The Trump administration has notified the California High Speed Rail Authority of a “proposed determination to terminate” two federal grant agreements totaling approximately $4 billion, money that was awarded by previous administrations to fund the bullet train.
“This commitment was made in reliance on assurances from CHSRA that the CHSR Project could be delivered,” Federal Railroad Administration Acting Administrator Drew Feeley wrote in a June 4 letter to rail authority CEO Ian Choudri. “These assurances proved illusory.”
Did they ever.
“FRA is not alone in realizing CHSRA is unable to deliver the Project,” Feeley wrote, citing the rail authority’s own inspector general’s report in February, which identified a $7 billion gap in the funding necessary to complete the Central Valley Segment. The gap has since grown to more than $10 billion.
FRA’s review of the project’s compliance with the terms of the grant agreements identified patterns of “broken promises,” “unattainable proposals” and “unrealistic assumptions” regarding deadlines, ridership projections and budget deficiencies.
The original 2008 ballot measure that launched the project provided for nearly $10 billion in state bonds. Voters were assured that the project would attract private investors, which never happened. The measure also stated that the high-speed rail project could not be built with a tax increase and could not be operated with a public subsidy.
Now California lawmakers face a stark choice: end the project, or find a loophole to raise taxes to pay for it. Gov. Gavin Newsom and legislative leaders have ruled out the first and are trying the second.
Currently the bullet train is funded with 25% of the revenue from the tax-equivalent cap-and-trade program, a regulatory invention run by the California Air Resources Board. Oil refineries, utilities and manufacturers must buy permits to emit greenhouse gases (in other words, to operate). The cost is passed through to consumers as higher prices for gasoline, electricity and goods that are made or transported in the state.
So far, state courts have held that the permit requirement is not a tax, but it’s close enough that legislative leaders have decided that renewing the program, which expires in 2030, will require a two-thirds vote like any other tax increase. Newsom has announced that he would like the bullet train to receive $1 billion per year from the program. The legislature may have other plans for the money.
But canceling the bullet train and allowing the costly cap-and-trade program to expire would significantly reduce the cost of living in California by cutting the price of energy and everything that uses energy. That’s not on the table in Sacramento. Instead, the Senate just passed Senate Bill 545, which would require a $700,000 study on how local taxes could be raised to pay for the high-speed rail project.
The study would “assess funding potential across a variety of funding mechanisms that can support the high-speed rail capital program or discrete system elements.” These so-called “funding mechanisms” could include fees charged to developers in exchange for density bonuses and permitting “efficiencies.” The study would also “identify available air rights around stations” for “value capture opportunities.”
These are taxes by another name. No. Just no.
There’s no credible path to completing even part of this project. The Assembly should kill SB 545 and the governor should kill the bullet train.
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