Tag Archive for California High-Speed Rail Authority

Revised: A Timeline of Activity Concerning What Will Be $9.95 Billion Borrowed through Proposition 1A Bond Sales for California High-Speed Rail

UPDATE – April 13, 2014: I’ve added information at the bottom of the chart below based on two additional Official Statements issued by the State of California since I wrote the original article.

“Long-Term Bonds Outstanding” for California High-Speed Rail Prop 1A remained at $703,530,000 as of September 1, 2013 but dropped (for the first time) to $623,705,000 as of February 1, 2014.

I presume some of the money borrowed by the State of California through these bond issues is being used to fund the “connectivity projects” authorized for $950 million in a part of Proposition 1A (now California Streets and Highways Code Section 2704.095):

2704.095. (a) (1) Net proceeds received from the sale of nine hundred fifty
million dollars ($950,000,000) principal amount of bonds authorized by this
chapter shall be allocated to eligible recipients for capital improvements to
intercity and commuter rail lines and urban rail systems that provide direct
connectivity to the high-speed train system and its facilities, or that are part of
the construction of the high-speed train system as that system is described in
subdivision (b) of Section 2704.04, or that provide capacity enhancements and
safety improvements. Funds under this section shall be available upon
appropriation by the Legislature in the annual Budget Act for the eligible
purposes described in subdivision (d).

SB 1029 (enacted in July 2012) appropriated $819,333,000 for state, regional, and local agencies other than the California High-Speed Rail Authority to help fund connectivity projects. (Note: this does not include the $1,100,000,000 appropriated for “bookend” projects, which includes $600,000 to electrify and update the Caltrain rail system and $500,000 to upgrade unspecified rail systems under a Southern California Memorandum of Understanding with the California High-Speed Rail Authority.)

Some questions to which I don’t know the answers:

  1. Why did the amount for “Long-Term Bonds Outstanding” go down between September 1, 2013 and February 1, 2014?
  2. How was the California State Treasurer able to issue bonds under Proposition 1A before the state legislature appropriated money in July 2012?
  3. Have any of the proceeds from Prop 1A bonds been spent on “bookend projects?” What happens if some of the $1.1 billion appropriated for “bookend” projects is spent but doesn’t become part of the California High-Speed Train System in the end? Will that money be transformed into connectivity funding?

Are the $1,274,000,000 in appropriations listed below for “Connectivity?” Or are they for “Bookends?” (Only $950,000,000 Can Be Spent Outside of High-Speed Train Service)

$706,000,000 Peninsula Corridor Joint Powers Board (Caltrain) - Electrification Installation of an electric rail system that phases out diesel trains and blends the Caltrain system with the high-speed rail line. With matching funds, total spending is $1.456 billion.
$42,000,000 Peninsula Corridor Joint Powers Board (Caltrain) - Advanced Signaling System: Communications Based Overlay Signal System (CBOSS) Positive Train Control (PTC) Project Design, installation, testing, training and warranty for an intelligent network of signals, sensors, train tracking technology, computers, etc. on the Caltrain Corridor to meet mandated federal guidelines. With funds from BART and the Santa Clara Valley Transportation Authority, total spending is $231 million. This work began in September 2013.
$26,000,000 Santa Clara Valley Transportation Authority (Caltrain) - Advanced Signaling System: Communications Based Overlay Signal System (CBOSS) Positive Train Control (PTC) Project Design, installation, testing, training and warranty for an intelligent network of signals, sensors, train tracking technology, computers, etc. on the Caltrain Corridor to meet mandated federal guidelines.
$500,000,000 Southern California Memorandum of Understanding Regional rail projects that improve local networks and facilitate high-speed rail travel to Southern California. Projects will be selected by local transit agencies, in conjunction with the High-Speed Rail Authority, and state funding will be matched by additional investments to make the total investment in these projects $1 billion.

Original Post – May 13, 2013: It seems that 99.999% of Californians are unaware of how, when, and how much the State of California has borrowed for California High-Speed Rail by selling bonds to investors. My requests at two board meetings of the California High-Speed Rail Authority to be open and transparent about the details of the bond sales – even to the point of having an agenda item at each meeting dedicated to the topic – have been ignored, of course. Their strategy is to keep the public and the news media uninformed, probably because the details are not comforting.

It appears the California State Treasurer has sold about $700 million worth of Proposition 1A bonds to date. While early bond sales for California High-Speed Rail appear to be segregated from bond sales for other purposes, recent sales suggest that California State Treasurer Bill Lockyer was correct when he said the high-speed rail bonds were “mixed together” with bonds for other purposes. That was his response to my questions at the California League of Bond Oversight Committees annual conference on May 10, 2013. Someone in the bond industry told me this mixing was “unusual,” but perhaps we’re misunderstanding what’s going on.

People have asked me how the state was able to sell California High-Speed Rail bonds before the legislature and governor first authorized the sale of bonds in July 2012. I do not know.

I have not been able to figure out how much in interest has been paid so far, where the money was obtained to pay the interest so far (perhaps appropriations for the California High-Speed Rail Authority from the General Fund?), and the current debt service on the bonds.

Basically, we’re all ignorant peons left in the dark by the forces that control everything.

Here’s a preliminary timeline of activity concerning bond sales for California High-Speed Rail, with links to source documents. It’s nothing great, but it’s a step in the right direction for people to fill in the blanks and try to figure out what’s going on. If you see a mistake or know something to be added to it, please let me know.

Amount Borrowed Through Bond Sales (Principal, Does Not Include Interest) Date and Action Link to Source Documents
$0 August 26, 2008 – Governor Schwarzenegger signs into law Assembly Bill 3034, which puts the “Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century” (Proposition 1A) on the November 4, 2008 California ballot. According to the bill, the state would borrow $9.95 billion through bond sales in order to “encourage the federal government and the private sector to make a significant contribution toward the construction of the high-speed train system.” Borrowed money would be available for the California High-Speed Rail Authority to spend under specified conditions and criteria for planning, land acquisition, design, engineering, and construction. The California High-Speed Rail Authority would be required to pursue and obtain other private and public funds, including, but not limited to, federal funds, funds from revenue bonds, and local funds. The California State Treasurer would sell the bonds as authorized by an appointed California High-Speed Passenger Train Finance Committee under terms and conditions specified in committee resolutions. Bonds could have a maturity period as long as 40 years. The committee would consider program funding needs, revenue projections, financial market conditions, and other necessary factors in determining the term for the bonds to be issued. Each year, the state would collect taxes and fees for the General Fund that would pay principal and interest to bond investors. In addition, the board of the California High-Speed Rail Authority could request a loan from the Pooled Money Investment Board to make a loan against the amount of authorized but unsold bonds. Assembly Bill 3034 - Proposition 1A
$0 November 4, 2008 – 52.7% of California voters (including 78.4% of San Francisco voters) approve Proposition 1A. November 2008 Election Results
$0 January 16, 2009 – the High-Speed Passenger Train Finance Committee approves Resolution I under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $32,010,000. The committee also approved Resolution II under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Refunding Bonds in the aggregate principal amount outstanding not to exceed $32,010,000. January 16, 2009 Minutes - Resolution I - Resolution II
$0 February 1, 2009 – Long Term Bonds Outstanding State Public Works 2009
$0 April 6, 2009 – “The High Speed Rail Authority had been financed via a commercial paper issue.” April 6, 2009 Minutes
>$0< April 15, 2009 – the High-Speed Passenger Train Finance Committee approves Resolution III under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, (i) amending the provisions of Resolution I authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $32,010,000, and (ii) authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed (a) the principal amount unissued under Resolution I of $32,010,000 and (b) an additional principal amount not to exceed $448,790,000, for a total principal amount not to exceed $480,800,000. The Committee also approves Resolution IV under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Refunding Bonds in the aggregate principal amount outstanding not to exceed $480,800,000. April 15, 2009 Minutes - Resolution III - Resolution IV
$90,045,000 April 22, 2009 – the California State Treasurer sells $90,045,000 of Safe Reliable High Speed Passenger Train 21st Century Series A Build America Bonds, Federally Taxable.CDIAC Number: 2009-0940 Standard & Poor’s Rating: A Moody’s Rating: A2 Fitch Rating: A –Term: 30 years Rate: VAR%

At the August 6, 2009 board meeting, the Authority executive director noted that this money was a piece of a $4-5 billion state bond sale and would be used by the Authority in FY 2009-10.

