    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

                    OVERSIGHT OF CALIFORNIA HIGH-SPEED RAIL

    =======================================================================

                                    (113-20)

                                 FIELD HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                           RAILROADS, PIPELINES, AND
                              HAZARDOUS MATERIALS

                                     OF THE

                                  COMMITTEE ON
                       TRANSPORTATION AND INFRASTRUCTURE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                       MAY 28, 2013 (Madera, California)

                                   __________

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                 COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                      BILL SHUSTER, Pennsylvania, Chairman
    DON YOUNG, Alaska                    NICK J. RAHALL, II, West Virginia
    THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
    HOWARD COBLE, North Carolina         ELEANOR HOLMES NORTON, District of
    JOHN J. DUNCAN, Jr., Tennessee,          Columbia
      Vice Chair                         JERROLD NADLER, New York
    JOHN L. MICA, Florida                CORRINE BROWN, Florida
    FRANK A. LoBIONDO, New Jersey        EDDIE BERNICE JOHNSON, Texas
    GARY G. MILLER, California           ELIJAH E. CUMMINGS, Maryland
    SAM GRAVES, Missouri                 RICK LARSEN, Washington
    SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
    CANDICE S. MILLER, Michigan          TIMOTHY H. BISHOP, New York
    DUNCAN HUNTER, California            MICHAEL H. MICHAUD, Maine
    ERIC A. ``RICK'' CRAWFORD, Arkansas  GRACE F. NAPOLITANO, California
    LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
    BLAKE FARENTHOLD, Texas              TIMOTHY J. WALZ, Minnesota
    LARRY BUCSHON, Indiana               STEVE COHEN, Tennessee
    BOB GIBBS, Ohio                      ALBIO SIRES, New Jersey
    PATRICK MEEHAN, Pennsylvania         DONNA F. EDWARDS, Maryland
    RICHARD L. HANNA, New York           JOHN GARAMENDI, California
    DANIEL WEBSTER, Florida              ANDRE CARSON, Indiana
    STEVE SOUTHERLAND, II, Florida       JANICE HAHN, California
    JEFF DENHAM, California              RICHARD M. NOLAN, Minnesota
    REID J. RIBBLE, Wisconsin            ANN KIRKPATRICK, Arizona
    THOMAS MASSIE, Kentucky              DINA TITUS, Nevada
    STEVE DAINES, Montana                SEAN PATRICK MALONEY, New York
    TOM RICE, South Carolina             ELIZABETH H. ESTY, Connecticut
    MARKWAYNE MULLIN, Oklahoma           LOIS FRANKEL, Florida
    ROGER WILLIAMS, Texas                CHERI BUSTOS, Illinois
    TREY RADEL, Florida
    MARK MEADOWS, North Carolina
    SCOTT PERRY, Pennsylvania
    RODNEY DAVIS, Illinois
    VACANCY
                                    ------                                7

         Subcommittee on Railroads, Pipelines, and Hazardous Materials

                       JEFF DENHAM, California, Chairman
    JOHN J. DUNCAN, Jr., Tennessee       CORRINE BROWN, Florida
    JOHN L. MICA, Florida                DANIEL LIPINSKI, Illinois
    GARY G. MILLER, California           JERROLD NADLER, New York
    SAM GRAVES, Missouri                 ELIJAH E. CUMMINGS, Maryland
    SHELLEY MOORE CAPITO, West Virginia  MICHAEL H. MICHAUD, Maine
    CANDICE S. MILLER, Michigan          GRACE F. NAPOLITANO, California
    LOU BARLETTA, Pennsylvania           TIMOTHY J. WALZ, Minnesota
    LARRY BUCSHON, Indiana               ALBIO SIRES, New Jersey
    BOB GIBBS, Ohio                      ELIZABETH H. ESTY, Connecticut
    PATRICK MEEHAN, Pennsylvania         PETER A. DeFAZIO, Oregon
    RICHARD L. HANNA, New York, Vice     MICHAEL E. CAPUANO, Massachusetts
        Chair                            STEVE COHEN, Tennessee
    DANIEL WEBSTER, Florida              DINA TITUS, Nevada
    THOMAS MASSIE, Kentucky              NICK J. RAHALL, II, West Virginia
    ROGER WILLIAMS, Texas                  (Ex Officio)
    TREY RADEL, Florida
    SCOTT PERRY, Pennsylvania
    BILL SHUSTER, Pennsylvania (Ex
        Officio)

                                    CONTENTS

                                                                       Page

    Summary of Subject Matter........................................     v

                                   TESTIMONY

    Dan Richard, Chairman of the Board, California High-Speed Rail
      Authority......................................................     7
    Kole Upton, Vice President, Preserve Our Heritage................     7
    Doug Verboon, Chairman, Kings County Board of Supervisors........     7
    Anja Raudabaugh, Executive Director, Madera County Farm Bureau...     7
    Louis S. Thompson, Chairman, California High-Speed Rail Peer
      Review Group...................................................     7
    Al Smith, President and CEO, Greater Fresno Area Chamber of
      Commerce.......................................................     7

     PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED
                                  BY WITNESSES

    Dan Richard:

        Prepared statement...........................................    48
        Answers to questions from Hon. Jeff Denham, a Representative
          in Congress from the State of California...................    71
    Kole Upton, prepared statement...................................    78
    Doug Verboon, prepared statement.................................   104
    Anja Raudabaugh, prepared statement..............................   107

        Footnote 2: Petitioners Opening Brief 2013...................   109
        Footnote 2: Reply Brief 2013.................................   118
        Footnote 4: Fresno to Bakersfield DEIR/EIS Comment Letter by
          Merced and Madera Farm Bureaus, 2013.......................   152
        Footnote 6: CHSRA 2012 Business Plan, pp. 3-5................   169
        Footnote 7: Hanna Declaration Letter, October 2012...........   171
        Footnote 8: Petitioner's Preliminary Injunction Brief, 2012..   176
    Louis S. Thompson:

        Prepared statement...........................................   237
        Answers to questions from Hon. Corrine Brown, a
          Representative in Congress from the State of Florida.......   243
    Al Smith:

        Prepared statement...........................................   247
        Answers to questions from Hon. Corrine Brown, a
          Representative in Congress from the State of Florida.......   251

                           SUBMISSIONS FOR THE RECORD

    Hon. Jim Costa, a Representative in Congress from the State of
      California, request to submit 55 letters in support of the
      California high-speed rail project from entities including
      California elected officials, chambers of commerce, building
      and construction trades, and citizens..........................   256
    Dan Richard, Chairman of the Board, California High-Speed Rail
      Authority:

        Letter dated May 28, 2013, responding to letter dated May 21,
          2013, from Hon. Jeff Denham, a Representative in Congress
          from the State of California...............................     8
        Letter providing supplementary information to spoken remarks,
          dated July 9, 2013, to Hon. Jeff Denham, a Representative
          in Congress from the State of California...................   375

                            ADDITIONS TO THE RECORD

    Shelli Andranigian, on behalf of the Andranigian family and
      Andranigian Farming, letter to Hon. Jeff Denham, June 27, 2013.   378
    Michael J. Brady, Attorney at Law, written statement.............   381
    James R. Janz, President, Community Coalition on High-Speed Rail,
      written statement..............................................   383
    Jodi Nagel, President, Associated Builders and Contractors of
      California, written statement..................................   385
    Jeff Taylor, letter to Hon. Jeff Denham, June 27, 2013...........   390

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    OVERSIGHT OF CALIFORNIA HIGH-SPEED RAIL

