Halt California funds for high-speed rail: budget watchdog

Reuters News
Posted: Apr 17, 2012 8:48 PM
Halt California funds for high-speed rail: budget watchdog

SAN FRANCISCO (Reuters) - California lawmakers should not approve Governor Jerry Brown's budget proposals to provide additional funds for the state's pricey planned high-speed rail system, the state's budget watchdog agency said in a report on Tuesday.

The report by the nonpartisan Legislative Analyst's Office said the California High-Speed Rail Authority has "not made a strong enough case for going forward with the project at this time."

The report comes after the authority earlier this month slashed its construction cost estimates by some $30 billion to $68.4 billion, tackling some of the cost concerns hanging over the project in the legislature, whose members must approve the release of the first chunk of the nearly $10 billion in rail bond funds voters approved in 2008.

Funding beyond proceeds from state debt and $3.5 billion from the federal government to build the statewide high-speed system is "highly uncertain," the report said.

"Specifically, funding for the project remains highly speculative and important details have not been sorted out. We recommend the Legislature not approve the Governor's various budget proposals to provide additional funding for the project," according to the Legislative Analyst's Office.

The office noted that plans for using revenue raised through California's new carbon trading system for reducing greenhouse emissions to help build the system are speculative and that "important details regarding the very recent, significant changes in the scope and delivery of the project have not been sorted out."

The report also cast doubt on prospects for ongoing federal funding for California to build its planned high-speed rail network, intended to connect the most populous U.S. state's far-flung metropolitan areas.

"Given the federal government's current financial situation and the current focus in Washington on reducing federal spending, it is uncertain if any further funding for the high-speed rail program will become available," the report said.

"In other words, it remains uncertain at this time whether or not the state will receive the necessary funds to complete the project," the report added.

Other funding sources also are in doubt, the report said, noting that "it is unclear how much, if any, other non-state funds (such as local funds, and funds from operations and development, or private capital) have been secured. In total, only $11.5 billion (or about 17 percent of the estimated funds needed to complete the project have been committed."

While the Legislative Analyst's Office urged putting the brakes on the high-speed rail project, it recommended lawmakers provide some minimal funding for it to continue some planning efforts, specifically around environmental and initial engineering review, that are underway to keep options for it open.

Brown is staunchly supporting building the high-speed rail system but fellow Democrats who control the legislature are nervous about committing $2.7 billion in state funds to break ground on it.

Republicans in the legislature, like Republicans in Congress, oppose proceeding with the project. One Republican state senator has proposed a bill to put state bonds for the project to a new statewide vote.

Brown's office was not immediately available for comment on the report.

Dan Richard, who Brown appointed to the California High-Speed Rail Authority to improve its management and produce a business plan for its planned system that lawmakers could rally around, said the report overlooked benefits of bullet trains - and that federal dollars are at stake.

State bonds would unlock money for Washington to help start building the system.

The Legislative Analyst's Office did not take stock of "significant environmental and economic benefits of reducing freeway pollution, improving transportation and creating jobs," Richard said. "This project is important for California and it would be a mistake to delay this project and lose billions of dollars in critical federal funds."

Mary Nichols, chairman of California's Air Resources Board, said a building a high-speed rail network would help the state meet its aggressive goals for reduce greenhouse emissions.

"Not only does it take millions of tons of greenhouse gases out of the air, it is also goes to the heart of the law itself, transforming California's economy to clean energy and clean technology and breaking our century-long dependence on fossil fuels," Nichols said.

(Reporting By Jim Christie; Editing by Eric Walsh)