Judge: Rail authority's funding plan violated law

Sacramento decision deals legal setback for $68 billion high-speed rail

The California High-Speed Rail Authority had violated state law and "abused its discretion" in proceeding with the controversial San Francisco-to-Los Angeles train system without first identifying the funding sources for the line's first usable segment, a Sacramento Superior Court judge wrote in a Friday decision.

The decision by Judge Michael Kenny presents a new setback for the rail authority, the agency charged with building the voter-approved project. The decision was prompted by a 2011 lawsuit from residents of Kings County, who argued that the rail authority's funding plan did not comply with Proposition 1A, the 2008 measure that authorized $9 billion in state funds for the line.

Attorneys for the plaintiffs included rail critic Michael Brady, an attorney from Redwood City, and Stuart Flashman, who represented Palo Alto, Atherton and Menlo Park in prior lawsuits against the rail authority.

Kenny's verdict comes at a time when the rail authority is preparing to build the "Initial Construction Segment" of the $68 billion line in the Central Valley, between Bakersfield and just north of Fresno. This segment would be the first phase of the rail line's "Initial Operating Segment," which in effect is the first stretch of the train system that would be usable.

In making his finding, Kenny argued that, while the rail authority had identified the funding sources for the construction segment, it failed to list the funding sources for the operating one, as mandated by law.

The ruling stopped short, however, of invalidating all rail-authority documents based on the funding plan. Rather, Kenny left open the question of remedy and directed both sides to confer and submit arguments, after which time he would decide the next steps. The plaintiffs, Aaron Fukuda, John Tos and County of Kings, argued that if the business plan were to be found invalid, everything that relied on the business plan should also be struck down.

"Essentially, defendants have built a house of cards upon the basis of a funding plan that violated the terms of the bond measure. If the funding plan is invalid, the entire house of cards must collapse along with it," the plaintiffs wrote.

While Kenny's decision may not stop the project, which has become increasingly unpopular on the Peninsula, it could set up a new legal speed bump for the beleaguered rail authority.

Last year, the rail authority won a razor-thin victory in Sacramento when the state Senate authorized the agency to tap into the first $2.6 billion in bond funding and to accept $3.3 billion in federal funding for the first segment of the project. The appropriation came by a single vote, with several Democrats joining every Republican in voting against the funding bill.

Kenny's ruling makes an argument that the rail authority's plan to fund its first operating segment (a 300-mile-long stretch from either north from Bakersfield to San Jose, or south from Merced to San Fernando) is flimsy at best. The rail authority's business plan lists numerous potential federal funding sources for the first operating segment, though it also makes clear that some of these sources are far from a sure thing.

The plan acknowledges that federal grants from the High-Speed Intercity Passenger Rail Program and Passenger Investment and Improvement Act of 2008 are uncertain and would require heavy lobbying by the state to "promote high-speed rail as a program of national interest." Other federal funding sources identified in the plan -- including a trust fund dedicated to transportation and qualified tax-credit bonds -- don't even exist.

"This language makes it absolutely clear that there is, in reality, no reasonably anticipated time of receipt for any of the potential new federal funds described in the funding plan and the 2012 draft business plan, and that there are no expected commitments, authorizations, agreements, allocations, or other means of actually receiving such funds," Kenny wrote.

The rail authority acknowledged in its 2012 business plan that it doesn't not have all the funding sources identified for future segments of the line and stated that it will identify them no later than 2015.

Kenny also cites the plan's statement that "the mix, timing and amount of federal funding for later sections of the High-Speed Rail is not known at this time." He points to this language in arguing that "the funding plan failed to comply with the statute because it simply did not identify funds available for the completion of the entire Initial Operating Segment."

After going over the history of the case, Kenny wrote: "Having exercised its independent judgment in this matter as authorized by law, the court concludes that the (rail) authority abused its discretion by approving a funding plan that did not comply with the requirements of law."

In a statement, attorneys for the plaintiffs said the ruling will require the rail agency to go back and correct its mistakes. Flashman wrote that Proposition 1A was by no means a "blank check" from the voters.

