SACRAMENTO, Calif. (CN) - A trial court overstepped its bounds by ordering the high-speed rail authority to rework a $25 billion shortfall before selling bonds to fund its beleaguered project, a California appeals court held Thursday.
Voters approved Proposition 1A in 2008, an ambitious bond-measure project to build a first-in-the-nation bullet train network linking Los Angeles and San Francisco with trains that can reach 220 mph. If finished, the 800-mile system would connect 24 cities throughout the Golden State.
But the California High-Speed Rail Authority, known as CHSRA, sold the project to voters with a $42.6 billion price tag, a figure that has since increased
to $65 billion and may go to $100 billion or higher once completed. And so far, not a single foot of track has been laid.
In 2013, state Attorney General Kamala Harris sued
to validate nearly $9 billion in bonds that would fund the project and shield the project against further litigation. Harris claimed the rail authority had complied with all aspects of Prop. 1A and were ready to start raising funds.
But late last year, Sacramento County Superior Court Judge Michael Kenny found
the high-speed rail project's finance committee failed to provide any evidence that "supports a determination that it was necessary or desirable to authorize the issuance of more that $8 billion in bonds under Prop. 1A," a requirement under state law.
Additionally, Kenny held that the proposition's language gave the finance committee free rein to deny the high-speed rail authority's request to sell bonds, making the committee the "ultimate keeper of the checkbook."
In a 49-page opinion issued Thursday, however, a three-judge panel of the Third Appellate District found Kenny's "keeper of the checkbook" theory lacking when applied to the high-speed rail finance committee.
"Neither the bond law, the Bond Act, nor any of the validation cases we could find support the trial court's highly unusual scrutiny of the finance committee's determination that it is 'necessary or desirable' to grant the CHSRA's request to authorize the issuance of the bonds," Presiding Judge Vance Raye wrote for the panel. "The Attorney General, supported by amici curiae, argues the trial court's notion that the voters intended the finance committee to serve as 'keeper of the checkbook' not only thwarts progress building a high-speed rail system in California, but jeopardizes the financing of public infrastructure throughout the state by interfering with the Legislature's exercise of its appropriation authority, invents judicial remedies where none are provided by law, and subverts the very purpose of the validation statutes."
The necessary or desirable standard also breaches the separation of powers between the legislative and judicial branches of government, Raye said. And he dismissed calls by other parties fighting the project that the finance committee is nothing more than the high-speed rail authority's rubber stamp.
"Real parties in interest contend that there is no purpose for the finance committee and we should not assume the voters would engage in the idle act of creating a meaningless decision-making body," Raye wrote. "Their argument requires us to presume that the state treasurer, the director of the Finance Department, the controller, all members of the finance committee with considerable public finance expertise, would shirk their responsibility to prudently control the timing of the authorization of the bonds. We do not agree that the creation of a finance committee with considerable discretion to employ its expertise would act as a mere rubber stamp. By enacting the Bond Act, the voters decided to mimic the same bifurcation of roles included in the bond law; that is, the voters intended to establish one body with expertise over managing the project and a second body with considerable public finance expertise to exercise its discretion over the timing and amount of the issuance of the bonds. Our deference to the finance committee's determination as to when the bonds are necessary or desirable does not render the voters' reliance on its expertise an idle act."
But the appeals court declined to greenlight the rail project's preliminary funding plan, which is being challenged as deficient in another case. And other cases up and down the Golden State challenge the project's environmental impact reports and the current "blended" model of combining high-speed rail and other rail in urban areas, which hampers the promise of 220 mph speeds.
"Substantial legal questions loom in the trial court as to whether the high-speed rail project the CHSRA seeks to build is the project approved by the voters in 2008. Substantial financial and environmental questions remain to be answered by CHSRA in the final funding plan the voters required for each corridor or usable segment of the project. But those questions are not before us," Raye wrote.
According to the CHSRA website, the system is expected to be operational between San Francisco and Los Angeles by 2029.