At a May hearing, judges signified their readiness to defer to the Legislature — at least so far — in determining whether state efforts were meeting the safeguards in Proposition 1A, the 2008 ballot measure providing $9.95 billion in bond seed money for the$68 billion project.

Below is the initial reaction of Michael Brady, one of the attorneys representing Kings County and other plaintiffs targeting the California High-Speed Rail Authority. In a nutshell, he says this isn’t a sweeping victory for the state — just a victory at a very early stage of years of court fights that is tempered by the appeals court’s acknowledgment of the project’s shortcomings:

1. We are disappointed in the decision in that we think it ignores  150 years of precedent which respects the intent and the protection of the voters who engage in the initiative process.  Proposition 1A had various safeguards and protections which do apply to this case, and we question whether the court has properly interpreted those protections; the court itself on several occasions even conceded that the initial funding plan was “deficient.”

2. However, the court was dealing with what is called the INITIAL funding plan procedures of Proposition 1A; it seems to be saying that those requirements were meant to provide notice to the legislature only and not to provide a measure of protection to the voters themselves (we disagree with that);

3. We still have (and the court so indicated) an opportunity to challenge the legality of the Authority’s actions when the Authority moves to the NEXT STEP and  actually tries to access the monies in the bond fund; they have to apply for that money through a different section of the law-a section which is actually much tougher on the Authority with respect to what it has to prove;

4. For example, when the Authority applies under the 2d/updated funding plan, they have to make a stronger showing that they have enough money in the bank or firmly committed  to be able to complete the usable segment that they picked-a segment costing, in today’s dollars, about $35 billion.  They only have $6 billion of that, or 20%; that will not suffice and they will not be allowed to access Proposition 1A for construction costs until they have the full $35 billion; that will be a heavy burden;

5. We also believe that the Authority when they apply for Proposition 1A bond funds will have o demonstrate that they have obtained all the environmental clearances for the entire 300 mile usable segment that THEY picked; they have at present nothing  beyond Bakersfield , nothing through the Tehachapi’s all the way to the Los Angeles Basin; those clearances  will take years to obtain and they have delayed doing this for years; these are both heavy burdens;

6. Finally, under the 2d/updated funding plan requirements they must show that the project will be successful financially and in other respects; actually the financial situation on funding, the increased costs, the lack of private investors, the likelihood  of government subsidies (forbidden by 1A) have all deteriorated in the last 2 years, making the prospects for success very remote; this project , state -wide, will cost well above $100 billion, and currently they have 6% of that available with no prospects for significant further financial help from the federal government or from private investors. Californians will bear this enormous cost by themselves and alone.  This was never intended and is a bleak prospect.

7. Therefore, we look forward to litigating these further issues where the burdens on the Authority to meet the requirements of 1A are even heavier;

8. We are also evaluating the possibility of going to the Supreme Court on issues such as respect for the protection of the voters in the initiative process when measures were specifically enacted for their protection and are then brushed aside, contrary to the intent of the initiative.

The protections were meant to ensure the state wouldn’t spend huge sums on a train segment that wouldn’t be usable or have any utility if further segments weren’t built. One required the state to have funding firmly lined up for the 300-mile Initial Operating Segment, which the CHSRA estimates would cost $31 billion. The second required the state to have all environmental reviews completed for the Initial Operating Segment before construction began.

But Kenny’s ruling waffled on whether he had the authority to block construction. “Proposition 1A appears to entrust the question of whether to make an appropriation based on the funding plan to the Legislature’s collective judgment,” he wrote. “The terms of Proposition 1A itself give the Court no authority to interfere with that exercise of judgment.” He ordered the state to suggest “remedies” to address the deficiencies, which he will consider at a hearing this Friday in his Sacramento courtroom.

In legal briefs filed last month, Attorney General Kamala Harris’ staff responded in unexpected fashion: Instead of saying Kenny’s ruling was wrong and a misreading of Proposition 1A, the state’s lawyers argued that so long as the rail authority only used the $3.3 billion in federal funds it had been given for the project, it could proceed with work for now.

