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



 
      A REVIEW OF THE CHALLENGES FACING CALIFORNIA HIGH-SPEED RAIL

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

                                (113-49)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       RAILROADS, PIPELINES, AND
                          HAZARDOUS MATERIALS

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 15, 2014

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


         Available online at: http://www.gpo.gov/fdsys/browse/
        committee.action?chamber=house&committee=transportation
             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
MARK SANFORD, South Carolina
                                ------                                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                      JANICE HAHN, California
PATRICK MEEHAN, Pennsylvania         ANN KIRKPATRICK, Arizona
RICHARD L. HANNA, New York, Vice     ELIZABETH H. ESTY, Connecticut
    Chair                            PETER A. DeFAZIO, Oregon
DANIEL WEBSTER, Florida              MICHAEL E. CAPUANO, Massachusetts
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
                                Panel 1

Hon. Zoe Lofgren, a Representative in Congress from the State of 
  California.....................................................     4
Hon. Kevin McCarthy, a Representative in Congress from the State 
  of California..................................................     4
Hon. Loretta Sanchez, a Representative in Congress from the State 
  of California..................................................     4
Hon. Jim Costa, a Representative in Congress from the State of 
  California.....................................................     4
Hon. Doug LaMalfa, a Representative in Congress from the State of 
  California.....................................................     4
Hon. David G. Valadao, a Representative in Congress from the 
  State of California............................................     4

                                Panel 2

Karen Hedlund, Deputy Administrator, Federal Railroad 
  Administration.................................................    24
Dan Richard, Chairman of the Board, California High-Speed Rail 
  Authority......................................................    24
Alissa M. Dolan, Legislative Attorney, American Law Division, 
  Congressional Research Service.................................    24

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

Hon. Zoe Lofgren, prepared statement.............................    59
Hon. Kevin McCarthy, prepared statement..........................    63
Hon. Loretta Sanchez, prepared statement.........................    69
Hon. Jim Costa, prepared statement...............................    74
Hon. Doug LaMalfa \1\
Hon. David G. Valadao, prepared statement........................    76
Karen Hedlund:

    Prepared statement...........................................    78
    Answers to questions for the record from the following 
      Representatives:

        Hon. Jeff Denham, of California..........................    86
        Hon. David G. Valadao, of California.....................    90
        Hon. Corrine Brown, of Florida...........................    94
Dan Richard:

    Prepared statement...........................................    97
    Answers to questions for the record from the following 
      Representatives:

        Hon. Jeff Denham, of California..........................   109
        Hon. Roger Williams, of Texas............................   110
        Hon. Corrine Brown, of Florida...........................   133
Alissa M. Dolan:

    Prepared statement...........................................   135
    Answers to questions for the record from Hon. Corrine Brown, 
      a Representative in Congress from the State of Florida.....   150

----------
\1\ Hon. Doug LaMalfa did not submit a prepared statement for the 
record.

                       SUBMISSION FOR THE RECORD

Karen Hedlund, Deputy Administrator, Federal Railroad 
  Administration, response to request from Hon. Corrine Brown, a 
  Representative in Congress from the State of Florida, for the 
  letter from the Office of the Governor of the State of 
  California, confirming that pending changes in the structure of 
  California State government will have no effect on the existing 
  legal obligations of the California High-Speed Rail Authority 
  or the State to the Federal Railroad Administration, November 
  29, 2012.......................................................    48

                        ADDITIONS TO THE RECORD

Shelli Andranigian, on behalf of the Andranigian family, written 
  testimony for the record.......................................   154
Alain C. Enthoven, William C. Grindley, William H. Warren, 
  Michael G. Brownrigg & Alan H. Bushell, Reports and Litigation 
  on Aspects of the California High-Speed Rail's Finances \2\

----------
\2\ William C. Grindley submitted for the record the reports by 
  the team listed above which document their review and analysis 
  of the financial risks of the planned California high-speed 
  rail project. The reports are available online at http://
  www.sites.google.com/site/hsrcaliffr.

  [GRAPHIC] [TIFF OMITTED] 


      A REVIEW OF THE CHALLENGES FACING CALIFORNIA HIGH-SPEED RAIL

                              ----------                              


                      WEDNESDAY, JANUARY 15, 2014

                  House of Representatives,
              Subcommittee on Railroads, Pipelines,
                           and Hazardous Materials,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:08 a.m. in 
Room 2167, Rayburn House Office Building, Hon. Jeff Denham 
(Chairman of the subcommittee) presiding.
    Mr. Denham. Ladies and gentlemen, the subcommittee will 
come to order. First, let me welcome our distinguished 
witnesses and thank them for testifying today. This is the 
second hearing this session of Congress that I have held on a 
hearing on California high-speed rail since I became chairman 
of the subcommittee.
    In 2008, the voters of California approved a $9.95 billion 
ballot measure, Prop 1A. I was serving in the State senate at 
the time, and voted in favor of this proposition because of the 
guarantee to taxpayers it would be fiscally responsible, and 
not need an ongoing subsidy. What was sold to voters was a $33 
billion project that would receive equal parts of financing 
from the State, Federal Government, and private investors. 
Since that vote, as costs have skyrocketed and the outcomes of 
the project have remained in flux, I have consistently called 
for the California High-Speed Rail Authority to develop a 
viable plan that accepts economic and budgetary realities.
    Sadly, after 5 years, we are nowhere closer to that viable 
plan, nor have any construction jobs been created, even though 
the premise for the Recovery Act was to create jobs 
immediately. In fact, in November the project received two new 
setbacks in the California State court system.
    First, the courts found that the California high-speed rail 
funding plan did not comply with Prop 1A. Those requirements 
were identified as $26 billion needed to build the entire 300 
miles of rail between Merced and San Fernando, and that all 
environmental clearances be completed for the entire initial 
operating segment.
    Second, the courts found that California High-Speed Rail 
Authority did not provide sufficient justification for the 
issuance of $8.6 billion in Prop 1A bond funds. Those bond 
funds were to be the source of the State match for the $2.55 
billion the Federal Government has provided to this project 
through the Recovery Act.
    Therefore, as of now, California does not have the funding 
in hand to begin supplying the State match for the Recovery Act 
grant, and the Federal Railroad Administration's grant 
agreement with California requires the first State match, that 
payment, due on April 1.
    In this hearing I want to hear from the Authority about how 
they are going to resolve these deficiencies, where the total 
$26 billion will come from, and how they complete the 
environmental reviews for the entire 300 initial operating 
segments.
    I will note that the 2014 omnibus appropriations bill 
released yesterday includes no funding for high-speed rail, the 
fourth straight year no monies have been provided. It is clear 
that the Federal Government will not be the source of more 
funding.
    I also want to understand how the Authority believes that 
Governor Brown's proposal to use revenue from California's cap 
and trade program to support the project is constitutional, 
since independent observers have stated that the high-speed 
rail program is not an eligible use for those revenues.
    I do want to thank Mr. Richard, who is here this morning, 
for being open and transparent with this subcommittee on the 
Authority's activities. While we may agree or disagree about 
the viability of the project, he has displayed professionalism 
in all of our discussions. However, I have many concerns about 
how the FRA is reacting to these recent setbacks, and what it 
is going to do to protect billions of taxpayer dollars.
    After the rulings, I sent a letter to the FRA on December 
12th with a number of commonsense, simple questions. The 
Administration sent back this letter that basically states, 
``Everything is fine. Nothing has changed.'' They didn't answer 
a question, and staff has basically refused to provide the data 
that we feel is necessary to conduct proper oversight.
    I note, however, that I originally wanted to have this 
hearing in December. Ms. Brown and I had discussed that. There 
were some logistics challenges with Mr. Szabo at the time. We 
also had a rail catastrophe that I know took some extra 
attention. So I agreed to delay this hearing for 3 weeks, give 
plenty of time for schedules, give plenty of time to have the 
promise of this information brought to this committee. But, as 
you can see here today, Mr. Szabo was unable to make it. While 
I understand Deputy Administrator Hedlund is quite 
knowledgeable, I am disappointed but not overly surprised that 
the Administrator could not attend.
    So, here we are now. And I will ask the same questions I 
asked a month ago. Hopefully the Administration has had time to 
prepare and actually give us straightforward answers to 
straightforward questions. Further, despite the loss of 
matching funds, FRA has continued to reimburse California for 
spending on the project. We need to understand what FRA has 
reimbursed California to date, including since the adverse 
rulings, and how much matching funds California is required to 
contribute to the project.
    Under FRA's grant agreement, the Administration has the 
ability today, right now, to suspend reimbursements until the 
California High-Speed Rail Authority presents a viable plan to 
identify a new source of the required State match. Given so 
much uncertainty around this project, why wouldn't FRA take the 
prudent step to hold off spending more taxpayer dollars until 
they are satisfied that California has remedied these legal 
setbacks?
    If the Administration continues to march down this same 
path, operating as though it is business as usual, then I am 
prepared to take my own action through legislation to force FRA 
to act in a more prudent fashion. Frankly, after 5 years filled 
with cost overruns, lawsuits, lost promises of immediate job 
creation in the valley, and reduced expectations, unless they 
can come up with a viable plan that meets the requirements of 
Prop 1A, I believe it is time to end this project.
    I look forward to discussing these important issues with 
the witnesses.
    I would now like to recognize Ranking Member Corrine Brown 
from Florida for 5 minutes to make any opening statement she 
may have. Ms. Brown?
    Ms. Brown. Thank you. I know that California's high-speed 
rail program is important to the chairman, and this 
subcommittee certainly has a responsibility to provide 
oversight of federally funded rail projects. But this is the 
third hearing that we have held since December 2012 on 
California high-speed rail, yet we have not had one hearing 
this Congress on rail safety.
    At the same time, we failed to reauthorize the National 
Rail Safety Program, which expired at the end of fiscal year 
2013. Several Members of Congress have written letters to the 
committee requesting a hearing on rail safety, particularly 
given the recent tragedies. Protecting our community and 
citizens from harm should always be the top priority for 
Congress. To that end, I am hand-delivering this letter to you 
today, Mr. Chairman, from all of the Democratic members of this 
subcommittee, requesting a hearing on rail safety as soon as 
possible. We urge you to promptly consider this request.
    As for the hearing today, like many States, including my 
home State of Florida, California is struggling to meet the 
transportation needs of its citizens. According to the U.S. 
Census Bureau projection, the population of California will be 
close to 60 million by the year 2050. This explosion in 
population will result in the crippling of California's already 
aging public transportation infrastructure.
    California's 170,000 miles of roadway is the busiest in the 
Nation. As a result, the statewide costs at this time in fuel 
waste and transportation congestion is estimated at $18.7 
billion annually. Travelers on California's interstate system 
is increasing at a rate five times faster than capacity. This 
is a formula for disaster, and everyone that has driven in 
California's major cities knows this all too well.
    Looking at air travel, the busiest short-haul air market in 
the country is between Los Angeles and San Francisco, with 100 
daily flights and more than 5 million passengers, annually. 
This is larger than the New York and Washington, DC, markets. 
In fact, the L.A.-San Francisco air route is one of the most 
delay prone in the Nation, with approximately one out of every 
four flights delayed by about an hour.
    What is the solution to the congestion? According to the 
California High-Speed Rail Authority, to achieve the same 
capacity as the San Francisco-Los Angeles high-speed rail 
system, California will need to construct 2,300 new lane miles 
of highway, 115 additional gates at California airports, and 
four new airport runways. The estimated costs for these 
improvements is $1.14 billion over the next 20 years, which is 
equivalent to $170 billion with inflation. This is four times 
what it would cost to develop a planned high-speed rail system.
    We are going to hear some complaints and reasons why high-
speed rail should not be developed in California. 
Unfortunately, we are not going to hear about any solutions for 
addressing the congestion disaster that is facing California in 
the very near future. This high-speed rail project will help 
the environment, reduce congestion, and create jobs.
    Now, I hope that during today's hearing the Members who 
opposed the development of high-speed rail in California will 
help us with details as to how they intend to finance this $170 
billion in improvement for the State.
    With that, I want to welcome today's panelists, and I am 
looking forward to hearing their testimony. I yield back the 
balance of my time.
    Mr. Denham. Thank you. And I would just respectfully remind 
Ms. Brown that this committee has already agreed to hold a rail 
safety hearing. We would actually be holding that hearing right 
now, today, but the ranking member had asked me to hold off on 
the high-speed rail hearing that we were supposed to have 3 
weeks ago. So, we look forward to scheduling that together, and 
I hope staff recognizes that, as well.
    I would like to again thank our witnesses here today. We 
have two panels today. Our first panel is with Majority Whip 
Kevin McCarthy, Representatives Zoe Lofgren, Loretta Sanchez, 
Jim Costa, Doug LaMalfa, and David Valadao. After receiving 
testimony from our first panel, we will proceed to our second 
panel of testimony.
    I ask that unanimous consent that our witnesses' full 
statements be included in the record.
    [No response.]
    Mr. Denham. Without objection, so ordered. Since your 
written testimony has been made part of the record today, the 
subcommittee would request that you limit your oral testimony 
to 5 minutes.
    Ms. Lofgren, welcome to the committee. Thank you for 
joining us.

  TESTIMONY OF HON. ZOE LOFGREN, A REPRESENTATIVE IN CONGRESS 
     FROM THE STATE OF CALIFORNIA; HON. KEVIN MCCARTHY, A 
 REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA; HON. 
LORETTA SANCHEZ, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
 CALIFORNIA; HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM 
THE STATE OF CALIFORNIA; HON. DOUG LAMALFA, A REPRESENTATIVE IN 
   CONGRESS FROM THE STATE OF CALIFORNIA; AND HON. DAVID G. 
    VALADAO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
                           CALIFORNIA

