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Hurdle For High-Speed Rail: Where Is The Money?

SACRAMENTO, Calif. (AP) —A judge's rulings this week ordered California's high-speed rail authority to rewrite its funding plan, bringing to the surface again one of the biggest hurdles facing the ambitious, $68 billion project: Where will the money come from to complete it?

State and federal sources so far account for less than 20 percent of the total price, and the current plan relies on vague funding from "federal, state, local and private sources." Republicans in Congress, including House members from California, have vowed to block any additional money.

Rail officials say they are not worried about the delay. They insist that most major infrastructure projects raise money as they go, rather than providing all the funding up front. Chief Executive Jeff Morales says a new financing plan will be ready in months, not years, and that the delay will not "have any material effect on the project."

Sacramento County Superior Court Judge Michael Kenny has ruled that the state's current financing plan does not comply with the promises made to voters in 2008 when they approved selling $10 billion in bonds for the project. Beyond the $6 billion in state and federal funds for the first 130 miles, the judge said, revenue is theoretical rather than "reasonably expected actually to be available starting in 2015." The current cost estimate for building the first 300 miles, which the judge has indicated he believes is what the bond measure intended to finance, is $31 billion.

On Monday, Kenny ordered the state to write a new financing plan before tapping the voter-approved bond money; the court rulings do not halt work that already is underway on the initial section of track between Madera and Fresno.

The rulings again raise the question of whether the rail system will ever deliver what voters were promised: A high-speed network shuttling riders between San Francisco and Los Angeles in 2 hours and 40 minutes, requiring no state operating subsidies.

There also is the possibility that California could spend billions for a rail network that is never completed, creating a "track to nowhere" in the Central Valley.

"The court said you've got to identify $31 billion," said Michael Brady, an attorney who represents the Central Valley farmers and residents who sued, noting that they only have $6 billion so far. "They've got to come up with another $25 billion in new money before they can even start."

The current financing plans also are based on cooperation from Congress, and the Republicans who control the House oppose any more appropriations. This week's court rulings gave opponents another opportunity to push for a re-vote on the project.

The U.S. House's majority whip, Rep. Kevin McCarthy of Bakersfield, said the state has "failed at every turn to detail a realistic plan that will fund this program" and promised he would continue efforts to "deny any federal funds going toward this unworkable boondoggle."

The judge also ruled that the California High Speed Rail Authority did not prove it was "necessary or desirable" to sell $8.6 billion in bonds right now, choking off immediate state funding.

It was not clear whether the rail authority's revised funding plan would identify the money needed to build the entire 300-mile segment. Morales said the voter initiative "requires it for the first useable segment, which is not the same as the first operating segment."

A report that does not identify funding for 300 miles would likely send both sides back to court.

In the meantime, the chairman of the rail authority's board, Dan Richard, has said California officials are not naively waiting for a federal government handout.

"The notion that we need to sit back and hope and pray for $20 billion of federal government money would strike most people as unreasonable, and us as well," he said in August.

He said most high-speed rail projects rely on varied revenue streams, including leasing rights of way to telecommunications companies, tapping solar energy, parking revenue and real estate development - which depend on first building the basic rail infrastructure.

"We haven't even scratched the surface on that," Richard said.

(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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