Harris’ position both elated and baffled attorneys for Kings County and two Kings County residents who are the plaintiffs in the case against the bullet train. They were elated because the state’s top lawyer accepted without challenge Kenny’s conclusion that the bullet-train project would break state law if it used state funds. But they were baffled at the AG’s opinion’s that taxpayer safeguards in Proposition 1A didn’t apply to federal funds, since they were supposed to be matched dollar for dollar by the state.

How do bullet-train advocates see path to construction?

What could be driving this legal maneuvering? How do bullet-train supporters — whose ranks at least nominally include the attorney general — see a path to construction?

Based on interviews with insiders and close observers of the bullet-train fight, the scenario builds off this assumption: “They don’t think the judge will have the [guts] to block this unilaterally,” one county supervisor from Silicon Valley told me. “He already signaled in the August decision that he didn’t want to do it … by raising the question of whether he even had the power to do it.”

After another ambiguous court ruling, the theory holds, Controller John Chiang and Treasurer Bill Lockyer will hold their noses and go along with the sale of state bonds. Where will the $20 billion or more that the state would still need to complete the Initial Operating Segment come from, given the lack of interest from private investors who can’t legally be given subsidies or revenue guarantees? The assumption is that the federal spigot will reopen if Democrats take back the House in November 2014.

In the sequester era, the idea that there will be a surge in discretionary domestic spending anytime soon seems unlikely. The disastrous rollout of the Affordable Care Act also seems certain to be a huge damper on House Democrats’ hopes to reinstate San Francisco Rep. Nancy Pelosi as speaker.

But the initial premise of the scenario also is open to question. The judge, a 2003 appointee of Gov. Gray Davis, may not be the controversy-wary milquetoast that bullet-train admirers hope.

He has been dealing with high-speed rail litigation for years and has issued several decisions unfavorable to the state before his Aug. 16 ruling. In 2009, he agreed with Menlo Park, Atherton and environmental groups who challenged the environmental reviews used in the decision to route high-speed trains through the San Francisco Peninsula instead of East Bay. This forced the rail authority to rescind its approval of an environmental study for a major section of the bullet train’s northern route. In 2011, he rejected the rail authority’s environmental reviews for a plan to send the bullet train through Gilroy in the San Francisco Peninsula.

A ‘remedies’ hearing in which the state offers no remedies

And a rereading of Kenny’s 16-page ruling shows it to be a thorough condemnation of the rail authority’s efforts to get around Proposition 1A’s taxpayer protections. Its language also suggests that he hasn’t ruled out a range of actions because of his concerns about legislative authority. Rather than rule out injunctive relief, the ruling suggests plaintiffs will have a better chance of achieving it if they make the case on limited grounds rather than by seeking a broad ban on construction spending.

But Kenny could also strike a decisive blow against the bullet train without ordering a moratorium on construction until funding had been firmly identified and environmental reviews completed for the first 300 miles of the project. In his “remedies” ruling, he could again conclude that the final authority on spending decisions rested with the Legislature — then warn bluntly of the impropriety of issuing state bond funds for a project that violates plainly written state laws.

There’s also the chance that the state’s decision to respond to his request for remedies by not offering any might incense him into more decisive action. Kenny’s Aug. 16 ruling treated it as a given that the state would take his concerns seriously. The attorney general didn’t. Instead, Kamala Harris gave the rail authority a fig leaf and a questionable temporary reprieve.

Will Kenny’s judicial temperament prompt him to overlook this diss? We shall see.

This prompted the state Attorney General’s Office — acting on behalf of the rail authority — to file a brief on Oct. 8 that argued that the state could begin building the bullet train project without violating Proposition 1A, the state law providing $9.95 billion in bond seed money to the project, if it only used the federal funding it had been provided by the Obama administration.

This was odd enough — Attorney General Kamala Harris refusing to defend the legality of the state’s bullet-train business plan yet arguing that it should be allowed to proceed for now. But according to the lawyers for Kings County and two of its residents — the plaintiffs in the lawsuit still being heard by Kenny — even the state’s use of federal funds for the first 29 miles of the project may not be legal.

