A Review of the Challenges Facing California High Speed Rail

2167 Rayburn House Office Building

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0 Wednesday, January 15, 2014 @ 10:00 |

Transcript of Hearing

Summary of Subject Matter

Invited Witnesses:

  • Honorable Kevin McCarthy (CA-23), Member of Congress
  • Honorable Zoe Lofgren (CA-19), Member of Congress
  • Honorable Loretta Sanchez (CA-46), Member of Congress
  • Honorable Jim Costa (CA-16), Member of Congress
  • Honorable Doug LaMalfa (CA-01), Member of Congress
  • Honorable David Valadao (CA-21), Member of Congress
  • Ms. Karen Hedlund, Deputy Administrator, Federal Railroad Administration | Written Testimony
  • Mr. Dan Richard, Chairman of the Board, California High Speed Rail Authority | Written Testimony
  • Ms. Alissa Dolan, Congressional Research Service | Written Testimony

Chairman Jeff Denham (R-CA)

Subcommittee on Railroads, Pipelines and Hazardous Materials
Hearing on “A Review of the Challenges Facing California High Speed Rail”


January 15, 2014
Opening Statement
(Remarks as Prepared)

This is the second hearing this Congress that I have held on the California High Speed Rail project since I became chairman of this subcommittee. 

In 2008, the voters of California approved a $9.95 billion ballot measure, Proposition 1A, for this project.  I was serving in the state senate at the time and voted in favor of the 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 financing from the state, the 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 five 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 the Proposition 1A requirements that funding sources be identified for the $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 the California High Speed Rail Authority did not provide sufficient justification for the issuance of $8.6 billion in Proposition 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 payment on April 1st.

In this hearing, I want to hear from the Authority about how they are going resolve these deficiencies – where the total $26 billion will come from, and how they will complete environmental reviews on the entire 300-mile initial operating segment. 

I will note that the 2014 omnibus appropriations bill released yesterday includes no funding for high speed rail, the fourth straight year no new monies have been provided.  It’s 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 for being open and transparent with this subcommittee on the Authority’s activities.  While we may agree to disagree about the viability of the project, he has displayed professionalism in all of our discussions.

However, I have many concerns about how the Federal Railroad Administration is reacting to these recent setbacks, and what it is doing to protect billions of taxpayer dollars.  After the rulings, I sent a letter to FRA on December 12th, with a number of common sense, simple questions.  The Administration’s sent back a response that basically states, “Everything is fine.  Nothing has changed.”  They did not answer one 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.  We were told then that Administrator Szabo wanted to testify and due to scheduling he could not make it.  Out of professional courtesy, I decided to hold the hearing in January to accommodate the Administrator.  While I understand Deputy Administrator Hedlund is quite knowledgeable, I am disappointed but not overly surprised that the Administrator could not attend. 

So, we are here 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 the matching funds, FRA has continued to reimburse California for spending on the project.  We need to understand what FRA has reimbursed California for 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 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’s 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 five years filled with cost overruns, lawsuits, lost promises of immediate job creation and reduced expectations, unless they can come up with a viable plan that meets the requirements of Proposition 1A, I believe it’s time to end this project.

I look forward to discussing these important issues with the witnesses.

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