2009 Annual Report
$90,045,000 July 1, 2009 – Long Term Bonds Outstanding 2009 Treasurer Publication
$90,045,000 August 1, 2009 – Long Term Bonds Outstanding Official Statement
$90,045,000 October 1, 2009 – Long Term Bonds Outstanding Official Statement
$258,395,000 October 8, 2009 – the California State Treasurer sells $168,350,000 of Safe Reliable High Speed Passenger Train 21st Century Series B Build America Bonds, Federally Taxable. CDIAC Number: 2009-1481 Standard & Poor’s Rating: A Moody’s Rating: Baa1 Fitch Rating: BBB Term: 30 years Rate: 6.933% 2009 Annual Report
$258,395,000 January 20, 2010 – the High-Speed Passenger Train Finance Committee amends Resolution III with resolution V and Resolution IV with Resolution VI. These two resolutions reflect changes to the General Obligation Bond Law that became effective January 1, 2010, and other technical amendments. January 20, 2010 Minutes - Resolution V - Resolution VI
$258,395,000 February 1, 2010 – Long Term Bonds Outstanding Official Statement
$258,395,000 June 30, 2010 – Long Term Bonds Outstanding Official Statement
$258,395,000 October 1, 2010 – Long Term Bonds Outstanding >Official Statement
$309,060,000 November 19, 2010 – the California State Treasurer sells $50,665,000 of Safe Reliable High Speed Passenger Train 21st Century Series C, Federally Taxable.CDIAC Number: 2010-1714Standard & Poor’s Rating: A-Moody’s Rating: A1Fitch Rating: A –Term: 30 yearsRate: 7.438% 2010 Annual Report
$410,050,000 November 22, 2010 – the California State Treasurer sells $100,990,000 of Safe Reliable High Speed Passenger Train 21st Century Series D. CDIAC Number: 2009-1695Standard & Poor’s Rating: A-Moody’s Rating: A1Fitch Rating: A-Term: 30 yearsRate: 5.133% Official Statement - see earlier Official Statement
$410,050,000 June 30, 2011 – Long Term Bonds Outstanding 2011 Annual Report
$410,050,000 September 21, 2011 – High-Speed Passenger Train Finance Committee approves Resolution VII, which amends Resolution III authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $480,800,000, and (ii) authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed (a) the principal amount unissued under Resolution III of $70,750,000 and (b) an additional principal amount not to exceed $59,250,000, for a total principal amount not to exceed $130,000,000. The Committee also approves Resolution VIII under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of State of California High-Speed Passenger Train Refunding Bonds in the aggregate principal amount outstanding not to exceed $540,050,000. September 21, 2011 Minutes - Resolution VII - Resolution VIII
$410,050,000 August 1, 2011 – Long Term Bonds Outstanding Official Statement
$499,285,000 October 25, 2011 – the California State Treasurer to sell $91,225,000 of Safe Reliable High Speed Passenger Train 21st Century bonds as Series E. Official Statement
$499,285,000 November 1, 2011 – Treasurer Lockyer Comments on Revised High-Speed Rail Business Plan. November 1, 2011 Press Release
$499,285,000 January 1, 2012 – Long Term Bonds Outstanding Official Statement
$499,285,000 February 1, 2012 – Long Term Bonds Outstanding Official Statement
$499,285,000 June 30, 2012 – Long Term Bonds Outstanding 2012 Annual Report
$499,285,000 July 18, 2013 – As required under Proposition 1A, Governor Jerry Brown signs into law Senate Bill 1029, which appropriates $2,609,076,000 in Proposition 1A funds plus $3,240,676,000 in federal funds for the first operating segment of the High-Speed Rail between Madera and Bakersfield, $1,100,000,000 for “Bookend” funding, $106,000,000 to CalTrans for capital improvement projects to intercity and commuter rail lines and urban rail systems that provide direct connectivity, and an appropriation of $713,333,000 for “Connectivity” funding. Senate Bill 1029 (2012)
$499,285,000 February 1, 2013 – Long Term Bonds Outstanding Official Statement
$499,285,000 March 18, 2013 – California High-Speed Rail Authority approves Resolutions #13-03 and #13-04 requesting the California High-Speed Passenger Train Finance Committee to authorize the sale of $8,599,715,000 in bonds. Resolution #13-03 - Resolution #13-04
$499,285,000 March 18, 2013 – the High-Speed Passenger Train Finance Committee approves Resolution IX and Resolution X to authorize sale of $8,599,715,000 in bonds. Resolution X
$499,285,000 March 29, 2013 – the High-Speed Passenger Train Finance Committee previously adopted Resolution III authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the Principal Amount Not to Exceed $480,800,000 (“Resolution III”) and Resolution VII authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the Principal Amount Not to Exceed $130,000,000 (“Resolution VII”). As of March 29, 2013, the State had issued $100,990,000 State of California High-Speed Passenger Train Bonds, Series D, currently outstanding in the principal amount of $99,000,000 (the “Resolution III Bonds”) pursuant to Resolution III. $38,775,000 remains in principal amount of bonds or commercial paper notes under Resolution VII, and the Committee now desires to authorize the issuance of bonds to refund any bonds issued from time to time under Resolution VII (the “Resolution VII Bonds”). Resolution XI
$538,060,000 April 11, 2013 – the California State Treasurer to sell $38,775,000 of Safe Reliable High Speed Passenger Train 21st Century bonds as Series F. Official Statement
$703,530,000 April 11, 2013 – the California State Treasurer to sell $165,470,000 of Safe Reliable High Speed Passenger Train 21st Century bonds as Series G. Official Statement
$703,530,000 September 1, 2013 – Long Term Bonds Outstanding Official Statement
$623,705,000 February 1, 2014 – Long Term Bonds Outstanding Official Statement

California High-Speed Rail 2014 Draft Business Plan Doesn’t Depict Project Labor Agreement Accurately or Usefully

By law, every two years the California High-Speed Rail Authority needs to prepare a “business plan,” which includes publishing a draft at least 60 days before final publication so that the public can review it and submit comments to the Authority about it. The Authority is required to “take into consideration comments from the public hearing and written comments” before publishing the final business plan. It is required to approve the final business plan at a board meeting and publish it by May 1, 2014.

My article California High-Speed Rail Business Plan Misrepresents Project Labor Agreement posted on March 18, 2014 in www.UnionWatch.org identifies ten distortions of just one paragraph of the 2014 Draft Business Plan. That paragraph describes the Authority’s “Community Benefits Policy,” which was implemented for construction through a Project Labor Agreement (“Community Benefit Agreement”) with the State Building and Construction Trades Council of California.

The Western Electrical Contractors Association (WECA), Plumbing-Heating-Cooling Contractors Association of California (CAPHCC), Air Conditioning Trade Association (ACTA), and Associated Builders and Contractors (ABC) – San Diego Chapter have already submitted comments to the California High-Speed Rail Authority based on my post about how the 2014 Draft Business Plan depicts the Project Labor Agreement:

March 20, 2014 Comments to California High-Speed Rail Authority on Project Labor Agreement.

I analyzed the provisions of the Project Labor Agreement in detail in my January 11, 2013 post in www.LaborIssuesSolutions.com entitled Analysis of the Phony Community Benefits and Other Provisions in the Union Project Labor Agreement for the First Segment of California’s High-Speed Rail. I also explained the origins of the Project Labor Agreement in my April 29, 2013 post entitled Newly Obtained Documents Reveal Which Elected Official Was the Catalyst for the Project Labor Agreement on California High-Speed Rail: Fresno Mayor Ashley Swearengin.

Here is the final version of the Project Labor Agreement:

Project Labor Agreement with Unions for California High-Speed Rail

To submit comments on the depiction of the Project Labor Agreement or other aspects of the California High-Speed Rail 2014 Draft Business Plan, go to High-Speed Rail Authority Releases Draft 2014 Business Plan.

Little-Known Facts About the Contract for the First Construction Segment of California High-Speed Rail

As reported by John Hrabe in the January 27, 2014 www.CalNewsroom.com article High-Speed Rail Critics Question Timing Of Rail Firm’s Contribution To Brown Campaign, Governor Jerry Brown’s 2014 re-election campaign committee received the maximum possible contribution of $27,200 on January 21, 2014 from the construction company Tutor Perini.

Tutor Perini is part of the Tutor Perini/Zachry/Parsons joint venture that won the design-build contract for the first construction segment of California High-Speed Rail, a 29-mile stretch from Madera to Fresno. (For detailed information on design-build procurement in California, see Why Lowest Responsible Bidders Don’t Necessarily Win Rail Construction Contracts: Explaining Design-Build Procurement and Best Value Criteria in California Law.)

Three days after the $27,200 contribution was made – and on the day it was recorded by the California Secretary of State – California Attorney General Kamala Harris submitted an extraordinary request to the California Supreme Court on behalf of Gov. Brown, the California High-Speed Rail Authority, and other interested parties. They want the court to grant relief to allow the project to continue, even though a Sacramento County Superior Court judge decided in 2013 that the California High-Speed Rail Authority failed to comply with the law established by Proposition 1A in 2008 and therefore could not sell any of the $9.95 billion in bonds authorized by voters under that statewide ballot measure.

Tutor Perini Contribution to Brown for Governor 2014 Campaign Committee

Tutor Perini Contribution to Brown for Governor 2014 Campaign Committee

As this brazen campaign contribution begins to gain public attention, here is some little-known information about the contract and cost for the first construction segment.

1. Tutor Perini Contract Amount Is Higher Than People Think

An April 12, 2013 press release showed California High-Speed Rail Authority officials were pleased when the low bid for the design-build contract came in under $1 billion.

The Authority had estimated the cost for the design-build contract to be between $1.2 billion and $1.8 billion. The Authority determined that Tutor Perini/Zachry/Parsons, a California-based Joint Venture, who bid $985,142,530, was the “apparent best value.”

But the amount announced to the public is deceptive.

At its June 6, 2013 meeting, the California High-Speed Rail Authority awarded a design-build contract to Tutor Perini/Zachry/Parsons, a Joint Venture, for their fixed bid price of $969,988,000 and hazardous material unit bid price of $15,154,530 for a total bid price of $985,152,530 on “Construction Package 1” (CP-1). This is the 29-mile segment between Madera and Fresno.

There was an additional $53 million included for contingencies, for a total of $1,022,988,000. See this information here:

Approval to Award Contract for Design/Build Services for Construction Package 1 – June 6, 2013

EXECUTION VERSION - Agreement No.: HSR13-06 - Book 2, Part A, Subpart 1 – Signature Document (see Attachment B – Prices)

Since then, a $160 million contingency fund was created for the project, including $20 million for compliance with Buy American provisions for utility relocation.

Approval of Contingency Fund for Construction Package 1 – September 10, 2013

Resolution #HSRA 13-21 - Approval of Contingency Fund for Construction Package 1 – September 10, 2013

This means that the Madera to Fresno construction segment is authorized to cost taxpayers as much as $1,182,988,000.

This amount does not include all of the consulting work beforehand. Pre-construction costs from Merced to Bakersfield are $160 million through September 30, 2013 and authorized for a total of $241 million. (A more specific amount for the Madera to Fresno first construction segment is not available.)

California High-Speed Rail Authority Project Update Report to the California State Legislature - November 15, 2013

Yes, this 29-mile segment is a billion-dollar segment, and that does not include interest to be paid on borrowed money obtained through bond sales.

2. Potential Windfall for Tutor Perini Because of California High-Speed Rail Authority’s “Strange Lack of Competency in Procurement Strategy”

The California High-Speed Rail Authority has completed the environmental review of the Merced to Fresno segment. It is in the process of environmental review for the Fresno to Bakersfield segment.

Construction Package 1 has 25 miles in the approved Merced to Fresno segment and 4 miles in the not-approved Fresno to Bakersfield segment. If the California High-Speed Rail Authority can’t conclude environmental review of the Fresno to Bakersfield segment by July 12, 2014, the Authority has to renegotiate the contract for Construction Package 1 with Tutor Perini/Zachry/Parsons.

This is why the California High-Speed Rail Authority quietly asked the federal Surface Transportation Board for an environmental exemption, which the board has refused to grant while it extends the time period for comment until February 14, 2014. The September 26, 2013 Petition for Exemption from the California High-Speed Rail Authority to the Surface Transportation Board states the following:

The Authority has entered into a design-build contract to construct a 29-mile segment of the HST System, comprised or approximately 5 miles of track and facilities within the boundaries of the Fresno to Bakersfield HST Section in the vicinity of Fresno and approximately 24 miles of track and facilities covered by the exemption granted in the Merced to Fresno Decision. The Authority’s design-build contract requires the Authority to give the contractor separate notices to proceed with construction of the 5-mile and 24-mile segments. The notice to proceed for the 5 miles of track and facilities must be issued by July 12, 2014. If the Authority cannot issue the notice on the 5-mile segment by July 12th, it will be removed from the contract and the Authority will need to re-negotiate the price for the construction of the 24-mile segment and the price and timetable for the 5-mile segment. Since the construction contract does not contain a separate price for the 5-mile and 24-mile segments, this could result in a substantial aggregate increase in the cost of construction of the two segments. There is a possibility that the Board will have a vacancy as of January 1, 2014. Given the Authority’s July 12th notice to proceed deadline, the possibility of a Board vacancy is of concern to the Authority. However, the Board has authority to grant conditional approval of construction exemptions. Although the Board does not do so absent compelling circumstances, there would be compelling circumstances in this case because conditional approval would avoid circumstances which could require the Authority to pay a higher price for the construction of the initial segment of the HST System. Accordingly, if a Board vacancy becomes imminent, the Authority respectfully requests that the Board conditionally grunt this Petition subject to the completion of the environmental review process, and issue a decision effective by December 31, 2013.

