Appeals court clears path for high speed rail bonds, reduces risk to Caltrain electrification

On Thursday, Judge Vance Ray of the California Appeals Court Third District cleared the way for the State to start to issue the $9 billion in bonds for the California High Speed Rail project called for in Proposition 1A, the voter-approved ballot measure that authorized the high speed rail project. This ruling clears the way for California to issue bonds, and greatly reduces the funding risk to Caltrain electrification.

Judge Ray overruled a lower court decision by Superior Court Judge Michael Kenny which froze the bond sale on the grounds that the project’s funding plan was inadequate and all of environmental clearances were not complete, as claimed by a group of Kings County residents.

Instead, the Appeals Court refused to second guess the decisions of the State Legislature and the High Speed Rail Finance Committee which had used the preliminary finance plan in deciding to authorize the bonds. The appeals court validated the Attorney General’s argument that blocking the bonds approved by the legislature “…jeopardizes the financing of public infrastructure throughout the state by interfering with the Legislature’s exercise of its appropriation authority, invents judicial remedies where none are provided by law, and subverts the very purpose of the validation statutes.”

Before the actual spending of bond proceeds, a final funding plan for each project segment will need to to be reviewed and approved by the Finance Director, Peer Review Group, and legislative committees. Update: It is not yet clear whether the final funding plan needed to spend Prop1A bond money would need to cover the full $26 Billion needed for the initial operating segment, or just for the segment being immediately built.

This past week’s decision does not yet cover the part of the lawsuit alleging that the current High Speed Rail project plan fails to meet the requirements of Proposition 1A. Another part of the lawsuit argues that blended system with Caltrain, and the trip times enabled by the current design, violate Proposition 1A. The appeals court ruling acknowledges that “Substantial legal questions loom in the trial court as to whether the high-speed rail project the California High-Speed Rail Authority (Authority) seeks to build is the project approved by the voters in 2008.” Judge Kenny will hear that part of the case later this year.

But if this blogger reads correctly, the Appeals Court is leaning toward allowing the High Speed Rail Authority flexibility in the specifics of implementation of a very large public works project that meets the overall intent the ballot measure. For example, the appeals court cites a precedent where BART was allowed to relocate one of the terminal stations, despite the language in the authorizing ballot measure that specified the station locations. The features in a ballot measure are characterized as “preliminary plans”, rather than as ironclad specifications from which deviation violates the legal contract with the voters.

The courts have been particularly attuned to the fluidity of the planning process for large public works projects. In fact, the Supreme Court has allowed substantial deviation between the preliminary plans submitted to the voters and the eventual final project, admonishing: “[T]he authority to issue bonds is not so bound up with the preliminary plans as to sources of supply upon which the estimate is based that the proceeds of a valid issue of bonds cannot be used to carry out a modified plan if the change is deemed advantageous.” (Cullen v. Glendora Water Co. (1896) 113 Cal. 503, 510.) Similarly, the court broadly construed the purpose of the proposition approving the Bay Area Rapid Transit District and sanctioned the relocation of one of the terminals

If the High Speed Rail project plan meets the overall goals: “a safe, convenient, affordable, and reliable alternative to driving and high gas prices; reduces traffic congestion on the state’s highways and at the state’s airports; reduces air pollution and global warming greenhouse gases” it sounds like the court will be skeptical of arguments focusing on specific features of the project described in the ballot measure.

This ruling reduces a big risk to the Caltrain electrification project, for which half of the funding comes from the High Speed Rail project. The state budget’s allocation of 25% of cap and trade funding toward High Speed Rail was helpful in potentially bringing in other revenue sources, but the $9Billion in Prop 1A funding will contribute directly to building the first parts of the system, including Caltrain electrification.

The component of the lawsuit about whether the project design complies with Prop1A will be heard later this year.

Update: with this information, the State of California is intending to sell Prop 1A bonds next year. This would be in time for Caltrain to make the next big purchases for the electrification project in 2015.