State bullet train breaks federal funding rules, too

Over the past two months, the California media have finally awoken to the folly that is the state high-speed rail project. Reporters for several newspapers have detailed all the lies the bullet train was sold with to voters in 2008 and chronicled the reasons it faces such intense public opposition in the Central Valley and Silicon Valley. They’ve also noted that its business plan continues to rely on ridership or revenue guarantees to attract private investors that are illegal under state law. But this Thursday, when the U.S. House Transportation and Infrastructure Committee holds a hearing on the state’s program, maybe California’s media will get around to mentioning another reason to think the bullet train is crazy: In providing California $3 billion-plus in federal funding for the project, the Obama administration is breaking clearly written rules on how stimulus dollars are supposed to be spent.

In fall 2010, after the U.S. Department of Transportation announced it was providing $902 million more for state high-speed rail, I wrote to the DOT to ask if it was aware of all the criticism California’s project faced — from the LAO to state Treasurer Bill Lockyer to state auditors to the UC Institute for Transportation, etc.

A DOT spokesman would not comment specifically on criticism of the bullet train. However, he did provide me with the federal regulations governing California’s request for federal funds for stimulus money for transportation projects.

These rules, published in the Federal Register on June 23, 2009, say that state applications must stand up after being subjected to a “rigorous analysis.” The key factors of this analysis involved the “financial plan (capital and operating),” the “reasonableness of financial estimates” and the “availability of operating financial support” and “quality of planning process” for proposed projects.

If that “rigorous analysis” really happened, how did California’s project get a dime? As I wrote a year ago …

On all these fronts, the California High-Speed Rail Authority has faced consistent sharp criticism from state watchdog agencies and from such key legislators as Joe Simitian … .

Doesn’t this matter to the Obama administration? Shouldn’t it matter if it wants to persuade people that stimulus money isn’t being spent in rash, wasteful ways?

Apparently not. So now California’s immense high-speed rail boondoggle isn’t just a burden on state taxpayers. It’s a burden on all U.S. taxpayers. Welcome to the club.

At Thursday’s House hearing, all this should be brought up — starting with the first witness, who appears to be Joseph Szabo, top executive at the Federal Railroad Administration. More than a year after I first posed the following questions to Szabo and the Obama administration, I still haven’t gotten coherent answers:

1) The $9.95 billion in Proposition 1A bond seed money approved by California voters in 2008 for a $43 billion joint public-private venture includes an airtight requirement written into state law that the high-speed rail project must be viable without further taxpayer subsidies. But the rail authority has yet to come up with a business plan that doesn’t include promises of either direct or indirect subsidies if revenue lags. Officials believe private investors needed to supply a minimum of $10 billion for the project won’t sign up unless taxpayers share more of the risk of the venture.

Hey, Joe Szabo, doesn’t state law matter here?

2) The loudest proponent of California high-speed rail, [former] Gov. Arnold Schwarzenegger, has mocked its doubters. But the governor at least acknowledges state law. In January [2010], a Schwarzenegger spokeswoman, Amanda Fulkerson, confirmed that he remained opposed to public operating subsidies for the project. In an e-mail, Fulkerson also pointed out that Proposition 1A “does not allow the state to invest capital from the bond into a segment until and unless that segment (I) has independent utility and (2) the state’s money is matched or exceeded by third-party capital.” Capital that hasn’t been forthcoming. No such capital, no project.

Hey, Joe Szabo, doesn’t this mean you should slow down, not speed up?

A year later, I guess not. Szabo and the White House are still proceeding with plans to build the first segment in the Central Valley, which can never show “independent utility” — that is, break even or make money. The strategy honestly seems to be that if a few billion are spent on this segment, the project will become “too big to fail,” and state laws and federal regulations will be rewritten to keep it alive.

Great, just great. As I wrote a year ago, what’s needed is …

“a real response from Szabo, not more of the spinning and stonewalling the California High-Speed Rail Authority churns out. The taxpayer safeguards included in Proposition 1A were put there for a reason. If they are going to be ignored by Washington as well as Sacramento, that demands an explanation.”

Here’s hoping the California GOP representatives on the House committee — Duncan Hunter of east San Diego County, Gary Miller of Diamond Bar and Jeff Denham of the Central Valley — bring up these points. (Gary owes me. It’s a long story.)

Anyone who thinks Szabo and the Obama administration actually conducted a “rigorous analysis” of the California High-Speed Rail Authority’s plan and concluded that it had a sound “financial plan (capital and operating)” that displayed “reasonableness of financial estimates,” “availability of operating financial support” and “quality of planning process” is smoking the good stuff.

Given the larger brawls in Washington D.C. over stimulus spending, and the debate over whether it “worked,” it’s hard to believe any House Dems would want to argue that the California bullet train is such a good thing that Uncle Sam should pay for it by borrowing money that our grandchildren must repay.

One would think that would hold for the California Dems on the House committee that will interrogate Szabo this week. Will Bob Filner of San Diego, Laura Richardson of Long Beach and Grace Napolitano of Los Angeles keep swigging from the green Kool-Aid? Or will they acknowledge just how big a fiasco the bullet-train project is for the Golden State?

On Thursday, we’ll find out.