if they cannot come up with their 50 percent
match, then we could hold up other funds. So, the Governor has
already committed $250 million that was supposed to go to
environmental. That would help out my Central Valley. That
would help out our air quality. We are already going to see--if
some of the environmentalists in California don't get outraged
that $250 million be used for something else.
But what other money could be held up? Could Federal
education dollars be held up?
Ms. Dolan. So, under the terms of the cooperative
agreement, their--FRA reserves their right to require repayment
of either all or a part of the funds that have been given to
the grantee. That repayment can be done through what is called
an administrative offset. And I believe that that would reach,
in this order, FRA funds and then DOT funds and then, in the
event that those funds cumulatively are not enough money, funds
from the rest of money that is owed to California from the
Federal budget.
Mr. Denham. So the Federal Government, if the State does
not repay its 50 percent match, which--the State is already in
the hole--if the State cannot come up with its match, the
Federal Government could first withhold all rail funding, then
withhold all highway funds and aviation funds, and then go into
deeper pockets of education, when our school systems are
already failing our kids in California. Is that correct?
Ms. Dolan. The FRA reserves that right in the cooperative
agreement. As it is written at the moment, it is in their
discretion to----
Mr. Denham. Also----
Ms. Dolan [continuing]. Decide how to exercise that----
Mr. Denham. Also, infrastructure dollars to water storage,
which--water is being shut off in my Central Valley right now,
and we are having huge droughts, tens of thousands of jobs that
will be lost, due to water. That is another issue that could be
held up.
This is why this is such a big issue for California. It is
about priorities. This is not just an endless pot of money,
this is not just free money. This is not just, ``Let's take it
from Florida and every other State and give it all to
California.'' We have priorities. We are dealing with budgets.
We have to be good stewards of the Federal taxpayers' dollar.
And so, when I am asking these questions, it is not because
I hate high-speed rail. I think there are some great high-speed
rail projects going in across the Nation. I think, you know,
seeing Maglev, a newer technology than high-speed rail, may
have an opportunity in the DC area. There are great
infrastructure projects that are moving forward, as we move
forward, as a country. The question is, what are our
priorities? Sixty-eight billion dollars that could balloon to
$100 billion is something I am going to continue to have a lot
of questions about.
Ms. Hedlund, Ms. Dolan said that she believes the--I don't
want to misquote you--that, ``They can make the determination
on whether or not to stop funding.'' Do you believe that you
have that ability to stop funding at this point? Is your
discretion--is it up to the discretion of the Administration?
Ms. Hedlund. Since we have not made a determination that
the Authority is currently in default, I think our legal
obligation, at this point in time, is to honor the commitments
made by the State of California, and continue funding. I think
we have a legal obligation to continue funding.
Mr. Denham. But if they do not--at a certain point, if the
Administration decides that you have--that the Authority has
hit some type of trigger, then you feel that you have the
ability to make that determination, that they are not
fulfilling their obligation?
Ms. Hedlund. It would depend on the facts and the
circumstances at the time; they do not exist today.
Mr. Denham. So, April 1st, they owe $180 million. If they
cannot find that money, would that be one?
Ms. Hedlund. It would depend on the facts at the time.
Mr. Denham. If the legislature does not approve the $250
million in August or July or June, would that be something that
would trigger it?
Ms. Hedlund. The Authority has the ability to cure the
deficiencies that were set out by the court. That is another
alternative.
Mr. Denham. In the grant agreement it reads, ``Any failure
to make reasonable progress on the project, and FRA
determination that the grantee may be unable to meet the
contributory match percentage required and complete the project
according to the project schedules, shall provide sufficient
grounds for FRA to terminate this agreement.'' You still agree
with that, correct?
Ms. Hedlund. That is what the agreement says.
Mr. Denham. My time is expired. Ms. Brown?
Ms. Brown. Just in closing, I would like to have some
questions submitted for the record.