    Ms. Lofgren. Thank you, Mr. Chairman and Ranking Member 
Brown, for allowing my colleagues to appear before you today. 
As chair of the California Democratic Congressional Delegation, 
which is the largest, most diverse delegation in the Congress, 
comprised of 38 Members, I am here to reaffirm our strong 
support for the California high-speed rail project. And that is 
because our economy improves, and our population--as our 
population grows, our transportation infrastructure is falling 
further behind.
    As many of us know, the transportation infrastructure is 
already in very serious need of upgrade in California. And 
California's skies are blue, our air corridors between San 
Francisco and L.A., as mentioned by the ranking member, is the 
busiest in the country. Our congestion is high. And we know 
that the lost time and fuel wasted in California traffic costs 
Californians an estimated $18.7 billion each year.
    As we watch our population grow--and the estimate is, as 
Ms. Brown has said, we will have 51 million people by the year 
2050--we know that we need to have the capacity to move people 
north, south. And without the high-speed rail project, it has 
been estimated that we would need to build over 4,000 new 
highway lanes, 115 airport gates, and 4 new runways, just to 
keep up with the demand. And we know that is just not possible.
    So, the California high-speed rail project is the largest 
and most ambitious infrastructure project of our time. When 
completed, it is going to be able to provide the transportation 
solutions that our State needs.
    Now, Californians, including folks in my home district in 
San Jose, are going to see immediate benefits from this 
project. It invests $1.5 billion in the Caltrain modernization 
program, which will replace Caltrans diesel trains with 
electric trains on the Peninsula Corridor. And, according to a 
recent economic impact report by the Bay Area Council, a 
premium business group in the bay area, the project will create 
over 9,500 jobs, with over 90 percent being in the bay area. 
The Bay Area Council also says that the high-speed rail will 
increase our State's bottom line. The State and local revenues 
will see an increase of $71 million during the construction 
phase. And we also know, from this business group, that 
neighborhoods near Caltrain will see an increase in property 
value by as much as $1 billion.
    As good stewards of the environment, Californians, by and 
large, also agree that we must make critical infrastructure 
investments that connect our communities and reduce carbon 
emissions, while keeping our economy strong. Electrifying 
Caltrain will make its operation quieter, reduce air pollution 
by 90 percent, and lower energy consumption by 64 percent, 
because its electric trains are less noisy and more cost-
effective to run.
    Now, despite the overwhelming arguments for the need and 
benefits of high-speed rail, the project, as we know, has 
detractors. And its first days, the project had a rocky start, 
before the current management team was put in place. And that 
led some to say the project was too large, or others disputed 
the high-speed rail project's business plans, and the like. And 
that is why I joined Chairman Denham in asking the GAO, the 
independent, nonpartisan auditors, to conduct a thorough review 
of the high-speed rail project and its cost estimates, the 
project's funding plan, and passenger ridership and revenue 
forecasts.
    And, last spring, the GAO came back with its report and 
gave the California High-Speed Rail Authority high marks for 
its cost estimates, ridership estimates, and funding plan. The 
GAO also made some noteworthy observations, saying that the 
greatest challenge before California's high-speed rail project 
is not whether it can be done, but whether it will be funded, 
particularly on the Federal level, in order to attract much-
needed private investment. That certainly continues to haunt 
the project, because investors question whether the Federal 
support will be there in the future.
    It is also one of the reasons why the California High-Speed 
Rail Authority's very realistic and responsible business plan 
is building the project in phases. However, based on 
experiences in other countries, and positive ridership 
estimates by the GAO, it seems likely that the private sector 
will invest in the project if it is allowed to move forward.
    It will take both public and private support at all levels 
to make high-speed rail in California a reality. The people of 
California, as been noted, have already voted in support of it, 
and taxpayers' dollars have already been invested in it, 
including $3.3 billion in Federal grants. And just this week, 
Governor Jerry Brown announced his State budget, pledging $250 
million in cap and trade revenues for high-speed rail, while 
laying out continued funding for the project in the following 
years.
    Now, given the environmental benefits, both short term and 
long term, using cap and trade funds for this project is very 
appropriate. And our delegation would like to commend Governor 
Brown for his leadership on high-speed rail.
    We know high-speed rail can work in America if it is given 
a chance to succeed. As the GAO noted in its report, several 
private consortiums were preparing bids for a high-speed rail 
project in Florida before that State's Governor pulled the 
plug. And, as recently as January 9th, the Washington Post 
reported that Japan is seriously interested in developing a 
high-speed rail line between Washington and Baltimore, 
Maryland, even offering to foot half of the projected $8 
billion it would cost to build.
    You know, our global competitors aren't holding back on 
their high-speed rail infrastructure. And that is because, 
around the world, high-speed rail has been shown to be an 
effective, popular, and profitable mode of transportation. When 
it comes to transportation, I believe the United States should 
be second to none. It was solid investments in infrastructure 
that helped make the 20th century the American century. And 
California's high-speed rail project can help continue that 
kind of success for our country in the century to come. I thank 
the chairman and the ranking member for the opportunity to 
testify today. And I yield back my time.
    Mr. Denham. Mr. McCarthy, welcome to our committee.
    Mr. McCarthy. Thank you.
    Mr. Denham. You may proceed.
    Mr. McCarthy. Well, thank you, Mr. Chairman, for holding 
another important hearing on California high-speed rail, and 
for allowing me to testify today.
    I have expressed my opposition to the California High-Speed 
Rail Authority's deeply flawed business plan, which is not what 
California voters approved in Proposition 1A back in 2008, and 
I do so again today. I continue to have serious concerns with 
the Authority's finances, and how they plan to come up with the 
tens of billions of additional funds needed to complete the 
project.
    To date, the Authority has never provided a satisfactory 
answer, and continues to move forward with this project. My 
colleagues and I even commissioned the Government 
Accountability Office to audit the Authority's plan. And GAO 
also expressed concerns about the Authority's funding sources, 
public and private. Not one additional cent has been identified 
for this project. In fact, the Authority recently lost its 
largest source of funds when a Sacramento County Superior Court 
judge prohibited the Authority from spending State funds on 
this project, because they are violating the requirements set 
by Prop 1A.
    That leaves the Authority with just little over $3 billion 
in Federal tax dollars to waste while they come up with new 
schemes to get State funds like cap and trade, not to mention 
one of the original requirements for spending these Federal 
funds was that the State matches every Federal dollar it 
spends, a requirement the State now looks unable to ever meet.
    The Authority's business plan and funding sources for high-
speed rail project were questionable from day one. The real 
concern here is the prudent use of billions of taxpayers' 
dollars, which the Authority has proven time and again that 
they are unable to be good stewards of.
    In addition, I know many on our side of the aisle were 
disappointed by the Surface Transportation Board's decision 
last year to approve the first segment of this project. I 
disagree with this decision, and believe the STB should have 
reviewed the project in its entirety, rather than an 
unprecedented segment-by-segment piecemeal fashion. At least 
the STB refused to approve the second segment of this project 
until environmental documentation is complete. This is just 
another example of how the California High-Speed Rail Authority 
continues to bend the rules and seek exemptions to ram through 
high-speed rail because they believe they know what is best for 
Californians.
    Mr. Chairman, the Authority has yet to break ground for the 
high-speed rail project, but they have already dug themselves 
in a hole, and are wasting the public's money. Since approving 
Prop 1A, California voters have turned on this project, because 
they now see it for the boondoggle it is. The Authority has not 
dealt with the Central Valley communities in a meaningful 
manner, has failed to properly plan this project, and has 
failed to secure any additional funding. If the Authority 
cannot prove to us and this committee that California high-
speed rail is viable, what makes them think they can build it, 
much less operate and maintain it?
    I call again for an end to the Authority's current plan for 
California high-speed rail, and that is not one more Federal 
dollar is spent on this boondoggle. Thank you for your time 
today. I yield back.
    Mr. Denham. Ms. Sanchez, you may proceed.
    Ms. Sanchez. Thank you, Chairman Denham, thank you Ranking 
Member Brown, and to the Members who are here today. I 
appreciate this opportunity because this, I believe, is 
instrumental to the economic recovery for California. This is 
bold, it is big, and, in other words, this is Californian.
    When the Spanish settled California, they built 21 
missions, each a day's ride apart by horseback, to connect our 
State. They did that because they knew commerce was important 
for the future of California. And we are the economic engine of 
the United States. When we built the aqueduct, it too cost 
money. But it moves water up and down California.
    When Governor Pat Brown built the UC system, it gave 
accessibility of education, higher education, to Californians.
    These are bold, they are big. And this project is just as 
important to California. It is probably our best project to get 
us out of this real recession we have felt for so long.
    There are a couple of realities in California. Our 
unemployment rate is still stuck at over 8 percent. And we have 
some of the worst traffic congestion in the Nation. High-speed 
rail moves both of those points. In the first 5 years of 
construction alone, this will support 100,000 new construction 
jobs, in particular in the areas where we need our people to 
work. And it is estimated that there will be over 1 million 
indirect and direct jobs related to that in my area, in the Los 
Angeles metropolitan area. Or, as I say, where we dream and 
build big in Anaheim, California.
    The project will move forward because there are funds. 
Let's talk a little bit of Proposition 1A and just what 
happened. The court has not issued an injunction against this 
project, nor have the recent rulings prohibited the State from 
selling bonds. In any major project--and remember the 
background that I come to this Congress with, transportation 
and infrastructure financing. And, believe me, you can ask 
people in California. As a financier, there were many times I 
stopped big projects and told them they had to wait their time 
until the financing was correct. So I am not afraid to do that. 
But this is the time for this project. I believe that the 
Authority has worked very hard to put together a finance plan 
that will work for Californians.
    I want to also say that we have to think about how we move 
right now from southern California to northern California. You 
either have to drive--and when I was young--and I admit I used 
to speed a little bit more than often--it would take me about 
5\1/2\ hours to get up to San Francisco from Anaheim. That was 
a--well, that was about midnight, when there was nothing on the 
highway, on that ``5,'' not dillydallying along our beautiful 
coast. I just went up to Ventura, what used to take maybe 2 or 
2\1/2\ hours to go, and today it takes about 3 or 4 hours to 
get there. So to San Francisco, I imagine it is much more than 
the 6 hours I typically think.
    As a private pilot in my former life, I know what it felt 
like to be at Orange County John Wayne Airport, and have all 
the major commercial airlines get in front of me and wait and 
wait with the propeller turning, spending fuel and time as I 
rented that plane. So, this whole idea that somehow our air is 
going to continue to get us out of this congestion problem is 
just not true, let alone--excuse me, for those who are in San 
Francisco--the weather you have there means that many times 
those of us who are trying to fly into your beautiful city just 
don't get there.
    This is an important project. It is important for jobs. It 
is important for our economy. And I urge you we all need to 
work together to make this a reality. Thank you, Mr. Chairman, 
for your time.
    Mr. Denham. Thank you, Ms. Sanchez.
    Mr. Costa, you may proceed. Good morning.
    Mr. Costa. Thank you. Good morning, Mr. Chairman and 
Ranking Member Brown, and the members of the subcommittee. 
Thank you for taking the time and allowing me to testify before 
you today.
    As we all know, building major infrastructure projects are 
never, ever easy. And the oversight of these projects are 
necessary and appropriate. And, therefore, this committee's 
work is appropriate. But that is also why I joined Chairman 
Denham, along with many of our colleagues, Republicans and 
Democrats alike, in asking the Government Accountability 
Office, the Government's independent watchdog, to audit this 
project.
    After more than a year of review, the GAO reported that the 
Authority followed best practices in each of the areas they 
studied. Ridership, revenue, cost estimates, and the analysis 
of the economic impact of the people, and this project have all 
been examined by the GAO. And they are--their information is 
there for all of us to read.
    In fact, the GAO's report shows that the California High-
Speed Rail Authority, over the last 2 years, has taken stock on 
a number of the comments that were made, and some of the 
criticisms that, Mr. Chairman, you and others and myself have 
made. They have listened and they have responded. And that is 
why they have come out with a new business plan that has 
created this blended approach.
    Therefore, I think things are beginning to move on the 
right track. But there are still challenges that remain, 
clearly. But this is not unique to this project or any other 
major project. We know that building infrastructure in this 
country is challenging. It is so difficult to get anything 
done, whether we are talking about water, whether we are 
talking transportation or education.
    But yet today, in California, we are living off the success 
that our parents and that our grandparents made. In the 1950s 
and the 1960s they were multitaskers. They not only invested in 
what is one of the world's great education systems, but they 
invested in one of the world's greatest water systems, and they 
invested in the transportation system, because they thought we 
could do those critical things that were necessary. When 
President John Kennedy came to Los Banos in 1962, 51 years ago, 
he said, ``We are investing in these water projects because we 
believe in the future of America.'' And it doesn't matter what 
part of the country we are talking about, we ought to be 
investing for all Americans.
    When California sought to build the State water project, 
guess what? It faced lawsuits. Guess what? It faced funding 
challenges. Guess what? It had opposition. Does that mean that 
the folks in those days, in the 1950s, said, ``Well, gee, we 
got lawsuits, we got opposition, we got funding challenges, 
maybe we shouldn't pursue this great water project''?
    Our forefathers knew that maybe the water wasn't quite 
necessary then, but they knew future generations of 
Californians would need water in the next century. Today we 
find ourselves water short. So what did they do? They buckled 
down, they worked together, and they built the largest, most 
complex water system that the world has ever seen. We ought to 
be doing the same thing, working together.
    I am hopeful today that we can focus on those legitimate 
challenges facing California high-speed rail, and that we can 
work together to deal with the challenges in this project and 
make it work.
    I also hope we can stick to the facts, you know. I mean the 
facts are the facts. We can all have our version of the 
politics; we get that. But the facts are that California has 38 
million people today living there. And by the year 2030 we will 
have over 50 million people. And we are behind on the 
investment in our transportation infrastructure, we are behind 
on the investment in our water infrastructure and our education 
system.
    So, to accommodate the future growth of California, we 
should be investing in all of the above. High-speed rail is a 
part of that response. In 2008, Californian voters approved of 
this construction of this system, a system that would address 
our intermodal transportation system, including our airports 
and our highways. From the time the first shovel hits the 
ground later this year, the project will be a true economic 
game-changer. We have too many unemployed workers, not only in 
the San Joaquin Valley, but throughout California. Many of them 
are being trained for the thousands of jobs this project will 
create.
    During this subcommittee's last field hearing in 
California, in Madera, we saw many hard-hats in that room, 
people in the audience looking for good-paying jobs. We ought 
to be working together for these Americans sooner, rather than 
later.
    Now, the impacts to agriculture have been well stated, and 
I am very, very, very focused on that. The major investment in 
our State's transportation network cannot and will not come, in 
my view, at the expense of San Joaquin Valley's agricultural 
sector. Yes, there will be impacts. But, like any 
transportation system, there are impacts. We have just expanded 
Highway 99 between Congressman Denham's district and mine, from 
Merced to Chowchilla. Guess what? It has taken 1,200 acres of 
land. It has impacted prime agriculture. But we accommodate it, 
and we paid for that, and we mitigated for that, just as we 
must for high-speed rail.
    As a third-generation farmer who continues to farm today, I 
fight every day on behalf of farmers and growers to preserve 
their businesses and our valley's way of life. I reject the 
idea that investing in our State's transportation network means 
that we cannot invest in our State's water infrastructure. We 
can do it today, just like they did it in the 1950s and the 
1960s.
    California can afford to invest in our water and our 
transportation because the success of our State in the next 30 
years depends upon both. That is what our parents and that is 
what our grandparents did.
    Mr. Chairman, and for others who are naysayers on this 
project, I wonder, I just wonder out loud what you might have 
said to that great American President, that great Republican 
American President, Abraham Lincoln, in the middle of the Civil 
War in 1862, when he decided boldly to build a rail system 
across the Nation. ``Well, gee, Abe, maybe we ought to wait 
until the Civil War is over. Maybe we can't figure out how to 
fund this.'' You know, maybe that is what we ought to do. But 
President Lincoln was bold and he was visionary. And he 
understood that the Nation needed to not only--to end this 
conflict, the Civil War, but he also needed to invest in 
America.
    The California high-speed rail project does face 
challenges, but it is no reason to kill the project. For those 
who oppose this project, give us your plan. Tell me, tell 
everybody else how you are going to build more freeways in 
California, how you are going to build more airports in 
California, and how you are going to mitigate for the impacts 
of those communities with those airports and those additional 
freeways. And how are you going to provide the subsidies to pay 
for the expansion of those airports and the expansion of those 
freeways? Because subsidies are directly related to that 
infrastructure.
    With thousands of jobs for California and the valley on the 
line, let's use today's hearing as an opportunity to exchange 
