Calif. Bullet Train Hits Lawsuit Snag Over Bond Funding

(California High-Speed Rail Authority)

SACRAMENTO, Calif. (CN) – Seeking to jump-start a $64 billion high-speed rail project that has been stymied by lawsuits and design flaws, California regulators on Tuesday approved the sale of $3.2 billion in voter-approved bonds – and were quickly sued by critics yet again.

The proposed bonds will be used to build a 119-mile stretch through the Central Valley and fund the electrification of a separate stretch from San Jose to San Francisco.

The High-Speed Rail Authority’s decision to unlock billions in Proposition 1A bonds drew an immediate lawsuit from familiar project opponents. The lawsuit, filed Tuesday by Kings County walnut farmer John Tos and several residents of the Bay Area city of Atherton claims the Legislature wrongly passed a bill allowing high-speed rail bonds to be spent on the electrification of tracks in the San Francisco Bay Area.

They claim Assembly Bill 1889 cunningly amended the project’s requirement that bond funds only be spent on “usable segments” to “suitable and ready for high-speed train operation.” They say Proposition 1A funding – passed by voters in 2008 – cannot be used to electrify a 55-mile corridor that would transport passengers from the bullet train’s terminus in San Jose to San Francisco.

The legislation was bitterly opposed by state Republicans, but eventually passed both chambers and was signed by Gov. Jerry Brown in September.

Brown is a major proponent of the proposed 800-mile train that will connect the Golden State with up to 24 stations. The first phase is expected to be completed by 2025.

According to the latest lawsuit against the rail authority filed in Sacramento Superior Court, AB 1889 is invalid and lawmakers must go back to voters to secure money for the track-electrification project.

“Plaintiffs allege that the enactment of [AB 1889] violated the California Constitution in that it attempts to materially modify a voter-approved state general-obligation bond measure without gaining voter approval for the modification,” the 19-page complaint states.

This past March, a Sacramento Superior Court judge denied a long-running lawsuit brought by some of the same parties and their attorney Stuart Flashman. After nearly five years, the project opponents lost their challenge when the court ruled that the project is “an ongoing, dynamic, changing project” and that whether the state is complying with funding restrictions is “not ripe for review.”

The opponents also take issue with the state’s reliance on funding the project with proceeds from cap-and-trade auctions. The cap-and-trade revenue, generated from a contentious carbon tax on California businesses, has dwindled recently and the program is set to expire in 2020. Kings County and Tos warn that cap-and-trade funds “cannot reasonably be anticipated” to last through the entire project as lawmakers have failed to extend the program.

Another perennial opponent re-entered the high-speed fray Tuesday, as Assemblyman Jim Patterson, R-Fresno, introduced two bills related to the project. Patterson reintroduced a bill that was vetoed by Brown in September to require the authority to provide more details about the financing costs and schedule of each project segment in biennial updates to its business plan.

Patterson also introduced Assembly Bill 65 Tuesday, which would bar the authority from using state transportation tax dollars to pay off the project’s bond debt. He says the money is meant for the state’s crumbling streets and highways, not a new bullet train.

“Gov. Brown ordered a halt to road projects claiming the state didn’t have enough money to complete them. Now he and the Legislature plan to use $19.5 billion of those very road funds – they claim they don’t have – to pay off high-speed rail bond debt instead of fixing our roads and highways,” Patterson said in a statement. “This is a blatant bait-and-switch that would amount to fraud if anyone in the private sector did the same thing.”