Sonali Sells

A lower price tag, fewer tracks and a fresh commitment to fund rail improvements in north and south California are among the features that the California High-Speed Rail Authority plans to unveil in its revised business plan.

That’s what representatives of the rail authority told a state Senate committee Tuesday night at a public hearing in Mountain View.

The revised plan, which the rail authority’s board of directors plans to release later this month, will also emphasize what has become known as the “blended” approach for the rail system — a design that would have the new rail system share two tracks with Caltrain along the Peninsula corridor.

This design, which was proposed by State Sen. Joe Simitian (D-Palo Alto), U.S. Rep. Anna Eshoo (D-Palo Alto) and Assemblyman Rich Gordon (D-Menlo Park) a year ago, has been the subject of much debate in recent months, with many city officials along the Peninsula urging the rail authority to commit to the two-track alternative.

At Tuesday’s packed hearing in the Mountain View Center for the Performing Arts, rail officials indicated that with the new business plan, they are preparing to do just that.

Dan Richard, chair of the rail authority’s board of directors, and Jim Hartnett, a board member, both said that the “blended” approach is central to the agency’s new vision for the project. The members made these comments at a meeting hosted by Simitian, who chairs a Senate budget committee on resources, environmental protection and transportation.

Last year, rail officials resisted the “blended approach,” suggesting that it would run counter to Proposition 1A, a $9.95 billion bond for the rail system that voters approved in 2008.

The agency’s latest environmental analysis for the major project sill refers to a four-track system, much to the consternation of officials in Palo Alto and elsewhere.

But Hartnett said Tuesday that the agency, in its revised plan, now embraces the idea of a “blended system” for both the northern and the southern sections of the San Francisco-to-Los Angeles system. Hartnett called the new emphasis on the “blended system” a “rethinking of the whole high-speed-rail approach.”

“The new direction for high-speed rail is a high-speed-rail system that is dependent on its success on a blended approach both in the north and in the south,” Hartnett said.

This new vision could have dramatic implications for Caltrain, which has also been adamant about scrapping the four-track design in favor of the less disruptive blended system. The new business plan, Hartnett said, would place greater emphasis on relying on existing infrastructure in what the rail authority is calling the “bookends” of the line (its northern and southern segments). Specifically, he said, it will lay out a plan for “early investment in the north and in the south that will have direct positive impact on the regional transit systems” and lay the foundation for high-speed rail.

For Caltrain, this early investment could mean getting the funding it needs for electrification — a project that the cash-strapped agency has been planning for more than a decade. The project, which the agency sees as key to raising its ridership numbers and achieving long-term financial stability, also includes positive train controls and a new stock of electric trains. It would cost more than $1 billion, money that the agency currently does not have.

The rail authority’s new vision for the rail system could change that. The authority is preparing a “memorandum of understanding” with the Metropolitan Transportation Authority (MTC) that would identify “early investment opportunities” that the authority can make in the Bay Area. Though the document is still in the works, Caltrain electrification is widely expected to top the list of the Bay Area’s transit priorities.

“This is an opportunity for Caltrain as much as it is an opportunity for high-speed rail,” Hartnett said, referring to the early investment. “We believe the plan will set out a reasonable way of doing that.”

But even as they talked about making early investment in the “bookends,” rail officials on Tuesday defended the authority’s decision to begin the line’s construction in the Central Valley.

This decision had prompted many critics of the $98.5 billion project to refer to the system as a “train from nowhere to nowhere.” Some, including the agency’s own peer review group, have challenged its earlier business plan for inadequate discussion of funding sources and for its vagueness in discussing plans to build the system beyond the initial segment.

Aside from the voter-approved bond and about $3 billion in federal money, the project has no other committed funding sources. The agency’s business plan anticipates private investment in the later stages of the project.

The challenge, Richard said, is to demonstrate that the first segment of the line would provide significant improvements even if the agency doesn’t get the funding it needs to build the entire system.

The revised business plan, he said, “will have a more rational basis for showing how the system develops over time so that each station that we’ll have in front us will have something that is useful — like Caltrain electrification, for example.”

Richard, who was recently appointed to the board of directors by Gov. Jerry Brown, defended the decision to start in the Central Valley. Starting the rail system in this region will allow the agency to test the new 225 mph trains, he said. On the Peninsula, the trains would reach speeds of up to 125 mph.

Richard also said the agency believes that the new system’s ridership will be sufficient to cover its operating costs.

The rail authority’s ridership and revenue numbers have been a subject of major criticism on the Peninsula and elsewhere. Uncertainties over these projections, along with the project’s escalating costs, were among the major factors that prompted the Palo Alto City Council to officially adopt a position last year calling for the project’s termination.

But Richard said that the numbers show that even in the line’s “initial operating segment” (the first constructed segment that would be capable of accommodating high-speed trains), ridership would be sufficient to pay for operations.

“We believe that the ultimate ridership projections will mean that there will be sufficient riders on the high-speed rail so that we will not be needing a public subsidy in order to operate,” Richard said.

Though Richard did not specify how much the rail system would cost under the “blended” approach, he said the number will come down from the prior estimate of $98.5 billion. He called the price tag (which was a major jump from the agency’s prior estimate of about $40 billion), a “sticker shock” for many people. It will be incumbent for the agency to show, in its new business plan, the ways in which the capital costs can be reduced.

“The key to it is the blend approach,” Richard said. “This is one of the things that will lock us into the course that I think will save us a lot of money.”

Though the rail authority’s new vision is more consistent with the views of many Peninsula officials, some said Tuesday that they remain skeptical about the latest plans.

Palo Alto Councilman Pat Burt, who chairs the Peninsula Cities Consortium (a coalition that also includes Atherton, Menlo Park, Belmont, Burlingame and Brisbane) said that when it comes to early investment opportunities on the Peninsula, the “devil will be in the details” of the agreement between the rail authority and the MTC. He noted that the MTC signaled that cities along the Peninsula would not have any direct participation in the process.

Burlingame Councilwoman Terry Nagel also said she is concerned about the MTC’s ability to adequately represent the Peninsula cities in the “eleventh hour.”

“I don’t think the majority of the cities are opposed to high-speed rail if it’s done right — and that’s a big if,” Nagel said. “It would require money that is well spent on the Peninsula.”

The president of the National Association of Realtors said last week that the organization “strongly opposes” elements of President Obama’s budget proposal that would limit itemized deductions, including the mortgage interest deduction, for thousands of families.

“As the leading advocate for housing and homeownership, NAR believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,” said Maurice (Moe) Veissi, a Realtor from Miami, Fla. “We urge the president and Congress to do no harm.”

Veissi said that while progress has been made in bringing stability to the housing market, the recovery has been slow. He added that the nation’s homeowners already pay 80% to 90% of U.S. federal income taxes.

“Raising taxes on them, now or in the future, could critically erode home values at all price levels,” he said. “This would destroy middle-class wealth accumulation and trillions of dollars in home values nationwide.”

“The mortgage interest deduction must not be targeted for change,” he added. “Any modifications to the deductibility of mortgage interest will harm housing and homeowners, and until housing markets have stabilized, there cannot be a robust economic recovery. Realtors are actively engaged to ensure that America’s 75 million home owners will continue to receive this important benefit.”

Veissi continued: “NAR also strongly opposes eliminating capital gains treatment for any carried interest of a real estate investment partnership. The loss of capital gains treatment for income from a carried interest could disrupt the conventional business model and places an unfair tax burden on general partners. Ultimately this would negatively impact commercial real estate investment.”