In addition to that, I want to just clarify for you, Mr.
Richard, Maglev is 1 billion per mile. There are many types of
high-speed rail, Maglev just being one of them. There are many
countries and many organizations that want to partner with you.
Are you looking at who is providing the best possible resources
and partnerships, and who is going to build a plant in the
area? I mean, there are many factors that you consider when you
decide who is going to partner. I know there are options
because I have talked to the Italians, the Japanese. Everybody
wants to partner with us.
Mr. Richard. You are exactly right, Congresswoman. And the
other issue you touched on is that the Congress, in
appropriating these dollars, made it very clear that the Buy
America provisions will apply. What that means is, for those
who would come in and provide locomotives or any other things
for high-speed rail, they are probably needing to look at
building factories here and hiring American workers, because
that is what American taxpayers expected. Our friends at the
FRA have been very, very clear that they will enforce the
Congress' policies on that provision, and we have made that
clear to the people that we are talking with.
But you are right. There is international interest. They
want to come here. They want to build high-speed rail in
America. I would really like to see American companies
developing the technology that some of the European and
companies in Japan and China have developed.
Ms. Brown. Spain. I mean, I love it. I love it.
Mr. Richard. They are very successful. But they want to
work with us, they are looking forward to it. Congresswoman, we
are going to be building high-speed rail in California.
Ms. Brown. Thank you, thank you. And, like I said, if you
can come up with some ways that we can help expedite it, the
permitting process, or anything that we could do on the
positive end, I would certainly be interested in, you know,
working with you to that regard. I am constantly out in L.A.,
which I think is a nightmare, as far as transportation is
concerned.
And, Deputy Secretary, I just want you to know that I know
that Congress is not interested in bullying the Administration.
And so, think kinder of us in our tone. We are learning, we are
working, and we are, hopefully, moving forward and going to be
a kinder, gentler Congress. I yield back.
Ms. Hedlund. Ranking Member Brown, we always appreciate the
opportunity to have a lively discussion with you.
Ms. Brown. Lively, yes. Thank you. I yield back the balance
of my time.
Mr. Denham. Thank you, Ms. Brown.
Mr. Richard, again, I appreciate your willingness, your
openness. You know, we have had a great relationship, and
continue to have ongoing conversations. And I understand that
we may have some disagreements on some of the funding
challenges, but you have certainly been a good partner to work
with in this process.
I do have a question on the operating segment itself, on
identifying available funding. The court ruling, that was one
of the things that they had ruled on, was that the initial
operating segment, the entire segment going from Merced all the
way down to Palmdale, there is a $20 billion deficiency in
putting that together.
So, basically, in a nutshell, the court is deciding that,
until you have that $20 billion funding gap, no Prop 1A funds
can be utilized. How do you fill that $20 billion gap?
Mr. Richard. Mr. Chairman, first of all, thank you for your
kind words. I also want to thank you for the courtesies that
you have shown to me. I know that you have policy differences
with us, but I have appreciated the opportunity to work with
you on this project, and we will continue to work with you and
the committee.
This is going to get to be a little bit technical, but I
think that in Ms. Dolan's excellent testimony that she provided
to this committee, there is really the key to understanding how
we look at this situation. The problem is that the bond act,
the law, does not say that we have to build an initial
operating segment. In fact, those words do not appear in the
bond act. What the bond act says is that we have----
Mr. Denham. So, just to clarify, you disagree with the
court's ruling.
Mr. Richard. No, sir. I can explain the court's ruling.
What the court dealt with was the initial funding plan that the
California High-Speed Rail Authority provided in November of
2011--and, Mr. Chairman, it was released just after I was
appointed by the Governor; it was really in the can ready to go
before that. That plan described the first ``usable segment''--
and the ``usable segment'' is the key term, here, that the bond
act says is what we have to build. The authors of the bond act
knew that nobody was going to be able to unwrap a 520-mile
high-speed rail system like a train set under a Christmas tree
in 1 day. They knew it was going to be built in segments. They
said that those must be usable segments. And I believe Ms.
