Indeed, the Appellate decision allows the High-Speed Rail Authority more time to comply with the Prop 1A bond act requirements. Those requirements included finishing all environmental work from Madera to the San Fernando Valley and pointing to real sources of funding the 300-mile segment and finding approximately 25 billion dollars more in funding to start building the first segment.
Though the Appellate Court reversed the adverse ruling of the Superior Court in the Validation action, the Treasurer is not bound to offer the bonds for the program for sale and the Rail Authority still must comply with the terms in the bond act by the time a second funding plan is filed immediately before bond funds are spent for construction.
Why did the court refuse to hear the case?
According to this San Jose Mercury News report, the court refused to hear the high-speed rail case but did not comment as to why so we don’t know exactly what their thinking was. It wasn’t really a surprise since the court hears only about 5% of the cases, which equates to 200 out of 5000 applications per year.
Jeff Morales, CEO for the Rail Authority made comments to the San Jose Mercury News,"This decision removes the cloud regarding allegations that we weren't doing things properly," said Jeff Morales, the rail authority's CEO. "It means we can go out and sell the bonds and get this system built." That statement is his opinion, it could be they declined for many other reasons.
Certainly silence does not equate to the Supreme Court giving the Rail Project a thumbs up. It certainly doesn’t mean the project is following the law.
It could be as Quentin Kopp suggested, the timing wasn’t right. It could be that politics played an ugly hand as well. After all, the Governor does set the budget for the State Supreme Court and they are terribly underfunded at this time.
According to the court brief for project opponents, “The Court of Appeal also frankly acknowledged that the initial funding plan (IFP) prepared and submitted to the Legislature by the Authority was woefully deficient in both these respects” and the voters intended for the Authority to be in a “financial straightjacket.” If the Supreme Court agreed with this aspect of the Appellate Court ruling, they certainly didn’t believe that the Rail Authority was “doing things properly.”
Mike Brady, co-counsel for the Prop 1A lawsuit said, “The Court of Appeal decision said the Authority cannot access Prop1A bond funds until it goes through a rigorous procedure. Brady promised, “We will be there to enforce those requirements.”
What does this mean?
It means for now, exactly the same as before, the Authority has more time to get its environmental work completed all the way from Madeira to the San Fernando Valley about 300 miles and find about $25 billion dollars before it files the second funding plan. See the comprehensive article written after the Appellate Decision was delivered:
Regarding the Superior Court’s other decision not to validate the bonds, the Appellate court ordered the Superior court to reverse it’s decision and to validate the bonds that will eventually be sold to fund the project so they could be sold.
However the purpose of validation of the bonds only guarantees investors that the state will pay the terms promised, no matter what happens to the project. But the timing of the actual sale of the bonds is up to the Treasury Department. Project opponents always had the right to challenge the actual spending of the bonds on the high-speed rail project.
Harold Johnson, an attorney from the Pacific Legal Foundation contested the bond validation and represented the First Free Will Baptist Church in Bakersfield. They also filed a petition for review to the State’s Supreme Court to review Sacramento’s 3rd District Appellate Court’s decision. Johnson commented:
“This is a disappointing development for the interests of California taxpayers and for the cause of integrity and common sense in government. The appellate court said that the High Speed Rail project is still in ‘flux’ so it’s too soon to judge whether it conforms with what voters authorized when they passed Proposition 1A in 2008. But the appellate court also ordered that $8.6 billion in bonds for the project be approved by the judiciary, so the bonds can be sold.
That’s a self-contradictory ruling, and it now stands, because the Supreme Court has declined to review it. This means that billions of dollars in bonds can be sold, even before we know what the money will be spent on, and even before we know if the final shape of the High Speed Rail project is true to the voters’ will and the state Constitution’s requirements.
Johnson added, “More than $8 billion can be borrowed on the taxpayers’ credit card, for what amounts to a pig in the poke. That’s bad public policy, and I believe it’s wrong as a matter of constitutional law.”
The Authority has more legal actions:
The Authority has 9 active legal actions against them per their October 2014 board meetingagenda.
Judge Kenny of the 3rd District Superior Court in Sacramento will hear one such suit, a civil suit, this Spring. It’s the second half of the Tos/Fukuda/Kings County case which covers some of the key promises made to the public in Prop 1A.
Mike Brady, lead counsel for the Tos petitioners said, “We will take the Authority to trial early 2015 on whether the high-speed rail system can meet the bond measure’s requirements. (e.g. two hours and 40 minute travel time from LA to SF) We think the evidence is very strong that it can’t.”
Other problems loom:
Having absolutely nothing to do with court decision, there are significant problems with environmental work. In particular the Bakersfield to Palmdale segment, which goes over the Tehachapi Mountains, is problematic. The Authority has been less than transparent about and there is no sign of trouble in the April 2014 Business Plan. On Pg. 54 says the Rail Authority states they are going to tunnel through the Tehachapi’s and no one can say at this time if that will be true. Zipping through a tunnel through a mountain is different than meandering down a mountainside.
Settling all environmental issues was exactly why the Legislature back in 2008 divided requirements in a first and second funding plan. They were supposed to have everything settled before they asked for funding by the Legislature.
See article in the Bakersfield Californian about the little secret that the Rail Authority has been keeping out of public view.
Frank Oliveira, Co-Chair for Citizens for California High-Speed Rail Accountability said this at the October 14, 2014 Board Meeting:
“Your Chief Program Manager’s sworn court statement reflects the train must make an almost 3,000-foot elevation drop down the mountains and through the entire Central Valley maintaining 220-mph, in order to meet the legally mandated time requirement of less than 2-hours and 40-minutes.