ideas on how we can best invest in California's infrastructure 
as an example on how we need to invest in America's 
infrastructure, because that is what this subcommittee ought to 
be about, and that is what we ought to be about in Congress, 
working together to invest in America's future. I thank you for 
your time.
    Mr. Denham. Thank you, Mr. Costa.
    Mr. LaMalfa?
    Mr. LaMalfa. Thank you, Mr. Chairman, committee members, 
for the opportunity to weigh in on this issue, one we have 
worked on a lot in California.
    You know, you would have to pose the question, what is the 
utility of this project? It is being compared to a lot of other 
important infrastructure projects in the history of California, 
or in the history of the Nation. I think nobody would dispute 
the interstate system or California water project, the Federal 
water project. Other comparable issues have been very useful to 
many Californians and many Americans. This here is a much more 
select group.
    Indeed, in order to afford to ride high-speed rail, it 
would have to be subsidized per ticket in the true cost of 
operating it, or someone is going to have to pay probably $300 
per ticket to ride it from L.A. to San Francisco, or vice 
versa, in order to sustain itself. It is not going to meet the 
mark of matching airline ticket prices. There is no possible 
way.
    We have heard some pretty grand claims on what it would 
provide for California. The Authority at one time was trying to 
claim a million jobs for Californians. We had a hearing in the 
State legislature on it, finally pinned them down, said they 
meant a million job years, which might translate to 
approximately 20,000 jobs during the time it is to be built.
    We heard claims on what it would cost. The voters of 
California in 2008 were told that this would be a $33 billion 
project, up to $45 billion if you add a spur to Sacramento and 
one to San Diego. Those two have been long since abandoned in 
this project. And the price ballooned at that hearing we had in 
November of 2011 in the State senate to just under $100 
billion. So what did the audit folks think about that, what the 
voters were sold when they were originally told $33 billion?
    So, the Governor revised the plan down to $68 billion, 
utilizing transport in the bay area and Los Angeles. Now, I can 
understand why those folks would want to have their areas 
enhanced with electrifying Caltrain, I am sure that is a good 
thing. It is not the domain of high-speed rail to be doing so. 
This revised plan is not even legal under Proposition 1A, 
because it doesn't deliver a true high-speed rail all the way 
from San Francisco to all the way to downtown Los Angeles. So, 
in time, this will be exposed.
    So, we have to ask ourselves here today, as a Federal body, 
are we being good stewards of Federal tax dollars with the $3-
plus billion of stimulus money that is still captured for this 
plan, as well as telling State voters that your investment of 
$9-plus billion in State bonds, which have to be paid back two-
to-one ratio--is this a good investment for you, for a plan 
that no private investors want to come in on?
    We can see that a forward-thinking project like the Maglev, 
perhaps, running from DC to Baltimore, has already attracted 
Japanese investors as a possibility. High-speed rail is using 
18th-century technology. It is steel wheels running on a rail. 
It might go faster if it is not stopping in every burg up and 
down the valley in order to gain the votes of those legislators 
to put high-speed rail on the ballots. Indeed, how many true 
high-speed rail end-to-end trains are going to be run, or will 
be able to run, at 220 miles per hour on this project?
    It is not going to meet the goals. It is not going to meet 
the cost goals. We heard some creative ridership numbers posed 
in the past by the Authority. There might be 32 million riders, 
and it is going to replace the airplane riders from S.F., to 
L.A., vice versa. There is only 8 million people that use 
airlines between those two towns. And so we are going to 
replace that with 32 million riders? There is only 31 million 
riders that use Amtrak nationwide, in the 48 States, per year. 
High-speed rail in California is going to surpass that?
    We have got some pretty phony numbers operating on this 
thing. And we are still seeing that taxpayers are going to be 
footing the bill federally and at the State level, paying back 
those bonds.
    So, we can only identify $13 billion of real funding so far 
to go into this project. By Governor Brown's estimate, it would 
be $68 billion. Where is the other $55 billion going to come 
from to build this thing? And what are the benefits going to be 
to global warming, or climate change, or whatever that is?
    Now, the Governor's proposal was to divert $250 million 
from California's new cap and trade into this project. That is 
not fulfilling the goal of whatever cap and trade is, because 
high-speed rail won't be operable for at least 30 years to 
replace and start on the positive side on reducing CO2. In the 
meantime, they are going to be constructing it, using heavy 
equipment to build the project.
    We saw the folks that got stuck in Antarctica the other 
day, trying to explore the ice sheet down there. They felt bad 
because they had to get rescued because there is too much ice, 
and so they had to--decided they had to offset their carbon 
footprint of getting rescued by the helicopters, and so they 
are going to go plant trees somewhere in Australia or New 
Zealand to offset that.
    Or I saw an article last night. In California, because of 
all the CO2 emissions that are going to be happening during the 
30 years of construction, they proposed they are also going to 
plant thousands of trees to offset the CO2 output from its 
construction. So we are not going to realize benefits any time 
soon to the CO2 equation of this project. Indeed, when I saw 
that--you know, there is a term in Hollywood, ``jump the 
shark.'' I think this project really jumped the shark when we 
started saying we are going to plant trees to offset carbon 
when it is supposed to be all about offsetting carbon some time 
in the future.
    We are at a point that we will need to assess what our 
priorities are, as a Nation, for our budget, for our spending. 
At a time--we had a budget deal the other day that is cutting 
dollars to retired veterans. We are going to go tell the people 
of this country or people of California that this is a project 
that is worthy of their goals? All the other things we are 
having to deal with? Food stamp program, whatever.
    We are looking at this still at this point, when we are $55 
billion short of the funding to do what is now an illegal plan, 
we need to really take a strong look at putting the brakes on 
it here in Washington, DC. And, as I hope, Californians will 
see the opportunity to re-vote on this project by a ballot 
initiative that is underway right now.
    So, Mr. Chairman, I do appreciate the time, and I hope this 
committee will keep delving into this issue and the falsehoods 
that have been used to sell this to what was at the time a very 
optimistic votership back in 2008.
    So I thank you for your time, and I yield back.
    Mr. Denham. Thank you, Mr. LaMalfa.
    Adam, can you close the door?
    Mr. Valadao, you may proceed.
    Mr. Valadao. Chairman Denham, Ranking Member Brown, and 
members of this subcommittee, thank you for the opportunity to 
testify before you today. As a lifelong resident and taxpayer 
in California's Central Valley, I have watched the proposed 
California high-speed rail project transform over the years. I 
have watched as the estimated costs of this project have 
ballooned tens of billions of dollars more than was promised to 
the voters in 2008. I have watched as the California High-Speed 
Rail Authority has invented a plan that takes thousands of 
acres of farmland out of production and destroys hundreds of 
homes and businesses throughout our communities.
    Every single day I hear from constituents of California's 
21st Congressional District who are opposed to, and worried 
about, California's misguided high-speed rail project. They say 
the project spends too much money, delivers too little on its 
promises, and threatens their very livelihoods. Constituents 
located in the path of the project complain about the lack of 
information provided to the landowners, and the sheer fear they 
are sacrificing their dreams and hard work for a project that 
is not feasible.
    The current path, which is constantly changing, calls for 
the tracks to cut across the entire length of the San Joaquin 
Valley through some of our Nation's most productive farmland. 
Fields will be cut in half, fertile ground will be taken out of 
farming, and production will suffer. For many, this farmland is 
their home, and the proposed high-speed rail project will 
impact countless families. All of this with very little benefit 
to my constituents in the Central Valley.
    While estimates of the project's price tag continue to 
escalate, I find it increasingly difficult to reconcile the 
tremendous cost of the project with the limited benefits it 
provides to my constituents and to all taxpayers in California, 
as a whole. When California voters approved the project in 
2008, they were told the project would cost $33 billion, and 
burden would be shared equally between State and Federal 
Governments and private investors. Since then, cost estimates 
skyrocketed to over $90 billion for a fully operational high-
speed rail line, and nearly $70 billion for a new blended line 
that is only high speed some of the time.
    California's taxpayers simply cannot support a 
multibillion-dollar boondoggle. To date, the State has been 
unable to uphold its promise and provide matching funds for the 
Federal dollars. As this committee continues to weigh the pros 
and cons of California's high-speed rail project, it is 
important to consider the trade-offs for this project. Every 
one of our constituents makes trade-offs when they manage their 
family budget, and our Government should operate no 
differently.
    When the State of California chooses to spend the 
taxpayers' money on high-speed trains, they are forced to set 
aside other priorities. This year, California faces a drought 
that leaves the availability of clean, high-quality water in 
jeopardy for families and farmers. At the same time, 
California's aging water infrastructure is struggling to keep 
up with demand from a growing population. When the State of 
California chooses to spend taxpayer money on high-speed rail, 
they are choosing to neglect addressing our valley's water 
crisis, and they are choosing to jeopardize water availability 
for over 30 million Californians.
    There was a time when California led the world in 
technological advancement and innovation. Unfortunately, the 
California high-speed train project is anything but innovative. 
California's high-speed rail proposal relies on old technology 
that is on its way to being phased out. Meanwhile, across the 
globe, America's competitors are already well on their way to 
developing the next generation of high-speed rail technology.
    Today, innovation is increasingly being performed overseas 
by foreign workers and inventors. At the same time, the United 
States continues to lag behind in many measures of worldwide 
educational achievement. We will continue to lose our advantage 
to foreign nations if we do not educate our young people. When 
the State of California chooses to spend taxpayer money on 
high-speed rail, they are choosing not to invest in education, 
our children, and our future.
    Last October, the State of California was ordered by a 
Federal judge to free over 9,600 inmates by the end of 2013. 
The reason? California has been unable to provide the funding 
necessary to stop overcrowding in prisons and keep dangerous 
criminals behind bars. I think many of our constituents would 
agree that public safety is among the most basic of Government 
functions. Simply put, if California cannot afford to keep 
convicted criminals behind bars, it certainly cannot afford to 
build a needless billion-dollar train project. When the State 
of California chooses to spend taxpayer money on high-speed 
rail, they are also choosing to put the safety of my 
constituents' families and communities in jeopardy.
    The California High-Speed Rail Authority continues to 
pursue this project with only 4 percent--$3 billion out of $68 
billion--of the funding necessary to achieve the largest 
infrastructure project in the country. To continue to pursue 
high-speed rail in California is to spend billions of dollars 
we don't have on a project we don't need. California high-speed 
rail comes at a tremendous cost to taxpayers while providing no 
benefit to my constituents. The project will destroy homes and 
businesses throughout my district and divert precious tax 
dollars away from far more pressing issues, like expanding our 
water infrastructure, protecting our communities, and ensuring 
access to quality education for our Nation's young people.
    The greater cost is to the entire Nation, as the public 
will continue to watch the Authority squander billions in 
pursuit of a dream they cannot achieve. Now, more than ever, 
the Central Valley must come together to make their voices 
heard, and oppose this wasteful project.
    I will continue to uphold my promise to my constituents and 
oppose the California high-speed rail project. I look forward 
to working with you, Chairman Denham, and members of the 
subcommittee, to make sure this wasteful project is held 
accountable to the taxpayers.
    Mr. Denham. Thank you, Mr. Valadao. Out of respect for each 
of our witnesses, I know you all have busy schedules. If you do 
need to go, we fully understand. But, at Ms. Brown's request--
she has requested that we do one round of questioning. So, 
again, if you do need to leave, that is understandable. But if 
you do have time to stay and answer a question from panel 
members, we would appreciate that, as well.
    Let me start by--it frequently comes up: Do you like having 
a new train in California or not? That has never been the issue 
here. The issue has been from a Federal perspective of can you 
afford a project that continues to grow out of control, and 
what is the business plan. And, from a California perspective, 
what are your priorities? Sixty-eight billion dollars, if that 
is the true number, if it doesn't grow any further, could 
rebuild our entire water infrastructure. Now, those of us that 
represent California's Central Valley, we know how important 
water is.
    Rebuilding our entire water infrastructure? The Federal 
obligation for every water project that is being proposed 
today, and every highway project in California, expanding all 
of that, and still having money left over for aviation 
infrastructure. I think we would actually even have money left 
over for education and public safety in the process. We are 
talking about a minimum of $68 billion. It is about priorities.
    We have some real needs in California. Our schools are 
falling behind, our public safety is a big issue, with people 
leaving prison early, and certainly our infrastructure is 
falling apart. This is about our priorities.
    Lots always talk about relieving traffic. This is not a 
commuter rail. This is going from L.A. to San Francisco. There 
is a reason that the comparison to this is the price of an 
airline ticket. This would be nice to have. But I think the 
question that every member of this committee needs to see and 
understand is the $55 billion that is still needed is more than 
we spend on infrastructure across the entire Nation. So is 
every member of this committee, every Member of this Congress 
willing to give up the money for their State for California to 
expand a rail system that goes from L.A. to San Francisco, may 
not relieve our traffic congestion? It would be nice, but maybe 
out of control.
    I just have one question for one Member. Mr. LaMalfa was in 
the State legislature, as I was, when this was being put 
together, while we were debating it, we were voting on it, and 
certainly saw the guarantees and the promises that were made 
within this. And it is my understanding that you did, while you 
were in the assembly, present a bill on--going back before the 
voters. This had changed many times.
    I would just ask you to explain what your reasoning for 
wanting to bring this back to the voters was, and what was in 
your legislation.
    Mr. LaMalfa. Yes, thank you, Mr. Chairman. In the State 
senate I offered two bills that had to do with high-speed rail. 
The first one was called Senate Bill 22 to merely put a pause 
on high-speed rail spending, planning, eminent domain, what 
have you, until a true plan could be brought forward. Because 
there wasn't a plan that really articulated true costs. We saw 
all the pie-in-the-sky numbers. The year after the 2008 vote, 
where it was claimed $33 billion, 1 year later the price was 
adjusted up to $42 billion in 2009. The voters at that point 
had already been sold a bill of goods. So, my proposal was to 
say just put a pause on any spending until a true plan, stem to 
stern, could be developed.
    Then my later bill was Senate Bill 985, which, at the time, 
at the--after the November hearing in 2011, the price of the 
high-speed rail had been adjusted upwards of $98.5 billion 
during that mark I mentioned. So that bill was to place it 
simply back on the ballot in front of the voters, asking the 
people of California, ``Would you like to still go through with 
this plan, in light of all the other challenges we face, with 
public safety, with law enforcement, with fire, with our school 
system, prisons,'' whatever, you name it.
    And so, I thought those were worthy efforts to ask again 
the voters of California that. And an assemblyman out there is 
proposing that bill again, Assemblyman Gorell down in Santa 
Barbara.
    So, I hope that the legislature would deem to place it on 
the ballot or go the initiative process. But I thought it was a 
very important question, to re-ask at that time, since the 
numbers had gone up so dramatically for the project. After that 
November 2011 hearing, indeed, there was a scramble to try and 
re-adjust the numbers. That is why the project was re-adjusted 
to now incorporate Caltrain and local infrastructure in the bay 
area and in southern California, so that it is now a San Jose 
to North L.A. County high-speed rail, and utilizing with other 
ones, which is illegal under Prop 1A.
    So, those were the efforts that we tried at, but California 
Legislature being what it is, they are still hell-bent on doing 
this project as-is.
    Mr. Denham. Thank you, Mr. LaMalfa. Ms. Brown?
    Ms. Brown. Thank you. And thank you, Mr. Chairman, first of 
all, for agreeing to schedule the safety hearing workshop, or 
hearing, which is important to all of the Members, both 
Democrats and Republicans.
    Let me just say that we in the Congress have dedicated $8 
billion, period, for high-speed rail. There is not another 
Member in Congress that has given more to the California 
project than I--$1 billion. So you have my money. My Governor 
sent it to you. You all competed for it and won. So I have 
already given $1 billion. Thank you.
    Now, as I travel around the world, everybody is moving 
ahead of the United States and investing in rail. We started 
the rail system, and now we are the caboose. And they don't use 
cabooses any more. Seventeen billion dollars, Saudi Arabia. 
China, $300 billion. And we are fighting.
    I mean, California is the most progressive and--I visit you 
all constantly. And let me just tell you. Talking about 
driving, I don't even want you, Ms. Sanchez, to even carry me 
around in the traffic. It is so scary. We have got to find a 
way to compete and be a leader in transporting people, goods, 
and services. Can you respond to that? Because I haven't heard 
any way, any discussion as to how we are going to be 
competitive with the rest of the world.
    And someone mentioned other countries. Let me tell you--
they want to participate. I mean you--the French, the Chinese, 
the Italian. They are constantly calling. They want to partner. 
Yes, ma'am?
    Ms. Sanchez. Well, I hope you were thinking that you didn't 
want me driving you around in my car because of the traffic, 
not because of my driving skills.
    Ms. Brown. Both.
    [Laughter.]
    Ms. Sanchez. So, several things. The first is while this is 
not a commuter line, per se, the fact of the matter is, for 
example, plenty of people go from Anaheim into downtown L.A. 
today on train. I imagine if we could get faster speed, there 
would be even more who would do that.
    The biggest problem for us, coming from the south of L.A., 
is getting through L.A. to get to the other side. This is where 
we hit traffic, not 3 hours of the day, but all day, every day, 
everywhere, any way, et cetera. So that would be a big deal, 
when someone is talking about how many stops you have. We don't 