Federal dollars supposed to go to Fresno-Bakersfield link

In a court filing last week, attorneys Michael Brady and Stuart Flashman cited an amendment to the 2009 federal stimulus bill, the American Recovery and Reinvestment Act (ARRA), the largest source of the $3.3 billion in federal funding for the project. That amendment “restricts the use of the ARRA grant proceeds to the Fresno to Bakersfield segment of the Authority’s Central Valley rail construction project.”

This is a major problem for the state because of costly contracts the rail authority has already signed.  “Virtually the entirety of both the Caltrans [construction] contract and the Tutor-Perini-Parsons contract for design and construction of the CP-1 segment of the Authority’s Central Valley rail project cover an area between Madera and Fresno. None of the work currently planned to proceed involves the area between Fresno and Bakersfield,” the Brady-Flashman brief noted.

That means that only federal funds not from the 2009 stimulus bill can be used — about $929 million. But the total design and construction costs for the Caltrans and the Tutor-Perini-Parsons contract are $1.196 billion.

Brady’s and Flashman’s brief also targets Harris’ premise that federal funds can legally be spent on the project without violating Proposition 1A’s restrictions on the use of state bond money, noting the ARRA requirement that the federal funds be matched by state funds. “The legislature explicitly expected Proposition 1A bond funds to be used to match the federal grant funds, not some other hypothetical future fund,” the brief notes.

But even if federal waivers remove the matching-fund requirement, the available federal funding for the 29-mile Madera-Fresno link still doesn’t cover the total cost of the contracts the state has already signed.

A ‘remedies’ hearing without any remedies proposed

The Brady-Flashman brief calls for Judge Kenny to ban the rail authority from beginning construction on the project until it resolves the funding and environmental-review deficiencies identified in Kenny’s Aug. 16 ruling.

The next major chapter in the fight in Kenny’s courtroom is going to be unusual. The veteran judge is holding a Nov. 8 “remedies” hearing at which the state explains how it will resolve its funding and construction plans’ violation of the state law established by Proposition 1A’s 2008 approval.

Yet the attorney general’s “remedies” brief of Oct. 8 offered no remedies addressing Kenny’s conclusion that the state was on track to break state law.

State media coverage has focused on the fact that Harris’ office says it is legal to proceed with work on the project for now using federal funds. What has received inexplicably little emphasis, however, is the fact that the leading law-enforcement official in California government agreed with a judge that the state would break the law if it started using state funds on the project without having firm funding for the first 300 miles of the project.

The rail authority, which has at most $13 billion available, estimates the cost of the 300-mile initial segment at $31 billion. This is not a gap that cash-poor state government can address or finesse, and the prospect for more federal funding in the sequester era seems far-fetched.

Has the bullet-train end game began?

What’s going on here? A veteran Democratic elected official from  Silicon Valley, who spoke with me on the condition of anonymity, suggested we may be seeing the beginning of the end game for the bullet train.

“There are a lot of angles to this. … The support for the train isn’t nearly what it was, the cost is way up, it’s gotten a lot of bad press. People in Sacramento understand that,” the politician told me.

Harris will face major pressure from building-trades unions to let the project go forward. But she will not certify as legal something that her office has already agreed is not legal.

State Treasurer Bill Lockyer and Controller John Chiang also have fiduciary responsibilities that preclude them from approving or proceeding with the sale of billions of dollars in state bonds of shaky legality.

And all three have political motives to disassociate themselves from the increasingly unpopular project. Harris is running for governor in 2018. Chiang is running for treasurer next year. And Lockyer is retiring from politics in 2014 with his most cherished possession being a reputation as an independent maverick.

It’s tough to imagine a better final flourish to Lockyer’s career than deciding not to sell the Prop. 1A bonds in December, as is now planned, on the grounds that he will not be a party to an assault on both state law and California taxpayers.

“That might appeal to Bill,” the Democratic elected official told me. “I could see that.”