High-Speed Rail Decision Is Victory for Rule of Law

Published December 21, 2013

California Judge Michael Kenny has barred state bond funding for the California high-speed rail system, finding “the state’s High-Speed Rail Authority failed to follow voter-approved requirements designed to prevent reckless spending.” These protections had been important in securing voter approval of a $10 billion bond issue in 2008.

Judge Kenny’s decision means California government officials cannot ignore the state’s laws, even when its leadership finds them politically inexpedient. The ruling forbids the state from arbitrarily casting aside legally binding promises.

Funding Must Be in Place
Superior Court Judge Michael Kenny ruled the California High-Speed Rail Authority could not proceed with using billions of dollars in bond funds to begin construction because it had not credibly identified funding sources for the entire $31 billion it will take to finish the 300-mile initial segment, nor had it completed necessary environmental reviews for the segment. These requirements were among the taxpayer protections written into law by California voters in November 2008, when they voted narrowly for Proposition 1A to allow the state to issue $9.95 billion in bonds as seed money for the project. Kenny said the state must develop a plan that comports with these requirements.

Judge Kenny rejected arguments by the state Attorney General that the state legislature, rather than Proposition 1A (now state law which has not been repealed) was the final authority on how the bonds are used.

The decision left the high-speed rail project without either a funding plan or the ability to borrow money. The only remaining source of construction funding is a federal grant, which requires a match of state funding.

Proposition 1A and the high-speed rail project have had a difficult history.

A $10 billion high-speed rail bond issue to support the project (then called Proposition 1) was scheduled for 2008, after having been postponed twice. There was concern, however, in the state legislature that Proposition 1 had insufficient fiscal, environmental, and management guarantees to attract a majority vote of the electorate. As a result, the legislature enacted and Gov. Arnold Schwarzenegger signed Assembly Bill 3034, which added substantial protections and recast the ballot measure as Proposition 1A.

Leading high-speed rail proponent and then-California High-Speed Rail Authority (CHSRA) Chairman Quentin Kopp applauded Assembly Bill 3034, saying “Californians will now be able to vote on a high-speed train system grounded in public-private financing and guided by fiscal accountability with the guarantee of no new taxes to fund the system.”

Unrealistic Cost Estimates
In a voter ballot pamphlet, proponents told voters the proposed system would operate from San Francisco to Los Angeles and Anaheim, as well as through the Inland Empire (Riverside-San Bernardino) to San Diego and to Sacramento. This promised cost of this complete system was $45 billion.

Like many other large infrastructure projects, projected costs soon expanded rapidly. By 2011 the cost had escalated to a range of almost $100 billion to more than $115 billion. Furthermore, the promised extensions to Sacramento and the Inland Empire and San Diego were not included in that price.

Abandoning ‘High Speed’
The political reaction to the cost escalation was negative, leading the CHSRA to radically revise the remaining San Francisco-to-Los Angeles-and-Anaheim line. CHSRA removed exclusive high-speed rail tracks in the San Francisco, San Jose, and Los Angeles metropolitan areas from the plan. CHSRA claimed the legislatively required travel time of 2:40 could be achieved without genuine high-speed rail configurations in the two metropolitan areas. Analysts pointed out this assertion defies common sense.

Former CHSRA Chair Quentin Kopp withdrew his support at this point, referring to the “blended system” as “the great train robbery.” Kopp also raised the possibility the new plan could violate Proposition 1A, which Judge Kenny’s decision ultimately confirmed.

Too Big to Fail?
Mother Jones columnist Kevin Drum argues making the financial fundamentals work would make the project too big to fail.

“As near as I can tell, the HSR authority’s plan all along has been to simply ignore the law and spend the bond money on a few initial miles of track. Once that was done, no one would ever have the guts to halt the project because it would already have $9 billion sunk into it. So one way or another, the legislature would keep it on a funding drip,” wrote Drum.

That would force California taxpayers to fill the gargantuan funding gap, which for the Los Angeles-to-San Francisco line now stands at approximately $65 billion. the federal funding of approximately $3 billion, the state is 95 percent short of the $68 billion it needs.

The San Jose Mercury-News, which like the San Francisco Chronicle was a strong supporter of Proposition 1A in 2008, has long since climbed off the train. In an editorial following Judge Kenny’s decision, the Mercury-News decried the project’s “bait and switch” tactics and called for “an end to this fraud.”

The Winners: California Citizens
At this point, the words of legendary New York Yankees catcher Yogi Berra seem appropriate: “It ain’t over ’til it’s over.” However, Judge Kenny has rewarded California residents with something that never should have been taken away from them—a government required to follow its laws.

Wendell Cox ([email protected]) is a visiting professor at Conservatoire National des Arts et Metiers, Paris, and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life. A longer version of this article appeared at newgeopgraphy.com. Reprinted with permission.