                                  ----------

                             TUESDAY, MAY 28, 2013

                      House of Representatives,
    Subcommittee on Railroads, Pipelines, and Hazardous
                                             Materials,
            Committee on the Transportation and Infrastructure,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:10 a.m., in
    the Madera Community College Center, Auditorium Room AM120,
    Madera, California, Hon. Jeff Denham (Chairman of the
    subcommittee) presiding.
        Mr. Denham. I ask unanimous consent, members not on the
    committee be permitted to sit with the committee at today's
    hearing and ask questions.
        Without objection, so ordered.
        First, let me thank the Madera Community College for
    hosting the subcommittee this morning, and everyone here for
    helping coordinate this very important hearing. Second, I would
    like to welcome our guests to lovely Madera County and thank
    them for agreeing to testify here today.
        This hearing is an oversight hearing on the California
    high-speed rail project, and I have several concerns I look
    forward to exploring with the witnesses.
        In 2008, the voters of California approved a $9.95 billion
    ballot measure, Prop 1A, for this project. I was serving in the
    State Senate at the time and voted in favor of the proposition.
    What was sold to voters was a $33 billion project that would
    receive equal parts financing from the State, Federal
    Government and private investors.
        Voters were told that they would use existing rail
    corridors and rights-of-way so that we would not destroy valley
    farm communities and agricultural production. The entire track
    was to be electrified, and the project was to be built in
    segments that would be profitable and usable individually. The
    project has changed significantly since 2008, so much so that
    it is unclear if it conforms to the requirements of Prop 1A.
        The first construction package will not be electrified,
    will not be a usable segment, may not meet the time
    requirements for passenger trips, and uses money designated for
    high-speed rail on conventional train upgrades. Moreover, at
    the time of Prop 1A, the project was estimated to cost $33
    billion and be completed by 2020. Since then, the project has
    undergone significant fluctuations in cost and completion date
    to a high in 2011 of $98 billion, with a completion date of
    2033, and now a $68.4 billion project with a completion date of
    2028.
        My concerns about these cost fluctuations were confirmed
    last year when I asked Secretary LaHood at our hearing about
    whether the current cost was the final cost for the project.
    And he said, ``It's going to be expensive to build the high-
    speed rail. If that is the figure today, that is the figure
    today. It'll be different tomorrow.'' That is just not
    something that we have agreed to in California.
        Secretary LaHood, in my view, spoke more truth than he may
    have realized as the GAO recently found that, ``We could not
    determine whether the cost estimates were unbiased because the
    California High-Speed Rail Authority did not conduct a risk and
    uncertainty analysis, which not only protects against bias, but
    also ensures contingencies are accounted for in the costs.''
    Simply put, this is a key factor in ensuring cost estimates are
    as accurate as possible.
        While the costs will likely continue to fluctuate, the
    project has not established any funding sources beyond the $3.8
    billion in Federal tax dollars and the Prop 1A money. Of the
    $68.4 billion cost, the Authority assumes $55 billion will come
    from public funds, of which $42 billion will be Federal
    taxpayer dollars. Therefore, the Authority expects an average
    of more than $2.5 billion a year from the Federal Government to
    complete this project. This annual amount is more than Amtrak's
    annual appropriations for its entire system nationwide.
        Both the GAO's recent study of the project and the Peer
    Review Group's review of the 2012 business plan has expressed
    concerns with the uncertainty of such future funding, given the
    current budgetary climate. Even the State's backup funding
    plan, to use the Cap and Trade Program, has been recognized as
    having its own set of challenges, leading the GAO to conclude
    the funding is uncertain.
        Furthermore, in 2008, we, the voters of California, were
    promised private sector investment in this project. Now in
    2013, with the project nearly doubled in cost, there is no
    private money at the table. Instead the 2012 business plan
    assumes $13 billion in private sector investment, but not until
    2022 when the initial operating segment is complete. The plan
    assumes once the IOS is complete, it will turn a profit in 1
    year, and so much so that the Authority will be able to sell an
    operating concession to raise private funds.
        These are assumptions that are based upon highly
    speculative estimates, which have been criticized in almost
    every official review of this project. The Peer Review Group,
    created by Prop 1A, has noted that the existing model is
    relatively simple and does not reflect the relationship between
    costs and the level of operations as well as it could. And the
    overall results of the model appear optimistic. And if the
    Authority's model is optimistic, the private sector will be
    less able to augment public investment.
        Furthermore, while the funding sources are each uncertain
    at best, the Authority also promised in 2008 that the project
    would follow existing transportation and utility corridors to
    the greatest extent possible. Instead, the first construction
    package will traverse prime agriculture land. This land is
    valued at a range from $28,000 to $33,000 per acre. I am not
    sure if this is the amount the Authority budgeted for, but if
    it is not and they do not pay such valuations, it could lead to
    further delay through continuous eminent domain proceedings.
        The Authority has failed to disclose precisely where the
    track will be laid, roughly a month from when the Authority
    intends to break ground, and no right-of-way has been acquired.
    No agreement is in place with freight rail regarding its
    assets, and land owners still do not know if train tracks will
    be coming straight into their living room.
        I want to conclude my statement by reiterating that I
    support the concept of high-speed rail. We are seeing it
    elsewhere around the world. We want to make sure that if it is
    done here in California, it is done right.
        What we have here today in no way reflects the promise that
    was made in 2008 to voters. The Authority has failed to produce
    a $33 billion project, failed to reach agreement on utilizing
    existing transportation corridors, will not deliver fully
    electrified high-speed rail infrastructure, and still has not
    settled on a precise route 5 years after Prop 1A was passed.
    The Authority is asking the Federal Government to pick up a $42
    billion tab on a project that was approved by California
    taxpayers.
        Obviously there have been a lot of questions from valley
    residents, as well as California and the Nation abroad. We are
    expecting to get a lot of those answers here this morning,
    especially as it pertains to this initial operating segment and
    the overall Prop 1A that was passed by voters.
        I look forward to hearing from our witnesses on these
    topics. I now call on Mr. Costa for an opening statement.
        Mr. Costa. Thank you very much, Chairman Denham, and
    Congressman Valadao. It is a pleasure for me to join you and
    the many constituents we have here at the community college,
    which is a terrific asset for the people of our valley. It
    demonstrates an investment that Californians have made over
    generations, investments in our education system, investments
    in our transportation system, and investments in our water
    system.
        We in the San Joaquin Valley have faced many challenges
    since our forebears stumbled across the Rockies and found
    fertile soil when they were looking for gold, and now we grow
    much of the world's food supply. I think we are all proud of
    that. We all reflect generations of families that have come
    here seeking a better life. Certainly that is the story of my
    family.
        The fact is that today we are living off the investments
    that our parents and that our grandparents made in California
    as it relates to our transportation system, as it relates to
    our water system, as it relates to our schools. And it is time,
    I believe, that our generation step up and respond to the
    challenges that our parents and grandparents made. By
    outsmarting and out-innovating whatever stood in our parents'
    and grandparents' way, we must do it in the same way because it
    is the greatness of America. Together we helped build one of
    the world's largest and most complex water delivery systems,
    but today it is not sufficient to apply to the needs of
    California and the 21st century. That is why I am working so
    hard with many of my colleagues to invest in California's long-
    term water needs.
        We also created a world-class higher education system, but
    it, too, needs investments. And clearly, we would not be the
    Golden State that we are if it were not for our highways, our
    ports, and harbors, and airports. But yet we need to invest in
    those transportation systems as well because they are
    insufficient for the growth of California that will have 50
    million people. Today we have 38 million people. We will have
    50 million people by the year 2030 and beyond.
        So clearly what I am laying out there is that California
    faces new challenges, but they are some of the same challenges
    our parents and grandparents faced when they first came to
    California, when they were raising their families, when they
    were starting their farms and businesses, and trying to create
    a better California as a greater, better United States.
    California obviously has a transportation system today that
    most experts will agree is inadequate to serve our long-term
    needs, just as our water system is inadequate.
        In order to accommodate the demand placed upon our State,
    the question is not should we invest. The question is how we
    should invest. The facts are clear: congested highways,
    especially 99, span the entire State, but yet as we get money
    at the local, and State, and Federal level, we continue to try
    to improve Highway 99, not too far from where we are between
    Chowchilla, and Madera, and Merced. We are investing millions
    of dollars that have taken 1,300 acres of prime agricultural
    land, but we do not hear much about that.
        One out of every four flights between Los Angeles and San
    Francisco, which is the busiest short home market in the United
    States, are late by close to an hour or more. And we know the
    population demands in the Bay area and southern California as
    well as in our valley will only continue to grow. Therefore,
    the transportation challenges will only get worse if we do not
    make the investments.
        High-speed rail is a response to the challenges, and as the
    chairman said, we see advances of high-speed rail in Asia, in
    Europe, and in parts of this country because it is a good part
    of an intermodal transportation system, especially between one
    and 400 miles in distance. If you are going less than 100
    miles, you should ride. If you are going more than 400 miles in
    distance, you take a plane. But where high-speed rail has been
    most successful in other parts of the world is in that niche,
    and that niche fits California with the population densities
    that we have today, something highways and airports cannot
    accomplish.
        From the time the first shovel hits the ground later this
    year, the project will have, I think, a true economic game
    changer to this State and to this valley. With the high
    unemployment that we have, we desperately need thousands of
    jobs that this system, I think, is going to create over the
    long term. To illustrate the point, we have letters of support
    here that, Mr. Chairman, I would like unanimous consent to
    enter into the record from local elected officials, from
    chambers of commerce, from school board members, and from
    citizens. Without objection.
        Mr. Denham. Without objection.
        Mr. Costa. Thank you very much.
        [The letters of support referenced by Hon. Costa can be
    found on page 256.]
        Mr. Costa. Agriculture is something that we in this valley
    feel very, very strongly about, and you are looking at a third
    generation family farmer. I know how hard our farmers, dairymen
    and women, and ranchers work. It is literally and figuratively
    how the butter on my bread got put. And so any major investment
    in any major public works project cannot come without the
    input, without the mitigation and the addressing of our major
    economy, and that is agriculture.
        The truth of the matter is that this is an important part
    of our long-term investments, but we must mitigate and we must
    protect prime agricultural land whenever possible, just as we
    did with the expansion of 99, just as we have done with the
    expansion of 198, and any other transportation corridor.
    Building these major projects is obviously not without
    controversy, and that is why I joined with Chairman Denham in
    asking the Government Accountability Office, the Government's
    watchdog, to audit the project. After more than a year of
    review, the GAO reported that the Authority followed best
    practices in each of the following areas: ridership study,
    revenue studies, cost estimates, and the analysis of the
    economic impact of the project.
        The Authority, let us be clear, as far as I am concerned,
    has not done everything right, not by a long ways, but they
    have gotten their act together in the last 18 months. I was as
    concerned as many of my colleagues were about the lack of
    effort in coming together, but I think they have come a long
    ways. The GAO's report shows that what we have begun to notice
    over the past year, that there they are putting things back in
    place, and they are listening.
        Let me close. Like our predecessors before us, we can and
    we will solve the challenges before us today. People can always
    say it is not the right time, it costs too much. I wonder if
    President Lincoln were living together in the middle of the
    Civil War, perhaps the greatest difficulty in our Nation's
    history, the Nation being torn apart, inflation running
    rampant, trying to figure out how to finance the Civil War, and
    in 1862, he says we are going to build a railroad across the
    country. You know, today with the talking heads, you know, all
    the news, I can see us: Abe, you know, you got to wait until
    your second term before you build this railroad. Well, the fact
    is he had boldness, he had vision, and that has been the spirit
    of America for our entire history.
        I look forward to hearing from our witnesses, Mr. Chairman,
    and trying to ensure that we provide the proper oversight, it
    is appropriate that we do so, and that we make sure that we try
    to do our very, very best in this effort. Thank you.
        Mr. Denham. Thank you. I now call on Mr. Valadao for an
    opening statement.
        Mr. Valadao. Thank you, Chairman Denham, and thank you,
    Congressman Costa, for allowing me to come to your district.
        Mr. Costa. You are welcome any time.
        Mr. Valadao. Good morning. My name is David Valadao. I
    represent California's 21st Congressional District. I have only
    been in Congress for about 5 months, but I served 2 years
    before that in the California State Legislature.
        The last 2 years have been kind of a surprise for me
    because when this first came before me, I actually did not have
    a problem with the high-speed rail in general. It became a
    serious issue when the money came from the Feds, when the $3
    billion, and then started really rushing the program forward.
        My constituents started to complain once more details came
    out, when they started hearing about losing their Amtrak
    station in their communities, like my Corcoran's and my
    Wasco's, and Hanford. It really started to scare those
    constituents because it is a way that they were able to get up
    to Hanford or Fresno to see doctors.
        We have got obviously farmers and businesses that are
    concerned with the movement, but we have also got a lot of
    concerns. When I hear from teachers and public safety officials
    and we talk from all the different Government agencies where we
    have seen so many cuts and so many things that affected people
    in their everyday lives. And then they think, well, we are
    going to spend all this money on this project. And so it
    started to turn me more and more in the direction where I am
    now where I am not a fan of the project.
        Then you see a project that I truly do believe that was
    flawed from the day it was first put on the ballot. When you
    set the ideal that the project, the train has to go a certain
    speed, has to between certain communities and at a certain
    amount of time, I think you started to define it in a way that
    is going to be tough to live up to. And I really do believe
    this project is just off on the wrong foot and continued on the
    wrong foot from the get-go.
        When I look at infrastructure around the United States and
    what is important, I do believe that infrastructure like rail
    is important. I do believe that infrastructure like ports and
    freeways are important. But I do believe they are important for
    two reasons, one, transport goods and two, transport people.
    And when we look at how we are going to improve our economy
    here, and it can be from manufacturer to agriculture to
    anything, you produce something, you transport it, and you
    bring dollars back. And that is how you revive our economy.
        And that is why I do not see high-speed rail as a future
    for us just because we only transport people. And when you look
    at how it is going to affect my district with my constituents,
    and they talk about traffic and all these other things, I mean,
    L.A., San Francisco, I will let their representatives worry
    about them. I am concerned with Central Valley, and that is
    where I have always put my focus, and that is where is where I
    will continue to put my focus.
        So I look forward to hearing the testimony and coming out
    with some good questions and answers. So I appreciate the
    opportunity, and thank you, Mr. Chairman.
        Mr. Denham. Thank you. Let me quickly discuss some ground
    rules of today's hearing. First of all, let me invite all those
    in the back of the room, ladies and gentlemen, we have plenty
    of seats up here in front if you would like to come down and
    grab a seat. We expect this hearing to be about 2 hours long.
    We will have several rounds of questioning.
        The way that we question is the green light, you have 5
    minutes for each Member to ask questions. The yellow light,
    just like a stoplight, it is kind of a yield, start slowing
    things down. And obviously the red light is stop your testimony
    and we will move on to the next question.
        Our goal here is to ask as many questions as possible so
    that we can get not only to the transparency, but the
    accountability to voters and taxpayers on where this project is
    and what it looks like in the future.
        I would like to welcome our witnesses here today. Thank you
    for being here. I ask unanimous consent that our witnesses'
    full statements be included in the record.
        Without objection, so ordered.
        Since your testimony has been made part of the record, the
    committee requests that you limit your summary to 5 minutes.
        First on our panel is Mr. Dan Richard, chairman of the
    board of directors, California High-Speed Rail Authority.
    Welcome. I would like to first say that as we have looked at
    this entire project, it has changed many times, but the
    leadership has also changed many times. We appreciate your
    openness and your ongoing work with this committee and Members
    of Congress as well.
        Mr. Kole Upton, vice president, Preserve Our Heritage; Mr.
    Doug Verboon, chairman, Kings County Board of Supervisors; Ms.
    Anja Raudabaugh, executive director, Madera County Farm Bureau;
    Mr. Louis Thompson, chairman, California High-Speed Rail Peer
    View Group; and Mr. Al Smith, president and CEO of the Greater
    Fresno Area Chamber of Commerce.
        Welcome, and, Mr. Richard, you may start with your opening
    statement.

      TESTIMONY OF DAN RICHARD, CHAIRMAN OF THE BOARD, CALIFORNIA
    HIGH-SPEED RAIL AUTHORITY; KOLE UPTON, VICE PRESIDENT, PRESERVE
      OUR HERITAGE; DOUG VERBOON, CHAIRMAN, KINGS COUNTY BOARD OF
    SUPERVISORS; ANJA RAUDABAUGH, EXECUTIVE DIRECTOR, MADERA COUNTY
    FARM BUREAU; LOUIS S. THOMPSON, CHAIRMAN, CALIFORNIA HIGH-SPEED
       RAIL PEER REVIEW GROUP; AND AL SMITH, PRESIDENT AND CEO,
                GREATER FRESNO AREA CHAMBER OF COMMERCE

