Bloomberg News

California High-Speed Rail Suffers Setback as Officials Quit

January 19, 2012

(Updates with U.S. government comment in 15th paragraph.)

Jan. 13 (Bloomberg) -- Plans for bullet trains to crisscross California at 220 miles per hour (354 kilometers per hour) face new questions after the chief executive officer and board chairman of the project both said they would leave their positions.

Roelof van Ark, CEO of the California High-Speed Rail Authority since June 2010, will step down in about two months, Rachel Wall, a spokeswoman, said yesterday by e-mail. Tom Umberg will relinquish his position as chairman, while remaining a board member, she said.

California is the only state working to build tracks for high-speed trains, which are to connect San Francisco to Los Angeles by 2033. A review panel on Jan. 3 recommended against selling bonds for the $98.5 billion project. This week, Republicans in the Legislature introduced a bill to prevent the bond sales, calling the train service a “lemon.” Governor Jerry Brown said the state should move forward with the project.

The departures are “clearly a sign from people who are trying to make this happen that” van Ark and Umberg “were not on a path to making this happen,” Mortimer Downey, a senior adviser with New York-based infrastructure consulting firm Parsons Brinckerhoff, said in a phone interview.

Van Ark’s resignation “should have happened sooner,” said Downey, who was U.S. deputy secretary of transportation from 1993 to 2001.

‘Common Agreement’

“Roelof van Ark and Tom Umberg spearheaded California High-Speed Rail through its earliest stages of planning and development and I thank them for their service,” Brown said in a statement e-mailed by Gil Duran, a spokesman. He said Brown, a Democrat, continues to support the rail project.

Asked whether Brown requested van Ark’s resignation, Duran replied, “There was common agreement that this is a good time for transition.”

Dan Richard, a co-founder of Heritage Oak Capital Partners, an infrastructure finance firm, will succeed Umberg as chairman, said Wall. Richard was an elected member of the San Francisco Bay Area Rapid Transit District from 1992 to 2004, twice serving as president of the board, according to his biography on the rail authority’s website.

The emergence of Richard, who is close to Brown, “is a sign that the governor is not walking away from the project and that it’s going to move ahead to some sort of pragmatic solution,” Downey said. “Dan’s political skills and project- development skills are very good.”

Governor’s Reputation

Van Ark’s responsibility as CEO was to make sure that people thought the rail project was “worth spending taxpayer dollars on, and he obviously hasn’t been doing a very good job of that,” Joshua Schank, CEO of the Washington-based Eno Center for Transportation, said in a phone interview.

Brown’s reputation is on the line, said Schank, who advised Hillary Clinton on transportation when she served as Democratic senator from New York.

“Governor Brown is sticking behind this thing even in the face of a lot of challenges and putting himself in the position where he’s going to be defined by this,” Schank said. “That doesn’t mean it couldn’t be turned around. If it were rethought a bit and if you have someone good” to replace van Ark, the governor could convince Californians the project is still worth doing, he said.

Government Funding

Fitch Ratings analysts yesterday wrote that the project “is likely to struggle under the weight of state cuts and a voting public that will continue to feel the effects of the economic downturn.”

The state, which has received $3.5 billion in U.S. funds for the project, has said it would need $17 billion to $19 billion. Congress eliminated high-speed rail funds requested for 2012.

“As the federal funding partner, the Department of Transportation continues to support California,” Justin Nisly, an agency spokesman, said in an e-mailed statement. “We look forward to working with the entire board on this critical and transformative transportation initiative.”

California voters in 2008 approved the sale of $9.95 billion in bonds to help finance the train. Most of the bonds haven’t been sold.

Jobs, Carbon Emissions

Brown and the Democratic heads of the state Assembly and Senate have expressed support for the rail project, saying it would create thousands of jobs and transport passengers among California’s major metropolitan areas with lower emissions than driving or flying.

Brown’s proposed budget for the fiscal year beginning July 1 proposes $15.9 million in funding for the rail authority, with the money earmarked for administration and project management.

U.S. Representative Kevin McCarthy, a Bakersfield Republican whose district would be bisected by the rail line, said earlier this week that the project should be abandoned due to a lack of long-term funding.

“It’s like you have enough money to build the foundation of a house but just have to hope you’ll get the rest later to actually build,” he said to reporters at a briefing in Sacramento. “I just think it’s wrong. You can’t afford it.”

--Editors: Andrea Snyder, Steve Geimann

To contact the reporters on this story: James Nash in Sacramento at jnash24@bloomberg.net; Lisa Caruso in Washington at lcaruso7@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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