The chairman of the state Assembly Transportation Committee is calling for California High-Speed Rail Authority board chairman Dan Richard to resign after a state audit that was critical of the rail agency’s decision-making and oversight of billions of dollars worth of in consulting contracts.
“I readily admit that I’m skeptical about the long-term viability” of the state’s bullet-train plans, “but I’ve been willing to work with the authority to get it done,” said Assemblyman Jim Frazier, a Democrat from Contra Costa County. “Unfortunately, these audit results are making me question my faith, that my faith has very much been misplaced.”
On Thursday afternoon, toward the end of a joint hearing in Sacramento before the Transportation Committee and the Senate-Assembly Joint Audit Committee, Frazier lamented the departure of former authority CEO Jeff Morales, who resigned in mid-2017.
“Understanding that the buck stops with the individual at the top, I really firmly believe it should have been the chairman of the board, Dan Richard, (who) should have been let go as the person responsible for ultimate oversight of all of this fiasco that’s been going on,” Frazier said. “And for that I call for his resignation going forward. I think it’s appropriate and I think the people of California deserve to understand that there at least was one action taken in the appropriate fashion for this going forward.”
“I think the board needs to look forward to better representation from the chairman,” he added. “Somebody was responsible for this and ultimately I think that individual needs to go.”
Tom Richards, a Fresno developer who is vice chairman of the authority’s board, represented the agency at the hearing.
Dan Richard, the board chairman, was in Washington, D.C. on Thursday. Upon returning to California, Richard did not directly address Frazier’s call for his resignation but described the testimony by Richards and authority Chief Operating Officer Joe Hedges as “a productive dialogue with members of the Legislature.”
“Our primary focus remains on continuing to improve this transformative project,” he added. “We are proud of our accomplishments, always open to constructive advice, but have no need to respond to errant and uninformed attacks.”
The audit report by State Auditor Elaine Howle determined that the authority, in a rush to meet a federal deadline for spending stimulus grant funds, awarded contracts for its first construction segments in the Valley long before it had finished planning, acquired enough land or fully assessed other potential risks to cost and schedule.
The audit also criticized the authority for major lapses in its oversight of contractors and consultants, including a lack of documentation by contract managers in reviewing invoices and approving changes to billions of dollars in construction and consultant contracts.
“The authority will need to do more to control the soaring costs of its contracts by improving its contract management,” the audit states. It adds that an over-reliance on consultants for contract management has resulted in “only weak and inconsistent oversight.”
Concerns from both sides
Democrats and Republicans alike at Thursday’s hearing expressed serious concerns about Howle’s findings over the ability of the high-speed rail authority to manage the project.
“I along with the majority of California voters initially supported the dream of our great state building the nation’s first bullet train,” said Assemblyman Al Muratsuchi, D-Torrance, chairman of the joint audit committee. “But many Californians have become increasingly disillusioned as the bullet train dream has become a nightmare of cost overruns and project delays.”
Fresno Assemblyman Jim Patterson, a Republican and longtime critic of the rail authority who requested the audit, said the report “confirmed what many of us have been concerned about with respect to the rush to put money out when they did not have property, they did not have a plan with respect to location and relocation of utilities.”
“This this audit says it was their fault, that they knew it going in, and they made a calculated decision to do it and to not tell anybody,” Patterson added.
Assemblyman Vince Fong, R-Bakersfield, vice chairman of the Transportation Committee, pointed to the rising cost estimates for the project since Proposition 1A, a $9.9 billion bond measure for high-speed rail, was approved by voters in 2008, from $42 billion at that time to between $77 billion and $96 billion now. “Californians are rightfully upset at what’s happening,” Fong said.
Richards acknowledged the concern. “I think that in our management of some of the administrative requirements of this system, we have not done a good job for the taxpayers of California,” he told Fong. “I can’t change the perception from the past and I’m as troubled by it as you are.” He added that some earlier estimates of the project’s costs predate his appointment to the board in late 2010, but said that the authority’s current board works to ensure its estimates are based on the best information available at the time.
Taking corrective steps
Richards noted that the the authority accepts the recommendations of the state auditor and, in some instances, is already moving to improve its accountability. “What we are doing today and in the future is what you would have expected to see before,” he said.
That did little to satisfy Fong: “The problem right now that exists is, the more information we get, the more we want to stop this project.”
Frazier zeroed in on the auditors’ findings that the authority approved changes to contracts against the advice of its consultants without fully documenting the rationale for the decision. “Are we just defying the experts that tell the authority what not to do and just move forward with impunity?” Frazier asked.
Richards responded that while consultants’ advice is not necessarily binding on the authority, policies put in place by the board have not always been followed by its staff.
“We certainly do have a lot of outside consultants. We’ve hired them for their advice and we consider it with everything else that may be going on with a specific issue,” Richards said. “We may not take the advice of a consultant in every instance.”
“What is really troubling and embarrassing is we have not appropriately recorded in documentation why we’ve done things,” he added. “I can sit here and tell you it’s inexcusable. … The breakdown that we have, I think, is not people not trying to do the right thing. I think, as demonstrated by this audit, it’s more in the documentation not being there to identify what the problems are.”
Who’s on the board?
The California High-Speed Rail Authority is tasked with planning and developing the statewide bullet-train system, including the 520-mile first phase connecting San Francisco and Los Angeles by way of Fresno, Bakersfield and the San Joaquin Valley. Five of the nine seats on the California High-Speed Rail Authority’s board of directors are appointed by the governor. Two other seats are appointees of the Assembly speaker while two are named by the state Senate leadership. One seat, a Senate appointee, is currently vacant.
Richard, a Bay Area resident, is a longtime adviser to Gov. Jerry Brown, a former PG&E executive and former member of the Bay Area Rapid Transit Board. He was appointed to the California High-Speed Rail Authority board by Brown in 2011, and named as the board’s chairman in 2012. His appointment was widely seen as part of a shakeup of the agency’s leadership in which another Brown associate, former Bank of America financial executive Mike Rossi, was also named to the board.
The longest-serving member of the board is Lynn Schenk of San Diego, a former member of Congress and former state secretary of business, transportation and housing who was appointed by Gov. Gray Davis in 2003 and has since been reappointed by Brown. Behind her is Richards, the Fresno businessman who was appointed to the board by then-Gov. Arnold Schwarzenegger in late 2010.
The most recent Brown appointee to the board is Nancy Miller, a Sacramento attorney who joined the board in August 2017.
What’s uncertain is whether the state’s incoming governor, Gavin Newsom, will want to find new faces to replace any of the Brown appointees. While Brown was an enthusiastic and vocal supporter of high-speed rail over the past eight years, Newsom’s support of the project has seemed tepid and measured by comparison.
Frazier was not available Thursday afternoon or Friday to elaborate on his call for Richard to resign. The Bee reached out to Newsom’s campaign team for comment on whether the governor-elect planned to make changes to the authority board, but as of midday Friday had received no response.