need a lot of stops, but we certainly would love to have a 
faster way to get across L.A.
    Even if we could do that by air, by the time you go up in 
the air, and you go that short distance, and you come down in 
the air, I mean, you are spending 3 hours or 4 hours, at least, 
doing that. In particular, having to be at the airport, TSA, et 
cetera.
    So--and remember that since we had that crash of a big 
liner and a little liner over Cerritos in our area, as a pilot, 
I would tell you that we have very limited air space going on. 
It is a very trafficked air space. And, again, fog in 
Sacramento, the situation in San Francisco, we need to move our 
people.
    And let me end with this. I told you we were the economic 
engine. Given any day, any year, we are anywhere between the 
fifth and the eighth largest economy in the world. I am 
astounded, because I had not heard Mr. Costa's number of we 
have 38 million people today. I know that. But if we are going 
to have 50 million people by 2030, this is a major problem. And 
we cannot build wider roads through our places.
    In the El Toro ``Y'' intersection, which is, I think, the 
widest freeway at least in California, you can--I am told you 
can see it from the moon. When you are up in a spaceship, you 
can actually see my highway down there. So we need to get this 
going. It needs to happen. We need to move our people. And 
there are plenty of people who are afraid to fly, who are--
don't have the time to drive, who I know we could get on that 
train to go up to San Francisco, and 2\1/2\ hours later be 
there, eating some great seafood.
    Mr. Costa. With the time remaining, let me quickly just 
indicate that the comments you made about the busiest, highly 
used air traffic corridor in the country, San Diego--I mean Los 
Angeles-bay area is true. But the comments that the chairman 
made about taking the $68 million--billion dollars, excuse me--
and applying that to the other systems, I mean, the seven 
airports that we talk about are all built on postage stamps. 
You are not going to expand them. And the cost of the eminent 
domain and that--the freeway, it is the same thing. The 
corridor is the cost of those freeways.
    You are talking about impacts to communities in the valley, 
which are real, and we need to mitigate for, but they are 
magnified tenfold when you talk about expanding those same 
freeways in the urban areas. And all the lawsuits and all the 
opposition that we see that has been concentrated in the last 
several years toward high-speed rail, I can guarantee you will 
be similarly used for some of the same reasons, trying to 
expand those airports for noise and for traffic, as well as for 
those freeway systems. And that is why you need an integrated, 
multimodal approach that uses our road systems, our air 
systems, and our rail system.
    And we are going to have to invest in all these areas, like 
our parents did, in water and education. We share those goals.
    Mr. Denham. Thank you, Mr. Costa. Mr. Webster.
    Mr. Webster. Well, thank you, Mr. Chairman. I don't usually 
get engaged in somebody else's food fight.
    [Laughter.]
    Mr. Webster. But I do have a question. Is there a neutral 
party that could tell me about the two lawsuits, and what the 
implication of those judgments were?
    Mr. Denham. Mr. Webster, that is going to be the next 
panel.
    Mr. Webster. Oh, that will be the next panel. All right, 
so, great. Well, thank you all for coming today, and it has 
been very interesting.
    Mr. Denham. Mr. DeFazio?
    Mr. DeFazio. Thank you, Mr. Chairman. I was pleased to hear 
you announce at the beginning of the hearing that you had 
agreed to schedule hearings on rail safety. And we haven't had 
a real hearing on rail safety for 3 years now. The last one 
that was held in the last Congress by the Republican majority 
was one against regulations and rules that might bring about 
more safety.
    So, I am pleased to hear that. I specifically asked for 
hearings on the DOT 111 tank car, which has been identified 
since 1992 as inadequate to withstand a rollover, crash, or 
derailment. It was news to everybody on this side, it would be 
news to the ranking member, the ranking member of this 
committee, to the--our chief of staff on our side, and to me, 
that the hearing had been agreed to and scheduled. But I am 
really pleased to hear that. Maybe someone knew that we were 
all going to bring up this issue, or a number of us at this 
hearing, and it got scheduled just before the meeting.
    As to the subject at hand, the chair made a point about how 
much this would, you know, compare to the rest of our 
investments in transportation in America. And, you know, I 
would agree that it is a challenging number. If there is going 
to be substantially more Federal investment, given the dearth 
of Federal investment--in fact, Federal investment in 
transportation in this country is going to drop by over 90 
percent, absent a new funding source and reauthorization by 
October 1st. So it would be even more of a contrast.
    But I think the point that was made--and I will ask a 
couple Members from there--but, I mean, if you are moving 8 
million passengers by plane--I have spent 27 years on the 
Aviation Subcommittee--I am not aware of any way to enhance the 
capabilities or capacity, absent the building of a new airport 
somewhere between L.A. and the San Francisco area. I am just 
wondering, with the expected increase in the California 
population, I expect that number will go up substantially. How 
are you going to accommodate that?
    Somehow, third-world, developing countries, you know, are 
able to build high-speed rail systems, but we just can't. We 
are the United States of America. We can't maintain our 
bridges, we can't build high-speed rail, we can't compete in 
the world economy, we can't move our people efficiently. What 
the heck? What happened to America and our vision?
    Mr. Costa, would you address--can you address that? How 
else are we going to deal with moving these people back and 
forth?
    Mr. Costa. Well, I think there is only really one way that 
we did it, and that is creating the integrated, multimodal 
system that has worked in other parts of the country, both 
developed countries, in Europe and Japan, as well as in 
developing countries, as you mentioned, places in Asia and 
elsewhere.
    So, the fact is transportation experts have studied these 
challenges with densities for a long time, and they know that 
there is not one silver bullet. You have got to use all of the 
technologies. And for those who--I have spent a lot of time on 
this stuff. Making reference toward high-speed steel on rail as 
an old technology, let me tell you. They are fifth generation 
of steel on rail. These trains have gone on regular corridors 
in France and Germany as fast as Maglev, 350 miles an hour they 
have been clocked. The Germans and the Japanese, I think, are 
very smart people. They have developed both technologies, 
Maglev and steel on rail, and they have chosen for themselves 
to be the most cost effective steel on rail for their needs and 
for the foreseeable generation or two.
    And the fact is that, if we want to be smart about 
investments, at the end of the day--and you hit the nail on the 
head, Congressman DeFazio--we have got to, on a bipartisan 
basis--and this subcommittee is, I think, where it starts--
figure out a strategy on how we are going to fund America's 
infrastructure for transportation. We can't do it with fairy 
dust. We have got to do it with some practical, commonsense 
means on how we are going to invest in every region of America. 
And it costs money; guess what?
    That is what our parents did. That is what our grandparents 
did. They invested. They knew it cost money, and they were 
willing to make those kinds of investments. I mean, otherwise, 
we are just playing to the public. Well, we have to have this, 
we have to have that. But, no, we don't--I don't want to--it is 
unpopular, politically, to talk about how you pay for these 
things.
    Mr. Denham. Thank you. Thank you, Mr. Costa. And I would 
just remind Mr. DeFazio that Florida is not a third-world 
country. Texas is not a third-world country. They are just 
doing high-speed rail much cheaper, and with private investors.
    Mr. Duncan?
    Mr. Duncan. Well, thank you, Mr. Chairman. I have been in 
another hearing, so I was going to reserve my questions to the 
panel. But since you all are still here, I will just very 
quickly mention that a few weeks ago there was an article in 
the Washington Times saying that estimated cost has gone from 
$33 billion to $68.5 billion. Does anybody know how much this 
is going to cost us? Are these cost estimates going to keep 
going up?
    Ms. Sanchez. Mr. Duncan, I think, again, that the second 
panel, as quickly as you can get to it, will be the technical 
people who will go through the plans, et cetera.
    Mr. Duncan. That----
    Ms. Sanchez. From both the Federal and the Authority.
    Mr. Duncan. That same article said 52 percent of the 
Californians were against this, and with some undecided, so 
that there was a minority in favor. What do you say about that?
    Ms. Sanchez. Mr. Duncan, I would just say that I am from 
Anaheim, California. There were many cities that were 
approached before we built Disneyland. Nobody wanted it, 
because they thought it was pie in the sky. We built it in 
Anaheim. It is the number one icon in the world.
    I will tell you that Anaheim is currently building--it is 
in construction, it is probably 75 percent done--the regional 
transportation hub which will house the end of the high-speed 
rail. We will have that finished in this year. So when people 
say, ``People don't want it,'' I am going to tell you we not 
only want it in Anaheim, but we have put our money--we have 
built the cart ahead of the horse, if you will, because we 
truly believe that we need this project in California.
    Mr. Duncan. Do you all want to say anything?
    Mr. LaMalfa. Mr. Duncan, thank you. I have lived this thing 
in the State legislature since 2010. And, as a farmer, I would 
also speak that my colleagues that live down in the valley--Mr. 
Valadao could attest to--their lives are going to change a lot, 
their cities, their way of life, because they are going to have 
this thing running through there that is 70 feet wide, changing 
their access to normally rural roads that are now going to have 
to have overcrossings every half a mile or 2 miles, or whatever 
they deem they are going to spend on them.
    So, a farmer with a tractor no longer just crosses a road. 
He has got to go several miles with a low-speed tractor to move 
his equipment back and forth to his fields that are now being 
sliced into small--maybe 12-acre--parcels and ribbons that way.
    But to get back to your question on cost, indeed, it was 
sold to the voters as a $33 billion project for the San 
Francisco-to-L.A. line. A year later, it was revised to $42 
billion, after the voters had already left. When we had the 
hearing in September--excuse me, November 2011, they finally 
admitted it was a $98.5 billion project to do the legal 
project, true high speed from San Francisco all the way to Los 
Angeles, or vice versa.
    So, the modified project, to get the cost down and not 
scare everybody so much, did reduce to $68 billion. But that 
means it is not a true high speed from San Francisco all the 
way to L.A. They are going to use Caltrain, they are going to 
pay to help electrify that track in the North and do other 
infrastructure in the South.
    So, the real number, for a legal Proposition 1A project, is 
somewhere around $100 billion as an old estimate. With 
inflation, who knows where it is: 120, 130, 150? We see how 
these things go. Just ask the Bay Bridge what that cost.
    And so, if you want the real numbers of a legal Prop 1A 
project, you are somewhere north of $100 billion. And so we are 
not just 55 short, we are 80, 90 short, or more.
    Mr. Duncan. Almost all of these major projects, and 
especially true of Federal medical programs, they always 
lowball the cost on the front end, and then the costs just 
explode after a time.
    Yes, Mr. Valadao?
    Mr. Valadao. The one comment that has been made quite often 
is that they don't know or they don't expect more money to come 
to California. No one disagrees that L.A.-San Francisco has 
horrible traffic. From a Central Valley perspective, it doesn't 
make any sense why you would start the project in the Central 
Valley, if L.A.'s traffic is so bad. I have no problem with 
helping fix the traffic in L.A. Do something there, spend the 
money there.
    Getting from where I live in Hanford down into L.A., if I 
wanted to get on Amtrak today, or if they built the high-speed 
rail, it would stop in Bakersfield. I would get off the 
proposed rail project, get on a Greyhound Bus, go over the 
Grapevine, then go into L.A. There is no connection there, 
there is no rail there.
    You would think we would start by filling in some holes in 
our current system with newer technology, versus building a 
train literally right next to an existing train that we already 
have and we already lose money on. It just doesn't make any 
sense. If you are hell bent on spending money and building 
rail, start somewhere where we actually need rail. And that is 
what my biggest beef with this project is right now.
    Mr. Duncan. All right----
    Mr. Valadao. Thank you.
    Mr. Duncan [continuing]. Thank you very much.
    Mr. Denham. Mrs. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chairman. And I have been 
listening to all the debate and the concerns that they have. I 
must point out that most of the voters that vote for these 
things are in southern California. I would say two-thirds of 
the voters are there. Most of the impact that is against it is 
in northern California. So southern California really has a 
great deal of interest in what is going to happen to be able to 
move people. You have got L.A. County with 12 million people. 
That is almost a third of the voters in the whole State.
    But we do need faster transportation in the North. I was in 
the Sacramento Assembly. And, Loretta, I hate to tell you, but 
I made it in 4\1/2\ hours to Sacramento from L.A.
    Ms. Sanchez. Oh, yes--San Francisco.
    Mrs. Napolitano. Right. Well, and it is--it was one of 
those things when you travel, and there is nobody else on the 
road, or one or two cars, your foot gets a little heavy.
    But there are concerns. There have been concerns with the 
Councils of Government in the areas where I am, in my former 
district and my new district, in regard to being able to work 
with them. And they have been addressing--the Authority has 
been addressing the concerns directly with the CoGs. So--and we 
are moving forward on those, because there are issues that they 
have. And it isn't the funding. It is if it is going to take 
away from the funds for local transportation projects, that is 
one of the main concerns that my Councils of Government have.
    Now, that put into perspective, as Loretta was saying, we 
need to be futuristic in California. We are a donor State to 
the rest of the Nation in many areas. And so, if we are not 
going to be able to help move people or move goods, then we are 
not helping our State move into and keep the position we have. 
As Loretta said, when I was in the State legislature, it was 
the fifth world's largest economy. I think we have dropped a 
few.
    But most of the concerns that we have are not going to be 
addressed by us speculating, until we know whether or not--and 
we will hear from the other panel, the upcoming panel, is 
whether or not they are already making inroads to be able to 
get outside investors to come in and help do, as in other 
areas.
    Now, I understand--and I agree, Mr. Denham--there are great 
projects in other countries. But, guess what? The Government 
owns the land. Here, it is either privately owned or railroad-
owned. And so, you have a lot of contentious litigation, 
whatever. But we must move forward.
    And I would like to give Loretta a chance to be able to 
expound more, because I could represent L.A. County sort of, 
kind of, but you, in Orange County, you have a lot more.
    Ms. Sanchez. Well, remember that we have an airport, John 
Wayne, which is at capacity. Some people would like to see--
that is the airport, if you have ever been to it, where, when 
you take off, you take off like this, because our residents 
don't want to hear the noise.
    So, we have a lot of limitations. We also have a lot of 
growth: 80 percent of the new trips that are going to be 
generated out of LAX are actually coming from South Orange 
County. I know this because we had to fight for a second 
commercial airport that never happened, for example. I have 
been through these wars.
    People are working. They are building companies in Orange 
County. They have got to go up to the Silicon Valley, they have 
got to go and get financing, et cetera.
    Currently, however, the Authority is working with local 
agencies. For example, in Anaheim, where we will use the same 
rails that we currently have, we have this problem called grade 
separations, or lack of, where you stop the traffic because the 
train is going by. Well, you know, they are investing in making 
sure that we are making grade separations. Cars will either go 
under or will go over where the track is. So we are already 
going to see some help, with respect to the way people move. 
And this is one of the costs that is being borne by the 
Authority.
    Mrs. Napolitano. Well, one of the other concerns is that 
the cost to the ridership. And I have always been of the 
opinion it should be available to all residents that need to 
use it. Now, how we work it out, I think it is important for us 
to be able to understand that this is--one of the points that 
has to be taken up and discussed and addressed is the cost of a 
ticket. Because if it is going to be more than airfare, then it 
is something that we need to be able to--allow others to be 
able to have access to that form of transportation. The choice 
should be for everybody.
    Ms. Sanchez. Congresswoman, certainly the cost is a concern 
to all of us.
    I will say that when I go into L.A., if I can, I do take 
the Metrolink that we have, which, if you are a commuter, you 
can buy a set of tickets that makes it lower, et cetera. And 
you would--it is amazing, because, first of all, the people who 
take the Metrolink are surprised that the congresswoman is 
taking the Metrolink. It is a great way to travel up to L.A.
    But secondly, I am surprised that it is not people with 
suit--with briefcases, et cetera, necessarily, that other 
people who 2 or 3 days a week commute into L.A., who I would 
say are not professionals as people typically think these 
commuter rails handle, are taking the trip. So we have made it 
manageable for many of them.
    Mrs. Napolitano. Thank you, ma'am. Thank you, Mr. Chairman.
    Mr. Denham. Thank you. Mr. Williams?
    Mr. Williams. [No response.]
    Mr. Denham. Thank you. Ms. Hahn?
    Ms. Hahn. Thanks. I think--and I will take a pass on a 
question, just because I think we need to get to the second 
panel. But, Mr. LaMalfa, where did ``jump the shark'' come 
from?
    Mr. LaMalfa. Jump the shark is a saying that is a----
    Ms. Hahn. Where did it come from?
    Mr. LaMalfa. Grew out of ``Happy Days.''
    Ms. Hahn. Very good.
    Mr. LaMalfa. During the end of the----
    Ms. Hahn. Which episode?
    [Laughter.]
    Ms. Sanchez. Number 31, second season.
    Mr. LaMalfa. Fonzie, wearing a leather jacket while water 
skiing, jumping a shark.
    Ms. Hahn. OK, fifth season, that is right. But, by the way, 
it was a phrase that meant to show a decline in a series, which 
was not the case for ``Happy Days.'' So, really, that phrase 
was not used properly, which I also don't think we ought to use 
about the high-speed rail project. And I hope to hear from that 
on the next panel. Thank you.
    Mr. Denham. Well, thank you, Ms. Hahn. I am sure that will 
end up in Politico today.
    [Laughter.]
    Mr. Denham. And certainly thank each of the Members for 
spending a little extra time with us this morning. Obviously, 
this is a very important issue, not only for California, but 
for the Nation. And so, we appreciate your time this morning.
    I would now like to welcome our second panel of witnesses: 
Karen Hedlund, Deputy Administrator of the Federal Rail 
Administration; Dan Richard, chairman of the board of the 
California High-Speed Rail Authority; and Alissa Dolan, 
legislative attorney, Congressional Research Service.
    I ask unanimous consent that our witnesses' full statements 
be included in the record.
    [No response.]
    Mr. Denham. Without objection, so ordered.
    Since your written testimony has been made part of the 
record, the subcommittee would request that you limit your oral 
testimony to 5 minutes.
    Welcome. And, Ms. Hedlund, you may proceed.

