California High Speed Rail Project – Time to Eliminate High Speed Rail Funding

There is someone in Sacramento that has stood up and said, “the Emperor has no clothes.” Diane Harkey, Assemblywoman from Orange County, has put forward a courageous bill, AB 2121, which would pull the plug on funding the High Speed Rail Project.

Why would she propose such a bill?   With a 30 years in banking and corporate finance, Harkey was attempting to find ways to save money for the state. “If we were a corporation, we’d be bankrupt.” She found a little known article in the state constitution. Article XVI says, “the legislature at any time after the approval of a general obligation bond act by the people, may reduce the amount of indebtedness authorized by the act to an amount not less than the amount contracted at the time of the reduction or to repeal the act if no debt is contracted.”

Harkey looked at the debt California owes: 73 billion in General Obligation (GO) debt and another 48 billion left to borrow. Dissatisfied with the numbers, she started to work on the problem of “too much accumulated debt and not enough revenue.”

Her original plan was to review some of the older uncommitted bonds on the books and she thought she’d shave off a little of this and a little of that, but then she came upon the High Speed Rail (HSR) bond. It was nearly fully outstanding with unspent bonds. Considering the financial condition it’s in, she wrote Assembly Bill 2121 to eliminate their funding.  While HSR sounds like a good idea, “we have a chronic deficit that we’ll be looking at for at least the next 4-5 years of $20 billion.” She also cites our high unemployment which will result in lower revenue; the triple B rating adds cost to state borrowing.  She also stated that, “we’ve borrowed from 719 internal accounts.  There’s nowhere left to grab.”

“The people of California expect us to set some priorities – that’s what we’re elected for – and they’d agree that we probably have much more important immediate needs such as education, local transportation, water and public safety.  Health and Human Services is being cut tremendously for the aged and disabled.”  She was looking for “ways to save money, ways to reduce debt and ways to keep the state afloat.”

Since she wrote the bill, people have been coming to her in droves, thanking her.  She has since discovered the Legislative Analyst’s Office findings that the 9 billion was a mere down payment of total cost which could be over 40 billion.  And there are issues such as the questionable ridership, “sketchy financial proposals” and she believes that the project would have to be heavily subsidized. Harkey says while there may be benefits to high-speed rail, she believes it shouldn’t come at the expense of schools, local transportation, public safety, and health and human services.

Rod Diridon is quoted in a local paper as saying, “my guess is [the bill] wouldn’t go very far.” At the most recent Board meeting in March, the High Speed Rail Authority voted to officially oppose the bill.  Jeff Barker, Deputy Director for CHSRA said, “It was just introduced, so we typically wouldn’t comment on a bill that hasn’t even been heard in a committee yet.” Diane Harkey admits, “it may meet with a lot of resistance, maybe the bill will die. I think it’s worthy bringing forward, I would like to hear how the committee members and supporters justify funding with public money a project that doesn’t have a work plan, a business plan that has tracking, funding, timelines, guidelines and doesn’t have any assurance of more federal stimulus dollars and one that the state may have to cover insurance for the rail operation.”

“We’re getting into something that we may not be able to afford for a very long time. We will be, in essence, pregnant with the bond and the funding and be stuck.  We have to be very, very careful with what we do with the public money. We would not go to Wall Street with a private offering like this without all this backup data.”

The bill will be heard in Sacramento at the Assembly Transportation meeting, tentatively on April 19 at 1 PM.  For more information go to:

http://arc.asm.ca.gov/member/73/?p=article&sid=217&id=222972  

 The contact person is Sharon Gonsalves who can be reached at (916) 319-2073 or sharon.gonsalves@asm.ca.gov.