Feds hope to reclaim over $2 billion in funds spent on California bullet train

Following through on President Donald Trump’s twitter threats, the U.S. Department of Transportation on Tuesday afternoon said it would not disburse a previously planned $929 million in federal funds for the state’s troubled high-speed rail project and indicated it hoped to recover $2.5 billion in federal grants that had already been spent on the train.

“This is clear political retribution by President Trump, and we won’t sit idly by,” Gov. Gavin Newsom said in a statement issued soon after the Transportation Department announcement. “This is California’s money, and we are going to fight for it.”

Newsom’s depiction of the decision as a Trump vendetta can be buttressed by the president’s repeated clashes with California over federal policies, but the state may face more of a difficult fight to retain bullet-train funding than top officials are willing to admit. While $929 million of the federal funding was directly approved by Congress – the other $2.5 billion came from the massive economic stimulus bill of 2009 – both chunks of money are covered by Federal Railroad Administration (FRA) rules that are meant to ensure federal funds are used properly.

Lack of ‘reasonable progress’ can trigger refund demand

One such provision specifically applies to the $2.5 billion that the Department of Transportation may want refunded: “Any failure to make reasonable progress on the project or other violation of this agreement that significantly endangers substantial performance of the project shall provide sufficient grounds for the FRA to terminate this agreement.”

As the Los Angeles Times reported in November, the California High-Speed Rail Authority was 13 years behind schedule in completing the now-$77 billion project. Citing a lack of available funding, Newsom has at least for now suspended moves to build the train beyond a route already under construction in the Central Valley and forced out longtime rail board chairman Dan Richard.

Yet the project isn’t just on shaky grounds on the question of proper use of federal funding. In mid-2009, in its application for federal stimulus dollars, the state of California made representations to the U.S. Department of Transportation about the project’s solid financing, careful planning and strong accountability provisions that have been repeatedly belied by state audits and reviews as well as independent reporting.

The Obama administration – which was disappointed that California was the only state to accept federal high-speed rail funding – was content to extend deadlines to try to help the Golden State project find its way. Under Obama, rail officials also rejected complaints from California House Republicans that the state project was breaking federal rules.

State claimed it had sound project in requesting stimulus funds

But if the U.S. DOT chooses to go after the California High-Speed Rail Authority, it has a wealth of examples that it can site to show the state’s 2009 grant request made false claims about the soundness of the state project. The short list:

— In January 2010, the Legislative Analyst’s Office concluded that the rail authority didn’t have a legal business plan because it anticipated using promises of subsidies if revenue estimates fell short to attract investors. Such subsidies were explicitly banned by Proposition 1A, the 2008 state ballot measure providing $9.95 billion in bond seed money for the then-$34 billion project. This is why the project has never attracted outside investors, unlike projects in Europe in which governments promised to share the risk if revenue goals weren’t met.

— In April 2012, to reduce the cost of the project – which had ballooned to $98 billion – Gov. Jerry Brown and rail authority officials announced that they would instead pursue a $64 billion “blended” rail system in which high-speed trains shared much-slower regular tracks for approximately 45 miles in the crowded urban areas on each end of the primary San Francisco-Los Angeles route. But as critics – including former state Sen. Quentin Kopp, considered the father of the state’s bullet train project – immediately noted, this meant that what the state wanted to build wasn’t actually a high-speed rail line linking San Francisco and Los Angeles. That’s what was promised to state voters in 2008 and the federal government in 2009.

— In October 2015, the Los Angeles Times reported that it had obtained documents that showed primary contractor Parsons Brinckerhoff had warned the rail authority in 2013 that a $9 billion cost overrun was likely on the project’s initial phase from Burbank to Merced. The authority didn’t disclose this to the public or revise cost estimates upward – decisions that could have been prosecuted if done by publicly held corporations.

What happens next from here is murky. But as the Associated Press noted, the federal government doesn’t need California to write it a check to get its money back. If the Department of Transportation concludes the state didn’t live up to its commitments with federal funds, it could withhold federal dollars on unrelated projects until it gets back all the money that it believes was misspent.

