The California High-Speed Rail Authority ("Authority") voted unanimously yesterday to approve submission of an additional funding application to the Federal Railroad Administration ("FRA") that would, if approved, extend the "starter" segment of the High-Speed Rail Project ("HSR") north to Merced and south to downtown Bakersfield, making what many have derided as a "train to nowhere" into a fully operational segment, connecting the Central and Southern San Joaquin Valley. As previously reported, the first segment of Phase I is now set to begin just south of Madera, in the town of Borden, and end in Corcoran. While the Authority has vigorously defended this choice, the Authority's Board Members were universally pleased with the possibility of converting the "train to nowhere" into a "train to somewhere."
What prompted this abrupt change of plans? The same sequence of events that gave rise to the funding that permitted the Authority to select the Borden-to-Corcoran route at the end of 2010: the Governor of Florida, following similar decisions by the Governors of Ohio and Wisconsin last year, returned his state's allocation of the American Recovery and Reinvestment Act of 2009 funding and other federal grants made for rail projects in 2010. Florida's decision made an extra $2.43 billion available to other states, including California.
With Florida out of the running for this round of funding, the Authority's chances of having its application approved are quite good, according to the Authority's CEO, Roelof van Ark. "Florida was California's biggest competitor [previously]," van Ark explained to the Authority Board. Only statewide agencies may submit applications to the FRA. Of course, Congress could take some action to block the funding, and California's Republican Congressional Delegation, including Central Valley Congressman Devin Nunes, has opposed federal funding for the California HSR and has already introduced legislation to divert previously awarded grants. More information on this effort can be found here.
The extension of the "starter" segment to Merced and Bakersfield, described at yesterday's meeting as "option 1," is estimated to cost $1.8 billion. The Authority approved the use of $360 million in state Proposition 1A funds as a match to the federal grant (or 20% of the total), which is a condition of the federal grant application. The extension to Merced and Bakersfield left $630 million of the available $2.43 billion up for grabs, and both the Authority's Staff and Board expressed concern about potentially "leaving money on the table." Therefore, Authority's Staff also recommended that at least one additional application be submitted for one of the two additional "extensions" of the starter segment, which were described as option 2A (extending the rail from Merced westward 39 miles to a point near San Luis Reservoir near Los Banos) and option 2B (extending the rail southward from the Bakersfield station to Palmdale at the base of the Tehachapi Mountains). These are referred to as "option 2" projects because the funding application for either option 2 project would only be considered if the FRA approved the option 1 application.
Consideration of the option 2 project applications became a political hot potato that the Board was ill-equipped to address on Tuesday. Authority Board Chairman Curt Pringle expressed his concern that submitting one or both of the option 2 project applications to the FRA may inadvertently cause federal funding alone to determine whether the Authority will complete the HSR to Los Angeles or to San Jose first, which would be a major policy decision. However, as was the case in December, the Authority had to act fast. The FRA issued a notice of funding availability on March 16, 2011 with applications being due this coming Monday, April 4, 2011. Therefore, the Board unanimously approved a motion that authorized the CEO to make a funding application for option 1, with the required 20% match of state funds, and two additional applications for options 2A and 2B, with the explanation that the 2A and 2B applications be further conditioned in that, if the FRA is inclined to approve of additional funding beyond option 1, the Authority be advised so that it can inform the FRA (at that time) which option, 2A or 2B, it prefers. While the FRA may not award California more than the $1.44 billion it will be requesting from the federal government for option 1, the Board must be prepared in the very near future to answer the question of whether the HSR will first go to San Jose or Los Angeles from the Central Valley.
The Authority's CEO's report to the Board for the March 20, 2011 meeting may be found here.
For additional information on this or any related topic, please contact Michael Mills or your Stoel Rives attorney.