My Public Comments on Bond Finance for California High-Speed Rail Entered into Record for Pivotal Bond Validation Lawsuit

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My March 15, 2013 written comments to the California High-Speed Passenger Train Finance Committee outlining several concerns about its plans for bond financing were the ONLY written comments submitted to the committee before its March 18, 2013 meeting, at which it authorized borrowing more than $8 billion for California High-Speed Rail through bond sales (a requirement under Proposition 1A).

In addition, I was one of four people to speak in person at the March 18, 2013 California High-Speed Passenger Train Finance Committee meeting at which committee members voted to authorize the bond sales.

My written and oral comments to the California High-Speed Passenger Train Finance Committee have been entered into the record for the validation lawsuit (High Speed Rail Authority et al. v. All Persons Interested et al. – Case No. 2013-00140689) filed on March 19, 2013 in Sacramento County Superior Court concerning the legal validity of the bond sales. My comments help to boost the case of the respondents (“All Persons Interested”) that the California High-Speed Passenger Train Finance Committee failed to fulfill its legal responsibilities under Proposition 1A before it authorized the bond sales.

My written comments are submitted to the court as Exhibit G (public comment letter to the HSPT Finance Board by Kevin Dayton, March 15 , 2013) in the August 19, 2013 declaration of Rita Wespi of Californians Advocating Responsible Rail Design (CARRD) based in Palo Alto. Her declaration states that “Based on a series of Public Records Act requests I submitted to the High-Speed Rail Authority and the High-Speed Passenger Train Finance Committee, it is my opinion that the Finance Committee voted to approve over eight billion dollars of state bonds with little more information than a resolution from the High Speed Rail Authority.”

The declaration goes on to state the following:

On March 25, 2013, I made a similar request of the HSPT Finance Committee for “copies of all reports, analyses and recommendations provided to the HSPT Finance Committee members.”

Mr. Mark Paxson, General Counsel for the Treasurer’s Office, replied that “other than the agendas, resolutions and minutes from the prior meeting that are due for approval, there are typically no other documents provided to Finance Committee members prior to their meetings.”

In his response, Mr. Paxson stated that, for the March 18 committee meeting, the HSPT Finance Committee received in total one public comment letter and a briefing memo from the Public Finance Division’s staff. The staff briefing memo simply reiterated the agenda.

The March 15, 2013 public comment letter requested the Finance Committee to add language to Resolutions IX and X which would a) prohibit 40-year terms of maturity, and b) prohibit the use of Capital Appreciation Bonds. The letter argued that without this language, the bond sales and resulting repayment schedule would deviate from what was described in the 2008 voter guide for Proposition 1A. To the best of my knowledge, this letter was not acknowledged or discussed by the Finance Committee.

The declaration is correct: the only indications that my public comment was received was a subsequent email dated March 20, 2013 from Timothy Aguirre in the State Treasurer’s office informing me that “The State Treasurer’s Office will be holding the High-Speed Passenger Train Finance Committee meeting on Friday, March 29, 2013 at 2:00 pm at STO Room 587. Please see the attached meeting agenda” and a March 25, 2013 email from a general mailbox for the State Treasurer’s Office stating “You have indicated you would like to be contacted on items relating to the High Speed Passenger Train Finance Committee. The resolutions to be taken up during the March 29th meeting have been posted to the State Treasurer’s website.  You can find the resolutions by following the web link provided below. http://www.treasurer.ca.gov/financial/meeting.asp.”

My comments in person at the California High-Speed Passenger Train Finance Committee meeting on March 18, 2013 were submitted as Exhibit A (transcript of the meeting) as part of an August 19, 2013 declaration of Kathy Hamilton of Menlo Park, who writes articles about California High-Speed Rail for the Examiner web site.

Kevin Dayton: Note: Tape was turned on a little late, missing his intro. Kevin is CEO of
Labor Issues Solutions.

“Will the bonds be sold separately or at the same time for state bonds for other purposes? What rate do you expect to sell them at? I heard the chairman say 6.25% but I’m going to guess that was probably made that number up out of his head. The bonds selling last week were between 3.5 and 3.8%, something like that. I’d like to hear more about what you think you will get out of this. How will the bonds be structured? Will we be selling capital appreciation bonds at all for this? If the lawsuit that is coming up in Kings County is lost by the High-Speed Rail Authority and you’ve sold bonds, what happens to the money? These are questions I think that regular Californian who voted for this want to know. [They want to know] a lot more about this. We need to know a lot more about this [because] it’s a lot of money for us especially when you consider the interest etc will be about $20 billion [interest on bond funds] total for the whole thing. Thank you.”

Carol Ferris breaks in: “I’d like to thank you for your comments. I would also like to say that the purpose of this is to hear public comment and certainly the committee members can then take your comment into consideration. It’s not a question and answer session at this time.”

As noted in Kathy Hamilton’s declaration about the California High-Speed Passenger Train Finance Committee, “There was no evidence presented, questions asked or witnesses called. There were no discussions that the approval of the High-Speed Rail resolution was necessary or desirable. There were no discussions at all…none of the appointed committee members were in attendance, and all were substitute representatives.”

In other words, it was a farce. My article California High-Speed Rail: One-Way Ticket to Debt in www.FlashReport.org on March 25, 2013 described my experience speaking at the March 18, 2013 meetings of the California High-Speed Rail Authority and the California High-Speed Passenger Train Finance Committee. Also related to this meeting are my March 15, 2013 post Message to California High-Speed Rail Authority and California High-Speed Passenger Train Finance Committee: No 40-Year Bonds, No Capital Appreciation Bonds, What If You Lose Lawsuit? and my March 30, 2013 post Reality of Crushing Public Debt from Bond Sales Eclipses the Fantasy Vision of California High-Speed Rail.

Additional Background on Bond Validation Lawsuits

Documents filed in California High-Speed Rail Bond Validation Lawsuit – on the web site of Transportation Solutions Defense and Education Fund (TRANSDEF)

Sacramento Judge Has a Full Plate of Rail LawsuitsFresno Bee – September 9, 2013

Legal Challenges Plague the California Rail Projectwww.Examiner.com, by Kathy Hamilton – September 8, 2013

Bullet Project Attempts Legal Maneuver to Limit Damage by Lawsuits – www.Examiner.com, by Kathy Hamilton – April 2, 2013

California’s High-Speed Rail Authority Sues Everybody, Invites You to Argue Case in CourtSan Jose Mercury-News – March 28, 2013

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