"There were numerous requirements that had to be met before the bond funds could be spent," Flashman said in the statement. "The authority will need to go back and do things right. If the Governor and the authority don't like these requirements, they'd need the the voters' approval to change them."

Brady concurred and said Proposition 1A "contains such strict safeguards that the authority may not be able to comply at all, in which event the High-Speed Rail project may never go forward."


2 people like this
Posted by Old Ben
a resident of Shoreline West
on Aug 18, 2013 at 11:34 am

This thing was a blatant scam from the very beginning. Civil forfeiture is the only way to recover the money.

2 people like this
Posted by Jim Neal
a resident of Old Mountain View
on Aug 18, 2013 at 10:31 pm

This is exactly what I was talking about when I ran for City Council last year! One of the main portions of my platform was doing away with this High Speed Rail scam. From the very beginning, I said that the financing for this made no sense and was merely a way of funneling hard earned money from taxpayers' pockets into the pockets of special interests.

This was touted as a 'green' project, but the only green it will see in my lifetime is the cold hard cash that will be wasted if this project is allowed to proceed! If you read the projects' own documents, HSR will not be finished until 2029 and will take a minimum of 30 years after that to become carbon neutral! This doesn't sound like a very green plan to me.

Additionally, why should it be run from San Francisco to LA? The SF to San Jose corridor is already highly developed with both rail and housing. It would be far simpler to have it run from San Jose to LA since Caltrain already serves SF to San Jose and the planned Caltrain improvements would not require the seizure of private property for additional right of way (at least not to my knowledge).

The fact that the HSR project is $25 Billion short just implementing the initial phase in the Central Valley, and that some of the sources of funding that were identified in the plan don't even exist, should set off warning bells even for the most hard core HSR supporters.

Why is the State trying so hard to build something that will bankrupt it when we have so many other pressing needs such as improving education and housing the homeless?

Jim Neal
Old Mountain View

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Posted by AC
a resident of another community
on Aug 19, 2013 at 2:27 pm

AC is a registered user.

@Jim Neal,

So how can we abort the project, now that we know that it's been mismanaged?

2 people like this
Posted by PoliticalInsider
a resident of Old Mountain View
on Aug 20, 2013 at 9:07 am

If they would only listen. A bore under the CalTrain tracks at a depth of 50 feet would make the Bay Area link feasible. Bart proves it can be done. Instead we argue about blended track. All it takes is one lone rock from the commercial traffic and that lightweight train is Spain disaster.

All they have done is spend the money on PR. We should all demand that get repaid as this smites as a scandal.

Its people like myself that want high speed rail, only done right. All the arguments to date are backward headed idiocy. Imagine the way they want it now, quadruple the traffic at 12 minute intervals. The intersection at Moffett and Castro would cease to exist as a thorough fare. An aim of certain council members I might add.

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Posted by @Jim Neal
a resident of Castro City
on Aug 20, 2013 at 11:42 am

The Mountain View City Council cant veto this State project. MV can lobby against a station here but the State can do whatever it wants. Only the voters or the Courts can pull the plug, not the leaders of one of the towns along the way or else Atherton would have already done it.

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Posted by Amtrak
a resident of Monta Loma
on Aug 20, 2013 at 2:44 pm

Trains are so much of the past that they are hurting financially.

Amtrak needs federal funds because they can only make 44ct for every dollar.

This idea of an HSR is propostris when we have roads, bridges, infrastructures that need work, an ever growing govt pension funds and medical costs. Yet, here they are, the politicians, with bloated dreams of trains. I say if they want trains, give them the lego train sets to work with.

But guess what, who will pay for all this, yes you and me, they take it directly for your paychecks each week.

Once the government starts getting out of the red, it's in, then they can start dreaming. Anything the govt runs turns into a money pit.

