Tensions with states grow over high speed rail

WASHINGTON (Reuters) - The Transportation Department warned two governors-elect that federal money allocated to building high-speed passenger rail lines in their states cannot be used to pay for other infrastructure projects, as tensions grow over federal transportation spending.

Transportation Secretary Ray LaHood, in letters to Ohio Governor-elect John Kasich and Wisconsin Governor-elect Scott Walker, both Republicans, said the two states would simply lose funding if they choose not to participate in the rail project.

When it comes to the stimulus money, "none of those funds may be used for anything other than our high-speed rail program," wrote Transportation Secretary Ray LaHood in a letter to Kasich dated November 9 and obtained by Reuters late Tuesday.

"I respect the authority of governors to make decisions for their states," LaHood said. "If, however, you choose not to participate in the program, we would like to engage in an orderly transition to wind down Ohio's involvement in the project so that we do not waste taxpayers' money."

In a similar letter to Walker that also threatened to end Wisconsin's involvement in the program, LaHood said 30 foreign rail manufacturers agreed to locate their bases of operations to the United States "so that we can restart idled manufacturing plants here at home and put our skilled workers back on the job."

On Wednesday afternoon, Walker shot back.

In a statement, his transition director John Hiller said Walker "is going to fulfill his campaign promise to stop the construction of the Madison-Milwaukee train line."

President Barack Obama's $814 billion economic stimulus plan includes funding to create a high-speed train network across the country.

The plan allocated $8 billion to building nine lines for "bullet trains," and Obama's budget included $2.4 billion in additional funding, which was awarded last month.

Walker, in a letter to LaHood on Tuesday, questioned putting dollars into high-speed rail when Wisconsin needs money for four new highway projects and $1 billion worth of repairs on a widely used interchange.

"I believe it is a grave mistake for the federal government to insist on building an unwanted passenger rail system at a time when our roads and bridges are literally crumbling," he wrote.

Similarly, Kasich has said he wants $400 million in high-speed rail money to go to road construction and freight train lines.

Under the nation-wide plans for a high-speed rail network, three lines would run through Illinois, turning Chicago into a bullet train hub. One would connect Milwaukee and Madison, Wisconsin, to Chicago and might later join Milwaukee to Minneapolis and St. Paul, Minnesota. In Ohio, a line would connect the cities of Cleveland, Cincinnati and Columbus.

Companies such as Germany's Siemens and French engineering group Alstom that have already established expertise in constructing high-speed train cars and rail lines are keenly watching how the states progress with their development plans.

Republicans swept into governors' offices and the U.S. House of Representatives in last week's elections, largely driven by worries about the economy and federal spending.

Republicans roundly criticized the economic stimulus plan, a package of spending and tax measures passed last year that included the largest transfer of funds from the federal government to states in U.S. history.

With the Republican election gains, U.S. Representative John Mica will now head the House Transportation committee starting in the new year and he is already setting his sights on the high-speed rail programs. Rick Scott, the Republican governor-elect of Mica's home state of Florida, has also voiced opposition to high-speed rail development, threatening to halt a planned rail line in Florida if it requires any state funding.

In an interview with Reuters, Mica said he would conduct a close review of how money from the stimulus plan was awarded.

(Additional reporting by John Crawley in Washington and by Karen Pierog in Chicago; Editing by Leslie Adler)