Trump's Battle With California Over Bullet Train Funding May Be Just Beginning

The Fresno Trench, a passage designed to allow future trains to travel beneath Highway 180 in the San Joaquin Valley city.  (California High-Speed Rail Authorituy)

A day after the Trump administration put California on notice that it would try to take back as much as $3.5 billion in federal funding for the state's high-speed rail project, just one thing is clear: The dispute is likely to take months to resolve and could well wind up in court.

Ronald Batory, the head of the Department of Transportation's Federal Railroad Administration, sent a letter to the California High-Speed Rail Authority on Tuesday informing the agency it intended to revoke a 2010 agreement to provide $929 million for construction of the bullet train.

The letter also said the FRA would try to recover another $2.5 billion in funds granted as part of the federal stimulus program in 2009 -- money that has already been spent on the high-speed rail program.

Batory said the federal rail agency was acting after finding that the state had "materially failed to comply" with the terms of its grant agreements.

Wednesday's FRA letter came in the midst of a dispute between President Trump and Gov. Gavin Newsom, touched off in part by the governor's announcement last week that the state would focus on building a 160-mile segment of high-speed rail route and essentially put key segments of the project -- building out the route to the Bay Area and Los Angeles -- on hold.

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Newsom's declaration came after a seemingly unending series of delays and difficulties that have increased the bullet train network's estimated cost from $33 billion to $77 billion and delayed the projected completion date for the San Francisco-Los Angeles link from 2020 to 2033. The problems confronting the project have included lawsuits challenging various aspects of the enterprise, long delays in acquiring land for construction and major cost overruns.

Trump blasted Newsom's announcement last week and vowed to seek repayment of the federal funds already granted for the project. The president upped the ante after the Newsom administration announced California was joining 15 other states in a legal challenge to his declaration of a national emergency to secure funding for his long-sought wall on the U.S.-Mexico border.

The situation leaves veteran transportation officials and analysts shaking their heads at a move they say is virtually without precedent.

"I’ve never heard of a case where it escalates to this level," Randy Rentschler, the Metropolitan Transportation Commission's director of legislation and public affairs, said Wednesday. "Usually these things are worked out quietly, not on the front pages of the papers. I can think of nothing remotely close to this. It’s unprecedented."

Art Bauer, a former senior staffer with the state Senate Transportation Committee who was involved in crafting the language for the state's 2008 high-speed rail ballot measure, said he was "unfamiliar with any precedent" for such a funding withdrawal.

"Certainly, in my 25 or 30 years of being involved in transportation policy development in the state, I'm unfamiliar with the idea of canceling a grant," Bauer said.

Bauer said that the state could have a problem hanging onto the $929 million grant because it hadn't yet filed for reimbursement of some work already done on the rail project.

"The way the grants work is you do a piece of work, then you file a claim with the Department of Transportation for reimbursement, and the grant money flows to you at that point," Bauer said. "Evidently, the state has not done that. So I guess if you're sitting in Washington and you're looking at this $930 million or whatever it is, and you say, 'Well, no one's used this money,' ... and you may feel, 'We can withdraw the money, we can withdraw their ability to claim the money.' "

Bauer predicted it will take months, at least, to unravel what happens to the funds.

The federal rail agency's letter alleged that the High-Speed Rail Authority has failed to meet certain funding and accounting requirements for work on the bullet train project.

The letter also said a review of the authority's documents led federal officials to conclude that the rail authority "has failed to make reasonable progress" on the project's initial segment in the San Joaquin Valley -- leading the federal agency to declare the work cannot be completed by the December 2022 deadline set by grant agreements.

State Sen. Scott Wiener, D-San Francisco, a strong proponent of public transportation in general, said the Trump administration's criticism of the high-speed rail project is disingenuous at best.

"It's Donald Trump's allies in the Central Valley who have done everything in their power to slow down the land acquisition and the other logistical steps to build the project," Wiener said. "So this project has been so politicized by Trump's own colleagues in the Republican Party who are opposing the project that it's hard for him to say, 'Well you didn't do it quickly enough.' "

While Newsom may have put the high-speed rail project in the crosshairs by taunting Trump in his State of the State speech last week, Wiener wouldn't criticize the Democratic governor.

"The governor said what he said and I believe what he was expressing was ... let's just finish the backbone of the system in the Central Valley. We're already constructing it. It's funded. Let's get it done and then we will move north and south from there."

James Moore, a USC professor of engineering and public policy and director of the university's transportation engineering program, said the matter could well wind up in court.

Moore said the issues itemized in Batory's letter "appear to me to be ... technicalities that normally would not stop a project. But much depends on the exact language in the full-funding agreements, and much depends on the posture the federal government wants to take. These are in fact agreements, they're contracts. There is an obligation to perform."

"The question then becomes, 'What is substantive non-performance?' " Moore said. "That's typically where judges get involved."

Moore also pointed to a 2010 case in which the Department of Transportation demanded repayment of grants awarded to a major transportation project.

In that episode, the department sought to reclaim $271 million in grants the state of New Jersey spent for initial planning of an $8.7 billion tunnel project under the Hudson River. The repayment demand was made after Gov. Chris Christie canceled the project. The state eventually agreed to pay back $95 million.

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