Dolan quoted that in her memo.
What happened was that the California High-Speed Rail
Authority defined its usable segment as the initial operating
segment. And, accordingly, the judge said, ``If that is your
first usable segment, you have to show me all the money, and
you have to show me the environmental permits,'' and we did not
have those.
But what was not in front of the judge was the revised
business plan that we put forward before the California
Legislature, 4 months later, in April 2012. And, responding to
a lot of public comment, what we did was we said the valley
segment is, in fact, a usable segment.
Mr. Denham. The valley segment, meaning the initial
construction?
Mr. Richard. Correct. And it is a usable segment, precisely
because, in response to public commentary, we are tying in to
Amtrak, we are tying into ACE train, and we are doing these
other things that would give it usability. And I would point
out, Mr. Chairman, that in its approval of the first leg of
that, the Surface Transportation Board used the term ``usable
segment'' as they--as a justification for why they were
providing that approval.
Our view is--and, obviously, the opponents of the project
will come back and try to test it--our view is that, if that
valley segment is a usable segment, and we believe it is--that
we will comply with the judge's ruling by showing that we have
all of the funding for that, which we do, and all of the
environmental permits, which we will.
I will just end on this point, Mr. Chairman, which, as a
former member of the California Legislature, I think you will
appreciate. When our revised plan was put before the California
Legislature in the spring of 2012, some of your former
colleagues asked legislative counsel, ``Does the High-Speed
Rail Authority revised business plan comply with Proposition
1A?'' The answer that came back from legislative counsel, in a
very detailed written opinion, was, ``yes, it does.''
That question has never been before Judge Kenny. He was
dealing with the prior plan. So that is one of the reasons why,
despite all of the press around this, we do not agree that in
order to comply, in order to have access to the bonds, that we
need to assemble $25 billion. We believe we have the funds in
hand, and what we need to do to comply is to show that funding
plan and to finish the environmental process so that we have
the environmental documents in hand. That is eminently doable.
Mr. Denham. I guess the piece that I don't understand about
this--I guess you would have two choices, either ignore the
court ruling all together and hope that the attorney general
can go ahead and float the bonds----
Mr. Richard. No, sir.
Mr. Denham [continuing]. Or, because you have a
disagreement with the court, the court is looking at the
initial operating segment, and you are redefining the usable
segment as the initial construction segment, the--you would
have to actually go back to another court, to another judge, or
to this very same judge, and fight that case. Would you not?
Mr. Richard. I would almost agree with that. First of all,
there is no prospect that the attorney general will give a
clean bond opinion to try to sell the bonds until----
Mr. Denham. I didn't think there was, but----
Mr. Richard. Right. So I don't want to pretend that there
is.
What the judge said to us was, ``Go back and redo your
funding plan to show that it complies.'' My view is that we can
go back and we do exactly what the judge said. We are not, by
any stretch of the imagination, Mr. Chairman, intending to
ignore what the court said. What the court said was, ``Before
you can go forward, I need you to go back and redo this funding
plan.'' In my view, that means updating the funding plan to be
exactly what was presented to the California Legislature that
they determined was likely to comply with the bond act.
There has been a lot of commentary about this, and I think
most of what has appeared in the press and the discussion has
been wrong. But it means that we can comply with the judge's
ruling, not ignore it, sir. We would not do that.
Mr. Denham. I do want to finish this. I have got a couple
more brief questions before we close. But do you want to go
first, or----
Ms. Brown. No, I am finished.
Mr. Denham. Mrs. Napolitano?
Mrs. Napolitano. Thank you, Mr. Chair. And this is an
interesting extension, and I enjoy it.
I have been privileged to be on CODELs with Ms. Brown in
Europe, and have ridden on some of those really fast trains,
and spoken to the boards, some of the board members, in regard
to how they put the plan together. We did that, what, 3 years
ago, something like that.