Petition for Exemption from the California High-Speed Rail Authority to the Surface Transportation Board - September 26, 2013, and subsequent correspondence

Californians Advocating Responsible Rail Design (CARRD) is harshly critical of what it calls “serious mistakes made by the Authority and its consultants” and “the strange lack of competency in procurement strategy.”

July 12, 2014: What Is the Big Deal?Californians Advocating Responsible Rail Design (CARRD) – December 4, 2013

Justified or not, Tutor Perini and its predecessor firms have a reputation for looking at big urban infrastructure projects and figuring out weaknesses and mistakes that can be exploited later for financial advantage. An April 19, 2013 article in the Los Angeles Times about the low bid for California High-Speed Rail (Bullet Train Bid Rules Altered) hints at that reputation:

Critics have complained that the firm tends to bid low to win contracts and then seeks change orders and contract amendments that increase costs. The firm has handled many major construction projects successfully. But it also has been embroiled in controversies involving accusations of overbilling, fraud and shoddy workmanship related to the Los Angeles subway, San Francisco International Airport and public works projects in New York. Those matters have cost the builder tens of millions of dollars in legal judgments, settlements and penalties.

This reputation for Tutor Perini is also addressed in the UT San Diego April 15, 2013 article Bullet Train Bidder Had Overruns and its April 16, 2013 article ‘Change-Order Artist’ Fights Back.

Anyone who has closely followed the business of the California High-Speed Rail Authority recognizes how it could be a sitting duck. Taxpayers will end up paying the bill.

Three Sacramento County Superior Court Rulings on California High-Speed Rail – Bond Validation Lawsuit and Prop 1A Lawsuit – November 25, 2013

California High-Speed Rail Court Decisions

November 25, 2013 California High Speed Rail Authority Bond Validation Lawsuit Ruling (original source http://www.saccourt.ca.gov/general/media/docs/tos-v-ca-high-speed-rail-authority-ruling-112513.pdf)

HIGH-SPEED RAIL AUTHORITY and HIGH-SPEED PASSENGER TRAIN FINANCE COMMITTEE, for the STATE OF CALIFORNIA, Plaintiffs, v. ALL PERSONS INTERESTED IN THE MATTER OF THE VALIDITY OF THE AUTHORIZATION AND ISSUANCE OF GENERAL OBLIGATION BONDS TO BE ISSUED PURSUANT TO THE SAFE, RELIABLE HIGH-SPEED PASSENGER TRAIN BOND ACT FOR
THE 21ST CENTURY AND CERTAIN PROCEEDING AND MATTER RELATED THERETO.

  • It was NOT proven to be “necessary and desirable” to authorize bond sales on 3/18/13 for California High-Speed Rail.
  • I’m referenced on pages 7-8 & page 18 (footnote 30).

August 16, 2013 Tos Fukuda Kings County v California High-Speed Rail Prop 1A Part 1 Ruling (original source http://www.saccourt.ca.gov/general/media/docs/tos-v-ca-high-speed-rail-authority-ruling.pdf)

JOHN TOS, AARON FUKUDA, COUNTY OF KINGS, Plaintiffs and Petitioners, v. CALIFORNIA HIGH SPEED RAIL AUTHORITY, et al., Defendants and Respondents.

  • California High-Speed Rail doesn’t need to rescind its Tutor-Perini contract for first segment construction (Merced to Fresno).
  • The 2012 appropriation of funds to California High-Speed Rail from Senate Bill 1029 is not invalidated.

November 25, 2013 Tos Fukuda Kings County v California High-Speed Rail Prop 1A Part 2 Ruling (original source http://www.saccourt.ca.gov/general/media/docs/tos-v-ca-high-speed-rail-authority-ruling2-112513.pdf)

JOHN TOS, AARON FUKUDA, COUNTY OF KINGS, Plaintiffs and Petitioners, v. CALIFORNIA HIGH SPEED RAIL AUTHORITY, et al., Defendants and Respondents.

  • California High-Speed Rail Authority has to rescind its approval of its non-compliant November 3, 2011 funding plan.

News Media Coverage

Judge Blocks Sale of California High-Speed Rail Bonds - Associated Press (in Sacramento Bee) – November 25, 2013

California High-Speed Rail Funding Overturned by Judge – FOX 11 (Los Angeles) – November 25, 2013

Judge Blocks Use of State Bond Money for California Bullet TrainLos Angeles Times – November 25, 2013

California High-Speed Rail Plans Stopped in TracksSan Francisco Chronicle – November 26, 2013

California’s High-Speed Rail Imperiled by Court RulingsSan Jose Mercury-News – November 25, 2013

Sacramento Judge Sides with Kings County Plaintiffs, Puts California High-Speed Rail Plan on the RopesHanford Sentinel – November 25, 2013

California High-Speed Rail Bond Sale Rejected by Judgewww.bloomberg.com - November 25, 2013

Judge Grants Partial Victory to Foes of California Bullet Train – KQED – November 25, 2013

California Bond Sale for High-Speed Rail Project Blocked by Judge – Reuters – November 26, 2013

Locals Participated in High-Speed Rail Court Case - Bakersfield Californian – November 26, 2013

Judge Blocks Sale of California High-Speed Rail Bonds – Capitol Public Radio – November 25, 2013

California High Speed Rail Bond Sales Halted and Funding Plan Invalidatedwww.nextcity.org – November 26, 2013

Judge Strikes Down High Speed Rail Bond, Causing More DelaysSilicon Valley Business Journal – November 26, 2013

Court Instructs California High-Speed Rail to Redo Funding Plan; Refuses to Validate State Bonds – www.Examiner.com – November 26, 2013

Judge Deals Setback to California High-Speed Rail ProjectWall Street Journal – November 26, 2013

Applying a Brake to High-Speed PlansThe Economist – November 26, 2013

California Judge Cuts Off State Funding for High-Speed Train Venture – FOX News Channel – November 26, 2013

Judge’s Rulings Favor Opponents of Rail Project – www.agalert.com – November 26, 2013

LaMalfa: High-Speed Rail ‘Dead in the Water’Redding Record-Searchlight – November 26, 2013

California Bullet Train Might Be Breathing Its LastMother Jones – November 25, 2013

Will High-Speed Rail Keep Rolling Ahead? - columnist Dan Walters (video) – Sacramento Bee – November 26, 2013

Hurdle for High-Speed Rail: Where is the Money? - Associated Press (in Sacramento Bee) – November 26, 2013

Hurdle For California High-Speed Rail: Where Is The Money? - KPIX Channel 5 (San Francisco), video – November 26, 2013

Judge Issues Setback to California’s High-Speed Rail Plan - KQED Forum, radio interview – November 27, 2013

  • Dan Richard, chairman, California High-Speed Rail Authority
  • Juliet Williams, political reporter for the Associated Press
  • Quentin Kopp, former chairman of California State Senate transportation committee

Bullet Train Snag Could Affect Transbay Terminal – columnists Matier & Ross (in San Francisco Chronicle) – November 27, 2013

High-Speed Rail Ruling Threatens To Derail Future Of Caltrain - KPIX Channel 5 (San Francisco), video – November 27, 2013

California State Senator Mark DeSaulnier Talks About The Fate Of High-Speed Rail – KPIX Channel 5 (San Francisco), video - December 1, 2013

Editorials

Bullet-Train Fiasco: Gov. Brown, Heed the JudgeUT San Diego – November 25, 2013

Time to End the California High-Speed Rail Fraud – Bay Area News Group (Contra Costa Times, Oakand Tribune, etc.) – November 26, 2013

Hit the Brakes on California’s High-Speed Rail FraudLos Angeles Daily News – November 26, 2013

Pump the Brakes on Bullet TrainRiverside Press-Enterprise – November 26, 2013

Judge Detours Plans for Bullet TrainOrange County Register – November 26, 2013

Bullet Train Must Deliver on Its Pledge to VotersVentura County Star – November 26, 2013

High-Speed Rail Proceeds in Fits and StartsSacramento Bee – November 27, 2013

Bumps in the Path of High-Speed RailSan Francisco Chronicle – December 1, 2013

Commentary

California Judge Sends High-Speed Rail Plan Careening Backward Into the Station - Reason Foundation – November 25, 2013

Rube Goldberg Legal System Derails California Bullet Train – The American Interest – November 26, 2013

End Game on Bullet Train: No $, No Project – and No Prospects for $ - CalWatchdog – November 26, 2013

Court Rules Against Bullet Train Authority – Howard Jarvis Taxpayers Association (in www.foxandhoundsdaily.com) - November 26, 2013

Obama’s Bullet Train Dream Just Derailed in California – American Enterprise Institute – November 26, 2013

Getting to the Bottom of it: Backroom Administrative/Executive Deliberation Leading to Project Labor Agreement on California High-Speed Rail

UPDATE: I emailed this message to the California High-Speed Rail Authority at 4:51 p.m. on Friday, December 20, 2013:

Today is December 20, 2013, the date cited in the last correspondence from the California High-Speed Rail Authority.

“Under Government Code §6253(a), the Authority invoked a 14 day extension in order to further research your request and make a determination. A determination letter would be sent to you no later than November 18, 2013. The Authority will provide all responsive documents to you by December 20, 2013.”

http://laborissuessolutions.com/wp-content/uploads/2013/11/2013-11-18-CaHSRA-letter-to-Dayton-on-Public-Records-Request.pdf

Any news on progress to fulfill the October 24, 2013 request?

At 5:58 p.m., the California High-Speed Rail Authority emailed me this letter notifying me that “The amount of electronic records that are responsive to your request are too large to send via email. A CD-ROM with electronic records will be sent via U.S. Mail to your attention no later than December 20, 2013.”

December 20, 2013 California High-Speed Rail Authority Letter to Kevin Dayton on Public Records Request

Then, at 6:14 p.m., the California High-Speed Rail Authority emailed me this batch of letters:

Associated Builders and Contractors of California – State Building and Construction Trades Council of California – California High-Speed Rail Authority 2013 letter exchange on Project Labor Agreement

UPDATE: In a November 18, 2013 letter, the California High-Speed Rail Authority informed me that it will provide me with the requested public records by December 20, 2013.

UPDATE: In a November 4, 2013 letter, the California High-Speed Rail Authority informed me that it is taking an additional 14 days (as allowed by law) to provide me with the requested public records.


On April 29, 2013, I posted the results of my request to the Fresno County Workforce Investment Board for public records related to the development of the Project Labor Agreement with the State Building and Construction Trades Council of California for construction of the California High-Speed Rail system. (See Newly Obtained Documents Reveal Which Elected Official Was the Catalyst for the Project Labor Agreement on California High-Speed Rail: Fresno Mayor Ashley Swearengin.)

I also listed seven questions that remain to be answered about how this costly union construction monopoly was implemented. It was done without any public discussion or vote by the board of the California High-Speed Rail Authority, obviously because public scrutiny and discussion would have further damaged its reputation in California and even in Washington, D.C.

