Fund Drive for California High-Speed Rail Stumbles

SACRAMENTO, Calif. (CN) - Imperiling the immediate future of bullet trains in California, a judge has ordered officials to rework a $25 billion shortfall before tapping billions in bonds to fund the project.

Five years ago, California voters approved Proposition 1A, an ambitious bond-measure project to build a first-in-the-nation bullet train network linking Los Angeles and San Francisco with trains that can reach 220 mph. If finished, the 800-mile system would connect 24 cities throughout the Golden State.

But the California High-Speed Rail Authority, known as CHSRA, sold the project to voters with a $42.6 billion price tag, a figure that has since increased to $65 billion and may go to $100 billion or higher once completed. And so far, not a single foot of track has been laid.

Problems and controversy had dogged the project before voters even approved the $10 billion bond measure. Environmental red tape, lawsuits from Central Valley farmers and tony Bay Area residents alike, and battles over routing have mired the project in the courts for years - costing taxpayers millions with nothing to show for it so far, and setting a 2020 completion date back to 2029 and beyond.

Earlier this year, California Attorney General Kamala Harris sued to validate nearly $9 billion in bonds that would fund the project and shield the project against further litigation. Harris claimed the rail authority had complied with all aspects of Prop. 1A and were ready to start raising funds.

But on Monday, Sacramento Superior Court Judge Michael Kenny found the high-speed rail project's finance committee failed to provide any evidence that "supports a determination that it was necessary or desirable to authorize the issuance of more that $8 billion in bonds under Prop. 1A," a requirement under state law.

"The finance committee's resolutions contain bare findings of necessity and desirability which contain no explanations of how, or on what basis, it made those findings," Kenny wrote. "Specifically, the findings contain no summary of the factors the finance committee considered and no description of the content of any documentary or other evidence it may have received and considered. Thus the findings themselves do not assist the court in determining whether those findings are supported by any evidence."

And while state officials argued that the CHSRA's request in itself supports the move to start selling bonds, Kenny said the finance committee shirked its responsibility to assess the request in any way.

"Some evidence other than the authority's request is necessary to establish that the finance committee actually exercised its discretion in deciding on that request, and did not merely accept it without question," Kenny wrote.

Validating the bonds without such review also flouts legislative intent, according to the ruling.

"This specific language in Prop. 1A clearly gives the finance committee discretion to deny a request by the authority for authorization of bonds, and thus contemplates that such denial may occur," Kenny wrote. "The obvious implication of such language is that the voters, in approving Prop. 1A, intended to empower the finance committee to serve as an independent decision-maker, protecting the interests of taxpayers by acting as the ultimate 'keeper of the checkbook.' Treating the authority's request, by itself, as sufficient evidence to support the finance committee's action authorizing issuance of bonds tends to negate the finance committee's independent decision-making role in the process."

While the state could still begin construction of the first segment - in the middle of the network between Fresno and Madera - in mid-2014 as planned, it will have to do so using $3 billion in federal funding not subject to the Prop. 1A conditions.

The high-speed rail authority would have to match those funds eventually, however, and, without access to bond money, officials would be forced to go to the Legislature for the money.

Prop. 1A additionally mandates that no construction begins until the state has enough money to complete a fully operational and self-supporting first section. CHSRA is $25 billion short there, and so far offers no explanation as to how or where it will get the money.

Dan Richard, chairman of the CHSRA board, stressed that Kenny's ruling did not derail the project.

"Like all transformative projects, we understand that there will be many challenges that will be addressed as we go forward in building the nation's first high-speed rail system," Richard said in a statement.

Public support of the project has waned in recent years, and in September, a USC Dornsife/Los Angeles Times poll found 52 percent of Californians consider the bullet train project a waste of money and want it stopped. Only 42 percent think construction should go forward, while 70 percent want the issue back on the ballot.

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