Since the dramatic ruling by Judge Michael Kenny, many wonder what happens next.
The High-Speed Rail Authority and the Governor (who was the former Attorney General) are busy making press comments that the ruling is no big deal. They loudly proclaimed they are moving full steam ahead, and pointedly signed the first contract for the 29 mile Merced - Fresno construction segment with Tutor Perini, the “morning” of the ruling.
The Authority is bluffing: they got caught with their hand in the cookie jar. Now they are grabbing all the cookies they can get as fast as they can. They were desperate to get the contract signed. However, no amount of bluffing in the press will change the court’s decision. Only the remedies are up for debate, the court hearing is tentatively schedule November 8th. Read the court's ruling.
Clearly, there's no way they can comply with the ruling. They have neither the additional $26 billion to fund a self-sustaining segment nor the completed environmental work. Even if there were court decisions, possibly decided late this year or next year or quick year-end legislative bills that change environmental requirements, the money is still a major stumbling block.
Elizabeth Alexis, co-founder of CARRD, believes that, while “the judge deferred to another hearing a decision about the consequences, the carefully worded opinion strongly hints that the consequences may be very significant indeed – possibly even a death blow to this rendition of high-speed rail in California.”
The Insides of the Ruling
The judge ruled that the Authority had failed to meet the requirements of Prop 1A, but deferred action until further briefing on the appropriate remedy for that failure. What’s a remedy? Simply, it is a court's action to right a wrong.
There's been a fair amount of confusion about how the doctrine of Separation of Powers (one branch of government can’t tell another what to do) might affect how the remedies part of the case plays out. The judge said he did not have the power to invalidate the appropriation, due to the separation of powers issue.
According to Attorney Stuart Flashman, regardless of the separation of power issue, “The court does have the power to say an action that the legislature took is invalid.” While the legislature may have legally appropriated the money for the project, spending it legally is another thing entirely. The court could very well prohibit the Authority from spending bond money, which is why the project could soon be dead.
The Authority’s reaction
Jeff Morales, Authority CEO, released a statement:
“In the ruling, the judge found that there were problems with the funding plan submitted by the Authority in November 2011; but, he clearly stated that the Legislature had the discretion to appropriate the funding as it did in SB 1029 last July, and that the Court has no ability to reverse that. Therefore, the funding remains in place, and we continue to move forward.
"As many of you know, the November 2011 draft plan was overhauled significantly, and it was the revised 2012 business plan that was in front of the Legislature when it voted. The revised plan addressed the problems identified by the court. I want to reassure you that we are moving forward, and that we are committed to complying fully with Prop 1A as we advance."
The overhaul Morales speaks of is the April 2012 Revised Business Plan. He apparently is unaware of the fact that the only funding plan ever submitted by the Authority is the November 2011 funding plan.
What happens next?
According to plaintiffs' co-counsel Mike Brady, the case is set for November 8th. Various briefs and responses that have to be written and filed with the court.
A lot of opinions have been voiced about why the attorneys for the plaintiffs did not ask for a Temporary Restraining Order as part of the original brief. Stuart Flashman, co-counsel, answered that “he does not generally ask for injunctive relief unless absolutely necessary.” He can address this as part of his remedies brief or, if the Authority attempts to move ahead at lightning speed, even before then.
The first part of the case was considered procedural. The Authority failed to meet the requirements of the bond measure intended to protect the public from having to pay for what could become a stranded asset.
The next part of the case, known as the 526a taxpayer action, will go into the particular promises of Prop 1A. A jury may be asked to participate as an advisory jury, that is, hear the evidence and give the judge their opinion and the judge still rules. Will the project be able to operate without a subsidy? Is the alleged travel time of 2 hours and forty minutes even possible? Many promises made in Prop 1A will be explored. Plaintiffs will attempt to get the earliest date possible for hearing.
What else is wrong?
There is another reason why the Authority shouldn’t obligate or spend money on the initial construction segment now. By law, the High-Speed Rail Authority must submit a second funding plan before construction contracts can be signed and it hasn’t even submitted one. A second funding plan is a refined version of the funding plan the legislature voted on in 2012. The second funding plan requires an independent professional services firm to prepare a report confirming that the proposed project can be built.
The law says this group must certify that if so completed, the corridor or usable segment thereof would be suitable and ready for high-speed train operation, (C) upon completion, one or more passenger service providers can begin using the tracks or stations for passenger train service, (D) the planned passenger train service to be provided by the authority, or pursuant to its authority, will not require operating subsidy, and (E) an assessment of risk and the risk mitigation strategies proposed to be employed. This smells like a problem.
The Authority has been merrily spending FRA money to do high-speed rail work on Hwy 99, with Caltrans at the helm. Now the Authority signs a contract obligating the state for $1 billion dollars. These actions are clear violations of the law, as this second funding plan has not been done. Making enforcement more difficult, the High-Speed Rail Authority has steadfastly refused to provide an accounting of how much money they “borrowed” from the FRA, prior to the point when they are able to spend CA bond funds to match the federal grant.
Because I can’t think of a more eloquent way to end because the outcome is so important, I will quote Dan Walters, political writer, from his insightful article written Tuesday:
“Something more than the fate of a dubious public works project is at stake. If officials can ignore laws that protect the governed, then the underpinnings of a free society are destroyed.” Amen Dan.