Today I submitted another request for public records related to the Project Labor Agreement, this time directly to the California High-Speed Rail Authority. I expect these records will answer those seven questions and give the public a complete picture of the backroom wheeling and dealing.


From: Kevin Dayton [mailto:kdayton@laborissuessolutions.com]
Sent: Thursday, October 24, 2013 10:45 AM
To: ‘records@hsr.ca.gov’; ‘xxxxx’
Subject: Public Records Request to California High-Speed Rail Authority: Community Benefits Agreement/Project Labor Agreement

October 24, 2013

Lisa Marie Alley
Assistant Deputy Director of Communications
California High-Speed Rail Authority
770 L Street, Suite 800
Sacramento, CA 95814

Re: Public Records Request – Community Benefits Agreement/Project Labor Agreement

Dear Ms. Alley:

Under the authority of the California Public Records Act, I am requesting the following records to determine the following:

The administrative/executive branch deliberative process within the California High-Speed Rail Authority that led to the execution of the “Community Benefits Agreement” (aka Project Labor Agreement) as signed by Robbie Hunter, President of the State Building and Construction Trades Council of California, on August 7, 2013 and by Jeff Morales, Chief Executive Officer of the California High-Speed Rail Authority, on August 13, 2013. Here’s a link to that Project Labor Agreement: Project Labor Agreement with Unions for California High-Speed Rail.

“Public records” include any writing containing information relating to the conduct of the public’s business prepared, owned, used or retained by the California High-Speed Rail Authority regardless of physical form or characteristics. “Writing” means handwriting, typewriting, printing, photostating, photocopying, photographing, transmitting by electronic mail or facsimile, and every other means of recording upon any tangible thing, any form of communication or representation, including letters, words, pictures, sounds or symbols or any combination thereof, and any record thereby created, regardless of the manner in which the record has been stored.

“Public records” shall include writing from private email addresses used by the Board and staff of the California High-Speed Rail Authority for public business. For example, if a staff member sends electronic mail through a Google mail account to schedule a meeting with Robbie Hunter, that email is a public record.

Please provide the following public records – in electronic form if possible – from the California High-Speed Rail Authority:

  • All records dated after January 1, 2012 concerning consideration, rejection, and approval from any federal or state agency for a Community Benefits Agreement/Project Labor Agreement and/or “Targeted Hiring Agreement” based on a similar agreement adopted at the Los Angeles County Metropolitan Transportation Authority.
  • All records dated after January 1, 2012 concerning evaluation or deliberation of the conditions, benefits, challenges, and negative impact of a Community Benefits Agreement/Project Labor Agreement.
  • All records dated after January 1, 2012 referencing the Community Benefits Agreement/Project Labor Agreement in communications from, to, or citing the following individuals:

a) Robbie Hunter (Current President, State Building and Construction Trades Council of California)

b) Bob Balgenorth (Past President, State Building and Construction Trades Council of California and past board member, California High-Speed Rail Authority)

c) Ashley Swearingen (Mayor of Fresno)

d) Tom Richards (Chair of Fresno Regional Workforce Investment Board and current board member, California High-Speed Rail Authority.)

e) Lee Ann Eager (Economic Development Corporation serving Fresno County)

f) Chuck Riojas (International Brotherhood of Electrical Workers – IBEW)

g) Blake Konczal (Executive Director, Fresno Regional Workforce Investment Board, and Fresno Works Consortium)

h) Ken Price (counsel for Fresno Regional Workforce Investment Board)

i) Michael Bernick (Applied Development Economics)

j) Robert Padilla (Small Business Advocate, California High-Speed Rail Authority)

  • All records dated after November 1, 2012 referencing the Community Benefits Agreement/Project Labor Agreement in communications from, to, or citing the following individuals:

a) Eric Christen (Coalition for Fair Employment in Construction)

b) Nicole Goehring (Associated Builders and Contractors, Northern California Chapter)

c) Kevin Dayton, Labor Issues Solutions, LLC

  • Any other records related to the Community Benefits Agreement/Project Labor Agreement.

Note: the California High-Speed Rail Authority does not need to provide board meeting agendas, minutes, board meeting transcripts, or staff reports for meetings already provided to the public as posted on the California High-Speed Rail Authority web site in association with board meetings. It does not need to provide the Addendum 8 version of the Project Labor Agreement (Addendum 8 Project Labor Agreement for Initial Construction Segment) or the revised Project Labor Agreement linked above (Project Labor Agreement with Unions for California High-Speed Rail).

Upon receiving this request for a copy of records, please, within 10 days, determine whether the request, in whole or in part, seeks copies of disclosable public records in the possession of the California High-Speed Rail Authority and promptly notify me of the determination and the reasons therefor.

In unusual circumstances, the time limit may be extended by written notice, setting forth the reasons for the extension and the date on which a determination is expected to be dispatched. No notice shall specify a date that would result in an extension for more than 14 days, and the notice shall provide the estimated date and time when the records will be made available.

###

2012 “Buy America” Law Estimated to Cost $20 Million for Utility Relocation on First 29 Miles of California High-Speed Rail

An item on the September 10, 2013 meeting agenda for the board of the California High-Speed Rail Authority authorized a “contingency” amount of $160 million for the $969,988,000 design-build contract (Construction Package 1) awarded to Tutor Perini/Zachry/Parsons for the first 29-mile segment of California High-Speed Rail, from Madera to Fresno.

As defined by the California Department of General Services, a “construction contingency” is a set percentage of the construction contract amount budgeted for unforeseen emergencies or design shortfalls identified after a construction project commences. The California High-Speed Rail Authority claims this amount was set based on “an exhaustive risk-based, informed investigation of the facts and circumstances that exist as design work commences.”

The staff report for the item included a cryptic explanation of a $20 million increase in the contingency amount:

Following the procedures established by this Board in Resolution #HSR13-20, Authority staff has developed a construction contingency of $160,000,000 as appropriate at this time for CP 1. Pursuant to said resolution, the CEO is authorized to manage the CP 1 contingency. For reference, $140,000,000 in contingency funds was included in the capital cost estimate for CP 1. Not included at that time was the application of new Buy America requirements to utility relocations. This issue has only surfaced in recent months, applying not just to the project but to federally-funded highway and transit projects throughout California and nationally. Although staff is working to mitigate any impacts, it is prudent to include additional contingency at this time.

As soon as I saw this, I wondered what materials were originally going to be imported for utility relocation but will now be obtained in the United States at an additional cost of $20 million.

I asked this question during public comment at the September 10 board meeting. I pointed out that my inquiry was not related to support or opposition to high-speed rail, but it was important for Congress to know specifically how its “Buy America” requirements affect purchasing and cost for projects, so it can make an informed decision on such policies in the future.

Staff failed to address my question when the item was under consideration. I was surprised and pleased when new board member Katherine Perez-Estolano asked staff for elaboration on the $20 million contingency amount to account for the newly-implemented Buy America directive. She did not get a specific answer, but staff assured her that they applied careful risk analysis.

Apparently the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) are now interpreting Section 1518 of the “Moving Ahead for Progress in the 21st Century Act” (MAP-21) as direction to impose “Buy America” requirements to utility relocation. MAP-21 is Pub.L. 112-141, signed into law as H.R. 4348 by President Obama on July 6, 2012.

SEC. 1518. BUY AMERICA PROVISIONS. Section 313 of title 23, United States Code, is amended by adding at the end the following: “(g) Application to Highway Programs.–The requirements under this section shall apply to all contracts eligible for assistance under this chapter for a project carried out within the scope of the applicable finding, determination, or decision under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), regardless of the funding source of such contracts, if at least 1 contract for the project is funded with amounts made available to carry out this title.”

A July 11, 2013 memo from the U.S. Department of Transportation Federal Highway Administration “Application of Buy America to non FHWA-funded Utility Relocations” suggests that the items made abroad that will now be made in the United States are “steel and iron products.” I’m guessing the United Steelworkers union was influential in adding this provision, and the country now making these products at lower cost is the People’s Republic of China. See the extensive Buy America information at the web site of the United Steelworkers.

A May 16, 2013 report from the California Department of Transportation (Caltrans) entitled “Buy America Utility Relocation Challenges in California” claimed that the regulation would jeopardize $2.5 billion in ongoing construction and $3.2 billion in planned construction: “A significant majority of these projects involve utility relocations by utility owners who have expressly stated that they are currently unable to comply with MAP-21s Buy America provisions.” This danger was alleviated on July 12, as reported by the Riverside Press-Enterprise in “‘Buy America’ Relief Clears Way for Projects,” when the Federal Highway Administration gave government agencies and utilities “until Dec. 31 to comply with new rules to buy domestic materials for utility lines that must move because they are in the path of construction.”

Here are some interesting questions that have yet to be answered:

  • Which countries and companies are losing business because of the Buy America requirement for utility relocation?
  • Which companies are gaining business?
  • How many net jobs will be gained in the United States because of it?
  • How much more in total will it cost utilities and government agencies?
  • The California High-Speed Rail Authority is estimating a cost increase of $20 million for the first 29-mile segment of the bullet train because of the Buy America requirement. What’s the estimated cost increase for the whole system?
  • Will any additional items be manufactured in California because of the requirement?
  • If so, will that manufacturing increase have any effect on the state’s greenhouse gas emissions?

I don’t expect these answers to come from the California High-Speed Rail Authority.

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

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

Here’s the August 16, 2013 Court Decision Against California High-Speed Rail

On August 16, 2013, a Sacramento County Superior Court judge ruled in Tos, Fukada, and County of Kings v. California High-Speed Rail Authority that “the Authority abused its discretion by approving a funding plan that did not comply with the requirements” of law approved by voters in November 2008 as Proposition 1A and implemented as California Streets and Highway Code Section 2704.09. Here’s the text of the court decision:

August 2013 court decision against California High-Speed Rail Authority

 

Proposed Route of California High-Speed Rail Through Kings County

A proposed route of California High-Speed Rail through Kings County.

Kings County posted its briefs and other documents related to its argument. Find them at Prop 1A Lawsuit Against High-Speed Rail. The case number is 34-2011-00113919; go to the web site of the Court Index System of the Sacramento County Superior Court to obtain all documents related to Tos, Fukada, and County of Kings v. California High-Speed Rail Authority.

Proposition 1A was enacted with 52.7% of the statewide vote in November 2008. (It won in San Francisco with 78.4% of the vote.) That statewide ballot measure authorized the State of California to borrow $10 billion (actually $9.95 billion) by selling bonds to Wall Street investors, thus providing seed money to start construction of a high-speed rail system estimated at that time to be $45 billion. That estimate turned out to be woefully low.

This court decision – combined with the lack of additional federal funding and the lack of interest from private investors – could mean the end of California High-Speed Rail.

