SACRAMENTO (Reuters) - California moved full steam ahead on Wednesday with a $68 billion high speed rail project, a move that comes as the state slashes spending to close a nearly $16 billion budget deficit and as a string of its cities mull bankruptcy.
At a ceremony in Los Angeles, Governor Jerry Brown signed an initial funding bill for the train project, clearing the way for construction of a 130-mile section of track through the state's agricultural heartland.
Brown says a bullet train network will boost job creation and provide an alternative to car and plane travel in the country's most populous state.
Critics say California can ill afford the $68 billion project that farmers unions regard as an "imminent threat" to some of the most agriculturally productive land in the United States.
"This legislation will help put thousands of people in California back to work," Brown said. "By improving regional transportation systems, we are investing in the future of our state and making California a better place to live and work."
Brown and fellow Democrats who control the legislature recently approved a state budget that closed a $15.7 billion budget gap with spending cuts, fund transfers and revenue that assumes voters will approve a tax ballot measure in November.
And in the last two months, three cities in California have sought bankruptcy protection as they struggle with weighty deficits: the state's fourth-largest city, Stockton, the ski resort city of Mammoth Lakes and San Bernardino.
Other cities, like Los Angeles suburb Compton, are considering following suit.
Undeterred, Brown criss-crossed the state on Wednesday to tout the project. The signing in Los Angeles marked one of the planned endpoints of the bullet train network and he was due in San Francisco later for another ceremony celebrating what is a substantial win for the Democratic governor.
"This project brings an infusion of energy into rural areas of high unemployment and provides relief for urban traffic gridlock," California state Senator Darrell Steinberg said in a statement welcoming the governor's signature.
FUNDING 'HIGHLY UNCERTAIN'
High speed rail links have proved popular alternatives to air travel in European countries such as France and Spain. They have not caught on in the United States where sprawling cities and cheaper gasoline make the costly train systems a hard sell in most states.
California's bullet train network, expected to take decades to complete, would eventually connect Sacramento and San Francisco to Los Angeles, with stops along the way.
The California Senate narrowly approved the measure earlier in July after a lengthy floor debate in which critics said the cash-strapped state lacked the financial means to undertake the project, the most ambitious public works endeavor to date in California.
The state and federal financing outlined in the bill includes the issuance of $2.6 billion in state bonds, which would in turn unlock $3.2 billion in federal funds for construction of track in the Central Valley that was expected to begin at the end of 2012 or the start of 2013.
The bill, which passed by a wider margin in the Democratic-controlled Assembly one day before the contentious Senate vote, also approves spending over $2 billion in federal, state and local funds on rail projects in urban areas to prepare to link them to a statewide system.
Construction on the bullet train line will start in the agriculturally rich Central Valley, where trains could reach 220 mph over flat and more sparsely populated terrain.
Critics worry that funding for the project will eventually run dry before the rail network can be completed, leaving California with a "train to nowhere" in its agrarian midsection .
The Legislative Analyst's Office, an independent budget watchdog agency, said the source of funding for the project beyond the initial round was "highly uncertain".
Other bullet train projects have fared poorly. Last year, Florida Governor Rick Scott rejected $2.4 billion in federal funds to build a high-speed line between Tampa and Orlando, saying it would put the state on the hook for billions of dollars it did not have.
Ohio and Wisconsin also rejected federal funds for high-speed rail projects.
(Reporting by Mary Slosson, editing by Dan Whitcomb and Andrew Hay)