        Mr. Richard. Thank you. And, Mr. Chairman, before I start,
    you sent me a letter last week. We have specific responses to
    that letter, and so if that is possible to make that a part of
    the record, we would appreciate the chance to do that.
        Mr. Denham. We will add to that to the record without
    objection.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Richard. Thank you. Chairman Denham, Congressman
    Valadao, Congressman Costa, I am Dan Richard. I am the chairman
    of the California High-Speed Rail Authority board of directors.
    It is a distinct honor to appear before you today. In view of
    the many questions that have been raised about California's
    high-speed rail plan, I have provided extended and detailed
    written testimony for the record to address these points. In
    that testimony, I discuss why we believe this transportation
    investment is absolutely vital to our economic future here in
    California, especially given population growth and the
    environmental challenges we face.
        I want to talk today about three main topics in addition to
    the testimony that we filed, and we look forward to your
    questions. The first point is that over the last year, we have
    developed a new vision and a new approach to this program, one
    that is more logical and in harmony with the State's rail
    transportation system.
        Our progress this past year includes the following: one, a
    better business plan. We will build the system in logical
    phases with each segment having funding in place beforehand and
    each segment having standalone utility. And it is a plan that
    will fully integrate high-speed rail into the State's intercity
    and urban rail network, including sharing corridors where
    appropriate, and that is an approach we call the blended
    system. As a result, this new plan generated widespread support
    and increased confidence, and the legislature appropriated $6
    billion to begin construction here in the valley this year.
        Number two, significant improvements in our cost and
    ridership forecasts. We have scrubbed these numbers completely
    and brought in outside experts to review them. As a result, the
    GAO gave us high marks in our cost, ridership, and revenue
    forecasting methodologies.
        Number three, new leadership with substantial talent and
    proven experience in infrastructure project management and
    delivery. As a result, the State auditor general, who had been
    highly critical of this program and the Authority as an
    organization in the past, said we have made substantial
    progress, and she issued a very laudatory report.
        Number four, better outreach to many affected communities
    and concerned stakeholders. Frankly, we are just doing a better
    job of listening and providing information. As a result, we
    have made alignment changes that have satisfied a number of
    concerns along the right-of-way, and I am proud to say that we
    have reached settlements on three of the environmental lawsuits
    here in the valley, all three I should say. This is an effort
    that we are committed to continuing as we go forward.
        That is a short list of our progress to date. Next, I want
    to briefly expand on the benefits of this blended
    implementation approach to building a system. Until about a
    year ago, the thinking was that high-speed rail was its own
    insular program separate from the existing statewide rail
    network and other transportation systems. Our business plan
    signaled a dramatic shift from that thinking to an approach
    where high-speed rail is fully integrated with other intercity
    commuter and urban rail systems. This approach is more
    efficient, it lowers costs, it reduces community impacts, and
    it maximizes connectivity and convenience for customers. And we
    are now working in concert with our rail partners, including
    ACE, L.A. Metro, the Amtrak-San Joaquin, Caltrain, and others,
    to make parallel investments in all of the systems around the
    State.
        Lastly, I am keenly aware that this committee has concerns
    about our plans to fund and complete the system. We believe we
    have a solid approach to funding this program, one that is
    appropriate to this stage of project development and consistent
    with how other major infrastructure projects are developed both
    here and abroad.
        Mr. Chairman, our current estimate is that the program will
    cost about $53 billion measured in 2012 dollars, or $68
    billion, as you pointed out, in fully inflated dollars over the
    next 15 years. And we are beginning an aggressive effort to
    bring those costs down.
        Today we have in hand about $13 billion in funding through
    a combination of State bonds and Federal appropriations, which
    is actually a good first step. But with high-speed rail in
    California, we have an additional opportunity to include
    significant private sector investment, and this is because we
    are highly confident the system will generate net operating
    cash flows. That is the universal experience of high-speed rail
    systems around the world that once built, once the capital is
    expended, they generate net positive operating cash flows. Our
    expectation is that by selling the rights to private sector
    operators, we will generate another approximately $14 billion
    net present value for the full build out of the system.
        So the question is not whether the private sector will
    invest, but when. In the absence of project completion
    guarantees or any type of revenue guarantee, they will want to
    see a proven revenue stream. This has been the experience
    around the world, and GAO confirmed that that was also their
    understanding and experience as well, and they said, ``The
    Authority's plan is consistent with this funding approach.''
        Remaining funds will come from a basket of high-value
    sources, such as real estate development around stations. In
    Japan, this accounts for about 30 percent of their revenues,
    concessions to lease our right-of-way for fiber optic and
    energy facilities, parking, and advertising revenues, and so
    forth. And finally--I will be very quick--the Brown
    administration has identified State cap and trade revenue as a
    potential backstop for this project, and the high-speed rail
    project is eligible to receive those revenues.
        Lastly, we do believe it is reasonable for the Federal
    Government to continue investing in high-speed rail, because,
    like the Interstate Highway System, it is good for the economy.
    However, our approach will not just be to come to you seeking
    Federal funds, but to work with you to find areas where Federal
    support can leverage private sector dollars and help us attract
    that investment. And in that regard, we look forward to working
    with you on innovative approaches to reauthorizing PRIIA.
        I want to thank you again, Mr. Chairman, for allowing me to
    provide you with a quick update. We look forward to your
    detailed questions. Thank you.
        Mr. Denham. Thank you, Mr. Richard.
        Mr. Upton?
        Mr. Upton. Thank you, Mr. Chairman. I am a farmer, and I am
    here to----
        Mr. Denham. Push the----
        Mr. Upton. How is that?
        Mr. Denham. There we go.
        Mr. Upton. OK. I am a farmer, like I said, so mics are a
    little bit of a mystery to me here.
        [Laughter.]
        Mr. Upton. I live on my farm. My son lives on my farm. My
    grandson lives on my farm. It was started by my dad in World
    War II when he got back. It means a lot to us. It is our
    heritage. It is our future. So I am going to give you my
    experience I have had with high-speed rail, which I do not
    think is dissimilar from other farmers here in the Central
    Valley.
        It started in November 2009 when we got a letter from the
    Authority saying that our property was in Route A3, and would
    we allow people on the property to do various studies. I called
    up the lady and said, I said, do I have the right to refuse?
    And she said, yes, but why would you want to do that? And I
    said, well, you are not following your own guidelines. This is
    not a transportation corridor, and it is certainly not
    minimizing ag land. So we did refuse.
        We then went with some of our fellow farmers to the
    Authority meeting in December 2009. Curt Pringle was the
    chairman at the time, and he said, which I thought was good
    advice, why do you not roll up your sleeves and work with us if
    you do not like what we are doing. So we did. We started
    working with Mr. Pringle and the local folks, and we actually
    had success.
        In March of 2010, the Authority board voted to eliminate
    Route A3. Hallelujah, we thought we had won. We done good.
    Well, we stayed with the process. We got on these technical
    committees, and we worked with them.
        In June 2010 in Merced, they had a joint technical
    committee between the Merced to San Jose Consultant Group,
    Merced to Fresno Consultant Group, and the county agencies. And
    I asked the question, where do we want the Wye? Do we want it
    north of Chowchilla or south of Chowchilla? It was unanimous.
    The public agencies represented wanted it south of Chowchilla.
        Well, a short month later in July of 2010, the consultant
    group and the Authority came out and said, OK, we are going to
    have it north of Chowchilla. So I challenged them, as did
    others. OK, how can you have a public input process, you take
    it, and then you do the exact opposite of what people want?
    Well, they said, no, the city of Chowchilla wanted it. So I
    called up the mayor, and he said, no way, it was not us. So we
    go back again. They said, no, it was FRA wanted it. So we asked
    the FRA. They did not want to talk to a bunch of farmers from
    California. So we did an FOIA request. It took a year to get
    the answer and to find out, no, they had nothing to do with
    that.
        So in August 2010, the Authority said, well, we have put
    the pencils down. So from August 2010 until December of 2011,
    we were sort of in this process where we worked with them. We
    got resolutions opposing some of the routes, et cetera, et
    cetera.
        In December 2011, the Authority and the consultant group
    came out with their preferred hybrid route, OK? This hybrid
    route is what you see for the construction in Fresno there and
    in Madera. But in the Wye section, they had one for us as well,
    and it was a worse abomination than what they had before. This
    moved it from Road 13 to a road called Road 12 and 1/4. The
    only problem was Road 12 and 1/4 does not exist. This is a
    figment of the imagination of the Authority.
        So again, we protested, and the board, to their credit,
    they excised out the Wye portion there in the spring and said,
    we are going to move that to Merced, to the San Jose group and
    let them study it. And so in June of 2012, we started working
    with the Merced to San Jose Group, and that was good. They
    started listening.
        I think the key change, for me anyway, was when they hired
    Diana Gomez as the regional director. She came in late 2012.
    She was a fresh face. She was willing to listen to us. She is a
    valley gal. And she brings a unique perspective because she is
    used to things that do not work very well and a lot of losses
    because she is a big Raiders fan, OK?
        [Laughter.]
        Mr. Upton. So what she did, which nobody else did, she was
    willing to meet with my farm laborers, the guys. I am an
    equipment intensive farmer, so my guys got good jobs. They have
    health benefits. Their kids go to college. They own their own
    homes. And she met with them, and we had a good discussion
    afterwards. And her point was, why do we have to replace good
    farm jobs with rail jobs? Why do we not have both? Why do we
    not make the structure so it is consistent with our existing
    infrastructure? And that is what we have been saying all this
    time, and we are hopeful that this is what will happen with
    this project.
        We have several projects or routes that are on the table
    now, 152 and Road 18, which will work. You also have two from
    the old days, Avenue 21 and Road 13, which are abominations. We
    have opposed them for 4 years. If you stick that on us, then
    you may as well just kept the old group in because we are back
    to square one, and we are going to start fighting again.
        And I would like to point out a couple of folks that have
    really helped us. Number one, Chairman Denham, I appreciate
    your efforts in doing this. I appreciate Supervisor Rogers and
    what he has done with us. But I want to point out a couple of
    folks that are strong high-speed rail advocates that have
    actually worked to try to get us together. One is Supervisor
    John Pedrozo of Merced County. He has worked with the Authority
    and us. The other was Dee Dee O'Donnell of your staff. And I
    got say they are unique. A lot of the other folks that are for
    this thing in the valley just have called us names, and that
    does not help.
        Mr. Denham. I told her to try to make you happy, Kole.
        [Laughter.]
        Mr. Upton. OK. Well, now ask Mr. Richard to make me happy
    and get the right routes, and we will be done here, OK?
        [Laughter.]
        Mr. Upton. So in conclusion, the ball is in the high-speed
    rail's court now, and I am hoping that they do not fumble it.
    Thank you.
        Mr. Denham. Thank you, Mr. Upton.
        Mr. Verboon?
        Mr. Verboon. Good morning. My name is Doug Verboon for
    those of you who do not know me, and I would like to thank the
    staff, the council here. Can you hear me all right? I would
    like to thank Congressman Denham, and Congressman Costa, and
    Congressman Valadao for letting us come today. I appreciate it.
        Since we last testified in 2011, the situation has
    worsened. It has dissolved into a Proposition 1A voters would
    not recognize. We have chronicled unaddressed concerns in
    volumes of correspondence. The project ignores environmental
    precedent in favor of political posturing.
        The county was completely excluded during the corridor
    refinement process. This exclusion caused the Authority to
    realize, too late, that it chose one of the most well-planned,
    completely protected, and ag-sustained areas in California to
    anoint the spine of the project. It has steadfastly ignored
    Kings County ever since, essentially stating it is too late.
        Kings County cannot possibly be the least environmentally
    damaging project alternative, when only 20 miles east of
    Highway 99 and 198 convene with the Visalia Airport. Visalia
    has tirelessly lobbied to have the Authority open its eyes and
    receive this perfect gift.
        The 2012 business plan may save dollars, at least on paper,
    but also robs the bond money, bestows it on conventional rail,
    and blends the project into the Prop 1A voters would not
    recognize.
        Sixty-eight billion dollars would allegedly build phase
    one, plus $32 billion to electrify that 100 miles, and billions
    more to complete phase two. Phase one will shift Amtrak and
    bypass cities whose people and economies have become dependent
    on them, including Hanford, Corcoran, and Kings County. The
    result is a project that will not be electrified, will be
    standard diesel, will be subsidized, will compete with
    conventional passenger and freight service, will travel at 79
    miles an hour, not the 200-plus indicated in Prop 1A, will not
    provide a nonstop L.A. to San Francisco Prop 1A required trip,
    will not be green, but it will seek cap and trade money
    claiming it is, will rely on speculative funding sources, will
    not have additional Federal money, will not entice venture
    capital, will not have independent utility, will clog the cash-
    strapped courts with condemnation cases, will be politically
    expedient for some, but at the cost of the environmental
    justice in Prop 1A.
        The project has no construction permit, but claims it will
    start construction in July of 2013. It does not have ARRA
    required agreements with Burlington Northern Santa Fe or Union
    Pacific. It does not have the necessary environmental permits
    to complete even the 29-mile initial construction segment, let
    alone drift into the Fresno-Bakersfield segment has yet to be
    certified.
        Even so, the Authority certified to the legislature that it
    will in the future comply with the required environmental
    thresholds, even though Prop 1A requires all environmental
    certifications be obtained for Merced to Palmdale before bond
    approval.
        Senator Rosenthal recently asked Chairman Richard if, for
    all this money, we are going to get our high-speed rail. He
    said, no, but you are going to get a lot. If they cannot comply
    with Prop 1A, they must stop. The Federal funding agreement
    requires compliance with State law.
        On January 3rd, 2012, the Prop 1A Commission Peer Group
    reported to the State legislature, ``We cannot overemphasize
    the fact that moving ahead on the high-speed rail without
    credible sources of adequate funding, without a definite
    business model, without a strategy to maximize the independent
    utility and value to the State, and without the appropriate
    management resources represents the fiscal risk on the part of
    the State of California.''