News Media Coverage

Judge: California High-Speed Rail Violates Initiative - Associated Press (San Jose Mercury-News) - August 16, 2013

Judge’s Ruling Could Bring Valley’s High-Speed Rail Project to Screeching HaltFresno Bee – August 16, 2013

Bullet Train Funding Plan at Odds with State Law, Judge RulesLos Angeles Times – August 16, 2013

Sanity May Finally Prevail on Bullet TrainUT San Diego (editorial) – August 16, 2013

California High-Speed Rail Violates Initiative, Judge Says – KABC (Los Angeles) – August 16, 2013

Construction Unions Remain Big Boosters of California High-Speed Rail – My Article in www.UnionWatch.org

I attended the May 28, 2013 field hearing in Madera, California of the Subcommittee on Railroads, Pipelines, and Hazardous Materials of the Committee on Transportation and Infrastructure for the U.S. House of Representatives. The hearing was on oversight of the California High-Speed Rail project.

As I expected, union representatives attended the hearing in their brightly-colored t-shirts, and letters from union officials comprised the bulk of 120 pages of support letters for California High-Speed Rail, as submitted by Congressman Jim Costa (D-Fresno/Merced) for the hearing record. I write about this in my June 4, 2013 article in www.UnionWatch.org entitled Unions Defend California High-Speed Rail Project at Congressional Hearing.

The Project Labor Agreement for the California High-Speed Rail first segment was never mentioned during the hearing, but Associated Builders and Contractors (ABC) of California submitted a written statement “critical of High Speed Rail Authority for shutting out California workers.”

My Article in www.FlashReport.org: Two Gifts for the Planet: Build California High-Speed Rail and Choose a Path that Crushes the Dairy Industry

Baker Commodities Entrance SignToday (June 4, 2013) www.FlashReport.org posted my article Two Gifts for the Planet: Build California High-Speed Rail and Choose a Path that Crushes the Dairy Industry. It reports on a little-known issue of concern to California’s Kings County: the proposed route for the California High-Speed Rail “goes in the front door and out the back door” of Baker Commodities, the main rendering plant in the region for dairy cow carcasses. Farmers worry (rightly) that environmental issues will prevent Baker Commodities from relocating this rendering plant, as a result exacerbating the economic difficulties of an already struggling dairy industry in the lower San Joaquin Valley.

Baker Commodities in Path of California High-Speed Rail

The Baker Commodities rendering plant is directly in the proposed path of California High-Speed Rail through Kings County.

Since I submitted the article to www.FlashReport.org, Item 2 on the original June 6, 2013 California High-Speed Rail Authority agenda – “Proposal to Identify a CEQA Preferred Alignment and Station Locations for Inclusion in the Fresno to Bakersfield Final Environmental Impact Report/Environmental Impact Statement (EIR/EIS)” – has been removed. Kings County will remain in suspense about the fate of the rendering plant, even as it waits for a Sacramento County Superior Court decision in John Tos; Aaron Fukuda and County of Kings v. California High Speed Rail Authority regarding the California High-Speed Rail Authority’s compliance with Proposition 1A.

2013 Annual Conference of California League of Bond Oversight Committees Highlights Current Controversies on Municipal Bond Sales for Schools (and High-Speed Rail)

I’m on the Advisory Board of the California League of Bond Oversight Committees (CalBOC), which held its annual conference today (May 10, 2013) in Sacramento. To improve public accountability for California K-12 and community college construction programs funded by money borrowed through bond sales, this non-partisan organization improves the training and resources available to bond oversight committees; educates the state legislature, local school boards, and the public about the oversight and reporting authority of bond oversight committees; and advocates on a state level, where appropriate, on issues of common concern to bond oversight committees.

California League of Bond Oversight Committees Logo 2013

Citizens’ Bond Oversight Committees were established through a section of Proposition 39 in 2000 that became California Education Code Sections 15278-15282Michael Day, president and co-founder of the California League of Bond Oversight Committees, said that attendees should “go with the knowledge that you’re doing good things” as ordinary California citizens. Day kicked off the 2013 conference by asserting that “spending wisely shouldn’t be a partisan issue.” (I would have added that spending foolishly doesn’t seem to be a partisan issue.)

Presenting first at the conference were two finance and business administrators from the Santa Ana Unified School District, which is getting criticized for borrowing $35 million in 2009 by selling Capital Appreciation Bonds at an almost 10:1 debt-service-to-principal ratio. In addition to suggesting that Capital Appreciation Bond sales can be a valid business decision under certain conditions, they insinuated that school districts know best how to sell their bonds, and perhaps the state legislature is needlessly interfering in their own local affairs. To boost their case, they asked two rhetorical questions to show the arbitrary nature of the provisions in Assembly Bill 182 that would restrict school district sales of Capital Appreciation Bonds:

1. What’s the proper maximum maturity period for school bonds?

(AB 182 proposes 25 years)

2. What’s the proper maximum ratio of debt-service-to-principal on school bonds?

(AB 182 proposes 4:1)

Following their presentation was Assemblywoman Joan Buchanan (D-San Ramon), who introduced Assembly Bill 182 to restrict the sale of Capital Appreciation Bonds. (The bill passed the Assembly on April 8, 2013 with a 75-0 vote.) Catching my attention during her speech was her assertion that the legislature should expand state-mandated performance reviews for school bond measures to include such items as an examination of the school district’s labor compliance program. Knowing how the old labor compliance program laws and regulations had changed starting in 2009, I asked what she meant. Assemblywoman Buchanan said that the State Allocation Board had discovered that some school districts had applied for and received state reimbursement for labor compliance program expenses but weren’t actually following the state requirements and didn’t deserve the reimbursement.

California State Treasurer Bill Lockyer Speaks at 2013 California League of Bond Oversight Committees Conference

California State Treasurer Bill Lockyer speaks at the 2013 California League of Bond Oversight Committees annual conference.

California State Treasurer Bill Lockyer was the keynote speaker. He declared that the Poway Unified School District officials who engineered its notorious 2009 Capital Appreciation Bond sales were “stupid” and should be fired or recalled. Many people in the meeting room clapped in response, although I don’t know what the representatives from the Poway Unified School District did.

Lockyer sees “a whole industry that lives off of this” scheme for Capital Appreciation Bonds and detects “an odor” of underwriters and other financial management firms engaged in “corrupt practices” and taking advantage of school districts through bond sales. He said he heard a story about how an underwriting firm turned down a school district’s request for handling a ill-advised, foolish Capital Appreciation Bond sale, and then the school district asked another firm with fewer scruples, which was pleased to do it for a fee.

Lockyer noted that the 4:1 debt service to principal ratio for school bonds indicated in Assembly Bill 182 was a political compromise among various parties, including some special interests that demanded either absurd ratios (such as 9:1) or no ratio at all. He actually supports an outright ban on Capital Appreciation Bond sales by school districts. (Michigan enacted such a ban in 1994.)

At the March 18, 2013 meeting of the board of the California High-Speed Rail Authority, chairman Dan Richard told me to ask the State Treasurer about the details of the bond sales for the California High-Speed Passenger Train for the 21st Century. So I was ready with the first question for Bill Lockyer: when will the authorized High-Speed Rail bonds be sold, what will be the rate, will they be 35-year bonds as authorized, and will some of them be sold as Capital Appreciation Bonds?

Lockyer answered by revealing that California High-Speed Rail bonds will not be issued separately but will be “mixed in” with general state bond sales (such as the state bond sales in mid-April 2013). Then to my surprise, he said that a small amount of the high-speed rail bonds had already been sold! I sent out a tweet that’s now getting some attention:

California Treasurer Bill Lockyer says small amount of bonds for California High-Speed Rail have been sold already. Did anyone know this?

He also told me that the market sets the rates – a clever answer from an experienced politician who knows how to evade the tough questions.

Regarding state K-12 school bonds, Lockyer said about $2 billion was left from the state school bond measures approved in the 2000s and that it was likely that the state legislature would put another school construction bond measure on the November 2014 ballot. (Three school bond measures approved by California voters in 2002, 2004, and 2006 authorized the state to borrow $35.8 billion by selling bonds. The State Allocation Board disperses the grants.)

Finally, in response to an excellent question from Kern County Taxpayers Association executive director Mike Turnipseed, Lockyer said that perhaps some of very old voter authorizations for bond sales that never happened in the end could be “erased” or cancelled, thus eliminating the state’s liability for repaying the principal on those bonds.

Kevin Carlin of the Carlin Law Group in San Diego made a presentation about single-source alternative construction procurement methods, including design-build and lease-leaseback. The presentation was routine until he began advancing his view that there’s a “proliferation of illegal lease-leaseback school contracting” in California and cited the Sweetwater Unified School District in Chula Vista as an example. A vocal faction in the audience – primarily school district officials and an attorney for school districts – disputed these claims. During the question-and-answer session, I told Carlin that his only ally in the state legislature was the self-interested Professional Engineers in California Government union and that his best chance for addressing the problem was to add provisions to law that ensure better public access to bidding and contract documents on design-build and lease-leaseback projects. (See California Public Contract Code Section 20133 (g).) Supporters of lease-leaseback complained that I wasn’t asking a question.

Joel Thurtell Speaks on Capital Appreciation Bonds at 2013 California League of Bond Oversight Committees Conference

Joel Thurtell speaks on Capital Appreciation Bonds at the 2013 California League of Bond Oversight Committees annual conference.

Retired Detroit Free Press reporter Joel Thurtell, now a blogger at www.JoelontheRoad.com, was the last speaker at the conference. His investigative report “Michigan Schools Load the Future with Debt” was the headline story in the April 5, 1993 Detroit Free Press, and it led to a 1994 state law banning Michigan school districts from selling Capital Appreciation Bonds.

One of the reasons why the article was effective in changing public policy was the directive of a Detroit Free Press editor to Thurtell to produce a “Big Graphic” showing the extent of Capital Appreciation Bond sales by Michigan school districts. Thurtell had to perform many days of tedious paper-based research at the state treasurer’s office in Lansing, but the result was stunning. (Likewise, I believe that the graphic elements of the www.VoiceofSanDiego.org articles on Capital Appreciation Bond sales by California school districts was a major factor in finally bringing state and national attention to the issue.)

In January 2009, Thurtell posted the text of his old Detroit Free Press articles on his web site. Nothing more happened with them until March 2012, when Alicia Minyen, a member of the Board of Directors of the California League of Bond Oversight Committees (CalBOC), found his articles with a web search using the terms “Capital Appreciation Bonds” and “ban.” At this time the word was beginning to spread about the astonishing 10:1 debt service to principal ratio for bonds sold in 2009 by the Poway Unified School District, and the Los Angeles County Treasurer was publicly warning against Capital Appreciation Bond sales.

Joel Thurtell and Alicia Minyen

Champions of fiscal responsibility: Joel Thurtell from Michigan and Alicia Minyen from California.

Minyen contacted Thurtell and then reported on what she learned at the 2012 California League of Bond Oversight Committees. I heard Minyen’s presentation on Capital Appreciation Bonds and then reported it on my blog on May 11, 2012 as Please Read This, Even If You Think Municipal Bonds Are Really BORING: We’re Setting Up the Next Generation of Californians to Pay Staggering Property Taxes, apparently being the first Californian to post a journalistic report on the web about this practice in California.

