Policy: Budgets & Deficits

State argues right to sell high-speed rail bonds

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Transportation,California,Budgets and Deficits,Municipal Bonds

SACRAMENTO, Calif. (AP) — Two lower court rulings that have complicated efforts to begin construction on California's $68 billion high-speed rail system are premature and should be overturned, attorneys for the state argued before an appellate court panel Friday.

The arguments come after Sacramento County Superior Court Judge Michael Kenny ruled that the bullet train project no longer complies with the promises made to voters when they approved selling nearly $10 billion in bonds in 2008. Kenny's rulings last November invalidated the sale of $8.6 billion in state bonds and required the state to write a new funding plan.

The lawsuits filed by Kings County and landowners there are premature because the state is not yet seeking to spend any of the bond money and only the state Legislature can determine whether there was enough detail in the funding plan, Deputy Attorney General Ross Moody told a three-judge panel of the California 3rd District Court of Appeal.

"We can't get this project off the ground. We're stopped because of this misreading of Proposition 1A," Moody said. "... We're at the precipice of actually getting this project into the next phase and we are stopped, we're being told to go back. We don't think it's a proper reading of the law."

Lawmakers approved the first phase of the planned 800-mile rail line in 2012. That allowed the state to begin selling bonds for construction of the first 130-mile stretch and tap $3.3 billion in federal matching funds.

Attorney Stuart Flashman, who represents the Kings County landowners, argued that the requirement for a valid funding plan would not have been included in the ballot measure if it was not paramount to protecting the public interest.

"That's what the ballot measure's intent was: to make sure you're not going to get stuck with a partially completed segment that you're jammed up with not being able to complete," Flashman said.

The panel seemed skeptical about overturning the Legislature's decision, noting that an updated funding plan would be required before the money is spent.

"You could be correct that at whatever point in time the project that's planned doesn't begin to resemble the project that the people authorized," Presiding Justice Vance Raye told Tim Bittle, an attorney who argued on behalf of the Howard Jarvis Taxpayers Association. "The question is are we there yet, at this point when there's been no construction and the only expenditure of funds has been of federal funds, not bond funds."

The California High-Speed Rail Authority has said that while the state money is tied up, it is spending the federal funds for pre-construction work that includes engineering, surveying and acquiring land along the first 28-mile segment from Merced to Fresno.

"We are getting close and anticipate actual construction in the near future," spokeswoman Lisa Marie Alley said later Friday.

Gov. Jerry Brown's administration initially appealed the Sacramento County judge's rulings to the California Supreme Court, which asked the appellate court to hear them on an expedited basis. The judges have 90 days to issue a ruling.

Moody argued that the law required the state to act quickly, which it can't do while the project is tied up in litigation.

"We have this big pot of federal money that's sitting out there that we need to spend by 2017," he said. "... If we take a time out every time we file a preliminary funding plan for a couple of years of litigation over it, this process is going to drag on forever."

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