11 comments

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  1. Ulysses Uhaul
    Ulysses Uhaul 20 February, 2019, 22:37

    Yep.

    Utopia does have warts.

    Reply this comment
    • ricky65
      ricky65 24 February, 2019, 08:18

      We have a new venereal wart called Gavin Newsome.
      He already proven to be a incompetent, empty suited wise ass who cannot keep his mouth shut.
      He has constantly taunted the notoriously thin skinned Trump with snarky comments beginning from his inauguration day forward.
      No wonder Trump jumped at the chance to give Junior a wedgie. He should have kept a low profile and let state and federal bureaucrats work out a solution.
      So now the Cali taxpayers will be on the hook for 3.5 billion.
      It’s not wise to poke the bear.

      Reply this comment
  2. Standing Fast
    Standing Fast 22 February, 2019, 10:10

    Uhm. Apparently His Honor the Governor doesn’t get that the grant of these Federal Funds was conditional, and if the conditions agreed to are not met, then the Federal government has every right to take back their money.

    Trump is not out of line unless he doesn’t follow proper procedure.

    Since States are not automatically entitled to special grants from Washington and the Feds can put any conditions on them that they want and the beneficiary agrees to, this is not a State’s right issue.

    The issue with Trump is whether he will follow the rules or strike out on his own and become entangled in a thicket. If he sticks to the rules, Newsom won’t be able to do a thing about it.

    Reply this comment
  3. ricky65
    ricky65 24 February, 2019, 08:43

    We have a new venereal wart called Gavin Newsome.
    He already proven to be a incompetent, empty suited wise ass who cannot keep his mouth shut.
    He has constantly taunted the notoriously thin skinned Trump with snarky comments beginning from his inauguration day forward.
    No wonder Trump jumped at the chance to give Junior a wedgie. He should have kept a low profile and let state and federal bureaucrats work out a solution.
    So now the Cali taxpayers will be on the hook for 3.5 billion.
    It’s not wise to poke the bear.

    Reply this comment
    • Ttttt T Tedly S
      Ttttt T Tedly S 24 February, 2019, 17:56

      “ven wart”? Ricky, are you projecting concerns for your
      own health problems or are you about 13 years of age and think that’s clever?

      Reply this comment
      • ricky65
        ricky65 25 February, 2019, 08:37

        Ven wart? Never heard that term. Is that an insider term for what folks with your particular proclivity call ‘speed bumps’?
        Yep, I’m 15, a smart ass, and can’t wait to get my driver’s license so I can rent one of Uly’s broken down trailers so I can leave the the lunatic asylum that is modern day California.

        Reply this comment
        • Ulysses Uhaul
          Ulysses Uhaul 26 February, 2019, 19:41

          Rickette

          We cannot assist you with moving services due to your purported age of 15.

          We are fresh out of training wheels Bro.

          Reply this comment
          • ricky65
            ricky65 27 February, 2019, 08:16

            Aw c’mon Uncle Uly.
            I’ll be 16 soon and your trailers are the ultimate training vehicles for inexperienced drivers. Who knows when a poorly welded hitch will snap off or a wheel will get loose.
            (Or as the old Kenny Rogers song says: You picked a fine time to leave me, loose wheel)

        • teddy S
          teddy S 3 March, 2019, 18:56

          your rhetoric sounded about teen age—- venereal wart jokes? Zzzzzzzzzz

          Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 24 February, 2019, 09:58

    We are near full up with moving trailers now that rains, fires, snow, intro of 2000 plus new laws on usual human activity have subsided.

    Our comfort bunker is well stocked with cammo goodies, MRE’s, barbecue rubs and repellants, topo map kits.

    This will be a busy Spring. Ahhhhh. Reserve early!!

    Reply this comment
  5. Ulysses Uhaul
    Ulysses Uhaul 28 February, 2019, 08:30

    Ricketteee

    I apoligize for being snarky toward you-

    Decorum/respect on CWD is warranted!

    Reply this comment

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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