        High-speed rail in California, as defined in Prop 1A, is a
    worthy objective, and one that my county initially supported so
    long as it allowed existing transportation corridors. It has
    developed into a project voters would not recognize, and given
    the truth, the Governor would probably decline to endorse. This
    should concern the Authority's Federal partner, the Federal
    Railroad Administration.
        This project needs more oversight, more accountability, and
    more common sense, and less antics. In reflection on its
    implication, I am reminded of the children's story of the three
    little pigs and the consequences of building a house of straw.
        That is all I have to say. I would like to make a comment.
    You know, Kings County has been fighting the high-speed rail
    for about 2\1/2\ years, and we were not against it from the
    beginning. But the high-speed rail put us in a position we are
    in today for lack of coordination into our county. We wanted to
    have the right to protect our farm ground and a right to work
    with high-speed rail to get the proper alignment through our
    county, and they have neglected us. And we have not seen the
    High-Speed Rail Authority in our county, in our chambers for 11
    months, and we have been trying to every single month to work
    with them to get this resolved. And now it is almost too late.
    So thank you.
        Mr. Denham. Thank you, Mr. Verboon.
        Ms. Raudabaugh?
        Ms. Raudabaugh. Thank you, Mr. Chairman, and honorable
    members of the valley. The Madera County Farm Bureau
    appreciates the opportunity to provide testimony on behalf of
    its 1,200 members in Madera County. Madera County ranks 10th in
    the State for gross agricultural production value and fourth in
    the entire world for the production of specialty crops. We
    receive no Federal subsidies. We pay our employees entirely off
    the profit and the sweat of our crop.
        Agriculture and ag related businesses account for over 76
    percent of Madera County's employed, and also represent nearly
    67 percent of Madera County's GDP. The Farm Bureau represents
    approximately 95 percent of all agricultural interests in
    Madera County.
        The California high-speed train project has a lengthy
    history in Madera County, which dates back to 2009, as my
    colleague, Kole Upton, mentioned. These design options that
    were originally presented included a variety of alignments that
    deviated significantly from major transportation routes,
    crossing agricultural lands and prime farm lands, ultimately
    causing what now appears to be an insurmountable level of
    mistrust, suspicion, and anger towards the project by the
    agrarian community.
        The final alignment selection in Madera County in May of
    2012 yielded thus far an unprecedented level of agricultural
    property acquisition, and irreparable damages to agricultural
    operations in Madera County. The final alignment again in
    Madera County leaves State Route 99 as much as 5 miles to the
    east in Madera, which bifurcates, dissects, and severs
    approximately 500 different ag operations. Four hundred and
    thirteen of those affected are in Madera County. The results,
    although yet to be defined, is certain to be a loss of
    businesses, revenue, jobs, and ultimately land that is
    available for agriculture.
        In 2012, once the final alignment was selected, the Madera
    County Farm Bureau, the Merced County Farm Bureau, Preserve Our
    Heritage, the Chowchilla Water District, Fagundes Brothers
    Dairy Entities, and originally Madera County, filed a lawsuit
    against the Authority, which claimed statutory violations under
    CEQA and the Bagley-Keene Open Meetings Act.
        A day before the litigation was scheduled to be heard in
    Sacramento Superior Court, the petitioner parties, along with
    the Authority, agreed to a settlement. The settlement is a
    comprehensive agreement that includes major facets associated
    with right-of-way acquisition and land acquisition processes.
    It also includes additional direct mitigation acreage related
    to indirect effects of the project in the form of an
    agricultural buffer running the length of the tracks, both to
    the east and west, 25 feet wide throughout ag land in the
    valley.
        The settlement also provides for a comprehensive ag land
    preservation program, which is called the Ag Land Mitigation
    Fund, which is designated to set aside acreage to offset
    unforeseen impacts to agricultural properties from the project.
        Moving forward into the future, the question of how smooth
    the land acquisition process will proceed remains unanswered.
    The Authority must begin by honoring its commitments in the
    settlement agreement and ensuring that land owners are given
    the best possible list of options for, first, maintaining their
    agricultural operations viability, and then and only then
    receiving just compensation for the impacts the project will
    cause.
        Approximately 80 percent of the landowners affected along
    the initial construction segment are Farm Bureau members. To
    date, none of them have expressed a willing desire to sell. The
    situation is most likely going to be one in which the majority
    of these property owners are going to be unwilling sellers. And
    given that the average price of farm ground in Madera is
    $25,000 an acre, the Farm Bureau is concerned about the
    allocation of costs associated with the Authority's business
    plan, and that the actual payments will be substantially lower
    than what should be required.
        The Farm Bureau would also like to ensure that there is
    adequate funding sources to purchase these properties well
    before any appraisal or offers are made. Our members are
    already suffering from an inability to obtain operating loans
    simply by being in the path of the project's alignment.
    Unfortunately, no amount of money or offsite mitigation can
    replace a farmstead that has been in the family for
    generations. The Farm Bureau is highly alarmed that this
    project may cause more irreparable harm before it can be
    completed.
        That is my statement, but I would like to make a comment.
    You have not heard about any ag acquisition or any complaints
    about ag acquisition for Caltrain's projects because those
    projects have been part of the county or local general plan for
    decades. This project has not. That is why we have not been
    screaming about those.
        Mr. Denham. Thank you.
        Mr. Thompson?
        Mr. Thompson. Chairman Denham, Mr. Costa, Mr. Valadao, I am
    happy to be here today representing the Peer Review Group of
    which I am the chairman. I hope we can add something useful to
    these discussions.
        The Peer Review Group has supported the concept of high-
    speed rail, but we have had, and we still have, a number of
    concerns, which we have discussed in our reports. Our objective
    has been to strengthen the project, but also to make sure that
    everyone understands the risks.
        We have been especially concerned to make sure that people
    know what we are getting into because my experience is that if
    you do not do that at the beginning, sometime in the next year
    is when people begin to realize how difficult it is. The
    project loses credibility. We want to avoid that if we can.
        Most of our concerns have been covered in your own summary
    of the subject matter statement, which was excellent. And I am
    not going to try to elaborate on those. I just want to list
    them briefly to put them all on the table.
        First, the source of complete project funding does not
    exist. Beyond the existing sources of funding, there is no
    Federal money, and there are no other sources. There is a
    possibility of a new Federal program. There is a possibility of
    using the State's cap and trade program. There could be a sales
    tax. Indeed the 2000 business plan depended on a sales tax.
    There could be a fuel tax. There could be private money. It
    will be delayed until later. Obviously we do not advocate any
    of these, but the point is that some of them will have to be
    developed or the project will not be able to go beyond the
    Central Valley.
        The second was the risk of what happens if it does not go
    beyond the Central Valley, and that risk still remains, but we
    feel that it has been mitigated very significantly by also
    beginning to work on the ends where the immediate ridership in
    the immediate population end benefits are.
        As Chairman Richard said, the planning context of this
    project was backwards. That is, we started with the wonderful
    idea of high-speed rail, and then we began to think about what
    to do about it if we got it. It should have been the other way
    around, and it is now. The State has issued a new State rail
    plan, which begins to put it into the right kind of context and
    gives us more confidence that it will be served by local
    transport.
        There was the issue of phasing and blending of the project
    to make sure that it got done in the right sequence. The
    Authority's proposal to build south first, we believe, was
    correct. That is the right way to get started. The phasing and
    the blending on both ends makes a lot of sense because it
    reduces the disruption of the project to the urban areas.
        Business model, we were concerned about. That is how you
    are going to manage the project because, among other things,
    the raising of private sector money is crucially dependent on
    the business model. The 2014 business plan we understand will
    spend a lot of time on the business model, and we support that.
        As the management resources, this project at its peak will
    be larger than Caltrain's. It will have a larger construction
    effort that Caltrain's, and we have been concerned all along
    that it would have the management resources it needs to manage
    the project.
        They have done two things. First, the adoption of the
    design bill contracting process, if it works the way it is
    supposed to, will shift a lot of the burden to the contractors.
    And secondarily, we give them considerable credit because the
    priority of the project has been raised, and as far as we can
    see, they have gotten a lot of the State resources that they
    needed. But design bill contracting has risks as well as
    benefits, and we certainly will want to see the next couple of
    the years of the project.
        Demand forecasting has been lowered a little bit, and the
    peer review panel has made a number of suggestions. Since there
    are no decisions to be made in effect until the decision to go
    south, we can take the time to get the demand forecasting
    better, and we can collect the data that we need to make a much
    better demand forecasting model.
        Capital costs, as you know, are based as of now on
    preliminary estimates of only one bid. There is no experience
    with the capital costs, so we will just have to see. Right now,
    no one has great confidence in those forecasts. The O&M model
    they are going to work on, and we believe they will improve it.
        Let me summarize this with two points. First of all, high-
    speed rail in California is an immense project. We should not
    kid ourselves. It is a giant project. The high-speed rail
    projects in Europe and Japan and in other places in Asia have
    been managed by an ongoing railway that knew what it was doing.
    The High-Speed Rail Authority has got a very steep learning
    curve, and it will be a real challenge.
        Second, though, they have made, as others have said,
    manifest progress in getting this project under control, the
    project of September 2011 and the project today is very, very
    different. And many of the issues that we had have been
    addressed. We stress that a number of things will not be
    resolved for a number of years, but at least they have
    addressed many of them, and they have made a lot of progress.
        Finally, our role, we think, is to work hard to identify
    issues and to make sure all of the right questions are on the
    table. And I hope we can do that, and I hope that in this
    meeting and in others we can be useful to you.
        Mr. Denham. Thank you, Mr. Thompson.
        Mr. Smith?
        Mr. Smith. Thank you very much. Chairman Denham,
    Congressman Costa, Congressman Valadao, thank you very much. I
    am Al Smith, and I thank you for the opportunity to be here
    today.
        As the president of the Fresno Area Chamber of Commerce, I
    work closely with the business community, and I guess I have a
    decent understanding of our Central Valley's economy. This
    Fresno chamber strongly supports the high-speed rail project
    for California. It will create jobs now and in the future, and
    it will make doing business in our valley more attractive and
    efficient.
        California's unique geography and expected population
    growth makes our State perfectly suited for this project.
    Central California is considered the bread basket of the world,
    as was noted. Its fertile soils generate billions of dollars of
    economic stimulus and thousands of jobs. Fresno, Madera, and
    Tulare Counties alone generate over $14 billion of the $32
    billion ag dollars statewide.
        But this area is almost totally dependent on agriculture.
    Unfortunately, it can be negatively impacted with drought
    conditions and environmental challenges, as we are witnessing
    even as we speak. The guarantee of ag's sustainability year in,
    year out is always fragile. As a result, there is an urgent
    need to diversify our economic base.
        In the Central Valley, unemployment ranges in excess of 15
    percent. That is double the nationwide average. Some west side
    cities have unemployment as high as 40 percent, so job creation
    is paramount. The development of high-speed rail has the
    opportunity to create 20,000 jobs for each billion dollars
    invested, and a lot of those jobs, thousands of those jobs,
    will be in the Central Valley. It will be a boost to small
    business with 25 percent of those funds targeted to them, and
    to disabled veterans. Should the maintenance facility be
    located in our area, it would create another 1,500 high-paying
    permanent jobs, bringing ancillary businesses and support
    services with them.
        This part of California could become the epicenter for
    future high-speed rail projects as it expands across the
    Nation. Businesses large and small in the San Joaquin Valley
    support high-speed rail. Jackie Emerian is a lifelong resident
    of Fresno, a business owner since 1967. He is the chief
    executive officer of Val Print, a marketing and design company
    based in Fresno. Three of the company's properties will be
    affected by the rail alignment, and throughout this process, he
    has found in the High-Speed Rail Authority a willing and
    supportive partner. He knows that his short-term sacrifice will
    serve the greater good, ensuring a brighter future for the
    valley.
        The same with Helen Chavez-Hansen, the owner of La Tapatia
    Tortilleria, who also has three properties affected by the
    project. She states that the high-speed rail staff has been
    extremely responsive in her questions and to help develop
    options for redirecting traffic flow in order to provide
    continuous operations.
        Now, about that unique geography. As you know, this State
    is long and slender. From north to south, it is 770 miles. That
    is the equivalent of driving from Chicago to Jackson,
    Mississippi. The distance from Los Angeles to San Francisco is
    an exhausting 382 miles, so that's 6 hours' drive. The distance
    from San Diego to Sacramento is a painful 504 miles. That would
    be an 8-hour drive. Our 38 million inhabitants are split with
    60 percent living in the southern part of the State and 40
    percent in the north.
        California's citizens and businesses in the south need to
    interface regularly with its northern counterparts. Primarily,
    San Francisco is a financial center, and Sacramento as its
    government. Our transportation choices are limited: automotive,
    air, Amtrak, bus, and rail. We suffer with three of the top
    five most congested urban areas in the United States, costing
    us approximately $20 billion per year in wasted fuel and lost
    time. We need more options.
        High-speed rail has the ability to speed transportation,
    lower stress, reduce fuel costs, contribute less wear and tear
    on highways, thus reducing the cost of highway maintenance,
    less traffic accidents and deaths, plus improving air quality.
        In conclusion, we who have accepted positions of leadership
    in our valley, cannot turn our backs on those 15 percent of our
    neighbors who are standing in a very long unemployment line
    scraping to keep food on the table and a roof over their head.
    We have been given the rare opportunity to put in place a
    project that will create jobs for thousands of our friends, our
    neighbors, our small businesses, and our disabled veterans who
    need them so desperately. Thousands of jobs, billions of
    dollars of investment right here in one of America's neediest
    regions. How can we as conscientious decisionmakers do anything
    but work towards making that possibility a reality?
        In my 25 years as a citizen of this valley, I have never