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Posted by Jim Neal
a resident of Old Mountain View
on Aug 21, 2013 at 2:52 pm

Resident of Castro City,

You are correct that the City Council can't veto a State project, but I hope that you will note that I never made that claim. What I am saying is that I am personally against it for all of the reasons that I did outline above. However, the Council could do several things to make it's displeasure known if it chose to do so. Other City Councils have spoken out against it and even filed lawsuits. If all the affected cities of California said "No" what do you think the result would be? And even if Mountain View stood alone in it's opposition to the project, why would that be wrong? I have found that sometimes, you have to be the one person with the courage to stand up and say "No" to what you know is wrong, even if you know that our cause is hopeless.

AC - You can call and write your local and state representatives and let them know how you feel... then get 500 friends to do the same, and tell them to get 500 of their friends to do it. You'd be amazed how fast this would shut down if we could do that.

Like this comment
Posted by Old Steve
a resident of Rex Manor
on Aug 21, 2013 at 4:33 pm


Fifty feet below grade tunnel like BART in Berkeley (which Berkeley paid for?). If HSR does not have the money now, how will they pay to double the cost from SJ to SF by tunneling. If Mtn Vw gets a tunnel, so do all of the other NIMBY little cities (some of whom have already sued). The voters approved it, the voters can kill it. Folks who are opposed, I'd suggest you stop whining on forums and start organizing an initiative petition drive. Nobody already in power who supports it will do it for you. Neither will those of us who support it.

Like this comment
Posted by Insider
a resident of Old Mountain View
on Aug 22, 2013 at 4:35 pm

Fremont Bart, dope

Like this comment
Posted by To Steve
a resident of Rex Manor
on Aug 22, 2013 at 4:37 pm

Tunneling is no longer that expensive as BART proved in Fremont. Oh and the HSR has no money? What are you smoking?

Like this comment
Posted by Old Steve
a resident of Rex Manor
on Aug 23, 2013 at 9:11 am

If HSR is already so short of money that folks are litigating to put it out of business because it cannot show us the money, where does the tunnel money come from? Fremont BART across Central Park is a shallow, cut and cover "underpass". Tunneling (think Caldecott, or Devils Slide) is a completely different undertaking. If you put HSR in a cut and cover "slot" on the Peninsula, keeping Caltrain running while doing so is a huge challenge, and also nearly double the current "blended" proposal. So some folks are mad because it is too expensive, and others are mad because it doesn't spend enough on their priorities. If it deserves to be killed, kill it with an initiative. Judge Kenney can hit "pause" but not stop. Full Stop will need to be up to the voters as long as Brown is Governor.

Like this comment
Posted by USA
a resident of Old Mountain View
on Aug 23, 2013 at 1:10 pm

Here's my surprised face Web Link

4 people like this
Posted by Otto Maddox
a resident of Monta Loma
on Aug 25, 2013 at 7:30 am

Remember this: Government always gets bigger.

The voters approved the creation of another government bureaucracy in 2008.

The government isn't going to give it back no matter how crazy their plans look.

I really hope we never see one mile of track laid for this boondoggle. It will just mean more government employees giving us piss poor service and then retiring with a pension for the rest of their lives that we have to pay for.

While we end up with a train service no one wants. I can't remember the last time I heard someone say "If only there was a train that went to Los Angeles." Well there is, it's called SOUTHWEST AIRLINES. If a ticket on Cailtrain from MV to SF is $14 roundtrip lord knows what a trip to LA and back is going to cost. I'd rather fly on a plan. It's faster.

6 people like this
Posted by Jim Neal
a resident of Old Mountain View
on May 9, 2016 at 8:14 am

Jim Neal is a registered user.

I just though that this would be a good reminder of what is really going on with High Speed rail and why it is a bad idea! To this day, it is still not funded. The taxpayers were lied to, and we continue to be lied to about this project. When I ran for office in 2012, I estimated the the total cost for the HSR project would be in the neighborhood of $200 Billion and I stand by that number today.

I also ask people to note that there is not any information (at least that I have been able to find) regarding how much tickets will cost. For this project to be profitable, it will likely cost MORE to get to LA by HSR than by jet. And the price to go from the central Valley to here will be so expensive, that if you can afford it, then you could probably afford to buy a house here and skip the commute!

Jim Neal
Old Mountain View

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