Thurtell noted today that the worst abuse of Capital Appreciation Bonds in Michigan was at a school district that even used bond proceeds to buy personal computers. I immediate thought about how California school districts are using bond proceeds to buy electronic tablets, with Los Angeles Unified School District and San Diego Unified School District being two prominent examples.

Newly Obtained Documents Reveal Which Elected Official Was the Catalyst for the Project Labor Agreement on California High-Speed Rail: Fresno Mayor Ashley Swearengin

Residents of California’s Central Valley from Merced to Bakersfield are still asking how unions obtained costly monopoly control of the first construction segment of the California High-Speed Rail through a Project Labor Agreement that all contractors must sign as a condition of work. The union requirement was inserted in late December 2012 as Addendum 8 in the bid specifications for the project, without public comment or scrutiny. Here are some of the mysterious circumstances behind this Project Labor Agreement:

  1. The board of the California High-Speed Rail Authority never voted on the Project Labor Agreement or even discussed the concept as a scheduled board item.
  2. The U.S. Department of Transportation’s Federal Railroad Administration apparently never approved the Project Labor Agreement, even though it awarded a American Recovery and Reinvestment Act (Obama stimulus package) grant in 2010 of $2,552,556,231 for construction of the first segment.
  3. No local elected officials in the Central Valley have taken responsibility or credit for the Project Labor Agreement; in fact, elected officials either express opposition to the Project Labor Agreement or avoid mentioning it.
  4. The head of the State Building and Construction Trades Council of California was on the board of the California High-Speed Rail Authority while Fresno civic leaders developed a local hiring program that eventually transformed into a union agreement.
  5. A select group of professional staff and appointed officials in Fresno seemed to be the driving force for the Project Labor Agreement, and they developed the policy and made the decisions without accountability to the people.

Today I obtained several documents through my California Public Records Act request to the Fresno County Workforce Investment Board. These documents reveal that agitation for a Project Labor Agreement was coming from the Fresno Works consortium, described on its web site as an unprecedented coalition of officials from the County of Fresno, City of Fresno and the Council of Fresno County Governments, working together with the education, labor and business communities to ensure the success of the California High-Speed Rail initiative and its heavy maintenance facility in Fresno County. This group has come together in support of this effort to bring forward a technically responsive and compelling expression of interest in locating the heavy maintenance facility in Fresno County.”

Somehow a lobbying effort to get the California High-Speed Rail Authority to place the highly-coveted Heavy Maintenance Facility in Fresno was used as the agent to get unions a Project Labor Agreement for construction of the Madera to Fresno segment of the rail line. One of the organizations listed in the consortium is the International Brotherhood of Electrical Workers (IBEW), and the photo on the home page shows local union officials standing in the background. As noted below, Chuck Riojas, the head of the local International Brotherhood of Electrical Workers (IBEW) Local No. 100, spoke before the board of the California High-Speed Rail Authority in November 2012 about a proposed targeted hiring program that became the Project Labor Agreement.

The other individual who seems to play a prominent role in the process to get a Project Labor Agreement is Fresno Mayor Ashley Swearengin, who had run for mayor in 2008 and was re-elected in 2012 with a platform of supporting fair and open competition on city construction projects. Mayor Swearengin had worked extensively with unions when she was the top executive for the Fresno Regional Jobs Initiative, and during that time union officials tried to use the Regional Jobs Initiative as an agent to recommend policies to local governments that favored unions for public works construction. (See documents concerning a 2005 controversy at the Fresno Regional Jobs Initiative concerning apprenticeship requirements.) Her June 2012 letter to the Secretary of the U.S. Department of Transportation asking for comments about a Project Labor Agreement ended up being a centerpiece of the process to implement it.

June 19, 2012 letter from Fresno Mayor Ashley Swearingen to DOT Secretary Ray LaHood - California High-Speed Rail Project Labor Agreement

Here are summaries of the documents leading to a Project Labor Agreement on the first segment of California’s High-Speed Rail:

The Acting Chief Counsel of the U.S. Department of Transportation’s Federal Railroad Administration (FRA) sent a letter dated January 6, 2012 to the Chief Counsel of the California High-Speed Rail Authority. It opened with this opinion:

This letter is in response to your request for the Federal Railroad Administration’s (FRA) views of the proposal described in the September 8, 2011 Memorandum to the Fresno Works Consortium (Memorandum) from the Fresno Regional Workforce Investment Board (FRWIB) staff recommending that the California High Speed Rail Authority (CHSRA) implement a “Targeted Unemployed Worker” Program and “First Source” transparency requirements for the California High Speed Rail Project (Project) funded in part by the Federal Railroad Administration (FRA). For the reasons set out below, we have concluded that while not specifically precluded as a matter of applicable Federal law, the “Targeted Unemployed Worker” Program conflicts with the U.S. Department of Transportation’s (U.S. DOT) – and FRA’s – general disapproval of local or in-state geographic preferences because of the potential negative impacts on open and competitive procurement procedures.

Meanwhile, an unrelated federal review of a government-mandated Project Labor Agreement for regional highway construction in Southern California would become a key justification for a Project Labor Agreement on the California High-Speed Rail. The Chief Counsel of the U.S. Department of Transportation’s Federal Transit Administration (FTA) sent a letter dated February 7, 2012 to the Chief Administrative Services Officer of the Los Angeles County Metropolitan Transportation Authority (LACMTA).

The letter indicated that the federal agency reviewed the LACMTA’s Project Labor Agreement and its associated “Construction Careers Policy” and concluded that the LACMTA would not violate the federal requirement that federal grant recipients “conduct federally assisted procurements using full and open competition.” The board of the LACMTA had already approved the Project Labor Agreement and Construction Careers Policy at its January 26, 2012 meeting. A group closely aligned with unions called LAANE (Los Angeles Alliance for a New Economy) had worked with Los Angeles County Supervisor Mark Ridley-Thomas to impose this union requirement on all significant transportation projects in the county. The head of the local International Brotherhood of Electrical Workers (IBEW) Local No. 11 is on the board of directors for LAANE.

In a memorandum to the Acting Chief Executive Officer of the California High Speed Rail Authority dated March 21, 2012, Blake Konczal – the co-chairman of the Education Committee of the Fresno Works Consortium and the executive director of the Fresno Regional Workforce Investment Board - proposed a set of revised “Targeted Unemployed Worker” Hire Criteria and “First Source” Transparency Requirements. In its list of proposed requirements, the proposal included these references to unions:

A mandate that to the extent that said jobs will be drawn from organized labor, that such hiring criteria also be reflective of union apprenticeship requirements.

Coordination with unions. The Contractor(s) and their sub- contractors that have an agreement with a construction union shall use the following procedures and shall inform each relevant union of these requirements:

While these provisions do not indicate that unions will be the sole source of construction trade labor, the proposal includes a reference to a Project Labor Agreement:

d. If a project labor agreement is negotiated to cover this project, such an agreement shall include a provision requiring the parties to adhere to this Targeted Unemployed Worker Program. The Contractor(s) and their subcontractors shall promptly notify the CA-HSRA of any union that fails or refuses to refer Targeted Unemployed Workers and/or Disadvantaged Workers for construction jobs on this project.

So when this memo was written, the idea was circulating in Fresno to require construction contractors to sign a Project Labor Agreement with unions as a condition of working on the California High-Speed Rail project. And at some time between March 21, 2012 and June 19, 2012, Fresno Mayor Ashley Swearengin learned that the U.S. Department of Transportation had declared that the Project Labor Agreement for the Los Angeles County Metropolitan Transportation Authority did not violate federal laws. In a June 19 letter to the Secretary of the U.S. Department of Transportation, Mayor Swearengin wrote the following comments:

it has come to my attention that Mr. Dorvel R. Carter, Chief Counsel of the Federal Transit Administration, approved language put forward by the Los Angeles County Metropolitan Transit Administration (sic) (LACMTA) and the Los Angeles/Orange Counties Building and Construction Trades Council which is very similar to the Fresno Works targeted hiring program. This language focuses on establishing targeted hiring criteria in project labor agreements…we have modified our initial proposal to more closely comport with the LACMTA language that has been approved by USDOT-FTA and respectfully request that USDOT work with us to institute this revised proposed, the “National Targeted Hiring Program,” for the Initial Construction Section of the California High Speed Rail program…I look forward to discussing it with you and your team at your earliest convenience.

Copies of Mayor Swearengin’s letter calling for the Project Labor Agreement were sent to Fresno County Supervisors Susan Anderson and Henry R. Perea and California High-Speed Rail Authority board members Dan Richard and Tom Richards, who is listed as the chairman of the Fresno Regional Workforce Investment Board and is also the chairman and CEO of The Penstar Group, a Fresno-based real estate investment, development and construction company. Presumably this letter would have alerted them to the proposed Project Labor Agreement, although they probably already knew that a Project Labor Agreement was in the works.

Obviously the Obama Administration works quickly when unions are involved. A letter sent from the head of the Federal Railroad Administration at “Secretary LaHood’s request” dated June 29, 2012 assures Mayor Swearengin that “we would respect the choices of CHSRA in adopting a variation of a targeted hiring program so long as the program is consistent with the California state procurement policies and procedures that CHSRA uses in the expenditure of its non-Federal funds.” The letter also expressed some concerns:

We are happy to work with CHSRA to examine the revisions to the targeted hiring program and the program advanced by Los Angeles County Metropolitan Transit Administration’s (LACMTA) and approved by the Federal Transit Administration (FTA). One distinction I note is that LACMTA, as a local government entity, is covered by 49 C.F.R. §18.36(b) through (i) while CHSRA, as a state entity, is governed by§ 18.36(a). Additionally, FRA looks forward to reviewing any final findings or recommendations resulting from the CHSRA subcommittee study of the Fresno Works proposal and CHSRA’s proposal for adopting a targeted hiring program in implementing the HST project.

The general counsel for the Fresno Regional Workforce Investment Board then sent a memorandum dated August 8, 2012 to the executive director of the Fresno Regional Workforce Investment Board summarizing a proposed “National Targeted Hiring Program” that would pass muster with the federal government. He notes the following:

The legality of the National Targeted Hiring Program is further evidenced by the U.S. D.O.T. Federal Transit Administration’s prior approval of a similar hiring program included in a project labor agreement proposed by the Los Angeles County Metropolitan Transportation Authority (“LACMTA”). The LACMTA’s project labor agreement included contractor requirements nearly identical to those proposed in the Fresno Works National Targeted Hiring Program.

In summary, the general counsel of the Fresno Regional Workforce Investment Board uses two letters as the basis to declare to the general counsel of the California High-Speed Rail Authority that the Fresno Works Consortium’s National Targeted Hiring Program is legal: (1) the Federal Transit Administration’s February 7, 2012 letter to the Los Angeles County Metropolitan Transportation Authority about the acceptability of the Project Labor Agreement and (2) the U.S. Department of Transportation’s June 29, 2012 letter to Fresno Mayor Ashley Swearengin.