The impressive thing about that was that their safety
record, their ridership, was exceedingly high, their cost was
affordable. And if they can do it, why couldn't we, other than
the fact that most of those countries own the land on which the
transportation lines were geared to?
So, to me, we need to concentrate on the bigger picture,
and that is the ability for us to be able to not necessarily
compete, but be able to maintain the necessity of options for
our ridership. And you are right. In California, I can tell
you, when I was into the first phases of the building of the
Freeway 105, which leads into where I live, it used to take me
20 minutes to the airport. It now takes me almost an hour. Same
amount of distance.
So, we are congested, and there is more to come. How do we
address the issues and begin to convince the general public and
the Government, especially my colleagues in northern
California, that this is going to be an effective way of being
able to deal with part--it is not the whole answer, it is part
of the answer, and we must be astute enough to understand that
we need to invest it, and we need to convince our voters that
this is where we need to go for the future of our generations.
And as far as taking funds and putting them into other
areas, I am concerned about my project funding. I have covered
that with you. But you can't commingle funds, like water funds
or transportation funds. Let's be real about that. So, while we
can talk big about how we need to be able to fund these other
entities, we need to understand that we are not able, legally,
to commingle funds, or to be able to transfer funds.
But, you know, there is an old--the movie--I can't remember
the name of it, but it said, ``Build it, and they will come.''
I have great expectations that it will be successful. And how
we go about it is just having the faith that we can and that we
will be able to not only find the funds, but find the partners
to be able to do that.
So, with that, Ms. Corrine Brown, you want any further
comments?
Ms. Brown. No.
Mrs. Napolitano. Thank you. I yield back. Thank you, Mr.
Chair.
Mr. Denham. Thank you, Mrs. Napolitano.
I just wanted to follow up on the last discussion we had.
So, if you disagree with the court's decision, or you have a
difference of opinion on what the usable segment is--the court
has defined that usable segment as the initial operating
segment. If you are going to take your day in court, what is
that timeline? When do you go back to court to clarify that?
Mr. Richard. First of all, Mr. Chairman, if I might
clarify, I don't think it is a matter of us disagreeing with
the court. What the court said was, ``What I have in front of
me, the preliminary plan from the high-speed rail, you guys
defined usable segment as the initial operating segment. If
that is your definition, then you have to meet these other
tests.''
Mr. Denham. Well, Prop 1A defines it, as well.
Mr. Richard. The words ``initial operating segment'' do not
appear in Proposition 1A. It only talks about a usable segment.
Mr. Denham. Correct.
Mr. Richard. So, my predecessors on the California High-
Speed Rail Authority board, as they were looking at their
business plan and finance plan, which I inherited in November
of 2011, they equated initial operating segment with a usable
segment. And the judge said, ``OK, I am going to take you guys
at your word. And, if that is the case, you needed to check
these boxes.''
It is not a matter that we are saying the judge was wrong.
What we are saying is that, after that plan that he had in
front of him, we presented an updated plan to the legislature
that did not equate usable segment with the initial operating
segment. It equated usable segment with the first valley
construction, as enhanced by connections to existing rail. We
think, then, that meets the same standard that the judge was
talking about, and that is what the legislature voted on, and
that is what the legislature's lawyers looked at and said met
the provisions of Prop 1A.
Mr. Denham. Either case, it--either you have to comply with
the court decision, it is a $20 billion hole to have an
electrified track that goes around Palmdale and to San Fernando
Valley--that is electrified, that will be high speed, hopefully
it is not running a subsidy, because that is what Prop 1A
says----
Mr. Richard. Won't be allowed to.
Mr. Denham. So, either you have to come up with that $20
billion and comply with the court, or you have to comply with
Prop 1A, which says, if you are redefining that usable segment,
that usable segment still says it 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?
