[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)

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

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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.]
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