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California’s $68 Billion Train Seeks Bond Sale Approval

California High-Speed Rail
The California High-Speed Rail station in San Jose, California, U.S., is seen in an artist rendering. Source: California High-Speed Rail Authority

May 23 (Bloomberg) -- The California High-Speed Rail Authority’s pitch to get the first U.S. bullet-train back on track was met by an appeals panel that questioned a lower-court ruling blocking $8 billion in bonds to finance the project.

The agency suffered a setback in November when a state judge blocked it from issuing bonds because a committee didn’t adequately disclose the reasons for the financing. The judge told the authority to withdraw its funding plan. Today, two justices on the California court of appeals voiced doubts about that ruling.

“The court doesn’t have any right to question an appropriation made by the Legislature,” Justice Ronald Robie said during a hearing in Sacramento, the state capital. “I think there is a serious separation-of-powers issue here.”

The November decision threatens to delay and increase the cost of the first-in-the-nation bullet-train, state officials say. With public support for the $68 billion project waning, lawyers for the authority told the appeals court panel that the committee’s decision isn’t reviewable and, if it is, members had sufficient grounds to approve the plan.

“The committee had all the evidence it needed to authorize the bonds: the Bond Act itself, which declares the high-speed rail system to be in the public interest,” Deputy Attorney General Stephanie Zook said in a court filing.

The project calls for laying tracks for trains running as fast as 220 miles an hour (354 kilometers an hour) from San Francisco to Los Angeles. That became a more difficult goal after the U.S. Congress cut funds for such projects in 2012.

Justice Vance Raye today questioned the timing of efforts to halt the project before bonds are issued.

“The proper time to raise those objections is at the time that the money is going to be spent,” Raye said.

The state is buying land and rights-of-way needed for the project, which is scheduled to begin running three-hour trips by 2029. The project is being challenged by landowners, farmers and taxpayer groups who say it has so deviated from the original proposal approved by voters in 2008 that it’s now illegal and violates environmental laws.

Federal Funds

California voters in 2008 also approved a measure authorizing the state to sell $9.95 billion of bonds to help build the line. The state plan anticipates that federal funds and private investors will pay for the rest. The proposal saves money by upgrading existing commuter and freight lines in some areas, rather than building new track.

A state appeals court last month ruled that the rail authority must face a trial over its plan to have the bullet-train share track with existing commuter lines.

The case is California High-Speed Rail Authority v. The Superior Court of Sacramento County, C075668, California Court of Appeal, 3rd District (Sacramento).

To contact the reporter on this story: Karen Gullo in federal court in San Francisco at kgullo@bloomberg.net Robert Burnson in state court in Sacramento, California, at burnson@mac.com

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg, Stephen Farr

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