Everything changed for California’s multi-billion-dollar high-speed rail plan on August 16. Sacramento Superior Court Judge Michael Kenny ruled that construction could not begin on the statewide rail system because officials had not met their legal requirement to secure financing for the project’s “Initial Operating Segment”—a 300-mile stretch from Madera in the Central Valley to the northern suburbs of Los Angeles. Kenny also held that the state had failed to complete appropriate environmental reviews for the first phase. But because Kenny didn’t order the California High-Speed Rail Authority (CHSRA) to cease spending money immediately, most media coverage failed to grasp the import of his decision. No reporter challenged Governor Jerry Brown when he dismissed the ruling as no big deal at a media event in Lake Tahoe last week.

Yet the sense of elation among bullet-train foes was unmistakable. “What we are trying to do is make the state comply with its own laws. We’re now on the way to accomplishing that,” said Michael J. Brady, the lead attorney for Kings County in central California and the other plaintiffs in the lawsuit to halt the bullet train. They argue that the CHSRA flouted the taxpayer protections built into Proposition 1A, the 2008 state ballot measure that provided nearly $10 billion in bond seed money for the project. The CHSRA wound up proposing a plan that differed significantly from the one it presented to voters during the campaign. Taxpayers were told that the train would cost about $36 billion; within two years, the price tag had tripled. The CHSRA also promised that it could secure private investment; to date, it has not.

Right now, the state has at most $13 billion potentially available from Prop. 1A bonds and federal funds. But according to Kenny’s ruling, Governor Brown can’t begin construction until his administration has $31 billion on hand. That’s the cost CHSRA officials projected for the initial 300-mile segment, according to their 2012 business plan. Brown has no hope of getting those additional billions from the state legislature or from Congress, and no investor would commit a dime of private capital without revenue or ridership guarantees, which Prop. 1A expressly forbids.

As reality sinks in with bullet-train proponents, most of the focus will remain on Kenny’s courtroom. The judge is expected to call another hearing soon to ask the state how—or if—it plans to respond to his findings. Later this year, the trial’s second phase will require the state to explain how it will meet the statutory requirement that the bullet train travel from downtown Los Angeles to downtown San Francisco in two hours and 40 minutes or less. According to Sacramento’s own “blended” plan, more than one-fifth of that 500-mile route will rely on conventional rather than high-speed rail—suggesting that, by design, the train will never run on time.

Kenny’s decision should raise some tough questions in Washington, D.C., too. The judge’s findings appear to undermine the Obama administration’s claim that the high-speed rail project remains eligible for billions in federal stimulus funds. The Department of Transportation awarded California $3.5 billion for the project, with most of the money coming from the $787 billion stimulus that Congress approved in 2009. Those stimulus funds are subject to all sorts of regulations and compliance rules. Federal regulations have a reputation for obscurity, but here they couldn’t be clearer: federal dollars may only go to state rail projects that have demonstrated a sound and viable “financial plan (capital and operating),” “reasonableness of financial estimates,” and “quality of planning process.” Just because the federal government approved a grant doesn’t mean that it can’t cancel it later. The rules require state officials to report regularly on their progress, and the Federal Railroad Administration audits those reports. Presumably, the report for the third quarter of 2013 will note that a state superior court judge moved to block the project because it lacked the necessary financing to get started.

If all of this doesn’t lead to the loss of federal funds, then critics of the Obama White House may add a new entry to the list of laws—the Affordable Care Act, the No Child Left Behind Act, and laws governing drug possession, illegal immigrants, and the disposal of nuclear waste—that the administration ignores or rewrites on the fly. Only such intervention, it now seems, can keep the illusion of California’s high-speed rail project alive.


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