    seen such a tremendous opportunity. This usually comes once in
    a lifetime, and it would be a shame if we do not make it work.
        Thank you.
        Mr. Denham. Thank you, Mr. Smith.
        [Applause.]
        Mr. Denham. Let me stop those in attendance now. We are not
    going to permit signs, cheering on either side. We are going to
    keep this a very orderly hearing so that we can actually get
    down to the facts.
        And let me start with that line of questioning. My goal of
    this hearing is twofold. First of all, I think the valley
    residents have a right to know what farms this is going to
    affect, how businesses will be disrupted, what the timeline is
    for construction. Basically, property rights and property
    owners should know what to expect in the future, whether they
    are planning for harvest or planting or getting their goods to
    market, as well as the businesses in this initial operating
    segment, initial construction segment. The businesses should
    know whether they have the opportunity to expand or are they
    going to have to relocate? Should they shut down their doors?
        And then secondly, overall Prop 1A, what was committed to
    the voters, where we are at on each of those different things
    that I brought up in my initial testimony.
        So, Mr. Richard, I would ask you to start this morning. If
    you can just give us an update on where this project was when
    you took over the position, where it is now, just a brief
    update, especially as it pertains to that timeline.
        Mr. Richard. Thank you, Mr. Chairman. First of all, with
    respect to the timeline for the project, the essential thing
    that we had to get through last year was the legislature's
    authorization for us to spend both bond money as well as the
    legislature actually had to appropriate our expenditure of the
    Federal money. So that was really the pressure point where all
    these questions came before them.
        I do want to point out on your second topic, the Prop 1A
    compliance, that just prior to that legislative vote, two
    members of the State Senate, then Senator Joseph Simitian and
    current Senator Mark DeSaulnier, asked the State legislative
    counsel to review this new business plan approach that has the
    blended system that we talked about to determine whether or not
    it complied with Prop 1A. And we do have that letter from leg
    counsel that basically said, yes, particularly the valley
    segment, because they went back and they looked at Prop 1A, and
    they said it does talk about usable segments. It does talk
    about being able to build things in phases.
        In fact, I went back and looked at the 2008 business plan,
    which was 3 years before I got here, and they actually in that
    plan laid out how the trains would go slower in the urban areas
    and faster in the middle. So a lot of these things were raised
    by the legislature prior to their actually issuing the vote in
    favor of the project.
        Fundamentally, the reason we believe this complies with
    Prop 1A is that we have never lost sight, and will not lose
    sight, of the ultimate vision here. What we are doing is we are
    building things in pieces, in stair steps. It is not unlike if
    you were looking at a long-term plan to build an interstate
    highway, you start with some segments. At some places, you go
    down to two lanes or maybe even into the town. But over time,
    those segments are filled in.
        And we are building this out in lateral segments, and then
    we are also bringing up the level of service to full high-speed
    rail service. Our plan is to meet those criteria. I do not
    disagree with Congressman Valadao that it is a little unusual
    to put engineering standards in a piece of legislation, but the
    fact of the matter is, they are there, and they are the law.
    And our plan is that we will get people from L.A. to San
    Francisco in the requisite timeframes and at the requisite
    speeds. And it will be a fully electrified system.
        So we think that it is really a question of as long as we
    are moving towards this, the leg counsel felt that this is in
    compliance with Proposition 1A. And I can go into further
    detail on that. With respect----
        Mr. Denham. Let me just stop you real quickly.
        Mr. Richard. Sure.
        Mr. Denham. The letter you are referring to, it does say
    that it is not clear. The overall San Francisco-Los Angeles
    segment, which would incorporate the blended segment compliance
    with the bond act is not clear.
        As we are moving forward, I want to make sure that the
    blended approach would also go north into my district to
    connect with ACE train, which is not part of this current plan,
    nor is it clear whether that would comply with Prop 1A.
        Mr. Richard. Mr. Chairman, well, first of all, I was
    referring to this on page 21 of 22. The construction of the
    initial 130-mile segment in the Central Valley complies with
    the bond act requirement to commence construction with the
    usable segment. It goes on from there.
        Now, you are right that there are portions of it where the
    bigger question were at the ends where we are doing the blended
    service. And there, as I read their letter, it is mainly saying
    we do not know because the Authority has told us that they will
    meet these criteria, they have got to meet them. And so they
    have to rely on our engineering judgment at this point. But
    with respect to the construction of the Central Valley portion,
    there did not seem to be any question, at least in my reading
    of the letter.
        Now, in terms of your question of where we are starting,
    the project through the Central Valley is about 130 miles from
    here in Madera down to north of Bakersfield. For environmental
    clearance purposes, we broke that into two segments: a Merced
    to Fresno environmental review and Fresno to Bakersfield. We
    have completed the Merced to Fresno review, and with the
    settlement of the litigation, there are no more questions about
    that segment. And so the plan is to start here, we believe,
    this summer, building that line from about Madera Acres, I
    think it is, down into Fresno. Mr. Chairman, we have provided
    you with specific parcel information along that.
        For the segment from Fresno to Bakersfield, we are not able
    to do that at this point because we are still in environmental
    review. We have an alignment----
        Mr. Denham. Mr. Richard, let me stop you there----
        Mr. Richard. Yes, sir.
        Mr. Denham [continuing]. Because I am out of time, and we
    are going to try to stick to the 5-minute questioning. But on
    that specific topic, just to be clear on this initial operating
    segment, Merced to Fresno, what you applied to the SDB for is
    only 29 miles of that segment, correct?
        Mr. Richard. Yes, sir, because that is the only part we
    have got environmental clearance for now. The rest of the
    clearance should come in the fall. In the valley portion for
    the Fresno to Bakersfield phase, we will complete the
    environmental work in the fall. And then our sixth construction
    packages will cover that entire 130-mile segment.
        Mr. Denham. And have you identified the route for the first
    operating segment?
        Mr. Richard. For the first segment, that 29-mile segment,
    that route is identified, and I believe we have given the
    parcel information to you.
        Mr. Denham. Yes, thank you.
        Mr. Costa?
        Mr. Costa. Thank you, Mr. Chairman. Mr. Louis Thompson,
    thank you for your thoughtful comments with regards to the GAO
    report. I suspect you have been a little bit modest here, but I
    am looking at your biography. You have been involved in major
    construction projects throughout your career, both in the
    private sector and the public sector with the Federal Railroad
    Administration and the Department of Transportation from 1978
    to 1986, and the World Bank from 1986 to 2003. So let us
    stipulate for the record that you have worked on a lot of
    infrastructure projects. And clearly your testimony and your
    peer review effort, I think, reflects that.
        You talked in your testimony about concerns on how the
    project will be funded and a dedicated source of funding for
    the project, which I and others are striving to achieve. But I
    am wondering in terms of a comparative analysis, for example, I
    have been working on the improvement of 99 from Bakersfield to
    Sacramento for my time in the State legislature, and now in
    Washington. And we have phases on Highway 99 for improvement,
    but we do not have a guaranteed source of funding. There are
    funds that are dedicated for these corridors, but it is not
    guaranteed. And so we have to build it in phases as money
    becomes available.
        198 in Supervisor Verboon's Kings County I have been
    working on for 14 years with first Senator Chuck Poochigian
    from Visalia to 99, and then from 99 to Hanford. I wish it had
    not taken so long. I had a very close cousin who was injured,
    like a lot of other people, in an accident in 1964 during one
    of those foggy January days. But that project stopped and
    started three times, and then went up on the shelf because of
    insufficient funding.
        I am wondering, Mr. Thompson, with your expertise, how
    those transportation corridor projects in terms of a guaranteed
    source of funding is different than this project or the I-5
    where we built it in phases.
        Mr. Thompson. Well, the interstate highway program, as you
    know, did have a guarantee, or at least, a hypothecated source
    of funding.
        Mr. Costa. Which is oversubscribed.
        Mr. Thompson. Which was oversubscribed.
        Mr. Costa. Still is oversubscribed.
        Mr. Thompson. The point is that the people who started out
    with the map of the highway system had a reliable source of
    money that they knew over a period of years would fund what
    they were going to do.
        It is extremely difficult to plan and manage the
    construction of a very large project like this if you do not
    know whether the money you are going to have each year is what
    you plan to have. When I built the Northeast Corridor project,
    we depended each year on an appropriation from the Congress,
    and we did not know each year what the appropriation was going
    to be.
        Mr. Costa. Well, as you know, because of my time here, the
    fact is that we are trying to get a stable source of funding
    for high speed for the Northeast Corridor and for other
    corridors around the country. That is part of the debate in the
    new transportation. And I concur that that is a goal that we
    should obtain for all of these projects. But the fact is we
    plan projects in America, whether they be transportation
    projects or other projects that are major infrastructure, and
    we do not always have the money upfront. Would you agree with
    that point?
        Mr. Thompson. Of course. We do not always have the money
    upfront. Our point was twofold. One is the money does not
    exist, and so it will have to be sought from one source or the
    other. And the second is that when you are trying to plan and
    manage a project of this magnitude, it certainly is better if
    the money is available upfront and you can rely on it. You can
    do it otherwise. There is no question about that.
        Mr. Costa. Yeah, but, I mean, I am trying to think of any
    project that I have been involved with for almost 30 years
    where the money was upfront. I mean, if that was whether you
    went forward or did not go forward--I mean, we are trying to
    fix the Delta right now. It is a $14 billion price tag. We have
    identified sources of money, but the money is not upfront.
        On the Wye project, Mr. Richard, Mr. Upton talked about the
    frustrations he had with the so-called Wye, and we have heard
    some of the comments. Can you describe how you, working with
    the property owners between Chowchilla or between Merced and
    Madera and Merced on the Wye?
        Mr. Richard. Yes, Congressman. First of all, to do that, I
    just want to indicate I am joined here by our CEO, Jeff
    Morales. Mr. Morales had the personal leadership to address
    those questions, and I am very happy that he has done an
    excellent job working not only with Mr. Upton, but also with
    the Madera and Merced Farm Bureaus.
        What he has done is come to us and suggested that certain
    potential problematic alignments be taken out. And because we
    are still in the environmental process, I cannot say what the
    ultimate outcome will be. We are now very fully informed at the
    board level that there are certain things that work and certain
    things that do not.
        Mr. Denham. Thank you, Mr. Richard.
        Mr. Valadao?
        Mr. Valadao. Thank you, Mr. Chair. It seems a lot of the
    concern is getting San Francisco and L.A. connected in a quick
    manner. I want to ask if, did the Authority take into
    consideration the cost of disruption associated with relocating
    infrastructure and splitting farm land in communities when it
    decided on the I-5 corridor, decided to rule out the I-5
    corridor? And what studies do you have to support that
    decision?
        Mr. Richard. Congressman Valadao, that decision was made
    before I came to the High-Speed Rail Authority.
        Mr. Valadao. 1996 is when it was made.
        Mr. Richard. Yes. My understanding is it goes back that
    far. The bond act also specifies that we would be connecting
    the cities through the valley. I get asked this question a lot.
    I have been asked this question repeatedly in Kings County,
    which is where I would say we are having the most difficulty
    right now with alignment choices, precisely, I will say because
    Kings County, among all the counties in the valley, has done
    probably the best job in preserving agricultural land. And so
    that makes it even more challenging to work there.
        But having said that, I am asked about this a lot. I think
    we have provided the study that was originally----
        Mr. Valadao. You provided the study that shows----
        Mr. Richard. I believe we have, but if I could,
    Congressman, I will follow up for the record on that and make
    sure that we have.
        Mr. Valadao. I appreciate that. And then the question also
    has to be asked, why did the Authority reject the offer from
    the French high-speed rail company, and supposedly one of the
    best in the world, to build a high-speed rail on the I-5 and
    assume all the risk? And where is the analysis justification
    and finding to reject that offer?
        Mr. Richard. Well, that also preceded my time, Congressman,
    but I can give you a very simple answer to it, which is that
    they, as I understand it, came in and proposed to take over the
    program. They did not bring a checkbook. And so if----
        Mr. Valadao. Neither is our side either.
        Mr. Richard. Well, no, but I am just saying.
        Mr. Valadao. There is no funding source either side of the
    aisle.
        Mr. Richard. Well, but I am just saying that there is also
    Virgin Rail, there is Japan Rail East, there are numerous
    operators around the world who would like a shot at this. And
    just handing it to one company with an unsolicited proposal
    with no checkbook, I think, would not have been in the public
    interest.
        Mr. Valadao. Well, and then with the blended approach, when
    I was in Sacramento, that vote came down, and the two members
    you specifically mentioned earlier that had concerns with it
    did end up voting against the project. And I think Joe Simitian
    actually did a wonderful job on the floor if anybody has a
    chance to listen to his speech, because he has always been a
    supporter. But he voted against the project when I was there.
        But the blended approach was brought in and brought to the
    table, so it would, in my opinion, buy off some off some of the
    votes in the larger areas with more votes--L.A. and San
    Francisco. But that blended approach was brought in to save
    money and to use existing resources.
        In the Central Valley, you are building a track alignment
    literally in some portions right next to others, a couple of
    miles away from an existing corridor. But from Bakersfield to
    L.A., there is absolutely nothing. Why not the same type of
    thought process and planning brought in for that portion of it,
    and why not enclose off a portion of the track or a portion of
    the area or the State that has absolutely nothing there? Why
    not the same blended approach? Why are we not granted the same
    luxury?
        Mr. Richard. Well, I think the answer to that question is
    that in the urban areas, the trains are never going to go 200
    miles an hour. As I said, even looking back to the 2008
    business plan where they had a fully dedicated rail line the
    entire way, they showed trains going 100 to 150 miles an hour
    in the urban areas. It is just the topography there. And in
    order to meet the standards, which, as you pointed out, were
    put in the law, the part where it is straighter and flatter is
    where the trains go faster.
        One of our problems in your community in Kings County is
    just that the BNSF line down there makes a right turn or a left
    turn heading south to the east. Trains going even 100 miles an
