On Aug. 14, the three litigants in the case to halt California’s high-speed rail project, Kings County and two local residents, filed a Petition for Rehearing. They challenged the July 31 ruling against them by Sacramento’s 3rd District Court of Appeal. The ruling, which reversed a lower-court decision, greenlighted the project.

The rehearing also would be with the 3rd District Court of Appeal.

Depending on the results of the rehearing, Stuart Flashman, the counsel for Kings County and the two residents, said the litigants could file an action with the California Supreme Court by Sept. 2 because of the precedent-setting nature of the arguments the justices made about bond measures in general.

The litigants insisted the Appeals Court decision made factual errors by raising two issues not brought up by the state of California during the trial.

First issue: The litigants said the decision included issues of fact and law that were neither proposed nor briefed by any party to the proceeding. They said, “The court’s decision asserted that the Preliminary Funding Plan was only an ‘interlocutory and preliminary step in a multistep process.’’’

However, according to the litigants, “[T]hat issue had neither been proposed nor briefed by any party.” They cited Government Code Section 68081:

“Before the Supreme Court, a court of appeal, or the appellate division of a superior court renders a decision in a proceeding other than a summary denial of a petition for an extraordinary writ, based upon an issue which was not proposed or briefed by any party to the proceeding, the court shall afford the parties an opportunity to present their views on the matter through supplemental briefing. If the court fails to afford that opportunity, a rehearing shall be ordered upon timely petition of any party.”

Second issue: The litigants said the court decision contained errors in its identification and discussion of facts, which affected the validity of the decision.

They contended that, according the court, “Proposition 1A did not in any way constrain the Legislature’s discretion in approving an appropriation for the high-speed rail project.” In fact, Prop. 1A, the 2008 initiative voters approved for $9 billion in bonds to fund the project, includes many stipulations how the Legislature can spend the bond money.

The litigants also contended that both these points were brought up in court by the justices during the arguments at the May 23, 2014 hearing, with no chance for rebuttal, effectively helping the state’s defense of the high-speed rail spending.

Kenny decision

The decision the 3rd District Court of Appeal overturned was Superior Court Judge Kenny’s remedy decision on Nov. 25, 2013, essentially halted the high-speed rail project. Kenny required the California High-Speed Rail Authority to redo its funding plan because the plan had not followed the “plain language” in the bond measure. The CHSRA had not completed environmental work, nor did it have commitments to fund the first 300 miles of the estimated $68 billion project.

Kenny also ruled in a separate decision that bonds needed for construction could not be allocated since the CHSRA failed to provide evidence to the High Speed Passenger Train Finance Committee that the bonds were necessary or desirable.

Legislature 

The 3rd District Court of Appeal also ruled July 31 that, without specific language in a ballot measure that forbade legislative tampering, the appellate court could not interfere with the appropriation process of the Legislature. They said there was no remedy, even though the CHSRA’s Funding Plan did not meet the requirements of the bond measure.

In their final ruling, though, the appeals court offered a window of hope to the litigants, writing that the litigants could protest the final funding plan if it was inadequate. Before spending any Prop. 1A bond funds, the CHSRA is required to have all environmental work completed and funding in place from Madera down to the San Fernando Valley, as well as requiring a financial consultant deem the project viable.

The appeals court also noted, “[T]he voters clearly intended to place the Authority in a financial straight-jacket by establishing a mandatory multi-step process to ensure the financial viability of the project.”  So even to the court, it was clear what the voters chose. Despite that, the court said, in effect: It doesn’t matter.

Flashman insisted that, whether the language is explicit or implicit, a bond measure must be honored. He said it is a contract and everybody, the voters and the government, had to agree before any changes were made. That would mean a new ballot measure would be needed to change the project.

He also said that, if this ruling stands, in the future someone with another bond could “intentionally mislead the public or even commit fraud” if the bond measure could easily be changed by the Legislature after voter approval.

The appeals court will have until the end of October to reply to the request for the Petition for Rehearing.

Kathy Hamilton is the Ralph Nader of high-speed rail, continually uncovering hidden aspects of the project and revealing them to the public.  She started writing in order to tell local communities how the project affects them and her reach grew statewide.  She has written more than 225 articles on high-speed rail and attended hundreds of state and local meetings. She is a board member of the Community Coalition on High-Speed Rail; has testified at government hearings; has provided public testimony and court declarations on public records act requests; has given public testimony; and has provided transcripts for the validation of court cases. 

Is a green light ahead for California’s high-speed rail project?

In a crucial hearing on May 23 before the Third District Court of Appeal, questions asked by the justices seemed to lean toward a reversal of a lower-court decision on March 4 by Superior Court Judge Michael Kenny that would delay the rail project from moving forward.

The lawsuit contended that the project’s funding plan did not comply with the requirements of Proposition 1A, the 2008 initiative that gave voter approval to the bonds for the project. If the lawsuit eventually is upheld by the California Supreme Court, it would require the California High-Speed Rail Authority to rescind its Nov. 2011 funding plan and start over.