Mr. Richard. Mr. Chairman, I think maybe one of the most
useful things I could do is to provide the committee with the
opinion of California legislative counsel. In a 21-page,
single-spaced opinion, they went through and looked at our
revised business plan. They were asked by two of your former
colleagues in the California Legislature, ``Does this comply?''
They concluded it did. That informed the vote of the California
Legislature to appropriate the bond monies to move forward. And
they went through an extensive legal analysis about why it did.
I could try to go through that here, but I fear, sir, that
we would really get down into the weeds. But what I would say
to you is I think, for this committee's purposes today, what
you are interested in doing is making sure that the Federal
taxpayers are protected, and that we have the ability to pay
them back.
I can't tell you, Chairman Denham, when we might have
access to the bond funds. People who oppose the project will
continue to bring litigation. But I can tell you that we
believe that our revised business plan is in harmony with
Proposition 1A. We believe that that can be established. And we
think that we have other backstop mechanisms. So, from the
standpoint of Federal taxpayers, we don't think that there is a
question.
As a Member of the delegation from the Central Valley, I
think you are also concerned about other aspects of this. Is
this just going to be stuck in the Central Valley? Are your
citizens going to actually be able to get to Los Angeles and
San Francisco? And there, Mr. Chairman, I think we are hoping
to come back to you very soon and say if we look at the bond
money, and we look at the cap and trade dollars, we really
believe--I want to be able to confirm this--but our vision is
that we can get all the way to Palmdale, connect to the
Metrolink, and that that triggers private-sector investment.
And, Mr. Chairman, I would look forward to working with you
to work through that challenge. Because, if that is the case,
that we can get to Palmdale, I think that is going to address
many of the questions that you have had about this project. And
that is what we are aiming to do right now.
Mr. Denham. And I don't know that you and I have ever had
this conversation, but I think you are absolutely correct. That
is my concern. 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.
Now, I know you and I are both--you are moving forward, and
that is your job. My job is looking over the Federal tax
dollars, that we are actually spending money properly, and that
we are not putting my voters, my State, at risk of losing
highway dollars, aviation dollars, or education dollars. And
so----
Mr. Richard. Absolutely.
Mr. Denham [continuing]. I look forward to this continued
dialogue. I look forward to you getting me that information
that proves that this operating segment either complies with
the court decision, or that this construction segment complies
with Prop 1A.
But I certainly think that FRA--I know that FRA has the
ability. The question is whether they have the will to make a
determination at a certain point. Whether that is April 1, when
there is $180 million due, or whether that is later in this
budget year, if the $250 million of cap and trade money becomes
unconstitutional, or the legislature just votes it down, at a
certain point FRA may be forced to make a determination that
they withhold funds.
I have a better solution, and I am prepared to introduce a
bill that will require FRA to suspend all payments until
California High-Speed Rail Authority has the matching funds
available, and is not hindered in coming forward with that, and
spending that money.
So, I will be introducing this bill before we leave on our
district work period next week, and I am happy to share the
language with--to you after this hearing.
Ms. Brown, do you have any closing remarks?
Ms. Brown. Just that I won't be signing on to your bill.
[Laughter.]
Mr. Denham. I am sure California would be happy to take
more money from Florida, then.
Again, I would like to thank each of you for your testimony
today. Ms. Hedlund, obviously, you can see my frustration has
to do with FRA and its transparency. I look forward to getting
those invoices from you.
If there are no further questions, I would ask unanimous
consent that the record of today's hearing remain open until
such time as our witnesses have provided answers to those
questions, and have submitted them in writing, and unanimous
consent that the record remain open for 15 days for additional
comments and information submitted by Members or witnesses to
be included in today's record of today's hearing.
[No response.]
Mr. Denham. Without objection, so ordered. Again, I would
like to thank our witnesses again for their testimony.
If no other Members have anything to add, the subcommittee
stands adjourned.
[Whereupon, at 1:11 p.m., the subcommittee was adjourned.]