    hour cannot navigate that. So it puts out in a difficult
    situation.
        But I would say that the blended approach is consistent
    with what has been done around the world as you come into urban
    areas, and in the open parts of the State in between, it is a
    dedicated rack at high speed.
        Mr. Valadao. Speaking of Union Pacific and Burlington
    Northern, how is your relationship with them, and have they
    signed off on the project? I have read a few letters from them
    that sounds like they are not very supportive or excited about
    the openness of the agency.
        Mr. Richard. Well, I think our relationships with both of
    those railroads, which are crucially important, are very good.
    And I have personally, as has Mr. Morales, been involved in
    high-level discussions all the way up to the top of UP and also
    with BNSF.
        I think we are close to an agreement with them. The main
    issues that they have concerns with are indemnifications, which
    we have promised them we are going to provide, and it is in our
    budget to do so. They are also concerned about their
    operational flexibility and the ability to reach customers and
    not be blocked out by the high-speed rail line. We have had
    extensive conversations with them about that.
        BNSF told us they were a little surprised and chagrined by
    the way their letter was characterized in the press. I think
    our relations with them are good, and I think that the
    agreements are pending.
        Mr. Valadao. Thank you, Mr. Chair.
        Mr. Denham. Thank you. Mr. Richard, I am going to ask a
    number of questions very, very quickly, if you could give me
    short answers. We are spending a lot of time with you, and we
    have a number of other panelists here.
        But let me, on the land acquisition piece, first of all,
    have you acquired any land yet?
        Mr. Richard. We are in the process. I am going to ask, if I
    could, Mr. Chairman, maybe during a break in questions, I will
    get a note from Mr. Morales as to where we are. We are in that
    process where are working with people right now. We may have
    concluded some of the agreements. I am not completely sure. I
    will find out for you in just a moment.
        Mr. Denham. And still on track to break ground this summer?
        Mr. Richard. Yes, sir, with the understanding that the
    Surface Transportation Board needs to render a judgment so that
    we can go forward. But if they do it in the timeframe that they
    have used in the past, we would be on track to break ground
    this summer.
        Mr. Denham. So you have a committed route, and you are
    buying property. So you are somewhere in the process of buying
    property along that committed route.
        Mr. Richard. Right. For the first 29-mile piece that has
    been environmentally cleared, our agents are out talking with
    land owners right now and engaging them in the conversations.
    And our hope is to buy all of this and to avoid eminent domain,
    if it at all possible.
        Mr. Denham. And you have sent out letters along the 29
    miles?
        Mr. Richard. Yes.
        Mr. Denham. Have you sent letters out beyond the 29 miles?
        Mr. Richard. No, because beyond 29 miles, we are not
    allowed by law to do that until we clear the environmental
    process, which will be this fall.
        Mr. Denham. And if you cannot come to an agreement with
    landowners, you are prepared to do it by eminent domain, or
    what is that process?
        Mr. Richard. We will follow the law. That process, as I
    understand--I am not a practicing lawyer--but is that there is
    a process where if there is no agreement, we go to to court to
    get an order for the take, and then people argue about the
    price. And I think it is fairly standard with what happens in
    other situations, whether it is highways or other types of
    developments.
        Mr. Denham. Thank you. Mr. Upton, it sounds like the
    routing of the proposed high-speed rail line through your area
    has been confusing, at least. You have gone through several
    different renditions of what this route could be. How would you
    describe your current relationship with the High-Speed Rail
    Authority after those objections?
        Mr. Upton. Our current relationship is it is the best it
    has ever been, OK? Early on, the first couple of years, we
    caught them lying to us several times, and that does not bode
    well for a relationship. So with the addition of the new people
    and the Merced to San Jose group and Ms. Diana Gomez, it has
    been a more refreshing approach with it. But the bottom line is
    at the end of the day, we have to see routes that are
    compatible with our existing infrastructure and supported by
    the community.
        Mr. Denham. And as you have testified, they are listening
    much better than they ever have been before. Do you have
    current suggestions for them on how we move forward? With other
    landowners as well.
        Mr. Upton. Well, I think the process of having the open
    houses and having the comment cards and that kind of thing is
    good if it works. One of the frustrating things about this is I
    cannot tell you how many comment cards and how many open
    houses, how many times we have done this. So it is a little bit
    frustrating when they would come back and say, well, we want to
    know what you think and how you feel about it. They already
    know that, OK? So maybe they just do not like what they are
    hearing.
        But it seems like this group has taken a more responsible
    approach with a little bit of integrity. And I hope I am not
    speaking out of turn here, but I hope that it results in some
    actual routes that reflect the community's wishes and is
    compatible with our infrastructure.
        Mr. Denham. Thank you. And, Mr. Richard, you have provided
    the committee with the parcel numbers along that initial
    segment. Would you also be willing, as Mr. Upton and other
    landowners, before reaching into eminent domain, adjusting
    parcel lines if you have the ability to adjust which parcels
    may make slight changes along the same route?
        Mr. Richard. I am going to need to check with our folks
    about that. I would like to be as flexible as we can be. We
    have to stay within the bounds of the State and Federal
    environmental process. There may be some amount of flexibility.
    If we deviate from that too much, I think we run into problems.
        But let me make this commitment to you, Mr. Chairman. We
    are going to do everything we can to work with landowners in a
    positive, productive way. There may be some people who simply
    do not want to do it. That is fine. But I know that you know
    our vice chairman, Tom Richards. He is from the valley, a very
    decent man. He and I have talked about this, how we want to
    approach people to make sure that they are fairly compensated
    for any land that we offer.
        We will continue to work with your office on this and keep
    you apprised of what we are doing with these landowners,
    because I know that you have a very strong interest in this.
        Mr. Denham. Thank you. Mr. Costa.
        Mr. Costa. Thank you, Mr. Chairman. Mr. Thompson, let me
    just indicate that your earlier comment about part of the
    purpose of the peer review is to strengthen the project is to
    be commended. And that continued advice will be much
    appreciated.
        Mr. Smith, you talked about the economic impacts to our
    valley and to our State with this major infrastructure project.
    There has been a lot of talk about different jobs numbers that
    will be created with the first 138 miles in the two phases. Is
    20,000 jobs per every billion dollars spent, do you think that
    is accurate?
        Mr. Smith. Well, I am not an expertise in that area. Mr.
    Thompson might have some input in that because he and I talked
    about that issue just a little bit before the hearing started.
    But from all indications, whether it is 20, whether it is 19,
    whether you do it in hours or jobs, the impact is going to be
    enormous into our valley.
        Mr. Costa. You talked about your time here in the valley 20
    plus years, and you and I have interacted over most of that
    time, I believe. One of the constant complaints, I think, that
    we get about living here in our valley, and I am third
    generation, is that we oftentimes when it comes to investing in
    major infrastructure projects are funding formulas for
    transportation or funding formulas for schools, go down the
    list, that we get short-changed from the Bay area and southern
    California.
        Now all of a sudden, we have the opportunity to be the key
    segment in beginning this enormous infrastructure project. That
    is kind of different, is it not?
        Mr. Smith. Well, I think it is a game changer. I mean, I
    really do believe that going forward in the next 20 years, if
    this project continues on and is done, and you can argue about
    how it is done and you can nibble around the edges about
    whether it is wrong, right, or indifferent. But if the project
    is successful, I think it is going to completely change the
    complexion of the Central Valley.
        As the urban areas become more congested, as the cost of
    living in those areas for businesses as well as for residents
    continue to sort of strangle those people on the coast and
    those larger cities, they are going to be looking for places to
    move to, their businesses as well as their homes. And they are
    going to have to look at areas like the Central Valley. And
    having a great efficient transportation structure, I think, is
    paramount to make that happen.
        Mr. Costa. An interconnected transportation structure.
        Mr. Richard, some of the most vocal critics, as you know,
    have been landowners and farmers. And I have been very
    concerned about that in every conversation you and I have ever
    had since you took on this responsibility. It comes from my
    concerns about maintaining our valley's number one economy and
    doing what we continue to do best.
        Can you tell me what specific steps you and board members
    and your staff have taken to try to really sit down in the
    affect corridor routes to try to meet with farmers and
    landowners?
        Mr. Richard. Well, Congressman, I am a person who lives in
    the Bay area. Over the last 18 months, I have personally spent
    quite a bit of time in the valley in, I think, all the counties
    up and down the alignment. We have met with individual
    landowners. We have also met with representatives of
    agricultural growing operations. And, you know, I had a chance
    to listen to them. As I like to say, I have stood in Sam
    Gaspar's milking barn in Hanford. I have been on people's dirt
    where they are growing organic cherries and almonds, pistachios
    and so forth. And so I have seen some of this in ways that I,
    frankly, have never understood it before as a northern
    Californian. And I think it is critical for us to preserve the
    valley and the agricultural resources.
        We have made alignment changes as we were looking at the
    Merced to Fresno Corridor that protected a major food processor
    there. We are currently in discussions in the Wasco-Shafter
    area with large growers there. It is not like they particularly
    want to wake up with high-speed rail coming through, but they
    have got one alignment that works for them and one alignment
    that very definitely does not. We are working with them to try
    to work on those issues. Kings County, we will be having
    another conversation next week with Kings County leadership.
        We have spent a lot of time--myself, Mr. Morales, Ms.
    Gomez, and others--certainly trying to do a better job of
    reaching out to the agricultural sector and listening to them.
    And we are making alignment changes as a result to try to
    minimize the impact on agriculture.
        I also want to say that the settlement that we entered into
    with Ms. Raudabaugh's organization, I think, is going to form a
    great template for agricultural protection going forward,
    particularly with the unique problem of going across farms and
    orchards at an angle and leaving remainder properties that
    would otherwise be----
        Mr. Costa. Stranded properties in terms of diagonal
    corridor.
        Mr. Richard. Right. And so the agreement that she hammered
    out that we have agreed to, I think, is going to be much better
    for people in those situations.
        Mr. Costa. Thank you.
        Mr. Denham. Mr. Valadao?
        Mr. Valadao. Thank you, Mr. Chair. Mr. Verboon, when was
    the last time you met with the High-Speed Rail Authority? Have
    you reached out, and are you meeting with them any time soon?
        Mr. Verboon. The last official meeting we had with the
    High-Speed Rail Authority was June 10th, 2011, and we left them
    with an idea to speed up the dairy permitting process. And we
    have not heard from them since. They have been vacant in our
    area for some time.
        We have left every Tuesday open since that day and have not
    heard from them until about 10 days ago, got a call from Diana
    Gomez, asked to meet. And we set up a coordinating meeting in
    our chambers on June 4th. So they have been absent for 11
    months.
        Mr. Valadao. So June 4th, that is next week, right?
        Mr. Verboon. Yeah.
        Mr. Valadao. All right. And I apologize if I butcher your
    name. I think Anja is probably better.
        Ms. Raudabaugh. That is fine. You can say that.
        Mr. Valadao. I understand some of your members are
    concerned about the Authority's use of eminent domain. How will
    this affect your Farm Bureau members, and how long does the
    litigation process take, if it comes to that?
        Ms. Raudabaugh. Well, I understand we have also deployed an
    eminent domain attorney. But I understand that standard eminent
    domain is at least a delay of 4 months. And unfortunately or
    fortunately for the condemnee, it actually works out really
    well if you are a victim of eminent domain to file and
    essentially become a plaintiff in an eminent domain case. So it
    almost removes the pro or anti project position and makes it
    more of a financial decision.
        And that is actually something that, for what it is worth,
    we have accepted in Madera County. We are very concerned,
    though, that the ultimate funding that has been estimated for
    project acquisition or parcel acquisition is actually about
    four or five times more, which is usually what is yielded out
    of an eminent domain case.
        So again, it is a one-way ticket. Not to use too much of a
    railroad pun, but when you buy ag land for this purpose, you
    cannot go back. So we are really worried that even the offers
    are going to damage our operations to such a point that the
    ultimate endowment accounts cannot be funded with the proper
    level of a fair market starting price before you go into
    evaluation hearing.
        Does that make sense?
        Mr. Valadao. Yeah. Have any of your members actually been
    in conversations with the High-Speed Rail Authority about land
    acquisition?
        Ms. Raudabaugh. Oh, yes.
        Mr. Valadao. And are they starting to see some prices?
        Ms. Raudabaugh. No prices yet. In fact, that is something
    that Chairman Richard alluded to. There have been several
    appraisals that I know of. I know there has been a debate about
    property access throughout this process, which, again, I
    understand. But some of the meat and potatoes of the appraisal
    process is actually just starting to formulate because, again,
    the lawsuit was just settled a month ago.
        Mr. Valadao. And have you seen an actual finalized
    alignment? Do the farmers know this is going through my
    property, exactly where it is going, and how it is going to
    affect them?
        Ms. Raudabaugh. Generally from Avenue 17, which is just to
    the north of the city of Madera, to the San Joaquin River, yes.
        Mr. Valadao. OK.
        Ms. Raudabaugh. Within 200 feet or so.
        Mr. Valadao. Within 200 feet? And what about Kings County,
    Mr. Verboon? Sorry.
        Mr. Verboon. We do not have an alignment as of yet. We have
    two proposed alignments, but there is no definite alignment in
    our county. But we kind of have an idea. There are some
    markings on the roads, but for the reason being that the High-
    Speed Rail Authority has been absent from our county, it is
    hard to know exactly where it is at.
        We had a meeting about a month ago with two engineers and
    Diana Gomez, and they had brought a map with a west side
    alternative. And we asked them why they chose the west side
    over the east side, and they said, well, it affected less
    dairies. It only affected one dairy. And I pointed out five
    dairies on one page. And I gave them this information, and
    neither one decided to pick up a pen or a notepad and write
    down the information that I was giving them. So I felt they
    were incompetent at that time when you give them information
    they could use and they chose not to.
        Mr. Valadao. All right, thank you. Mr. Richard, page 4 of
    your STB filing states that phase one is to be constructed in
    stages dependent upon funding availability. Would you build the
    first section from Fresno to Bakersfield if you knew there was
    never going to be any additional funding?
        Mr. Richard. Well, I do not----