At the latest hearing, California Attorney General Kamala Harris was represented by Deputy Attorney General Ross Moody. He argued that Kenny erred in interpreting Proposition 1A. Moody said the California Legislature had the right to change what was being done.

And he said what are called the “A-K requirements” for the funding plan from Prop. 1A, now listed in Section 2704.08 of the California Streets and Highway Code, were meant as informational reporting for the Legislature.

Arguing for Kings County and two residents who have brought suit to stop the project was Stuart Flashman. He said Kenny’s decision should stand because the CHSRA’s plan didn’t follow Prop. 1A.

Presiding Justice Vance W. Raye agreed with Moody that, if objections are to be made to the project, they ought to be made in the future when the CHSRA’s second funding plan comes out just prior to construction. But that could be some time.  The design for the smallest segment, Madera to Fresno, is not complete yet; nor is that for the second segment, Fresno to Bakersfield.

A proposed second funding plan also has to be studied by an independent financial company and prove it meets many other requirements.  Then the CHSRA sends it forward to the director of finance and the chairperson of the Joint Legislative Budget Committee. Next, the Surface Transportation Board must approve the Fresno-to-Bakersfield EIR for construction.  Another critical component is the CHSRA must have agreements in place with Union Pacific Railroad and BNSF railroad before construction begins.

All this could take many months, possibly until 2015 before construction can begin in earnest for the first leg of California’s high-speed rail project.  Although it’s also possible the CHSRA could approve this the second funding plan while other work is being done concurrently.

Legislature

Moody also insisted that it was the responsibility of the Legislature, not the courts, to accept or reject the plan, even with deficiencies. The Legislature conducted months of hearings listening to opinions from both sides.

Flashman responded that the Legislature is bound to follow its own law, Assembly Bill 3034 from 2008, which included the same information from Prop. 1A. He added that these fiscal protections were added as assurances to get votes in favor of Prop. 1A, and that the courts now were required to uphold the people’s will at the ballot box, not what the Legislature might do in the future.

AB3034 stipulated that each usable segment built by the CHSRA must, before construction, complete all environmental permits, identify all funding and be high-speed rail ready – including electrification.

Doing so would be a problem because the CHSRA has not even covered electrification in its Environmental Impact Report for the first segment of the project in the Central Valley.

Separation of Powers

Other discussions centered around the separation of the legislative and judicial branches of government. Flashman told the Appellate Court that Kenny did not require the Legislature to reverse its appropriation decision.

But Associate Justice Ronald Boyd Robie said the effect was the same. At one point Robie, who challenged many of Flashman’s points, said the lawyer “was trying too hard.”

Both sides were extensively questioned by the justices. But the tone of many of the questions or statements, particularly from Robie to Flashman, seemed argumentative. As a result, it seemed Flashman had less time to make his arguments than Moody. Flashman had to take extra time to answer the questions and to counter Robie’s statements.

In addition, Flashman had to share his time with others who were party to the case such as the Howard Jarvis group and Union Pacific Railroad. These other arguments will be covered in Part 2 of this series.

Moody also was asked many questions. But for the most part the exchanges carried a more cordial and conversational tone. At times some of those questions even helped his arguments.  Moody also had a full 30 minutes to present his side.

Aftermath

After the hearing, Flashman said:

“The justices have been confronted with a stark dichotomy.  On the one hand, they have Gov. Brown demanding, by way of the attorney general, that the court let him move ahead with building his ‘legacy’ high-speed rail project.

“On the other hand, they are faced with having to emasculate the clear language of a bond measure that had been placed before and approved by the state’s voters.  If they do Brown’s bidding, I fear they will do long-term damage, not only to the court’s reputation as a fair arbiter of justice, but perhaps even more importantly to voters’ trust in the meaning of language placed before them on the ballot.  The potential damage to Californian’s confidence in state government could perhaps be compared to that done to the integrity of national elections by the U.S. Supreme Court’s 2000 Bush vs. Gore decision.”

Legal scholars sometimes contend that what justices in appeals courts say from the bench doesn’t necessarily reflect what their decisions will be. But the tone from the Third District Court of Appeal certainly indicated flipping the green light on for the high-speed rail project.

The hearing can be heard in it’s entirety at https://www.youtube.com/watch?v=twdcDrKBBVY&feature=youtu.be

Kathy Hamilton is the Ralph Nader of high-speed rail, continually uncovering hidden aspects of the project and revealing them to the public.  She started writing in order to tell local communities how the project affects them and her reach grew statewide.  She has written more than 225 articles on high-speed rail and attended hundreds of state and local meetings. She is a board member of the Community Coalition on High-Speed Rail; has testified at government hearings; has provided public testimony and court declarations on public records act requests; has given public testimony; and has provided transcripts for the validation of court cases. 

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.”