California to Owe Feds $180M for High-Speed Rail

Funding for the $68 billion bullet train system is in legal limbo

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    NEWSLETTERS

    TK

    California officials sought Wednesday to reassure congressional Republicans that the state will be able to match billions of dollars in federal funding for the state's high-speed rail project, including a $180 million payment due in April.

    Funding for the $68 billion bullet train system is in legal limbo after two court rulings last year, one of which prevented the state from selling $8.6 billion in bonds that it had intended to use to pay its share of the project. The federal government has awarded $3.5 billion in grants to the project, including $2.5 billion in federal stimulus money, which requires a dollar-for-dollar match and must be spent by 2017.

    Rep. Jeff Denham, a Republican from the Central Valley, called Wednesday's hearing of the House Subcommittee on Railroads, Pipelines and Hazardous Materials to investigate whether the federal government should continue funding the project while California's money is tied up. Denham, who has sought to block further funding, noted that the omnibus budget bill Congress was to begin voting on Wednesday contains no money for high-speed rail.

    "It's clear that the federal government will not be the source of more funding," he said.

    The hearing grew heated at times as Denham repeatedly grilled Federal Railroad Administration Deputy Administrator Karen Hedlund over what he said were delays in responding to his requests for records of payments that have been made to California.

    She said the agency is concerned about the funding problems and has sought assurances from state officials about the plans. She said the state has so far complied with the funding agreements, including $100 million in matching funds toward construction, compared to the federal government's $275 million. The state also has spent another $300 million in bonds sold before the judge's ruling.

    "We are absolutely comfortable that we are safeguarding the taxpayers' dollars," Hedlund said.

    She added that delaying the project could significantly increase its cost, causing penalties for violations of contracts.

    If California fails to make its April payment, the federal government could withhold further funding, at the discretion of the railroad administration. And if the state eventually is unable to make its matching payments and the project crumbled, federal officials could seek repayment, said Dan Richard, chairman of the board of the California High-Speed Rail Authority.

    "What the agreement says is that if we can, we will pay back the money from the bonds," Richard told the hearing. "If we don't have the bonds, we will pay back the money from other sources of state funds. If all of that fails, they have the right to actually offset other federal monies that would come to California."

    Gov. Jerry Brown wants to spend $250 million in cap-and-trade pollution credit funding for the rail project, which could help the state meet its obligation. But that move requires legislative approval, action that might not come until June or later.

    Rep. Corrine Brown, D-Florida, said the U.S. is falling behind other nations' infrastructure by failing to invest in projects such as California's bullet train. The federal government also had sought to give Florida $1 billion in grants for a high-speed rail system, but Florida officials backed out.

    "We are becoming a third-world country while we sit here arguing about nickels and dimes," she said.

    She later joked to Richard that if California doesn't make its April payment, "I'm sure we'll be back here April 1 with another hearing. We're going to micromanage this project; you need to know that."