        Mr. Valadao. It is a yes or no question.
        Mr. Richard. Yes. Yes, we would.
        Mr. Valadao. OK.
        Mr. Richard. And I can explain that if you would like, but
    the answer is yes.
        Mr. Valadao. Really, really quickly because I am running
    out of time here.
        Mr. Richard. The reason is because we do believe there will
    be funding down the road, and secondly, because we believe what
    we are building will have----
        Mr. Valadao. Well then, your answer--I asked if you believe
    there is never going to be. So you do believe----
        Mr. Richard. Right. The answer to your question is, yes,
    sir.
        Mr. Valadao. OK. So if never connected to anything else, do
    you still consider this good transportation policy? I mean,
    because I personally do not believe it is actually going to get
    any more money.
        Mr. Richard. But, Congressman, it is still connected to
    something else, and that is the point. And that is why we do
    believe that it is a worthwhile first step.
        Mr. Valadao. There is still no money to fund anything
    connecting the southern tip of this with any of the population
    south of Bakersfield--Palmdale, L.A., nothing.
        Mr. Richard. Very quickly, even if that were true, it is
    still going to be connected to the Amtrak system here, which
    will have value.
        Mr. Valadao. There is Amtrak between L.A. and Bakersfield.
    There is no connecting rail. They ride a bus.
        Mr. Richard. Yes, sir. I would like to answer that
    question. I understand your time has expired, but I will follow
    the lead.
        Mr. Denham. Actually let me start with that same line. I
    have got a few questions that are similar, but short answers.
    So you do plan on operating the trains over the initial
    construction segment of Fresno to Bakersfield.
        Mr. Richard. We plan to operate trains. They will not be
    the full high-speed rail trains.
        Mr. Denham. They will not be electrified.
        Mr. Richard. Not at the beginning, no.
        Mr. Denham. And so initially, it will be Amtrak. Amtrak
    would connect with the north part of the segment, so basically
    where Amtrak currently operates, it would connect in with this
    line at some point in Merced?
        Mr. Richard. Near Madera I think. That is maybe Merced. We
    come within 102 feet of the Amtrak alignment. And basically
    what that would do is it would knock at least an hour, perhaps
    an hour 15 minutes, off the transvalley trip right now on the
    San Joaquin.
        Mr. Denham. So where ACE train runs over to Amtrak.
        Mr. Richard. Right.
        Mr. Denham. In the short term, at least you would be able
    to get from San Francisco to Bakersfield.
        Mr. Richard. Yes. And, Mr. Chairman, the key here is that,
    as you know, when freight railroads and passenger rail operate
    on the same line, Federal law limits that speed to 79 miles an
    hour. But when there is a dedicated line, the trains can go as
    fast as they can go. And so that means that once we build our
    track, even if it is not electrified, the existing Amtrak
    service will be substantially improved because even their
    existing locomotives could probably hit 120 or something like
    that. I would look at Lou Thompson.
        But it will enable, at the very first step, better trips up
    and down the valley on the Amtrak line. And then we have the
    next step line to get to Palmdale.
        Mr. Denham. So just to be clear, from Madera to Bakersfield
    would be that initial segment, which is going to be dedicated
    track for Amtrak specific, which would at least be able to get
    higher speeds from Madera to Bakersfield at a $6 billion cost.
        Mr. Richard. Precisely correct. That is right.
        Mr. Denham. Thank you. Mr. Thompson, I want to talk a
    little bit about the peer reviews, the group's last review of
    the 2012 that raised concerns with cost ridership. Ridership is
    what this whole thing is predicated on. Obviously we are not
    going to have any private investor if they cannot substantiate
    these ridership numbers. Can you explain the concerns that you
    have over ridership?
        Mr. Thompson. Well, there were a number of concerns
    expressed about the ridership demand forecasting. The main one
    that we expressed was not that it was either right or wrong,
    but that people should understand that when you are making a
    forecast for what we called the green field project as opposed
    to a brown field project, you inherently have a lot more range
    of----
        Mr. Costa. For the audience, you might want to explain the
    distinction between brown and green.
        Mr. Thompson. OK. A green field is a brand new project
    where no service exists now, and we have nothing on which to
    base the demand forecast except questions that you ask people
    what would you do if there were a service. Almost every high-
    speed rail project in the world has been a brown field project
    in which there was an existing service, and all you were doing
    was improving it. It is a very different forecasting situation.
    And the confidence that you have in the results is much greater
    when all you are doing is improving an existing service rather
    than building something entirely new.
        Mr. Denham. The primary ridership numbers are predicated
    upon pulling people from air travel to train travel, correct?
        Mr. Thompson. Actually they are more predicated on pulling
    people from the highway. Far more of the ridership comes from
    the highway than comes from the air.
        Mr. Denham. So then the ridership numbers that you are
    looking at would be the highway travel that is currently up and
    down Highway 99 in the valley?
        Mr. Thompson. No. Some relatively small portion of that
    travel. The imbalance between highway riders and train riders
    is very great, and all you take is a percentage of the highway
    travel, and that is what the railway ridership would be made of
    predominantly. Of course it is significant for airways as well.
        Mr. Denham. So how do your ridership numbers differ from
    what the California High-Speed Rail Authority's numbers are
    projecting?
        Mr. Thompson. Well, I am not sure they differ. What they
    have done as they have refined their models is, generally
    speaking, reduced their demand forecast. So as we stand today,
    the demand forecasts are lower than they have been in the past.
        But we never said they were right or wrong. What we said
    was be aware that there is a fairly wide range of outcome from
    these, and just because it says 28 does not mean it cannot be
    14 or 42.
        Mr. Denham. We do not have any private investors here to
    testify today, but I will tell you I have talked to some of the
    largest rail companies throughout the world, as well as some of
    the national providers of trains. None have seen anything that
    would encourage them to invest at this point. What should give
    us confidence in these ridership numbers that we will have a
    private investor in the future?
        Mr. Thompson. First of all, actual experience. If they
    build the IOS and they actually will have ridership, and you
    can see that does give them confidence. But the second thing is
    that the role of the private sector in this project and, in
    fact, in most high-speed rail projects, has not been to pay
    back the investment in the infrastructure. It has been to
    provide the rolling stock and to operate the system, and to use
    the operating revenues from that to cover their costs and, in
    some cases, generate a contribution to infrastructure. The role
    of the private sector will be wholly dependent on how much of
    the infrastructure you want them to pay back.
        Mr. Denham. And my time has expired. Let me just conclude
    with, of the $68.4 billion that is being proposed, $55 billion
    of that, if the Federal Government and State government were to
    be able to come up with that $55 billion, which I think is a
    huge if at this point, but if it were, are the ridership
    numbers able to substantiate a $13 billion investment from
    private investors?
        Mr. Thompson. I believe that the ridership numbers will be
    sufficient to cover the cost of the rolling stock and cover the
    operating costs of the system, including the maintenance. I
    think what is in question is how much of a contribution above
    that can be made to the infrastructure. And I really cannot
    give you a number on that.
        Mr. Denham. But the investment that you are talking about
    is not the $13 billion that is currently being proposed.
        Mr. Thompson. That will wholly be dependent on numbers that
    we will not know for years.
        Mr. Denham. Mr. Richard, I would ask you to follow up on
    that as I come back around for this last line of questioning.
        Mr. Costa?
        Mr. Costa. Yeah, thank you very much. Mr. Thompson, I think
    in your comments, it quite clearly points out the challenges we
    face, and that is that unlike in Europe and Asia where they
    have made a commitment to it over the last 40 years, there is
    no book that has been written on how you build high-speed rail
    in America. We have had a number of different efforts that have
    taken place with the Northeast Corridor. We have had other
    proposals that have been out there. But really we are writing
    that book today here in California, I would submit.
        And so, there are a lot of important questions that have
    yet to be answered. But if we decide, like we have decided in
    America for 238 years in our Nation's history, that we are
    going to do something, we make a commitment, we put America's
    ingenuity to that using the best of our private sector as well
    as the private sector public partnership, we have been
    enormously successful for transportation projects, for water
    projects.
        And I think the peer review area is, I mean, where these
    pieces fit into place. It is hard, I think, to take the
    rhetorical question that was just asked to talk about investors
    from Europe or Japan or anywhere else, including here in the
    United States, if, in fact, Congress is still debating about
    taking money away from the project. I mean, that does not leave
    a lot of confidence for potential investors. So, I think that
    we have to be mindful of that. I do not know if you care to
    comment.
        Mr. Thompson. Well, I have absolutely no doubt that we can
    build this system if we want to. There is no question about
    that. I also have no doubt that there are public benefits from
    this system that you can never capture from the private
    sector--pollution, safety, congestion, a number of things. The
    reasons why the European countries built their systems were not
    because they wanted to make money. They built them because they
    had public benefits as well as the private benefits to be----
        Mr. Costa. Plus the public-private partnership.
        Mr. Thompson. Absolutely. And the trick is to get the
    partners in the right roles and to get the risks in the right
    place so that each of them----
        Mr. Costa. And that is why your peer review is so important
    as we try to make sure we get this right.
        Mr. Thompson. It is why we have spent a lot of time on the
    business model issue, for example, because that will be the
    name of the game in the future.
        Mr. Costa. Right. And to that point, Mr. Verboon, you
    commented upon whether or not Prop 1A is being appropriately
    followed, and Mr. Richards commented upon his view that it is.
    And I guess we will have a judge that will opine on this later
    or soon as to whether or not Prop A is being followed.
        But let me give you a nonlawyer's perspective because I am
    just a farm kid from Kearney Park. I was the original author of
    Prop 1A, and I could tell you that it follows the intent,
    having worked on this effort for almost 20 years in the 1990s
    when we put together the first preliminary proposal to see
    whether or not high-speed rail, given the same applications of
    other parts of the world, could work here, and then coming up
    with creating the Authority. And I was very upset that the
    Authority did not work out as I had initially hoped. I think it
    has gotten better, as I said, in the last 12 months.
        But your frustrations are valid. But I will tell you it was
    always intended to be an interconnected, intermodal, blended
    transportation system. It is the only way it works. It is the
    way it has worked in Europe. It is the way it has worked in
    Asia. You got to connect the existing high-speed state-of-the-
    art. These will be 220-mile-an-hour trains in corridors to the
    slower trains. That is what they do in Europe. That is what
    they do in Asia.
        You have got to connect it so you have access to the
    airports. That is the interconnectivity, so that you can go
    from point A to point B to point C, whether it is for business
    or for travel purposes, with a minimum amount of difficulty.
        And so, lawyers, I guess, will opine. We had leg counsel
    opine last year. We will see what the judge determines earlier
    this year. But I think on that point as a nonlawyer, at least
    as the person that created the initial legislation, in my
    opinion, it complies. And we can agree to disagree because that
    is the wonderful part about this country. That is not a
    question. That is not a question. I am sorry.
        Mr. Richard, you know, there is a lot of frustration here,
    and I think you have done your best to try to respond to a lot
    of aspects of it. In your written testimony, you talk about the
    new business plan envisioned to modernize the entire State's
    transportation system. And it is complicated because part of
    the rail system carries both passengers and freights. What is
    the largest rail passenger system in the Nation in terms of
    ridership? What is the largest commitment that we have in the
    Nation in terms of investment for passenger ridership?
        Mr. Richard. Well, that would be Amtrak.
        Mr. Costa. And it is in California that we lead the Nation.
        Mr. Richard. Well, we have----
        Mr. Costa. The second most busiest corridor, the third most
    busiest corridor, and the----
        Mr. Richard. Of the top five busiest Amtrak corridors, the
    busiest is in the Northeast Corridor, but three of the next
    four are in California: the Capital Corridor, the San Joaquin,
    and the Los Angeles-San Diego-Lausanne Corridor.
        Mr. Costa. Thank you.
        Mr. Denham. Mr. Valadao.
        Mr. Valadao. Thank you. Mr. Richard, in every country they
    do a cost benefit analysis for individual segments that lead to
    a complete project. Have you done an independent risk analysis
    for this first construction segment?
        Mr. Richard. I want to be careful how I answer this
    question because I believe we have, but I want to make sure
    that it is consistent with what you may have in mind. But what
    I would say, Mr. Valadao, is that we have been very clear in
    looking at building this project in segments that we want each
    segment to have the funding before we start, and we want it to
    have independent utility.
        The biggest risk is the first segment. There is no question
    about it.
        Mr. Valadao. The GAO states that the Authority did not
    conduct a risk and uncertainty analysis, and that was on page
    19 of their report. And when you say that this first segment is
    the riskiest in the starting point, it sounds like it is a
    pretty serious issue that we should be doing a risk analysis
    when so much taxpayer money is on the line.
        In a recent court litigation concerning the Merced to
    Fresno AIR, the Authority claimed that amount of estimated cost
    stated in various master agreements with local agencies
    totaling $1.5 billion were somehow double counted, and that
    some of these costs were actually part of the estimated $1.2 to
    $1.8 billion cost for constructing high-speed DHST project
    infrastructure for the 29-mile construction package, CP1. Can
    you explain which of the costs in the master agreement task
    order were double counted?
        Mr. Richard. I am sorry, I do not have that information
    here. We will absolutely provide it for the record.
        Mr. Valadao. OK. Can you confirm the total cost of
    constructing CP1, including all costs associated with the work
    outlined in the various master agreements with local agencies,
    the cost of ROW project acquisition, and the cost of
    mitigation?
        Mr. Richard. The construction package one that the staff is
    going to bring to the board next is for $985 million. I want to
    make sure in answering that that way that I have included all
    of the costs that you laid out. I will, again, confirm that
    with the staff, and we will follow up on the record.
        Mr. Valadao. Thank you. What do you mean as the people also
    get for this investment? Do we get a high-speed rail service?
    Do we even get an electrified system? And it looks like we are
    getting the first construction, and earth is getting going. But
    do we actually get an electrified track, or do we have
    permission, or does the environmental impact report allow us to
    use diesel Amtrak trains on the existing rail, or the new rail
    that is going to be constructed right alongside of the
    existing?
        Mr. Richard. Yes.
