November 26, 2013 / 1:25 AM / 6 years ago

UPDATE 3-California bond sale for high-speed rail project blocked by judge

By Jim Christie

SAN FRANCISCO, Nov 25 (Reuters) - A California judge ruled on Monday against the state’s plan to issue more than $8 billion in bonds to help build an 800-mile high-speed train system and rescinded the project’s funding plan, which estimates the system’s cost at $68 billion.

Judge Michael Kenny of Sacramento County Superior Court said in a written ruling that there was too little information to support the decision by the California High-Speed Rail Authority to move forward with the debt sale.

“In this case, the court can find no evidence in the record of proceedings submitted by plaintiffs that supports a determination that it was necessary or desirable to authorize the issuance of more than $8 billion in bonds under Proposition 1A as of March 18, 2013,” he said in the ruling.

In a separate decision, Kenny ordered the rail authority to rescind its funding plan for the statewide passenger rail system but did not put a halt to the project, which has the political backing of Governor Jerry Brown.

Brown’s office was not immediately available to comment.

California voters approved the ambitious project in 2008 when they endorsed Proposition 1A, which authorized nearly $10 billion in state obligation bonds for financing.

The project, which would connect California’s far-flung metropolitan areas, has faced opposition including lawsuits aimed at stopping it and controversy over its different funding plans.

Doubts have also been raised about the project’s ridership estimates and whether trains on its tracks will be able run from Los Angeles to San Francisco in under three hours by 2029 as advertised.

Stuart Flashman, the lawyer for Kings County and opponents there of the rail project, said Kenny’s ruling should be a wake-up call for the California High-Speed Rail Authority to reconsider how it can meet requirements in Proposition 1A.

“What they need to do is rethink the project and maybe this will be the impetus,” said Flashman. “What it’s all about is a project that works and this one doesn’t.”

Dan Richard, chairman of the rail authority, said in a statement that he was reviewing Kenny’s rulings to “chart our next steps, but it is important to stress that the court again declined the opposition’s request to stop the high-speed rail project from moving forward.”

The judge did not invalidate the bonds as approved by the voters in Proposition 1A, Richard added.

“Like all transformative projects, we understand that there will be many challenges that will be addressed as we go forward in building the nation’s first high-speed rail system,” he said.

Jon Coupal of the Howard Jarvis Taxpayers Association, an opponent of the project, said Kenny’s decisions mark a major setback for the California High-Speed Rail Authority.

“It’s a victory for common sense,” Coupal told Reuters. “I’m not sure how they salvage this.”

Critics of California’s high-speed rail effort say money will run dry before its network can be completed and that it is uncertain federal and private funds will be available for it over the long haul.

A USC Dornsife/Los Angeles Times Poll in September found seven out of 10 California voters want another vote on whether the high-speed rail project should continue and 52 percent say it should be stopped, compared with 43 percent who want it to move forward.

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