California's High-Speed Rail has been nothing but bad news almost since the beginning, but with the President on-board, the Governor riding shotgun
California bullet train officials, responding to a judge's ruling that the project has failed to comply with voter-imposed spending controls, argued Friday that they can use federal funds to begin construction of an initial 29-mile segment of Central Valley track.
The state's high-speed rail agency asserted in a legal filing that using federal funds would not trigger restrictions imposed in 2008 on use of state bond money for the proposed $68-billion, Los Angeles-to-Bay Area high-speed train.
The filing followed an August finding by Sacramento Superior Court Judge Michael Kenny that the authority failed to follow a requirement that it identify all of the sources of funding needed to complete the first operational segment of the system.
The ruling is part of a tangle of legal problems threatening the momentum of the project as it nears a planned groundbreaking next year. State Treasurer Bill Lockyer's office said Friday he is not willing to sell high-speed rail bonds, which would generate funds for the project, until a separate court case is resolved. A ruling in that suit may not come until late December.
The more immediate legal risk centers on a case filed by two Central Valley residents and Kings County. It argues the state violated key taxpayer and environmental protections contained in a 2008 bond measure. Among the protections was a provision intended to ensure the system would not be partially built and run out of money before a self-sustaining, operational portion is completed.
The first operational bullet train segment will cost $31 billion and run from Merced to the San Fernando Valley, according to state officials. But they have only identified about $12 billion in available funds.
The new spending strategy could bypass potential legal obstacles posed by the case in Kenny's court. Attorneys for the California High Speed Rail Authority asserted in Friday's court filing that legal restrictions apply only to state money and do not affect $3.24 billion in federal grants awarded for the project.
Originally, the state had to match the federal grant money with state money as the project progressed. But the Obama administration, which strongly supports the project, agreed last December that the state could use all of the federal grants before putting in matching state funds.
The modifications were sought because the project has fallen behind schedule and federal money had to be spent by September 2017.
Michael Brady, an attorney representing plaintiffs in the Sacramento case, said the state's latest legal argument is "full of holes."
Brady said the voter-imposed spending restrictions apply to all financial obligations, not just the expenditure of state bond money.
"If the federal government is advancing the money, the minute that occurs the state has incurred a financial obligation to match it," Brady said. "The risk of all this is that someday California would find itself with a $3.8 billion debt to the federal government with nothing to show for it."
Agency officials declined to discuss Friday's filing. A hearing on the matter is scheduled in Kenny's court for Nov. 8.
State bullet-train project now a step closer to oblivion
On Aug. 16, Sacramento Superior Court Judge Michael Kenny ruled that the California High-Speed Rail Authority’s plan to begin initial construction of a state bullet-train system violated two provisions of a 2008 state law.
That law was enacted by voters as part of Proposition 1A, which provided $9.95 billion in bond seed money for the project. Kenny held that the state failed to meet mandates that construction could not begin until the state had both a solid financing plan and all environmental clearances for the project’s entire initial operating segment — a 300-mile span from Merced to the San Fernando Valley.
The segment’s cost is estimated at $31 billion, more than double the $13 billion in combined state and federal funds available for the project. Given the state’s inability to attract private financing without the revenue or ridership guarantees that are banned by Proposition 1A and the drying up of federal funds, this appears to doom the venture.
So how did the state formally respond to Kenny’s ruling? In a 20-page brief filed Friday, Attorney General Kamala Harris and her staff didn’t challenge Kenny’s conclusion that the project’s financial and environmental deficiencies broke state law. Instead, the brief contended that nothing the rail authority had done so far violated Proposition 1A because federal funds had been used instead of state bond funds on certain expenditures.
“It ignores the fundamental basis of the [Aug. 16] decision,” said Mike Brady, attorney for Kings County and two Central Valley landowners, plaintiffs in the lawsuit before Kenny.
What’s going on here? It appears the state finds hope in the section of Kenny’s Aug. 16 ruling in which he expressed doubt over his authority to block funding of the project. But Kenny’s ruling made clear that Proposition 1A’s taxpayer protections had teeth, starting with provisions limiting the financial risk to the state from starting a huge project with inadequate funding.
As such, it appears just a matter of time before Kenny or some other judge pulls the plug. A state — even California — can’t break its own laws.