Halt California funds for high-speed rail: budget watchdog

SAN FRANCISCO Tue Apr 17, 2012 8:55pm EDT

An undated artist's illustration courtesy of the California High-Speed Rail Authority. REUTERS/Handout

An undated artist's illustration courtesy of the California High-Speed Rail Authority.

Credit: Reuters/Handout

Related Topics

SAN FRANCISCO (Reuters) - California lawmakers should not approve Governor Jerry Brown's budget proposals to provide additional funds for the state's pricey planned high-speed rail system, the state's budget watchdog agency said in a report on Tuesday.

The report by the nonpartisan Legislative Analyst's Office said the California High-Speed Rail Authority has "not made a strong enough case for going forward with the project at this time."

The report comes after the authority earlier this month slashed its construction cost estimates by some $30 billion to $68.4 billion, tackling some of the cost concerns hanging over the project in the legislature, whose members must approve the release of the first chunk of the nearly $10 billion in rail bond funds voters approved in 2008.

Funding beyond proceeds from state debt and $3.5 billion from the federal government to build the statewide high-speed system is "highly uncertain," the report said.

"Specifically, funding for the project remains highly speculative and important details have not been sorted out. We recommend the Legislature not approve the Governor's various budget proposals to provide additional funding for the project," according to the Legislative Analyst's Office.

The office noted that plans for using revenue raised through California's new carbon trading system for reducing greenhouse emissions to help build the system are speculative and that "important details regarding the very recent, significant changes in the scope and delivery of the project have not been sorted out."

The report also cast doubt on prospects for ongoing federal funding for California to build its planned high-speed rail network, intended to connect the most populous U.S. state's far-flung metropolitan areas.

"Given the federal government's current financial situation and the current focus in Washington on reducing federal spending, it is uncertain if any further funding for the high-speed rail program will become available," the report said.

"In other words, it remains uncertain at this time whether or not the state will receive the necessary funds to complete the project," the report added.

Other funding sources also are in doubt, the report said, noting that "it is unclear how much, if any, other non-state funds (such as local funds, and funds from operations and development, or private capital) have been secured. In total, only $11.5 billion (or about 17 percent of the estimated funds needed to complete the project have been committed."

While the Legislative Analyst's Office urged putting the brakes on the high-speed rail project, it recommended lawmakers provide some minimal funding for it to continue some planning efforts, specifically around environmental and initial engineering review, that are underway to keep options for it open.

Brown is staunchly supporting building the high-speed rail system but fellow Democrats who control the legislature are nervous about committing $2.7 billion in state funds to break ground on it.

Republicans in the legislature, like Republicans in Congress, oppose proceeding with the project. One Republican state senator has proposed a bill to put state bonds for the project to a new statewide vote.

Brown's office was not immediately available for comment on the report.

Dan Richard, who Brown appointed to the California High-Speed Rail Authority to improve its management and produce a business plan for its planned system that lawmakers could rally around, said the report overlooked benefits of bullet trains - and that federal dollars are at stake.

State bonds would unlock money for Washington to help start building the system.

The Legislative Analyst's Office did not take stock of "significant environmental and economic benefits of reducing freeway pollution, improving transportation and creating jobs," Richard said. "This project is important for California and it would be a mistake to delay this project and lose billions of dollars in critical federal funds."

Mary Nichols, chairman of California's Air Resources Board, said a building a high-speed rail network would help the state meet its aggressive goals for reduce greenhouse emissions.

"Not only does it take millions of tons of greenhouse gases out of the air, it is also goes to the heart of the law itself, transforming California's economy to clean energy and clean technology and breaking our century-long dependence on fossil fuels," Nichols said.

(Reporting By Jim Christie; Editing by Eric Walsh)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
Whittier5 wrote:
California needs a GOOD HSR Plan and it needs the JOBS. Right now, it has neither.
The problem is the Plan, which is sad.

Today’s Republicans would repeal the 20th Century if they could. 50% of the Party is in a headlong race to the 8th Century – and we’re not sure whether A.D. or B.C.E.

Apr 18, 2012 10:32am EDT  --  Report as abuse
appetoni wrote:
Why not use the funding available and build what they can, then use the revenue to continue the growth. It creates jobs which are needed now, uses the stimulus money available for this to create jobs, and its a step in the right direction toward a greener environment. Build what you can. in good faith, and revenue and (hopefully) more funding will come. As long as we have a Democratic President in office there will be future funding for clean energy.

Apr 18, 2012 12:40pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.