Notice three things at this stage of the development of the Project Labor Agreement:

  1. The Federal Railroad Administration never explicitly approved the Project Labor Agreement. The national office of Associated Builders and Contractors (ABC) realized this and sent a letter dated January 17, 2013 to the head of the Federal Railroad Administration asking for more information. A letter back to ABC from the Federal Railroad Administration dated March 26, 2013 stated that “We have received CHSRA’s analysis demonstrating that the proposed CBA is consistent with California’s procurement practices and policies and is otherwise consistent with state law” and also that “FRA understands the CHSRA is evaluating whether the HST project meets the criteria established in the Executive Order.”
  2. The union Project Labor Agreement itself is mentioned only in passing, even though by this time it is to be the vehicle for any alleged efforts to hire any “targeted” workers.
  3. The hiring policy no longer focuses on employment opportunities for workers in the Central Valley, where the construction will be performed.

According to the transcript of the November 14, 2012 meeting of the board of the California High-Speed Rail Authority, the executive director of the Fresno Regional Workforce Investment Board – speaking on behalf of the Fresno Works Consortium – made a presentation in conjunction with Chuck Riojas, a union official with the International Brotherhood of Electrical Workers (IBEW) Local No. 100. Blake Konczal told the following to the board:

…we were able to find out the Los Angeles County Metropolitan Transit Authority in working with the Federal Transit Administration rather was addressing the same question. And through the Chief Legal counsel at FTA, at the Transit Administration, a man by the name of Dorvel Carter, an opinion was put forward that said it was possible to have focused or targeted hiring for areas of high long-term unemployment nationally. We were able to get ahold of the legal reasoning that went into that opinion. And through elected representatives in Fresno, a request was put forward to the Secretary of Transportation LaHood that it seemed that what the FTA was granting to Los Angeles County Transit was what the FRA was denying in our request. So Secretary LaHood asked there be a unified federal policy across the different administrations and we were able to generate a revised positive findings from Federal Rail Administration legal counsel Melissa Porter. I should mention the letters I’m referencing, I have copies if you want all went them. I can give them to you. We were ecstatic. We found a policy. We revised our policy to comport with the language that Los Angeles County had submitted and been analyzed. And then we communicated that information back to your Board.

Mr. Konczal does not mention how “we were able to find out” about the letter from the Federal Transit Administration to the Los Angeles County Metropolitan Transportation Commission about the acceptability of the Project Labor Agreement. (Communication among officials of the International Brotherhood of Electrical Workers might be a good guess.) Nor does he name Fresno Mayor Ashley Swearengin as the local elected official who sent the inquiry to the U.S. Department of Transportation about using the language of that Project Labor Agreement for the California High-Speed Rail.

Mr. Konczal also added the following:

And to be clear up front and to clear up any misconception about what we’re proposing, we are not recommending a local hire program. We are not mandating the Authority or its contractors hire on the basis of any geographical region.

He is correct – the Project Labor Agreement subsequently included in the bid specifications for the Madera to Fresno segment as Addendum 8 is not a local hire program. Other than one passing reference in the preamble, there is nothing mentioned about Central Valley residents getting jobs. It is a UNION hire program, so it’s not surprising that Mr. Konczal introduced a representative of the unions to speak:

MR. KONZCAL: If I could ask Chuck Riojas to come up from the local IBEW also with the Fresno, Madera, Tulare, Kings - I think that’s all of them – Building Trades Council.

Mr. Riojas then talks about union apprenticeship programs and pre-apprenticeship programs. He claims he’s “here not to speak as a union electrician” and that “This isn’t I’d like to stress a union or non-union document” because it would give “people the opportunity to come into the respective apprenticeship programs, be it union or non-union in any apprenticeable craft.” This is not true, of course: Article 1.2 of the Project Labor Agreement specifies that apprentices shall be registered and participating in Joint Labor/Management Apprenticeship Programs.

And in fact California High-Speed Rail Authority chairman Dan Richard concludes discussion of the proposal by noting “there had been a lot of very positive discussions with the construction trades, the represented union, and making sure that this program dovetails with what is the normal course of business there.” He has no qualms about the union requirements.

At their December 6, 2012 meeting, the board of the California High-Speed Rail Authority approved a “Community Benefits Policy” that contained no references to a Project Labor Agreement. That policy was then incorporated internally and administratively into the Project Labor Agreement with the State Building and Construction Trades Council of California, which was added to bid specifications in late December 2012.

Here are questions that remain to be answered:

  1. Is the Project Labor Agreement for California High-Speed Rail actually acceptable to the U.S. Department of Transportation’s Federal Railroad Administration?
  2. Did Fresno Mayor Ashley Swearengin know that she was submitting an inquiry to the Secretary of the U.S. Department of Transportation asking about the acceptability of a union Project Labor Agreement for the California High-Speed Rail? Why did she help the effort to give unions a monopoly on this project?
  3. Is there a connection between the quest of the Fresno Works Consortium for a Project Labor Agreement and the quest of the Fresno Works Consortium to get Fresno selected as the site for the California High-Speed Rail Heavy Maintenance Facility?
  4. Why is there so little overt involvement of the California High-Speed Rail Authority Board of Directors and staff in the development of the hiring policy? Was this to avoid an apparent conflict of interest involving the board member who was head of the state’s construction unions? Or are there reasons not yet known that might be troubling to the public if revealed?
  5. To what extent did Fresno-based California High-Speed Rail Authority board member Tom Richards know about the union Project Labor Agreement?
  6. Who tipped off the Fresno Works Consortium that it should adopt the Project Labor Agreement and associated Construction Careers policy implemented at the Los Angeles County Metropolitan Transportation Authority?
  7. Does this process build public confidence in California High-Speed Rail?
Background and Sources:

Project Labor Agreement for California High-Speed Rail

Analysis of the Phony Community Benefits and Other Provisions in the Union Project Labor Agreement for the First Segment of California’s High-Speed Rail - www.LaborIssuesSolutions.com – January 11, 2013

Community Benefits Policy for California High-Speed Rail

Project Labor Agreement for Los Angeles County Metropolitan Transportation Authority

Construction Careers Policy for Los Angeles County Metropolitan Transportation Authority

Fresno Regional Workforce Investment Board (FRWIB) Board of Directors

Fresno Works Consortium

Fresno Mayor Ashley Swearengin

January 6, 2012 Federal Railroad Administration Letter – California High-Speed Rail – Targeted Hiring

March 21, 2012 Fresno Works Consortium Revised Targeted Hiring Program for California High-Speed Rail

June 19, 2012 Letter from Fresno Mayor Ashley Swearengin to Federal Railroad Administration – Inquiry on Applying Project Labor Agreement to California High-Speed Rail

June 29, 2012 Letter from Federal Railroad Administration to Fresno Mayor Ashley Swearengin on Targeted Hiring Program for California High-Speed Rail

August 8, 2012 Legal Analysis for Fresno Regional Workforce Investment Board of California High-Speed Rail Targeted Hiring Program

Transcript of November 14, 2012 Board Meeting for California High-Speed Rail Authority – Hints of Project Labor Agreement

January 17, 2013 Letter from Associated Builders and Contractors (ABC) National Office to Federal Railroad Administration on California High-Speed Rail Project Labor Agreement

March 26, 2013 Letter from Federal Railroad Administration to Associated Builders and Contractors on California High-Speed Rail Project Labor Agreement

April 11, 2013 Letter from Fresno Regional Workforce Investment Board – Public Documents – Process Leading to Project Labor Agreement on California High-Speed Rail

California High-Speed Rail Authority Keeps Union Deal Out of Public Forums - my article in www.FlashReport.org – February 10, 2013

www.CaliforniaHighSpeedRailScam.com – your centralized source for key information about the debacle that is the California High-Speed Passenger Train for the 21st Century.

Reality of Crushing Public Debt from Bond Sales Eclipses the Fantasy Vision of California High-Speed Rail

Originally presented to Californians as a $45 billion statewide high-speed rail system to transport people between major metropolitan areas, the “Safe, Reliable California High-Speed Passenger Train for the 21st Century” has been distorted by the state’s leftist ideologues and corporate and union special interests into the California High Speed Rail Scam.

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. I asked pivotal questions about how the State of California planned to sell the $9.95 billion in bonds authorized by 52.7% of California voters through Proposition 1A in the November 2008 election.

My questions were reported throughout the state in a March 18, 2013 Associated Press article Board Seeks $8.6 Billion in California High-Speed Rail Bonds:

Several speakers challenged the timing of the authorization during the board’s public comment period, asking why the board was acting on the bulk of the bonds approved by voters now when it could be years before the money is needed. Kevin Dayton, a public policy consultant from Roseville, questioned whether the board was rushing to beat the outcome of the lawsuits attempting to block the railroad.

“That’s the obvious question that comes up,” Dayton said. “I think it’s reasonable to assume they’re very worried about it.”

TV viewers also saw (and read) my comments in Nannette Miranda’s story Board Seeks $8.6 Billion in California High-Speed Rail Bonds for various local news programs of ABC affiliates throughout the state:

“What’s your current estimate of the total amount of debt that will be assessed including the interest on this?” high speed rail opponent Kevin Dayton asked the board.

During media interviews after the board meeting, California High-Speed Rail Authority chairman Dan Richard claimed the cost of interest payments for the entire project could eventually reach $700 million per year. He also claimed that interest on the first $2.61 billion in bond sales authorized by Senate Bill 1029 (2012) would cost $175 million per year over 30 years.

As stated in this article California Bullet Train Clears One Obstacle; Land, Legalities Remain, “It all depends on Wall Street, but for estimation purposes, the state is using a 6.5 percent interest rate for 35 years.” This was the rate cited by Chairman Richard during the media interviews. According to California Municipal Bond Advisor, yields for State of California 30-year general obligation bonds were 4.80% on September 20, 2012 and 5.03% on October 19, 2012.

My Questions Reveal One Surprise: Truckers Will Pay for the Bond Interest

California High-Speed Rail Authority chairman Dan Richard responded to my comments by declaring that my questions should be addressed to the California State Treasurer, Bill Lockyer. But later in the meeting, he said that the state would pay interest on the bonds NOT from the general fund, but from vehicle weight fees paid by truckers.

Fox News 11 in Los Angeles reported on this revelation with its March 28 story Money Shell Game? Potholes or High Speed Rail. I was interviewed for the story, and an excerpt from the interview appears in the segment. I am also quoted in the associated article:

Those are fees paid when trucks are too heavy. And that money is supposed to go to highway construction projects. This is typical of the entire way the rail authority operates. Things change. You don’t know what’s going on, there’s very little transparency and openness. Essentially, all they’re doing is taking the money, transferring it into another fund and pretending the general fund is not paying for it. In reality, California taxpayers are still paying the interest.

Assembly Bill 105 (2011) authorized vehicle weight fees to pay interest on bonds for transportation projects. The March 13, 2013 California Legislative Analyst’s Office Overview of Transportation Funding explains how vehicle weight fees will pay interest in 2013-14 on transportation-related bonds:

In addition to ongoing revenues from fuel taxes, the state has issued general obligation bonds in order to pay for transportation projects. The largest such bond measure was Proposition 1B (2006), which authorized the state to sell $20 billion in bonds to finance transportation projects. The Governor’s budget estimates that the debt-service costs on Proposition 1B and other outstanding transportation bonds will be about $1.1 billion in 2013-14.

