The Third District Court of Appeal late yesterday overturned two trial rulings that had hamstrung Californiaʼs still-embattled High-Speed Rail project. The Court ruled
that “The Legislature appropriated the bond proceeds based on the preliminary funding plan, however deficient, and there is no present duty to redo the plan.”
Plaintiff’s lead counsel, Michael Brady, was disappointed with the ruling. He said “The voters approved Proposition 1A only because it included stringent requirements to protect the state from financial risk. The Court ruled that although the project did not meet the requirements, taxpayers have no remedy now. They can only sue after many more tens of millions of dollars are spent on design and analysis.”
Stuart Flashman, co-counsel added, “The court has essentially allowed the Authority to ignore promises it and the legislature made to Californiaʼs voters. It bodes ill for votersʼ willingness to trust such promises in the future. Supreme Court review appears warranted.”
In November 2013, Judge Michael Kenny ruled that the High-Speed Rail Authorityʼs Funding Plan failed to properly certify, as the bond measure required, that all needed environmental clearances had been obtained and sufficient funding was available to complete the Merced to San Fernando Valley segment of the project.
The Tos v. California High-Speed Rail Authority
case was brought by a farmer, a rural homeowner and Kings County. It asked the Court to block the Authority from using bond funds because the project failed to meet the ballot measureʼs requirements.
In addition, the appeals court reversed Kennyʼs ruling that blocked the issuance of bonds because of another failure to satisfy bond measure requirements. In California High-Speed Rail Authority et al. v. All Persons Interested
, the appellate court held that no evidence was needed to show that it was “necessary or desirable” to issue the bonds, effectively erasing that provision from the ballot measure.
to access documents from the two cases. Three other claims in the Tos case are still pending in the trial court.
Kathy Hamilton on the decision in Cal Watch
provides links to Judge Kenny's two earlier decisions. What the Court of Appeal has done is essentially invalidate promises made to state voters in Proposition 1A
, which passed with only 52% of the vote in 2008.
Supporters of the project don't understand how costly the project is. From the ballot measure:
If the bonds are sold at an average interest rate of 5 percent, and assuming a repayment period of 30 years, the General Fund cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year.
$647 million a year just to service the $9.95 billion bonds! But the price tag on the project is officially $68 billion, not $9 billion.
This is from the project's 2009 business plan when the project was supposed to cost a mere $43 billion:
Federal Grants: $17-19 billion
State Grants (Prop. 1A bonds): $9.95 billion
Local Grants: $4-5 billion
Private Funding: $10-12 billion
The project already got $3 billion from the federal government, but that source has dried up completely since the Republicans took over the House. There has been no private money invested in the project---why would there be?---and the notion that local governments are likely to chip in $4-$5 billion has always been pure fantasy (see pages 7-9 of this document
for a short primer on the improbable chance of getting the money to even build the system).
Governor Brown got the legislature to give the project $250 million in cap-and-trade money this year. But even if he could get that amount every year, it would never be nearly enough to help much in a project that will cost $68 to $100 billion to build (the $68 billion is a lowball estimate) Where is the governor going to get the rest of the construction money? He has no idea.
For Republican Neel Kashkari, who has dubbed the $68 billion effort to link San Francisco and Los Angeles "the Crazy Train," the appeals court's ruling puts the issue back in play for his run for governor. Kashkari has slammed the high-speed-rail plan as a financial albatross for the state, created by what he sees as Brown's lack of concern about what's important for California. "We have many more-important needs across the state," Kashkari said Friday. "We should cancel the project right now and ask voters to repurpose the bond money for water storage projects, which would both create jobs and help us grow food for the future." Then there's the political angle, which the GOP candidate will probably point out many times between now and November. "If I'm elected governor, the first thing I'll do, day one, is stop the train," Kashkari said.
I'm a Democrat who's never voted for a Republican candidate for Governor, but, considering the importance of this project for California---and how stupid it is---Kashkari has my vote.