        Mr. Valadao. It does? Does Kings County lose the Corcoran
    and Hanford station, or are we able to keep those?
        Mr. Richard. We do not have any plans to stop Amtrak
    service--it is not ours to stop--between Corcoran, Wasco, and--
    --
        Mr. Valadao. So we will continue to have a Wasco station as
    well?
        Mr. Richard. Yes. We are not closing down the station.
        Mr. Valadao. What happens when Amtrak moves, because that
    is part of the plan for the first segment is to move the Amtrak
    trains over to the new rail line, and the new rail line does
    not go through or have any plans for stations there.
        Mr. Richard. As I have explained numerous times in Kings
    County, we support the continuation of rail service on those
    smaller stations.
        Mr. Valadao. So we are going to have two Amtrak trains
    running literally a couple of miles away from each other up and
    down.
        Mr. Richard. We could have express trains as well as local
    trains. That is very common around the world. But we are not
    the ones in charge of that. What we are saying is we are
    creating a facility that Amtrak can use to improve its service.
    It does not mean we want to orphan these smaller stations. And,
    in fact, we do not, and I have committed to the people in Kings
    County and Kern County that we want to work with them and our
    State transportation authority to make sure that rail service
    continues there.
        Mr. Valadao. All right, thank you.
        Mr. Denham. This is kind of off the point a little bit, but
    pertaining to this. We are doing the passenger reauthorization
    bill. Is there anything in the new area with Amtrak that would
    be involved in the new passenger reauthorization bill?
        Mr. Richard. I think we want to work with your office and
    Amtrak on that. We have a very good relationship with Amtrak.
    In fact, our new chief engineer was the chief engineer of
    Amtrak. Mr. Morales announced an agreement in Washington a few
    months ago with Amtrak to coordinate on the procurement of
    high-speed train vehicles because they are looking at things
    for the Northeast. You know, I think PRIIA gives us a lot of
    opportunities.
        Mr. Denham. We would ask you to work with us. That is
    obviously a huge goal of this committee is to get the passenger
    reauthorization bill done this fall. And if there is any
    concerns with that, we just want to be upfront in working with
    you.
        Mr. Richard. We appreciate your leadership on that bill,
    Mr. Chairman, and we thank you for that invitation. We will
    take it up.
        Mr. Denham. Thank you. And I have a couple of just quick
    followup questions. We do want to finish by noon, but I will
    allow my colleagues, if either have additional questions. We
    can either submit them for the record to be answered at a later
    date at the conclusion of this hearing, or we can continue on
    as you see fit.
        So let me ask my questions, and if you would like to----
        Mr. Costa. I will make it easy, Mr. Chairman. At this
    point, all the questions that I have highlighted, I think I
    have asked. And I will submit any further questions for the
    record.
        Mr. Denham. Thank you. And, Mr. Valadao, likewise?
        Mr. Valadao. I will as well.
        Mr. Denham. Thank you. So just to follow up on Mr.
    Thompson's point, the $68.4 or $68.5 billion, does that include
    rolling stock?
        Mr. Richard. No, it does not.
        Mr. Denham. So the----
        Mr. Richard. Wait a second, excuse me.
        Voice. It does.
        Mr. Richard. It does?
        Voice. Yes.
        Mr. Denham. So the $13 billion----
        Mr. Richard. Excuse me.
        Mr. Denham [continuing]. That a private investor would pay
    for does include rolling stock as well.
        Mr. Richard. Yes. They would put up the rolling stock and
    collect the--and I am sorry, I misspoke. The project total is
    the project total, which includes rolling stock. So they would
    put up money.
        Mr. Chairman, if I could just take a moment. This approach
    that we have is not like when I was on BART where we had public
    employees operating the trains, maintaining the trains. Our
    fundamental approach here is that we make a public investment.
    The private sector comes in and bids for the rights to operate
    that. They will put up the rolling stock. They will collect the
    fares. They will do the operations and maintenance.
        Mr. Denham. With no ongoing subsidy.
        Mr. Richard. With no ongoing subsidy. That is not only the
    law, but that is also what we think is appropriate, and it is
    consistent with what has happened around the world. We do not
    see any need for an ongoing subsidy. In fact, our hope is that
    we will be like the line in France that just paid back hundreds
    of millions of euros to help pay off some of the existing cost
    of the capital of the system. We cannot promise you that at
    this point, but that is what we believe will happen.
        Mr. Denham. Thank you. And of the $13.3 billion or $13.1
    billion that would be the private investment, what percentage
    of that is rolling stock versus actual asset infrastructure?
        Mr. Richard. I do not know the answer to that question. I
    think Mr. Thompson is right. I want to point out for this
    committee that we are refining our models in ways suggested by
    his group as well as by the GAO. And I think the GAO report has
    become a little bit like astrology: everybody gets out of it
    what they want.
        I am looking at their quote that said, you know, our
    funding, which relies on both public and private sources, faces
    uncertainty. Yes, that is true. The Authority's plan recognizes
    the uncertainty of the current funding environment so is
    building the project in phases, and has identified an
    alternative funding source. And they said that that is a
    reasonable approach to doing this.
        Mr. Denham. Thank you. And just clarifying for the record,
    I have talked to the French. They are investing in rail all
    over the world, and they are not doing it just because they
    think that is great for air quality or environmental quality.
    They are doing it because they are doing it in places where
    they can turn a profit for France----
        Mr. Richard. Sure.
        Mr. Denham [continuing]. And for their company. Let me just
    close. The one thing that we did not touch on today, which is
    an important part of this, you have entered into a contract
    with Tutor Perini, the construction bid on this. We have a
    number of questions pertaining to that bid process that we will
    submit in writing.
        But the one thing that did come up in chapter 2 of the
    business plan, you explained that the private sector will be
    retained for design build contracts. And the benefits of doing
    so are to eliminate the risk, especially cost overruns, which
    are transferred to the private sector.
        Mr. Richard. Right.
        Mr. Denham. So can you promise us today that because we
    went to a construction package one, the citizens of California
    will not have to pay anything in this initial project because
    it is on the private investor to have 100 percent of that cost
    controlled?
        Mr. Richard. What I can tell you, Mr. Chairman, is that
    absolutely using design build will minimize any risk of
    overruns. I am not going to sit here and promise that there
    will not be because there might be something that happens.
        I will tell you that I worked, when I was on BART, with
    this contractor. They built the BART to San Francisco Airport
    project. They also built the new airport terminal. Both were
    under design builds. Our experience with them under a design
    build contract was that it was completed on time and within our
    project budget.
        Mr. Denham. Are the cost overruns because of change orders
    or are they cost overruns because a private industry did not
    manage the project?
        Mr. Richard. Well, in one case we had somebody run over an
    endangered snake, which shut us down for a couple of weeks.
    But, I mean, generally what happens is because the--yes, I
    know.
        Mr. Denham. We have a lot of ferry shrimp here in the
    valley. Those are hard to see.
        [Laughter.]
        Mr. Richard. I get it. But generally what happens, normally
    what is the normal cause of overruns is that somebody is handed
    a design, and then is able to say, oh, well, this design does
    not work, and they come in and say, now we are hitting you with
    a change order.
        Under a design build contract, they are handed about 30
    percent of the design. They complete the design and build to
    their own design. It makes it very hard for them to come in and
    say the two pieces did not fit here when they are the ones
    having to complete the design.
        I agree with Lou Thompson. There are risks in design build
    contracts. We need to stay on top of those risks. But in
    general, we think it is the best protection that the public has
    against overruns.
        Mr. Denham. So the $983 million that is set aside for
    construction package one, if there are overruns, is there a
    contingency? Is there a 10-percent contingency?
        Mr. Richard. First of all, if there are overruns, they are
    on the contractor, unless there is something that we did. And
    we do not think that that is going to be the case.
        Secondly, in terms of our contingency, what it would
    probably mean is that for the next segment from Fresno down to
    Bakersfield, we would have to build fewer miles of track. That
    is the way we are sort of handling contingencies here as
    opposed to setting aside a dollar amount. But we feel very good
    about these numbers. GAO felt pretty good about our forecasting
    methodology.
        Mr. Denham. Thank you. And the final question, this
    question has come up a lot in our conference. When we go back
    to Washington, DC, after the August break, we are going to be
    working on appropriations bills, funding bills, as well as what
    came up last year under the transportation bill. If there is a
    $38 billion shortfall, or there is a shortfall of any magnitude
    that the Federal Government is going to have to come up with
    money for, the question that my colleagues have come back to me
    and asked for the other 49 States that will contribute to the
    State of California, why would not the California voters demand
    that this goes back to the ballot? If it has gone from a $33
    billion project to a $68 billion or whatever the final number
    may be, at a certain point, do you feel the need to go back to
    voters?
        Mr. Richard. I think if you look at Proposition 1A, Mr.
    Chairman, voters' protection, I think, as the first line of
    defense was that the proposition by its terms required the
    legislature to appropriate the money. And these questions were
    before the legislature last year.
        I would just say, and I know there are a lot of questions
    here, and I am sure you want a lot of them answered. I would
    like the opportunity to do it. But, Mr. Chairman, we are not
    going to be coming to you in your role on this committee or to
    your colleagues looking for $50 billion of Federal
    appropriations.
        We are going to build this in pieces. The next piece after
    the valley is to jump over the Tehachapis to get to Palmdale.
    It is about $10 billion. We have about half that money right
    now from the bonds that are left. We think we can get there.
    That will be an incredibly useful project and will answer Mr.
    Valadao's concerns about getting us to the gates of L.A.
        With each step, we will come to you where we are asking for
    Federal support, having looked at the other things that we can
    do to put the dollars together. And we have laid out some of
    those in our testimony. But that is now we feel we can build
    this in piece in a careful way, and it is not going to depend
    on those levels of Federal dollars.
        And I think there is a whole lot of other private sector
    dollars from concessions and other things that we have just
    started to look at. The High-Speed Rail Authority in the past
    had never looked at those things. As I said, in Japan, 30
    percent of their revenues come from real estate around the
    stations, the opportunities looking at Fresno, Bakersfield,
    other places, Palmdale. That is why some of the mayors there
    are very excited in Palmdale and Fresno. So we think that there
    are a number of different things.
        We are going to do our job to put as many of those pieces
    together before we come to you, Mr. Chairman, and ask you for
    Federal dollars. And when we do, we may look for things in new
    forms that are not just the old grants, earmarked grants, that
    your Congress has basically moved away from, but areas where we
    can work together to accelerate and focus private sector
    investment.
        And I know that that is your interest, and, Mr. Chairman,
    we are committed to that, too. We think that there are some
    things that could be done in PRIIA or other places that can get
    the private sector involved earlier.
        So it is a complex topic. There are risks with this
    program, but there are great benefits. Our job is to manage
    those risks. We are getting lots of advice as to how to do
    that. We really believe we can build this project for the
    benefit of Californians and not leave people hanging out to dry
    with something that does not have value. And I appreciate you
    letting me make that statement right at the end.
        Mr. Costa. Mr. Chairman, would you yield on that point? I
    appreciate all the time and effort, Congressman Denham, that
    you provided in this effort, both when you were in Sacramento
    and now. I would just like to opine that I think the projects
    that we build that we invest in California, or anywhere else in
    the country, will, at certain times, be more popular or less
    popular. But I think it is the legislature's responsibility not
    only to determine whether or not they want to issue the bonds
    that the voters approved, but also they have, as was stated by
    Mr. Richards, the approval by the Federal funding that we have
    achieved.
        I am a big supporter of Temperance Flat, a reservoir
    proposal that is up here. I hope that we will have a ballot
    measure next year that will provide funding for Temperance
    Flat. It is currently advertised at $2\1/2\ billion. I do not
    know if that will be the ultimate cost.
        I would hate to see a precedent set where we pass a water
    bond measure next year, we commit to build water storage
    projects, and then it becomes unpopular for whatever various
    reasons. I remember the Dinkey Creek project, the PG&E cost
    overrun, and became very unpopular, and that we did not
    complete it. It is complete today. And I hope we will be able
    to get the funding for Temperance Flat, and that we will
    complete it.
        But, gee, if it became unpopular 4 years from now or 6
    years from now, and we decided, well, gee, maybe we ought to go
    back to the voters again, we all are so frustrated. It is so
    hard to get things done. And let us work together. Let us work
    through this so that we can get things done, whether it be for
    water or transportation.
        Thank you very much, Mr. Chairman.
        Mr. Denham. Thank you, Mr. Costa. And as always, we look
    forward to working in a bipartisan fashion on this. And I think
    the difference is and the challenge here is, the $9.95 billion
    was approved by California voters. And there is a $38 billion
    shortfall that we are going to have to convince our colleagues
    whether or not this is a good investment for the other 49
    States. That is something we will continue to discuss.
        And we certainly have a number of questions for a number of
    our witnesses here today that we will submit and ask for the
    record. I will ask you as a valley representative, as chair of
    the committee, we have a lot to work on with high-speed rail.
    We certainly have a lot to work on with the passenger
    reauthorization bill. But as a valley legislator, as valley
    legislators, all of us, this is about constituent services as
    well. And so, as we move forward and look at each of these
    individual parcels and the farming that is going to go on, the
    businesses that are going to continue on, we want to make sure
    that as constituent services, that we are addressing our
    community needs as well. And so we will be discussing each of
    those from that perspective as well.
        If there are no further questions from any members of the
    committee? Seeing none, I would like to thank each of our
    witnesses for their testimony today.
        I ask unanimous consent that the record of today's hearing
    remain open until such time as our witnesses have provided
    answers to any questions that may be submitted to them in
    writing, and unanimous consent that the record remain open for
    15 days for additional comments and information submitted by
    other Members or members of this panel today and witnesses to
    be included in the record of today's hearing.
        Without objection, so ordered.
        Mr. Denham. I would like to thank our witnesses again for
    their testimony. If no Members have anything to add, the
    committee standards adjourned.
        [Whereupon, at 12:09 p.m., the subcommittee was adjourned.]