   TESTIMONY OF KAREN HEDLUND, DEPUTY ADMINISTRATOR, FEDERAL 
 RAILROAD ADMINISTRATION; DAN RICHARD, CHAIRMAN OF THE BOARD, 
  CALIFORNIA HIGH-SPEED RAIL AUTHORITY; AND ALISSA M. DOLAN, 
  LEGISLATIVE ATTORNEY, AMERICAN LAW DIVISION, CONGRESSIONAL 
                        RESEARCH SERVICE

    Ms. Hedlund. Chairman Denham, Ranking Member Brown, and 
members of the committee, thank you for this opportunity to 
speak with you today.
    The high-speed and intercity passenger rail program is the 
largest grant program for passenger rail in our Nation's 
history. And it supports more than 150 projects in over 32 
States. We are focused on executing high-quality projects that 
deliver tangible value for the taxpayers.
    And California's high-speed rail project, like all of our 
projects, has received a very high level of scrutiny and 
oversight that reflects our good stewardship of Federal 
funding. The project has made significant progress, and 
continues today to move forward. The design-build contract for 
construction package one was awarded in August. Right-of-way is 
currently being acquired. Final design is progressing. And we 
anticipate utility relocation and building demolition to begin 
this winter, with significant construction activities to begin 
this spring.
    As we address the project's short-term challenges, it is 
important for us to also recognize the fundamental reality that 
the Authority's phased approach is consistent with how major 
infrastructure projects have been designed and constructed, 
both here in the United States and around the world. Each 
interim stage is projected to be self-sustainable on an 
operating basis. Each interim stage is projected to generate 
enormous public benefits. And by doing it this way, the 
Authority, the State, and stakeholders are in a position to be 
highly adaptable to challenges and changing conditions.
    Furthermore, the data driving our decisionmaking progress 
reveals a clear need for California to move forward. Our data 
justifies the project's need. It identifies rail in California 
as the mode of opportunity.
    And lastly, it foretells pretty ominous consequences, 
should the State fail to act. Choosing to do nothing is 
choosing to allow the producer of more than 10 percent of 
America's GDP to be paralyzed by clogged roads, by overwhelmed 
airports, and by rapidly diminishing air quality, all as, by 
2050, the Central Valley population doubles and the State's 
overall population, as has been mentioned, swells to 60 million 
people.
    On the other hand, to build transportation capacity, 
California needs an alternative to high-speed rail. As has been 
previously mentioned this morning, this would require building 
4,300 miles of new lanes of highway, 115 additional airport 
gates, and 4 new airport runways. It is not only considerably 
more expensive; in many cases, geographic constraints would 
make it impossible.
    High-speed rail is a necessary part of California's 
response to its mobility and transportation challenges. It will 
deliver tremendous transportation capacity and, at the same 
time, reduce greenhouse gas emissions. It will spur economic 
development and create thousands of jobs and, at the same time, 
relieve pressure and reduce wear and tear on our Nation's most 
congested highways and airports.
    The challenges this project faces, including some of the 
opposition, are nothing new. Critics of the Golden Gate Bridge 
called it an upside-down rat trap. Some engineers believed the 
towers would never stand. They dismissed the whole thing as 
impossible to build. Meanwhile, as the project got close to 
breaking ground, opponents filed more than 2,300 lawsuits to 
stop it. And that was before the Environmental Protection Act.
    Some question the revenue sources. Some even grasped at the 
issue of how the bonds would be used. In fact, later, 
historians would write that building the bridge was the easy 
part. The hard part was breaking ground. But, ultimately, the 
project did break ground, and during the Great Depression, at 
that. Can you imagine anyone today saying it would have been 
wiser not to build it? Can you imaging anyone today--can you 
imagine, today, if tens of thousands of drivers each day lacked 
a direct crossing into one of America's signature cities?
    We have an opportunity to not only absorb these great 
lessons from the past, but to reclaim them as an essential 
feature of the American identity, and to accept our 
responsibility to do for future generations what previous 
generations have done for us. We will continue to work with the 
Authority as it updates its business plan, conducts 
environmental analysis, and develops a project we believe is 
critical to both California's future and to America's future.
    And I look forward to discussing with you today how we can 
agree to work together to move this project forward. Thank you.
    Mr. Denham. Thank you, Ms. Hedlund.
    Mr. Richard?
    Mr. Richard. Thank you, Mr. Chairman. Chairman Denham, 
Ranking Member Brown, members of this committee, I am pleased 
to be here today to discuss the status of the California high-
speed rail program, our progress to date, and our prospects for 
the future.
    Mr. Chairman, the subject of this hearing is a review of 
the challenges facing California high-speed rail program. I 
think what you have heard this morning from your colleagues and 
from Ms. Hedlund is that the kind of challenges we face are not 
new. We certainly do have challenges. We have engineering 
challenges, we have the challenge of protecting our 
environment, farmland, riparian zones, species, communities. 
And we have, as all major infrastructure projects have, funding 
challenges and some legal challenges, as well.
    And, of course, this is not the first massive 
infrastructure project to face tests like these. As has been 
said, the generations before us built this country in the face 
of even greater uncertainties. And I would note, Mr. Chairman, 
that a project that you know better than anyone is of vital 
importance to our State, the California water project, which 
has provided sustenance to our farms and agricultural sector in 
the Central Valley, was highly controversial. It passed the 
legislature in California by a single vote. The Bay Area Rapid 
Transit System, where I once served as a director, similarly 
barely came into existence, again by a one-vote margin. But 
today it provides essential transportation service, and its 
replacement value was recently estimated at $30 billion.
    My point is that these monumental infrastructure projects 
are difficult, contentious, belittled, fought, and questioned. 
And, yet, in retrospect, in virtually every case, we have 
determined that they are undoubtedly worth the struggle. We 
feel that way about the California high-speed rail project. 
This project is much more than a train. In addition to meeting 
rapidly growing transportation needs, high-speed rail will 
bring untold economic and environmental benefits to communities 
throughout our State.
    In approving the program, the California Legislature 
unleashed $13 billion of statewide transportation modernization 
improvements that are all tied to the high-speed rail program, 
but reach into every portion of our State. In places like 
Fresno, Palmdale, and other cities, we see already local 
leaders envisioning revitalized downtown areas, anchored by the 
high-speed rail transit hubs. In fact, we anticipate creating 
as many as 20,000 construction jobs during each of the first 5 
years of the project. And once operational, the initial 
operating segment will directly employ at least 1,300 workers.
    Mr. Chairman, we have made tremendous progress towards 
delivering these benefits to Californians. Our design-build 
contractor is firmly ensconced in the downtown historic Fresno 
area, bringing 65 full-time jobs to that region, already. They 
are currently focused on acquiring properties and equipment, 
finishing design work, doing utility relocation, archeological 
work, permit finalization, and geotechnical surveying.
    And, since the last time I appeared before this 
subcommittee, we have strengthened our agreements with the 
Merced and Madera County Farm Bureaus for the protection of 
agricultural lands, with the San Joaquin Regional Rail 
Commission for improving the ACE Train service, which is vital 
to central California and with the California Department of 
Veteran Affairs for employment of veterans and the utilization 
of veteran-owned businesses. We want the benefits of this 
program to reach every Californian.
    I know this hearing will address some recent developments, 
including a November California State court opinion, and we 
will be prepared to discuss those. But I can say to you that in 
concert with our Federal funding partners, we will address 
these matters expeditiously, maintain the momentum of the 
program, and we will continue to meet our matching fund 
obligations.
    At the same time, the committee should note that, to date, 
approximately $100 million of State funds have already been 
spent, and that we anticipate fully participating in this 
project with the Federal Government for the entire amount that 
was appropriated.
    Mr. Chairman, you also know that last week Governor Jerry 
Brown released his new budget for the coming year. And, in so 
doing, he included a proposal to allocate revenues from the 
State's new cap and trade greenhouse gas emission program to 
the California high-speed rail program. We believe this $250 
million in the coming fiscal year, if approved, will portend a 
long-term, sustained effort, which combined with the bond funds 
and the Federal funds, can help us build all the way to the 
gates of Los Angeles within a decade, and that will change 
things dramatically.
    Finally, I would like to thank you again for the 
opportunity to provide the committee with an update.
    And I would like to close with these words from Governor 
Brown, as he described his commitment to the California high-
speed rail project. And he said--and I quote--``No big project, 
whether it was the Golden Gate Bridge, Transcontinental 
Railroad, or the Panama Canal, was free of very strong 
criticisms, skepticism, and attack. That goes with the 
territory. This is a big project. It was started by my 
predecessor,'' the Governor said, ``something that I proposed 
and talked about when I was Governor the last time. There is no 
doubt that California will have millions more people coming to 
live in this State. Many of them will live in central 
California. We cannot add more freeway miles, particularly when 
we already saw 331.8 billion vehicle miles traveled last year. 
We need alternatives. And transit and high-speed rail are part 
of that mix. And the program that I have set forth,'' said the 
Governor, ``strengthens the local rail, the commuter rail 
between San Francisco and San Jose, and in the southern 
California area. It reduces greenhouse gases. It ties 
California together. The high-speed rail serves all these 
functions, and that is why I think it is in the public 
interest.''
    Mr. Chairman, we look forward to continuing to work with 
the subcommittee and all stakeholders to ensure that the 
Nation's first true high-speed rail system is built correctly, 
cost effectively, and in the best interest of the Nation's and 
California's taxpayers. Thank you, sir, and we look forward to 
answering questions from the committee members. Thank you.
    Mr. Denham. Thank you, Mr. Richard. And I would also say I 
appreciate when we had talked back in December, you asked me to 
delay this hearing, as well. I asked you to make sure that you 
could be here today. You did, and I appreciate that.
    And would just also remind you, Mr. Brown's--I believe in 
his comments, because next year's budget he is anticipating $20 
billion coming from the Federal Government to fill that funding 
gap. That is in his--we would have that up on the screen, but 
our screen, I guess, is broken. So we will hand that out to 
others. Thank you.
    Ms. Dolan, you may proceed.
    Ms. Dolan. Thank you. Chairman Denham, Ranking Member 
Brown, and members of the subcommittee, my name is Alissa 
Dolan, and I am a legislative attorney in the American Law 
Division of the Congressional Research Service. I thank you for 
inviting CRS to testify today regarding the legal issues 
associated with challenges facing California high-speed rail. I 
will be discussing two recent California Superior Court cases 
and specific provisions of the cooperative grant agreement that 
exists between FRA and the California High-Speed Rail 
Authority.
    The first case I will discuss is Tos v. California High-
Speed Rail Authority, which is a suit that was brought by Kings 
County, California, and two taxpayers who reside therein. The 
plaintiffs alleged that the Authority's funding plan did not 
comply with the statutory requirements contained in Proposition 
1A. Specifically, the statute requires that the funding plan, 
one, identify the sources of funds for the corridor, or usable 
segment thereof, defined in the plan as the initial operating 
section, or IOS; and, two, certify that all project-level 
environmental clearances needed to proceed to construction have 
been completed.
    The court ruled in favor of the plaintiffs on these claims. 
It held that the funding plan did not comply with Prop 1A 
because it only identified funding sources for a portion of the 
IOS, and did not certify that all environmental reviews for the 
IOS had been completed. The court issued a writ of mandate, 
ordering the Authority to rescind its approval of the plan. It 
appears as though the Authority will have to approve a new 
funding plan that identifies sources of funds for the entire 
IOS, and certifies the completion of all environmental 
clearances before the Authority can proceed towards spending 
bond proceeds.
    The court also noted that this case had no direct bearing 
on the Authority's ability to expend Federal funds, which are 
not governed by Prop 1A.
    The second case is a validation claim that was brought by 
the Authority and the High-Speed Passenger Train Finance 
Committee, a body that was created in Prop 1A to approve the 
issuance of bonds. In this claim, the Authority and the 
committee sought to validate the committee's March 2013 
approval of the issuance of Prop 1A bonds. A successful 
validation claim would prevent future suits that challenged the 
legitimacy of the bonds.
    In this case, the court refused to issue a validation 
judgment, because the Finance Committee did not provide 
substantial evidence that it complied with the statute 
requiring it to decide that bond issuance was necessary or 
desirable. The court found no evidence in the record to support 
the Finance Committee's decision. The record contained no 
explanation of how or on what basis the committee decided that 
bonds were necessary and desirable in March 2013, and no 
summary of the factors that were considered.
    Therefore, the court denied the Authority and the Finance 
Committee's request for validation. By statute, they have 30 
days to file an appeal. However, representatives of the State 
have signaled that they will seek to restart the validation 
process, in order to obtain a validation judgment before 
issuing Prop 1A bonds.
    Finally, I will discuss the cooperative agreement that 
governs Federal grant funds awarded by the FRA to the Authority 
under the American Recovery and Reinvestment Act, or ARRA. 
Under the ARRA agreement, the Authority must provide matching 
funds that cover approximately 50 percent of the project costs. 
The agreement does not require these funds to come from a 
specific source, but recognizes that the Authority plans to use 
Prop 1A bond funds.
    Currently, the agreement allows the Authority to spend 
Federal money without concurrently providing the required 
matching funds. This advanced payment method expires on April 
1, 2014, or at the time of a Prop 1A bond sale, whichever is 
earlier. After that date, Federal funds will only be available 
via reimbursement for expenses already incurred. Since the 
current agreement requires the Authority to begin spending 
matching funds in April 2014, it does not appear that the 
Authority's failure to obtain bond proceeds or secure other 
matching funds has led to a violation of the cooperative 
agreement at this time.
    The agreement also establishes FRA's rights if a violation 
or anticipated violation of the agreement occurs. The FRA may 
choose to suspend or terminate all or part of the grant funding 
provided under the agreement under several circumstances, 
including if the Authority violates the agreement, or if the 
FRA determines that the Authority may be unable to meet the 
contributory match percentage, and complete the project 
according to schedule.
    Additionally, under these circumstances, the FRA may also 
require the Authority to repay all or part of the funds it has 
received.
    This concludes my prepared statement. Thank you for the 
opportunity to appear before the subcommittee, and I will be 
happy to answer any questions you may have.
    Mr. Denham. Thank you. Ms. Hedlund, back in December I had 
a discussion with Mr. Szabo, I had a discussion with Mr. 
Richard about holding this hearing. We obviously wanted to hold 
this hearing in December, after the court ruling on November 
25th. I understand that this hearing held in December, with the 
catastrophe with Metro North, would have been untimely.
    So, out of professional courtesy, after the request from 
Ms. Brown, we delayed this hearing to accommodate everybody's 
schedules, and give plenty of time to answer questions and 
provide staff information that we detailed out in several 
letters. Now, that has put this committee behind. We obviously 
wanted to have a rail safety hearing already. We wanted to have 
it today. We will still plan on having a rail safety hearing. I 
want to make sure all of our Members know that.
    But we asked you for specific information. I sent a letter 
December 12th asking for information that Mr. Szabo and I 
discussed on the phone call that he would provide, not only 
answers to my questions, but he would provide invoices. Four 
weeks later, we didn't have any of the questions answered, we 
didn't have any of the invoices. And now he can't be here 
today.
    So, we sent another letter, again, asking for those 
invoices. We have had staff make multiple phone calls on these 
invoices. Now, this is an administration that the President 
said, ``We are the most transparent and ethical administration 
in U.S. history.'' It doesn't say we are the most transparent, 
except for FRA. And yet we can't get invoices?
    Do you have these invoices?
    Ms. Hedlund. Yes, sir, we do. But let me first state, on 
behalf of Administrator Szabo, he very much regrets not being 
able to be here today. Frankly, he understood the safety 
hearing was going to be yesterday, and would have been 
available yesterday for that hearing. Today he has both 
business and personal issues that he needed to deal with.
    Mr. Denham. And your testimony is more than fine today. I 
know that you are very knowledgeable, you are very capable. We 
respect your expertise. But whether it is Szabo or you, we 
expect answers. This committee expects the cooperation to have 
those invoices presented to it.
    Ms. Hedlund. Mr. Chairman, we wanted to have further 
conversations with your staff about the least burdensome way we 
could respond to----
    Mr. Denham. You have had 4 weeks to work on that. We could 
have had those conversations. And certainly, if it is boxes of 
invoices, we would have been able to accommodate that over the 
holiday break. I think there was some staff that had plenty of 
extra time, with such a long break.
    Ms. Hedlund. It was over the holiday. But be that as it 
may, we have provided your staff with significant information 
with respect to all the invoices that were paid since the 
decision came down. We have provided a breakdown of all 
invoices that have been paid from the inception of this 
project----
    Mr. Denham. The $275 million that has been spent so far, we 
have received invoices on?
    Ms. Hedlund. No, you have received a breakdown, by task 
order, of the amounts that have been spent, both by the 
Authority and by FRA----
    Mr. Denham. Is there a reason that we can't see specific 
invoices?
    Ms. Hedlund. Sir, we are more than happy to meet your 
demands, and--but we would like to----
    Mr. Denham. You haven't met them to date. We have had 4 
weeks to work on this. And if there is specific information 
that you need from our committee, we have had 4 weeks to work 
on it. We have had phone calls. Mr. Szabo and I have exchanged 
several phone calls, and we provided several letters. If there 
is any question on what we are asking for, whether it is you 
and I or whether it is staff, I would assume that those 
questions can be answered, so that we can get these invoices in 
a timely manner.
    Ms. Hedlund. I think we should work with you on how we 
provide you the information that we have that you have asked 
from us. We are committed to being completely transparent. 
There is nothing that we have to hide, or that the Authority 
has to hide. We are trying to get----
    Mr. Denham. That is the real question. What are you hiding? 
This is--the administration--the President has said several 
times, ``This is the most transparent administration in the 
history of our country,'' yet it has been 4 weeks, several 
phone calls, and a couple of letters, and we have still not 
received any invoices.
    In fact, what we have received, over the $275 million to 
date that has been--that has come in, we got that information 
from our Democrat counterparts. Now, I appreciate--this is a 
bipartisan committee, and we are working together. But what are 
you hiding that we have to get information--do you only share 
transparency--let me see one of these other quotes. ``My 
administration is committed to creating an unprecedented level 
of openness in Government.'' Only with Democrats. No, it 
doesn't say that. It says, ``My administration is committed to 
creating an open--unprecedented level of openness in 
Government.''
    The most transparent administration in history, not just to 
Democrats, but to both, to--a bipartisan committee of Congress, 
yet we can't get these invoices. When will we have these 
invoices? That is the question.
    Ms. Hedlund. We will discuss that with your staff, and talk 
about----
    Mr. Denham. What do we need to discuss? Is there a reason 
that we can't send somebody over to pick up invoices today?
    Ms. Hedlund. I do not know, sir. I can't answer that 
question. We are talking about a process of turning over 
information. We need to have further discussions----
    Mr. Denham. You have had 4 weeks. How much more time do you 
need before we can send somebody over to pick up information?
    Ms. Hedlund. We will talk to your staff about how we can 
turn over the information you are looking for.
    Mr. Denham. A week?
    Ms. Hedlund. I can't tell you.
    Mr. Denham. A month?
    Ms. Hedlund. I----
    Mr. Denham. This is the most transparent Government in our 
U.S. history.
    Ms. Hedlund. We agree----
    Mr. Denham. Do you need 2 months? How much time do you need 
to have our staff go over and pick up invoices?
    Ms. Hedlund. There are thousands of documents, sir.
    Mr. Denham. How about every invoice over $100,000? How many 
documents is that?
    Ms. Hedlund. I have no idea.
    Mr. Denham. I assume that is a smaller amount. Is there any 
reason why the FRA can't put together every invoice over 
$100,000?
    Ms. Hedlund. I--you know, the invoices that we get from the 
Authority are a combination of invoices that they get from 
their contractors.
    Mr. Denham. Look, I am not concerned with the combination--
--
    Ms. Hedlund. That is why----
    Mr. Denham. I am not concerned where they are, or what is 
in them. What I am concerned about is an agency that is hiding 
information from Congress. We are a congressional committee 
that is overseeing this project, and you cannot provide us 
information.
    Ms. Hedlund. Sir, we are committed to give you all the 
information that you----
    Mr. Denham. So when can we get this information?
    Ms. Hedlund. I can't say that today, exactly what it will 
take for us to provide the information that you are seeking. 
But we will certainly be as cooperative as possible.
    Mr. Denham. Well, you have not been cooperative. You have 
not given us the information over the last 4 weeks. That is 
what this committee will be demanding, is--at least in the 
