Court Faces Call to Validate Bonds|Worth Billions for Rail Project

(CN) - California's attorney general filed suit this week to validate the $8.6 billion in state bonds issued to fund the construction of a high speed train system projected to cost $68 billion.

Voters authorized the sale of up to $9 billion worth of bonds in November 2008 with Proposition 1A, codified as the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, according to the complaint in Sacramento County Superior Court.

Last Friday, California's High-Speed Rail Authority asked the High-Speed Passenger Train Finance Committee to determine whether the bonds should be issued. The committee then authorized the issuance of more than $8.599 billion in bonds.

Citing Section 860 of the California Code of Civil Procedure and Section 17700 of the California Government Code, the authority and committee brought the in rem action on Tuesday to validate their actions.

The complaint names five California newspapers in which it intends publish notice of its action "to give notice to persons interested in these proceedings."

It also asks the court to give notice of the complaint to plaintiffs that sued the authority in 2011 over the Prop. 1A funds. That complaint was filed by Aaron Fukada, John Tos and Kings County.

The authority and the committee say that such notice accords with the law, giving the court "jurisdiction over all persons and subject matter of this action."

"Based on the foregoing, plaintiffs are entitled to a judgment determining that ... all proceedings by and for plaintiffs in connection with the bonds, notes and any refunding bonds to be issued pursuant to the bond act, including the adoption of the resolutions and the authorization of the issuance and sale of the bonds, notes and any refunding bonds, and any contracts related to the issuance and sale of the bonds, notes or any refunding bonds, were, are, and will be valid and binding, and were, are, and will be in conformity with the applicable provisions of all laws and enactments in force or controlling upon such proceedings, whether imposed by law, Constitution, statute, regulation, or otherwise," the complaint states

"The bonds, notes and any refunding bonds to be issued and sold, and any contracts related to the issuance and sale of the bonds, notes or any refunding bonds, when executed and delivered, will constitute valid and binding obligations under the Constitution and laws of the state of California," it continues.

"Any challenges (including pending challenges) based on uses of proceeds of the bonds, notes or refunding bonds will not affect the determination of validity of the bonds, notes and any refunding bonds to be issued and sold, or the determination of validity of any contracts related to the issuance and sale of the bonds, notes or refunding bonds.

Deputy Attorney General Stephanie Zook signed the complaint filed by Attorney General Kamala Harris.

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