Not a problem for a garbage in, garbage out, computer model but there is no steel wheel, on steel rail trains available that can maintain a 220-mph climb up the Tehachapi’s. There is no braking system that would make it safe to go down the Tehachapi’s at 220.”
If goal is of course is to get either over or through the mountain and bridge the gap in the commuter rail system, the Authority hasn’t figured out exactly how to do that yet. However going down a mountainside with a very steep grade at 220 miles per hour is not reality. It is common sense that you can’t propose the same speed for a train traveling through 20 miles of long tunnels and apply it to a route that has to meander slowly down a steep mountainside for safety reasons.
This segment called Bakersfield and Palmdale was skipped and lies squarely between two segments the Rail Authority has chosen to develop first, Fresno to Bakersfield and Palmdale to Burbank. All of these segments are part of the Initial Operating Segment and must be solved for the first segment to work as well as the entire project to be successful.
Another option is to scratch the current route and change direction and go through the Grapevine, a route they turned down after a re-study in 2012. Here’s the study done in January 2012. Look at the map on the cover of the report, certainly more direct and supposedly shorter. While the Grapevine route does have earthquake faults so does the current route, in fact more than anticipated. If the Authority changed the route at this point, they face two sure lawsuits one from the City of Palmdale for changing the route and eliminating service through their city and the other from the Tejon Ranch Company who doesn’t want the rail line near their developments. See article written back in 2012 with the threat of legal action from the Taejon Ranch Co. Barry Zoeller, VP of Tejon Ranch pledged that “should (high-speed rail officials) make the decision to move ahead with the Grapevine alignment, they would find a strong opponent in the Tejon Ranch.
Project viability issues due to lack of time and finances:
Besides the environmental difficulties, the project has two other very basic problems that have nothing to do with court decisions. It lack’s sufficient time to build the first segment using federal grant money and it lacks additional funding to move the project forward for the first segment, let alone the whole project.
They don’t have the time to spend the $6 billion for construction according to this May 2012 Los Angeles Times article with federal grant deadlines looming in September 2017.
The segment they want to build, Madera to the San Fernando Valley costs roughly $31 billion to build, however that is an old number and by now surely it costs more. They could have $6 billion in hand that is, if they get their hands on the $2.7 billion in bond funds but that's a long way to $31 billion. They have some cap-and-trade funds about $650 million this year and some have to be spent in the Central Valley to meet federal match requirements. Some of those funds were also promised for development in the Palmdale to Burbank segment, promised in order to capture enough votes to get cap-and-trade dollars. How far can those monies stretch?
The Rail Authority hasn't completed their second funding plan requirements which is why they haven’t moved forward in an attempt to get them. It’s doubtful they can meet those stringent requirements- all environmental work completed to the San Fernando Valley and the source of the funds to complete the entire segment for some time.
But $6 billion isn’t enough funding to build even one legal section of the project- $31 billion needed. The Appellate Court didn’t challenge the actual segment. Even considering the cap-and-trade revenue the peer review group estimates the gap in financing using the most favorable revenue scenario is $15 billion for the Madera to San Fernando Valley segment. See the peer review commentary about the 2014 Business Plan and the financial gap despite the cap-and-trade revenue. The Legislative Analyst office published a report that predicts a larger gap of approximately $21 billion and that was when the governor was expecting 33% of the proceeds of the Cap-and-Trade auctions.
Though the Authority won a crucial vote to receive 25% of the cap-and-trade auction proceeds each year on a continuous basis, no one knows how much that will be.
Per the Legislative Analyst Office (LAO) the Authority needs $4 billion a year to finish the first operational segment.
According to Tiffany Roberts, co-founder of California Aspire Project, who has beentracking the auctions since they auctions started, November 14, 2012, the state has received $833 million over the span of TWO years and eight auctions.
According to Roberts in a phone interview, if the petroleum companies come under the cap-and-trade guidelines they must buy carbon credits for each gallon of gas they sell within the state. This is designed to offset any environmental damage they produced in the production of the gasoline. She predicts the impact on the price of gasoline at the pump could range from 10 to 76 cents a gallon with fluctuations.
The auction proceeds could easily double with the oil companies coming under the cap-and-trade regulations starting in January 2015. But the cap-and-trade auctions would have to produce $16 billion a year to produce $4 billion the project needs which is not likely to happen.
Entire project funding:
Looking at the longer term outlook for funding the entire project from Washington, DC, there is zero hope for future federal funding in the present political atmosphere in Washington DC and according to the GAO report, see page 39, the Authority has budgeted $42 billion in total coming from federal contributions for the entire system from Los Angeles to San Francisco. They are concerned. Everyone questions where the money is coming from-- the Senate, the Peer Review Group, the Federal General Accounting Office (GAO), the Legislative Analyst office and the State Auditor.
Bottom line the High-Speed Rail Authority still has its own very real challenges before it begins to construct the first segment of the rail project even if they dodged a bullet by the State Supreme Court denying review.
For those who want to review individual case decisions here they are:
The Appellate Court decision was issued July 31, 2014 that overturned Judge Kenny’s January 2014 ruling in the Tos Case and September 2013 ruling in the Validation case.
See one of the newest cases filed: http://transdef.org/HSR/Fresno-Bakersfield.html
Source: The Examiner