We have been chronicling the journey of California’s vaunted “high speed train” construction project, which has been anything but speedy.

When we last checked, Sacramento judge Michael Kenney had wisely ruled that state officials cannot pursue a plan to tap billions of dollars in voter-approved bond funding for construction—a decision that could cause indefinite delays in the massive $68 billion project.

It looked like the project was poised to be derailed.

In July of this year, however, the Third Appellate District Court ruled that the “voters clearly intended to place the Authority in a financial straitjacket by establishing a mandatory multistep process to ensure the financial viability of the project.” But then the panel decided to allow the plan to move forward.

The Wall Street Journal editorial board took exception to this seemingly questionable ruling:

The court could require the authority to redo its plan, but the judges say that would be unnecessary since the Director of Finance must still approve a rigorous final plan before the authority can spend the bond revenue. In other words, the law’s procedural requirements don’t matter.

Yet the bond referendum had ordered a preliminary plan for legislative review precisely so lawmakers could force the rail authority to address their concerns before appropriating the bonds. This added a modicum of political accountability.

So here we have the spectacle of legislators ignoring the very taxpayer protections that they had used to gull voters into approving a ballot measure that might never have passed without those protections. The lesson is that politicians will grab any new power or spending authority voters give them. They’ll blow through the caveats and dare voters to sue to stop them.

True. However, Cal Watchdog pundit Chris Reed says that the Third District’s decision is not the big victory for Governor Jerry Brown and his legacy that the WSJ fears (hat-tip, So Cal Tax Revolt Coalition’s Dawn Wildman).

The appeals court that vacated Sacramento Superior Court Judge Michael Kenny’s ruling to block the project did not say that Kenny’s conclusion that the HSRA violated Proposition 1A was wrong. Instead, the decision held that a trial judge had no authority to block construction until the legislature and the High Speed Rail Authority approved a final business plan. “The scope of our decision is quite narrow,” the judges wrote in the first paragraph. The decision went on to reinforce two key protections contained in Proposition 1A—both meant to ensure that the state didn’t spend billions on initial construction only to run out of money before a financially viable train system could be built. Judge Kenny ruled that the state had to identify “sources of funds that were more than theoretically possible” in explaining how it would pay for the project’s $31 billion, 300-mile initial operating segment. He also said that the HSRA had to complete environmental reviews for the entire segment before construction could begin. The appeals court contradicted him on neither point.

The appellate court underscored that the law requires the state to establish “financial viability” for the bullet train’s first segment by adhering to a voter-approved “financial straitjacket.” It said that bond funds could only be spent after a funding plan gained approvals from the state finance department, the Joint Legislative Budget Committee, and an independent financial analyst who certified the plan’s soundness—specifically that if built as planned, the bullet train could operate without a taxpayer subsidy. The appeals court judges also agreed with Judge Kenny that the rail authority had to obtain “all the requisite environmental clearances before construction begins.”

These are shortcomings that Brown … cannot easily finesse. The state has less than $10 billion left from Proposition 1A and from federal stimulus funding. The prospect of obtaining additional federal funding from House majority leader Kevin McCarthy, a Bakersfield Republican and ferocious critic of the project, is virtually nil. And the HSRA reportedly has 10 percent of the necessary environmental clearances in hand—and a long list of lawyers lined up to fight future reviews.

Bullet train cheerleaders may be excited now, but Proposition 1A’s financial safeguards (and California’s budget problems) remain formidable obstacles.

Dean Riehm is the San Diego area blogger most versed in the bullet train saga. He says, “In essence, Brown is not getting anymore state bond money, so he is effectively working with a budget of about $10 Billion (for a deeply flawed overall projected $68 billion project)… which is what the original bond measure authorized back in 2008. The private sources of funding he promised would materialize never have and never will. This is a pyhrric victory. Private backing will be scared off even more now that Brown has embraced a go-it-alone mentality.”

All this ruling means is that the train project is going to derail a little bit farther down the road than initially anticipated.


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