Florida rail deal off the tracks, funds withdrawn

* Deal was strongly opposed by Tea Party-backed governor

* State Supreme Court nixes bid to force governor's hand

* LaHood says rail plans embraced elsewhere across America

By Michael Peltier

TALLAHASSEE, Fla., March 4 (Reuters) - About $2.4 billion in federal funds for a high-speed rail project in Florida will go elsewhere after the state's Republican governor rejected the deal out of hand, U.S. Transportation Secretary Ray LaHood said on Friday.

LaHood said the Obama administration was pulling the plug on the financing after speaking with Rick Scott, Florida's Tea Party-backed governor, Friday morning in a last-ditch attempt to win his approval.

The money, which many Floridians hoped would bring thousands of jobs to a state burdened with record-high unemployment, would now be spent in other parts of the country, LaHood said.

"I know that states across America are enthusiastic about receiving additional support to help bring America's high-speed rail network to life and deliver all its economic benefits to their citizens," LaHood said in a statement.

Under LaHood's offer, Washington would have paid for all but $300 million of the $2.7 billion high-speed line. The project was originally approved in late 2009 by former Governor Charlie Crist and by state lawmakers, who set aside funds to finance the state's share.

Scott rejected LaHood's offer at least three times, saying the state could not afford it and, if the line were built, taxpayers would be responsible for operating losses. The Tampa-Orlando line would be the first phase of a longer line to Miami at a cost of billions more.

"Put simply, the proposed high-speed rail line is far too uncertain and offers far too little long-term benefit for me to consider moving forward and ultimately putting taxpayers at risk during an already challenging fiscal climate," Scott had written in a Feb. 16 letter to LaHood.

OTHER RAIL PROJECTS

The $2.4 billion Scott is relinquishing will go to high-speed rail projects in other states such as California, Washington State, Illinois and possibly the Northeast Corridor.

Two Florida state senators filed a lawsuit earlier this week in a bid to keep the project alive, saying Scott overstepped his authority in rejecting the deal.

But Florida's Supreme Court tossed out the lawsuit on Friday, saying there were no grounds on which Scott could be compelled to accept federal money for a Tampa-to-Orlando route, the first leg of a larger network that would eventually stretch south to Miami.

"The governor is gratified that the court provided a clear and unanimous decision, (and) he is now focused on moving forward with infrastructure projects that create long-term jobs and turn Florida's economy around," said Scott spokesman Brian Burgess.

Scott, meanwhile, announced plans to fully fund a $77 million shortfall for a Port of Miami dredging project to deepen the port so larger ships can enter it.

The port expansion project will ultimately bring 30,000 jobs to the state. Scott said.

"This is the type of infrastructure project that will pay permanent, long-term dividends, and provide a solid return on investment for Florida's taxpayers," Scott said.

The Tea Party is a conservative political movement that advocates smaller government and fewer taxes. (Editing by Tom Brown and Philip Barbara)