Vehicle weight fees are used to pay the debt-service cost on transportation bonds rather than the General Fund. For 2013-14, the Governor’s budget uses all $946 million in weight fees to benefit the General Fund. Of this amount, $907 million is to pay debt service and $39 million is loaned to the General Fund and set aside for future debt service.

In addition, the Governor’s budget proposes to use miscellaneous revenues in the SHA to pay transportation debt service on an ongoing basis.

I asked this question in a tweet during the California High-Speed Rail Authority meeting on March 18 after the Authority chairman talked about paying interest from vehicle weight fees:

Does California Trucking Association @Caltrux know truck weight fees to pay interest Prop 1A bond sales for high-speed rail? $10 billion.

This response came on March 28 after the Fox News 11 story aired:

@DaytonPubPolicy we are well aware that the weight fees we pay to maintain roads now go to non-road projects. Trucks pay their share.

(They certainly do, and more – trucks are a favorite target of the Left in California.)

What Were the 2008 Cost Estimates for Interest Paid on the Bonds?

The official legislative analysis of Proposition 1A provided voters with an estimated cost of selling bonds with a 30-year maturity:

If the bonds are sold at an average interest rate of 5 percent, and assuming a repayment period of 30 years, the General Fund cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year.

A July 7, 2008 Senate Appropriations Committee analysis estimated the cost of selling bonds with a 40-year maturity:

AB 3034 would extend the maximum allowable bond maturity term from 30 years to 40 years. Assuming the same interest and inflation rates, this bill could result in an increase in total General Fund costs of $3.78 billion if the term of the bonds is extended to 40 years (to a total cost of $23.2 billion). Annual debt service payments would be $580 million for 40 years.

According to Section 5.02(b)(vii) of the resolutions passed on March 18, the Treasurer is now authorized to borrow the $8.6 billion by selling bonds with a maturity period of 35 years

So does the Governor’s proposed 2013-14 budget adequately account for interest to be paid after the state borrows money for California High-Speed Rail through bond sales? It depends on how the California State Treasurer intends to structure and market them.

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?

March 18, 2013 is a big day for the People of California: the Day of Debt.

There will be two votes at two meetings three hours apart to authorize the sale of the bulk of the $9.95 billion Prop 1A bonds. (Several hundred million were approved in 2010 and 2012, FYI.)

At 11:00, the California High-Speed Rail Authority will meet to authorize borrowing $8.6 billion through the sale of bonds authorized by 52.7% of California voters in November 2008 as Proposition 1A. Here is the meeting agenda:

http://www.cahighspeedrail.ca.gov/WorkArea/DownloadAsset.aspx?id=2147483707

At 2:00, the California High-Speed Passenger Train Finance Committee will meet at the same location to authorize borrowing $8.6 billion through the sale of bonds authorized by 52.7% of California voters in November 2008 as Proposition 1A. Here is the meeting agenda:

http://www.treasurer.ca.gov/financial/2013/20130318/1a.pdf

At these meetings, I will ask for amendments to the resolutions to prohibit the sale of 40-year bonds (this maturity term is allowed in statute, by the way, see California Streets and Highways Code Section 2704.11(b)) and prohibit the sale of Capital Appreciation Bonds. I’m also going to ask about what happens if the state sells the bonds and then the Authority loses the lawsuit alleging its failure to conform to the terms of Proposition 1A.

I also sent this message electronically to the California High-Speed Rail Authority (boardmembers@hsr.ca.gov) and the California High-Speed Passenger Train Finance Committee:

Dear California High-Speed Rail Authority leadership:

At your Monday, March 18, 2013 meeting, you will consider a resolution as part of the procedure to direct the state to borrow $8.6 billion for high-speed rail by selling bonds authorized under Proposition 1A (2008) to investors:

4. Consideration of request to the High-Speed Passenger Train Finance Committee to approve resolutions under the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, authorizing the issuance of bonds and commercial paper notes as follows: Resolution IX, authorizing the issuance of State of California High-Speed Passenger Train Bonds or Commercial Paper Notes in the principal amount not to exceed $8,599,715,000. ($8.6 billion)

I am requesting you to add language to these resolutions that does the following:

1. Prohibit these bonds from being sold with 40-year terms of maturity.

2. Prohibit these bonds from being sold as Capital Appreciation Bonds.

Assembly Bill 3034, enacted in 2008, authorized sale of the Proposition 1A bonds as 40-year bonds. The bill analysis for the July 7, 2008 Senate Appropriations Committee indicated that the maturity extension from a 30-year to a 40-year term would increase interest payments and increase the overall cost at an estimated amount of $3,777,000,000 ($3.7 billion) in 2008 dollars, assuming 5 percent interest and 3 percent inflation. (Source: http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_3001-3050/ab_3034_cfa_20080707_114445_sen_comm.html)

These estimates were produced at a time when the official cost was estimated at $45 billion. Now the figure of $68 billion is being officially cited. Why add another $3.7 billion to the cost?

Also, in the Official Voter Information Guide for the November 2008 election, the Legislative Analyst’s Office stated this about the cost of the proposed Proposition 1A bond sales authorized under the Safe, Reliable High-Speed Passenger Train Bond Act:

The costs of these bonds would depend on interest rates in effect at the time they are sold and the time period over which they are repaid. While the measure allows for bonds to be issued with a repayment period of up to 40 years, the state’s current practice is to issue bonds with a repayment period of up to 30 years. If the bonds are sold at an average interest rate of 5 percent, and assuming a repayment period of 30 years, the General Fund cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year. (Source: http://voterguide.sos.ca.gov/past/2008/general/analysis/prop1a-analysis.htm)

The voter guide leaves the voter to assume that the state would maintain the current practice of selling 30-year bonds. It does not even mention the cost of 40-year bonds!

Regarding the Capital Appreciation Bonds, you are surely aware of the controversy surrounding California’s school districts selling these bonds for construction rather than the traditional type of general obligation bond (current interest bond). Please don’t hide the cost of this project by delaying repayment to investors with costly bonds that accumulate compound interest.

This project will assess huge debt burdens on future generations of Californians. Please avoid schemes that hide the cost from this generation.

Finally, at your March 18, 2013 meeting, please address what would happen if the state sells the Proposition 1A bonds and then the California High-Speed Rail Authority loses the court case John Tos v. California High Speed Rail Authority (Case No: 34-2011-00113919) (aka “the Kings County lawsuit”) regarding conformity to the provisions of Proposition 1A. A hearing in this case is scheduled for May 31, 2013 in Sacramento County Superior Court.

Kevin Dayton
President and CEO
Labor Issues Solutions, LLC
www.laborissuessolutions.com

 

We’ll see if the California High-Speed Rail Authority and the California High-Speed Passenger Train Finance Committee can explain their plans for borrowing money through bond sales in a simple, transparent manner at their meetings in Sacramento on Monday, March 18, 2013.

California’s Joint Legislative Audit Committee Rejects Proposed Audit of California High-Speed Rail Project

Nicole Goehring, Government Affairs Director of the Northern California Chapter of Associated Builders and Contractors, just provided me with this report (below) about Assemblywoman Diane Harkey‘s failed proposal to the California’s Joint Legislative Audit Committee (Senate web site, Assembly web site) at its March 13, 2013 meeting to audit the $68-203 billion California High-Speed Rail Project, the most expensive public works project in history.

The California High-Speed Rail Authority is requiring construction contractors to sign a Project Labor Agreement with the State Building and Construction Trades Council of California as a condition of working on the first construction segment from Madera to Fresno.

Read Assemblywoman Harkey’s request for audit here: 2013-105: Audit Request of California High-Speed Rail Authority – Construction Package 1. It states the following motivation:

Ensuring that the Authority has proper policies, protocols, and resources in place to manage its contractors prior to breaking ground is critical for protecting passenger safety and controlling costs. Missteps during this early planning period could imperil the project for decades with defective construction, expensive litigation, massive cost overruns and lengthy project delays. An active and prominent role for the State Auditor during these crucial months could ultimately save lives and billions of taxpayer dollars.

The request was co-signed by numerous Republican state legislators (including Dan Logue, whose signature was added late and is not on the version linked above).

ABC Northern California Testifies in Favor of California High Speed Rail Audit in the Joint Legislative Audit Committee

From: Nicole Goehring, Government Affairs Director, Northern California Chapter, Associated Builders and Contractors (ABC)

On March 13, I attended the Joint Legislative Audit Committee (JLAC) meeting. The Joint Legislative Audit Committee is statutorily charged with ascertaining facts and making reports and recommendations to the Legislature concerning the State, its agencies, departments and political subdivisions of the State. In carrying out these duties, the JLAC reviews requests for audits from any of the 120 members of the Legislature and approves those requests that are a good use of the resources of the State Auditor.

Six audits were on the meeting agenda for consideration. The committee approved the first two audits without objection: Salton Sea Restoration fund and Military Veterans Employment. Then came Assemblywoman Harkey’s request for an audit of the California High Speed Rail Project, specifically the contracting practices authority given to California High Speed Rail Authority Executive Director Jeff Morales, risk management practices, and land acquisition for the California High-Speed Rail project.

Assemblywoman Harkey said that the California High Speed Rail Authority would spend $1.1 million per day on the project when the land acquisition starts. In addition, the California High-Speed Rail Authority still has not presented a business plan.

Senator Cathleen Galgiani and committee chairman (Assemblyman) Adam Gray objected to the proposed audit because two audits were previously approved in 2009 and 2011. They questioned what could be learned from another audit. Assemblyman Tim Donnelly spoke strongly in favor of the audit. He said the project needs a permanent chaperone and this particular use of public funds needs to be audited every step of the way.

Paul Guerrero from the Associated Professionals and Contractors of California and I spoke in favor of the audit. I also spoke against the government-mandated Project Labor Agreement that contractors must sign with unions to work on Construction Package 1. My testimony can be heard 1:17:47 into the hearing.

Speaking in opposition to the audit – and in favor of Project Labor Agreements – were Cesar Diaz from the State Building and Construction Trades Council of California; Scott Wetch representing the California Coalition of Utility Employees, California State Association of Electrical Workers, and Western States Council of Sheet Metal Workers; Keith Dunn of the Association for California High Speed Trains (representing design, engineering, and construction management firms); and a representative from Our Train: Young Voters for California High-Speed Rail.

In the end, the California Joint Legislative Audit Committee rejected (on an 8-3 party-line vote – Democrats opposed, Republicans in support) Assemblywoman Diane Harkey’s request for an audit of the California High-Speed Rail Project.

I will note that the rejection of this audit request is consistent with the comments of Assemblywoman Bonnie Lowenthal at the February 26, 2013 high-speed rail oversight hearing claiming that there was no interest in rehashing old controversies. Supporters of the project are intent on portraying the numerous problems with the project as resolved and in the past.