short term--every invoice that is over $100,000.
    My time is expired. I now--Ms. Brown?
    Ms. Brown. Thank you. Mr. Richard, I am interested, since 
you have a billion of my dollars from Florida, to tell us what 
we can do to expedite the process in getting the project done. 
For example, we have had lots of discussions about one stop 
permitting. What can we do to help you and assist you?
    I mean, obviously, the Congress, you know, even this 
committee, we are on various tangents. My goal is to make sure 
that we have true--we have high speed. And there is a 
discussion about what is high speed. But when I go to Europe, I 
can go 200 miles from downtown Paris to other European capitals 
in 1 hour and 15 minutes. And that is the goal, to move people, 
goods, and services.
    You know, the Congress is on a different kind of tangent, 
obviously. So can you tell us what we can do, as a Congress, to 
help you all?
    Mr. Richard. Congresswoman Brown, first of all, thank you 
very much, both for your support and for that question.
    And you are right. In Europe and those places where you've 
traveled, they are true high-speed trains. I know there has 
been some commentary on whether that is what we are building, 
but that is what we are building: a high-speed train that will 
go more than 200 miles an hour and be fully electrified and 
clean, and so forth, exactly what the people of California and 
the people of the United States want to see.
    To answer your question directly, I know that this is a 
controversial project. But if we can find ways to come together 
and talk seriously about this project and what its objectives 
are, to the extent that the private sector sees that there is 
an ongoing commitment, both from the State of California and 
the Federal Government, that will accelerate private-sector 
money into this project.
    I know the chairman has been very concerned, as has been 
the concern of all Members, to see if we can find a way to 
leverage public dollars with private-sector dollars. Madam 
Ranking Member, we estimate that $20 billion of private-sector 
dollars would be coming into our project, based on the revenues 
that would be generated. That is a lot of money. What they are 
waiting to see is the first piece of this built and a 
commitment going forward.
    In fact, just yesterday, at our monthly meeting of the 
California High-Speed Rail Authority, a representative of one 
of the largest infrastructure builders in the world, from 
Spain, stood up and said, ``We see what Governor Brown is doing 
with his commitment of money from cap and trade. This type of 
long-term commitment is creating excitement and generating more 
and immediate interest on the part of the private sector.''
    So, Madam Ranking Member, I really believe that if we can 
come together around this project, we can achieve these 
objectives of leveraging public dollars with a lot of private-
sector money.
    Ms. Brown. Thank you. Would you like to respond and explain 
the Federal role in making sure that we are spending taxpayers' 
dollars properly? Do you want to expound on that? I mean----
    Ms. Hedlund. We engage in all of our projects in extensive 
oversight and monitoring of the expenses. We do detailed 
reviews, desk reviews, on-site reviews. And every single 
payment, reimbursement, that we make to a grantee is subject to 
audit. So, even if, after the fact, some question is raised 
about the propriety of a specific expenditure, we can recapture 
that.
    Ms. Brown. CRS, do you want to respond, as far as 
taxpayers' dollars are concerned?
    Ms. Dolan. I will decline to answer any questions that deal 
with policy. So I think, as--from the legal standpoint, you 
know, the FRA's relationship to the Authority is set out in the 
cooperative agreement, and they have certain rights under that 
agreement. And as far as the way that that agreement is 
written, the FRA has the responsibility at this point to make 
decisions on how to proceed.
    Ms. Brown. OK. I wasn't aware that I was asking you a 
policy question. But let me just make a statement: I think 
that--and I have said it before--I think certain Members in 
this body need to run for Governor of California, need to run 
for the State legislature in California or the State senate in 
California. We have a bigger role here. We are interested in 
California, but we are interested in the entire country. Yes, 
interested in how we can move our country forward.
    We are stuck on stupid. We are not investing any money. 
Eight billion dollars, not a dime--and proud of it--not a dime 
for high-speed rail. But when I go to other places, they are 
moving forward. They are moving forward. And we are left 
behind. I am talking about third-world countries moving ahead 
and leaving us. Third-world countries have intermodal airports. 
I mean, I don't understand why we don't understand the 
importance of moving people, goods, and services. We are 
becoming a third-world country, while we sit here and argue 
about nickels and dimes.
    Mr. Denham. Mr. Webster?
    Mr. Webster. Thank you, Mr. Chairman. Mr. Richard, which 
segment--OK, I don't know much about California, except just 
somewhat where the cities are. Which is the segment that you 
are building first?
    Mr. Richard. Congressman, first of all, we would welcome 
you to come visit and see what we are doing. The segment that 
we are actually building first is in the Central Valley of 
California, but simultaneously we are making investments in our 
urban areas in San Francisco and Los Angeles. We are building 
the spine of the system in the Central Valley. This is an 
intercity rail system, and so it is going to connect the great 
regions of our State.
    Mr. Webster. So how long is that segment?
    Mr. Richard. The segment that we are building will be 130 
miles through the Central Valley, and that will go from north 
of Fresno, which is right in the center of that region, to 
Bakersfield, which is in Congressmember McCarthy's district.
    Mr. Webster. What is the projected passenger travel per 
day, or----
    Mr. Richard. So, Congressman, this gets into the issue of 
how we are building in a stair-step fashion.
    Mr. Webster. Well, just in this segment. I am just--if we 
are talking about the----
    Mr. Richard. Right. That segment is what we have the funds 
to build today. And that is not going to be a segment where we 
are going to be able to start full high-speed rail service.
    So, what we are going to do in the interim is to upgrade 
the existing Amtrak service on that segment while we clear the 
environmental process and put the funding package together to 
get to the next segment, which is over the mountains to a 
community of Palmdale, right at the edge of the Los Angeles 
basin. That is where I think we will be able to start to 
operate.
    I will tell you that it surprises a lot of people, but, 
today, three of the top five Amtrak ridership corridors are in 
California. And the Central Valley segment where we are 
building right now is the fifth most used Amtrak corridor, with 
more than 1 million trips per year. So there is substantial 
ridership in those communities. And as we move to transition up 
to high-speed rail level service, we expect to see, ultimately, 
between that area and Los Angeles, about 2.2 million trips, 
just in the first year, to start, as we get into the Los 
Angeles basin. So it is significant.
    Mr. Webster. So, what I--I just heard a lot of numbers 
flying around here, 8 million passengers, you know. What kind 
of--I just want to see what kind of impact it was going to have 
on the traffic, air traffic, even the bridge that was 
mentioned. That has----
    Mr. Richard. So----
    Mr. Webster [continuing]. 60,000 cars a day on it. You 
know, is that going to--that is certainly a different kind of 
project than this. This would be far less than that, as far as 
people moving. I am just trying to get an idea.
    So--but that is not going to be high speed. It eventually 
will. Is that what you are saying?
    Mr. Richard. Yes, sir. Absolutely. As the GAO noted, when 
it was asked by several Members to review our project, a 
project of this size can only be built in phases, and that is 
what we are doing. Our approach is to make sure that each phase 
is usable, as we build it. Then, as additional phases are 
added, the whole system gets better and better and better.
    But our Central Valley in California right now suffers from 
tremendous traffic and serious environmental issues. The air 
basin is very bad there; 21 percent of the kids have asthma. It 
is actually one of the poorest areas of our State, in addition 
to having some of the great wealth from our agribusiness 
communities. And this is an area that has been left behind in 
investment in California for years.
    So, our first $6 billion--half from Federal funds, half 
from the State--targeted to that area, is going to have 
immediate benefits in terms of employment, air quality, 
transportation, and mobility. And it is the spine of the system 
that we are building that is ultimately going to connect the 
entire State.
    Mr. Webster. What does the ridership produce, as far as 
operating cost, in just that segment?
    Mr. Richard. Under our bond act, Congressman, we are not 
allowed to operate high-speed rail with a subsidy in 
California. And that is the crux of the issue.
    Because everywhere in the world, once high-speed rail is 
built, it generates enough money to operate without needing a 
public subsidy. And our projections are that we will be able to 
do that, too. Not on that first segment, which is why we will 
probably use it for upgraded Amtrak service. But as we get over 
the mountains to Palmdale, and to connect to L.A., we believe 
we will be able to start operating without a public subsidy. In 
other words, our high-speed rail will cover its costs, and that 
will trigger further private-sector investment that will help 
build out other portions of the system. So that is the approach 
we are taking.
    Mr. Webster. Thank you very much.
    Mr. Richard. Thank you, sir.
    Mr. Denham. Thank you, Mr. Webster. Mrs. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chairman. It is really 
interesting to hear some of the information. But I--Mr. 
Richard, what--because I know there is going to be some grade 
separation improvements. And, as I have mentioned before in 
this subcommittee, that in my area there were 54 grade 
crossings, and only 20 are going to be separated. So some of 
the investment is going to be in helping the communities be 
able to deal with the impact it would have on its traffic. And, 
of course, you are talking about improving the infrastructure 
of the rail lines, which, of course, have been sadly in need. 
We talk about not funding infrastructure repair, that we are so 
back--and bridges and dams and railroads, and all of that.
    So, all of that said, I think we need to have more 
information from the Authority to the general public about the 
benefits it brings, besides being able to do the connection and 
the choices of travel for folks and eventually into the L.A. 
area.
    We talk about Palmdale, going into Palmdale. How--what is 
the connection between there and Los Angeles?
    Mr. Richard. Congresswoman Napolitano, in the first phase, 
part of the appropriation from the California Legislature is to 
upgrade the Metrolink line from Los Angeles to Palmdale. So 
there will be near-term improvements in that service. That 
service right now has about 1.2 million riders per year. As you 
know, it is very well-traveled. We will be improving the travel 
time, straightening part of the track, and doing grade 
separations there. Those things will provide immediate benefits 
for the Metrolink service between Los Angeles and Palmdale.
    Mrs. Napolitano. Well, I am not opposed to the high-speed 
rail, at all. I just want to be sure that the communities that 
I represent, and the rest of the county, is aware of the plans 
that the Authority has for the area, and how the impact is 
going to be on those communities, themselves. And I think I 
shared that with you, and I hope to be able to continue working 
on that.
    Ms.--I would yield to Ms. Brown.
    Ms. Brown. First of all, I would like to make some breaking 
news. I would like to clarify that the Democrats on this 
committee, members or staff, are not getting any information 
that the Republicans have not been getting. I want to be clear: 
We have not gotten any information.
    Secondly, for the Deputy Secretary, in light of the two 
recent court decisions that we have heard about this morning, 
is the Authority currently meeting its obligations to FRA, or 
are there any violations of the agreement?
    And my second question, have either one of these lawsuits 
stopped the projects?
    Ms. Hedlund. Thank you, Ms. Brown, for giving me an 
opportunity to clarify that issue. As our learned counsel from 
the CRS has pointed out, the Authority is not in violation of 
the cooperative agreement as a result of its inability to 
access bond funds at this time. The Authority is in the process 
of developing a plan to address concerns raised by the court in 
pursuing supplemental funding sources, and you have heard the 
chairman of the Authority today, that they are committed to 
meeting their matching fund obligations under this agreement.
    With our Federal investment secured by strong protections 
in our grant agreement, we are working with California on a 
path forward that best serves the interests of the American 
people. And with these strong protections in place, any 
premature adverse action on the part of the Federal Government 
would not serve the taxpayers' interest, because it could delay 
project delivery and cause the Authority to incur substantial 
contract damages and other costs that could needlessly increase 
the ultimate cost of the project to the taxpayers by millions 
of dollars.
    Ms. Brown. You want to add to that, Mr. Richard?
    Mr. Richard. Yes, Congresswoman. I want to reaffirm what I 
said before. We are meeting our obligations. We will continue 
to meet our obligations.
    When we negotiated this last grant agreement amendment with 
the Federal Government, it allowed us to access Federal funds 
ahead of State funds. And I would like to emphasize that was 
just good business. The Congress, in its wisdom, set a deadline 
on the use of the stimulus money of September 2017. We were 
facing a situation where, in order to use the Federal funds in 
time, we were going to pay about $180 million of acceleration 
fees to our contractor to get them to go faster. We have saved 
that money now, because of the cooperation and the work that we 
have done with our Federal funding partners. It was good 
business.
    But, at the same time, Ms. Hedlund and her colleagues 
negotiated a very strong agreement that went through all kinds 
of ``what-if'' questions. They anticipated that there might be 
a problem like this. The agreement, by its terms, says the 
State intends to pay back the difference with bond money. But 
if they can't, there will be other monies, and other monies, 
and ultimately, Federal protections, as was described by Ms. 
Dolan.
    So, we feel that the Federal taxpayers are fully protected. 
The State of California recognizes its obligation to match the 
Federal commitment. We are doing so, and we will continue to do 
so.
    Ms. Brown. Thank you, sir.
    Mr. Denham. Thank you, Mr. Richard. Mr. Williams?
    Mr. Williams. Thank you, Mr. Chairman. And I want to thank 
all of you for being here this morning. Appreciate it.
    I am from Texas. I am a business guy for 42 years, and I am 
a big believer in the private sector. I think the private 
sector is the biggest, the best partner anybody can have. And 
they get it done right, much better, in most cases, than the 
Federal Government.
    But just last week Secretary Foxx was in my State, in San 
Antonio, announcing an agreement between the Federal Railroad 
Administration, TxDOT, and the Central Texas Railway, to 
prepare two environmental studies that will lay the groundwork 
for high-speed rail between Dallas/Fort Worth and Houston. And 
I must tell you, I personally look forward to seeing the 
results of that Department's work, and--with our State, on the 
project.
    Now, in preparing for this hearing, I was struck by the 
stark difference between the work that has been done in Texas 
and that that you describe that is being done in California. 
Most glaring to me is the private-sector involvement. In Texas, 
I understand there is a lot of private-sector interest and 
backing, but I don't see any of that, that you are talking 
about. You have touched a little bit on it, but we don't see 
any of that in California.
    So, Mr. Richard, I would direct this, my first question, to 
you. How much private-sector money do you have in hand for all 
this project? Now, I heard you talk a little bit about that. 
But what do you have on hand now that shows you are 
aggressively going after the private sector?
    Mr. Richard. Congressman, thank you for that question about 
the private sector. Let me just say, sir, that this is actually 
a part-time job for me, being the chair of the California High-
Speed Rail Authority. It is sort of a full-time part-time job. 
In fact, I have spent much of my career in the private sector, 
including infrastructure finance. And so I share your view that 
the private sector brings innovation and efficiency.
    And, indeed, our business model for high-speed rail in 
California anticipates that it would be operated by the private 
sector. This is not going to be a public-sector railroad. Our 
business model is to have initial investment, and then to 
auction the rights to the private sector to come in and build 
and operate on that system. They would be the operators. That 
is a model that has been used successfully around the world. I 
am sure that that is what they are looking at in Texas. So we 
are going to follow that model.
    Sir, we have had extensive conversations, not only with 
private-sector entities in this country, but with sovereign 
funds and private-sector builders and operators from around the 
world. There is no question there is going to be extensive 
private-sector involvement in California high-speed rail. The 
only question, Congressman, is when. Our view is, as we talk 
with them--and we would be happy to share this with you and 
your colleagues--that they want to see certain things first.
    It is a question of how they price the risk. If we bring 
them in too early, it could be very costly for us. If we can 
effectively use public dollars first and show a ridership base, 
then we have got something much better to sell to them, and we 
can generate a lot more private-sector dollars.
    So, we think that we are working very well with the private 
sector. I would like to point out that when Governor Brown 
appointed me, he also appointed a fellow named Mike Rossi, who 
was the former vice chairman of Bank of America. Mr. Rossi sits 
on the board of Cerberus and other financial companies. He has 
extensive finance experience. Together, we have laid out an 
entire financial approach to this project that we think will 
maximize private-sector involvement.
    We don't have those dollars in hand today, but that is 
because we believe that it is proper to use the Federal 
stimulus dollars first, and then lever up the private-sector 
dollars afterwards.
    Mr. Williams. Well, with that in mind, as--what I 
understand, as I have listened to this, even before the 
stimulus money came out, you all turned down an offer from the 
private sector to help build this project. Can you explain that 
offer? And can you speak on why it was turned down?
    Mr. Richard. Congressman, I am aware of the situation you 
are referring to. It predated my time on the California High-
Speed Rail Authority. But what I understand was that a company 
that has operated the French railroad, SNCF, made a proposal at 
one point to the California High-Speed Rail Authority to simply 
take over the project. It is also my understanding that that 
offer did not come with any dollars attached to it. They just 
said, ``You know, we can come in and take this over.''
    To me, that would basically be the same as saying, ``Well, 
why don't we let Airbus come in and run our airports?'' I'm not 
quite sure that the jetways would fit the Boeing airliners at 
that point. So we wanted to have an open-source project. We 
didn't want to turn it over to just one company, particularly 
when there was no financial commitment associated with that 
proposal. If they had brought dollars to the table, it might 
have been a different conversation.
    But that is my understanding of the history, sir. And, if 
you are interested, I am happy to provide more information.
    Mr. Williams. I think you should provide that information, 
let us see that.
    Mr. Richard. I would be happy to do that, sir.
    Mr. Williams. And also, talking about the model in Texas, I 
note that the Texas Central has been speaking with STB 
throughout their process, to ensure that they check all the 
boxes they need to, and they don't get hung up anywhere.
    You all, however, didn't apply for the necessary STB 
authority until after Chairman Denham asked you to look into 
it. Is that correct?
    Mr. Richard. That is absolutely correct. We had thought 
that we did not need to go to the STB until we started 
operations. Upon assuming the chairmanship of this 
subcommittee, Chairman Denham told us that he did not agree 
with that view. We told him that we respected that position, 
and we immediately went to the Surface Transportation Board to 
put the question to them. They determined that we were under 
their jurisdiction, and we have proceeded apace since then. But 
you are absolutely correct, Congressman.
    Mr. Williams. Well, you think if you discussed it with them 
before, and supposedly applied on time, that you would not have 
had to ask for approval to be--to have the process affected?
    Mr. Richard. Congressman, my understanding is that once we 
applied, the application went through the normal process at the 
STB.
    A few months ago, for the next leg, we asked the Surface 
Transportation Board if they wanted to bifurcate our 
application and deal with the transportation issues first and 
the environmental issues second, in order to meet time 
schedules. They told us they didn't feel the need to do that, 
that they felt that their process would work just fine, and we 
accepted that judgment.
    Mr. Denham. Thank you, Mr. Williams. Ms. Hahn?
    Mr. Williams. Yield back.
    Ms. Hahn. My turn already? It is only 2 hours. So it is 2 
hours into this hearing. Pretty much everything has been said. 
But everything hasn't been said by everybody, so I am going to 
say it. And, as co-chair of the California High-Speed Rail 
Caucus, I am a strong supporter of bringing high-speed rail to 
California.
    We are behind the rest of the world. China has built more 
than 6,000 miles of high-speed rail track since 2008, and is 
investing more than $100 billion in high-speed rail. Japan and 
France have also made substantial investments. In California, 
our transportation system is at its limit. Our highways are 
jammed. L.A. to San Francisco is the second busiest air route 
in the country, and faces constant delays because of their 
weather. We need another option, and I think that is what high-
speed rail is for California.
    It is true that the Authority has had a lot of challenges. 
It needs to quickly and effectively and--address, so that we 
can ensure that this project moves forward. I hope that, at 
some point, we can begin to talk about the serious impact that 
this project is going to have on some of the communities, and 
how we might mitigate that. But let's not pretend that these 
challenges are insurmountable, and that we haven't faced 
similar challenges before. Everybody has been talking about it.
    The great California water project, which, by the way, when 
it was introduced, only passed the legislature by one vote. And 
today, it provides drinking water for more than 23 million 
Californians annually. Nobody is going to question that.
    The New York Times talked about when the Golden Gate Bridge 
was in development, it had 2,300 lawsuits before it was built. 
So, again, nobody is discussing whether or not that project was 
worthwhile.
    I believe this is worthwhile. When we talked about 15 
million residents residing in California, you know, I hope that 
these are the kinds of projects we are dreaming about and 
thinking about and planning for.
