SAN FRANCISCO (Reuters) - California Governor Jerry Brown wants to move forward with building a statewide high-speed rail system seen costing nearly $100 billion, but lawmakers are nervous about approving bonds needed to lock in federal funds to get the project under way.
They are gagging at the rail system’s projected cost, which towers above its previous estimate of $43 billion, and are anxious about the uncertain outlook for federal and private-sector dollars needed to lay hundreds of miles of train tracks between California’s far-flung metropolitan areas.
Like many in the Legislature, Democratic Assemblyman Jared Huffman supports the concept of high-speed rail. But he has sticker shock: “Anybody who is paying attention has to be very sobered by the numbers.”
Lawmakers are also concerned about the California High-Speed Rail Authority’s oversight of the project. Its chief executive resigned on Thursday and the chairman of its board also stepped down, though he will remain on the board. Dan Richard, a board member appointed by Brown, has been nominated as new chairman.
Additionally, lawmakers are acutely aware of buyer’s remorse among many voters over the project with state finances still under pressure. California faces a $9.2 billion budget gap.
Voters approved nearly $10 billion of general obligation debt in 2008 to help build the rail system. Now nearly two-thirds of them want lawmakers to put the bond package back on the ballot, and if given another vote on it, 59 percent would reject it, according to Field Poll findings released last month.
“The matter is somewhat different now than it was when it was billed to them,” said Field Poll director Mark DiCamillo.
‘IMMENSE FINANCIAL RISK’
A recent peer review group’s report ratcheted up anxiety among lawmakers by recommending they not approve $2.7 billion of bonds for the rail system. Proceeds would open the door to more than $3 billion in federal funds for the project’s first phase.
The report said starting the project “without credible sources of adequate funding, without a definitive business model, without a strategy to maximize the independent utility and value to the State ... represents an immense financial risk on the part of the State.”
The California High-Speed Rail Authority panned the report, saying that “by and large, this report is deeply flawed, in some areas misleading, and its conclusions are unfounded.”
But even lawmakers who would like to see high-speed trains whizzing across the state say the report needs to be taken seriously - adding the Legislature must make tough decisions over the next few months about the rail project’s future.
“This has now reached a critical moment in the Legislature,” said Senator Alan Lowenthal, the Democratic chair of his chamber’s select committee on high-speed rail.
Republican Senator Doug LaMalfa said it’s time for a bill for a ballot measure to reconsider state bonds for the rail system.
“You have to ask yourself: Can we afford it?” he said.
Republican Assemblywoman Diane Harkey went a step further, proposing a bill to ban state debt sales for the rail system to effectively kill it.
Democrats who control the Legislature hope to keep the project on track in some form. One option may be to rewrite its plan by assuming a small federal contribution and rethinking where its rails should run, Lowenthal said.
The U.S. government has slated more than $3 billion that with proceeds from an initial sale of state debt, which state lawmakers must approve, will be used for the project’s first leg. It would be a 130-mile line from just north of Fresno running south to Bakersfield in the Central Valley, one of the state’s least populated areas, where bullet trains would run.
Congressional Republicans have criticized the planned line, but it also is a sore point with some Democrats in California.
“That one has always been a head scratcher,” said Huffman.
Lowenthal said California’s high-speed rail efforts should be directed to urban areas, adding that “I see nothing in the near horizon that suggests we’ll see more federal funds.”
Lowenthal said Brown should demand flexibility on where limited federal funds may be spent. But the U.S. Department of Transportation says money from Washington for the Central Valley line can’t be used elsewhere, a decision California’s rail authority has accepted so it can break ground later this year - if lawmakers approve the initial state debt to start the system.
If they do not, the state could forfeit Washington’s money, a point California U.S. Senator Dianne Feinstein pressed in a letter on Monday to fellow Democrat Brown: “As you know, without the Legislature’s approval of this appropriation, more than $3.5 billion in federal funding competitively awarded to California would be at risk.”
Richard also is pressing that point to lawmakers. Brown appointed Richard, who served 12 years on the board of the San Francisco region’s Bay Area Rapid Transit rail system, to the California High-Speed Rail Authority’s board last summer to help keep plans for the train system on track.
That will require serious lobbying.
“How do we restore confidence? We do it day by day,” Richard told Reuters. “We’ve had a sort of blizzard of comments and criticism and political attacks, and I get all that.”
“We certainly have our work cut out for us,” he added.
Reporting By Jim Christie; Editing by Jan Paschal