Sacramento judge delivers setback to high-speed rail project

A Sacramento Superior Court judge on Monday ordered the agency building California’s high-speed rail system to rescind its original funding plan, a decision that figures to halt state bond funding for the $68 billion project until a new plan is put in place.

But, in another ruling in the same case, Judge Michael P. Kenny refused to block the California High-Speed Rail Authority from spending the $3.4 billion in federal money it already has obtained to build an initial rail segment near Fresno.

In a second case, Kenny declined the rail authority’s request to validate its issuance of $8 billion in bonds that California voters approved in 2008 in Proposition 1A. The ruling sets the stage for several of the project’s opponents to challenge its financing even further.

While the rulings appeared to be a setback for construction of a bullet train that would travel from Los Angeles to San Francisco through the Central Valley, advocates on both sides argued over just how bad it was for the future of high-speed rail in California.

Plaintiffs’ attorneys who represented a grower, a homeowner and the Kings County Board of Supervisors, maintained that Kenny’s rulings amounted to a golden spike through the heart of the train.

“They’re stymied,” said Michael J. Brady, a Redwood City lawyer for the plaintiffs. Brady interpreted the ruling to mean that the project can’t move forward until the state identifies where its funding will come from and obtains environmental clearances on its proposed 290-mile “usable segment” from Merced to the San Fernando Valley.

A prepared statement by Dan Richard, board chairman of the California High-Speed Rail Authority board, disagreed.

Richard’s statement said the court “again declined the opposition’s request to stop the high-speed rail project from moving forward.”

Kenny “did not invalidate the bonds as approved by the voters,” Richard said. “Like all transformative projects, we understand there will be many challenges that will be addressed as we go forward,” his statement said.

Kenny ruled in August that the rail authority was out of compliance with the mandates of Proposition 1A, the initiative authorizing $9.95 billion for bullet train construction, on matters related to its funding stream and environmental clearances.

In a hearing last month, the plaintiffs sought not just the rescission of the funding plan, but a court order to keep the state from spending any federal money that is contingent on a state match.

Along with $3.4 billion from the federal government, the authority has obtained approval from the state Legislature to receive $2.6billion in Proposition 1A funds. It was not immediately clear if Kenny’s ruling on state bond funding applied to the July 2012 action by lawmakers.

Even if the authority can spend the money, the plaintiffs say that still leaves the state $25billion short of the amount needed for the Merced-to-San Fernando segment, with more environmental hurdles in the way.

“So that’s a question of huge delays,” Brady said.

As for the judge refusing to block the expenditure of the federal funds, Brady said, “I believe the federal government as a political and legal matter will now take a long, hard look, and they will ask themselves, this ruling means no matching funds can be put up possibly for years, if ever, until all these deficiencies are cured.”

“We’re very pleased,” Brady said. “We think this project is now at a standstill, where it should be.”

High-speed rail officials declined to comment beyond Richard’s statement.

Rod Diridon, a former Santa Clara County supervisor and one-time high-speed rail board chairman, said the ruling will likely make the project more expensive and take longer to finish. But he insisted it won’t stop the project.

The authority already has environmental clearances for a 29-mile stretch from Madera to Fresno and the money to build it, said Diridon, now executive director of the Mineta Transportation Institute in San Jose.

“Based on talking to a lot of people around the world, I think once the high-speed rail filibuster has been broken in America, you’ll see a franchise bid come forward,” Diridon said. “That franchise bid is when (interests from) China or Japan or Korea or Germany and Italy step forward for the right to operate the system and retain the profit for the next 30, 40 or 50 years. All it takes for the dirt to be turned is a valid environmental clearance and contract in the Central Valley.”

Kenny turned down the authority’s application for a bond validation on grounds that a finance committee created under the 2008 initiative “did not comply with an essential legal requirement” to put evidence on the record on why the issuance of the bonds would be “necessary or desirable.”

In light of the other ruling on the funding plan, “I think the committee would have a very hard time justifying, ‘Let’s go ahead and issue the bonds,’” a second plaintiffs’ lawyer, Stuart M. Flashman of Oakland, said in an interview.

Diridon said the validation ruling will allow seven possible challenges to the bonds to go ahead separately rather than in one case. The validation opponents include the plaintiffs in the funding case – Hanford area grower John Tos, homeowner Aaron Fukuda and Kings County. Others were the Kings County Water District and Citizens for California High-Speed Rail Accountability, the Howard Jarvis Taxpayers Association, Union Pacific Railroad, Eugene Voiland, Kern County and the Free Will Baptist Church.