    I was disappointed one of my fellow California Members, Mr. 
Valadao, was more interested in dealing with the population by 
building more prisons. You know, I don't think that is the 
future of California. I think we need to be innovative and big 
thinkers. And you know, with the jump the shark comment, you 
know, we both had knowledge of ``Happy Days.'' The problem is 
that episode was in the fifth season. It went on for 11 more 
seasons. So, even the way people use that comment to describe a 
project that is declining, or that is relying on gimmicks to 
keep attention on it, was used improperly. I think we are in 
season 1 of the high-speed rail, and I think we have got at 
least 11 seasons that are going to be strong and problematic.
    And I hope we, as Californians, can come together and talk 
about the problems, and talk about the solutions. And I hope, 
Mr. Denham, your line of questioning is more about tough love 
than, you know, about shaming and punishing a project that I 
think will mean a lot to California. And I think we ought to be 
fighting together to bring Federal resources to California, not 
trying to oppose Federal resources.
    So, Mr. Richard, a couple things have been talked about. 
You have been accused in this hearing of having phony numbers 
with your ridership and your business plan and your financing. 
Can you address some of that?
    And also, one of the things I am interested in is the 
Governor's proposal to offer the $250 million in cap and trade. 
Is that legal? What does our legislative analyst say, whether 
or not we can use that? Is $250 million even close to what we 
are going to need to fill the gap? And how do we plan to fill 
the gap in this project, which I think is one of the greatest 
projects that we have seen in this country in a really long 
time?
    Mr. Richard. Well, Congresswoman Hahn, thank you for those 
comments and questions. Let me just quickly address the issue 
on the use of the cap and trade money.
    The Governor did propose in his recent budget to use cap 
and trade money for high-speed rail. But this has been talked 
about for several years. In fact, going back to the 
commencement of the greenhouse gas reduction program by the 
California Legislature, early on, the California Air Resources 
Board put out a scoping plan, talking about the types of 
strategies they would have for meeting the target reductions. 
California high-speed rail was included in that early scoping 
plan. So, from the very beginning, the Air Resources Board saw 
this project as having major benefits for helping us meet our 
goals of reducing greenhouse gas emissions to 1990 levels.
    Now, it is true that the legislative analyst of the 
California Legislature came out this week and said that they 
thought that this was not necessarily consistent with the law, 
I think the term they used was a ``legally risky strategy.'' 
But the problem with that conclusion is that it was based on 
two assumptions, both of which are not correct.
    The first assumption was that the legislative analyst 
assumed that there wouldn't be benefits before the year 2020, 
as contemplated by the law. But, in fact, there will be 
tremendous benefits. Because of our cooperative agreements, we 
are going to be electrifying the Caltrain commuter rail system. 
That, itself--and that is going to be in place by 2018 or 2019 
and reduce 18,000 tons per year of carbon emissions 
immediately, just for that train system there.
    The second assumption was that we would generate greenhouse 
gas emissions during construction. As far as construction in 
the Central Valley goes, we are committed--and we are required, 
under the environmental processes--to a zero impact 
construction. The equipment that is being procured right now is 
called Tier 4 equipment, which has the lowest possible 
emissions. We have required the contractor to recycle all 
steel, all concrete, to take care of all those materials, so 
that they don't go into landfills. And landfills themselves 
generate greenhouse gas emissions.
    My point is there are immediate and durable benefits that 
are being provided through this program.
    Mr. Denham. And we will be having a couple more rounds.
    Ms. Hedlund, I appreciate that in all efforts for it to be 
transparent, you will be providing those invoices. Our staff 
looks forward to having those conversations and getting those 
in a timely manner. But let me ask you a little more about the 
lawsuit and what is happening right now with California, as it 
pertains to our Federal tax dollars.
    So, is it accurate that FRA has not changed any policy or 
procedures related to the grant since the court ruling?
    Ms. Hedlund. We have not--I think that is accurate. We have 
not made any change to the grant agreement since the court 
ruling.
    Mr. Denham. So even though a court has made the decision 
that there is no State match at this time, FRA is not taking 
any separate precaution on Federal tax dollars?
    Ms. Hedlund. I would not agree with your characterization, 
sir, of the court's decision. The court decision--and I am a 
little reluctant to discuss a litigation to which we are not a 
party, but you have been advised by counsel to the CRS--the 
court decision did not say that the funds would never be 
available. It said that the Authority has to----
    Mr. Denham. It said ``currently,'' which----
    Ms. Hedlund. They----
    Mr. Denham [continuing]. Is your responsibility, watching 
over the taxpayer dollars. You have a fiduciary responsibility 
to make sure that, under the Antideficiency Act, that you are 
going to receive your 50 percent match coming back. So, 
currently----
    Ms. Hedlund. I don't----
    Mr. Denham [continuing]. The court decision has said--so 
the question is, have you made any changes? And who has 
actually made this decision? Did it go up to DOT? Is the White 
House aware that the FRA is not making any changes in its 
current procedures?
    Ms. Hedlund. We are in discussions with the Authority about 
their plans to continue to meet their obligations under this 
agreement. They have not failed to meet their obligations. As 
far as we can determine to date, they have said they will 
continue to meet their obligations. And so, we are going to 
continue to talk to them about this.
    Mr. Denham. Ms. Hedlund----
    Ms. Hedlund. But we have not made a decision.
    Mr. Denham. A court has made a ruling. Today, currently, 
there is no State match. Now, the courts have said Prop 1A 
cannot be used, the $9.95 billion cannot be used under the 
current system. And April 1, $180 million is going to be owed 
back, by your numbers, by your request, on that State match.
    So, I understand the Governor has been very creative, $250 
million for the cap and trade dollars. But as I served in the 
State legislature, that vote has to be done by the legislature 
at the end of the fiscal year. Most of the time they are late, 
meaning July or August. How do they meet the April 1st 
deadline, if it is even constitutional to do cap and trade, and 
if both liberals and conservatives in the legislature agree 
that cap and trade dollars should be used for this process? We 
are still talking August versus April.
    Ms. Hedlund. I would suggest you address that question to 
Mr. Richard. We do recognize that acts of the legislature, that 
they are subject to appropriation, as is my next paycheck.
    Mr. Denham. My concern is this does not seem to be raising 
any red flags.
    Ms. Hedlund. We are very concerned about it, sir, and that 
is why we have been engaged in discussions with the Authority 
about their plans.
    Mr. Denham. So who made the final decision to continue to 
spend the dollars? Is that something that Mr. Szabo makes on 
his own? Is that something he takes to Secretary Foxx? Is it 
something Secretary Foxx takes to the administration?
    Ms. Hedlund. We have not made a determination that they are 
in violation of their agreement. And so, we have continued to 
make those payments in the ordinary course.
    Mr. Denham. Ms. Dolan, do you think that they are in 
violation?
    Ms. Dolan. I think, under the terms of the cooperative 
agreement as it stands at the moment, two things happen on 
April 1st. They may no longer take advantage of an advanced 
payment method, and can only be granted Federal funds under a 
reimbursement method. And, according to the funding 
contribution plan, as it exists in the cooperative agreement, 
funds starting in April of 2014 until, it appears from the 
chart, April of 2015 will be spent solely from the matching 
funds the State provides, instead of the ARRA funds, as an 
effort to ``catch up'' on the contributory match percentage 
that they are required to have.
    So, at this point, considering that those contributory 
match funds are due in April of 2014, it doesn't appear that 
they have violated the agreement right now, as it stands.
    Mr. Denham. So, given the November ruling, does the FRA 
have the right, under the grant agreement, to suspend payment? 
Do they have the right to be able to suspend payment to the 
California High-Speed Rail Authority if they so choose?
    Ms. Dolan. So, under Section 23 of the grant agreement, the 
FRA has several options for suspension and termination of the 
cooperative agreement if any number of circumstances exist. One 
of those possible circumstances is if the FRA makes a 
determination that the grantee will not be able to meet the 
contributory match percentage that is required under the 
agreement.
    So, if the FRA determined that the Authority would not be 
able to meet the contributory match percentage, then under the 
agreement they would have the option to suspend or terminate 
funding.
    Mr. Denham. Thank you. I do have a followup question on 
that, but my time has expired.
    Ms. Brown?
    Ms. Brown. Thank you. You know, I have been here for 22 
years, and I guess this is the first time I have ever seen 
anybody go after money for their State. I mean this is really 
breaking.
    But my question has to be that if California is temporarily 
prevented from selling bonds because of the recent lawsuit, are 
there other ways California can meet its obligations?
    Mr. Richard, you mentioned that we--you saved us $188 
million. Can you expound upon that?
    Mr. Richard. Well, thank you, Congresswoman. I think it is 
important to note that Governor Brown came into this project 
when it was already underway. It had been started by his 
predecessor and had been supported by many Governors over the 
years. In fact, even when he was President, President Reagan 
spoke to the Japanese and said, ``We are going to be building 
high-speed rail in California, just like you folks have here, 
in Japan.'' So this has been something that California has been 
looking at for many, many years.
    When Governor Brown came in, this program did have a number 
of challenges and a number of problems, which we've tried to 
address. My background is in local transit. My colleague's 
background is in finance. We tried to bring a businesslike 
approach to this project. What that meant was that we wanted to 
look at this in a way that business leaders would look at the 
challenges and opportunities of a similar venture.
    You know, Ms. Hedlund, before she had this position, was a 
commercial attorney working on infrastructure projects. She 
knows how to negotiate an agreement that has security 
provisions in it. And I can tell you that when we sat down to 
negotiate for months and months with the Federal Railroad 
Administration, they went through, in chapter and verse, how 
they were going to make sure that they protected themselves.
    What the agreement says is that if we can, we will pay back 
the money from our bonds. If we don't have the money from the 
bonds, we will pay it back from other sources of State funds. 
If all of that fails, they have the right, under Federal law, 
to actually offset monies that would come to California. So 
they have an agreement that you, as a Member of Congress, 
should be happy about, because it protects the taxpayers of 
Florida and every other State in the Nation, Federal taxpayers, 
when it comes to California.
    Now, our administration is committed to meeting its 
obligations. Our hope is that, possibly by April, we will have 
access to the bond money. But if we do not, the Brown 
administration is committed to working with our Federal funding 
partners to make sure that, under the grant agreement, we 
continue to work in harmony to achieve the objectives. That is 
what we are going to do.
    Ms. Brown. Well, I surely hope so, because I am sure we 
will be back here April 1 with another hearing. You know, we 
are going to micromanage this project. You need to know that.
    Deputy, are you comfortable that we are safeguarding the 
taxpayers' dollars, particularly the billion dollars I gave?
    [Laughter.]
    Ms. Hedlund. We are absolutely comfortable that we are 
safeguarding the taxpayers' dollars.
    Ms. Brown. And do you need any authority from us?
    Ms. Hedlund. We do not need any additional authority from 
you to safeguard the taxpayers' dollars in this project.
    Ms. Brown. I am, overall, interested in how to expedite 
projects. I heard the person talking from Texas, which--I have 
been out there five times. The flights between Houston and 
Dallas, I mean, it is--I have sat on the runway for an hour. 
And if they had a high-speed train, I could have been there. 
And we just sit on the runway. And all of the local communities 
are supportive of the project. But the problem was you didn't 
have the support in the capital. And that is part of the 
project. Where you have the local government's support, then 
you don't have the people--the capital.
    So, this is a project that has local and State support, but 
you are having problems up here, with the Federal Government. 
Not the Federal Government, but Members of Congress.
    Mr. Richard. Well, Madam Ranking Member----
    Ms. Brown. Republican Members of Congress, OK.
    Mr. Richard. There are certainly people in California who 
have concerns about the project. So I don't want to pretend 
otherwise----
    Ms. Brown. I was there. I mean I was there when the 
Governor announced the--I was there for another meeting, so I 
was there when the $100 million, $100 billion, or something--I 
was there. So I have been there, over and over again, in the 
congestion, in the traffic. I had a convention out there, it 
was the worst one I ever had, because it takes all day to get 
from one place to another. So there has got to be a better way 
to get around.
    Mr. Richard. Well, and on that point--and also, in response 
to something that Congressman DeFazio said before--one of the 
biggest supporters of the California high-speed rail project is 
the head of the San Francisco International Airport. That is 
because, right now, between San Francisco and Los Angeles, 
which is the busiest short-haul air corridor in the country, 25 
percent of those flights are delayed. They don't have any room 
to expand the airport. And their view is they want to use their 
runways and their gates for long-haul----
    Ms. Brown. Long-haul.
    Mr. Richard [continuing]. International flights. That is 
the most effective use of that resource. So they have been very 
strong supporters, and we have enjoyed the support of the 
mayors of all of our biggest cities, the heads of the business 
communities in all the major cities. We have a lot of support. 
We do have detractors, but we have a lot of support.
    Ms. Brown. Yes, sir.
    Mr. Denham. Thank you, Mr. Richard. Mr. Mica?
    Mr. Mica. Thank you. A couple of questions. Since we have 
got pretty substantial Federal expenditure already in the 
project, and this will be one of the biggest expenditures of 
Federal funds for any infrastructure project, there is some--
there is now some uncertainty. I guess your superior court had 
said that there are not funds available. Has the Governor made 
a commitment? And that may be a temporary situation. If, in 
fact, those funds are not available for California to come up 
with its share, has he made a commitment to find the resources 
to continue the project? Do you have a written--I mean or some 
solid commitment?
    Again, there--a quarter of a billion Federal funds has 
already been spent. State has certain commitments. This is not 
just the Federal project, but California's project.
    Mr. Richard. Yes, Congressman Mica, and I am glad you made 
that last point. The Federal Government has spent several 
hundreds of millions of dollars on this project, already. But 
so also has California. We have spent $400 million of our State 
bond funds on this project to date. Of that, about $97 million 
qualifies as matching funds under our agreement with the 
Federal Government. But the other $300 million is money that we 
spent, preparatory to that, to do environmental----
    Mr. Mica. No, but both sides have spent money. My question 
deals with----
    Mr. Richard. Going forward.
    Mr. Mica. Yes.
    Mr. Richard. Going forward, Congressman, Governor Brown 
just went to the California Legislature with his budget to put, 
at least for the upcoming fiscal year, $250 million from our 
new greenhouse gas emission program into high-speed rail. He 
also indicated in his budget that he will be asking the 
California Legislature to create a more permanent structure 
around that, so that we have----
    Mr. Mica. But right now the answer would have to be no, you 
do not have a commitment, because he doesn't have the approval 
of the legislature. He does have a proposal before the 
legislature for both short term or interim, and then long term. 
Is that the answer?
    Mr. Richard. That would be my answer, sir.
    Mr. Mica. OK. Well, you know, I am the strongest advocate 
of high-speed rail in the Congress. Have been. I didn't think 
they should start in California, with a stretch that--nowhere. 
It can lead to somewhere. It has to lead to the bay area or it 
has to lead to L.A.
    Mr. Richard. Right.
    Mr. Mica. Those are very expensive links, too. And in the 
future we are going to end up with a high-speed train, 
unfortunately, that does not serve substantial population 
areas, nor does it connect in to fixed systems. And again, my 
druthers would be to do the Northeast Corridor, where we have 
the only right of way we own, Amtrak-substantial, that could be 
eligible for that. So I see more and more money going into this 
project. California has had incredible financial problems. I 
think it is starting to come out of it. And we have no 
commitment for the future.
    The other question I have is I consider Amtrak our Soviet-
style train system. They are just--I mean their record, and we 
keep pouring more money into losing propositions. But now I 
understand Amtrak has a potential operational--or some 
participation in the project. Can you describe that to me, 
without me getting a prescription for depressant medication?
    Mr. Richard. I can't guarantee that, Congressman. First, I 
want to say that even though I understand that you have had 
concerns about the California project, we recognize and respect 
your leadership on high-speed rail.
    We also believe that the Northeast Corridor is an essential 
corridor for high-speed rail. So we don't see competition with 
that program. In fact, we would love to work together with that 
project.
    On the question of Amtrak, as I was explaining before, to 
one of your colleagues, we are starting in the Central Valley, 
sir, and I would be very happy to talk about reasons why.
    Mr. Mica. Do you have a relationship now, or an agreement 
with Amtrak----
    Mr. Richard. Yes.
    Mr. Mica [continuing]. For service, or what?
    Mr. Richard. Well, we--the most interesting agreement we 
have with Amtrak is actually for the joint procurement of 
locomotives for the----
    Mr. Mica. Oh, that--oh, please. I am going to have to go 
get a double dose of depressants. Their last locomotives were 
the Acela engines. You know the history of that. They 
misdesigned them, they were supposed to be tilt, so you could 
get the speed, then--they spent so much money in the suit of 
the acquisition almost as they did for the equipment. Then the 
tilt trains were misdesigned so they were hitting--they could 
hit the other trains. They had to put metal wedges in, so we 
have never had them utilized to their full capability. Now they 
are replacing them. That is another nightmare that I am 
concerned about.
    I would look at--to anybody except for Amtrak to--if you 
are going to get into a locomotive operational or any kind of a 
deal.
    Mr. Richard. Well, I am happy I stumbled into that one, 
sir.
    But the thing I was going to say is that of the five 
busiest Amtrak routes in the United States, three are in 
California. The fifth busiest Amtrak route is in the Central 
Valley of California. There are a million trips per year on 
that segment. As we build to full high-speed rail, which will 
accomplish what you said you wanted to see, connecting our 
cities with high-speed, intercity service, we can, as an 
interim step, upgrade that Amtrak service substantially.
    Mr. Denham. Thank you, Mr. Mica. Mrs. Napolitano?
    Mrs. Napolitano. Thank you. Thank you, Mr. Chair. And one 
of the other things that I think we have heard--not heard as 
much about is the system of payment, the fare system, and how 
it can be made affordable for the nonprofessional people.
    Then the next issue that I would like for you to maybe even 
touch upon would be the safety issue, whether there will be the 
positive train control type system to protect the general 
public, the safety of the workers, the rail workers, the 
conductors, et cetera. Would you address that, please?
    Mr. Richard. I would be happy to. First of all, we are very 
committed to make sure that this high-speed rail program 
benefits all Californians. I had the opportunity recently to 
travel to China with Governor Brown on his trade mission. We 
rode the high-speed rail system in China. As you know, they 
have built 7,000 miles of high-speed rail in China.
    It was very interesting because there were levels of 
service. In some of the cars, there were basically the workers, 
who were moving back and forth between the cities. And I 
understand in Japan this is true, as well. So this system has 
to accommodate all of the community's needs for travel and 
transportation, and we believe that it will.
    Regarding our pricing structure, I took the Amtrak from 
Sacramento to Fresno many times in the course of this effort. 
The fare is $43. If we were operating high-speed rail today, 
the fare to go all the way from Los Angeles to San Francisco 
would be $81. So we think we are pretty comparable to the 
Amtrak fare structure right now, and that is a very popular 
system, especially with working-class folks in the Central 
Valley.
    On your question about safety, the California high-speed 
rail system will be 520 miles in the first phase of fully 
positive train-controlled track. It will be entirely subject to 
positive train control. And, Congresswoman, our program is also 
providing $180 million to upgrade the existing Amtrak service 
in California, including the addition of positive train 
control. So we are getting a jump on positive train control 
through funding from the California high-speed rail program.
    And on your final question about worker safety, I am happy 
to say that we work very closely with the Teamsters, 
Brotherhood of Locomotive Engineers. We are working to make 
sure that what we are doing is going to meet those safety 
standards. It is very important.
    Mrs. Napolitano. Thank you, sir, for the answer. And I 
would yield to Ms. Brown.
    Ms. Brown. Thank you. I just want to mention and clarify 
that Governor Brown sent a letter to DOT committing that the 
State is to meet its obligations in the grant agreement. I 
don't know, do you have that, Deputy?
    Mr. Richard. Ms. Brown, I don't have that letter with me. I 
am aware of that letter. That letter was part and parcel of our 
negotiations with the Department of Transportation and what I 
was saying before about their insistence that they have 
security against our advance payments.
    Ms. Brown. Deputy, are you all----
    Ms. Hedlund. Yes, we have that letter, and we are very 
gratified by that letter. Thank you.
    Ms. Brown. And that letter--it meets your qualifications?
    Ms. Hedlund. Yes.
    Ms. Brown. OK.
    Ms. Hedlund. Additional security.
    Ms. Brown. Can you please submit that letter to the record?
    Ms. Hedlund. Yes, we will do that.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6279.008
    
    Ms. Brown. Thank you. Thank you very much. I yield back the 
balance of my time.
    [Laughter.]
    Ms. Brown. I yield back. And do you want your time back? I 
yield it to Ms. Hahn, so we can finish.
    You wanted a minute?
    Ms. Hahn. Thank you. It is so surreal to be in this 
hearing, literally. The voices behind me, if I didn't know 
better, that voice sounds like a congressmember representing 
any State but California. And the voice right behind me sounds 
like, if I didn't know better, secretly lived in California, 
not to mention gave up $1 billion from the State that she 
represents to go towards this high-speed project. So it is just 
really amazing to me that our California delegation is not 
united together in trying to bring Federal resources to the 
beautiful State of California, instead of trying to fight it.
    So, my last couple questions are, you know, again, just 
reiterate, Mr. Richard, how confident you are that the State 
legislature will approve this $250 million and the cap and 
trade dollars.
    Also, I haven't talked a lot about jobs. You were accused 
by one of our Members of being fuzzy on the jobs number. Once 
construction begins, like to know how many jobs are we talking 
about? And, of course, for those of us down in the southern 
California area, even though the project is starting somewhere 
else, can we count on some of those construction jobs to come 
from Los Angeles, some of the communities that I represent?
    And maybe talk about how Palmdale seems to be this tipping 
point. And what does that mean for this project in the future?
    Mr. Richard. Very quickly, Congresswoman, first of all, 
yes, we hope that you will be seeing jobs in southern 
California, as well, with a lot of the grade separations that 
Mrs. Napolitano had talked about, and other things that we are 
doing in southern California. We estimate that, during the 
initial construction segment, there will be 20,000 jobs per 
year for 5 years.
    And Mr. LaMalfa was correct. Some people jumped on us 
because we used the term ``100,000 jobs.'' That was basically 
the same way that people have described these job estimates 
historically. But we went and broke it down and said 100,000 
jobs means 20,000 jobs a year for 5 years, which is a lot of 
jobs in an area that has twice the unemployment rate of the 
State, as a whole. The million jobs relates to the entire 
build-out, which is 100,000 jobs per year for 10 years. So, 
there is a lot of employment associated with this project.
    I will be respectful of our California Legislature, so I 
won't make a prediction as to how they would vote on cap and 
trade. It would be inappropriate for me to do so. But I will 
say that we are having conversations with environmental leaders 
and others, and I think they are more comfortable, as they have 
seen the Governor's entire program for use of the cap and trade 
money, of which only 29 percent is not just for high-speed 
rail, but also for rail modernization--$250 million for us, $50 
million for rail modernization, $200 million more for clean 
vehicles, more money for transit land use, more money for urban 
forestry. So, as they are seeing the totality of the Governor's 
approach to using the cap and trade funds, I think we are 
seeing a lot of support.
    Palmdale is emerging as a major hub. The mayor of Palmdale, 
Jim Ledford, is a real visionary, and sees the benefit of high-
speed rail. And Palmdale could be the place where the Desert 
Express connects from Las Vegas, if that project is built, 
where high-speed rail connects into the Central Valley, and the 
third leg reaches down into L.A., Anaheim. The mayor and the 
civic leaders there already see what that could mean, in terms 
of the revitalization of downtown and development in Palmdale.
    Mr. Denham. Thank you. There has certainly been a lot of 
questions to this Member, who is from California, on ``Why 
wouldn't you just spend the money?'' Just give all the money to 
California, $68 billion. Let's take some more money, 55--no, 
let's take the entire transportation budget for the rest of the 
United States, and just give it to California. You are from 
California, why wouldn't you take it? Here is why. Here is my 
concern.
    Ms. Dolan, Mr. Richard testified a minute ago that FRA, the 
Administration, the U.S. Government, if the Antideficiency Act 
was not followed, if they cannot come up with their 50 percent 
match, then we could hold up other funds. So, the Governor has 
already committed $250 million that was supposed to go to 
environmental. That would help out my Central Valley. That 
would help out our air quality. We are already going to see--if 
some of the environmentalists in California don't get outraged 
that $250 million be used for something else.
    But what other money could be held up? Could Federal 
education dollars be held up?
    Ms. Dolan. So, under the terms of the cooperative 
agreement, their--FRA reserves their right to require repayment 
of either all or a part of the funds that have been given to 
the grantee. That repayment can be done through what is called 
an administrative offset. And I believe that that would reach, 
in this order, FRA funds and then DOT funds and then, in the 
event that those funds cumulatively are not enough money, funds 
from the rest of money that is owed to California from the 
Federal budget.
    Mr. Denham. So the Federal Government, if the State does 
not repay its 50 percent match, which--the State is already in 
the hole--if the State cannot come up with its match, the 
Federal Government could first withhold all rail funding, then 
withhold all highway funds and aviation funds, and then go into 
deeper pockets of education, when our school systems are 
already failing our kids in California. Is that correct?
    Ms. Dolan. The FRA reserves that right in the cooperative 
agreement. As it is written at the moment, it is in their 
discretion to----
    Mr. Denham. Also----
    Ms. Dolan [continuing]. Decide how to exercise that----
    Mr. Denham. Also, infrastructure dollars to water storage, 
which--water is being shut off in my Central Valley right now, 
and we are having huge droughts, tens of thousands of jobs that 
will be lost, due to water. That is another issue that could be 
held up.
    This is why this is such a big issue for California. It is 
about priorities. This is not just an endless pot of money, 
this is not just free money. This is not just, ``Let's take it 
from Florida and every other State and give it all to 
California.'' We have priorities. We are dealing with budgets. 
We have to be good stewards of the Federal taxpayers' dollar.
    And so, when I am asking these questions, it is not because 
I hate high-speed rail. I think there are some great high-speed 
rail projects going in across the Nation. I think, you know, 
seeing Maglev, a newer technology than high-speed rail, may 
have an opportunity in the DC area. There are great 
infrastructure projects that are moving forward, as we move 
forward, as a country. The question is, what are our 
priorities? Sixty-eight billion dollars that could balloon to 
$100 billion is something I am going to continue to have a lot 
of questions about.
    Ms. Hedlund, Ms. Dolan said that she believes the--I don't 
want to misquote you--that, ``They can make the determination 
on whether or not to stop funding.'' Do you believe that you 
have that ability to stop funding at this point? Is your 
discretion--is it up to the discretion of the Administration?
    Ms. Hedlund. Since we have not made a determination that 
the Authority is currently in default, I think our legal 
obligation, at this point in time, is to honor the commitments 
made by the State of California, and continue funding. I think 
we have a legal obligation to continue funding.
    Mr. Denham. But if they do not--at a certain point, if the 
Administration decides that you have--that the Authority has 
hit some type of trigger, then you feel that you have the 
ability to make that determination, that they are not 
fulfilling their obligation?
    Ms. Hedlund. It would depend on the facts and the 
circumstances at the time; they do not exist today.
    Mr. Denham. So, April 1st, they owe $180 million. If they 
cannot find that money, would that be one?
    Ms. Hedlund. It would depend on the facts at the time.
    Mr. Denham. If the legislature does not approve the $250 
million in August or July or June, would that be something that 
would trigger it?
    Ms. Hedlund. The Authority has the ability to cure the 
deficiencies that were set out by the court. That is another 
alternative.
    Mr. Denham. In the grant agreement it reads, ``Any failure 
to make reasonable progress on the project, and FRA 
determination that the grantee may be unable to meet the 
contributory match percentage required and complete the project 
according to the project schedules, shall provide sufficient 
grounds for FRA to terminate this agreement.'' You still agree 
with that, correct?
    Ms. Hedlund. That is what the agreement says.
    Mr. Denham. My time is expired. Ms. Brown?
    Ms. Brown. Just in closing, I would like to have some 
questions submitted for the record.
    In addition to that, I want to just clarify for you, Mr. 
Richard, Maglev is 1 billion per mile. There are many types of 
high-speed rail, Maglev just being one of them. There are many 
countries and many organizations that want to partner with you. 
Are you looking at who is providing the best possible resources 
and partnerships, and who is going to build a plant in the 
area? I mean, there are many factors that you consider when you 
decide who is going to partner. I know there are options 
because I have talked to the Italians, the Japanese. Everybody 
wants to partner with us.
    Mr. Richard. You are exactly right, Congresswoman. And the 
other issue you touched on is that the Congress, in 
appropriating these dollars, made it very clear that the Buy 
America provisions will apply. What that means is, for those 
who would come in and provide locomotives or any other things 
for high-speed rail, they are probably needing to look at 
building factories here and hiring American workers, because 
that is what American taxpayers expected. Our friends at the 
FRA have been very, very clear that they will enforce the 
Congress' policies on that provision, and we have made that 
clear to the people that we are talking with.
    But you are right. There is international interest. They 
want to come here. They want to build high-speed rail in 
America. I would really like to see American companies 
developing the technology that some of the European and 
companies in Japan and China have developed.
    Ms. Brown. Spain. I mean, I love it. I love it.
    Mr. Richard. They are very successful. But they want to 
work with us, they are looking forward to it. Congresswoman, we 
are going to be building high-speed rail in California.
    Ms. Brown. Thank you, thank you. And, like I said, if you 
can come up with some ways that we can help expedite it, the 
permitting process, or anything that we could do on the 
positive end, I would certainly be interested in, you know, 
working with you to that regard. I am constantly out in L.A., 
which I think is a nightmare, as far as transportation is 
concerned.
    And, Deputy Secretary, I just want you to know that I know 
that Congress is not interested in bullying the Administration. 
And so, think kinder of us in our tone. We are learning, we are 
working, and we are, hopefully, moving forward and going to be 
a kinder, gentler Congress. I yield back.
    Ms. Hedlund. Ranking Member Brown, we always appreciate the 
opportunity to have a lively discussion with you.
    Ms. Brown. Lively, yes. Thank you. I yield back the balance 
of my time.
    Mr. Denham. Thank you, Ms. Brown.
    Mr. Richard, again, I appreciate your willingness, your 
openness. You know, we have had a great relationship, and 
continue to have ongoing conversations. And I understand that 
we may have some disagreements on some of the funding 
challenges, but you have certainly been a good partner to work 
with in this process.
    I do have a question on the operating segment itself, on 
identifying available funding. The court ruling, that was one 
of the things that they had ruled on, was that the initial 
operating segment, the entire segment going from Merced all the 
way down to Palmdale, there is a $20 billion deficiency in 
putting that together.
    So, basically, in a nutshell, the court is deciding that, 
until you have that $20 billion funding gap, no Prop 1A funds 
can be utilized. How do you fill that $20 billion gap?
    Mr. Richard. Mr. Chairman, first of all, thank you for your 
kind words. I also want to thank you for the courtesies that 
you have shown to me. I know that you have policy differences 
with us, but I have appreciated the opportunity to work with 
you on this project, and we will continue to work with you and 
the committee.
    This is going to get to be a little bit technical, but I 
think that in Ms. Dolan's excellent testimony that she provided 
to this committee, there is really the key to understanding how 
we look at this situation. The problem is that the bond act, 
the law, does not say that we have to build an initial 
operating segment. In fact, those words do not appear in the 
bond act. What the bond act says is that we have----
    Mr. Denham. So, just to clarify, you disagree with the 
court's ruling.
    Mr. Richard. No, sir. I can explain the court's ruling. 
What the court dealt with was the initial funding plan that the 
California High-Speed Rail Authority provided in November of 
2011--and, Mr. Chairman, it was released just after I was 
appointed by the Governor; it was really in the can ready to go 
before that. That plan described the first ``usable segment''--
and the ``usable segment'' is the key term, here, that the bond 
act says is what we have to build. The authors of the bond act 
knew that nobody was going to be able to unwrap a 520-mile 
high-speed rail system like a train set under a Christmas tree 
in 1 day. They knew it was going to be built in segments. They 
said that those must be usable segments. And I believe Ms. 
Dolan quoted that in her memo.
    What happened was that the California High-Speed Rail 
Authority defined its usable segment as the initial operating 
segment. And, accordingly, the judge said, ``If that is your 
first usable segment, you have to show me all the money, and 
you have to show me the environmental permits,'' and we did not 
have those.
    But what was not in front of the judge was the revised 
business plan that we put forward before the California 
Legislature, 4 months later, in April 2012. And, responding to 
a lot of public comment, what we did was we said the valley 
segment is, in fact, a usable segment.
    Mr. Denham. The valley segment, meaning the initial 
construction?
    Mr. Richard. Correct. And it is a usable segment, precisely 
because, in response to public commentary, we are tying in to 
Amtrak, we are tying into ACE train, and we are doing these 
other things that would give it usability. And I would point 
out, Mr. Chairman, that in its approval of the first leg of 
that, the Surface Transportation Board used the term ``usable 
segment'' as they--as a justification for why they were 
providing that approval.
    Our view is--and, obviously, the opponents of the project 
will come back and try to test it--our view is that, if that 
valley segment is a usable segment, and we believe it is--that 
we will comply with the judge's ruling by showing that we have 
all of the funding for that, which we do, and all of the 
environmental permits, which we will.
    I will just end on this point, Mr. Chairman, which, as a 
former member of the California Legislature, I think you will 
appreciate. When our revised plan was put before the California 
Legislature in the spring of 2012, some of your former 
colleagues asked legislative counsel, ``Does the High-Speed 
Rail Authority revised business plan comply with Proposition 
1A?'' The answer that came back from legislative counsel, in a 
very detailed written opinion, was, ``yes, it does.''
    That question has never been before Judge Kenny. He was 
dealing with the prior plan. So that is one of the reasons why, 
despite all of the press around this, we do not agree that in 
order to comply, in order to have access to the bonds, that we 
need to assemble $25 billion. We believe we have the funds in 
hand, and what we need to do to comply is to show that funding 
plan and to finish the environmental process so that we have 
the environmental documents in hand. That is eminently doable.
    Mr. Denham. I guess the piece that I don't understand about 
this--I guess you would have two choices, either ignore the 
court ruling all together and hope that the attorney general 
can go ahead and float the bonds----
    Mr. Richard. No, sir.
    Mr. Denham [continuing]. Or, because you have a 
disagreement with the court, the court is looking at the 
initial operating segment, and you are redefining the usable 
segment as the initial construction segment, the--you would 
have to actually go back to another court, to another judge, or 
to this very same judge, and fight that case. Would you not?
    Mr. Richard. I would almost agree with that. First of all, 
there is no prospect that the attorney general will give a 
clean bond opinion to try to sell the bonds until----
    Mr. Denham. I didn't think there was, but----
    Mr. Richard. Right. So I don't want to pretend that there 
is.
    What the judge said to us was, ``Go back and redo your 
funding plan to show that it complies.'' My view is that we can 
go back and we do exactly what the judge said. We are not, by 
any stretch of the imagination, Mr. Chairman, intending to 
ignore what the court said. What the court said was, ``Before 
you can go forward, I need you to go back and redo this funding 
plan.'' In my view, that means updating the funding plan to be 
exactly what was presented to the California Legislature that 
they determined was likely to comply with the bond act.
    There has been a lot of commentary about this, and I think 
most of what has appeared in the press and the discussion has 
been wrong. But it means that we can comply with the judge's 
ruling, not ignore it, sir. We would not do that.
    Mr. Denham. I do want to finish this. I have got a couple 
more brief questions before we close. But do you want to go 
first, or----
    Ms. Brown. No, I am finished.
    Mr. Denham. Mrs. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chair. And this is an 
interesting extension, and I enjoy it.
    I have been privileged to be on CODELs with Ms. Brown in 
Europe, and have ridden on some of those really fast trains, 
and spoken to the boards, some of the board members, in regard 
to how they put the plan together. We did that, what, 3 years 
ago, something like that.
    The impressive thing about that was that their safety 
record, their ridership, was exceedingly high, their cost was 
affordable. And if they can do it, why couldn't we, other than 
the fact that most of those countries own the land on which the 
transportation lines were geared to?
    So, to me, we need to concentrate on the bigger picture, 
and that is the ability for us to be able to not necessarily 
compete, but be able to maintain the necessity of options for 
our ridership. And you are right. In California, I can tell 
you, when I was into the first phases of the building of the 
Freeway 105, which leads into where I live, it used to take me 
20 minutes to the airport. It now takes me almost an hour. Same 
amount of distance.
    So, we are congested, and there is more to come. How do we 
address the issues and begin to convince the general public and 
the Government, especially my colleagues in northern 
California, that this is going to be an effective way of being 
able to deal with part--it is not the whole answer, it is part 
of the answer, and we must be astute enough to understand that 
we need to invest it, and we need to convince our voters that 
this is where we need to go for the future of our generations.
    And as far as taking funds and putting them into other 
areas, I am concerned about my project funding. I have covered 
that with you. But you can't commingle funds, like water funds 
or transportation funds. Let's be real about that. So, while we 
can talk big about how we need to be able to fund these other 
entities, we need to understand that we are not able, legally, 
to commingle funds, or to be able to transfer funds.
    But, you know, there is an old--the movie--I can't remember 
the name of it, but it said, ``Build it, and they will come.'' 
I have great expectations that it will be successful. And how 
we go about it is just having the faith that we can and that we 
will be able to not only find the funds, but find the partners 
to be able to do that.
    So, with that, Ms. Corrine Brown, you want any further 
comments?
    Ms. Brown. No.
    Mrs. Napolitano. Thank you. I yield back. Thank you, Mr. 
Chair.
    Mr. Denham. Thank you, Mrs. Napolitano.
    I just wanted to follow up on the last discussion we had. 
So, if you disagree with the court's decision, or you have a 
difference of opinion on what the usable segment is--the court 
has defined that usable segment as the initial operating 
segment. If you are going to take your day in court, what is 
that timeline? When do you go back to court to clarify that?
    Mr. Richard. First of all, Mr. Chairman, if I might 
clarify, I don't think it is a matter of us disagreeing with 
the court. What the court said was, ``What I have in front of 
me, the preliminary plan from the high-speed rail, you guys 
defined usable segment as the initial operating segment. If 
that is your definition, then you have to meet these other 
tests.''
    Mr. Denham. Well, Prop 1A defines it, as well.
    Mr. Richard. The words ``initial operating segment'' do not 
appear in Proposition 1A. It only talks about a usable segment.
    Mr. Denham. Correct.
    Mr. Richard. So, my predecessors on the California High-
Speed Rail Authority board, as they were looking at their 
business plan and finance plan, which I inherited in November 
of 2011, they equated initial operating segment with a usable 
segment. And the judge said, ``OK, I am going to take you guys 
at your word. And, if that is the case, you needed to check 
these boxes.''
    It is not a matter that we are saying the judge was wrong. 
What we are saying is that, after that plan that he had in 
front of him, we presented an updated plan to the legislature 
that did not equate usable segment with the initial operating 
segment. It equated usable segment with the first valley 
construction, as enhanced by connections to existing rail. We 
think, then, that meets the same standard that the judge was 
talking about, and that is what the legislature voted on, and 
that is what the legislature's lawyers looked at and said met 
the provisions of Prop 1A.
    Mr. Denham. Either case, it--either you have to comply with 
the court decision, it is a $20 billion hole to have an 
electrified track that goes around Palmdale and to San Fernando 
Valley--that is electrified, that will be high speed, hopefully 
it is not running a subsidy, because that is what Prop 1A 
says----
    Mr. Richard. Won't be allowed to.
    Mr. Denham. So, either you have to come up with that $20 
billion and comply with the court, or you have to comply with 
Prop 1A, which says, if you are redefining that usable segment, 
that usable segment still says it cannot operate with a 
subsidy, and it cannot operate outside of high speed.
    So, you are saying that this construction segment will not 
be high speed, it will not be electrified, it will just be a 
second Amtrak, which I know Mr. McCarthy, if he were still 
here, has huge issues with having two Amtraks that stop in his 
district and you get on a bus on both of them to go over 
Tehachapis. So, if it is not high speed, because it is not 
electrified, and it is running a subsidy, how does that initial 
construction segment comply with Prop 1A?
    Mr. Richard. Mr. Chairman, I think maybe one of the most 
useful things I could do is to provide the committee with the 
opinion of California legislative counsel. In a 21-page, 
single-spaced opinion, they went through and looked at our 
revised business plan. They were asked by two of your former 
colleagues in the California Legislature, ``Does this comply?'' 
They concluded it did. That informed the vote of the California 
Legislature to appropriate the bond monies to move forward. And 
they went through an extensive legal analysis about why it did.
    I could try to go through that here, but I fear, sir, that 
we would really get down into the weeds. But what I would say 
to you is I think, for this committee's purposes today, what 
you are interested in doing is making sure that the Federal 
taxpayers are protected, and that we have the ability to pay 
them back.
    I can't tell you, Chairman Denham, when we might have 
access to the bond funds. People who oppose the project will 
continue to bring litigation. But I can tell you that we 
believe that our revised business plan is in harmony with 
Proposition 1A. We believe that that can be established. And we 
think that we have other backstop mechanisms. So, from the 
standpoint of Federal taxpayers, we don't think that there is a 
question.
    As a Member of the delegation from the Central Valley, I 
think you are also concerned about other aspects of this. Is 
this just going to be stuck in the Central Valley? Are your 
citizens going to actually be able to get to Los Angeles and 
San Francisco? And there, Mr. Chairman, I think we are hoping 
to come back to you very soon and say if we look at the bond 
money, and we look at the cap and trade dollars, we really 
believe--I want to be able to confirm this--but our vision is 
that we can get all the way to Palmdale, connect to the 
Metrolink, and that that triggers private-sector investment.
    And, Mr. Chairman, I would look forward to working with you 
to work through that challenge. Because, if that is the case, 
that we can get to Palmdale, I think that is going to address 
many of the questions that you have had about this project. And 
that is what we are aiming to do right now.
    Mr. Denham. And I don't know that you and I have ever had 
this conversation, but I think you are absolutely correct. That 
is my concern. My concern is that we build another Amtrak that 
stops in Bakersfield, and the rest of the Nation looks at 
California and says, ``You just spent $6 billion,'' and it is 
decades, if ever, that this thing ever gets accomplished.
    Now, I know you and I are both--you are moving forward, and 
that is your job. My job is looking over the Federal tax 
dollars, that we are actually spending money properly, and that 
we are not putting my voters, my State, at risk of losing 
highway dollars, aviation dollars, or education dollars. And 
so----
    Mr. Richard. Absolutely.
    Mr. Denham [continuing]. I look forward to this continued 
dialogue. I look forward to you getting me that information 
that proves that this operating segment either complies with 
the court decision, or that this construction segment complies 
with Prop 1A.
    But I certainly think that FRA--I know that FRA has the 
ability. The question is whether they have the will to make a 
determination at a certain point. Whether that is April 1, when 
there is $180 million due, or whether that is later in this 
budget year, if the $250 million of cap and trade money becomes 
unconstitutional, or the legislature just votes it down, at a 
certain point FRA may be forced to make a determination that 
they withhold funds.
    I have a better solution, and I am prepared to introduce a 
bill that will require FRA to suspend all payments until 
California High-Speed Rail Authority has the matching funds 
available, and is not hindered in coming forward with that, and 
spending that money.
    So, I will be introducing this bill before we leave on our 
district work period next week, and I am happy to share the 
language with--to you after this hearing.
    Ms. Brown, do you have any closing remarks?
    Ms. Brown. Just that I won't be signing on to your bill.
    [Laughter.]
    Mr. Denham. I am sure California would be happy to take 
more money from Florida, then.
    Again, I would like to thank each of you for your testimony 
today. Ms. Hedlund, obviously, you can see my frustration has 
to do with FRA and its transparency. I look forward to getting 
those invoices from you.
    If there are no further questions, I would ask unanimous 
consent that the record of today's hearing remain open until 
such time as our witnesses have provided answers to those 
questions, and have submitted them in writing, and unanimous 
consent that the record remain open for 15 days for additional 
comments and information submitted by Members or witnesses to 
be included in today's record of today's hearing.
    [No response.]
    Mr. Denham. Without objection, so ordered. Again, I would 
like to thank our witnesses again for their testimony.
    If no other Members have anything to add, the subcommittee 
stands adjourned.
    [Whereupon, at 1:11 p.m., the subcommittee was adjourned.]

                              
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